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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
¨ PRE-EFFECTIVE AMENDMENT NO. | ¨ POST-EFFECTIVE AMENDMENT NO. |
MFS® VARIABLE INSURANCE TRUST II
(Exact Name of Registrant as Specified in Charter)
500 Boylston, Street, Boston, Massachusetts 02116
(Address of Principal Executive Offices)
Registrant’s Telephone Number, Including Area Code: (617) 954-5000
Susan S. Newton, Massachusetts Financial Services Company
500 Boylston Street, Boston, Massachusetts 02116
(Name and Address of Agent for Service)
With copy to
W. John McGuire
Morgan, Lewis & Brockius
1111 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of the registration statement.
Title of Securities Being Registered: Initial Class shares of beneficial interest in the series of the Registrant designated MFS Global Governments Portfolio, MFS Government Securities Portfolio, MFS High Yield Portfolio, MFS Massachusetts Investors Growth Stock Portfolio, MFS Money Market Portfolio and MFS Total Return Portfolio, a series of MFS Variable Insurance Trust II.
NO FILING FEE IS REQUIRED BECAUSE AN INDEFINITE NUMBER OF SHARES HAVE PREVIOUSLY BEEN REGISTERED PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940. PURSUANT TO RULE 429, THIS REGISTRATION STATEMENT RELATES TO SHARES PREVIOUSLY REGISTERED ON FORM N-1A (FILE NO. 2-83616).
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE ON
SEPTEMBER 19, 2011 PURSUANT TO RULE 488
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE ACCOUNT OWNER MEETING TO BE HELD ON NOVEMBER 17, 2011
THIS PROXY STATEMENT IS AVAILABLE AT
www.
MONEY MARKET VARIABLE ACCOUNT
HIGH YIELD VARIABLE ACCOUNT
CAPITAL APPRECIATION VARIABLE ACCOUNT
GOVERNMENT SECURITIES VARIABLE ACCOUNT
GLOBAL GOVERNMENTS VARIABLE ACCOUNT
TOTAL RETURN VARIABLE ACCOUNT
500 BOYLSTON STREET
BOSTON MA 02116
September __, 2011
Dear Contract Owners and Payees:
A special meeting of contract owners of, and payees under, Compass 2 and Compass 3 annuity contracts issued by Sun Life Assurance Company of Canada (U.S.) (“Sun Life”) in connection with Sun Life’s Money Market Variable Account, High Yield Variable Account, Capital Appreciation Variable Account, Government Securities Variable Account, Global Governments Variable Account and Total Return Variable Account (individually an “Account” and collectively the “Accounts”) will be held at the offices of the Accounts, 500 Boylston Street, 24th Floor, Boston, Massachusetts 02116, on November 17, 2011, at 10:00 a.m. local time. The following proposals will be considered and acted upon at the meeting:
Proposals 1-6: | To approve an Agreement and Plan of Reorganization and related transactions to transfer the assets of the Accounts to certain portfolios of MFS Variable Insurance Trust II (the “Trust”), in exchange for shares of the corresponding Trust portfolios and to restructure the Accounts into a single unit investment trust. | |
Proposal 7: | To elect managers to each Account’s Board of Managers, each to hold office until he or she dies, resigns or is removed or, if sooner, until the next meeting of contract owners called for the purpose of electing managers and until the election and qualification of his or her successor. | |
Proposal 8: | To transact such other business as may properly come before the meeting or any adjournments or postponements thereof. |
After reviewing this matter carefully, the Board of Managers of each Account unanimously recommends that you vote “FOR” the proposals. Your vote is extremely important regardless of the number of votes that you hold. Please take a few minutes to review this material, cast your vote on the enclosed proxy and return it in the enclosed postage-paid envelope. Your prompt response is needed so that the necessary quorum and vote can be obtained. It is important that your vote be received prior to the special meeting.
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We appreciate your participation and prompt response in this matter, and thank you for your continued support.
Sincerely, |
�� |
Maria F. Dwyer |
President of each Account |
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MONEY MARKET VARIABLE ACCOUNT
HIGH YIELD VARIABLE ACCOUNT
CAPITAL APPRECIATION VARIABLE ACCOUNT
GOVERNMENT SECURITIES VARIABLE ACCOUNT
GLOBAL GOVERNMENTS VARIABLE ACCOUNT
TOTAL RETURN VARIABLE ACCOUNT
500 BOYLSTON STREET
BOSTON MA 02116
NOTICE OF SPECIAL MEETINGS OF UNITHOLDERS
TO BE HELD ON NOVEMBER 17, 2011
Special Meetings of contract owners of, and payees under, Compass 2 and Compass 3 annuity contracts issued by Sun Life Assurance Company of Canada (U.S.) in connection with each Account named above will be held at the offices of the Accounts, 500 Boylston Street, 24th Floor, Boston, Massachusetts 02116, at 10:00 a.m. on Thursday, November 17, 2011.
The special meeting is for the purpose of considering and acting on the following matters:
1. | To approve an Agreement and Plan of Reorganization and related transactions to transfer the assets of the Money Market Variable Account, High Yield Variable Account, Capital Appreciation Variable Account, Government Securities Variable Account, Global Governments Variable Account and Total Return Variable Account (individually, an “Account” and collectively the “Accounts”), to certain portfolios of MFS Variable Insurance Trust II (the “Trust”), in exchange for shares of the corresponding Trust portfolios and to restructure the Accounts into a single unit investment trust. |
2. | To elect managers to each Account’s Board of Managers, each to hold office until he or she dies, resigns or is removed or, if sooner, until the next meeting of contract owners called for the purpose of electing managers and until the election and qualification of his or her successor. |
3. | To consider and act upon such other business as may properly come before the special meeting or any adjournment(s) or postponement(s) thereof. |
After careful consideration, the Board of Managers of each Account unanimously approved the proposals and unanimously recommends that contract owners vote “FOR” the proposals. The matters referred to above are discussed in detail in this Proxy Statement/Prospectus. The Board of Managers of each Account has fixed the close of business on August 26, 2011 as the record
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date for determining contract owners entitled to notice of and to vote at the special meeting, and any adjournment thereof.
PLEASE NOTE:
IF YOU HAVE CONTRACT VALUE IN MORE THAN ONE ACCOUNT, YOU WILL RECEIVE A SEPARATE PROXY STATEMENT AND PROXY CARD FOR EACH ACCOUNT. PLEASE BE SURE TO EXECUTE AND RETURN ALL PROXY CARDS WHICH YOU RECEIVE IN ORDER TO BE REPRESENTED AT THE MEETINGS.
Whether or not you plan to attend the special meeting, please complete, sign, and return the enclosed proxy promptly so that you will be represented at the special meeting. If you have returned a proxy and are present at the special meeting, you may change the vote specified in the proxy at that time. However, attendance at the special meeting, by itself, will not revoke a previously tendered proxy.
The date of the first mailing of the proxy cards and this Proxy Statement/Prospectus will be on or about September , 2011. If you have any questions about the meeting, please feel free to call us at 1-877-411-3325.
This Proxy Statement/Prospectus, which should be retained for future reference, sets forth concisely the information about the portfolios of the Trust that a prospective investor should know before investing. We recommend that you read this Proxy Statement/Prospectus in its entirety as the explanations will help you to decide how to vote on the Proposals. A Statement of Additional Information dated September , 2011, relating to this Proxy Statement/Prospectus and the reorganization is incorporated hereby by reference. If you would like a copy of the Statement of Additional Information, call 1-877-411-3325 or write the Trust c/o MFS Service Center, Inc., PO Box 55824, Boston, Massachusetts 02205-5824 and you will be mailed one promptly, free of charge.
By order of the Board of Managers |
Susan S. Newton, |
Assistant Secretary and Assistant Clerk |
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QUESTIONS AND ANSWERS
Q. Why am I receiving this Proxy Statement/Prospectus?
You are receiving this Proxy Statement/Prospectus because you are an owner (“Contract Owner”) or payee (“Payee”) (Contract Owners and Payees are collectively referred to as “Account Owners”) under a Compass 2 and/or Compass 3 annuity contract (individually, a “Contract” and collectively, the “Contracts”) issued by Sun Life Assurance Company of Canada (U.S.) (“Sun Life”), and such contract was issued through one or more of the following separate Sun Life separate accounts: Money Market Variable Account (“MMVA”), High Yield Variable Account (“HYVA”), Capital Appreciation Variable Account (“CAVA”), Government Securities Variable Account (“GSVA”), Global Governments Variable Account (“GGVA”) and Total Return Variable Account (“TRVA”).
You are being asked to vote on proposals pursuant to which the investment assets in the Accounts will be transferred to portfolios of the Trust in accordance with the following chart and the Accounts which are currently each a managed separate account will be restructured as a single unit investment trust separate account (“New UIT”) with six sub-accounts (the “Reorganization”).
Separate Account | Trust Portfolio | Proposal # | ||
MMVA | MFS Money Market Portfolio | 1 | ||
HYVA | MFS High Yield Portfolio | 2 | ||
CAVA | MFS Massachusetts Investors Growth Stock Portfolio | 3 | ||
GSVA | MFS Government Securities Portfolio | 4 | ||
GGVA | MFS Global Governments Portfolio | 5 | ||
TRVA | MFS Total Return Portfolio | 6 |
The Reorganization is being proposed because it offers Account Owners the opportunity to participate in larger combined funds with the same investment objectives and the same or substantially similar investment strategies and principal risks. There is also the potential for lower expenses as the result of fixed expenses being spread over each combined portfolio’s larger asset base. The larger asset base in the portfolios in which Account Owners will be invested can be expected to increase investment opportunities and broaden diversification of the funding medium for their contracts.
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Further, the end result of the Reorganization will be an organizational structure for Account Owners that is more common in the variable annuity and variable life insurance industries than the current organization structure. All of Sun Life’s other individual variable annuity and variable life insurance products are structured with two tiers or levels; namely, the insurance company separate account purchases shares of mutual funds and those mutual funds hold diverse portfolios of investments. Currently, the Accounts have a one-tier structure consisting of an insurance company separate account that invests directly in a diverse portfolio of investments. The Reorganization will move the Accounts from a one-tier structure to the more common two-tiered structure. After the Reorganization, there will be no change in the Contracts or, with the exception of voting rights as described below, in the rights of Account Owners under those Contracts. (See “Will the Reorganization result in a change in Voting Procedures?”). What will change is the six existing Accounts will become a single New UIT.
This Proxy Statement/Prospectus is soliciting Account Owners to approve the Agreement and Plan of Reorganization (the “Reorganization Agreement”), which contemplates the transfer of all of the assets and liabilities of the Accounts (other than insurance obligations such as death benefits, surrender benefits and annuity payments) to corresponding portfolios of the Trust in exchange for Initial Class shares of the portfolios having an aggregate value equal to the net asset value of the transferring Account, and the restructuring of the Accounts into six sub-accounts of a single unit investment trust under the Investment Company Act of 1940, as amended (“1940 Act”), that will invest in Initial Class shares of portfolios of the Trust. No sales charge will be imposed on the shares of the Trust received by the New UIT.
You are being asked to approve the Reorganization Agreement and the related transactions. Because Account Owners are being asked to approve a Reorganization that will result in their having an interest in shares of certain portfolios of the Trust, including the MFS Money Market Portfolio (“Money Market Portfolio”), MFS High Yield Portfolio (“High Yield Portfolio”), MFS Massachusetts Investors Growth Stock Portfolio (“Massachusetts Investors Growth Stock Portfolio”), MFS Government Securities Portfolio (“Government Securities Portfolio”) , MFS Global Governments Portfolio (“Global Governments Portfolio”) and MFS Total Return Portfolio (“Total Return Portfolio”) (each, a “Portfolio” and collectively, the “Portfolios”), this document is being mailed together with a Prospectus for each Portfolio owned as well as such Portfolio’s Annual Report to contract owners for the year ended December 31, 2010 and such Portfolio’s Sem-Annual Report for the six-month period ended June 30, 2011.
Accompanying this Proxy Statement/Prospectus as Exhibit A is a copy of the Agreement and Plan of Reorganization pertaining to the transaction.
Q. Are there differences between the Accounts and the corresponding Portfolios?
Each Account and its corresponding Portfolio have identical investment objectives and the same or substantially similar principal investment strategies and principal risks.
Please see the section entitled “Principal Investment Strategies and Risks of Each Fund” in this Proxy Statement/Prospectus for a more detailed discussion of the similarities and any differences in the investment objectives, policies and principal risks of the Accounts and the Portfolios.
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Q. Will there be any tax consequences as a result of the merger?
The Reorganization is being structured as a tax-free reorganization. See “Information About the Reorganization—Federal Income Tax Consequences.”
Q: Why am I being asked to elect a Board of Managers?
In May 2011, MFS, the Accounts’ investment adviser and the administrator, recommended that the Boards of Managers consider and approve a plan for the transition of the oversight and supervision of both the Accounts and the Trust to the Nominated Board (as defined in this proxy statement). At the Accounts’ July 2011 meeting of the Board of Managers, the Managers approved submitting to the Account Owners the election of the Nominated Board in the event that the Account Owners of one or more of the Accounts do not approve the Reorganization. If you approve the election of the Nominated Board, the Nominated Board will replace the existing Board of Managers on January 1, 2012 for any Account that is not restructured as a sub-account of the New UIT because the Account Owners of such Account do not approve the Reorganization with respect to that Account.
Q. Will my vote make a difference?
Your vote is important regardless of the number of shares attributable to your Contract and/or qualified plan. To avoid the added cost of follow-up solicitations and possible adjournments, please take a few minutes to read the proxy statement/prospectus and provide your vote. It is important that your vote be received before the special meeting.
Q. Who will pay for the costs of the preparation, printing and mailing of this Proxy Statement/Prospectus?
MFS, the investment adviser for the Accounts, has agreed to pay the costs of the Reorganization, which includes preparation of the Proxy Statement/Prospectus, printing and distributing proxy materials, legal fees, accounting fees, and expenses of holding the shareholder meeting. The Accounts and the Portfolios will bear any brokerage costs associated with repositioning each Account’s portfolio holdings as a result of the Reorganization. We anticipate these costs will be immaterial.
Q. How does the Board recommend that I vote?
The Board of Managers of each Account unanimously recommends that you vote to APPROVE the Reorganization on behalf of each Account and that you vote to APPROVE the election of the Nominated Board.
Q. How do I give my voting instructions?
VOTING PROCEDURES
Contract Owners /Payees are urged to designate their choice on the matters to be acted upon by using one of the following three methods:
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1. BY INTERNET
• | Read the Proxy Statement/Prospectus. |
• | Go to the voting link found on your proxy card. |
• | Follow the instructions using your proxy card as a guide. |
(Do not mail the proxy card if you provide voting instructions by Internet.)
2. BY MAIL
• | Read the Proxy Statement/Prospectus. |
• | Indicate your vote on the proxy card. |
• | Date, sign, and return the enclosed proxy card in the envelope provided, which requires no postage if mailed in the United States. |
3. BY TELEPHONE
• | Read the Proxy Statement/Prospectus. |
• | Call the toll-free number found on your proxy card. |
• | Follow the recorded instructions using your proxy card as a guide. |
(Do not mail the proxy card if you provide voting instructions by telephone.)
Q. Who do I call if I have questions?
If you have any questions about the meeting or anything in this Proxy Statement/Prospectus, please feel free to call us toll free at 1-877-411-3325.
Q. Is there any other information available to me?
The Accounts. The following documents have been filed with the Securities and Exchange Commission (“SEC”): (i) the Prospectus of each Account, dated April 30, 2011, which is incorporated herein by reference into this Proxy Statement/Prospectus; (ii) the Statement of Additional Information for each Account dated April 30, 2011, which is incorporated herein by reference into this Proxy Statement/Prospectus; (iii) the Annual Report for each Account dated December 31, 2010, which is incorporated herein by reference into this Proxy Statement/Prospectus; and (iv) the Semi-Annual Report for each Account dated June 30, 2011, which is incorporated herein by reference into this Proxy Statement/Prospectus. The SEC file numbers for the Accounts are as follows:
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Money Market Variable Account 811-3563 | Government Securities Variable Account 811-4009 | |
High Yield Variable Account 811-3562 | Global Governments Variable Account 811-5450 | |
Capital Appreciation Variable Account 811-3561 | Total Return Variable Account 811-5448 |
The Trust. The following documents have been filed with the SEC (SEC File No. 811-03732); (i) the Prospectus of each Portfolio (Initial Class Shares) dated April 30, 2011, a copy of which is being mailed herewith and is incorporated herein by reference into this Proxy Statement/Prospectus; (ii) the Statement of Additional Information for the Trust, dated April 30, 2011, which is incorporated herein by reference into this Proxy Statement/Prospectus; (iii) the Annual Report for the Trust, dated December 31, 2010, which is incorporated herein by reference into this Proxy Statement/Prospectus; and (iv) the Semi-Annual Report for the Trust, dated June 30, 2011, which is incorporated herein by reference into this Proxy Statement/Prospectus.
Copies of each of these documents, the Statement of Additional Information related to this Proxy Statement /Prospectus and any subsequently released shareholder reports are available upon request by calling 1-877-411-3325 or writing to MFS Service Center, Inc., PO Box 55824, Boston, Massachusetts 02205-5824 and you will be mailed one free of charge.
The Accounts and the Trust are each subject to informational requirements of the Securities Exchange Act of 1934 and the 1940 Act, and in accordance therewith, file reports and other information with the SEC. Accordingly, they must file proxy material, reports, and other information with the SEC. Such proxy material, reports, and other information filed by the Accounts and the Trust can be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, DC 20549. To learn more about this service, call the SEC at (202) 551-8090. Copies of such materials can also be obtained at prescribed rates by electronic request at the following email address: publicinfo@sec.gov, or by writing the Public Reference Branch, Office of Consumer Affairs and Information Services, U.S. Securities and Exchange Commission, Washington, DC 20549-0102. Contract owners and Payees may also obtain such information from the SEC’s website at http://www.sec.gov.
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PROPOSAL 1, 2, 3, 4, 5 and 6
To Approve an Agreement and Plan of Reorganization
This summary is qualified in its entirety by reference to the additional information contained elsewhere in this Proxy Statement/Prospectus and the Agreement and Plan of Reorganization, which is attached hereto as Exhibit A.
How will the Reorganization affect me?
This Proxy Statement/Prospectus is soliciting Account Owners with contract value allocated to one or more Accounts to approve a reorganization of each Account whereby (1) the assets and liabilities of each Account (other than liabilities associated with insurance obligations) will be transferred to a Portfolio of the Trust, an open-end management investment company registered under the 1940 Act, in exchange for Initial Class shares of the Portfolio and (2) the Accounts will be restructured as a single unit investment trust under the 1940 Act with multiple sub-accounts. If Account Owners approve the Reorganization, then immediately following the consummation of the Reorganization, each Account Owner will have an interest in the New UIT equal in value to that Account Owner’s interest in each Account immediately prior to the Reorganization.
The Account Owners are being asked to approve the Reorganization Agreement and the related transactions pursuant to which the Reorganization transaction would be accomplished. Because the Account Owners are being asked to approve a Reorganization transaction that will result in their holding an interest in shares of the Portfolios through their ownership of a Sun Life variable annuity contract, a current prospectus for the Portfolios is included herewith.
The Accounts are separate accounts under Delaware insurance law and are registered as management investment companies under the 1940 Act. The Portfolios are separate series of the Trust, a Massachusetts business trust, which is registered as an open-end management investment company under the 1940 Act. The investment objectives of each Account and of the Portfolios being exchanged are the same and the principal investment strategies of the Accounts and the corresponding Portfolios are substantially similar. The Accounts and the Portfolios have the same investment adviser, Massachusetts Financial Services Company (“MFS” or “Adviser”), the same portfolio manager(s), and are managed in the same manner. The investment objectives of the Accounts and the Portfolios are not fundamental and may be changed without shareholder approval.
The Reorganization offers Account Owners the opportunity to participate in larger combined funds with the same investment objectives, substantially similar investment strategies and the potential for lower expenses as the result of fixed expenses being spread over the resulting Portfolio’s larger asset base.
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There will be no change in the Contracts or in the rights of Account Owners (except their voting rights as described below) under their Contracts after the Reorganization. Also, there will be no change in purchase or transfer privileges or surrender or withdrawal procedures. Insurance obligations under Contracts or certificates issued by Sun Life (e.g., death benefits, surrender benefit, and annuity payments) and currently supported by the assets of an Account will be supported by the assets of the New UIT after the Reorganization. The total value of the accumulation or annuity units an Account Owner has in an Account immediately prior to the Reorganization will be the same as the total value of the accumulation or annuity units the Account Owner will have in the New UIT immediately after the Reorganization.
Will the Reorganization result in a change in Voting Procedures?
Voting procedures will change after the Reorganization. Currently, Account Owners vote directly with respect to items affecting an Account. After the Accounts are restructured as a single UIT, it will no longer have a Board of Managers. However, the Trust has a Board of Trustees.
If the Reorganization is approved, Account Owners will vote indirectly by instructing Sun Life as to how to vote shares of the Portfolios held by the New UIT. Account Owners will complete voting instruction cards as opposed to proxy cards. Sun Life will vote the shares in accordance with the shareholder instructions pursuant to the requirements of the 1940 Act. Sun Life will vote the shares of the Portfolios held by the New UIT for which instructions are not provided in proportion to the instructions received from Account Owners.
See “Voting Information” and “Quorum Requirements/Votes Necessary to Approve Proposals.”
Why is the Reorganization being proposed?
The Reorganization offers Account Owners the opportunity to participate in larger combined funds with the same investment objectives and substantially similar principal investment strategies and principal risks, and the potential for lower expenses as the result of fixed expenses being spread over the combined Portfolios’ larger asset bases. Further, the end result will be an organizational structure that is more common in the variable annuity industry than the current organization structure.
What are the key features of the Reorganization?
The Reorganization Agreement sets forth the key features of the Reorganization. For a complete description of the Reorganization, see Exhibit A. The Reorganization Agreement generally provides for the following:
• | Each Account will transfer all of its assets to the corresponding Portfolio. Each Portfolio will assume the corresponding Account’s stated liabilities other than liabilities associated with insurance obligations that will be assumed by the New UIT. |
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• | The Accounts will be restructured as sub-accounts of the New UIT. The New UIT will assume the Accounts’ stated liabilities associated with insurance obligations. |
• | Each Portfolio will issue Initial Class shares to be held by the New UIT in an amount equal to the value of the assets that the Portfolio received from the corresponding Account, less the liabilities the Portfolio assumes. Immediately after the Reorganization, your indirect interest in a Portfolio will equal your previous direct interest in an Account. |
• | Account Owners will retain their same Sun Life contract. The aggregate contract charges will not change for Account Owners. There will be no change in the value of your Contract and no change in your benefits under your Contract as a result of the Reorganization. The Reorganization also will not affect the features of the Contracts. |
• | The Reorganization should not result in adverse tax consequences to Account Owners. |
Will I have to pay any sales load, commission or other transaction fee in connection with the Reorganization?
Neither the Account Owners nor the Accounts will pay any fees or charges in connection with the Reorganization. MFS will pay all costs and expenses associated with effecting the Reorganization.
How does the Board of Managers recommend that I vote?
After careful consideration, the Board of Managers of each Account unanimously approved the proposed reorganization. The Board of Managers of each Account unanimously recommends that you vote “FOR” the proposed reorganization.
What happens if an Account’s owners do not approve the Reorganization?
In the event that Account Owners with an interest in an Account do not approve the Reorganization, that Account’s Board of Managers will determine what further action, if any, to take. It is anticipated, however, that the Reorganization would proceed with respect to those Accounts whose Account Owners did approve.
How do the Portfolios’ investment objectives, principal investment strategies and risks compare?
The investment objectives, principal investment strategies and risks of the Accounts are described below and are identical to those of the corresponding Portfolios, with one exception related to the Capital Appreciation Variable Account and the Money Market Variable Account. With respect to the risks, Appendix 1 is a glossary providing information about each risk.
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MONEY MARKET VARIABLE ACCOUNT
MMVA’s investment objective is to seek a high level of current income consistent with preservation of capital and liquidity.
MFS normally invests MMVA’s assets in money market instruments and repurchase agreements. Money market instruments include bank certificates of deposit and other bank obligations, notes, commercial paper, asset-backed securities, U.S. and foreign government securities, and municipal instruments.
The principal risks of investing in MMVA are Interest Rate, Credit, Liquidity Risk, Bank Focus Risk, Municipal Risk, Foreign Exposure Risk, Investment Selection Risk, Counterparty and Third Party Risk, Liquidity Risk and Defensive Investing Risk.
Money Market Portfolio’s investment objective, principal risks and the types of securities in which it will invest are substantially similar to those of MMVA
HIGH YIELD VARIABLE ACCOUNT
HYVA’s investment objective is to seek total return with an emphasis on high current income, but also considering capital appreciation.
MFS normally invests at least 80% of HYVA net assets in high income debt instruments.
MFS may invest up to 100% of HYVA’s assets in lower quality debt instruments.
MFS also may invest HYVA’s assets in foreign securities.
While MFS may use derivatives for any investment purpose, to the extent MFS uses derivatives, MFS expects to use derivatives primarily to increase or decrease exposure to a particular market, segment of the market, or security, to increase or decrease interest rate or currency exposure, or as alternatives to direct investments.
The principal risks of investing in HYVA are Interest Rate Risk, Credit Risk, Foreign Risk, Derivatives Risk, Leveraging Risk, Investment Selection Risk, Counterparty and Third Party Risk, Liquidity Risk, Frequent Trading Risk and Defensive Investing Risk.
High Yield Portfolio’s investment objective, investment strategies and principal risks are identical to those of HYVA.
CAPITAL APPRECIATION VARIABLE ACCOUNT
CAVA’s investment objective is to seek appreciation.
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MFS normally invests CAVA’s assets primarily in equity securities.
MFS focuses on investing CAVA’s assets in the stocks of companies it believes to have above average earnings growth potential compared to other companies (growth companies).
While MFS may invest CAVA’s assets in companies of any size, MFS generally focuses on companies with large capitalizations.
MFS may invest CAVA’s assets in foreign securities.
The principal risks of investing in CAVA are Stock Market Risk, Company Risk, Growth Company Risk, Foreign Risk, Derivatives Risk, Leveraging Risk, Investment Selection Risk, Counterparty and Third Party Risk, Liquidity Risk, Frequent Trading Risk and Defensive Investing Risk.
Massachusetts Investors Growth Stock Portfolio’s investment objective and principal risks are substantially similar to those of CAVA. MFS invests CAVA’s assets primarily in equity securities and normally invests at least 80% of Massachusetts Investor Growth Stock Portfolio’s net assets in equity securities.
GOVERNMENT SECURITIES VARIABLE ACCOUNT
GSVA’s investment objective is to seek total return with an emphasis on current income, but also considering capital appreciation.
MFS normally invests at least 80% of GSVA’s net assets in U.S. Government securities and substantially all of its assets in investment grade debt instruments.
MFS may invest a relatively large percentage of GSVA’s assets in the debt instruments of a single issuer or a small number of issuers. While MFS may use derivatives for any investment purpose, to the extent MFS uses derivatives, MFS expects to use derivatives primarily to increase or decrease exposure to a particular market, segment of the market, or security, to increase or decrease interest rate exposure, or as alternatives to direct investments.
The principal risk of investing in GSVA are Interest Rate Risk, Credit Risk, Issuer Focus Risk, Prepayment/Extension Risk, Inflation-Adjusting Risk, Derivatives Risk, Leveraging Risk, Investing Selection Risk, Counterparty and Third Party Risk, Liquidity Risk, Frequent Trading Risk and Defensive Investing Risk.
Government Securities Portfolio’s investment objective, principal investment strategies and principal risks are identical to those of GSVA.
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GLOBAL GOVERNMENTS VARIABLE ACCOUNT
GGVA’s investment objective is to seek total return with an emphasis on current income, but also considering capital appreciation.
MFS normally invests at least 80% of GGVA’s net assets in U.S. and foreign government securities and may invest more than 25% of GGVA’s assets in one country or a limited number of countries.
MFS generally invests substantially all of GGVA’s assets in investment grade debt instruments.
GGVA is a non-diversified investment management company.
While MFS may use derivatives for any investment purpose, to the extent MFS uses derivatives, MFS expects to use derivatives primarily to increase or decrease exposure to a particular market, segment of the market, or security, to increase or decrease interest rate or currency exposure, or as alternatives to direct investments.
The principal risks of investing in GGVA are Interest Rate Risk, Credit Risk, Foreign Risk, Emerging Markets Risk, Currency Risk, Geographic Concentration Risk, Non-Diversification Risk, Prepayment/Extension Risk, Inflation Adjustment Risk, Derivatives Risk, Leveraging Risk, Investment Selection Risk, Counterparty and Third Party Risk, Liquidity Risk, Frequent Trading Risk and Defensive Investing Risk.
Global Government Portfolio’s investment objective, principal investment strategies and principal risk are identical to those of GGVA.
TOTAL RETURN VARIABLE ACCOUNT
TRVA’s investment objective is to seek total return.
MFS seeks to invest between 40% and 75% of TRVA’s assets in equity securities and at least 25% of its assets in fixed income senior securities.
MFS generally focuses on companies with large capitalizations and generally invests substantially all of its debt investments in investment grade debt instruments.
MFS may invest TRVA’s assets in foreign securities.
While MFS may use derivatives for any investment purpose, to the extent MFS uses derivatives, MFS expects to use derivatives primarily to increase or decrease exposure to a particular market, segment of the market, or security, to increase or decrease interest rate or currency exposure, or as alternatives to direct investments.
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The principal risks of investing in TRVA are Stock Market Risk, Company Risk, Value Company Risk, Interest Rate Risk, Credit Risk, Foreign Risk, Prepayment/Extension Risk, Inflation Adjusting Risk, Municipal Risk, Derivatives Risk, Leveraging Risk, Investment Selection Risk, Counterparty and Third Party Risk, Liquidity Risk, Frequent Trading Risk and Defensive Investing Risk.
Total Return Portfolio’s investment objective, principal investment strategies and principal risks are identical to those of TRVA.
How do the fees and expenses of the Accounts and the Portfolios compare?
Each Account offers only one class of shares through two contracts, Compass 2 and Compass 3, the latter of which has two levels, while each Portfolio of the Trust offers two classes of shares, Initial Class and Service Class shares. After the Reorganization, the New UIT will be invested in the Initial Class shares of the Portfolios. While Account Owners will not own the shares directly, Account Owners will have an indirect interest through their ownership of Contracts or certificates. Account Owners will not pay any initial or deferred sales charge in connection with the Reorganization.
The following tables allow you to compare the various fees and expenses that you may pay for buying and holding shares of each of the Portfolios. The second and third columns of each table show the fees and expenses associated with the shares of the named Variable Account and the corresponding Portfolio, respectively, for the year ended December 31, 2010. The last column of each table shows the estimated fees and expenses for the named Portfolio assuming the Reorganization takes place. The amounts in the last column are based on what the estimated expenses of such Portfolio Initial Class would have been for the year ended December 31, 2010, after giving effect to the proposed Reorganization.
THESE TABLES DO NOT REFLECT THE VARIABLE ANNUITY CONTRACT-RELATED CHARGES AND FEES SUN LIFE ASSESSES BECAUSE THESE CHARGES AND FEES WILL REMAIN THE SAME WHETHER OR NOT EACH ACCOUNT REORGANIZATION TAKES PLACE.
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MONEY MARKET VARIABLE ACCOUNT AND MFS MONEY MARKET PORTFOLIO
Annual Total Operating Expenses1
Fiscal Year Ending December 31, 2010
MMVA | Money Market Portfolio Initial Class | Money Market Portfolio Initial Class (Pro Forma) | ||||||||||
Annual Fund Operating Expenses (as a % of the average daily net assets in the separate account or fund, as applicable) | ||||||||||||
Management Fees | 0.50 | % | 0.50 | % | 0.50 | % | ||||||
Distribution (12b-1) Fees | N/A | N/A | N/A | |||||||||
Other Expenses2 | 0.26 | % | 0.09 | % | 0.09 | % | ||||||
Total Annual Fund Operating Expenses | 0.76 | % | 0.59 | % | 0.59 | % | ||||||
Fee Reductions and/or Expense Reimbursements3 | 0.49 | % | 0.32 | % | 0.33 | % | ||||||
Total Fund Operating Expenses After Fee Reductions and/or Expense Reimbursements3 | 0.26 | % | 0.27 | % | 0.26 | % |
1 | Expenses computed for the twelve-month period ended December 31, 2010, the Account’s and the Portfolio’s most recent fiscal year end. |
2 | MMVA and Money Market Portfolio have entered into an expense offset arrangement that reduces the Account’s and the Portfolio’s custodian fee based upon the amount of cash maintained by the Account and the Portfolio with its custodian. Such fee reduction is not reflected in the table. Had this fee reduction been taken into account, “Total Fund Operating Expenses After Fee Reductions and/or Expense Reimbursements” would be lower. |
3 | With respect to MMVA, MFS has agreed in writing to reduce its management fee to 0.45% in excess of $500 million of MMVA’s average daily net assets annually. This arrangement will continue until modified by a vote of MMVA’s contract owners. During the year ended December 31, 2010, MFS voluntarily waived receipt of $122,209 of the fund’s management fee in order to avoid a negative yield. MFS has also agreed in writing to assume and bear MMVA’s “Total Annual Fund Operating Expenses” which exceed 1.25% of MMVA’s average daily net assets annually. This expense limitation agreement excludes interest, taxes, portfolio brokerage commissions, and to the extent permitted, extraordinary expenses, and mortality and expense risk charges, distribution expense risk charges, and contract maintenance charges payable to Sun Life. This agreement is contained in MMVA’s Investment Advisory Agreement and cannot be changed without a vote of MMVA’s contract owners. In addition, MFS has agreed in writing to bear MMVA’s “Total Annual Fund Operating Expenses” such that MMVA’s “Total Annual Fund Operating Expenses” do not exceed 0.65% of MMVA’s average daily net assets annually. This expense limitation agreement excludes interest, taxes, brokerage and transaction costs, extraordinary expenses, investment-related expenses, mortality and expense risk charges, distribution expense risk charges and contract maintenance charges payable to Sun Life and will continue until April 30, 2013. With respect to Money Market Portfolio, MFS |
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has agreed in writing to reduce its management fee to 0.45% in excess of $500 million of Money Market Portfolio’s average daily net assets annually. This arrangement will continue until modified by a vote of Money Market Portfolio’s shareholders. During the year ended December 31, 2010, MFS voluntarily waived receipt of $1,108,139 of the fund’s management fee in order to avoid a negative yield. MFS has agreed in writing to assume and bear Money Market Portfolio’s “Total Annual Fund Operating Expenses” which exceed 1.25% of Money Market Portfolio’s average daily net assets annually. This expense limitation agreement excludes interest, taxes, brokerage commissions, and extraordinary expenses. This agreement is contained in Money Market Portfolio’s Investment Advisory Agreement and cannot be changed without a vote of Money Market Portfolio’s shareholders. MFS has also agreed in writing to bear expenses such that “Total Annual Fund Operating Expenses” for Money Market Portfolio do not exceed 0.57% for Initial Class shares. This expense limitation agreement excludes interest, taxes, extraordinary expenses, brokerage and transaction costs and investment-related expenses, and will continue until April 30, 2013. |
At a Board of Trustees meeting held on July 13, 2011, the Trustees voted to solicit approval of a new investment advisory agreement between the Money Market Portfolio and MFS. The current agreement provides that MFS will bear this Portfolio’s operating expenses, excluding interest, taxes, brokerage commissions and extraordinary expenses, which exceed 1.25% of the average net assets of such Portfolio incurred during any fiscal year. The proposed agreement would make no change in the management fee schedule, but would not contain such an expense limitation agreement. Rather, MFS intends to continue its current practice of negotiating an expense limitation arrangement with the Trustees. Currently, MFS has agreed to an expense limitation of 0.57% through April 30, 2013 for Initial Class shares.
HIGH YIELD VARIABLE ACCOUNT AND MFS HIGH YIELD PORTFOLIO
Annual Total Operating Expenses1
Fiscal Year Ending December 31, 2010
HYVA | High Yield Portfolio Initial Class | High Yield Portfolio Initial Class (Pro Forma) | ||||||||||
Annual Fund Operating Expenses (as a % of the average daily net assets in the separate account or fund, as applicable) | ||||||||||||
Management Fees | 0.75 | % | 0.75 | % | 0.75 | % | ||||||
Distribution (12b-1) Fees | N/A | N/A | N/A | |||||||||
Other Expenses2 | 0.32 | % | 0.13 | % | 0.13 | % | ||||||
Total Annual Fund Operating Expenses | 1.07 | % | 0.88 | % | 0.88 | % | ||||||
Fee Reductions and/or Expense Reimbursements3 | 0.17 | % | 0.05 | % | 0.05 | % | ||||||
Total Fund Operating Expenses After Fee Reductions and/or Expense Reimbursements3 | 0.90 | % | 0.83 | % | 0.83 | % |
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1 | Expenses computed for the twelve-month period ended December 31, 2010, the Account’s and the Portfolio’s most recent fiscal year end. |
2 | HYVA and High Yield Portfolio have entered into an expense offset arrangement that reduces the Account’s and the Portfolio’s custodian fee based upon the amount of cash maintained by the Account and the Portfolio with its custodian. Such fee reduction is not reflected in the table. Had this fee reduction been taken into account, “Total Separate Account and Fund Operating Expenses After Fee Reductions and/or Expense Reimbursements” would be lower. |
3 | With respect to HYVA, MFS has agreed in writing to reduce its management fee to 0.675% in excess of $300 million of HYVA’s average daily net assets annually. This arrangement will continue until modified by a vote of the HYVA’s contract owners. MFS has also agreed in writing to reduce its management fee for HYVA to 0.70% annually of the first $300 million of the HYVA’s average daily net assets until April��30, 2013. MFS has further agreed in writing to assume and bear HYVA’s “Total Annual Fund Operating Expenses” which exceed 1.25% annually of HYVA’s average daily net assets. This expense limitation excludes interest, taxes, portfolio brokerage commissions, to the extent permitted, extraordinary expenses, and mortality and expense risk charges, distribution expense risk charges, and contract maintenance charges payable to Sun Life, and will continue until modified by a vote of the HYVA’s contract owners. In addition, MFS has agreed in writing to bear HYVA’s “Total Annual Fund Operating Expenses” such that HYVA’s “Total Annual Fund Operating Expenses” do not exceed 0.90% annually of HYVA’s average daily net assets. This expense limitation agreement excludes interest, taxes, brokerage and transaction costs, extraordinary expenses, investment related expenses, mortality and expense risk charges, distribution expense risk charges, and contract maintenance charges payable to Sun Life and will continue until April 30, 2013. With respect to High Yield Portfolio, MFS has agreed in writing to reduce its management fee to 0.70% of the first $1 billion of High Yield Portfolio’s average daily net assets annually, and 0.65% in excess of $1 billion of High Yield Portfolio’s average daily net assets annually. This written agreement will remain in effect until modified by a vote of the Fund’s shareholders. MFS has also agreed in writing to assume and bear High Yield Portfolio’s “Total Annual Fund Operating Expenses” which exceed 1.25% annually of High Yield Portfolio’s average daily net assets. This expense limitation agreement excludes interest, taxes, brokerage commissions, and extraordinary expenses. This agreement is contained in High Yield Portfolio’s Investment Advisory Agreement and cannot be changed without a vote of High Yield Portfolio’s shareholders. |
At a Board of Trustees meeting held on July 13, 2011, the Trustees voted to solicit approval of a new investment advisory agreement between the High Yield Portfolio and MFS. The current agreement provides that MFS will bear this Portfolio’s operating expenses, excluding interest, taxes, brokerage commissions and extraordinary expenses, which exceed 1.25% of the average net assets of such Portfolio incurred during any fiscal year. The proposed agreement would make no change in the management fee schedule, but would not contain such an expense limitation agreement. Rather, MFS intends to continue its current practice of negotiating an expense limitation arrangement with the Trustees. Currently, MFS has agreed to an expense limitation of 1.00% through April 30, 2013 for Initial Class shares.
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CAPITAL APPRECIATION VARIABLE ACCOUNT
AND MFS MASSACHUSETTS INVESTORS GROWTH STOCK PORTFOLIO
Annual Total Operating Expenses1
Fiscal Year Ending December 31, 2010
CAVA | Massachusetts Investors Growth Stock Portfolio Initial Class | Massachusetts Investors Growth Stock Portfolio Initial Class (Pro Forma) | ||||||||||
Annual Fund Operating Expenses (as a % of the average daily net assets in the separate account or fund, as applicable) | ||||||||||||
Management Fees | 0.75 | % | 0.75 | % | 0.75 | % | ||||||
Distribution (12b-1) Fees | N/A | N/A | N/A | |||||||||
Other Expenses2 | 0.13 | % | 0.11 | % | 0.10 | % | ||||||
Total Annual Fund Operating Expenses | 0.88 | % | 0.86 | % | 0.85 | % | ||||||
Fee Reductions and/or Expense Reimbursements3 | n/a | 0.04 | % | 0.03 | % | |||||||
Total Fund Operating Expenses After Fee Reductions and/or Expense Reimbursements3 | 0.88 | % | 0.82 | % | 0.82 | % |
1 | Expenses computed for the twelve-month period ended December 31, 2010, the Account’s and the Portfolio’s most recent fiscal year end. |
2 | CAVA and Massachusetts Investors Growth Stock Portfolio have entered into an expense offset arrangement that reduces the Account’s and the Portfolio’s custodian fee based upon the amount of cash maintained by the Account and the Portfolio with its custodian. Such fee reduction is not reflected in the table. Had this fee reduction been taken into account, “Total Separate Account and Fund Operating Expenses After Fee Reductions and/or Expense Reimbursements” would be lower. |
3 | With respect to CAVA, MFS has agreed in writing to reduce its management fee to 0.675% in excess of $300 million of CAVA’s average daily net assets annually. This arrangement will continue until modified by a vote of the CAVA’s contract owners. MFS has also agreed in writing to assume and bear CAVA’s “Total Annual Fund Operating Expenses” which exceed 1.25% of CAVA’s average daily net assets annually. This expense limitation excludes interest, taxes, portfolio brokerage commissions, and to the extent permitted, extraordinary expenses, and mortality and expense risk charges, distribution expense risk charges, and contract maintenance charges payable to Sun Life, and will continue until modified by a vote of the CAVA’s contract owners. With respect to Massachusetts Investors Growth Stock Portfolio, MFS has agreed in writing to reduce its management fee to 0.65% in excess of $1 billion of Massachusetts Investors Growth Stock Portfolio’s average daily net assets annually until modified by a vote of the Massachusetts Investors Growth Stock Portfolio’s shareholders. In addition, MFS has agreed in writing to bear expenses such that “Total Annual Fund Operating Expenses,” determined without giving effect to the |
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expense offset arrangement described above, do not exceed 0.82% for Initial Class shares. This agreement excludes interest, taxes, extraordinary expenses, brokerage and transaction costs and investment-related expenses, and will continue until April 30, 2013. |
GOVERNMENT SECURITIES VARIABLE ACCOUNT
AND MFS GOVERNMENT SECURITIES PORTFOLIO
Annual Total Operating Expenses1
Fiscal Year Ending December 31, 2010
GSVA | MFS Government Securities Initial Class | Government Securities Initial Class (Pro Forma) | ||||||||||
Annual Fund Operating Expenses (as a % of the average daily net assets in the separate account or fund, as applicable) | ||||||||||||
Management Fees | 0.55 | % | 0.55 | % | 0.55 | % | ||||||
Distribution (12b-1) Fees | N/A | N/A | N/A | |||||||||
Other Expenses2 | 0.22 | % | 0.09 | % | 0.09 | % | ||||||
Total Annual Fund Operating Expenses | 0.77 | % | 0.64 | % | 0.64 | % | ||||||
Fee Reductions and/or Expense Reimbursements3 | N/A | N/A | N/A | |||||||||
Total Fund Operating Expenses After Fee Reductions and/or Expense Reimbursements3 | 0.77 | % | 0.64 | % | 0.64 | % |
1 | Expenses computed for the twelve-month period ended December 31, 2010, the Account’s and the Portfolio’s most recent fiscal year end. |
2 | GSVA and Government Securities Portfolio have entered into an expense offset arrangement that reduces the Account’s and the Portfolio’s custodian fee based upon the amount of cash maintained by the Account and the Portfolio with its custodian. Such fee reduction is not reflected in the table. Had this fee reduction been taken into account, “Total Separate Account and Fund Operating Expenses After Fee Reductions and/or Expense Reimbursements” would be lower. |
3 | With respect to GSVA, MFS has agreed in writing to reduce its management fee to 0.495% in excess of $300 million of GSVA’s average daily net assets annually. This arrangement will continue until modified by a vote of the GSVA’s contract owners. MFS has also agreed in writing to assume and bear GSVA’s “Total Annual Fund Operating Expenses” which exceed 1.25% of GSVA’s average daily net assets annually. This expense limitation excludes interest, taxes, portfolio brokerage commissions, and to the extent permitted, extraordinary expenses, and mortality and expense risk charges, distribution expense risk charges and contract maintenance charges payable to |
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Sun Life, and will continue until modified by a vote of the GSVA’s contract owners. With respect to Government Securities Portfolio, MFS has agreed in writing to reduce its management fee to 0.50% in excess of $1 billion of Government Securities Portfolio’s average daily net assets annually. This written agreement will remain in effect until modified by a vote of the Government Securities Portfolio’s shareholders. In addition, MFS has agreed in writing to assume and bear Government Securities Portfolio’s “Total Annual Fund Operating Expenses” which exceed 1.25% of Government Securities Portfolio’s average daily net assets annually. This expense limitation agreement excludes interest, taxes, brokerage commissions, and extraordinary expenses. This agreement is contained in Government Securities Portfolio’s Investment Advisory Agreement and cannot be changed without a vote of Government Securities Portfolio’s shareholders.
At a Board of Trustees meeting held on July 13, 2011, the Trustees voted to solicit approval of a new investment advisory agreement between the Government Securities Portfolio and MFS. The current agreement provides that MFS will bear this Portfolio’s operating expenses, excluding interest, taxes, brokerage commissions and extraordinary expenses, which exceed 1.25% of the average net assets of such Portfolio incurred during any fiscal year. The proposed agreement would make no change in the management fee schedule, but would not contain such an expense limitation agreement. Rather, MFS intends to continue its current practice of negotiating an expense limitation arrangement with the Trustees. Currently, MFS has agreed to an expense limitation of 1.00% through April 30, 2013 for Initial Class shares. In addition, MFS has agreed to an expense limitation of 0.61% for Initial Class shares through April 30, 2014 in the event that the reorganization of GSVA into Government Securities Portfolio is consummated.
GLOBAL GOVERNMENTS VARIABLE ACCOUNT
AND MFS GLOBAL GOVERNMENTS PORTFOLIO
Annual Total Operating Expenses1
Fiscal Year Ending December 31, 2010
GGVA | Global Governments Portfolio Initial Class | MFS Global Governments Portfolio Initial Class (Pro Forma) | ||||||||||
Annual Fund Operating Expenses (as a % of the average daily net assets in the separate account or fund, as applicable) | ||||||||||||
Management Fees | 0.75 | % | 0.75 | % | 0.75 | % | ||||||
Distribution (12b-1) Fees | N/A | N/A | N/A | |||||||||
Other Expenses2 | 1.64 | % | 0.40 | % | 0.40 | % | ||||||
Total Annual Fund Operating Expenses | 2.39 | % | 1.15 | % | 1.15 | % | ||||||
Fee Reductions and/or Expense Reimbursements3 | 1.14 | % | N/A | N/A | ||||||||
Total Fund Operating Expenses After Fee Reductions and/or Expense Reimbursements3 | 1.25 | % | 1.15 | % | 1.15 | % |
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1 | Expenses computed for the twelve-month period ended December 31, 2010, the Account’s and the Portfolio’s most recent fiscal year end. |
2 | GGVA and Global Governments Portfolio have entered into an expense offset arrangement that reduces the Account’s and the Portfolio’s custodian fee based upon the amount of cash maintained by the Account and the Portfolio with its custodian. Such fee reduction is not reflected in the table. Had this fee reduction been taken into account, “Total Separate Account and Fund Operating Expenses After Fee Reductions and/or Expense Reimbursements” would be lower. |
3 | With respect to GGVA, MFS has agreed in writing to assume and bear GGVA’s “Total Annual Fund Operating Expenses” which exceed 1.25% of GGVA’s average daily net assets annually. This expense limitation excludes interest, taxes, portfolio brokerage commissions, and to the extent permitted, extraordinary expenses, and mortality and expense risk charges, distribution expense risk charges, and contract maintenance charges payable to Sun Life, and will continue until modified by a vote of the GGVA’s contract owners. With respect to Global Governments Portfolio, MFS has agreed in writing to assume and bear Global Governments Portfolio’s”Total Annual Fund Operating Expenses” which exceed 1.25% of Global Governments Portfolio’s average daily net assets annually. This expense limitation agreement excludes interest, taxes, brokerage commissions, and extraordinary expenses. This agreement is contained in Global Governments Portfolio’s Investment Advisory Agreement and cannot be changed without a vote of Global Governments Portfolio’s shareholders. |
At a Board of Trustees meeting held on July 13, 2011, the Trustees voted to solicit approval of a new investment advisory agreement between the Global Governments Portfolio and MFS. The current agreement provides that MFS will bear this Portfolio’s operating expenses, excluding interest, taxes, brokerage commissions and extraordinary expenses, which exceed 1.25% of the average net assets of such Portfolio incurred during any fiscal year. The proposed agreement would make no change in the management fee schedule, but would not contain such an expense limitation agreement. Rather, MFS intends to continue its current practice of negotiating an expense limitation arrangement with the Trustees. Currently, MFS has agreed to an expense limitation of 1.00% through April 30, 2015 for Initial Class shares.
TOTAL RETURN VARIABLE ACCOUNT AND MFS TOTAL RETURN PORTFOLIO
Annual Total Operating Expenses1
Fiscal Year Ending December 31, 2010
TRVA | Total Return Portfolio Initial Class | Total Return Portfolio Initial Class (Pro Forma) | ||||||||||
Annual Fund Operating Expenses (as a % of the average daily net assets in the separate account or fund, as applicable) | ||||||||||||
Management Fees | 0.75 | % | 0.69 | % | 0.68 | % | ||||||
Distribution (12b-1) Fees | N/A | N/A | N/A | |||||||||
Other Expenses2 | 0.18 | % | 0.08 | % | 0.08 | % | ||||||
Total Annual Fund Operating Expenses | 0.93 | % | 0.77 | % | 0.76 | % | ||||||
Fee Reductions and/or Expense Reimbursements3 | 0.08 | % | 0.03 | % | 0.02 | % | ||||||
Total Fund Operating Expenses After Fee Reductions and/or Expense Reimbursements3 | 0.85 | % | 0.74 | % | 0.74 | % |
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1 | Expenses computed for the twelve-month period ended December 31, 2010, the Account’s and the Portfolio’s most recent fiscal year end. |
2 | TRVA and Total Return Portfolio have entered into an expense offset arrangement that reduces the Account’s and the Portfolio’s custodian fee based upon the amount of cash maintained by the Account and the Portfolio with its custodian. Such fee reduction is not reflected in the table. Had this fee reduction been taken into account, “Total Separate Account and Fund Operating Expenses After Fee Reductions and/or Expense Reimbursements” would be lower. |
3 | With respect to TRVA, MFS has agreed in writing to assume and bear TRVA’s “Total Annual Fund Operating Expenses” which exceed 1.25% of TRVA’s average daily net assets annually. This expense limitation agreement excludes interest, taxes, portfolio brokerage commissions, and to the extent permitted, extraordinary expenses, and mortality and expense risk charges, distribution expense risk charges, and contract maintenance charges payable to Sun Life. This agreement is contained in TRVA’s Investment Advisory Agreement and cannot be changed without a vote of TRVA’s contract owners. In addition, MFS has agreed in writing to bear TRVA’s “Total Annual Fund Operating Expenses” such that TRVA’s “Total Annual Fund Operating Expenses” do not exceed 0.85% of TRVA’s average daily net assets annually. This expense limitation agreement excludes interest, taxes, brokerage and transaction costs, extraordinary expenses, investment-related expenses, mortality and expense risk charges, and contract maintenance charges payable to Sun Life and will continue until April 30, 2013. With respect to Total Return Portfolio, MFS has agreed in writing to reduce its management fee to 0.60% in excess of $1 billion of Total Return Portfolio’s average daily net assets annually. This arrangement will continue until modified by a vote of the Total Return Portfolio’s shareholders. MFS has also agreed in writing to assume and bear Total Return Portfolio’s “Total Annual Fund Operating Expenses” which exceed 1.25% of Total Return Portfolio’s average daily net assets annually. This expense limitation agreement excludes interest, taxes, brokerage commissions, and extraordinary expenses. This agreement is contained in Total Return Portfolio’s Investment Advisory Agreement and cannot be changed without a vote of Total Return Portfolio’s shareholders. MFS has also agreed in writing to bear expenses such that “Total Annual Fund Operating Expenses” for Total Return Portfolio do not exceed 0.74% for Initial Class shares. This expense limitation agreement excludes interest, taxes, extraordinary expenses, brokerage and transaction costs and investment-related expenses, and will continue until April 30, 2013. |
At a Board of Trustees meeting held on July 13, 2011, the Trustees voted to solicit approval of a new investment advisory agreement between the Total Return Portfolio and MFS. The current agreement provides that MFS will bear this Portfolio’s operating expenses, excluding interest, taxes, brokerage commissions and extraordinary expenses, which exceed 1.25% of the average net assets of such Portfolio incurred during any fiscal year. The proposed agreement would make no change in the management fee schedule, but would not contain such an expense limitation agreement. Rather, MFS intends to continue its current practice of negotiating an expense limitation arrangement with the Trustees. Currently, MFS has agreed to an expense limitation of 0.74% through April 30, 2013 for Initial Class shares.
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EXAMPLES
The tables below show examples of the total expenses you would pay on a $10,000 investment over one-, three-, five- and ten-year periods. The examples are intended to help you compare the cost of investing in the Accounts (shown in the first row of each table), the Portfolios of the Trust currently (shown in the second row of each table), and the Portfolios of the Trust assuming each Reorganization takes place (shown in the third row of each table). The examples assume a 5% average annual return, that you redeem all of your shares at the end of each time period, and that you reinvest all of your dividends. The following also assumes that total annual operating expenses remain the same throughout all periods, except that contractual fee waivers are reflected only for the length of the contractual limit in the pro forma example for the Fund.
THE EXAMPLES ARE FOR ILLUSTRATION ONLY AND YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER.
THE EXAMPLES DO NOT REFLECT CONTRACT-RELATED FEES AND CHARGES SUN LIFE ASSESSES UNDER YOUR VARIABLE ANNUITY CONTRACTS. IF THOSE FEES AND EXPENSES HAD BEEN INCLUDED, YOUR COSTS WOULD BE HIGHER.
1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
Capital Appreciation Variable Account | $ | 90 | $ | 281 | $ | 488 | $ | 1,084 | ||||||||
Massachusetts Investors Growth Stock Portfolio | ||||||||||||||||
Initial Class | $ | 84 | $ | 267 | $ | 470 | $ | 1,054 | ||||||||
Massachusetts Investors Growth Stock Portfolio (Pro Forma Combined) | ||||||||||||||||
Initial Class | $ | 84 | 266 | 466 | $ | 1,044 |
1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
Global Governments Variable Account | $ | 127 | $ | 397 | $ | 686 | $ | 1,511 | ||||||||
Global Governments Portfolio | ||||||||||||||||
Initial Class | $ | 117 | $ | 365 | $ | 633 | $ | 1,398 | ||||||||
Global Governments Portfolio (Pro Forma Combined) | ||||||||||||||||
Initial Class | $ | 117 | $ | 365 | $ | 633 | $ | 1,398 |
1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
Government Securities Variable Account | $ | 79 | $ | 246 | $ | 428 | $ | 954 | ||||||||
Government Securities Portfolio | ||||||||||||||||
Initial Class | $ | 65 | $ | 205 | $ | 357 | $ | 798 | ||||||||
Government Securities Portfolio (Pro Forma Combined) | ||||||||||||||||
Initial Class | $ | 65 | $ | 205 | $ | 357 | $ | 798 |
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1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
High Yield Variable Account | $ | 92 | $ | 312 | $ | 562 | $ | 1,280 | ||||||||
High Yield Portfolio | ||||||||||||||||
Initial Class | $ | 85 | $ | 265 | $ | 460 | $ | 1,025 | ||||||||
High Yield Portfolio (Pro Forma Combined) | ||||||||||||||||
Initial Class | $ | 85 | $ | 265 | $ | 460 | $ | 1,025 |
1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
Money Market Variable Account | $ | 66 | $ | 224 | $ | 404 | $ | 925 | ||||||||
Money Market Portfolio | ||||||||||||||||
Initial Class | $ | 58 | $ | 186 | $ | 326 | $ | 735 | ||||||||
Money Market Portfolio (Pro Forma Combined) | ||||||||||||||||
Initial Class | $ | 58 | $ | 186 | $ | 326 | $ | 735 |
1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
Total Return Variable Account | $ | 87 | $ | 283 | $ | 502 | $ | 1,131 | ||||||||
Total Return Portfolio | ||||||||||||||||
Initial Class | $ | 76 | $ | 238 | $ | 415 | $ | 928 | ||||||||
Total Return Portfolio (Pro Forma Combined) | ||||||||||||||||
Initial Class | $ | 76 | $ | 237 | $ | 411 | $ | 918 |
Who will be the investment adviser of my Portfolio(s) after the Reorganization? What are the advisory fees for the Accounts and the Portfolios?
MFS, located at 500 Boylston Street, Boston, Massachusetts, serves as the investment adviser for each Portfolio. MFS is a subsidiary of Sun Life of Canada (U.S.) Financial Services Holdings, Inc. which in turn is an indirect majority-owned subsidiary of Sun Life Financial Inc.
The table shows the effective fee rate that each Account and the corresponding Portfolio paid to their respective advisers for the year ended December 31, 2010.
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Effective advisory fee rate for the year ended December 31, 2010
Money Market Variable Account | 0.111 | %* | Money Market Portfolio | 0.198 | %* | |||||
High Yield Variable Account | 0.70 | % | High Yield Portfolio | 0.70 | % | |||||
Capital Appreciation Variable Account | 0.75 | % | Massachusetts Investors Growth Stock Portfolio | 0.75 | % | |||||
Government Securities Variable Account | 0.55 | % | Government Securities Portfolio | 0.55 | % | |||||
Global Governments Variable Account | 0.75 | % | Global Governments Portfolio | 0.75 | % | |||||
Total Return Variable Account | 0.75 | % | Total Return Portfolio | 0.67 | % |
* | This includes MFS’ voluntary management fee waiver to avoid a negative yield. The effective management fee for MMVA and the Money Market Portfolio would both be 0.50% if this voluntary waiver had been excluded. |
What will be the primary federal tax consequences of the Reorganization?
The Reorganization is intended to qualify as a tax-free transaction for federal income tax purposes. Assuming the Reorganization qualifies for such treatment, each Account Owner will not recognize taxable income as a result of the Reorganization. As a condition to the closing of the Reorganization, the Accounts will receive an opinion of counsel to the effect that the Reorganization will qualify as a tax-free transaction for federal income tax purposes, which opinion will be based on customary representations made by parties to the Reorganization. You should separately consider any state, local and other tax consequences in consultation with your tax advisor. Opinions of counsel are not binding on the Internal Revenue Service or the courts.
The Accounts and the Portfolios of the Trust both declare and pay dividends from net investment income and net realized capital gains each year to their shareholders. A Portfolio may distribute net realized capital gains only once a year. As described in more detail in “More Information About the Accounts and the Trust—Distributions” below, all dividends and distributions are reinvested automatically in additional units/shares of the same class of the Account/Portfolio at net asset value.
The Accounts do not generally hold annual meetings of their Account Owners. Neither does the Trust hold annual shareholder meetings. The 1940 Act requires that a shareholder meeting be called for the purpose of electing Managers/Trustees at such time as less than a majority of Managers/Trustees holding office have been elected by shareholders. Meetings of the contractowners/shareholders may be called at any time by the Board of Managers/Trustees or by the chairperson of the Board or of the Accounts/Trust. To the extent required by the 1940 Act, meetings of the shareholders for the purpose of voting on the removal of any Trustees shall be
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called promptly by the Trustees upon the written request of shareholders holding at least 10% of the outstanding shares of the Trust entitled to vote.
Under the laws of the State of Delaware, Account Owners do not have appraisal rights in connection with a combination or acquisition of the assets of another fund. Under the laws of the Commonwealth of Massachusetts, shareholders of the Trust do not have appraisal rights in connection with an acquisition of the assets of another fund.
DESCRIPTION OF FEATURES OF COMPASS 2 AND
COMPASS 3 VARIABLE ANNUITY CONTRACTS
The following presents a brief description of the Compass 2 and Compass 3 Contracts. Currently the Accounts referenced in the Contracts are managed separate accounts which directly hold portfolio securities. Except that, as part of the Reorganization, the Accounts will become sub-accounts of a UIT separate account which will hold shares of Trust portfolios which in turn will hold portfolio securities, the Reorganization will not result in any change in the features of the Contracts, with the exception of voting rights as described above, in the rights of Account Owners under those Contracts. (See “Will the Reorganization result in change in Voting Procedures?”). Greater detail regarding the Contracts is provided in the Prospectuses for the Accounts, which are incorporated herein by reference.
The Contracts are flexible payment nonparticipating deferred combination variable and fixed annuity contracts which permit allocation to six variable investment options and a fixed account option. Subject to certain conditions Account Owners can transfer Account Value among the variable investment options and between the fixed account option and one or more variable investment options. The Contracts are no longer being offered for sale, but additional payments may be made on certain outstanding Contracts.
Before annuity payments begin, a death benefit is payable if the Annuitant dies.
The death benefit is equal to the greatest of:
1. | the value of your Accumulation Account; |
2. | the total Purchase Payments made under the Contract reduced by all withdrawals; and |
3. | unless prohibited by applicable state law, the value of your Accumulation Account on the fifth Contract Anniversary for Compass 2 Contracts (seven year Contract Anniversary, immediately preceding the death of the annuitant, for Compass 3 Contracts), |
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adjusted for any Purchase Payments or cash withdrawal payments made and Contract charges assessed after such fifth (or such seven year) Contract Anniversary. |
Under the Compass 2 and Compass 3 Contracts, while the Annuitant is alive, the Contract Owner may select one or more of the following annuity options:
Annuity Option A. Life Annuity: Monthly payments during the lifetime of the Payee.
Annuity Option B. Life Annuity with 60, 120, 180 or 240 Monthly Payments Certain: Monthly payments during the lifetime of the Payee and in any event for 60, 120, 180 or 240 months certain as elected.
Annuity Option C. Joint and Survivor Annuity: Monthly payments during the joint lifetime of the Payee and the designated second person and during the lifetime of the survivor. During the lifetime of the survivor, variable monthly payments, if any, will be determined using the percentage chosen at the time of the election of this option of the number of each type of Annuity Unit credited to the Contract and each fixed monthly payment, if any, will be equal to the same percentage of the fixed monthly payment payable during the joint lifetime of the Payee and the designated second person.
Annuity Option D. Fixed Payments for a Specified Period Certain: Fixed monthly payments for a specified period of time (at least five years but not exceeding 30 years), as elected.
Annuity Option E. Fixed Payments: The amount applied will provide fixed payments in accordance with this option at interest. Fixed payments will be made in such amounts and at such times (at least over a period of five years) as have been agreed upon and will continue until the amount held with interest is exhausted. Interest will be credited yearly on the amount remaining unpaid at a rate which is determined from time to time but which shall not be less than 4% per year compounded annually. The rate so determined may be changed at any time; however, the rate may not be reduced more frequently than once during each calendar year.
Before annuity payments have commenced and subject to a possible withdrawal charge during the first five years after a purchase payment is made under a Compass 2 Contract (seven years for Compass 3 Contracts) Contract Owners may withdraw any or all of the value under their Contracts.
INFORMATION ABOUT THE REORGANIZATION
Reasons for the Reorganization
The Reorganization is being proposed because it offers Account Owners the opportunity to participate in larger resulting Portfolios with the same investment objectives, the same or
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substantially similar investment strategies and principal risks. There is also the potential for lower expenses as the result of fixed expenses being spread over each resulting Portfolio’s larger asset base. The larger asset base in the Portfolios in which Account Owners will be invested can be expected to increase investment opportunities and broaden diversification of the funding medium for their contracts. As can be seen in the chart below, as of December 31, 2010, the net assets of each Account was substantially smaller than that of the corresponding Portfolio,
Assets as of December 31, 2010 ($ millions) | ||||||||||
Money Market Variable Account | $ | 28 | $ | 342 | MFS Money Market Portfolio | |||||
High Yield Variable Account | 41 | 224 | MFS High Yield Portfolio | |||||||
Capital Appreciation Variable Account | 130 | 500 | MFS Massachusetts Investors Growth Stock Portfolio | |||||||
Government Securities Variable Account | 56 | 669 | MFS Government Securities Portfolio | |||||||
Global Governments Variable Account | 6 | 33 | MFS Global Governments Portfolio | |||||||
Total Return Variable Account | 99 | 1406 | MFS Total Return Portfolio |
At the July 13, 2011 meeting of the Board of Managers (the “Board”) for each Account, representatives of Sun Life and MFS presented the Reorganization to the Board. Prior to the meeting the Board had received materials prepared by MFS, with assistance from Sun Life, regarding the reasons for the Reorganization and details concerning each of the six Accounts proposed to be acquired and the Portfolios which are the proposed acquirers. MFS explained that the Reorganization was being proposed because it offers Account Owners the opportunity to participate in larger resulting Portfolios with the same investment objectives and principal risks, and the same or substantially similar principal investment strategies. In addition, the Board was advised that there is the potential for lower expenses as the result of fixed expenses being spread over each resulting Portfolio’s larger asset base. The larger asset base in the Portfolios in which Account Owners will be invested can be expected to increase investment opportunities and broaden diversification of the funding medium for their contracts.
Further, it was explained that the end result of the Reorganization will be an organizational structure for Account Owners that is more common in the variable annuity and variable life insurance industries than the current organization structure. All of Sun Life’s other individual variable annuity and variable life insurance products are structured with two tiers or levels; namely, the insurance company separate account purchases shares of mutual funds and those mutual funds hold diverse portfolios of investments. Currently, the Accounts have a
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one-tier structure consisting of an insurance company separate account that invests directly in a diverse portfolio of investments. The Reorganization will move the Accounts from a one-tier structure to the more common two-tiered structure. In addition, MFS and Sun Life will achieve certain efficiencies as a result of no longer having to maintain the Accounts’ current single tier structure. At the same time, there will be no change in the Contracts or in the rights of Account Owners (with the exception of voting rights as described above) under those Contracts after the Reorganization.
All of the Managers who are not “interested persons” (as such term is defined in the 1940 Act) (the “Independent Managers”) met separately with their independent legal counsel to review and consider the proposed Reorganization, information about the Accounts and the Portfolios and the supporting materials provided. Among other matters, independent legal counsel advised the Independent Managers of the findings that would need to be made by the Board under Rule 17a-8 under the 1940 Act to approve the merger of the Accounts and the Portfolios which are affiliates.
The Board concluded that participation in the Reorganization is in the best interests of each Account and that the interests of Contract Owners and Payees will not be diluted as a result of the Reorganization. In reaching this conclusion, the Board considered a number of factors, including:
• | that, with the exception of voting rights as described above, the contractual rights of Account Owners following the Reorganization would not differ from their rights prior to the Reorganization. Immediately after the Reorganization, the value of each contract would be the same as before the Reorganization; |
• | immediately after the Reorganization, each Account Owner will have an interest in a Portfolio whose investment objective, principal investment strategies, and risk factors are substantially identical to those of the Account in which they currently have an interest; |
• | MFS’ representation that the larger asset base of the Portfolios after the Reorganization should increase investment opportunities and broaden diversification of the underlying investment options for the Contracts and had the potential for reducing the expense ratios of the Portfolios, which currently are lower than, and in one case the same as, the expense ratios for the corresponding Accounts; |
• | that MFS advised both the Accounts and the corresponding Portfolios using the same portfolio manager(s); |
• | that MFS has agreed to pay all costs and expenses associated with effecting the Reorganization other than certain brokerage and repositioning costs which are expected to be minimal; |
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• | that MFS has agreed to bear Government Securities Portfolio’s operating expenses, excluding interest, taxes, brokerage and transaction costs, extraordinary expenses, and investment-related expenses which exceed 0.61% for Initial Class shares of the average net assets of such Portfolio through April 30, 2014 in the event that the reorganization of GSVA into Government Securities Portfolio is consummated; |
• | that each Account and its corresponding Portfolio have equivalent historical performance records; |
• | that Sun Life has agreed to limit the New UIT’s expenses to ensure that Account Owners do not incur aggregate Contract expenses that are higher than their pre-Reorganization aggregate Contract expenses; and |
• | that the Reorganization has been structured as a tax free transacation for federal income tax purposes. |
Agreement and Plan of Reorganization
To effect the Reorganization, the assets and liabilities of each Account (other than liabilities relating to insurance obligations such as death benefits, surrender benefits and annuity payments) will be used to purchase Initial Class shares of the corresponding Portfolio. The date that the assets and liabilities of the Accounts will be valued for purposes of the Reorganization will be after the close of business on the closing date, which is a date to be mutually agreed upon by all of the parties to the Reorganization Agreement. If the Reorganization is approved, the closing is expected to occur in the fourth quarter of 2011. After the Reorganization, the Accounts will no longer hold securities and other instruments directly; instead, the Accounts, which will be restructured as an SEC-registered unit investment trust, will hold similar investments indirectly through the intermediate vehicle of the Portfolios. When the Accounts are restructured as a unit investment trust, they will no longer be registered as management investment companies under the 1940 Act.
Each Portfolio will issue the Initial Class shares to the New UIT in an amount equal to the value of the assets that the Portfolio receives from an Account, less the Account’s liabilities (other than liabilities relating to insurance obligations that will be assumed by the New UIT) assumed by each Portfolio in the transaction. As a result, the New UIT will become a shareholder of each Portfolio. Accumulation or annuity units an Account Owner had in an Account prior to the Reorganization, will, as part of the Reorganization, be allocated to the New UIT investing in the Portfolios. The total value of the accumulation or annuity units a Account Owner has in an Account immediately prior to the Reorganization will be the same as the total value of the accumulation or annuity units the same Contract Owner or Payee will have in the New UIT immediately after the Reorganization.
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More information on the Reorganization is contained in the Agreement and Plan of Reorganization attached to this Proxy Statement/Prospectus as Exhibit A. Approval of the Reorganization by Account Owners is a prerequisite to the implementation of the Reorganization. The Reorganization may be postponed or canceled for any reason with the consent of the parties to the Agreement and Plan of Reorganization.
THE BOARD, INCLUDING ALL OF THE INDEPENDENT MANAGERS, UNANIMOUSLY RECOMMENDS APPROVAL OF THE REORGANIZATION AGREEMENT.
Description of Portfolio Shares
The New UIT will receive shares of a Portfolio in accordance with the procedures provided for in the Agreement and Plan of Reorganization. Each such share will be fully paid and non-assessable when issued, which means that the consideration for the shares has been paid in full and the issuing Portfolio may not impose levies on shareholders for more money, respectively. Full and fractional Initial Class shares of the Portfolios will be issued to the New UIT in accordance with the procedures detailed in the Agreement and Plan of Reorganization. A Portfolio will not issue share certificates; rather, the ownership of the shares will be recorded on the books of the Trust. The shares of the Portfolios issued to the New UIT will have no pre-emptive or conversion rights.
Federal Income Tax Consequences
The Reorganization is not expected to result in the realization of taxable income or loss to Sun Life, the Accounts, or the Trust. The Reorganization is also not expected to result in tax consequences to Account Owners. The Reorganization itself will not result in a distribution from Contracts currently supported by the Accounts that would give rise to taxable income to Account Owners.
The Reorganization is intended to qualify for federal income tax purposes as a tax-free transaction under section 351(a) of the Internal Revenue Code of 1986, as amended (the “Code”). As a condition to the closing of the Reorganization, Sun Life, the Accounts, and the Trust will receive an opinion from the law firm of Morgan, Lewis & Bockius LLP to the effect that, on the basis of the existing provisions of the Code., U.S. Treasury regulations issued thereunder, current administrative rules, pronouncements and court decisions, and certain representations made by the parties to the Reorganization, for federal income tax purposes, upon consummation of the Reorganization:
1. Sun Life, the Accounts and the New UIT will not recognize any gain or loss as a result of the restructuring of the Accounts into corresponding sub-accounts of the New UIT.
2. Under Section 351 of the Code, Sun Life will not recognize any gain or loss as a result of the transfer of the assets of each Account to its corresponding Portfolio in exchange for shares of such corresponding Portfolio and assumption by such
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corresponding portfolio of such Account’s liabilities, (other than liabilities associated with insurance obligations that will be assumed by the corresponding sub-account of the New UIT).
3. Under Section 1032 of the Code, no gain or loss will be recognized by a Portfolio upon the receipt of the assets of the corresponding Account solely in exchange for the issuance of such Portfolio’s shares and the assumption of such Account’s liabilities (other than liabilities associated with insurance obligations that will be assumed by the corresponding sub-account of the New UIT).
4. Under Section 362(a) of the Code, each Portfolio’s basis in the assets it receives from the corresponding Account will be the same as such Account’s basis in those assets immediately prior to the Reorganization.
5. Under Section 1223(2) of the Code, each Portfolio’s holding period for the transferred assets will include the Account’s holding period therefor.
6. Under Section 358 of the Code, the aggregate basis in the shares of a Portfolio received in the Reorganization by the corresponding sub-account of the New UIT will be the same as the aggregate adjusted basis of the assets surrendered by the corresponding Account in exchange therefore reduced by the amount of liabilities, if any, of the Account assumed by such Portfolio.
7. Under Section 1223(1) of the Code, Sun Life’s holding period (through each sub-account of the New UIT) in the shares of each Portfolio received in the Reorganization will include its holding period (through each Account) for the assets surrendered in exchange therefor, provided such assets were held as capital assets on the closing date.
8. No gain or loss will be recognized by the owners of variable contracts based on the Accounts (and then the sub-accounts of the New UIT) as a result of the Reorganization.
Capitalization. The following table shows the capitalization of the Capital Appreciation Variable Account and the Massachusetts Investors Growth Stock Portfolio as of December 31, 2010 on a pro forma combined basis, giving effect to the proposed acquisition of assets at net asset value as of that date:
Capital Appreciation Variable Account | Massachusetts Investors Growth Stock Portfolio | Pro Forma Adjustments | Pro Forma Combined Fund | |||||||||||||
Net Assets | ||||||||||||||||
Compass 2 | $ | 85,332,486 | (a) | $ | N/A | $ | — | $ | — |
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Compass 3 | 806,530 | (a) | N/A | — | — | |||||||||||
Compass 3-Level 2 | 44,005,014 | (a) | N/A | — | — | |||||||||||
Initial Class | N/A | 429,925,381 | $ | 130,138,240 | (b) | $ | 560,063,621 | |||||||||
Service Class | N/A | 69,714,269 | — | 69,714,269 | ||||||||||||
Total | $ | 130,144,030 | (a) | $ | 499,639,650 | $ | 130,138,240 | (b) | $ | 629,777,890 | ||||||
Units/Shares outstanding | ||||||||||||||||
Compass 2 | 1,359,806 | N/A | ||||||||||||||
Compass 3 | 20,021 | N/A | ||||||||||||||
Compass 3-Level 2 | 2,587,734 | N/A | ||||||||||||||
Initial Class | N/A | 37,613,815 | 11,385,673 | (d) | 48,999,488 | |||||||||||
Service Class | N/A | 6,146,900 | — | 6,146,900 | ||||||||||||
Total | 3,967,561 | 43,760,715 | 11,385,673 | (d) | 55,146,388 | |||||||||||
Accumulation Unit Value/Net Asset Value per Share | ||||||||||||||||
Compass 2 | $ | 61.454 | (c) | N/A | N/A | |||||||||||
Compass 3 | $ | 40.282 | (c) | N/A | N/A | |||||||||||
Compass 3-Level 2 | $ | 16.917 | (c) | N/A | N/A | |||||||||||
Initial Class | N/A | $ | 11.43 | — | $ | 11.43 | ||||||||||
Service Class | N/A | $ | 11.34 | — | $ | 11.34 |
Shares outstanding have been rounded for presentation purposes.
(a) | Contract level net assets also include the net assets associated with the contract level reserve. |
(b) | Net assets of the Capital Appreciation Variable Account acquired by the Massachusetts Investors Growth Stock Portfolio. |
(c) | Accumulation unit value does not reflect net assets associated with the reserve of each contract level. |
(d) | If the reorganization had taken place on December 31, 2010, the Capital Appreciation Variable Account would have received 11,385,673 Initial Class shares, of the Massachusetts Investors Growth Stock Portfolio. No assurances can be given as to the number of Reorganization Shares the Capital Appreciation Variable Account will receive on the Exchange Date. The foregoing is merely an example of what the Capital Appreciation Variable Account would have received had the reorganization been consummated on December 31, 2010, and should not be relied upon to reflect the amount that will be actually received on or after the Exchange Date. |
Unaudited pro forma combined financial statements of the Capital Appreciation Variable Account and Massachusetts Investors Growth Stock Portfolio as of December 31, 2010 and for the twelve-month period then ended are included in the Statement of Additional Information relating to the proposed reorganization. Because the Agreement provides that the Massachusetts Investors Growth Stock Portfolio will be the surviving fund following the reorganization and because the Massachusetts Investors Growth Stock Portfolio’s investment objective and policies will remain unchanged, the pro forma combined financial statements reflect the transfer of the assets and
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liabilities of the Capital Appreciation Variable Account to the Massachusetts Investors Growth Stock Portfolio as contemplated by the Agreement.
The following table shows the capitalization of the Global Governments Variable Account and the Global Governments Portfolio as of December 31, 2010 on a pro forma combined basis, giving effect to the proposed acquisition of assets at net asset value as of that date:
Global Governments Variable Account | Global Governments Portfolio | Pro Forma Adjustments | Combined Fund Pro Forma | |||||||||||||
Net Assets | ||||||||||||||||
Compass 2 | $ | 1,742,393 | (a) | $ | N/A | $ | — | $ | — | |||||||
Compass 3 | 174,922 | (a) | N/A | — | — | |||||||||||
Compass 3-Level 2 | 4,173,495 | (a) | N/A | — | — | |||||||||||
Initial Class | N/A | 30,046,688 | $ | 6,090,958 | (b) | $ | 36,137,646 | |||||||||
Service Class | N/A | 3,093,289 | — | 3,093,289 | ||||||||||||
Total | $ | 6,090,810 | (a) | $ | 33,139,977 | $ | 6,090,958 | (b) | $ | 39,230,935 | ||||||
Units/Shares outstanding | ||||||||||||||||
Compass 2 | 55,035 | N/A | ||||||||||||||
Compass 3 | 5,750 | N/A | ||||||||||||||
Compass 3-Level 2 | 229,635 | N/A | ||||||||||||||
Initial Class | N/A | 2,731,783 | 553,723 | (d) | 3,285,506 | |||||||||||
Service Class | N/A | 285,120 | — | 285,120 | ||||||||||||
Total | 290,420 | 3,016,903 | 553,723 | (d) | 3,570,626 | |||||||||||
Accumulation Unit Value/Net Asset Value per Share | ||||||||||||||||
Compass 2 | $ | 31.477 | (c) | N/A | N/A | |||||||||||
Compass 3 | $ | 30.421 | (c) | N/A | N/A | |||||||||||
Compass 3-Level 2 | $ | 18.003 | (c) | N/A | N/A | |||||||||||
Initial Class | N/A | $ | 11.00 | — | $ | 11.00 | ||||||||||
Service Class | N/A | $ | 10.85 | — | $ | 10.85 |
Shares outstanding have been rounded for presentation purposes.
(a) | Contract level net assets also include the net assets associated with the contract level reserve. |
(b) | Net assets of the Global Government Variable Account acquired by the Global Governments Portfolio |
(c) | Accumulation unit value does not reflect net assets associated with the reserve of each contract level. |
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(d) | If the reorganization had taken place on December 31, 2010, the Global Governments Variable Account would have received 553,723 Initial Class shares, of the Global Governments Portfolio. No assurances can be given as to the number of Reorganization Shares the Global Governments Variable Account will receive on the Exchange Date. The foregoing is merely an example of what the Global Governments Variable Account would have received had the reorganization been consummated on December 31, 2010, and should not be relied upon to reflect the amount that will be actually received on or after the Exchange Date. |
Unaudited pro forma combined financial statements of the Global Governments Variable Account and Global Governments Portfolio as of December 31, 2010 and for the twelve-month period then ended are included in the Statement of Additional Information relating to the proposed reorganization. Because the Agreement provides that the Global Governments Portfolio will be the surviving fund following the reorganization and because the Global Governments Portfolio’s investment objective and policies will remain unchanged, the pro forma combined financial statements reflect the transfer of the assets and liabilities of the Global Governments Variable Account to the Global Governments Portfolio as contemplated by the Agreement.
The following table shows the capitalization of the Government Securities Variable Account and the Government Securities Portfolio as of June 30, 2011 on a pro forma combined basis, giving effect to the proposed acquisition of assets at net asset value as of that date:
Government Securities Variable Account | Government Securities Portfolio | Pro Forma Adjustments | Combined Fund Pro Forma | |||||||||||||
Net Assets | ||||||||||||||||
Compass 2 | $ | 40,282,477 | (a) | $ | N/A | $ | — | $ | — | |||||||
Compass 3 | 84,380 | (a) | N/A | — | — | |||||||||||
Compass 3-Level 2 | 12,379,625 | (a) | N/A | — | — | |||||||||||
Initial Class | N/A | 208,433,015 | $ | 52,749,784 | (b) | $ | 261,182,799 | |||||||||
Service Class | N/A | 429,535,311 | — | 429,535,311 | ||||||||||||
Total | $ | 52,746,482 | (a) | $ | 637,968,326 | $ | 52,749,784 | (b) | $ | 690,718,110 | ||||||
Units/Shares outstanding | ||||||||||||||||
Compass 2 | 822,820 | N/A | ||||||||||||||
Compass 3 | 2,562 | N/A | ||||||||||||||
Compass 3-Level 2 | 633,781 | N/A | ||||||||||||||
Initial Class | N/A | 15,354,434 | 3,887,235 | (d) | 19,241,669 | |||||||||||
Service Class | N/A | 31,909,719 | — | 31,909,719 | ||||||||||||
Total | 1,459,163 | 47,264,153 | 3,887,235 | (d) | 51,151,388 | |||||||||||
Accumulation Unit Value/Net Asset Value per Share | ||||||||||||||||
Compass 2 | $ | 47.450 | (c) | N/A | N/A | |||||||||||
Compass 3 | $ | 32.934 | (c) | N/A | N/A | |||||||||||
Compass 3-Level 2 | $ | 19.473 | (c) | N/A | N/A | |||||||||||
Initial Class | N/A | $ | 13.57 | — | $ | 13.57 | ||||||||||
Service Class | N/A | $ | 13.46 | — | $ | 13.46 |
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Shares outstanding have been rounded for presentation purposes.
(a) | Contract level net assets also include the net assets associated with the contract level reserve. |
(b) | Net assets of the Government Securities Variable Account acquired by the Government Securities Portfolio. |
(c) | Accumulation unit value does not reflect net assets associated with the reserve of each contract level. |
(d) | If the reorganization had taken place on June 30, 2011, the Government Securities Variable Account would have received 3,887,235 Initial Class shares, of the Government Securities Portfolio. No assurances can be given as to the number of Reorganization Shares the Government Securities Variable Account will receive on the Exchange Date. The foregoing is merely an example of what the Government Securities Variable Account would have received had the reorganization been consummated on June 30, 2011, and should not be relied upon to reflect the amount that will be actually received on or after the Exchange Date. |
The following table shows the capitalization of High Yield Variable Account and the High Yield Portfolio as of December 31, 2010 on a pro forma combined basis, giving effect to the proposed acquisition of assets at net asset value as of that date:
High Yield Variable Account | High Yield Portfolio | Pro Forma Adjustments | Combined Fund Pro Forma | |||||||||||||
Net Assets | ||||||||||||||||
Compass 2 | $ | 32,524,937 | (a) | $ | N/A | $ | — | $ | — | |||||||
Compass 3 | 217,938 | (a) | N/A | — | — | |||||||||||
Compass 3-Level 2 | 8,150,572 | (a) | N/A | — | — | |||||||||||
Initial Class | N/A | 122,665,835 | $ | 40,897,640 | (b) | $ | 163,563,475 | |||||||||
Service Class | N/A | 101,188,595 | — | 101,188,595 | ||||||||||||
Total | $ | 40,893,447 | (a) | $ | 223,854,430 | $ | 40,897,640 | (b) | $ | 264,752,070 | ||||||
Units/Shares outstanding | ||||||||||||||||
Compass 2 | 662,038 | N/A | ||||||||||||||
Compass 3 | 6,206 | N/A | ||||||||||||||
Compass 3-Level 2 | 427,983 | N/A | ||||||||||||||
Initial Class | N/A | 20,565,184 | 6,862,020 | (d) | 27,427,204 | |||||||||||
Service Class | N/A | 17,124,158 | — | 17,124,158 |
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Total | 1,096,227 | 37,689,342 | 6,862,020 | (d) | 44,551,362 | |||||||||||
Accumulation Unit Value/Net Asset Value per Share |
| |||||||||||||||
Compass 2 | $ | 48.077 | (c) | N/A | N/A | |||||||||||
Compass 3 | $ | 35.117 | (c) | N/A | N/A | |||||||||||
Compass 3-Level 2 | $ | 18.963 | (c) | N/A | N/A | |||||||||||
Initial Class | N/A | $ | 5.96 | — | $ | 5.96 | ||||||||||
Service Class | N/A | $ | 5.91 | — | $ | 5.91 |
Shares outstanding have been rounded for presentation purposes.
(a) | Contract level net assets also include the net assets associated with the contract level reserve. |
(b) | Net assets of the High Yield Variable Account acquired by the High Yield Portfolio. |
(c) | Accumulation unit value does not reflect net assets associated with the reserve of each contract level. |
(d) | If the reorganization had taken place on December 31, 2010, the High Yield Variable Account would have received 6,862,020 Initial Class shares, of the High Yield Portfolio. No assurances can be given as to the number of Reorganization Shares the High Yield Variable Account will receive on the Exchange Date. The foregoing is merely an example of what the High Yield Variable Account would have received had the reorganization been consummated on December 31, 2010, and should not be relied upon to reflect the amount that will be actually received on or after the Exchange Date. |
Unaudited pro forma combined financial statements of the High Yield Variable Account and High Yield Portfolio as of December 31, 2010 and for the twelve-month period then ended are included in the Statement of Additional Information relating to the proposed reorganization. Because the Agreement provides that the High Yield Portfolio will be the surviving fund following the reorganization and because the High Yield Portfolio’s investment objective and policies will remain unchanged, the pro forma combined financial statements reflect the transfer of the assets and liabilities of the High Yield Variable Account to the High Yield Portfolio as contemplated by the Agreement.
The following table shows the capitalization of the Money Market Variable Account and the Money Market Portfolio as of June 30, 2011 on a pro forma combined basis, giving effect to the proposed acquisition of assets at net asset value as of that date:
Money Market Variable Account | Money Market Portfolio | Pro Forma Adjustments | Combined Fund Pro Forma | |||||||||||||
Net Assets |
| |||||||||||||||
Compass 2 | $ | 12,801,488 | (a) | $ | N/A | $ | — | $ | — | |||||||
Compass 3 | 147,896 | (a) | N/A | — | — | |||||||||||
Compass 3-Level 2 | 13,699,250 | (a) | N/A | — | — | |||||||||||
Initial Class | N/A | 174,327,538 | $ | 26,646,940 | (b) | $ | 200,974,478 |
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Service Class | N/A | 146,523,154 | — | 146,523,154 | ||||||||||||
Total | $ | 26,648,634 | (a) | $ | 320,850,692 | $ | 26,646,940 | (b) | $ | 347,497,632 | ||||||
Units/Shares outstanding | ||||||||||||||||
Compass 2 | 599,092 | N/A | ||||||||||||||
Compass 3 | 8,619 | N/A | ||||||||||||||
Compass 3-Level 2 | 1,050,343 | N/A | ||||||||||||||
Initial Class | N/A | 174,453,166 | 26,646,940 | (d) | 201,100,106 | |||||||||||
Service Class | N/A | 146,622,066 | — | 146,622,066 | ||||||||||||
Total | 1,658,054 | 321,075,232 | 26,646,940 | (d) | 347,722,172 | |||||||||||
Accumulation Unit Value/Net Asset Value per Share | ||||||||||||||||
Compass 2 | $ | 21.111 | (c) | N/A | N/A | |||||||||||
Compass 3 | $ | 17.183 | (c) | N/A | N/A | |||||||||||
Compass 3-Level 2 | $ | 13.005 | (c) | N/A | N/A | |||||||||||
Initial Class | N/A | $ | 1.00 | — | $ | 1.00 | ||||||||||
Service Class | N/A | $ | 1.00 | — | $ | 1.00 |
Shares outstanding have been rounded for presentation purposes.
(a) | Contract level net assets also include the net assets associated with the contract level reserve. |
(b) | Net assets of the Money Market Variable Account acquired by the Money Market Portfolio. |
(c) | Accumulation unit value does not reflect net assets associated with the reserve of each contract level. |
(d) | If the reorganization had taken place on June 30, 2011, the Money Market Variable Account would have received 26,646,940 Initial Class shares, of the Money Market Portfolio. No assurances can be given as to the number of Reorganization Shares the Money Market Variable Account will receive on the Exchange Date. The foregoing is merely an example of what the Money Market Variable Account would have received had the reorganization been consummated on June 30, 2011, and should not be relied upon to reflect the amount that will be actually received on or after the Exchange Date. |
The following table shows the capitalization of the Total Return Variable Account and the Total Return Portfolio as of June 30, 2011 on a pro forma combined basis, giving effect to the proposed acquisition of assets at net asset value as of that date:
Total Return Variable Account | Total Return Portfolio | Pro Forma Adjustments | Combined Fund Pro Forma | |||||||||||||
Net Assets | ||||||||||||||||
Compass 2 | $ | 30,101,344 | (a) | $ | N/A | $ | — | $ | — | |||||||
Compass 3 | 955,034 | (a) | N/A | — | — |
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Compass 3-Level 2 | 65,622,477 | (a) | N/A | — | - | |||||||||||
Initial Class | N/A | 558,252,776 | $ | 96,685,163 | (b) | $ | 654,937,939 | |||||||||
Service Class | N/A | 801,365,793 | — | 801,365,793 | ||||||||||||
Total | $ | 96,678,855 | (a) | $ | 1,359,618,569 | $ | 96,685,163 | (b) | $ | 1,456,303,732 | ||||||
Units/Shares outstanding | ||||||||||||||||
Compass 2 | 548,907 | N/A | ||||||||||||||
Compass 3 | 18,564 | N/A | ||||||||||||||
Compass 3-Level 2 | 2,600,875 | N/A | ||||||||||||||
Initial Class | N/A | 31,920,595 | 5,528,025 | (d) | 37,448,620 | |||||||||||
Service Class | N/A | 46,328,115 | — | 46,328,115 | ||||||||||||
Total | 3,168,346 | 78,248,710 | 5,528,025 | (d) | 83,776,735 | |||||||||||
Accumulation Unit Value/Net Asset Value per Share | ||||||||||||||||
Compass 2 | $ | 53.271 | (c) | N/A | N/A | |||||||||||
Compass 3 | $ | 51.448 | (c) | N/A | N/A | |||||||||||
Compass 3-Level 2 | $ | 25.114 | (c) | N/A | N/A | |||||||||||
Initial Class | N/A | $ | 17.49 | — | $ | 17.49 | ||||||||||
Service Class | N/A | $ | 17.30 | — | $ | 17.30 |
Shares outstanding have been rounded for presentation purposes.
(a) | Contract level net assets also include the net assets associated with the contract level reserve. |
(b) | Net assets of the Total Return Variable Account acquired by the Total Return Portfolio. |
(c) | Accumulation unit value does not reflect net assets associated with the reserve of each contract level. |
(d) | If the reorganization had taken place on June 30, 2011, the Total Return Variable Account would have received 5,528,025 Initial Class shares, of the Total Return Portfolio. No assurances can be given as to the number of Reorganization Shares the Total Return Variable Account will receive on the Exchange Date. The foregoing is merely an example of what the Total Return Variable Account would have received had the reorganization been consummated on June 30, 2011, and should not be relied upon to reflect the amount that will be actually received on or after the Exchange Date. |
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COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND STRATEGIES
The following discussions comparing the investment objectives, policies and strategies of each Account and its corresponding Portfolio is based upon and qualified in its entirety by the investment objectives, policies and strategies set forth in the prospectuses for each Account and each Portfolio dated April 30, 2011.
Money Market Variable Account/Money Market Portfolio
MMVA’s investment objective is to seek a high level of current income consistent with preservation of capital and liquidity. MMVA’s objective may be changed without approval by Contract Owners or Payees. Money Market Portfolio’s investment objective is identical and can also be changed without shareholder approval.
Principal Investment Strategies
MFS normally invests MMVA’s and Money Market Portfolio’s assets in U.S. dollar-denominated money market instruments and repurchase agreements.
In buying and selling investments for MMVA, MFS complies with industry-standard regulatory requirements for money market funds regarding credit quality, diversification, liquidity, and maturity. MFS stresses liquidity and income. MFS does not seek to maintain a single unit value of $1.00 per unit.
In buying and selling investments for the Money Market Portfolio, MFS seeks to comply with Securities and Exchange Commission rules for money market funds regarding credit quality, diversification, liquidity, and maturity. MFS stresses maintaining a stable $1.00 share price, liquidity, and income.
Historically, the portfolios of MMVA and Money Market Portfolio have had substantially similar investment characteristics.
High Yield Variable Account/High Yield Portfolio
HYVA’s investment objective is to seek total return with an emphasis on high current income, but also considering capital appreciation. HYVA’s objective may be changed without approval by Contract Owners or Payees. High Yield Portfolio’s investment objective is identical and can also be changed without shareholder approval.
Principal Investment Strategies
MFS normally invests at least 80% of HYVA’s net assets in high income debt instruments.
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MFS may invest HYVA’s assets in other types of debt instruments.
MFS may invest up to 100% of HYVA’s assets in lower quality debt instruments.
MFS may invest HYVA’s assets in foreign securities.
While MFS may use derivatives for any investment purpose, to the extent MFS uses derivatives, MFS expects to use derivatives primarily to increase or decrease exposure to a particular market, segment of the market, or security, to increase or decrease interest rate or currency exposure, or as alternatives to direct investments.
MFS uses a bottom-up investment approach to buying and selling investments for HYVA. Investments are selected primarily based on fundamental analysis of individual instruments and their issuers in light of issuers’ current financial condition and current market, economic, political, and regulatory conditions. Factors considered may include the instrument’s credit quality, collateral characteristics, and indenture provisions, and the issuer’s management ability, capital structure, leverage, and ability to meet its current obligations. Quantitative models that systematically evaluate the structure of the debt instrument and its features may also be considered.
High Yield Portfolio’s principal investment strategies are identical to those of HYVA.
Capital Appreciation Variable Account/MFS Massachusetts Investors Growth Stock Portfolio
CAVA’s investment objective is to seek capital appreciation. CAVA’s objective may be changed without approval by Contract Owners or Payees. MFS Massachusetts Investors Growth Stock’s investment objective is identical and can also be changed without shareholder approval.
Principal Investment Strategies
MFS normally invests CAVA’s assets primarily in equity securities.
MFS focuses on investing CAVA’s assets in the stocks of companies it believes to have above average earnings growth potential compared to other companies (growth companies). Growth companies tend to have stock prices that are high relative to their earnings, dividends, book value, or other financial measures.
While MFS may invest CAVA’s assets in companies of any size, MFS generally focuses on companies with large capitalizations.
MFS may invest CAVA’s assets in foreign securities.
MFS uses a bottom-up investment approach to buying and selling investments for CAVA. Investments are selected primarily based on fundamental analysis of individual issuers and their
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potential in light of their current financial condition, and market, economic, political, and regulatory conditions. Factors considered may include analysis of an issuer’s earnings, cash flows, competitive position, and management ability. Quantitative models that systematically evaluate an issuer’s valuation, price and earnings momentum, earnings quality, and other factors may also be considered.
With one exception, CAVA’s principal investment strategies are identical to those of Massachusetts Investors Growth Stock Portfolio. CAVA invests primarily in equity securities while Massachusetts Investors Growth Stock Portfolio invests at least 80% of its net assets in equity securities. MFS does not consider this difference to be material.
Government Securities Variable Account/Government Securities Portfolio
GSVA’s investment objective is to seek total return with an emphasis on current income, but also considering capital appreciation. GSVA’s objective may be changed without approval by Contract Owners or Payees. Government Securities Portfolio’s investment objective is identical and can also be changed without shareholder approval.
Principal Investment Strategies
MFS normally invests at least 80% of GSVA’s net assets in U. S. Government securities.
MFS generally invests substantially all of GSVA’s assets in investment grade debt instruments.
MFS may invest a relatively large percentage of GSVA’s assets in a single issuer or a small number of issuers.
While MFS may use derivatives for any investment purpose, to the extent MFS uses derivatives, MFS expects to use derivatives primarily to increase or decrease exposure to a particular market, segment of the market, or security, to increase or decrease interest rate exposure, or as alternatives to direct investments.
MFS uses a bottom-up investment approach to buying and selling investments for GSVA. Investments are selected primarily based on fundamental analysis of individual instruments and their issuers in light of issuers’ current financial condition and current market, economic, political, and regulatory conditions. Factors considered may include the instrument’s credit quality, collateral characteristics, and indenture provisions, and the issuer’s management ability, capital structure, leverage, and ability to meet its current obligations. Quantitative models that systematically evaluate the structure of the debt instrument and its features may also be considered.
The principal investment strategies of Government Securities Portfolio are identical.
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Global Governments Variable Account/Global Governments Portfolio
GGVA’s investment objective is to seek total return with an emphasis on current income, but also considering capital appreciation. GGVA’s objective may be changed without approval by Contract Owners or Payees. Global Government Portfolio’s investment objective is identical and can also be changed without shareholder approval.
Principal Investment Strategies
MFS normally invests at least 80% of GGVA’s net assets in U.S. and foreign government securities.
MFS normally invests GGVA’s assets primarily in debt instruments of the U.S. Government and of foreign governments in developed countries.
MFS may invest more than 25% of GGVA’s assets in one country or a limited number of countries.
MFS generally invests substantially all of GGVA’s assets in investment grade debt instruments.
GGVA is a non-diversified investment management company. This means that MFS may invest a relatively large percentage of GGVA’s assets in a single issuer or a small number of issuers.
While MFS may use derivatives for any investment purpose, to the extent MFS uses derivatives, MFS expects to use derivatives primarily to increase or decrease exposure to a particular market, segment of the market, or security, to increase or decrease interest rate or currency exposure, or as alternatives to direct investments.
MFS generally uses a top-down approach to buying and selling investments for GGVA. MFS allocates GGVA’s assets across countries and selects investments primarily based fundamental economic and financial analysis of the creditworthiness of each country and the relative value of countries’ external debt, currencies, and local market debt. MFS may consider economic and financial fundamentals, liquidity, duration, relative value, and other factors. Quantitative models that systematically evaluate these and other factors may also be considered.
The principal investment strategies of Global Governments Portfolio are identical to those of GGVA.
Total Return Variable Account/Total Return Portfolio
TRVA’s investment objective is to seek total return. TRVA’s objective may be changed without approval by Contract Owners or Payees. Total Return Portfolio’s investment objective is identical to TRVA’s and can also be changed without shareholder approval.
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Principal Investment Strategies
MFS invests TRVA’s assets in equity securities and debt instruments. Equity securities include common stocks, preferred stocks, securities convertible into common stocks, and depositary receipts for those securities. Debt instruments include corporate bonds, U.S. Government securities, collateralized instruments, municipal instruments, foreign government securities, inflation-adjusted bonds, and other obligations to repay money borrowed. MFS seeks to invest between 40% and 75% of TRVA’s assets in equity securities and at least 25% of TRVA’s assets in fixed-income senior securities.
MFS focuses on investing TRVA’s assets in the stocks of companies that it believes are undervalued compared to their perceived worth (value companies).
While MFS may invest TRVA’s assets in companies of any size, MFS generally focuses on companies with large capitalizations.
Of TRVA’s investments in debt instruments, MFS generally invests substantially all of these investments in investment grade debt instruments.
MFS may invest TRVA’s assets in foreign securities.
While MFS may use derivatives for any investment purpose, to the extent MFS uses derivatives, MFS expects to use derivatives primarily to increase or decrease exposure to a particular market, segment of the market, or security, to increase or decrease interest rate or currency exposure, or as alternatives to direct investments.
MFS uses a bottom-up investment approach to buying and selling investments for TRVA. Investments are selected primarily based on fundamental analysis of individual issuers and/or instruments in light of the issuer’s current financial condition and market, economic, political, and regulatory conditions. Factors considered for equity securities may include analysis of an issuer’s earnings, cash flows, competitive position, and management ability. Factors considered for debt instruments may include the instrument’s credit quality, collateral characteristics and indenture provisions and the issuer’s management ability, capital structure, leverage, and ability to meet its current obligations. Quantitative models that systematically evaluate the valuation, price and earnings momentum, earnings quality, and other factors of the issuer of an equity security or the structure of a debt instrument may also be considered.
The principal investment strategies of Total Return Portfolio are identical to those of TRVA.
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PURCHASE AND REDEMPTION OF FUND SHARES
Each Portfolio/Account determines its net asset value per share (“NAV”) as of close of regular trading (normally 4:00 p.m., Eastern time) on the New York Stock Exchange (“NYSE”) on each day the NYSE is open for trading. Each Portfolio/Account determines its NAV by a formula which in effect:
• | Adds the values of all securities investments and other assets; |
• | Subtracts liabilities (including dividends payable); and |
• | Divides by the number of shares outstanding. |
To determine the value of each Portfolio/Account’s assets except for MMVA and MFS Money Market Portfolio, the Portfolio/Account’s investments for which reliable market quotations are readily available are valued at market value. Certain short term debt instruments are valued at amortized cost. To determine the value of MMVA’s and MFS Money Market Portfolio’s assets, the Portfolio/Account’s investments are generally valued at amortized cost.
The Boards of Trustees/Managers have delegated primary responsibility for determining or causing to be determined the value of each Portfolio/Account’s investments (including any fair valuation) to the Adviser pursuant to valuation policies and procedures approved by the Boards. 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 Boards of Trustees/Managers.
Under each Portfolio/Account’s valuation policies and procedures, market quotations are not considered to be readily available for many types of debt instruments. These investments are generally valued at fair value based on information from third-party pricing services. These valuations can be based on both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. 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 a foreign exchange or market) and prior to the determination of the value of each Portfolio/Account’s assets.
Account/Portfolio securities may be traded in other markets on days when the NYSE is closed. Therefore, a Portfolio/Account’s NAV may fluctuate on days when you do not have access to the Account/Portfolio to purchase or redeem shares.
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Each Portfolio offers two classes of shares: the Initial Class and the Service Class. The two classes of shares are identical, except that Service Class shares are subject to a distribution (Rule 12b-1) fee, which has been adopted pursuant to a distribution and service plan.
As part of the Reorganization, each Portfolio will issue Initial Class shares to be held by the New UIT in an amount equal to the value of the assets that the Portfolio receives from the corresponding Account, less the liabilities a Portfolio assumes. Following the Reorganization, Account Owners will have an indirect interest in a Portfolio’s Initial Class shares.
MORE INFORMATION ABOUT THE FUNDS
Management of the Accounts and the Trust
The Accounts’ and the Trust’s business and affairs are managed under the direction of their Boards of Managers and Board of Trustees, respectively. The Boards of Managers and the Board of Trustees have the power to amend their bylaws, to declare and pay dividends, and to exercise all the powers of the Accounts and the Trust, except those granted to the Account Owners/shareholders.
MFS, located at 500 Boylston Street, Boston, Massachusetts, serves as the investment adviser for each Portfolio. MFS is a majority-owned subsidiary of Sun Life of Canada (U.S.) Financial Services Holdings, Inc. which in turn is an indirect majority-owned subsidiary of Sun Life Financial Inc. MFS is a Delaware company, registered with the SEC as an investment adviser. MFS and its predecessor organizations have been managing mutual funds since 1924.
For further information about each Portfolio’s investment adviser, please see “Who will be the investment adviser of my Portfolio after the Reorganization?” above and the prospectus for each Portfolio.
The following chart lists the effective advisory fee rate for the most recently completed fiscal year, and portfolio manager(s) for each Portfolio other than the MFS Money Market Portfolio. The effective advisory fee rate for the MFS Money Market Portfolio’s most recently completed fiscal year was 0.198%. (This includes MFS’ voluntary management fee waiver to avoid a negative yield. The effective management fee for the Money Market Portfolio would be 0.50% if this voluntary waiver had been excluded.) The Trust’s SAI provides additional information about the portfolio managers’ compensation, other accounts managed by the portfolio managers, and the portfolio managers’ ownership of securities in the Portfolios.
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Portfolio | Portfolio Manager(s) | Effective advisory fee rate for the year ended December 31, 2010 | ||||
MFS High Yield | William Adams David Cole | 0.70 | % | |||
MFS Massachusetts Invesors Growth Stock | Jeffrey C. Constantino | 0.75 | % | |||
MFS Government Securities | Geoffrey Schechter | 0.55 | % | |||
MFS Global Governments | Matthew Ryan Erik Weisman | 0.75 | % | |||
MFS Total Return | Derin Chitkara, William Douglas Steven Gorsham Richard Hawkins Joshua Marston Brooks Taylor | 0.67 | % |
The business experience for the past five years for each Portfolio Manager is as follows:
MFS High Yield Portfolio | ||
William J. Adams
| Employed in the investment area of MFS since 2009; Credit Analyst at MFS from 1997-2005 | |
David P. Cole | Employed in the investment area of MFS since 2004 | |
MFS Massachusetts Investors Growth Stock Portfolio | ||
Jeffrey Constantino | Employed in the investment area of MFS since 2006 | |
MFS Government Securities Portfolio | ||
Geoffrey L. Schechter | Employed in the investment area of MFS since 1993 | |
MFS Global Governments Portfolio | ||
Matthew W. Ryan | Employed in the investment area of MFS since 2002 | |
Erik S. Weisman | Employed in the investment area of MFS since 2004 | |
MFS Total Return Portfolio | ||
Brooks A. Taylor | Employed in the investment area of MFS since 2004 | |
Nevin P. Chitkara | Employed in the investment area of MFS since 2006 | |
William P. Douglas | Employed in the investment area of MFS since 2004 | |
Steven R. Gorham | Employed in the investment area of MFS since 2002 | |
Richard O. Hawkins | Employed in the investment area of MFS since 2005 | |
Joshua P. Marston | Employed in the investment area of MFS since 1999 |
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A discussion regarding the basis for the Board of Trustees’ most recent approval of the investment advisory contracts for the Portfolios of the Trust whose shares are being offered by this Proxy Statement/Prospectus is available in the Trust’s annual report to shareholders for the twelve-month period ended December 31, 2010.
Distributions and Federal Income Tax Considerations
The policy of each Portfolio is to distribute substantially all of its net investment income and net realized capital gains each year to its shareholders. A Portfolio may distribute net realized gains only once a year. Dividends and capital gain distributions will be automatically reinvested in additional Portfolio shares of the same class of the Portfolio at no charge.
Because all of the shares of the Trust’s Portfolios will be owned directly or indirectly by insurance companies, except where specifically stated, this Proxy Statement/Prospectus does not discuss the federal income tax consequences at the Account Owner level.
Overview of the Board of Managers
Each Account is under the general supervision of a Board of Managers (the “Board”). The members of the Board (except Ms. Kean) have each been elected by Account Owners. Members of the Boards of Managers and officers of all six Accounts are the same. MFS is responsible for the investment management of each Account’s assets and for providing a variety of other administrative services to each Account. The officers of each Account are responsible for its operations.
The Board consists of seven Managers, six of whom are not “interested persons” (as defined in the 1940 Act) of each Account (each an “Independent Manager” and collectively the “Independent Managers”). An Independent Manager serves as Chair of the Managers. For a description of the Managers, see “Current Managers” below on pages [ ] of this Prospectus/Proxy Statement. There are four standing Committees of the Board, to which the Board has delegated certain authority and oversight responsibilities. For a description of the oversight functions of each of the Committees, see “Committees” on pages [ ] of this Prospectus/Proxy Statement. In connection with each of the Board’s regular meetings, the Managers meet separately from MFS with their counsel and with each Account’s Independent Chief Compliance Officer. The Board reviews its leadership structure periodically and believes that its structure is appropriate to enable the Board to exercise its oversight of each Account.
Each Account has retained MFS as investment adviser and administrator. MFS provides each Account with investment advisory services, and is responsible for day-to-day administration of each Account and management of the risks that arise from each Account’s investments and operations. Employees of MFS serve as each Account’s officers, including each Account’s principal executive officer. The Board provides oversight of the services provided by MFS,
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including the risk management activities. In addition, each Committee of the Board provides oversight of MFS’ risk management activities with respect to the particular activities within the Committee’s purview. In the course of providing oversight, the Board and the Committees receive a wide range of reports on each Account’s activities, including regarding each Account’s investment portfolio, the compliance of each Account with applicable laws, and each Account’s financial accounting and reporting. The Board and the relevant Committees meet periodically with MFS’ Chief Regulatory Officer, MFS’ Chief Investment Risk Officer and other appropriate officers to receive reports on MFS’ risk management activities. The Board also meets periodically with each Account’s Independent Chief Compliance Officer to receive reports regarding the compliance of each Account with the federal securities laws and each Account’s internal compliance policies and procedures. In addition, the Board meets periodically with the portfolio managers of each Account to receive reports regarding the management of the Account, including each Account’s investment risks.
Purpose of Election of Managers
In May 2011, MFS recommended that the Managers consider and approve a plan for the transition of the oversight and supervision of the Accounts and the Trust to the Nominated Board (as defined below). As of January 1, 2011 each Nominee (as defined below) served as a board member of 105 funds within the MFS Family of Funds. MFS and the Board believe that (i) a single Board overseeing any remaining Accounts and all of the funds within the MFS Family of Funds may enhance that Board’s efficiency; (ii) realigning the Boards into one Board may reduce certain fund expenses, such as costs associated with Board member compensation, holding Board meetings and committee meetings; (iii) reporting to a single board will reduce the administrative costs and burden on fund management that are inherent in reporting to two Boards, including the significant reduction in the volume of Board materials required to be prepared by Fund and Account management and other service providers for each of the Board meetings; and (iv) reporting to a single Board will reduce the portfolio management time dedicated to keeping multiple Boards up to date on performance and portfolio management issues.
With respect to the Accounts, at their July 13, 2011 meeting, the Managers approved submitting to the Account Owners approval of the conversion of each Account to a sub-account of the New UIT as described above and the election of the Nominated Board in the event that the Account Owners do not approve the Reorganization for one or more of the Accounts.
In light of MFS’ proposal, the current Managers, Messrs. J. Kermit Birchfield, Robert C. Bishop, Frederick H. Dulles, David D. Horn, Ronald G. Steinhart, and Haviland Wright, and Ms. Marcia A. Kean, are each not standing for election as Manager. In the event that the Account Owners do not approve the Reorganization of one or more of the Accounts, the Compliance and Governance Committee has selected, nominated, and recommended that the Board nominate, for election by Account Owners and other persons entitled to vote, each of Messrs. Robert E. Butler, David H. Gunning, William R. Gutow, Michael Hegarty, John P. Kavanaugh, Robert J. Manning, J. Dale Sherratt, and Robert W. Uek, and Mss. Maureen R. Goldfarb and Laurie J. Thomsen (each a “Nominee”, and together the “Nominated Board”) to hold office until his or her successor is elected and qualified. The Board has nominated each of the individuals selected and nominated by the Committee and fixed the number of Managers of each Account at ten, effective January 1, 2012,
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pursuant to each Account’s Amended and Restated Rules and Regulations, subject to the election and qualification of the Nominees at the Special Meeting of Account Owners. There are ten nominees, nine of whom are not “interested persons” (as defined in the 1940 Act) of the Accounts. Each Nominee has agreed to serve as a Manager of each Account if elected. The Board recommends that you vote in favor of their election. For a description of each Nominee, see “Nominees for Election as Manager” on pages [ ] of this Prospectus/Proxy Statement.
It is intended that, absent contrary instructions, proxies will be voted in favor of electing each of Messrs. Butler, Gunning, Gutow, Hegarty, Kavanaugh, Manning, Sherratt, and Uek, and Mss. Goldfarb and Thomsen as Manager of an Account in the event that a majority of the voting securities of such Account does not approve the Reorganization as described above in Item 1. If, before the Meeting, any Nominee refuses or is unable to serve, or if any of the Nominees is unavailable at the time of the Meeting, and such refusal or inability to serve or unavailability is not anticipated, the Managers may vote for other nominees at their discretion, or the Managers may fix the number of Managers at fewer than ten for an Account. Under the terms of each Account’s retirement policy, the Managers have a mandatory retirement age of 73 years, except two current Managers (Messrs. Birchfield and Horn) have a mandatory retirement age of 78, and the Board of Managers may, in its discretion, determine prior to the end of the calendar year in which a Manager shall otherwise retire to extend the term of such Manager for a maximum of two additional one-year periods. With respect to Mr. Sherratt, subject to his election by Account Owners, the Board has agreed to a one-year extension of his eligibility to serve as a Manager from January 1, 2012 through December 31, 2012, subject to Board approval for a second one-year extension for the 2013 calendar year pursuant to the retirement policy.
Effective January 1, 2012 through December 31, 2012, it is anticipated that Messrs. Birchfield, Bishop, Dulles, Horn, Steinhart, and Wright, and Ms. Kean will each serve as a member of an advisory Board to MFS with respect to the anticipated transition of the oversight of the Trust to a new Board. MFS will compensate each member of the advisory board at a rate equal to $36,000 per annum, plus a meeting fee of $5,000 per meeting. In addition, MFS will compensate the Chair of the advisory board an additional $15,000 per annum. The compensation of the advisory board and Chair will be borne entirely by MFS.
The following table presents certain information regarding the current Managers of each Account, including their principal occupations, which, unless specific dates are shown, are of more than five years duration, although the titles may not have been the same throughout. Additional information about each Manager follows the table.
Name, Age | Position(s) Held with Fund | Manager/Officer Since(h) | Principal Occupation During the Past Five Years | Other Directorships(j) | ||||
INTERESTED MANAGERS | ||||||||
David D. Horn(k) age 70 | Board Member | April 1986 | Private investor |
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Name, Age | Position(s) Held with Fund | Manager/Officer Since(h) | Principal Occupation During the Past Five Years | Other Directorships(j) | ||||
INDEPENDENT MANAGERS | ||||||||
J. Kermit Birchfield age 71 | Chairman | May 1997 | Private investor | |||||
Robert C. Bishop age 68 | Board Member | May 2001 | AutoImmune, Inc. (pharmaceutical product development), Chairman, President and Chief Executive Officer | Caliper Life Sciences Corp. (laboratory analytical instruments), Chairman; Millipore Corporation (purification/filtration products), Director (until July 2010) | ||||
Frederick H. Dulles age 69 | Board Member | May 2001 | Dulles International Law LLC (law firm), Senior Lawyer (since 2009) | |||||
Marcia A. Kean age 63 | Board Member | April 2005 | Feinstein Kean Healthcare (consulting), Chief Executive Officer | |||||
Ronald G. Steinhart age 71 | Board Member | May 2001 | Private investor | Penske Automotive Group (automotive retailer), Director; Animal Health International, Inc. (animal health products), Director (since 2007); Texas Industries (concrete/ aggregates/cement), Director (since 2007); Susser Holdings Corporation (retail convenience stores and distributor of wholesale motor fuel), Director (since 2009); Penson Worldwide, Inc. (securities clearance), Director (until 2008) | ||||
Haviland Wright age 63 | Board Member | May 2001 | X-Change Corp. (multi-media web services), Director (since 2010) |
(h) | Date first appointed to serve as Manager/Trustee/Officer of an MFS/Sun Life Product. Each Manager has served continuously since appointment. |
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(j) | Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., “public companies”). |
(k) | “Interested person” of Sun Life of Canada (U.S.), 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 Accounts. The address of Sun Life of Canada (U.S.) is One Sun Life Executive Park, Wellesley Hills, Massachusetts 02481. |
All Managers of the Accounts are also Trustees of the Trust.
The Accounts do not hold annual meetings for the purpose of electing Managers, and Managers are not elected for fixed terms. This means that each Manager is elected to hold office until his or her successor is chosen and qualified or until his or her earlier death, resignation, retirement or removal.
The following provides an overview of the considerations that led the Board to conclude that each individual serving as a member of the Board of Managers of the Accounts should so serve. The current members of the Board have joined the Board at different points in time since 1986. Generally, no one factor was decisive in the original selection of an individual to join the Board. Among the factors the Board considered when concluding that an individual should serve on the Board were the following: (i) the individual’s business and professional experience and accomplishments; (ii) the individual’s ability to work effectively with the other members of the Board; (iii) the individual’s prior experience, if any, serving on the boards of public companies (including, where relevant, other investment companies) and other complex enterprises and organizations; and (iv) how the individual’s skills, experience and attributes would contribute to an appropriate mix of relevant skills and experience on the Board.
In respect of each current Board member, the individual’s substantial professional accomplishments and prior experience, including, in some cases, in fields related to the operations of the Accounts, were a significant factor in the determination that the individual should serve as a Member of the Board. Following is a summary of each member’s professional experience and additional considerations that contributed to the Board’s conclusion that an individual should serve on the Board:
J. Kermit Birchfield
Mr. Birchfield’s experience as senior executive of several public and private companies, including service as general counsel, chief financial officer, and chief executive officer, and as a director of both public and private companies, gives him an extensive understanding of regulatory, financial reporting, and corporate governance issues. His fourteen years of service as an independent member of the Board of Managers of the Accounts, including eight years as independent chairman, have given him extensive knowledge about the Accounts’ operations.
Robert C. Bishop
Mr. Bishop’s experience as chairman, president, and chief executive officer of a pharmaceutical product development company, along with his service as a director of other public and private
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companies, gives him an extensive knowledge of regulatory, financial reporting, and management issues. His ten years of experience as an independent member of the Board of Managers of the Accounts have given him extensive knowledge about the Accounts’ operations.
Frederick H. Dulles
Mr. Dulles’ thirty-eight years experience as a corporate lawyer has included both private practice and in-house legal positions, practicing law in both the United States and Europe. His legal background provides him with extensive knowledge of regulatory, business, financial reporting, and corporate governance matters. In addition, his ten years as an independent member of the Board of Managers of the Accounts have given him extensive knowledge about the Accounts’ operations.
David D. Horn
Mr. Horn’s prior thirty years experience with Sun Life Assurance Company of Canada, the parent company of MFS, first as counsel and then as senior vice president and general manager of the U.S. operations of Sun Life, along with his prior service as an officer and a director of Sun Life’s U.S. subsidiaries, gives him an extensive knowledge of legal, management, investment, financial, marketing, and insurance matters. His twenty-five years experience as a member of the Board of Managers of the Accounts have given him extensive knowledge about the Accounts’ operations.
Marcia A. Kean
Ms. Kean’s experience as senior executive of several public and private companies, along with her current position as chief executive officer of a private health care consulting company, gives her an extensive knowledge of marketing, regulatory, operational, and corporate governance issues. Her six years of service as an independent member of the Board of Managers of the Accounts have given her extensive knowledge about the Accounts’ operations.
Ronald G. Steinhart
Mr. Steinhart’s experience includes more than thirty years as an executive in the commercial banking industry, including senior positions at two major banks. In addition, he currently serves as a director of several public companies. This experience gives him an extensive knowledge of financial reporting, management, and corporate governance issues. His ten years of experience as an independent member of the Board of Managers of the Accounts have given him extensive knowledge about the Accounts’ operations.
Haviland Wright
Mr. Wright’s experience includes service as a senior executive of several public and private technology companies, and work as an audit manager for a major independent accounting firm. He currently serves as director of a software development company and director, chief executive officer, and president of a multi-media web services company. This background gives him a
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broad understanding of marketing, information technology, financial reporting, and corporate governance issues. His ten years of experience as an independent member of the Board of Managers of the Accounts have given him extensive knowledge about the Accounts’ operations.
Each Account pays the Board Members an annual fee plus a fee for each meeting attended. In addition, the Members are reimbursed for their out-of-pocket expenses. Please see “Compensation Table” on pages [ ] of this Proxy Statement.
Nominees for Election as Manager
The following table presents certain information regarding the Nominees, including their principal occupations, which, unless specific dates are shown, are of more than five years duration, although the titles may not have been the same throughout. Additional information about each nominee follows the table.
Name, Age | Position(s) To Be Held with Variable Accounts | Trustee Since(h) | Principal Occupations During the Past Five Years | Other Directorships(j) | ||||
INTERESTED MANAGERS | ||||||||
Robert J. Manning(k) age 47 | Manager | February 2004 | Massachusetts Financial Services Company, Chairman, Chief Executive Officer and Director; President (until December 2009); Chief Investment Officer (until July 2010) | |||||
INDEPENDENT MANAGERS | ||||||||
David H. Gunning age 69 | Manager and Chair of Managers | January 2004 | Retired; Cleveland-Cliffs Inc. (mining products and service provider), Vice Chairman/Director (until May 2007) | Lincoln Electric Holdings, Inc. (welding equipment manufacturer), Director; Development Alternatives, Inc. (consulting), Director/Non-Executive Chairman; Portman Limited (mining), Director (until 2008) |
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Name, Age | Position(s) To Be Held with Variable Accounts | Trustee Since(h) | Principal Occupations During the Past Five Years | Other Directorships(j) | ||||
Robert E. Butler age 69 | Manager | January 2006 | Consultant – investment company industry regulatory and compliance matters | |||||
Maureen R. Goldfarb age 56 | Manager | January 2009 | Private investor | |||||
William R. Gutow age 69 | Manager | December 1993 | Private investor and real estate consultant; Capital Entertainment Management Company (video franchise), Vice Chairman | Atlantic Coast Tan (tanning salons), Vice Chairman (until 2007); Texas Donuts (donut franchise), Vice Chairman (until 2010) | ||||
Michael Hegarty age 66 | Manager | December 2004 | Private investor | |||||
John P. Kavanaugh age 56 | Manager | January 2009 | Private investor; The Hanover Insurance Group, Inc., Vice President and Chief Investment Officer (until 2006); Allmerica Investment Trust, Allmerica Securities Trust and Opus Investment Trust (investment companies), Chairman, President and Trustee (until 2006) | |||||
J. Dale Sherratt age 72 | Manager | June 1989 | Insight Resources, Inc. (acquisition planning specialists), President; Wellfleet Investments (investor in health care companies), Managing General Partner |
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Name, Age | Position(s) To Be Held with Variable Accounts | Trustee Since(h) | Principal Occupations During the Past Five Years | Other Directorships(j) | ||||
Laurie J. Thomsen age 54 | Manager | March 2005 | Private investor; New Profit, Inc. (venture philanthropy), Executive Partner (until 2010) | The Travelers Companies (property and casualty insurance), Director | ||||
Robert W. Uek age 70 | Manager | January 2006 | Consultant to investment company industry |
(h) | Date first appointed to serve as Trustee of an MFS fund. Each Nominee 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 of certain MFS funds other than the Accounts or the Trust. |
(j) | Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., “public companies”). |
(k) | “Interested person” of each Account 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 Account, as a result of position with MFS. The address of MFS is 500 Boylston Street, Boston, Massachusetts 02116 |
Each Nominee serves as Trustee of certain other funds of which MFS or a subsidiary is the investment adviser or distributor. As of January 1, 2011, the Nominees served as Trustees of 105 funds within the MFS Family of Funds.
The following provides an overview of the considerations that led the Board to nominate each Nominee for election as a Manager. The Nominees have joined the Board of other MFS funds at different points in time since 1989. Generally, no one factor was decisive in the nomination of a Nominee. Among the factors the Board considered when concluding to nominate an individual for election as a Manager were the following: (i) the individual’s business and professional experience and accomplishments; (ii) the individual’s ability to work effectively with the other members of the Board; (iii) the individual’s prior experience, if any, serving on the boards of public companies (including, where relevant, other investment companies) and other complex enterprises and organizations; and (iv) how the individual’s skills, experience and attributes would contribute to an appropriate mix of relevant skills and experience on the Board.
In respect of each Nominee, the individual’s substantial professional accomplishments and prior experience, including, in some cases, in fields related to the operations of the Accounts, were a significant factor in the determination to nominate the individual for election as a Manager of each Account. Following is a summary of each Nominee’s professional experience and additional considerations that contributed to the Board’s conclusion to nominate each individual for election to the Board:
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Robert E. Butler, CPA
Mr. Butler has substantial accounting and compliance consulting experience for clients in the investment management industry. Mr. Butler was a partner at PricewaterhouseCoopers LLP (“PWC”) (including its predecessor firms) for 24 years, and led the firm’s National Regulatory Compliance Consulting Group, specializing in compliance consulting for investment management clients, including mutual funds and investment advisers. During his tenure at PWC, he served for ten years as a consultant to the independent directors/trustees for two major fund groups during their contract deliberation processes. He also conducted branch reviews of insurance broker/dealers selling variable products. Since retiring from PWC, Mr. Butler has worked as a consultant to mutual fund boards and investment advisers on regulatory and compliance matters. He has served as, or assisted, the Independent Compliance Consultant in conjunction with the implementation of SEC market timing orders at three major fund groups.
Maureen R. Goldfarb
Ms. Goldfarb has substantial executive and board experience at firms within the investment management industry. She was the Chief Executive Officer and Chairman of the Board of Trustees of the John Hancock Funds and an Executive Vice President of John Hancock Financial Services, Inc. Prior to joining John Hancock, Ms. Goldfarb was a Senior Vice President with Massachusetts Mutual Life Insurance Company. She also held various marketing, distribution, and portfolio management positions with other investment management firms. Ms. Goldfarb is a former member of the Board of Governors of the Investment Company Institute.
David H. Gunning
Mr. Gunning has substantial executive and board experience at publicly-traded and privately-held companies, including past service as the Vice Chairman and a director of Cleveland-Cliffs Inc. (now Cliffs Natural Resources Inc.), a director of Lincoln Electronic Holdings, Inc., and a director of Southwest Gas Corp. He is the former Chairman and Chief Executive Officer of Capitol American Financial Corp. Mr. Gunning is also a former partner and head of the corporate department of Jones Day, a large international law firm.
William R. Gutow
Mr. Gutow is the Vice Chairman of Capitol Entertainment Management Company. He has substantial senior executive experience at a publicly-traded company and various privately held companies as well as board experience at privately held companies and non-profits. Mr. Gutow served as the Senior Vice President of Real Estate and Property Development for Zale Corporation. Mr. Gutow has substantial investment company board experience, having served on boards of trustees responsible for oversight of funds in the MFS family of funds for over 17 years.
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Michael Hegarty
Mr. Hegarty has substantial senior executive and board experience at firms within the financial services industry, as well as board experience at publicly-traded and privately held companies. He served as the Vice Chairman and Chief Operating Officer of AXA Financial and as the President and Chief Operating Officer of The Equitable Life Assurance Society. Mr. Hegarty also served as Vice Chairman of Chase Manhattan Corporation and Chemical Bank. He is a former director of Alliance Capital Management Corporation, which serves as the general partner of a publicly-traded investment adviser, and a former trustee of investment companies in the EQ Advisers Trust family of funds.
John P. Kavanaugh
Mr. Kavanaugh has substantial executive, investment management, and board experience at firms within the investment management industry, as well as board experience for other investment company families. Mr. Kavanaugh was the Vice President and Chief Investment Officer of The Hanover Insurance Group, Inc., and the President and Chairman of Opus Investment Management, Inc., an investment adviser. He also served as a trustee for various investment company complexes. Mr. Kavanaugh held research analyst and portfolio management positions with Allmerica Financial and PruCapital, Inc.
Robert J. Manning
Mr. Manning is Chairman and Chief Executive Officer of MFS (the MFS Funds’ investment adviser) and in this capacity heads MFS’ Board of Directors. He has substantial executive and investment management experience, having worked for MFS for 26 years. He also is a member of the Board of Directors of MFS.
J. Dale Sherratt
Mr. Sherratt is the President of Insight Resources and the Managing General Partner of Wellfleet Investments. He was a senior executive at Colgate-Palmolive and the Chief Executive Officer of the Kendall Company in Boston, Massachusetts. Mr. Sherratt has held senior executive positions at various healthcare technology companies, and served on the boards of directors of publicly-traded companies and numerous early stage technology companies. Mr. Sherratt has substantial investment company board experience, having served on boards of trustees responsible for oversight of funds in the MFS family of funds for over 21 years.
Laurie J. Thomsen
Ms. Thomsen has substantial venture capital financing experience, as well as board experience at publicly-traded and privately-held companies. Ms. Thomsen was a co-founding General Partner of Prism Venture Partners, a venture capital firm investing in healthcare and technology companies and served as an Executive Partner of New Profit, Inc., a venture philanthropy firm. Prior to that, she was a General Partner at the venture capital firm, Harbourvest Partners.
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Ms. Thomsen is a director of The Travelers Companies, Inc. and a trustee of Williams College. She is a former director of Travelers Property Casualty Corp. and New Profit.
Robert W. Uek
Mr. Uek has substantial accounting and consulting experience for clients in the investment management industry. Mr. Uek was a partner in the investment management industry group of PWC, and was the chair of the investment management industry group for Coopers & Lybrand. He also has served as a consultant to mutual fund boards. Mr. Uek previously served on the boards of trustees of investment companies in the TT International family of funds and Hillview Capital family of funds. Mr. Uek is a former Chairman of the Independent Directors Council, a unit of the Investment Company Institute that serves the mutual fund independent director community.
Information about each Account, including information about its investment adviser and administrator, independent registered public accounting firm, and executive officers appears under “Account Information” beginning on [page #] of this Prospectus/Proxy Statement.
THE BOARD, INCLUDING THE INDEPENDENT MANAGERS, UNANIMOUSLY RECOMMENDS THAT THE ACCOUNT OWNERS OF EACH ACCOUNT VOTE TO ELECT EACH OF THE NOMINEES AS MANAGERS OF EACH ACCOUNT.
The Board meets regularly throughout the year to discuss matters and take certain actions relating to the Accounts. The Board has several standing committees, which are described below.
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Name of Committee | Number of Meetings in Last Fiscal Year | Functions | Current | |||
AUDIT COMMITTEE | 4 | Provides oversight with respect to the accounting and auditing procedures of the Accounts and, among other things, selection of the independent registered public accounting firm for the Accounts and considers the scope of the audit and the effect on the independence of those accountants of any non-audit services such accountants provide to the Accounts and any audit or non-audit services such accountants provide to other MFS funds, MFS and/or certain affiliates; pre-approves audit and permissible non-audit services of independent registered public accounting firm. | Birchfield*, Bishop*, and Wright* | |||
COMPLIANCE AND GOVERNANCE COMMITTEE | 5 | Responsible for oversight of the development and implementation of the Accounts’ compliance policies, procedures and practices under the 1940 Act and other applicable Laws as well as oversight of compliance policies of the Accounts’ investment adviser and certain other service providers as they relate to Account activities. The Accounts’ Independent Chief Compliance Officer reports directly to the Committee and assists the Committee in carrying out its responsibilities. The Committee also recommends qualified candidates to the Board in the event that a position is vacated or created. Reviews and articulates the governance structure of the Board of Managers. Administers and approves all elements of Compensation for the Managers who are not “interested persons” of the Accounts Trust as defined in the 1940 Act or affiliated with the Accounts’ investment adviser. The Committee would consider recommendations by Account Owners if a vacancy were to exist. Account Owners wishing to recommend Manager candidates for consideration by the Committee may do so by writing the Accounts’ Secretary. Such suggestions must be accompanied by complete biographical and occupational data on the prospective nominee, along with a written consent of the prospective nominee to consideration of his or her name by the Committee. | Birchfield*, Dulles*, and Kean* | |||
DISTRIBUTION COMMITTEE | 5 | Responsible for oversight of the means by which shares of the Funds are sold, expenditures by the Funds’ distributor of amounts paid under the Funds’ Rule 12b-1 plans, the nature and quality of administrative services provided to the Accounts, and the overall level of servicing provided to Account Owners. | Horn, Bishop*, and Wright* | |||
OPERATIONS COMMITTEE | 5 | Reviews MFS’ process and procedures, internal controls, and compliance monitoring relating to portfolio trading, best execution and brokerage costs and trade allocations. Reviews procedures for the valuation of securities and periodically reviews information from MFS regarding fair value and liquidity determinations made pursuant to the board-approved procedures, and makes related recommendations to the full Board and, if requested by MFS, assists MFS’ internal valuation committee and/or the full Board in resolving particular valuation matters. Reviews on an ongoing basis the Accounts’ proxy voting policies and procedures and recommends the establishment and periodic modifications of such policies and procedures to the full Board. | Horn, Birchfield*, Bishop*, Dulles*, Kean*, Steinhart,* and Wright* |
(1) | The Managers’ identification and background are set forth above. |
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* | Independent Manager. |
The Managers generally hold at least five regular meetings each calendar year. These regular meetings take place over a two-day period. The performance and operations of each Account is reviewed by the Managers at each meeting and more in-depth reviews of particular Accounts are conducted by the Managers throughout the year. During the fiscal year ended December 31, 2010, each Account held five Board meetings. Each Manager attended at least 75% of the Board and applicable committee meetings noted for each Account.
Compliance and Governance Committee
The Trustees have adopted a written charter for the Compliance and Governance Committee. A copy of the Committee’s charter is attached to this Proxy Statement as Appendix 2.
Each Account’s Compliance and Governance Committee consists only of Independent Managers.
The Compliance and Governance Committee requires that Manager candidates have a college degree or equivalent business experience, but has not otherwise established specific, minimum qualifications that must be met by an individual to be considered by the Committee for nomination as a Manager. The Compliance and Governance Committee may take into account a wide variety of factors in considering Manager candidates, including, but not limited to: (i) availability and commitment of a candidate to attend meetings and perform his or her responsibilities to the Board; (ii) relevant industry and related experience; (iii) educational background; (iv) financial expertise; (v) an assessment of the candidate’s ability, judgment and expertise; (vi) overall diversity of the composition of the Board; and (vii) such other factors as the Committee deems appropriate. While the Committee has not adopted a particular definition of diversity, when considering a nominee’s and the Board’s diversity, the Committee generally considers the manner in which each nominee’s professional experience, expertise in matters that are relevant to the oversight of the Accounts (e.g., investment management, distribution, accounting, trading, compliance, legal), general leadership experience, and life experience (including with respect to gender and ethnicity) are complementary and, as a whole, contribute to the ability of the Board to oversee the Accounts. The Compliance and Governance Committee may consider candidates for Manager recommended by each Account’s current Managers, officers or shareholders or by MFS or any other source deemed appropriate by the Compliance and Governance Committee. The Compliance and Governance Committee may, but is not required to, retain a third-party search firm at the applicable Account’s expense to identify potential candidates.
The Compliance and Governance Committee will review and consider nominees recommended by Account Owners to serve as Manager, provided that the recommending Account Owner follows the procedure for Account Owners to submit nominee candidates under Federal securities law and applicable state law, if any.
The Compliance and Governance Committee has full discretion to reject nominees recommended by Account Owners, and there is no assurance that any such person properly
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recommended and considered by the Committee will be nominated for election to the Board of a Account.
Because the Managers, officers, and Nominees are not eligible to purchase shares of any Account, no Manager, officer, or Nominee had an ownership interest in the Accounts or any other fund supervised by the Board as of the date of this Prospectus/Proxy Statement.
Each Nominee beneficially owned on an aggregate basis over $100,000 in all MFS funds overseen by the Nominee, as of the date of this Prospectus/Proxy Statement.
Account Owner Communications with the Board of Managers
Account Owners may mail written communications to the Board of Managers, [Name of Account], c/o Massachusetts Financial Services Company, 500 Boylston Street, Boston, Massachusetts 02116, Attention: Frank Tarantino, Independent Chief Compliance Officer. Account Owner communications must (i) be in writing and be signed by the Account Owner, (ii) identify the Account to which they relate and (iii) identify the number of units held by the Account Owner. Each Account’s Independent Chief Compliance Officer (“ICCO”) is responsible for reviewing all properly submitted Account Owner communications. The ICCO shall either (i) provide a copy of each properly submitted Account Owner communication to the Board at its next regularly scheduled meeting or (ii) if the ICCO determines that the communication requires more immediate attention, forward the communication to the Chair of the Managers promptly after receipt. The ICCO may, in good faith, determine that an Account Owner communication should not be provided to the Board because it is ministerial in nature (such as a request for Account literature, unit data or financial information). The ICCO may in such cases forward the communication to the appropriate party or parties at MFS. This process does not apply to (i) any communication from an officer or Manager of a Account, (ii) any communication from an employee or agent of an Account, unless such communication is made solely in such employee’s or agent’s capacity as an Account Owner or (iii) any Account Owner proposal submitted pursuant to Rule l4a-8 under the Securities Exchange Act of 1934, as amended, or any communication made in connection with such a proposal. Each Account’s Managers are not required to attend an Account’s Account Owner meetings or to otherwise make themselves available to Account Owners for communications, other than pursuant to the aforementioned process.
Each Account’s Rules and Regulations currently provide that an Account will indemnify its Managers and officers against liabilities and expenses incurred in connection with litigation in which they may be involved because of their offices with the Account, unless it is finally adjudicated or, in case of a settlement, it has been determined by Managers not involved in the matter or independent legal counsel, that they have not acted in good faith in the reasonable belief that their actions were in the best interests of the Account or that they engaged in willful misfeasance or acted with bad faith, gross negligence or reckless disregard of the duties involved in the conduct of their offices.
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Compensation Table – Current Managers
Manager Compensation Table
The fees paid by each Account are set forth below:
Manager Fees(1) | ||||||||||||||||
Name and Position | Capital Appreciation Variable Account(1) | Global Governments Variable Account(1) | Government Securities Variable Account(1) | High Yield Variable Account(1) | ||||||||||||
Interested Manager | ||||||||||||||||
David D. Horn | $ | 2,017 | $ | 116 | $ | 934 | $ | 626 | ||||||||
Non-Interested Managers | ||||||||||||||||
J. Kermit Birchfield | $ | 2,583 | $ | 149 | $ | 1,196 | $ | 801 | ||||||||
Robert C. Bishop | $ | 2,017 | $ | 116 | $ | 934 | $ | 626 | ||||||||
Frederick H. Dulles | $ | 2,017 | $ | 116 | $ | 934 | $ | 626 | ||||||||
Marcia A. Kean | $ | 2,017 | $ | 116 | $ | 934 | $ | 626 | ||||||||
Ronald G. Steinhart | $ | 2,017 | $ | 116 | $ | 934 | $ | 626 | ||||||||
Haviland Wright | $ | 2,017 | $ | 116 | $ | 934 | $ | 626 |
Name and Position | Money Market Variable Account(1) | Total Return Variable Account(1) | ||||||
Interested Manager | ||||||||
David D. Horn | $ | 518 | $ | 1,611 | ||||
Non-Interested Managers | ||||||||
J. Kermit Birchfield | $ | 663 | $ | 2,063 | ||||
Robert C. Bishop | $ | 518 | $ | 1,611 | ||||
Frederick H. Dulles | $ | 518 | $ | 1,611 | ||||
Marcia A. Kean | $ | 518 | $ | 1,611 | ||||
Ronald G. Steinhart | $ | 518 | $ | 1,611 | ||||
Haviland Wright | $ | 518 | $ | 1,611 |
(1) | Information provided for the fiscal year ended December 31, 2010. Each Manager oversees 31 funds in the MFS Family of Funds as of December 31, 2010. |
The total compensation from the Accounts and other funds in the MFS Family of Funds is set forth below:
Manager Name | Total Compensation Paid by MFS Family of Funds(2) | |||
J. Kermit Birchfield | $ | 137,000 | ||
Robert C. Bishop | $ | 107,000 | ||
Frederick H. Dulles | $ | 107,000 | ||
David D. Horn | $ | 107,000 | ||
Marcia Kean | $ | 107,000 | ||
Ronald G. Steinhart | $ | 107,000 | ||
Haviland Wright | $ | 107,000 |
(2) | For calendar year 2010 for 31 funds. |
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Nominees for Election as Manager
The table below shows the total compensation paid to the Nominees for calendar year 2010 for 96 funds. The Nominees have not received compensation from the Accounts. Robert J. Manning receives no compensation from any fund or Account for his services as Manager or Trustee.
Nominee Name | Total Compensation Paid by MFS Family of Funds | |||
Robert E. Butler | $ | 253,990 | ||
Maureen R. Goldfarb | $ | 242,990 | ||
David H. Gunning | $ | 307,990 | ||
William R. Gutow | $ | 242,990 | ||
Michael Hegarty | $ | 252,990 | ||
John P. Kavanaugh | $ | 243,990 | ||
J. Dale Sherratt | $ | 253,990 | ||
Laurie J. Thomsen | $ | 252,990 | ||
Robert W. Uek | $ | 260,240 |
Retirement Benefit Deferral Plan — Under a Retirement Benefit Deferral Plan, certain Nominees have deferred benefits from a prior retirement plan for certain MFS funds, not including the Accounts. The value of the benefits is periodically readjusted as though the Manager had invested an equivalent amount in Class A shares of other MFS fund(s), not including any Account, designated by such nominee. The value of the deferred benefits will be paid to the nominees upon retirement or thereafter. The plan does not obligate any fund or Account to retain the services of any Manager or pay any compensation to any Manager. The plan is not funded and the funds and Accounts are not obligated to pay the Nominee’s deferred compensation.
This section provides certain information about the Accounts, including information about their investment adviser and administrator, independent registered public accounting firm, and executive officers.
Investment Adviser and Administrator
Each Account engages MFS, a Delaware corporation with offices at 500 Boylston Street, Boston, Massachusetts 02116, as its investment adviser and administrator. MFS is a majority-owned subsidiary of Sun Life of Canada (U.S.) Financial Services Holdings, Inc., which is a majority-owned subsidiary of Sun Life Financial (U.S.) Holdings, Inc., 500 Boylston Street, Boston, Massachusetts 02116, which in turn is a wholly-owned subsidiary of Sun Life Assurance Company of Canada—U.S. Operations Holdings, Inc., One Sun Life Executive Park, Wellesley Hills, Massachusetts 02481 (“Sun Life U.S. Operations”). Sun Life U.S. Operations is a wholly-
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owned subsidiary of Sun Life Financial Corp., 150 King Street West, Toronto, Canada MSH 1J9, which in turn is a wholly-owned subsidiary of Sun Life Financial Inc.
Independent Registered Public Accounting Firm
The Board of Managers has appointed Deloitte & Touche LLP (“Deloitte”) to serve as independent accountants to each Account. Each Account has a fiscal year end of December 31. Deloitte has no direct or material indirect interest in any Account. Representatives of Deloitte are not expected to be present at the Meeting, but they will have the opportunity to make a statement if they wish, and they will be available should any matter arise requiring their presence.
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 Accounts and all permissible non-audit services rendered to MFS or various entities either controlling, controlled by, or under common control with MFS that provide ongoing services to the Account (“Service Affiliates”) if the services relate directly to the operations and financial reporting of an Account. 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.
The tables in the section entitled “Independent Registered Public Accounting Firm Fees” describe for each Account’s two most recent fiscal years the fees billed by Deloitte to each Account for (a) all audit and non-audit services provided directly to each Account and (b) those non-audit services provided to Service Affiliates that relate directly to each Account’s operations and financial reporting under the following captions:
Audit Fees — fees related to the audit and review of the financial statements included in annual reports and registration statements, and other services that are normally provided in connection with statutory and regulatory filings or engagements.
Audit-Related Fees — 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.
Tax Fees — 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 reviews.
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All Other Fees — fees for products and services provided to an Account by Deloitte other than those reported under “Audit Fees”, “Audit- Related Fees” and “Tax Fees,” including fees for services related to analysis of certain portfolio holdings, review of internal controls and review of Rule 38a-1 compliance program.
The tables in the section entitled “Independent Registered Public Accounting Firm Fees” also set forth the aggregate fees billed by Deloitte (the “Independent Registered Public Accounting Firm”) for each Account’s two most recent fiscal years for non-audit services rendered to each Account and each Account’s Service Affiliates.
The Audit Committee has considered whether the provision by each Account’s Independent Registered Public Accounting Firm of non-audit services to each Account’s Service Affiliates that were not pre-approved by the Audit Committee (because such services did not relate directly to the operations and financial reporting of each Account) was compatible with maintaining the independence of the Independent Registered Public Accounting Firm as each Account’s principal auditor.
The following table provides information about the current officers of each Account including their principal occupations, which, unless specific dates are shown, are of more than five years duration, although the titles may not have been the same throughout. The officers of the Accounts hold similar positions for the Trust and other funds in the MFS Family of Funds. Each officer will hold office until his or her successor is chosen and qualified, or until he or she retires, resigns or is removed from office.
Name, Age | Position(s) Held with Fund | Manager/Officer | Principal Occupation | Other Directorships(j) | ||||
OFFICERS | ||||||||
Maria F. DiOrioDwyer(n) age 52 | President | November 2005 | Massachusetts Financial Services Company, Executive Vice President and Chief Regulatory Officer; Chief Compliance Officer (since December 2006) | |||||
Christopher R. Bohane(n) age 37 | Assistant Secretary and Assistant Clerk | July 2005 | Massachusetts Financial Services Company, Vice President and Senior Counsel |
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Name, Age | Position(s) Held with Fund | Manager/Officer | Principal Occupation | Other Directorships(j) | ||||
John M. Corcoran(n) age 46 | Treasurer | October 2008 | Massachusetts Financial Services Company, Senior Vice President (since October 2008); State Street Bank and Trust (financial services provider), Senior Vice President, (until September 2008) | |||||
Ethan D. Corey(n) age 47 | Assistant Secretary and Assistant Clerk | July 2005 | Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel | |||||
David L. DiLorenzo(n) age 43 | Assistant Treasurer | July 2005 | Massachusetts Financial Services Company, Vice President | |||||
Timothy M. Fagan(n) age 43 | Assistant Secretary and Assistant Clerk | September 2005 | Massachusetts Financial Services Company, Vice President and Senior Counsel | |||||
Robyn L. Griffin age 36 | Assistant Independent Chief Compliance Officer | August 2008 | Griffin Compliance LLC (provider of compliance services), Principal (since August 2008); State Street Corporation (financial services provider), Mutual Fund Administration Assistant Vice President (October 2006 – July 2008); Liberty Mutual Group (insurance), Personal Market Assistant Controller (April 2006 – October 2006); Deloitte & Touche LLP (professional services firm), Senior Manager (prior to April 2006) | |||||
Brian E. Langenfeld(n) age 38 | Assistant Secretary and Assistant Clerk | May 2006 | Massachusetts Financial Services Company, Vice President and Senior Counsel (since May 2006); John Hancock Advisers, LLC, Assistant Vice President and Counsel (until April 2006) |
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Name, Age | Position(s) Held with Fund | Manager/Officer | Principal Occupation | Other Directorships(j) | ||||
Ellen Moynihan(n) age 53 | Assistant Treasurer | May 1997 | Massachusetts Financial Services Company, Senior Vice President | |||||
Susan S. Newton(n) age 61 | Assistant Secretary and Assistant Clerk | May 2005 | Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel | |||||
Susan A. Pereira(n) age 40 | Assistant Secretary and Assistant Clerk | July 2005 | Massachusetts Financial Services Company, Vice President and Senior Counsel | |||||
Mark N. Polebaum(n) age 59 | Secretary and Clerk | February 2006 | Massachusetts Financial Services Company, Executive Vice President, General Counsel and Secretary (since January 2006); Wilmer Cutler Pickering Hale and Dorr LLP (law firm), Partner (until January 2006 | |||||
Frank L. Tarantino age 67 | Independent Chief Compliance Officer | September 2004 | Tarantino LLC (provider of compliance services), Principal | |||||
Richard S. Weitzel(n) age 41 | Assistant Secretary and Assistant Clerk | October 2007 | Massachusetts Financial Services Company, Vice President and Assistant General Counsel | |||||
James O. Yost(n) age 51 | Assistant Treasurer | April 1992 | Massachusetts Financial Services Company, Senior Vice President |
(h) | Date first appointed to serve as Officer of an MFS fund. For the period March 2008 until October 2008, Ms. DiOrioDwyer served as Treasurer of the Funds. |
(j) | Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., “public companies”). |
(n) | “Interested person” of MFS within the meaning of the 1940 Act. The address of MFS is 500 Boylston Street, Boston, Massachusetts 02116. |
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Independent Registered Public Accounting Firm Fees
The tables below set forth the audit fees billed to each Account as well as fees for non-audit services provided to the Account and/or to the Account’s investment adviser, MFS, and Service Affiliates of each Account.
For each Account’s last two fiscal years, fees billed by each Account’s Independent Registered Public Accounting Firm (Deloitte) for services provided directly to each Account:
Audit Fees | ||||||||
Account | 2010 | 2009 | ||||||
Capital Appreciation Variable Account | 36,902 | 36,194 | ||||||
Global Governments Variable Account | 47,369 | 46,456 | ||||||
Government Securities Variable Account | 42,484 | 41,667 | ||||||
High Yield Variable Account | 52,442 | 51,430 | ||||||
Money Market Variable Account | 22,946 | 22,512 | ||||||
Total Return Variable Account | 50,159 | 49,192 |
Audit Related Fees(1) | Tax Fees | All Other Fees(2) | ||||||||||||||||||||||
Account | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||
Capital Appreciation Variable Account | 0 | 0 | 0 | 0 | 1,376 | 1,166 | ||||||||||||||||||
Global Governments Variable Account | 0 | 0 | 0 | 0 | 1,376 | 1,166 | ||||||||||||||||||
Government Securities Variable Account | 0 | 0 | 0 | 0 | 1,376 | 1,166 | ||||||||||||||||||
High Yield Variable Account | 0 | 0 | 0 | 0 | 1,376 | 1,166 | ||||||||||||||||||
Money Market Variable Account | 0 | 0 | 0 | 0 | 1,376 | 1,166 | ||||||||||||||||||
Total Return Variable Account | 0 | 0 | 0 | 0 | 1,376 | 1,166 |
For each Variable Account’s last two fiscal years, fees billed by each Account’s Independent Registered Public Accounting Firm for services provided to the Account’s Service Affiliates that relate directly to such Account’s operations and financial reporting:
Audit Related Fees(1) | Tax Fees | All Other Fees(1) | ||||||||||||||||||||||
Trust | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||
Service Affiliates of Capital Appreciation Variable Account* | 1,241,490 | 1,061,841 | 0 | 0 | 60,000 | 59,174 | ||||||||||||||||||
Service Affiliates of Global Governments Variable Account* | 1,241,490 | 1,061,841 | 0 | 0 | 60,000 | 59,174 |
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Service Affiliates of Government Securities Variable Account* | 1,241,490 | 1,061,841 | 0 | 0 | 60,000 | 59,174 | ||||||||||||||||||
Service Affiliates of High Yield Variable Account* | 1,241,490 | 1,061,841 | 0 | 0 | 60,000 | 59,174 | ||||||||||||||||||
Service Affiliates of Money Market Variable Account* | 1,241,490 | 1,061,841 | 0 | 0 | 60,000 | 59,174 | ||||||||||||||||||
Service Affiliates of Total Return Variable Account* | 1,241,490 | 1,061,841 | 0 | 0 | 60,000 | 59,174 |
* | This amount reflects the fees billed to Service Affiliates of each Account for non-audit services relating directly to the operations and financial reporting of the Account (portions of which services also related to the operations and financial reporting of all funds within the MFS funds complex). |
(1) | 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 “All Other Fees” are fees for products and services provided by each Account’s Independent Registered Public Accounting Firm other than those reported under “Audit Fees,” “Audit-Related Fees” and “Tax Fees,” including fees for services related to analysis of certain portfolio holdings and, review of internal controls and review of Rule 38a-1 compliance program. |
During the periods indicated in the tables above, no services described under “Audit-Related Fees,” “Tax Fees” or “All Other Fees” were approved pursuant to the de minimis exception set forth in paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
Aggregate fees billed by each Independent Registered Public Accounting Firm, for each Variable Account’s two most recent fiscal years, for non-audit services rendered to each Account and each Account’s Service Affiliates:
Trust | 2010 | 2009 | ||||||
Capital Appreciation Variable Account and its Service Affiliates | 1,903,662 | 1,361,346 | ||||||
Global Governments Variable Account and its Service Affiliates | 1,903,662 | 1,361,346 | ||||||
Government Securities Variable Account and its Service Affiliates | 1,903,662 | 1,361,346 | ||||||
High Yield Variable Account and its Service Affiliates | 1,903,662 | 1,361,346 | ||||||
Money Market Variable Account and its Service Affiliates | 1,903,662 | 1,361,346 | ||||||
Total Return Variable Account and its Service Affiliates | 1,903,662 | 1,361,346 |
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As of August 26, 2011 (the “Record Date”), the number of units of each Account and the number of shares of each class of each Portfolio whose shares are being offered by this prospectus are listed in the table at Exhibit B.
To the knowledge of the Accounts, as of the Record Date, no person, except as set forth in the table at Exhibit B, owned units attributable to 5% or more of the assets of an Account. To the knowledge of the Trust, as of the Record Date, no person, except as set forth in the table at Exhibit B, owned of record 5% or more of the outstanding shares of any class of a Portfolio whose shares are being offered by this Proxy Statement/Prospectus. On the Record Date, the Trustees and officers of the Trust, as a group, owned separate account units attributable to less than one percent of the assets of any class of a Portfolio of the Trust.
The proxy solicitation will be done by mail but may also be done by telephone, e-mail, facsimile or personal interview conducted by MFS, Sun Life or outside contractors employed to assist in the solicitation. The estimated expenses for the solicitation are $ .
All proxies executed, dated and returned to Sun Life prior to the beginning of the Meeting on November 17, 2011 will be voted in accordance with the instructions marked thereon. If instructions are not marked thereon, proxies will be voted “FOR” the relevant Account’s Reorganization.
Any Account Owner who provides voting instructions has the power to revoke the instructions by (1) delivering to the Secretary of the Accounts (at the offices of the Accounts) written notice of revocation, or (2) submitting superseding voting instructions, in each case at any time prior to the date of the Meeting. Account Owners may also revoke prior voting instructions by voting in person at the Meeting.
The number of votes which a Payee under an annuity contract in the annuity period may cast is equal to (1) the amount of the assets remaining in each Account to meet the annuity obligations related to such contract divided by (2) the value of the accumulation unit.
Quorum Requirements/Votes Necessary to Approve Proposals
With respect to each Account, the presence in person or by proxy of the holders of more than fifty percent (50%) of the total number of votes entitled to be cast at the Meeting is required to constitute a quorum. For Proposals 1, 2,3,4,5 and 6, the Reorganization of each Account will
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consummated only if approved by the affirmative vote of a “majority of the outstanding voting securities” of each Account entitled to vote. Under the 1940 Act, the vote of a “majority of the outstanding voting securities” means the affirmative vote of the lesser of (a) 67% or more of the voting power of the securities present at the Meeting or represented by proxy if the holders of more than 50% of the outstanding voting power of the securities are present or represented by proxy or (b) more than 50% of the voting power of the outstanding voting securities. For Proposal 7, each Nominee named in Proposal 7 must be elected by shares representing a plurality of the Account’s voting power entitled to be cast at the Meetings that are present in person or by proxy.
If a proxy is properly executed and returned and is marked with an abstention (collectively, “abstentions”), the units represented thereby will be considered to be present at the applicable Meeting for purpose of determining the existence of a quorum for the transaction of business. Accordingly, abstentions will effectively be “NO” votes on Proposals 1 through 6.
The Meeting may be adjourned for the purpose of further proxy solicitation if a quorum is not present at the Meeting or if the vote necessary to approve the Reorganization has not been obtained. The persons designated as proxies will vote proxies in favor of any adjournment unless you provide other instructions. At any subsequent reconvening, the persons designated as proxies will vote proxies in the same manner as the proxies would have been voted at the original Meeting, unless you revoke the proxies before the Meeting is reconvened.
The Board of Managers of the Accounts know of no other matters which are likely to be brought before the Meeting. In the event any other matters do properly come before the Meeting, however, the persons named in the enclosed proxy will vote the proxies in accordance with their best judgment.
The Accounts do not hold regular Account Owner meetings. If one or more Reorganizations are not approved, Account Owners wishing to submit proposals for inclusion in a proxy statement for a subsequent Account Owner meeting (if any) should send their written proposals to the principal executive offices of Sun Life at the address set forth on the cover of this Proxy Statement/Prospectus.
Proposals must be received a reasonable time prior to the date of a meeting of Account Owners to be considered for inclusion in the proxy materials for a meeting. The submission of a proposal does not guarantee its inclusion in the proxy statement and is subject to limitations under the federal securities laws.
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Bank Focus Risk: Events that affect the banking or related industries may have a significant adverse affect on the Portfolio.
Counterparty and Third Party Risk: Transactions involving a counterparty or third party other than the issuer of the instrument are subject to the credit risk of the counterparty or third party, and to the counterparty’s or third party’s ability to perform in accordance with the terms of the transaction.
Credit Risk: The price of a debt instrument depends, in part, on the credit quality of the issuer, borrower, counterparty, or underlying collateral and can decline in response to changes in the financial condition of the issuer, borrower, counterparty, or underlying collateral, or changes in specific or general market, economic, industry, political, regulatory, geopolitical, or other conditions.
Currency Risk: The value of foreign currencies relative to the U.S. dollar fluctuates in response to market, economic, political, regulatory, geopolitical or other conditions, and a decline in the value of a foreign currency versus the U.S. dollar reduces the value in U.S. dollars of investments denominated in that foreign currency.
Defensive Investing Risk: When MFS invests defensively, different factors could affect the Account’s or Portfolio’s performance and the Account/Portfolio may not achieve its investment objective. In addition, the defensive strategy may not work as intended.
Derivatives Risk: Derivatives can be used to take both long and short positions (i.e., the value of a derivative can be positively or negatively related to the value of the underlying indicator(s) on which the derivative is based). Derivatives can be highly volatile and involve risks in addition to the risks of the underlying indicator(s). Gains or losses from derivatives can be substantially greater than the derivatives’ original cost and can involve leverage.
Foreign and Emerging Markets Risk: Exposure to foreign markets, especially emerging markets, through issuers or currencies can involve additional risks relating to market, economic, political, regulatory, geopolitical, or other conditions. These factors can make foreign investments, especially those in emerging markets, more volatile and less liquid than U.S. investments. In addition, foreign markets can react differently to these conditions than the U.S. market. Emerging markets can have less developed markets and less developed legal, regulatory, and accounting systems, and greater political, social, and economic instability than developed markets.
Foreign Exposure Risk: Exposure to foreign markets can involve increased risks due to adverse market, economic, political, regulatory, geopolitical, or other conditions.
Foreign Risk: Exposure to foreign markets through issuers or currencies can involve additional risks relating to market, economic, political, regulatory, geopolitical, or other conditions. These factors can make foreign investments, especially those in emerging markets, more volatile and less liquid than U.S. investments. In addition, foreign markets can react differently to these conditions than the U.S. market.
Frequent Trading Risk: Frequent trading increases transaction costs, which may reduce the Portfolio’s or Account’s return.
Geographic Concentration Risk: The Portfolio’s performance could be closely tied to the market, currency, economic, political, regulatory, geopolitical, or other conditions in the countries or regions in which the Portfolio invests and could be more volatile than the performance of more geographically-diversified funds.
Growth Company Risk: The stocks of growth companies can be more sensitive to the company’s earnings and more volatile than the market in general.
Interest Rate, Credit, and Liquidity Risk: MFS seeks to maintain a stable $1.00 share price for the fund, there is no guarantee that it will be able to do so. A major increase in interest rates or a decline in the credit quality of an issuer or entity providing credit support, an inactive trading market for money market instruments, or adverse market, economic, political, regulatory, geopolitical, or other conditions could cause the Portfolio’s share price to fluctuate.
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Inflation-Adjusting Risk: Interest payments on inflation-adjusted debt instruments can be unpredictable and vary based on the level of inflation. If inflation is negative, principal and income can both decline.
Interest Rate Risk: The price of a debt instrument falls when interest rates rise and rises when interest rates fall. Instruments with longer maturities, or that do not pay current interest, are more sensitive to interest rate changes.
Investment Selection Risk: The MFS analysis of an investment can be incorrect and can lead to an investment focus that results in the Portfolio underperforming other funds with similar investment strategies and/or underperforming the markets in which the Portfolio invests.
Issuer Focus Risk: The Portfolio’s performance could be more volatile than the performance of more diversified funds.
Leveraging Risk: Leverage involves investment exposure in an amount exceeding the initial investment. Leverage can cause increased volatility by magnifying gains or losses.
Liquidity Risk: It may not be possible to sell certain investments, types of investments, and/or segments of the market at any particular time or at an acceptable price.
Municipal Risk: The price of a municipal instrument can be volatile and significantly affected by adverse tax or court rulings, legislative or political changes, changes in specific or general market and economic conditions, and the financial condition of municipal issuers and insurers. Because many municipal instruments are issued to finance similar projects, conditions in these industries can significantly affect the Portfolio and the overall municipal market.
Non-Diversification Risk: The Portfolio’s performance could be more volatile than the performance of more diversified funds.
Prepayment/Extension Risk: Instruments subject to prepayment and/or extension can reduce the potential for gain for the instrument’s holders if the instrument is prepaid and increase the potential for loss if the maturity of the instrument is extended.
Stock Market/Company Risk: Stock markets are volatile and can decline significantly in response to issuer, market, economic, political, regulatory, geopolitical, and other conditions. The price of an equity security can decrease significantly in response to these conditions, and these conditions can affect a single issuer or type of security, issuers within a broad market sector, industry or geographic region, or the market in general.
Value Company Risk: The stocks of value companies can continue to be undervalued for long periods of time and not realize their expected value.
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Compass Board
COMPLIANCE AND GOVERNANCE COMMITTEE CHARTER
Adopted February 24, 2005
Revised February 2008 (Trust Name Change)
The Board of Trustees (“Trustees”) of the MFS Variable Insurance Trust II (“Trust”) and the Board of Managers (“Managers”)(Trustees and Managers collectively referred to as “Trustee(s)”) of the various Compass Variable Accounts (“Accounts”) (the Trust and the Accounts each a “Fund” or collectively the “Funds”)(collectively the “Board” or the “Compass Board”) has adopted this Charter to govern the activities of the Compliance and Governance Committee (the “Committee”) of the particular Board. This Charter applies separately to each Trust and its particular Board and Committee, and shall be interpreted accordingly.
Statement of Purposes and Responsibilities
The Committee is generally responsible for oversight of regulatory and fiduciary compliance matters involving each series of a Trust and each Account, as well as Fund-related activities of the Funds’ investment adviser and administrator, Massachusetts Financial Services Company (“MFS”), and the principal underwriter and transfer agent of the Funds (together, “Applicable Fund Service Providers”). While the intention is that the Committee will have broad oversight of all areas of Fund compliance, it is expected that principal oversight responsibilities for certain specific areas of compliance (e.g., audit, operations) will be assumed by other committees of the Board or the full Board.
In addition, the Committee advises and makes recommendations to the Board on matters concerning Trustee practices and recommendations concerning the functions and duties of the committees of the Board, which may be based on developments in the mutual fund industry and practices used by other comparable fund complexes.
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The Committee is responsible for (i) determining requisite standards or qualifications for nominees to serve as trustees on the Board, (ii) identifying possible candidates to become members of the Board in the event that a trustee position is vacated or created and/or in contemplation of a shareholders’ meeting at which one or more trustees is to be elected, and (iii) considering and evaluating such candidates and recommending trustee nominees for the Board’s approval.
In addition, the Committee is responsible for recommending for approval by the Board the structure and levels of compensation and other related benefits to be paid or provided by the Funds to Board members.
Committee Membership and Operations
The Committee shall be comprised of as many Board members as the Board shall determine, provided that all members of the Committee shall be Board members who are not “interested persons” of the Trust, as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended (“Independent Trustees”).
One or more members of the Committee may be designated by the Board as the Committee’s chair or co-chair, as the case may be. The Committee may delegate any portion of its authority or responsibilities to a sub-committee of one or more members.
The Committee will ordinarily meet at least four times per year, in connection with regularly scheduled Board meetings, and otherwise as and when the Committee or the Board determines necessary or appropriate in accordance with the Trust’s By-Laws. A Chair of the Trustees, the chair or vice-chair of the Committee or a majority of the members of the Committee are authorized to call a meeting of the Committee and send notice thereof.
A majority of the members of the Committee shall constitute a quorum for the transaction of business at any meeting of the Committee. The action of a majority of the members of the Committee present at a meeting at which a quorum is present shall be the action of the Committee. The Committee may also take action by written consent of a majority of the Committee members. The Committee may meet by means of a telephone conference circuit or similar communications
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equipment by means of which all persons participating in the meeting can hear each other.
The Committee may invite such members of management and other persons to its meetings as it may deem desirable or appropriate. The Committee shall report regularly to the Board summarizing the Committee’s activities and actions and any significant issues considered by the Committee.
Committee Duties and Responsibilities
The following are the duties and responsibilities of the Committee:
Compliance
1. | To provide oversight with respect to regulatory and fiduciary compliance matters involving the Trusts and the Funds, as well as Fund-related activities of MFS and other Applicable Fund Service Providers. Principal areas of compliance to be overseen by the Committee include: (i) federal securities laws governing the Funds and Applicable Fund Service Providers, (ii) potential conflicts of interest involving MFS and other affiliated persons, (iii) the Code of Ethics applicable to the Funds and MFS, (iv) Fund disclosure documents, including prospectuses, proxies and shareholder reports, (v) MFS’s fiduciary duties to Fund shareholders and (vi) other compliance areas identified by the Board from time to time as appropriately falling principally within the scope of the Committee’s functions. |
2. | To recommend to the Board the allocation of compliance responsibilities among the committees of the Board, and to keep apprised of and coordinate with the full Board and other committees with respect to specific areas of compliance for which the Committee does not have principal oversight responsibility, including (i) fund advisory and related fee arrangements, (ii) Fund sales and distribution arrangements, (iii) processing of transactions in Fund shares, (iv) Fund portfolio trading and brokerage, (v) Fund audit-related matters, and (vi) valuation of Fund portfolio securities and pricing of Fund shares. |
3. | To review and make recommendations to the Board regarding the scope and contents of the Funds’ compliance policies and procedures adopted by |
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the Board in accordance with applicable law, as well as compliance policies and procedures of MFS and other Applicable Fund Service Providers required to be approved by the Board (together, “Compliance Policies and Procedures”). |
4. | To periodically (at least annually) review and assess the implementation and administration of the Compliance Policies and Procedures and to report to the Board regarding these matters, including any recommendations for changes to the Policies and Procedures or the means by which they are administered. |
5. | To advise the Board regarding the retention, compensation and evaluation of the Trusts’ Independent Chief Compliance Officer (the “ICCO”). The ICCO will report directly to the Committee and, in consultation with the Board, the Committee shall be primarily responsible for defining the responsibilities and overseeing the activities of the ICCO on behalf of the Funds, and for serving as principal liaison between the ICCO and the Board for reporting and related purposes. |
6. | To receive reports from and serve as principal liaison between the Board and compliance officers and related personnel of MFS and other Applicable Fund Service Providers. |
Governance
1. | To make recommendations to the Board from time to time as to changes that the Committee believes to be desirable in the size of the Board or any committee thereof. |
2. | To make recommendations to the Board from time to time as to the establishment of any new committees of the Board or changes in the powers, duties or composition of any existing committee. |
3. | To make recommendations to the Board regarding Board and committee meeting procedures, including the appropriateness and adequacy of the information supplied to the Trustees in connection with such meetings. |
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General
1. | To make such other reports and recommendations to the Board within the scope of the Committee’s functions. |
2. | To discharge any other duties or responsibilities delegated to the Committee by the Board from time to time. |
Performance Evaluation
The Committee shall produce and provide to the Board orally or in writing an annual performance evaluation of the Committee, which evaluation shall compare the performance of the Committee with the requirements of this charter. The performance evaluation shall also include a review of the adequacy of this charter and shall recommend to the Board any revisions the Committee deems necessary or desirable, although the Board shall have the sole authority to amend this charter. The performance evaluation shall be conducted in such manner as the Committee deems appropriate.
Delegation to Subcommittees
The Committee may, in its discretion, delegate all or a portion of its duties and responsibilities to a subcommittee of the Committee.
Outside Resources and Assistance from Management
The appropriate officers of the Fund shall provide or arrange to provide such information, data and services as the Committee may request. Subject to the ultimate authority of the Board, the Committee shall have the authority to engage at the Fund’s expense independent counsel and other experts and consultants whose expertise the Committee considers necessary to carry out its responsibilities.
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EXHIBITS TO PROXY STATEMENT/PROSPECTUS
Exhibit A—Form of Agreement and Plan of Reorganization
Exhibit B—Ownership of Shares as of Record Date
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Exhibit A
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated as of , 2011(the “Plan”), among SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) (“Sun Life”), a Delaware corporation, Money Market Variable Account, Global Governments Variable Account, Capital Appreciation Variable Account, Total Return Variable Account, High Yield Variable Account and Government Securities Variable Accounts (each an “Account” and collectively the “Variable Accounts” or the “Acquired Accounts”), managed separate accounts of Sun Life, and MFS VARIABLE INSURANCE TRUST II, a Massachusetts business trust (the “Trust”).
WHEREAS, the Variable Accounts are segregated asset accounts of Sun Life under the insurance code of the State of Delaware;
WHEREAS, the Trust is a Massachusetts business trust and is authorized to issue separate series of beneficial interest including the MFS Money Market, MFS Global Governments, MFS Massachusetts Investors Growth Stock, MFS Total Return, MFS High Yield and MFS Government Securities Portfolios (each, a “Fund” and collectively, the “Funds” or the “Acquiring Funds”);
WHEREAS, the parties desire to restructure the Variable Accounts by providing (1) that each of the Money Market Variable Account, Global Governments Variable Account, Capital Appreciation Variable Account, Total Return Variable Account, High Yield Variable Account and Government Securities Variable Account, respectively, will transfer its assets other than insurance-related assets and obligations (“Acquired Assets”) and its investment-related liabilities (“Assumed Liabilities”) to the MFS Money Market, MFS Global Governments, MFS Massachusetts Investors Growth Stock, MFS Total Return, MFS High Yield and MFS Government Securities Portfolios, respectively, in exchange for issuance of Initial Class shares of the Funds (the “Reorganization Shares”) to the corresponding Variable Account; (2) that the Money Market Variable Account will be converted into a sub-account of a new unit investment trust separate account (“New UIT”); and (3) the Variable Accounts other than the Money Market Variable Account will be redenominated as unit investment trust sub-accounts of the New UIT.
NOW, THEREFORE, in consideration of the mutual promises herein contained, the Variable Accounts agree to the transfer of all of the Acquired Assets to the corresponding Funds solely in exchange for (1) the issuance by the Trust of the Reorganization Shares of the Funds and (2) the assumption by each of the Funds of the Assumed Liabilities of the corresponding Variable Accounts, on the terms and conditions hereinafter set forth:
All representations, warranties, covenants and obligations of the Acquiring Funds and the Acquired Accounts contained herein shall be deemed to be representations, warranties, covenants and obligations of Sun Life, acting on behalf of the Acquired Accounts, and the Trust,
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acting on behalf of the Acquiring Funds, respectively, and all rights and benefits created hereunder in favor of the Acquiring Funds and the Acquired Accounts shall inure to, and shall be enforceable by, Sun Life and the Trust, acting on behalf of the Acquired Accounts and the Acquiring Funds, respectively.
1. | The Reorganization |
1.1 The Acquired Accounts will transfer to the Acquiring Funds all of the Acquired Assets, (consisting of, without limitation, portfolio securities and instruments, dividend and interest receivables, claims and rights of action related to the Acquired Accounts investment activity, cash and other assets) as set forth in a statement of assets and liabilities as of the Valuation Time (as defined in paragraph 2.1 hereof) prepared in accordance with generally accepted accounting principles consistently applied, certified by the Acquired Accounts’ Treasurer or Assistant Treasurer and delivered by the Acquired Accounts to the Acquiring Funds pursuant to paragraph 5.6 hereof (the “Statement of Assets and Liabilities”), free and clear of all liens and encumbrances, except as otherwise provided herein, in exchange solely for (a) the assumption by the Acquiring Funds of all of the Assumed Liabilities of the Acquired Accounts as set forth in the Statement of Assets and Liabilities and (b) the issuance and delivery by the Acquiring Funds to the Acquired Accounts of the number of full and fractional (rounded to the [third decimal] place) Reorganization Shares determined as provided in paragraph 2.2 hereof. Such transactions shall take place at the closing provided for in paragraph 3.1 hereof (the “Closing”).
1.2 The Acquired Accounts reserve the right to sell any of the portfolio securities or other assets prior to the Closing in the ordinary course of business.
2. | Valuation |
2.1 The net asset value of each Reorganization Share and the net value of the Acquired Assets shall in each case be determined as of the close of business (4:00 p.m. Eastern Time) on the Closing Date (the “Valuation Time”). The net asset value of the Reorganization Shares shall be computed by State Street Bank and Trust Company (the “Custodian”), as custodian and pricing agent for the Acquiring Funds, using the valuation procedures set forth in the Trust’s Amended and Restated Declaration of Trust (the “Declaration of Trust”) or Master Amended and Restated By-Laws (the “By-Laws”) and the Acquiring Funds’ then-current prospectus and statement of additional information (collectively, the “Acquiring Funds Valuation Procedures”), [to not less than two decimal places]. The net value of the Acquired Assets shall be computed by the Custodian, as custodian and pricing agent for the Acquired Accounts, by calculating the value of the Acquired Assets and subtracting therefrom the amount of the Assumed Liabilities, using the valuation procedures set forth in the Amended and Restated Rules and Regulations, dated May 31, 2001, of each Account or the Master Amended and Restated By-Laws of the Accounts, dated August 6, 2004 and the Acquired Accounts’ then-current prospectus and statement of additional information (collectively, the “Acquired Accounts Valuation Procedures”). The determinations of the Custodian shall be conclusive and binding on all parties in interest; provided, however, that, in computing each Fund’s/Acquired Account’s net asset
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value in accordance with this paragraph 2.1, any fair value determination required to be made by the Acquiring Funds’ Valuation Procedures or Acquired Accounts’ Valuation Procedures with respect to a portfolio security or other asset of either an Acquiring Fund or an Acquired Account shall be made in accordance with the applicable party’s Valuation Procedures, and any such fair value determinations shall be conclusive and binding on the Custodian and all parties in interest.
2.2 The number of Reorganization Shares (including fractional shares, if any, rounded to the [third decimal place]) the Acquiring Funds shall issue pursuant to paragraph 1.1(b) hereof shall be determined by dividing the net value of the Acquired Assets (computed as set forth in paragraph 2.1 hereof) (the “Acquired Accounts Value”) by the net asset value of a Reorganization Share (computed as set forth in such paragraph).
2.3 Except for certain fair value determinations as described in paragraph 2.1 hereof, all computations of value shall be made by the Custodian in its capacity as pricing agent for the Acquiring Funds and the Acquired Accounts, as applicable, and in accordance with its regular practice in pricing the shares and assets of the Acquiring Funds and the Acquired Accounts, as applicable, using the relevant Fund’s or Account’s Valuation Procedures.
3. | Closing and Closing Date |
3.1 The Closing Date shall be December , 2011 or such other date on or before December 31, 2011 as the parties may agree. The Closing shall be held at [5:00] p.m., Eastern Time, at the offices of the Trust, 500 Boylston Street, Boston, Massachusetts 02116, or at such other time and/or place as the parties may agree (the “Effective Time”).
3.2 The Acquired Assets shall be transferred by the Acquired Accounts to the Custodian for the accounts of the Acquiring Funds on the Closing Date, duly endorsed in proper form for transfer, in such condition as to constitute good delivery thereof in accordance with the custom of brokers or, in the case of portfolio securities held in the US Treasury Department’s book-entry system or by the Depository Trust Company or other third-party depositories, by transfer to the accounts of the Custodian in accordance with Rule 17f-4, Rule 17f-5, or Rule 17f-7, as the case may be, under the Investment Company Act of 1940, as amended (the “1940 Act”) and shall be accompanied by all necessary federal and state stock transfer stamps or a check for the appropriate purchase price thereof. The cash delivered shall be in the form of currency, certified or official bank check or federal funds wire, payable to the order of, as appropriate, “State Street Bank and Trust Company, Custodian for the MFS Money Market Portfolio, MFS Global Governments Portfolio, MFS Massachusetts Investors Growth Stock Portfolio, MFS Total Return Portfolio, MFS High Yield Portfolio and MFS Government Securities Portfolios Portfolio or in the name of any successor organization.
3.3 If on the Closing Date (a) the New York Stock Exchange shall be closed to trading or trading thereon shall be restricted or (b) trading or the reporting of trading on such exchange or elsewhere shall be disrupted so that accurate appraisal of the net value of the Acquired Assets or the net asset value of the Reorganization Shares is impracticable, the Closing Date shall be postponed until the next business day when trading shall have been fully resumed
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and reporting shall have been restored; provided that if trading shall not be fully resumed and reporting restored on or before December 31, 2011, this Plan may be terminated by any party upon the giving of written notice to the other.
3.4 The Acquiring Funds shall issue and deliver to the Acquired Accounts a confirmation evidencing the Reorganization Shares credited on the Closing Date, or provide evidence satisfactory to the Acquired Accounts that such Reorganization Shares have been credited to the Acquired Accounts’ accounts on the books of the Acquiring Funds. At the Closing each party shall deliver to the other such bills of sale, checks, assignments, stock certificates, receipts or other documents as such other party or its counsel may reasonably request.
4. | Representations and Warranties |
4.1 Sun Life represents and warrants to the Funds as follows:
(a) The Variable Accounts were established by Sun Life as separate accounts pursuant to the insurance code of the State of Delaware, and are separate accounts under the provisions of the insurance code.
(b) Sun Life has the power to enter into this Plan and to carry out its obligations hereunder. The execution, delivery and performance of this Plan, and the consummation of the transactions contemplated hereby, have been duly authorized by Sun Life and, except for approval by variable annuity contract owners participating in the Acquired Accounts, no other proceedings by Sun Life, are necessary to authorize its officers to effectuate this Plan and the transactions contemplated hereby. Sun Life is not a party to or obligated under any charter, by-law, indenture or contract provision or any other commitment or obligation, or subject to any order or decree, which would be violated by its executing and carrying out this Plan.
(c) Except as previously disclosed to the Trust, there are no claims, actions, suits or proceedings pending or, to the knowledge of Sun Life, threatened which would materially adversely affect the Variable Accounts or their assets or business or which would prevent or hinder in any material respect consummation of the transactions contemplated hereby.
(d) Except for contracts and agreements disclosed to the Trust, under which no default exists, Sun Life, at the Effective Time, is not a party to or subject to any contract, debt instrument, plan, lease, franchise, license or permit of any kind or nature whatsoever, that may materially affect this Plan.
(e) Any information to be furnished by Sun Life for use in applications for orders, registration statements, proxy materials and other documents that may be necessary in connection with the transactions contemplated hereby shall be accurate and complete and shall comply fully with federal securities and other laws and regulations thereunder applicable thereto.
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(f) No consent, approval, authorization or order of any court or governmental authority is required for the consummation by Sun Life of the transactions contemplated by this Plan, except such as have been obtained under the Securities Act of 1933, as amended (the “1933 Act”), the Securities Exchange Act of 1934, as amended, and the 1940 Act and the rules and regulations thereunder (collectively, the “Acts”), and such as may be required under state securities or insurance laws.
4.2. Each Variable Account represents and warrants to the corresponding Fund as follows:
(a) The Account is a duly registered investment company classified as a management company of the open-end type, and its registration with the Commission as an investment company under the 1940 Act is in full force and effect;
(b) The audited financial statements of the Variable Account for the fiscal year ended December 31, 2010, and the unaudited financial statements of the Variable Account dated as of June 30, 2011 (the “Variable Accounts’ Financial Statements”), as delivered to the Trust, fairly present the financial position of such Variable Account as of the dates thereof, and the results of its operations and changes in its net assets for the periods indicated.
(c) The Variable Account has the power to enter into this Plan and to carry out its obligations hereunder. The execution, delivery and performance of this Plan, and the consummation of the transactions contemplated hereby, has been duly authorized by the Board of Managers of the Variable Account (“Board of Managers”) and, except for approval by variable annuity contract owners participating in the Variable Account, no other proceedings by the Variable Account are necessary to authorize its officers to effectuate this Plan and the transactions contemplated hereby. The Variable Account is not a party to or obligated under any charter, by-law, indenture or contract provision or any other commitment or obligation, or subject to any order or decree, which would be violated by its executing and carrying out this Plan.
(d) There are no investment-related liabilities of the Variable Account, whether or not determined or determinable, other than those liabilities disclosed or provided for in the Variable Accounts’ Financial Statements and liabilities incurred in the ordinary course of business subsequent to the date of the Variable Accounts’ June 30, 2011 Financial Statements or otherwise previously disclosed to the Trust, none of which has been materially adverse to the business, assets or results of operations of the Variable Accounts. The Variable Account’s registration statement, for registration of variable annuity contracts with the United States Securities and Exchange Commission (the “SEC”), which is on file with the SEC, does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The statement of assets and liabilities, including the schedule of portfolio investments, of each Variable Account as of December 31, 2010, and the related statement of operations for the fiscal year then ended, and the statement of changes in net assets for the fiscal years ended December 31, 2010 and December 31, 2009 (copies of which have been furnished to the Acquiring Funds) have been audited by Deloitte & Touche LLP, Independent Registered Public Accounting Firm, and present fairly in all material respects the financial position of the Variable Accounts as of December 31, 2010 and the results of its operations and changes in net assets for the respective stated periods in accordance with Accounting principles generally accepted in the United States of America consistently applied, and there are no known actual or contingent liabilities of the Variable Accounts as of the respective dates thereof not disclosed therein;
(e) The unaudited statement of assets and liabilities, including the schedule of portfolio investments, of each Variable Account as of June 30, 2011, and the related statement of operations for the fiscal semi-annual period then ended, and the statement of changes in net assets for the fiscal semi-annual period ended June 30, 2011 (copies of which have been furnished to the Acquiring Funds) present fairly in all material respects the financial position of the Variable Accounts as of June 30, 2011 and the results of its operations and changes in net assets for the respective stated periods in accordance with Accounting principles generally accepted in the United States of America consistently applied, and there are no known actual or contingent liabilities of the Variable Accounts as of the respective dates thereof not disclosed therein;
(f) Except as previously disclosed to the Trust, there are no claims, actions, suits or proceedings pending or threatened, to the knowledge of the Variable Accounts, which would materially adversely affect the Variable Accounts or their assets or business or
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which would prevent or hinder in any material respect consummation of the transactions contemplated hereby.
(g) Except for contracts and agreements disclosed to the Trust, under which no default exists, each of the Variable Accounts, at the Effective Time, is not a party to or subject to any contract, debt instrument, plan, lease, franchise, license or permit of any kind or nature whatsoever, that may materially affect this Plan.
(h) Since December 31, 2010, there has not been any material adverse change in the Acquired Accounts’ financial condition, assets, liabilities or business other than changes occurring in the ordinary course of business, or any incurrence by the Acquired Accounts of indebtedness maturing more than one year from the date such indebtedness was incurred, except as otherwise disclosed to and accepted by the Trust, on behalf of the Acquiring Funds. For the purposes of this subparagraph (f), a decline in net asset value per unit of an Acquired Account resulting from losses upon the disposition of investments or from changes in the value of investments held by the Acquired Accounts, or a distribution or a payment of dividends shall not constitute a material adverse change.
(i) As of the Closing Date, the Acquired Accounts will have, within the times and in the manner prescribed by law, properly filed all required federal and other tax returns and reports which, to the knowledge of the Accounts’ officers, are required to have been filed by the Acquired Accounts by such date and all such returns and reports were complete and accurate in all material respects. The Acquired Accounts has timely paid or will timely pay, in the manner prescribed by law, all federal and other taxes shown to be due on said returns or on any assessments received by the Acquired Accounts. All tax liabilities of the Acquired Accounts have been adequately provided for on its books, and no tax deficiency or liability of the Acquired Accounts has been asserted, and no question with respect thereto has been raised or is under audit, by the Internal Revenue Service or by any state, local or other tax authority for taxes in excess of those already paid.
(j) Except as previously disclosed to the Trust, at the Closing Date the Acquired Accounts will have good and marketable title to the Acquired Assets and full right, power and authority to sell, assign, transfer, convey and deliver the Acquired Assets hereunder, and upon delivery and payment for the Acquired Assets, the Acquiring Funds will acquire good and marketable title thereto subject to no restrictions on the full transfer thereof, including such restrictions as might arise under the 1933 Act.
(k) The information to be furnished by the Acquired Accounts for use in applications for orders, registration statements, proxy materials and other documents that may be necessary in connection with the transactions contemplated hereby shall be accurate and complete and shall comply fully with federal securities and other laws and regulations thereunder applicable thereto.
(l) The proxy statement of the Acquired Accounts (the “Proxy Statement”) to be included in the Registration Statement (as defined in paragraph 5.7 hereof) (other than
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written information furnished by the Acquiring Funds for inclusion therein, as covered by the Trust’s representation and warranty in paragraph 4.2(n) hereof), on the effective date of the Registration Statement, on the date of the Meeting (as defined in paragraph 5.2 hereof) and on the Closing Date, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements were made, not misleading.
(m) No consent, approval, authorization or order of any court or governmental authority is required for the consummation by the Acquired Accounts of the transactions contemplated by this Plan, except such as have been obtained under the Acts, and such as may be required under state securities and insurance laws.
(n) All of the issued and outstanding units of the Acquired Accounts have been offered for sale and sold in conformity with all applicable federal and state securities laws, except as may have been previously disclosed in writing to the Acquiring Funds.
(o) The then current prospectus and statement of additional information of the Acquired Accounts, as supplemented and updated from time to time, will conform in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the rules and regulations of the SEC thereunder on the date of the Proxy Statement, on the date of the Meeting (as defined in paragraph 5.2 hereof) and on the Closing Date and will not on any of such dates include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
(p) The Acquired Accounts incurred the Assumed Liabilities in the ordinary course of its business.
4.3 The Acquiring Funds represent and warrant to the Acquired Accounts and Sun Life, on behalf of the New UIT, as follows:
(a) The Trust is a business trust that is duly organized, validly existing and in good standing under the laws of The Commonwealth of Massachusetts and has the power to own all of its properties and assets and to carry out its obligations under this Plan. Neither the Trust nor the Acquiring Funds is required to qualify to do business in any other jurisdiction. This Plan has been duly authorized by the Trust on behalf of the Acquiring Funds. The Trust has all necessary federal, state and local authorizations to own all of its properties and assets and to carry on its business as now being conducted.
(b) The Trust is a duly registered investment company classified as a management company of the open-end type, and its registration with the Commission as an investment company under the 1940 Act is in full force and effect; and the Acquiring Funds are separate series of the Trust duly constituted in accordance with the applicable provisions
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of the Declaration of Trust and By-Laws and the laws of The Commonwealth of Massachusetts.
(c) The current prospectus and statement of additional information of the Acquiring Funds , each dated April 30, 2011, as supplemented and updated from time to time (collectively, the “Acquiring Funds Prospectus”), and the Registration Statement (other than written information furnished by the Acquired Accounts and Sun Life for inclusion therein as covered by the representations and warranties in paragraphs 4.1(e) and 4.2(i) hereof) will conform in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the rules and regulations of the SEC thereunder on the date of the Proxy Statement, on the date of the Meeting (as defined in paragraph 5.2 hereof) and on the Closing Date and will not on any of such dates include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
(d) At the Closing Date, the Acquiring Funds will have good and marketable title to its assets.
(e) The Trust is not, and the execution, delivery and performance of this Plan will not result, in violation of the Declaration of Trust or By-Laws or of any agreement, indenture, instrument, contract, lease or other undertaking to which the Trust or the Acquiring Funds is a party or by which the Trust or the Acquiring Funds is bound.
(f) Except as otherwise disclosed in writing to and accepted by the Acquired Accounts and Sun Life, no material litigation or administrative proceeding or investigation of or before any court or governmental body is currently pending or, to the knowledge of the Trust or the Acquiring Funds, threatened against the Trust or the Acquiring Funds or any of its properties or assets. Neither the Trust nor the Acquiring Funds know of facts that might form the basis for the institution of such proceedings, and neither the Trust nor the Acquiring Funds is a party to or subject to the provisions of any order, decree or judgment of any court or governmental body that materially and adversely affects their business or their ability to consummate the transaction herein contemplated.
(g) The statement of assets and liabilities, including the schedule of portfolio investments, of the Acquiring Funds as of December 31, 2010, and the related statement of operations for the fiscal year then ended, and the statement of changes in net assets for the fiscal years ended December 31, 2010 and December 31, 2009 (copies of which have been furnished to the Acquired Accounts) have been audited by Deloitte & Touche LLP, Independent Registered Public Accounting Firm, and present fairly in all material respects the financial position of the Acquiring Funds as of December 31, 2010 and the results of its operations and changes in net assets for the respective stated periods in accordance with Accounting principles generally accepted in the United States of
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America consistently applied, and there are no known actual or contingent liabilities of the Acquiring Funds as of the respective dates thereof not disclosed therein.
(h) The unaudited statement of assets and liabilities, including the schedule of portfolio investments, of each Acquiring Fund as of June 30, 2011, and the related statement of operations for the fiscal semi-annual period then ended, and the statement of changes in net assets for the fiscal semi-annual period ended June 30, 2011 (copies of which have been furnished to the Variable Accounts) present fairly in all material respects the financial position of the Acquiring Funds as of June 30, 2011 and the results of its operations and changes in net assets for the respective stated periods in accordance with Accounting principles generally accepted in the United States of America consistently applied, and there are no known actual or contingent liabilities of the Acquiring Funds as of the respective dates thereof not disclosed therein;
(i) Since December 31, 2010, there has not been any material adverse change in the Acquiring Funds’ financial condition, assets, liabilities or business other than changes occurring in the ordinary course of business, or any incurrence by the Acquiring Funds of indebtedness maturing more than one year from the date such indebtedness was incurred, except as otherwise disclosed to and accepted by the Acquired Accounts and Sun Life. For the purposes of this subparagraph (h), a decline in net asset value per share of an Acquiring Fund resulting from losses upon the disposition of investments or from changes in the value of investments held by an Acquiring Fund, or a distribution or a payment of dividends, shall not constitute a material adverse change.
(j) As of the Closing Date, the Acquiring Funds, will have, within the times and in the manner prescribed by law, properly filed all federal and other tax returns and reports which, to the knowledge of the officers of the Trust, are required to be filed by the Acquiring Funds, and all such returns and reports were complete and accurate in all material respects. The Acquiring Funds have timely paid or will timely pay, in the manner prescribed by law, all federal and other taxes shown to be due on said returns or on any assessments received by the Acquiring Funds. All tax liabilities of the Acquiring Funds have been adequately provided for on its books, and no tax deficiency or liability of the Acquiring Funds has been asserted, and no question with respect thereto has been raised or is under audit, by the Internal Revenue Service or by any state, local or other tax authority for taxes in excess of those already paid.
(k) For federal income tax purposes, each Acquiring Fund is taxable as a separate corporation and intends to satisfy the requirements to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).
(l) The authorized capital of the Trust consists of an unlimited number of shares, currently divided into twenty-five series and, with respect to the Acquiring Funds, into two classes at the date hereof. All issued and outstanding shares (including the Reorganization Shares) of the Acquiring Funds are, and at the Closing Date will be, duly and validly issued and outstanding, fully paid and nonassessable by the Acquiring Funds (except as described in the Acquiring Funds’ current prospectus and statement of additional information). The Acquiring Funds do not have outstanding any options, warrants or other rights to subscribe for or purchase any shares of the Acquiring Funds, nor is there outstanding any security convertible into any such shares.
(m) The execution, delivery and performance of this Plan have been duly authorized by all necessary action on the part of the Trust, on behalf of the Acquiring Funds, and this Plan constitutes a valid and binding obligation of the Acquiring Funds enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
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reorganization, moratorium and other laws relating to or affecting creditors’ rights and to general equity principles.
(n) The Reorganization Shares to be issued and delivered to the Acquired Accounts pursuant to the terms of this Plan will be duly authorized at the Closing Date and, when so issued and delivered, will be duly and validly issued shares of the Acquiring Funds, and will be fully paid and nonassessable by the Acquiring Funds (except as described in the Acquiring Funds’ current prospectus and statement of additional information).
(o) The information to be furnished by the Acquiring Funds for use in applications for orders, registration statements, proxy materials and other documents that may be necessary in connection with the transactions contemplated hereby shall be accurate and complete and shall comply fully with federal securities and other laws and regulations applicable thereto.
(p) The Trust, on behalf of the Acquiring Funds, agrees to use all reasonable efforts to obtain the approvals and authorizations required by the 1933 Act, the 1940 Act and such state securities laws or other securities laws as it may deem appropriate in order to continue its operations and the operations of the Acquiring Funds after the Closing Date;
(q) All of the Acquiring Funds’ issued and outstanding Shares have been offered for sale and sold in conformity with all applicable federal and state securities laws, except as may have been previously disclosed in writing to the Acquired Accounts.
(r) No consent, approval, authorization or order of any court or governmental authority is required for the consummation by the Acquiring Funds of the transactions contemplated by this Plan, except such as have been obtained under the Acts and such as may be required under state securities laws.
(s) No consideration other than Reorganization Shares (and the Acquiring Funds’ assumption of the Assumed Liabilities) will be issued in exchange for the Acquired Assets in the Reorganization.
5. | Covenants |
5.1 Each Acquired Account and Acquiring Fund will operate its business in the ordinary course between the date hereof and the Closing Date, it being understood that such ordinary course of business will include the declaration and payment of customary dividends and other distributions.
5.2 The Acquired Accounts will call a meeting of owners of variable annuity contracts who have an interest in the Acquired Accounts (the “Meeting”) to consider and act upon this Plan and to take all other action necessary to obtain approval of the transactions contemplated herein.
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5.3 Sun Life covenants that the Reorganization Shares to be issued hereunder are not being acquired for the purpose of making any distribution thereof other than in accordance with the terms of this Plan.
5.4 Sun Life will provide such information as the Acquiring Funds reasonably request concerning the ownership of units of the Acquired Accounts.
5.5 Subject to the provisions of this Plan, Sun Life, the Acquired Accounts, and the Trust, on behalf of each of the Acquiring Funds, will each take, or cause to be taken, all action, and do or cause to be done all things, reasonably necessary, proper or advisable to consummate and make effective the transactions contemplated by this Plan.
5.6 Each Acquired Account will furnish to the corresponding Acquiring Fund on the Closing Date the Statement of Assets and Liabilities.
5.7 The Trust, on behalf of the Acquiring Funds, will prepare and file with the SEC a registration statement on Form N-14 (the “Registration Statement”) in compliance with the 1933 Act and the 1940 Act, in connection with the issuance of the Reorganization Shares as contemplated herein.
5.8 The Trust, on behalf of the Acquiring Funds, will prepare a Proxy Statement, to be included in the Registration Statement in compliance with the Acts, in connection with the Meeting to consider approval of this Plan.
5.9 Sun Life agrees to provide the Acquiring Funds with information applicable to the Acquired Accounts required under the Acts for inclusion in the Registration Statement and the Proxy Statement.
6. | Conditions Precedent to Obligations of the Acquired Accounts and of Sun Life on behalf of the New UIT |
The obligations of the Acquired Accounts and of Sun Life, on behalf of the New UIT, to consummate the transactions provided for herein shall be, at their election, subject to the performance by the Acquiring Funds of all the obligations to be performed by them hereunder on or before the Closing Date, and, in addition thereto, the following further conditions:
6.1 All representations and warranties of the Trust, on behalf of the Acquiring Funds, contained in this Plan shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Plan, as of the Closing Date with the same force and effect as if made on and as of the Closing Date.
6.2 The Trust, on behalf of the Acquiring Funds, shall have delivered to the Acquired Accounts on the Closing Date a certificate executed in its name by its President, Vice President, Secretary or Assistant Secretary and Treasurer or Assistant Treasurer, in form and substance satisfactory to the Acquired Accounts, and dated as of the Closing Date, to the effect that the
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representations and warranties of the Acquiring Funds, made in this Plan are true and correct at and as of the Closing Date, except as they may be affected by the transactions contemplated by this Plan, and that the Trust and the Acquiring Funds shall have complied with all covenants and agreements and satisfied all conditions on their parts to be performed or satisfied under this Plan at or prior to the Closing Date, and as to such other matters as the Acquired Accounts shall reasonably request.
6.3 The Acquired Accounts shall have received on the Closing Date a favorable opinion from Susan S. Newton, Associate General Counsel and Senior Vice President of Massachusetts Financial Services Company (“MFS”), the Acquiring Funds’ investment adviser, dated as of the Closing Date, in a form satisfactory to the Acquired Accounts, to the effect that:
(a) the Trust is a business trust duly organized and validly existing under the laws of The Commonwealth of Massachusetts and has power to own all of its properties and assets and to carry on its business as currently conducted, as described in the Registration Statement. The Acquiring Funds are separate series of the Trust duly constituted in accordance with the Declaration of Trust and By-Laws;
(b) this Plan has been duly authorized, executed and delivered by the Acquiring Funds and, assuming that the Acquiring Funds prospectus contained in the Registration Statement and the Proxy Statement comply with the Acts, and assuming due authorization, execution and delivery of this Plan by Sun Life on behalf of the Acquired Accounts, is a valid and binding obligation of the Trust and the Acquiring Funds enforceable against the Trust and the Acquiring Funds in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally and other equitable principles;
(c) assuming that consideration therefor of not less than the net asset value thereof has been paid, the Reorganization Shares to be issued and delivered to the Acquired Accounts as provided by this Plan are duly authorized and upon such issuance and delivery will be validly issued and outstanding and fully paid and nonassessable by the Acquiring Funds (except as described in the Acquiring Funds’ current prospectus and statement of additional information), and no shareholder of the Acquiring Funds has any preemptive right to subscription or purchase in respect thereof pursuant to any federal or Massachusetts law or the Declaration of Trust or By-Laws;
(d) the execution and delivery of this Plan did not, and the consummation of the transactions contemplated hereby will not, violate the Declaration of Trust or By-Laws, or any material provision of any agreement (known to such counsel) to which the Trust or the Acquiring Funds is a party or by which it is bound or, to the knowledge of such counsel, result in the acceleration of any obligation or the imposition of any penalty, under any agreement, judgment or decree to which the Trust or the Acquiring Funds is a party or by which it is bound;
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(e) to the knowledge of such counsel, no consent, approval, authorization or order of any court or governmental authority is required for the consummation by the Trust or the Acquiring Funds of the transactions contemplated herein, except such as have been obtained under the Acts and such as may be required under state securities laws;
(f) the descriptions in the Registration Statement of statutes, legal and governmental proceedings and contracts and other documents, if any, only insofar as they relate to the Trust or the Acquiring Funds, are accurate in all material respects;
(g) to the knowledge of such counsel, there are no legal or governmental proceedings relating to the Trust or the Acquiring Funds existing on or before the date of mailing the Proxy Statement or the Closing Date required to be described in the Registration Statement that are not described as required;
(h) to the knowledge of such counsel, the Trust is a duly registered investment company and, to the knowledge of such counsel, its registration with the Commission as an investment company under the 1940 Act is in full force and effect; and
(i) except as may have been previously disclosed by the Trust, on behalf of the Acquiring Funds , in writing to the Acquired Accounts, to the knowledge of such counsel, no litigation or administrative proceeding or investigation of or before any court or governmental body currently is pending or threatened as to the Trust or the Acquiring Funds or any of their properties or assets, and neither the Trust nor the Acquiring Funds is a party to or subject to the provisions of any order, decree or judgment of any court or governmental body that materially and adversely affects its business or its ability to consummate the transactions contemplated hereby.
Such opinion shall also state that while such counsel has not independently verified, and is not passing upon and does not assume any responsibility for, the accuracy, completeness or fairness of the statements contained in the Registration Statement, she generally reviewed and discussed certain of such statements with certain officers of the Acquiring Funds and that in the course of such review and discussion no facts came to the attention of such counsel that led her to believe that, on the effective date of the Registration Statement, the date of the Meeting or the Closing Date and only insofar as such statements relate to the Acquiring Funds, the Registration Statement contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. Such opinion may state that such counsel does not express any opinion or belief as to the financial statements or other financial or statistical data, or as to the information relating to the Trust or the Acquired Accounts, contained in the Proxy Statement or Registration Statement. Such opinion may also state that such opinion is solely for the benefit of the Trust, Sun Life, the Acquired Accounts, their Boards of Managers and their officers. Such opinion shall also include such other matters incidental to the transaction contemplated hereby as the Acquired Accounts may reasonably request.
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7. | Conditions Precedent to Obligations of the Trust on behalf of the Acquiring Funds |
The obligations of the Trust, on behalf of the Acquiring Funds, to complete the transactions provided for herein shall be, at its election, subject to the performance by Sun Life and the Acquired Accounts of all the obligations to be performed by them hereunder on or before the Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of Sun Life and the Acquired Accounts contained in this Plan shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Plan, as of the Closing Date with the same force and effect as if made on and as of the Closing Date;
7.2 The Acquired Accounts shall have delivered to the Acquiring Funds the Statement of Assets and Liabilities, together with a list of the Acquired Accounts’ portfolio securities showing the federal income tax bases of and holding periods for such securities as of the Closing Date, certified by the Treasurer or Assistant Treasurer of the Acquired Accounts;
7.3 The Acquired Accounts shall have delivered to the Acquiring Funds on the Closing Date a certificate executed in their name by their President, Vice President, Secretary or Assistant Secretary and Treasurer or Assistant Treasurer, in form and substance satisfactory to the Acquiring Funds and dated as of the Closing Date, to the effect that the representations and warranties of the Acquired Accounts made in this Plan are true and correct at and as of the Closing Date, except as they may be affected by the transactions contemplated by this Plan, and that the Acquired Accounts shall have complied with all covenants and agreements and satisfied all conditions on their part to be performed or satisfied under this Plan at or prior to the Closing Date, and as to such other matters as the Acquiring Funds shall reasonably request. Sun Life shall have delivered to the Acquiring Funds on the Closing Date a certificate executed in its name by at least two authorized officers, in form and substance satisfactory to the Acquiring Funds and dated as of the Closing Date, to the effect that the representations and warranties of Sun Life made in this Plan are true and correct at and as of the Closing Date, except as they may be affected by the transactions contemplated by this Plan, and that Sun Life shall have complied with all covenants and agreements and satisfied all conditions on its part to be performed or satisfied under this Plan at or prior to the Closing Date, and as to such other matters as the Acquiring Funds shall reasonably request;
7.4 The Acquiring Funds shall have received on the Closing Date a favorable opinion from Susan S. Newton, Associate General Counsel and Senior Vice President of MFS, the Acquired Accounts’ investment adviser, dated as of the Closing Date, in a form satisfactory to the Acquiring Funds to the effect that:
(a) the Variable Accounts were established by Sun Life as separate accounts pursuant to the insurance code of the State of Delaware, and are separate accounts under the provisions of the insurance code;
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(b) this Plan has been duly authorized, executed and delivered by the Acquired Accounts and, assuming that the Acquiring Funds prospectus contained in the Registration Statement and the Proxy Statement comply with the Acts, and assuming due authorization, execution and delivery of this Plan by the Trust, on behalf of the Acquiring Funds, is a valid and binding obligation of Sun Life and the Acquired Accounts enforceable against Sun Life and the Acquired Accounts in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally and other equitable principles;
(c) the Acquired Accounts have power to sell, assign, convey, transfer and deliver the assets contemplated hereby and, upon consummation of the transactions contemplated hereby in accordance with the terms of this Plan, the Acquired Accounts will have duly, sold, assigned, conveyed, transferred and delivered such assets to the Acquiring Funds ;
(d) the execution and delivery of this Plan did not, and the consummation of the transactions contemplated hereby will not, violate the Amended and Restated Rules and Regulations, dated May 31, 2001, of any Account or the Master Amended and Restated By-Laws of the Accounts, dated August 6, 2004, or any material provision of any agreement (known to such counsel) to which any Acquired Account is a party or by which it is bound or, to the knowledge of such counsel, result in the acceleration of any obligation or the imposition of any penalty, under any agreement, judgment or decree to which any Acquired Account is a party or by which it is bound;
(e) to the knowledge of such counsel, no consent, approval, authorization or order of any court or governmental authority is required for the consummation by the Acquired Accounts of the transactions contemplated herein, except such as have been obtained under the Acts and such as may be required under state securities laws;
(f) the descriptions in the Proxy Statement of statutes, legal and governmental proceedings and contracts and other documents, if any, only insofar as they relate to Sun Life and the Acquired Accounts, are accurate in all material respects;
(g) to the knowledge of such counsel, there are no legal or governmental proceedings relating to Sun Life or the Acquired Accounts existing on or before the date of mailing the Proxy Statement or the Closing Date required to be described in the Proxy Statement that are not described as required;
(h) to the knowledge of such counsel, each Account is a duly registered investment company and, to the knowledge of such counsel, its registration with the Commission as an investment company under the 1940 Act is in full force and effect; and
(i) except as may have been previously disclosed by Sun Life or the Acquired Accounts, in writing to the Acquiring Funds, to the knowledge of such counsel, no
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litigation or administrative proceeding or investigation of or before any court or governmental body is currently pending or threatened as to the Acquired Accounts or any of the Acquired Accounts’ properties or assets, and none of the Acquired Accounts is a party to or subject to the provisions of any order, decree or judgment of any court or governmental body that materially and adversely affects its business or its ability to consummate the transactions contemplated hereby.
Such opinion shall also state that while such counsel has not verified, and is not passing upon and does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Proxy Statement, she generally reviewed and discussed certain of such statements with certain officers of the Trust and that in the course of such review and discussion no facts came to the attention of such counsel that led her to believe that, on the effective date of the Registration Statement or on the date of the Meeting and only insofar as such statements relate to the Acquired Accounts, the Proxy Statement contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. Such opinion may state that such counsel does not express any opinion or belief as to the financial statements or other financial or statistical data, or as to the information relating to Sun Life or the Acquiring Funds, contained in the Proxy Statement or Registration Statement. Such opinion may also state that such opinion is solely for the benefit of the Trust, the Acquiring Funds, its Board of Trustees and its officers. Such opinion shall also include such other matters incidental to the transaction contemplated hereby as the Acquiring Funds may reasonably request. As to matters relating to Sun Life expressed in such opinion, such opinion may rely on, and assume the accuracy of, information in a certificate of an officer of Sun Life.
7.5 The assets of the Acquired Accounts to be acquired by the Acquiring Funds will include no assets which the Acquiring Funds, by reason of limitations contained in the Declaration of Trust or of investment restrictions disclosed in an Acquiring Fund’s prospectus and statement of additional information in effect on the Closing Date, may not properly acquire.
8. | Further Conditions Precedent to Obligations of the Trust on behalf of the Acquiring Funds, Sun Life, and the Acquired Accounts |
The obligations of Sun Life and the Acquired Accounts hereunder are, at the option of the Acquiring Funds, and the obligations of the Trust, on behalf of the Acquiring Funds, hereunder are, at the option of Sun Life and the Acquired Accounts, each subject to the further conditions that on or before the Closing Date:
8.1 This Plan and the transactions contemplated herein shall have been approved by the requisite vote of the holders of outstanding Acquired Account units in accordance with the provisions of the Amended and Restated Rules and Regulations, dated May 31, 2001, of any Account or the Master Amended and Restated By-Laws of the Accounts, dated August 6, 2004, and the 1940 Act and the rules thereunder, and certified copies of the resolutions evidencing such approval shall have been delivered to the Acquiring Funds;
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8.2 On the Closing Date, no action, suit or other proceeding shall be pending before any court or governmental agency in which it is sought to restrain or prohibit, or obtain damages or other relief in connection with, this Plan or the transactions contemplated herein;
8.3 All consents of other parties and all other consents, orders and permits of federal, state and local regulatory authorities (including those of the SEC, the Delaware insurance commissioner, and state securities authorities, including “no-action” positions of such federal or state authorities) deemed necessary by the Acquiring Funds or the Acquired Accounts to permit consummation, in all material respects, of the transactions contemplated hereby shall have been obtained, except where failure to obtain any such consent, order or permit would not involve a risk of a material adverse effect on the assets or properties of either an Acquiring Fund or an Acquired Account, provided that either the Acquiring Funds or the Acquired Accounts may waive any such conditions for itself, respectively;
8.4 The Registration Statement shall have become effective under the 1933 Act and, as of the Closing Date, no stop orders suspending the effectiveness thereof shall have been issued, and, to the best knowledge of the parties hereto, no investigation or proceeding for that purpose shall have been instituted or be pending, threatened or contemplated under the 1933 Act;
8.5 Sun Life, the Acquired Accounts, and the Trust, on behalf of the Acquiring Funds, shall have received an opinion of Morgan, Lewis & Bockius LLP, (“Tax Counsel”), reasonably satisfactory to them, as to the federal income tax consequences mentioned below (the “Tax Opinion”). In rendering the Tax Opinion, Tax Counsel may rely as to factual matters, exclusively and without independent verification, on the representations and warranties made in this Plan, which Tax Counsel may treat as representations and warranties made to it, and in separate letters addressed to Tax Counsel and certificates delivered pursuant to this Plan. The Tax Opinion shall be substantially to the effect that, although not free from doubt, based on the existing provisions of the Code, Treasury regulations, current administrative rules, and court decisions, on the basis of the facts and assumptions stated therein and conditioned on consummation of the Reorganization in accordance with this Plan, for federal income tax purposes:
[(a) Sun Life, the Accounts and the New UIT will not recognize any gain or loss as a result of the restructuring of the Accounts into corresponding sub-accounts of the New UIT.
(b) Under Section 351 of the Code, Sun Life will not recognize any gain or loss as a result of the transfer of the assets of each Account to its corresponding Fund in exchange for shares of such corresponding Fund and assumption by such corresponding portfolio of such Account’s liabilities (other than liabilities associated with insurance obligations that will be assumed by the corresponding sub-account of the New UIT).
(c) Under Section 1032 of the Code, no gain or loss will be recognized by a Fund upon the receipt of the assets of the corresponding Account solely in exchange for the
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issuance of such Fund’s shares and the assumption of such Account’s liabilities (other than liabilities associated with insurance obligations that will be assumed by the corresponding sub-account of the New UIT).
(d) Under Section 362(a) of the Code, each Fund’s basis in the assets it receives from the corresponding Account will be the same as such Account’s basis in those assets immediately prior to the Reorganization.
(e) Under Section 1223(2) of the Code, each Fund’s holding period for the transferred assets will include the Account’s holding period therefor.
(f) Under Section 358 of the Code, the aggregate basis in the shares of a Fund received in the Reorganization by the corresponding sub-account of the New UIT will be the same as the aggregate adjusted basis of the assets surrendered by the corresponding Account in exchange therefore reduced by the amount of liabilities, if any, of the Account assumed by such Fund.
(g) Under Section 1223(1) of the Code, Sun Life’s holding period (through each sub-account of the New UIT) in the shares of each Fund received in the Reorganization will include its holding period (through each Account) for the assets surrendered in exchange therefor, provided such assets were held as capital assets on the closing date.
(h) No gain or loss will be recognized by the owners of variable contracts based on the Accounts (and then the sub-accounts of the New UIT) as a result of the Reorganization.]
The Trust, with respect to the Acquiring Funds, and Sun Life agree to make and provide additional representations to Tax Counsel that are reasonably necessary to enable Tax Counsel to deliver the Tax Opinion. Notwithstanding anything herein to the contrary, the Trust may not waive in any material respect the condition set forth in this paragraph 8.5.
8.6 The Boards of Managers of the Acquired Accounts shall have determined, with respect to each Acquired Account, that the Reorganization is in the best interests of each Acquired Account and is not dilutive of the interests of owners of units of each Acquired Account and, based on such determinations, shall have approved this Plan and the transactions contemplated thereby.
9. | Brokerage Fees and Expenses; Contingent Deferred Sales Charges; Certain Records |
9.1 The Acquiring Funds and the Acquired Accounts each represents and warrants to the other that there are no brokers or finders entitled to receive any payments from either party to this Plan in connection with the transactions provided for herein.
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9.2 The Acquiring Funds and the Acquired Accounts will, as between each other, be liable for its own expenses incurred in connection with entering into and carrying out the provisions of this Plan, whether or not the Reorganization is consummated.
10. | Entire Agreement |
Sun Life, the Acquiring Funds and the Acquired Accounts agree that no party has made any representation, warranty or covenant not set forth herein or referred to in Article 4 hereof or required in connection with paragraph 8.5 hereof and that this Plan constitutes the entire agreement between the parties.
11. | Termination |
11.1 This Plan may be terminated by the mutual agreement of the parties. In addition, any party may at its option terminate this Plan unilaterally at or prior to the Closing Date because of:
(a) a material breach by another party of any representation, warranty or agreement contained herein to be performed at or prior to the Closing Date; or
(b) a condition herein expressed to be precedent to the obligations of the terminating party that has not been met and that reasonably appears will not or cannot be met.
11.2 In the event of any such termination, there shall be no liability for damages on the part of the Trust, Sun Life, the Acquiring Funds, or the Acquired Accounts, or their respective trustees or officers, to the other party or its trustees or officers, but each shall bear the expenses incurred by it incidental to the preparation and carrying out of this Plan.
12. | Amendments |
This Plan may be amended, modified or supplemented in such manner as may be mutually agreed upon in writing by the authorized officers of the parties; provided, however, that following the Meeting, no such amendment may have the effect of changing the provisions for determining the number of Reorganization Shares to be issued to the Acquired Accounts under this Plan to their detriment without their further approval; and provided further that nothing contained in this Article 12 shall be construed to prohibit the parties from amending this Plan to change the Closing Date.
13. | Notices |
Any notice, report, statement or demand required or permitted by any provisions of this Plan shall be in writing and shall be personally delivered or given by prepaid telegraph, telecopy or certified mail addressed to the Acquired Accounts or the Trust, on behalf of the Acquiring Funds, at 500 Boylston Street, Boston, Massachusetts 02116, Attention: Secretary, and to Sun Life at One Sun Life Executive Park, Wellesley Hills, Massachusetts 02481.
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14. | Miscellaneous |
14.1 The article and paragraph headings contained in this Plan are for reference purposes only and shall not affect in any way the meaning or interpretation of this Plan.
14.2 This Plan shall be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts; provided that, in the case of any conflict between such laws and the federal securities laws, the latter shall govern.
14.3 This Plan shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, but no assignment or transfer hereof or of any rights or obligations hereunder shall be made by any party without the written consent of the other party. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm or corporation, other than the parties hereto and their respective successors and assigns, any rights or remedies under or by reason of this Plan.
14.4 A copy of the Declaration of Trust of the Trust is on file with the Secretary of State of The Commonwealth of Massachusetts. As provided in the Declaration of Trust of the Trust, and pursuant to certain responsibilities and powers conferred upon the Board of Trustees of the Trust, the Boards of Managers of the Acquired Accounts, and the Board of Directors of Sun Life, this Plan was executed by the undersigned officers of Sun Life, the Acquired Accounts and the Trust, on behalf of each of the Funds, as officers and not individually, and the obligations of this Plan are not binding upon the undersigned officers, nor are they binding upon Sun Life’s, the Acquired Accounts’, or the Trust’s other officers or upon the members of their boards, individually, but are binding only upon the assets and property of Sun Life, the Acquired Accounts, and the Trust. Moreover, no Fund of the Trust shall be liable for the obligations of any other Fund of the Trust.
14.5 Notwithstanding Article 12 of this Plan, but subject to the first proviso contained therein, any party to this Plan, with the consent of its president, vice president, secretary or assistant secretary, may waive any condition (other than that contained in paragraph 8.5 hereof) or covenant to which the other party is subject or may modify such condition or covenant in a manner deemed appropriate by any such officer.
IN WITNESS WHEREOF, each of the parties hereto has caused this Plan to be duly executed by a duly authorized officer on its behalf.
Attest: | SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) | |||||||
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Attest: | CAPITAL APPRECIATION VARIABLE ACCOUNT | |||||||
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Attest: | GLOBAL GOVERNMENTS VARIABLE ACCOUNT | |||||||
By: | ||||||||
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Title: | ||||||||
Attest: | GOVERNMENT SECURITIES VARIABLE ACCOUNT | |||||||
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Attest: | HIGH YIELD VARIABLE ACCOUNT | |||||||
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Attest: | MONEY MARKET VARIABLE ACCOUNT | |||||||
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Attest: | TOTAL RETURN VARIABLE ACCOUNT | |||||||
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Attest: | MFS VARIABLE INSURANCE TRUST II, on behalf of the Funds | |||||||
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PART B
STATEMENT OF ADDITIONAL INFORMATION
September , 2011
MFS VARIABLE INSURANCE TRUST II
MFS Money Market Portfolio
MFS High Yield Portfolio
MFS Massachusetts Investors Growth Stock Portfolio
MFS Government Securities Portfolio
MFS Global Governments Portfolio
MFS Total Return Portfolio
Acquisition of the Assets and Liabilities of the following separate accounts of Sun Life Assurance Company of Canada (U.S.):
Money Market Variable Account
High Yield Variable Account
Capital Appreciation Variable Account
Government Securities Variable Account
Global Governments Variable Account
Total Return Variable Account
One Sun Life Executive Park
Wellesley Hills, Masschusetts
In Exchange for Shares of MFS Money Market Portfolio, MFS High Yield Portfolio, MFS Massachusetts Investors Growth Stock Portfolio, MFS Government Securities Portfolio, MFS Global Governments Portfolio and MFS Total Return Portfolio (each a series of MFS Variable Insurance Trust II)
500 Boylston Street, 24th Floor
Boston Massachusetts 02116
This Statement of Additional Information (“SAI”), which is not a prospectus, supplements and should be read in conjunction with, the Proxy Statement/Prospectus dated September __, 2011 relating specifically to the proposed transfer of all of the assets and liabilities of the following separate accounts of Sun Life Assurance Company of Canada (U.S.) (the “Reorganization”): Money Market Variable Account, High Yield Variable Account, Capital Appreciation Variable
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Account, Government Securities Variable Account, Global Governments Variable Account and Total Return Variable Account in exchange for shares of MFS Money Market Portfolio, MFS High Yield Portfolio, MFS Massachusetts Investors Growth Stock Portfolio, MFS Government Securities Portfolio, MFS Global Governments Portfolio and MFS Total Return Portfolio (each a series of MFS Variable Insurance Trust II (the “Trust”)). To obtain a copy of the Proxy Statement/Prospectus, please write to MFS Variable Insurance Trust II, 500 Boylston Street, 24th Floor Boston Massachusetts 02116 or call (800) . The Reorganization will be pursuant to an Agreement and Plan of Reorganization.
This SAI incorporates by reference the following described documents, each of which was filed electronically with the Securities and Exchange Commission and is incorporated by reference herein:
(1) The SAI of MFS Variable Insurance Trust II, dated April 30, 2011, as supplemented;
(2) The Financial Statements of Money Market Variable Account, High Yield Variable Account, Capital Appreciation Variable Account, Government Securities Variable Account, Global Governments Variable Account and Total Return Variable Account included in the Annual Report to Shareholders of the Accounts, dated December 31, 2010.
(3) The Financial Statements of Money Market Variable Account, High Yield Variable Account, Capital Appreciation Variable Account, Government Securities Variable Account, Global Governments Variable Account and Total Return Variable Account included in the Semi-Annual Report to Shareholders of the Accounts, dated June 30, 2011.
(4) The Financial Statements of the MFS Money Market Portfolio, MFS High Yield Portfolio, MFS Massachusetts Investors Growth Stock Portfolio, MFS Government Securities Portfolio, MFS Global Governments Portfolio and MFS Total Return Portfolio included in the Trust’s Annual Report to Shareholders, dated December 31, 2010.
(5) The Financial Statements of the MFS Money Market Portfolio, MFS High Yield Portfolio, MFS Massachusetts Investors Growth Stock Portfolio, MFS Government Securities Portfolio, MFS Global Governments Portfolio and MFS Total Return Portfolio included in the Trust’s Semi-Annual Report to Shareholders, dated June 30, 2011.
Financial Statements
Below are unaudited pro forma financial statements reflecting consummation of the Reorganization for the High Yield, Capital Appreciation, and Global Governments Variable Accounts. Unaudited pro forma financial statements for the Money Market, Government Securities and Total Return Variable Accounts are not included in this SAI because the assets of these Accounts which are being acquired are less than 10% of the assets of the acquiring Trust series. As previously noted, the audited financial statements for the year ended December 31, 2010 and the unaudited financial statements for the period ended June 30, 2011 for the Money Market Variable Account, High Yield Variable Account, Capital Appreciation Variable Account,
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Government Securities Variable Account, Global Governments Variable Account and Total Return Variable Account are incorporated by reference into this SAI from the most recent Annual Report and Semi-Annual Report to Shareholders of these Accounts. As previously noted, the audited financial statements for the year ended December 31, 2010 and the unaudited financial statements for the period ended June 30, 2011 for the MFS Money Market Portfolio, MFS High Yield Portfolio, MFS Massachusetts Investors Growth Stock Portfolio, MFS Government Securities Portfolio, MFS Global Governments Portfolio and MFS Total Return Portfolio are incorporated by reference into this SAI from the Trust’s most recent Annual Report and Semi-Annual Report to Shareholders.
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Portfolio of Investments and Pro Forma Combined Portfolio of Investments (unaudited)
December 31, 2010
High Yield | MFS High Yield | Pro Forma | ||||||||||||||||||||||||||
Variable Account | Portfolio | Pro Forma | Combined Fund | |||||||||||||||||||||||||
Issuer | Shares/Par | Value ($) | Shares/Par | Value ($) | Adjustments | Shares/Par | Value ($) | |||||||||||||||||||||
BONDS (94.2%, 92.2%, and 92.5%, respectively) | ||||||||||||||||||||||||||||
Aerospace | ||||||||||||||||||||||||||||
Alliant Techsystems, Inc., 6.875%, 2020 | $ | 20,000 | $ | 20,548 | $ | 115,000 | $ | 118,306 | $ | — | $ | 135,000 | $ | 138,854 | ||||||||||||||
BE Aerospace, Inc., 8.5%, 2018 | 110,000 | 120,450 | 620,000 | 678,900 | — | 730,000 | 799,350 | |||||||||||||||||||||
Bombardier, Inc., 7.5%, 2018 (n) | 185,000 | 198,413 | 935,000 | �� | 1,002,788 | — | 1,120,000 | 1,201,201 | ||||||||||||||||||||
Bombardier, Inc., 7.45%, 2034 (n) | — | — | 160,000 | 156,800 | — | 160,000 | 156,800 | |||||||||||||||||||||
Hawker Beechcraft Acquisition Co. LLC, 8.5%, 2015 | 178,000 | 132,165 | 1,016,000 | 754,380 | $ | — | $ | 1,194,000 | $ | 886,545 | ||||||||||||||||||
Oshkosh Corp., 8.25%, 2017 | 75,000 | 81,563 | 400,000 | 435,000 | — | 475,000 | 516,563 | |||||||||||||||||||||
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$ | 553,139 | $ | 3,146,174 | $ | — | $ | 3,699,313 | |||||||||||||||||||||
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Airlines | ||||||||||||||||||||||||||||
Continental Airlines, Inc., 6.748%, 2018 | $ | 22,636 | $ | 22,466 | $ | 113,178 | $ | 112,329 | $ | — | $ | 135,814 | $ | 134,795 | ||||||||||||||
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Apparel Manufacturers | ||||||||||||||||||||||||||||
Hanesbrands, Inc., 8%, 2016 | $ | 110,000 | $ | 117,975 | $ | 605,000 | $ | 648,863 | $ | — | $ | 715,000 | $ | 766,838 | ||||||||||||||
Hanesbrands, Inc., 6.375%, 2020 (n) | 50,000 | 47,500 | — | — | — | 50,000 | 47,500 | |||||||||||||||||||||
Phillips-Van Heusen Corp., 7.375%, 2020 | 120,000 | 127,500 | 655,000 | 695,937 | — | 775,000 | 823,437 | |||||||||||||||||||||
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$ | 292,975 | $ | 1,344,800 | $ | — | $ | 1,637,775 | |||||||||||||||||||||
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Asset-Backed & Securitized | ||||||||||||||||||||||||||||
Airlie LCDO Ltd., CDO, FRN, 2.2%, 2011 (a)(p)(z) | $ | — | $ | — | $ | 717,270 | $ | 315,599 | $ | — | $ | 717,270 | $ | 315,599 | ||||||||||||||
Anthracite Ltd., CDO, 6%, 2037 (z) | — | — | 1,300,000 | 390,000 | — | 1,300,000 | 390,000 | |||||||||||||||||||||
Arbor Realty Mortgage Securities, CDO, FRN, 2.589%, 2038 (z) | — | — | 577,317 | 75,051 | — | 577,317 | 75,051 | |||||||||||||||||||||
ARCap REIT, Inc., CDO, “H”, 6.078%, 2045 (z) | $ | 165,567 | $ | 9,520 | �� | — | — | — | 165,567 | 9,520 | ||||||||||||||||||
Babson Ltd., CLO, “D”, FRN, 1.789%, 2018 (n) | — | — | 670,000 | 520,925 | — | 670,000 | 520,925 | |||||||||||||||||||||
Citigroup Commercial Mortgage Trust, FRN, 5.697%, 2049 | 148,212 | 67,694 | 952,699 | 435,135 | — | 1,100,911 | 502,829 | |||||||||||||||||||||
Crest Ltd., CDO, 7%, 2040 | 159,437 | 7,972 | — | — | — | 159,437 | 7,972 | |||||||||||||||||||||
CWCapital Cobalt Ltd., CDO, 6.23%, 2045 (a)(p)(z) | — | — | 1,075,028 | 21,501 | — | 1,075,028 | 21,501 | |||||||||||||||||||||
CWCapital Cobalt Ltd., CDO, “F”, FRN, 1.588%, 2050 (z) | — | — | 508,349 | 10,167 | — | 508,349 | 10,167 | |||||||||||||||||||||
First Union National Bank Commercial Mortgage Trust, 6.75%, 2032 | 165,000 | 159,973 | 855,000 | 828,953 | — | 1,020,000 | 988,926 | |||||||||||||||||||||
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 6.06%, 2051 | 110,000 | 50,988 | 690,000 | 319,835 | — | 800,000 | 370,823 | |||||||||||||||||||||
Merrill Lynch Mortgage Trust, FRN, “B”, 5.825%, 2050 | 110,000 | 55,370 | 690,000 | 347,322 | — | 800,000 | 402,692 | |||||||||||||||||||||
Merrill Lynch/Countrywide Commercial Mortgage Trust, FRN, 5.747%, 2050 | 62,000 | 53,037 | 404,000 | 345,596 | — | 466,000 | 398,633 | |||||||||||||||||||||
Wachovia Bank Commercial Mortgage Trust, FRN, 5.753%, 2047 | 87,180 | 16,692 | 557,306 | 106,704 | — | 644,486 | 123,396 | |||||||||||||||||||||
Wachovia Credit, CDO, FRN, 1.652%, 2026 (z) | 250,000 | 87,500 | 376,000 | 131,600 | — | 626,000 | 219,100 | |||||||||||||||||||||
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|
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| |||||||||||||||||||||
$ | 508,746 | $ | 3,848,388 | $ | — | $ | 4,357,134 | |||||||||||||||||||||
|
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| |||||||||||||||||||||
Automotive | ||||||||||||||||||||||||||||
Accuride Corp., 9.5%, 2018 (n) | $ | 110,000 | $ | 119,075 | $ | 610,000 | $ | 660,325 | $ | — | $ | 720,000 | $ | 779,400 | ||||||||||||||
Allison Transmission, Inc., 11%, 2015 (n) | 115,000 | 125,350 | 610,000 | 664,900 | — | 725,000 | 790,250 | |||||||||||||||||||||
Ford Motor Credit Co. LLC, 12%, 2015 | 504,000 | 634,001 | 2,826,000 | 3,554,936 | — | 3,330,000 | 4,188,937 | |||||||||||||||||||||
General Motors Corp., 7.125%, 2013 (d) | 150,000 | 50,250 | 777,000 | 260,295 | — | 927,000 | 310,545 | |||||||||||||||||||||
Goodyear Tire & Rubber Co., 10.5%, 2016 | 30,000 | 34,200 | 195,000 | 222,300 | — | 225,000 | 256,500 | |||||||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||||
$ | 962,876 | $ | 5,362,756 | $ | — | $ | 6,325,632 | |||||||||||||||||||||
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| |||||||||||||||||||||
Basic Industry | ||||||||||||||||||||||||||||
Trimas Corp., 9.75%, 2017 | $ | 115,000 | $ | 125,925 | $ | 645,000 | $ | 706,275 | $ | — | $ | 760,000 | $ | 832,200 | ||||||||||||||
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Table of Contents
Portfolio of Investments and Pro Forma Combined Portfolio of Investments (unaudited)
December 31, 2010
High Yield | MFS High Yield | Pro Forma | ||||||||||||||||||||||||||
Variable Account | Portfolio | Pro Forma | Combined Fund | |||||||||||||||||||||||||
Issuer | Shares/Par | Value ($) | Shares/Par | Value ($) | Adjustments | Shares/Par | Value ($) | |||||||||||||||||||||
Broadcasting | ||||||||||||||||||||||||||||
Allbritton Communications Co., 8%, 2018 | $ | 100,000 | $ | 101,000 | $ | 545,000 | $ | 550,450 | $ | — | $ | 645,000 | $ | 651,450 | ||||||||||||||
Bonten Media Acquisition Co., 9%, 2015 (p)(z) | 34,086 | 17,837 | 181,025 | 94,729 | — | 215,111 | 112,566 | |||||||||||||||||||||
Citadel Broadcasting Corp., 7.75%, 2018 (z) | 15,000 | 15,525 | 110,000 | 113,850 | — | 125,000 | 129,375 | |||||||||||||||||||||
Entravision Communications Corp., 8.75%, 2017 (n) | 30,000 | 31,650 | 185,000 | 195,175 | — | 215,000 | 226,825 | |||||||||||||||||||||
Inmarsat Finance PLC, 7.375%, 2017 (n) | 200,000 | 210,000 | 860,000 | 903,000 | — | 1,060,000 | 1,113,000 | |||||||||||||||||||||
Intelsat Bermuda Ltd., 11.25%, 2017 | 55,000 | 59,950 | 295,000 | 321,550 | — | 350,000 | 381,500 | |||||||||||||||||||||
Intelsat Jackson Holdings Ltd., 9.5%, 2016 | 415,000 | 437,825 | 2,190,000 | 2,310,450 | — | 2,605,000 | 2,748,275 | |||||||||||||||||||||
Lamar Media Corp., 6.625%, 2015 | 85,000 | 87,125 | 420,000 | 430,500 | — | 505,000 | 517,625 | |||||||||||||||||||||
Lamar Media Corp., “C”, 6.625%, 2015 | 35,000 | 35,525 | 220,000 | 223,300 | — | 255,000 | 258,825 | |||||||||||||||||||||
LBI Media, Inc., 8.5%, 2017 (z) | 100,000 | 81,250 | 640,000 | 520,000 | — | 740,000 | 601,250 | |||||||||||||||||||||
Local TV Finance LLC, 9.25%, 2015 (p)(z) | 143,986 | 131,027 | 783,161 | 712,677 | — | 927,147 | 843,704 | |||||||||||||||||||||
Newport Television LLC, 13%, 2017 (n)(p) | 47,645 | 42,785 | 256,939 | 230,728 | — | 304,584 | 273,513 | |||||||||||||||||||||
Nexstar Broadcasting, Inc., 0.5% to 2011, 7% to 2014 (p) | 202,491 | 196,444 | 1,295,759 | 1,257,066 | — | 1,498,250 | 1,453,510 | |||||||||||||||||||||
Nexstar Broadcasting, Inc., 7%, 2014 | $ | 67,000 | $ | 65,493 | 426,000 | 416,415 | — | 493,000 | 481,908 | |||||||||||||||||||
Salem Communications Corp., 9.625%, 2016 | 19,000 | 20,140 | 113,000 | 119,780 | — | 132,000 | 139,920 | |||||||||||||||||||||
Sinclair Broadcast Group, Inc., 9.25%, 2017 (n) | 65,000 | 70,363 | 400,000 | 433,000 | — | 465,000 | 503,363 | |||||||||||||||||||||
Sinclair Broadcast Group, Inc., 8.375%, 2018 (n) | 20,000 | 20,650 | 115,000 | 118,738 | — | 135,000 | 139,388 | |||||||||||||||||||||
SIRIUS XM Radio, Inc., 13%, 2013 (z) | 30,000 | 35,700 | 175,000 | 208,250 | — | 205,000 | 243,950 | |||||||||||||||||||||
SIRIUS XM Radio, Inc., 8.75%, 2015 (n) | 120,000 | 129,900 | 665,000 | 719,863 | — | 785,000 | 849,763 | |||||||||||||||||||||
SIRIUS XM Radio, Inc., 7.625%, 2018 (n) | 80,000 | 82,600 | 435,000 | 449,138 | — | 515,000 | 531,738 | |||||||||||||||||||||
Univision Communications, Inc., 12%, 2014 (n) | 28,000 | 30,660 | 172,000 | 188,340 | — | 200,000 | 219,000 | |||||||||||||||||||||
Univision Communications, Inc., 9.75%, 2015 (n)(p) | 478,168 | 501,080 | 2,570,696 | 2,693,875 | — | 3,048,864 | 3,194,955 | |||||||||||||||||||||
Univision Communications, Inc., 7.875%, 2020 (n) | 55,000 | 57,750 | 285,000 | 299,250 | — | 340,000 | 357,000 | |||||||||||||||||||||
Young Broadcasting, Inc., 8.75%, 2014 (d) | 80,000 | 0 | 525,000 | 0 | — | 605,000 | 0 | |||||||||||||||||||||
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|
| |||||||||||||||||||||
$ | 2,462,279 | $ | 13,510,124 | $ | — | $ | 15,972,403 | |||||||||||||||||||||
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| |||||||||||||||||||||
Brokerage & Asset Managers | ||||||||||||||||||||||||||||
E*TRADE Financial Corp., 7.875%, 2015 | $ | 50,000 | $ | 49,625 | $ | 265,000 | $ | 263,012 | $ | — | $ | 315,000 | $ | 312,637 | ||||||||||||||
E*TRADE Financial Corp., 12.5%, 2017 | 80,000 | 94,000 | 465,000 | 546,375 | — | 545,000 | 640,375 | |||||||||||||||||||||
Janus Capital Group, Inc., 6.95%, 2017 | 220,000 | 229,202 | 825,000 | 859,507 | — | 1,045,000 | 1,088,709 | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
$ | 372,827 | $ | 1,668,894 | $ | — | $ | 2,041,721 | |||||||||||||||||||||
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| |||||||||||||||||||||
Building | ||||||||||||||||||||||||||||
Building Materials Holding Corp., 6.875%, 2018 (n) | $ | 85,000 | $ | 84,150 | $ | 480,000 | $ | 475,200 | $ | — | $ | 565,000 | $ | 559,350 | ||||||||||||||
Building Materials Holding Corp., 7%, 2020 (n) | 55,000 | 56,513 | 290,000 | 297,975 | — | 345,000 | 354,488 | |||||||||||||||||||||
CEMEX Finance Europe B.V., 9.625%, 2017 (n) | EUR | 75,000 | 98,770 | EUR | 435,000 | 572,868 | — | EUR | 510,000 | 671,638 | ||||||||||||||||||
Nortek, Inc., 11%, 2013 | $ | 175,933 | 187,369 | $ | 845,933 | 900,919 | — | $ | 1,021,866 | 1,088,288 | ||||||||||||||||||
Nortek, Inc., 10%, 2018 (z) | 35,000 | 36,138 | 190,000 | 196,175 | — | 225,000 | 232,313 | |||||||||||||||||||||
Owens Corning, 9%, 2019 | 95,000 | 111,453 | 555,000 | 651,123 | — | 650,000 | 762,576 | |||||||||||||||||||||
Ply Gem Industries, Inc., 11.75%, 2013 | 85,000 | 90,950 | 450,000 | 481,500 | — | 535,000 | 572,450 | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
$ | 665,343 | $ | 3,575,760 | $ | — | $ | 4,241,103 | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Business Services | ||||||||||||||||||||||||||||
First Data Corp., 9.875%, 2015 | $ | 155,000 | $ | 147,638 | $ | 820,000 | $ | 781,050 | $ | — | $ | 975,000 | $ | 928,688 | ||||||||||||||
Interactive Data Corp., 10.25%, 2018 (n) | 110,000 | 120,450 | 610,000 | 667,950 | — | 720,000 | 788,400 | |||||||||||||||||||||
Iron Mountain, Inc., 6.625%, 2016 | 145,000 | 145,544 | 870,000 | 873,262 | — | 1,015,000 | 1,018,806 | |||||||||||||||||||||
Iron Mountain, Inc., 8.375%, 2021 | 70,000 | 75,075 | 415,000 | 445,087 | — | 485,000 | 520,162 | |||||||||||||||||||||
SunGard Data Systems, Inc., 10.25%, 2015 | 156,000 | 163,995 | 832,000 | 874,640 | — | 988,000 | 1,038,635 | |||||||||||||||||||||
SunGard Data Systems, Inc., 7.375%, 2018 (n) | 50,000 | 50,250 | 275,000 | 276,375 | — | 325,000 | 326,625 | |||||||||||||||||||||
SunGard Data Systems, Inc., 7.625%, 2020 (n) | 60,000 | 60,750 | 335,000 | 339,188 | — | 395,000 | 399,938 | |||||||||||||||||||||
Terremark Worldwide, Inc., 12%, 2017 | 45,000 | 51,525 | 160,000 | 183,200 | — | 205,000 | 234,725 | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
$ | 815,227 | $ | 4,440,752 | $ | — | $ | 5,255,979 | |||||||||||||||||||||
|
|
|
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|
Table of Contents
Portfolio of Investments and Pro Forma Combined Portfolio of Investments (unaudited)
December 31, 2010
High Yield | MFS High Yield | Pro Forma | ||||||||||||||||||||||||||
Variable Account | Portfolio | Pro Forma | Combined Fund | |||||||||||||||||||||||||
Issuer | Shares/Par | Value ($) | Shares/Par | Value ($) | Adjustments | Shares/Par | Value ($) | |||||||||||||||||||||
Cable TV | ||||||||||||||||||||||||||||
Bresnan Broadband Holdings LLC, 8%, 2018 (z) | $ | 30,000 | $ | 30,900 | $ | 165,000 | $ | 169,950 | $ | — | $ | 195,000 | $ | 200,850 | ||||||||||||||
Cablevision Systems Corp., 8.625%, 2017 | 85,000 | 92,544 | 465,000 | 506,269 | — | 550,000 | 598,813 | |||||||||||||||||||||
CCH II LLC, 13.5%, 2016 | 120,000 | 143,100 | 665,000 | 793,013 | — | 785,000 | 936,113 | |||||||||||||||||||||
CCO Holdings LLC, 7.875%, 2018 | 130,000 | 134,550 | 1,030,000 | 1,066,050 | — | 1,160,000 | 1,200,600 | |||||||||||||||||||||
CCO Holdings LLC, 8.125%, 2020 | 85,000 | 89,463 | 125,000 | 131,562 | — | 210,000 | 221,025 | |||||||||||||||||||||
Charter Communications Operating LLC, 10.875%, 2014 (n) | 80,000 | 89,400 | 405,000 | 452,588 | — | 485,000 | 541,988 | |||||||||||||||||||||
CSC Holdings LLC, 8.5%, 2014 | 190,000 | 208,763 | 1,095,000 | 1,203,131 | — | 1,285,000 | 1,411,894 | |||||||||||||||||||||
CSC Holdings LLC, 8.5%, 2015 | 60,000 | 65,100 | 315,000 | 341,775 | — | 375,000 | 406,875 | |||||||||||||||||||||
EchoStar Corp., 7.125%, 2016 | 80,000 | 82,600 | 425,000 | 438,812 | — | 505,000 | 521,412 | |||||||||||||||||||||
Insight Communications Co., Inc., 9.375%, 2018 (n) | 75,000 | 79,875 | 420,000 | 447,300 | — | 495,000 | 527,175 | |||||||||||||||||||||
Mediacom LLC, 9.125%, 2019 | 115,000 | 117,300 | 655,000 | 668,100 | — | 770,000 | 785,400 | |||||||||||||||||||||
Videotron LTEE, 6.875%, 2014 | 45,000 | 45,563 | 510,000 | 516,375 | — | 555,000 | 561,938 | |||||||||||||||||||||
Virgin Media Finance PLC, 9.125%, 2016 | 228,000 | 242,820 | 1,275,000 | 1,357,875 | — | 1,503,000 | 1,600,695 | |||||||||||||||||||||
Virgin Media Finance PLC, 9.5%, 2016 | — | — | 225,000 | 254,250 | — | 225,000 | 254,250 | |||||||||||||||||||||
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|
| |||||||||||||||||||||
$ | 1,421,978 | $ | 8,347,050 | $ | — | $ | 9,769,028 | |||||||||||||||||||||
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| |||||||||||||||||||||
Chemicals | ||||||||||||||||||||||||||||
Ashland, Inc., 9.125%, 2017 | $ | 210,000 | $ | 242,025 | $ | 1,255,000 | $ | 1,446,387 | $ | — | $ | 1,465,000 | $ | 1,688,412 | ||||||||||||||
Celanese U.S. Holdings LLC, 6.625%, 2018 (n) | 75,000 | 77,438 | 415,000 | 428,488 | — | 490,000 | 505,926 | |||||||||||||||||||||
Hexion Specialty Chemicals, Inc., 8.875%, 2018 | 195,000 | 208,406 | 1,130,000 | 1,207,688 | — | 1,325,000 | 1,416,094 | |||||||||||||||||||||
Hexion U.S. Finance Corp/Hexion Nova Scotia Finance, 9%, 2020 (n) | 30,000 | 31,725 | 170,000 | 179,775 | — | 200,000 | 211,500 | |||||||||||||||||||||
Huntsman International LLC, 8.625%, 2021 (n) | 110,000 | 118,800 | 600,000 | 648,000 | — | 710,000 | 766,800 | |||||||||||||||||||||
Lumena Resources Corp., 12%, 2014 (n) | 105,000 | 97,650 | 331,000 | 307,830 | — | 436,000 | 405,480 | |||||||||||||||||||||
Lyondell Chemical Co., 11%, 2018 | 377,972 | 428,053 | 2,248,711 | 2,546,665 | — | 2,626,683 | 2,974,718 | |||||||||||||||||||||
Momentive Performance Materials, Inc., 12.5%, 2014 | 153,000 | 170,786 | 946,000 | 1,055,973 | — | 1,099,000 | 1,226,759 | |||||||||||||||||||||
Momentive Performance Materials, Inc., 11.5%, 2016 | 75,000 | 81,375 | 391,000 | 424,235 | — | 466,000 | 505,610 | |||||||||||||||||||||
Momentive Performance Materials, Inc., 9%, 2021 (n) | 60,000 | 63,300 | 330,000 | 348,150 | — | 390,000 | 411,450 | |||||||||||||||||||||
Polypore International, Inc., 7.5%, 2017 (z) | 20,000 | 20,400 | $ | 110,000 | $ | 112,200 | — | 130,000 | 132,600 | |||||||||||||||||||
Solutia, Inc., 7.875%, 2020 | 125,000 | 133,750 | 685,000 | 732,950 | — | 810,000 | 866,700 | |||||||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||||
$ | 1,673,708 | $ | 9,438,341 | $ | — | $ | 11,112,049 | |||||||||||||||||||||
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|
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|
| |||||||||||||||||||||
Computer Software | ||||||||||||||||||||||||||||
Syniverse Holdings, Inc., 9.125%, 2019 (z) | $ | 80,000 | $ | 82,600 | $ | 430,000 | $ | 443,975 | $ | — | $ | 510,000 | $ | 526,575 | ||||||||||||||
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|
|
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| |||||||||||||||||||||
Computer Software - Systems | ||||||||||||||||||||||||||||
DuPont Fabros Technology, Inc., REIT, 8.5%, 2017 | $ | 165,000 | $ | 176,550 | $ | 915,000 | $ | 979,050 | $ | — | $ | 1,080,000 | $ | 1,155,600 | ||||||||||||||
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| |||||||||||||||||||||
Conglomerates | ||||||||||||||||||||||||||||
Amsted Industries, Inc., 8.125%, 2018 (n) | $ | 115,000 | $ | 122,044 | $ | 640,000 | $ | 679,200 | $ | — | $ | 755,000 | $ | 801,244 | ||||||||||||||
Pinafore LLC, 9%, 2018 (n) | 105,000 | 113,400 | 580,000 | 626,400 | — | 685,000 | 739,800 | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
$ | 235,444 | $ | 1,305,600 | $ | — | $ | 1,541,044 | |||||||||||||||||||||
|
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| |||||||||||||||||||||
Consumer Products | ||||||||||||||||||||||||||||
ACCO Brands Corp., 10.625%, 2015 | $ | 15,000 | $ | 16,875 | $ | 100,000 | $ | 112,500 | $ | — | $ | 115,000 | $ | 129,375 | ||||||||||||||
ACCO Brands Corp., 7.625%, 2015 | 60,000 | 60,000 | 360,000 | 360,000 | — | 420,000 | 420,000 | |||||||||||||||||||||
Central Garden & Pet Co., 8.25%, 2018 | 85,000 | 86,063 | 460,000 | 465,750 | — | 545,000 | 551,813 | |||||||||||||||||||||
Easton-Bell Sports, Inc., 9.75%, 2016 | 95,000 | 104,263 | 170,000 | 186,575 | — | 265,000 | 290,838 | |||||||||||||||||||||
Jarden Corp., 7.5%, 2017 | 115,000 | 121,181 | 620,000 | 653,325 | — | 735,000 | 774,506 | |||||||||||||||||||||
Libbey Glass, Inc., 10%, 2015 (n) | 100,000 | 107,500 | 545,000 | 585,875 | — | 645,000 | 693,375 | |||||||||||||||||||||
NBTY, Inc., 9%, 2018 (n) | 15,000 | 16,013 | 80,000 | 85,400 | — | 95,000 | 101,413 | |||||||||||||||||||||
Scotts Miracle-Gro Co., 6.625%, 2020 (z) | 20,000 | 20,000 | 110,000 | 110,000 | — | 130,000 | 130,000 | |||||||||||||||||||||
Visant Corp., 10%, 2017 (n) | 100,000 | 106,250 | 570,000 | 605,625 | — | 670,000 | 711,875 | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
$ | 638,145 | $ | 3,165,050 | $ | — | $ | 3,803,195 | |||||||||||||||||||||
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|
|
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|
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|
Table of Contents
Portfolio of Investments and Pro Forma Combined Portfolio of Investments (unaudited)
December 31, 2010
High Yield | MFS High Yield | Pro Forma | ||||||||||||||||||||||||||
Variable Account | Portfolio | Pro Forma | Combined Fund | |||||||||||||||||||||||||
Issuer | Shares/Par | Value ($) | Shares/Par | Value ($) | Adjustments | Shares/Par | Value ($) | |||||||||||||||||||||
Consumer Services | ||||||||||||||||||||||||||||
KAR Holdings, Inc., 10%, 2015 | $ | 41,000 | $ | 43,460 | $ | 175,000 | $ | 185,500 | $ | — | $ | 216,000 | $ | 228,960 | ||||||||||||||
KAR Holdings, Inc., FRN, 4.286%, 2014 | 85,000 | 80,538 | 525,000 | 497,437 | — | 610,000 | 577,975 | |||||||||||||||||||||
Service Corp. International, 6.75%, 2015 | 55,000 | 56,375 | 375,000 | 384,375 | — | 430,000 | 440,750 | |||||||||||||||||||||
Service Corp. International, 7%, 2017 | 190,000 | 193,800 | 1,510,000 | 1,540,200 | — | 1,700,000 | 1,734,000 | |||||||||||||||||||||
Service Corp. International, 7%, 2019 | 160,000 | 160,000 | 185,000 | 185,000 | — | 345,000 | 345,000 | |||||||||||||||||||||
Ticketmaster Entertainment, Inc., 10.75%, 2016 | 160,000 | 173,200 | 910,000 | 985,075 | — | 1,070,000 | 1,158,275 | |||||||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||||
$ | 707,373 | $ | 3,777,587 | $ | — | $ | 4,484,960 | |||||||||||||||||||||
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|
| |||||||||||||||||||||
Containers | ||||||||||||||||||||||||||||
Graham Packaging Co. LP/GPC Capital Corp., 9.875%, 2014 | $ | 145,000 | $ | 150,075 | $ | 1,365,000 | $ | 1,412,775 | $ | — | $ | 1,510,000 | $ | 1,562,850 | ||||||||||||||
Graham Packaging Co. LP/GPC Capital Corp., 8.25%, 2018 | 20,000 | 21,000 | 115,000 | 120,750 | — | 135,000 | 141,750 | |||||||||||||||||||||
Greif, Inc., 6.75%, 2017 | 165,000 | 172,425 | 855,000 | 893,475 | — | 1,020,000 | 1,065,900 | |||||||||||||||||||||
Owens-Illinois, Inc., 7.375%, 2016 | 75,000 | 79,688 | 400,000 | 425,000 | — | 475,000 | 504,688 | |||||||||||||||||||||
Reynolds Group, 7.75%, 2016 (n) | 100,000 | 105,750 | 325,000 | 343,688 | — | 425,000 | 449,438 | |||||||||||||||||||||
Reynolds Group, 7.125%, 2019 (n) | 100,000 | 101,750 | 335,000 | 340,863 | — | 435,000 | 442,613 | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
$ | 630,688 | $ | 3,536,551 | $ | — | $ | 4,167,239 | |||||||||||||||||||||
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| |||||||||||||||||||||
Defense Electronics | ||||||||||||||||||||||||||||
ManTech International Corp., 7.25%, 2018 | $ | 85,000 | $ | 88,825 | $ | 450,000 | $ | 470,250 | $ | — | $ | 535,000 | $ | 559,075 | ||||||||||||||
MOOG, Inc., 7.25%, 2018 | 60,000 | 62,700 | 315,000 | 329,175 | — | 375,000 | 391,875 | |||||||||||||||||||||
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|
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|
|
|
|
| |||||||||||||||||||||
$ | 151,525 | $ | 799,425 | $ | — | $ | 950,950 | |||||||||||||||||||||
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| |||||||||||||||||||||
Electronics | ||||||||||||||||||||||||||||
Freescale Semiconductor, Inc., 10.125%, 2018 (n) | $ | 55,000 | $ | 61,875 | $ | 325,000 | $ | 365,625 | $ | — | $ | 380,000 | $ | 427,500 | ||||||||||||||
Freescale Semiconductor, Inc., 9.25%, 2018 (n) | 75,000 | 82,500 | 440,000 | 484,000 | — | 515,000 | 566,500 | |||||||||||||||||||||
Jabil Circuit, Inc., 7.75%, 2016 | 120,000 | 134,700 | 700,000 | 785,750 | — | 820,000 | 920,450 | |||||||||||||||||||||
NXP B.V., 7.875%, 2014 | 75,000 | 78,000 | 325,000 | 338,000 | — | 400,000 | 416,000 | |||||||||||||||||||||
NXP B.V., 9.75%, 2018 (n) | — | — | 105,000 | 118,125 | — | 105,000 | 118,125 | |||||||||||||||||||||
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|
| |||||||||||||||||||||
$ | 357,075 | $ | 2,091,500 | $ | — | $ | 2,448,575 | |||||||||||||||||||||
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| |||||||||||||||||||||
Emerging Market Sovereign | ||||||||||||||||||||||||||||
Republic of Argentina, FRN, 0.677%, 2012 | $ | 38,175 | $ | 36,157 | $ | 240,750 | $ | 228,020 | $ | — | $ | 278,925 | $ | 264,177 | ||||||||||||||
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| |||||||||||||||||||||
Energy - Independent | ||||||||||||||||||||||||||||
Anadarko Petroleum Corp., 8.7%, 2019 | $ | 60,000 | $ | 73,272 | $ | 310,000 | $ | 378,574 | $ | — | $ | 370,000 | $ | 451,846 | ||||||||||||||
Carrizo Oil & Gas, Inc., 8.625%, 2018 (n) | 135,000 | 139,050 | 705,000 | 726,150 | — | 840,000 | 865,200 | |||||||||||||||||||||
Concho Resources, Inc., 8.625%, 2017 | 30,000 | 32,700 | 145,000 | 158,050 | — | 175,000 | 190,750 | |||||||||||||||||||||
Denbury Resources, Inc., 8.25%, 2020 | 110,000 | 119,350 | 595,000 | 645,575 | — | 705,000 | 764,925 | |||||||||||||||||||||
Energy XXI Gulf Coast, Inc., 9.25%, 2017 (z) | 130,000 | 135,200 | 705,000 | 733,200 | — | 835,000 | 868,400 | |||||||||||||||||||||
Harvest Operations Corp., 6.875%, 2017 (n) | 115,000 | 118,450 | 625,000 | 643,750 | — | 740,000 | 762,200 | |||||||||||||||||||||
Hilcorp Energy I LP, 9%, 2016 (n) | 200,000 | 211,500 | 1,020,000 | 1,078,650 | — | 1,220,000 | 1,290,150 | |||||||||||||||||||||
Linn Energy LLC, 8.625%, 2020 (n) | 35,000 | 37,713 | 185,000 | 199,338 | — | 220,000 | 237,051 | |||||||||||||||||||||
Linn Energy LLC, 7.75%, 2021 (n) | 88,000 | 90,200 | 472,000 | 483,800 | — | 560,000 | 574,000 | |||||||||||||||||||||
Newfield Exploration Co., 6.625%, 2014 | 125,000 | 127,500 | 725,000 | 739,500 | — | 850,000 | 867,000 | |||||||||||||||||||||
Newfield Exploration Co., 6.625%, 2016 | 60,000 | 61,650 | 315,000 | 323,662 | — | 375,000 | 385,312 | |||||||||||||||||||||
OPTI Canada, Inc., 9.75%, 2013 (n) | 90,000 | 90,000 | 490,000 | 490,000 | — | 580,000 | 580,000 | |||||||||||||||||||||
OPTI Canada, Inc., 8.25%, 2014 | 205,000 | 146,063 | 1,080,000 | 769,500 | — | 1,285,000 | 915,563 | |||||||||||||||||||||
Penn Virginia Corp., 10.375%, 2016 | 175,000 | 195,125 | 935,000 | 1,042,525 | — | 1,110,000 | 1,237,650 | |||||||||||||||||||||
Pioneer Natural Resources Co., 6.875%, 2018 | 130,000 | 138,204 | 740,000 | 786,697 | — | 870,000 | 924,901 | |||||||||||||||||||||
Pioneer Natural Resources Co., 7.5%, 2020 | 135,000 | 148,234 | 760,000 | 834,501 | — | 895,000 | 982,735 | |||||||||||||||||||||
Plains Exploration & Production Co., 7%, 2017 | 210,000 | 215,775 | 1,115,000 | 1,145,662 | — | 1,325,000 | 1,361,437 | |||||||||||||||||||||
QEP Resources, Inc., 6.875%, 2021 | 120,000 | 126,000 | 645,000 | 677,250 | — | 765,000 | 803,250 | |||||||||||||||||||||
Quicksilver Resources, Inc., 8.25%, 2015 | 115,000 | 119,313 | 625,000 | 648,437 | — | 740,000 | 767,750 | |||||||||||||||||||||
Quicksilver Resources, Inc., 9.125%, 2019 | 105,000 | 115,238 | 545,000 | 598,137 | — | 650,000 | 713,375 | |||||||||||||||||||||
Range Resources Corp., 8%, 2019 | 75,000 | 81,656 | 315,000 | 342,956 | — | 390,000 | 424,612 | |||||||||||||||||||||
SandRidge Energy, Inc., 8%, 2018 (n) | 135,000 | 137,025 | 385,000 | 390,775 | — | 520,000 | 527,800 | |||||||||||||||||||||
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| |||||||||||||||||||||
$ | 2,659,218 | $ | 13,836,689 | $ | — | $ | 16,495,907 | |||||||||||||||||||||
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Table of Contents
Portfolio of Investments and Pro Forma Combined Portfolio of Investments (unaudited)
December 31, 2010
High Yield | MFS High Yield | Pro Forma | ||||||||||||||||||||||||||
Variable Account | Portfolio | Pro Forma | Combined Fund | |||||||||||||||||||||||||
Issuer | Shares/Par | Value ($) | Shares/Par | Value ($) | Adjustments | Shares/Par | Value ($) | |||||||||||||||||||||
Entertainment | ||||||||||||||||||||||||||||
AMC Entertainment, Inc., 11%, 2016 | $ | 150,000 | $ | 159,000 | $ | 450,000 | $ | 477,000 | $ | — | $ | 600,000 | $ | 636,000 | ||||||||||||||
AMC Entertainment, Inc., 8.75%, 2019 | 120,000 | 128,100 | 740,000 | 789,950 | — | 860,000 | 918,050 | |||||||||||||||||||||
AMC Entertainment, Inc., 9.75%, 2020 (z) | 60,000 | 62,400 | 330,000 | 343,200 | — | 390,000 | 405,600 | |||||||||||||||||||||
Cinemark USA, Inc., 8.625%, 2019 | 95,000 | 102,838 | 535,000 | 579,137 | — | 630,000 | 681,975 | |||||||||||||||||||||
NAI Entertainment Holdings LLC, 8.25%, 2017 (z) | 50,000 | 52,500 | 280,000 | 294,000 | — | 330,000 | 346,500 | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
$ | 504,838 | $ | 2,483,287 | $ | — | $ | 2,988,125 | |||||||||||||||||||||
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|
|
| |||||||||||||||||||||
Financial Institutions | ||||||||||||||||||||||||||||
American General Finance Corp., 5.375%, 2012 | $ | 55,000 | $ | 51,975 | $ | 290,000 | $ | 274,050 | $ | — | $ | 345,000 | $ | 326,025 | ||||||||||||||
American General Finance Corp., 6.9%, 2017 | 100,000 | 80,750 | 655,000 | 528,912 | — | 755,000 | 609,662 | |||||||||||||||||||||
CIT Group, Inc., 7%, 2014 | 150,000 | 151,500 | 820,000 | 828,200 | — | 970,000 | 979,700 | |||||||||||||||||||||
CIT Group, Inc., 7%, 2016 | 185,000 | 185,694 | 990,000 | 993,713 | — | 1,175,000 | 1,179,407 | |||||||||||||||||||||
CIT Group, Inc., 7%, 2017 | 510,000 | 511,275 | 2,610,000 | 2,616,525 | — | 3,120,000 | 3,127,800 | |||||||||||||||||||||
General Electric Capital Corp., 6.375% to 2017, FRN to 2067 | 70,000 | 69,300 | — | — | — | 70,000 | 69,300 | |||||||||||||||||||||
GMAC, Inc., 6.75%, 2014 | 270,000 | 284,175 | 1,455,000 | 1,531,387 | — | 1,725,000 | 1,815,562 | |||||||||||||||||||||
International Lease Finance Corp., 5.625%, 2013 | 75,000 | 75,375 | 385,000 | 386,925 | — | 460,000 | 462,300 | |||||||||||||||||||||
International Lease Finance Corp., 8.75%, 2017 (n) | 155,000 | 166,238 | 865,000 | 927,713 | — | 1,020,000 | 1,093,951 | |||||||||||||||||||||
International Lease Finance Corp., 7.125%, 2018 (n) | 154,000 | 163,625 | 837,000 | 889,313 | — | 991,000 | 1,052,938 | |||||||||||||||||||||
International Lease Finance Corp., 8.25%, 2020 | 30,000 | 30,900 | 165,000 | 169,950 | — | 195,000 | 200,850 | |||||||||||||||||||||
Nationstar Mortgage LLC, 10.875%, 2015 (z) | 75,000 | 73,688 | 410,000 | 402,825 | — | 485,000 | 476,513 | |||||||||||||||||||||
SLM Corp., 8%, 2020 | 155,000 | 157,155 | 825,000 | 836,472 | — | 980,000 | 993,627 | |||||||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||||
$ | 2,001,650 | $ | 10,385,985 | $ | — | $ | 12,387,635 | |||||||||||||||||||||
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|
|
|
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|
| |||||||||||||||||||||
Food & Beverages | ||||||||||||||||||||||||||||
ARAMARK Corp., 8.5%, 2015 | $ | 115,000 | $ | 120,175 | $ | 535,000 | $ | 559,075 | $ | — | $ | 650,000 | $ | 679,250 | ||||||||||||||
B&G Foods, Inc., 7.625%, 2018 | 85,000 | 89,463 | 460,000 | 484,150 | — | 545,000 | 573,613 | |||||||||||||||||||||
CEDC Finance Corp. International, Inc., 9.125%, 2016 (n) | 200,000 | 212,500 | 715,000 | 759,688 | — | 915,000 | 972,188 | |||||||||||||||||||||
Constellation Brands, Inc., 7.25%, 2016 | 60,000 | 63,600 | 335,000 | 355,100 | — | 395,000 | 418,700 | |||||||||||||||||||||
Del Monte Foods Co., 6.75%, 2015 | 185,000 | 188,931 | 850,000 | 868,062 | — | 1,035,000 | 1,056,993 | |||||||||||||||||||||
Pinnacle Foods Finance LLC, 9.25%, 2015 | 155,000 | 161,394 | 865,000 | 900,681 | — | 1,020,000 | 1,062,075 | |||||||||||||||||||||
TreeHouse Foods, Inc., 7.75%, 2018 | 95,000 | 102,956 | 495,000 | 536,456 | — | 590,000 | 639,412 | |||||||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||||
$ | 939,019 | $ | 4,463,212 | $ | — | $ | 5,402,231 | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Forest & Paper Products | ||||||||||||||||||||||||||||
Boise, Inc., 8%, 2020 | $ | 115,000 | $ | 123,050 | $ | 465,000 | $ | 497,550 | $ | — | $ | 580,000 | $ | 620,600 | ||||||||||||||
Cascades, Inc., 7.75%, 2017 | 80,000 | 83,400 | 455,000 | 474,338 | — | 535,000 | 557,738 | |||||||||||||||||||||
Georgia-Pacific Corp., 7.125%, 2017 (n) | 65,000 | 69,225 | 635,000 | 676,275 | — | 700,000 | 745,500 | |||||||||||||||||||||
Georgia-Pacific Corp., 8%, 2024 | 140,000 | 159,950 | 505,000 | 576,962 | — | 645,000 | 736,912 | |||||||||||||||||||||
Georgia-Pacific Corp., 7.25%, 2028 | 35,000 | 37,888 | 210,000 | 227,325 | — | 245,000 | 265,213 | |||||||||||||||||||||
Graphic Packaging Holding Co., 7.875%, 2018 | 75,000 | 78,563 | 405,000 | 424,238 | — | 480,000 | 502,801 | |||||||||||||||||||||
JSG Funding PLC, 7.75%, 2015 | 35,000 | 35,875 | 190,000 | 194,750 | — | 225,000 | 230,625 | |||||||||||||||||||||
Millar Western Forest Products Ltd., 7.75%, 2013 | 135,000 | 127,913 | 705,000 | 667,987 | — | 840,000 | 795,900 | |||||||||||||||||||||
Sappi Papier Holding GmbH, 6.75%, 2012 (z) | 60,000 | 61,527 | 315,000 | 323,019 | — | 375,000 | 384,546 | |||||||||||||||||||||
Smurfit Kappa Group PLC, 7.75%, 2019 (n) | EUR | 100,000 | 140,311 | EUR | 465,000 | 652,448 | — | EUR | 565,000 | 792,759 | ||||||||||||||||||
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|
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|
|
|
|
| |||||||||||||||||||||
$ | 917,702 | $ | 4,714,892 | $ | — | $ | 5,632,594 | |||||||||||||||||||||
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|
| |||||||||||||||||||||
Gaming & Lodging | ||||||||||||||||||||||||||||
Firekeepers Development Authority, 13.875%, 2015 (n) | $ | 100,000 | $ | 118,250 | $ | 530,000 | $ | 626,725 | $ | — | $ | 630,000 | $ | 744,975 | ||||||||||||||
Fontainebleau Las Vegas Holdings LLC, 10.25%, 2015 (d)(n) | 180,000 | 630 | 1,270,000 | 4,445 | — | 1,450,000 | 5,075 | |||||||||||||||||||||
Gaylord Entertainment Co., 6.75%, 2014 | 105,000 | 103,425 | 575,000 | 566,375 | — | 680,000 | 669,800 | |||||||||||||||||||||
GWR Operating Partnership LLP, 10.875%, 2017 | 80,000 | 84,400 | 470,000 | 495,850 | — | 550,000 | 580,250 |
Table of Contents
Portfolio of Investments and Pro Forma Combined Portfolio of Investments (unaudited)
December 31, 2010
High Yield | MFS High Yield | Pro Forma | ||||||||||||||||||||||||||
Variable Account | Portfolio | Pro Forma | Combined Fund | |||||||||||||||||||||||||
Issuer | Shares/Par | Value ($) | Shares/Par | Value ($) | Adjustments | Shares/Par | Value ($) | |||||||||||||||||||||
Harrah’s Operating Co., Inc., 11.25%, 2017 | 245,000 | 275,625 | 1,330,000 | 1,496,250 | — | 1,575,000 | 1,771,875 | |||||||||||||||||||||
Harrah’s Operating Co., Inc., 10%, 2018 | 55,000 | 50,188 | 667,000 | 608,637 | — | 722,000 | 658,825 | |||||||||||||||||||||
Harrah’s Operating Co., Inc., 10%, 2018 | 128,000 | 116,800 | 353,000 | 322,112 | — | 481,000 | 438,912 | |||||||||||||||||||||
Host Hotels & Resorts, Inc., 6.75%, 2016 | 140,000 | 142,975 | 950,000 | 970,187 | — | 1,090,000 | 1,113,162 | |||||||||||||||||||||
Host Hotels & Resorts, Inc., 9%, 2017 | 135,000 | 149,850 | 720,000 | 799,200 | — | 855,000 | 949,050 | |||||||||||||||||||||
MGM Mirage, 10.375%, 2014 | 20,000 | 22,450 | 150,000 | 168,375 | — | 170,000 | 190,825 | |||||||||||||||||||||
MGM Mirage, 11.125%, 2017 | 60,000 | 69,000 | 370,000 | 425,500 | — | 430,000 | 494,500 | |||||||||||||||||||||
MGM Mirage, 9%, 2020 (n) | 115,000 | 126,500 | 625,000 | 687,500 | — | 740,000 | 814,000 | |||||||||||||||||||||
MGM Resorts International, 11.375%, 2018 | 105,000 | 113,925 | 525,000 | 569,625 | — | 630,000 | 683,550 | |||||||||||||||||||||
Penn National Gaming, Inc., 8.75%, 2019 | 125,000 | 137,813 | 745,000 | 821,363 | — | 870,000 | 959,176 | |||||||||||||||||||||
Royal Caribbean Cruises Ltd., 11.875%, 2015 | 50,000 | 61,750 | 270,000 | 333,450 | — | 320,000 | 395,200 | |||||||||||||||||||||
Starwood Hotels & Resorts Worldwide, Inc., 6.75%, 2018 | 65,000 | 71,175 | 385,000 | 421,575 | — | 450,000 | 492,750 | |||||||||||||||||||||
Station Casinos, Inc., 6.5%, 2014 (d) | 330,000 | 33 | 2,020,000 | 202 | — | 2,350,000 | 235 | |||||||||||||||||||||
Station Casinos, Inc., 6.875%, 2016 (d) | 380,000 | 38 | 2,495,000 | 249 | — | 2,875,000 | 287 | |||||||||||||||||||||
Station Casinos, Inc., 7.75%, 2016 (d) | 70,000 | 7 | 452,000 | 45 | — | 522,000 | 52 | |||||||||||||||||||||
Wyndham Worldwide Corp., 6%, 2016 | 85,000 | 88,947 | 445,000 | 465,664 | — | 530,000 | 554,611 | |||||||||||||||||||||
Wyndham Worldwide Corp., 7.375%, 2020 | 110,000 | 120,928 | 595,000 | 654,111 | — | 705,000 | 775,039 | |||||||||||||||||||||
Wynn Las Vegas LLC, 7.75%, 2020 | 55,000 | 59,538 | 300,000 | 324,750 | — | 355,000 | 384,288 | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
$ | 1,914,247 | $ | 10,762,190 | $ | — | $ | 12,676,437 | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Industrial | ||||||||||||||||||||||||||||
Altra Holdings, Inc., 8.125%, 2016 | $ | 85,000 | $ | 90,100 | $ | 480,000 | $ | 508,800 | $ | — | $ | 565,000 | $ | 598,900 | ||||||||||||||
Diversey, Inc., 8.25%, 2019 | 80,000 | 86,800 | 475,000 | 515,375 | — | 555,000 | 602,175 | |||||||||||||||||||||
Great Lakes Dredge & Dock Corp., 7.75%, 2013 | 100,000 | 100,875 | 575,000 | 580,031 | — | 675,000 | 680,906 | |||||||||||||||||||||
Mueller Water Products, Inc., 7.375%, 2017 | 85,000 | 82,025 | 440,000 | 424,600 | — | 525,000 | 506,625 | |||||||||||||||||||||
Mueller Water Products, Inc., 8.75%, 2020 | 60,000 | 66,300 | 328,000 | 362,440 | — | 388,000 | 428,740 | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
$ | 426,100 | $ | 2,391,246 | $ | — | $ | 2,817,346 | |||||||||||||||||||||
|
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|
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|
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|
| |||||||||||||||||||||
Insurance | ||||||||||||||||||||||||||||
American International Group, Inc., 8.175% to 2038, FRN to 2068 | $ | 390,000 | $ | 415,276 | $ | 2,060,000 | $ | 2,193,507 | $ | — | $ | 2,450,000 | $ | 2,608,783 | ||||||||||||||
ING Capital Funding Trust III, FRN, 3.902%, 2049 | 95,000 | 87,638 | 555,000 | 511,987 | — | 650,000 | 599,625 | |||||||||||||||||||||
ING Groep N.V., 5.775% to 2015, FRN to 2049 | 190,000 | 163,400 | 1,000,000 | 860,000 | — | 1,190,000 | 1,023,400 | |||||||||||||||||||||
MetLife, Inc., 9.25% to 2038, FRN to 2038 (n) | — | — | 800,000 | 940,000 | — | 800,000 | 940,000 | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
$ | 666,314 | $ | 4,505,494 | $ | — | $ | 5,171,808 | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Insurance - Property & Casualty | ||||||||||||||||||||||||||||
Liberty Mutual Group, Inc., 10.75% to 2038, FRN to 2058 (n) | $ | 180,000 | $ | 217,800 | $ | 995,000 | $ | 1,203,950 | $ | — | $ | 1,175,000 | $ | 1,421,750 | ||||||||||||||
USI Holdings Corp., 9.75%, 2015 (z) | 160,000 | 161,600 | 990,000 | 999,900 | — | 1,150,000 | 1,161,500 | |||||||||||||||||||||
XL Group PLC, 6.5% to 2017, FRN to 2049 | 100,000 | 86,000 | 565,000 | 485,900 | — | 665,000 | 571,900 | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
$ | 465,400 | $ | 2,689,750 | $ | — | $ | 3,155,150 | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Machinery & Tools | ||||||||||||||||||||||||||||
Case Corp., 7.25%, 2016 | $ | 60,000 | $ | 64,800 | $ | 330,000 | $ | 356,400 | $ | — | $ | 390,000 | $ | 421,200 | ||||||||||||||
Case New Holland, Inc., 7.875%, 2017 (n) | 245,000 | 267,663 | 1,285,000 | 1,403,863 | — | 1,530,000 | 1,671,526 | |||||||||||||||||||||
Rental Service Corp., 9.5%, 2014 | 80,000 | 84,000 | 410,000 | 430,500 | — | 490,000 | 514,500 | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
$ | 416,463 | $ | 2,190,763 | $ | — | $ | 2,607,226 | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Major Banks | ||||||||||||||||||||||||||||
Bank of America Corp., 8% to 2018, FRN to 2049 | $ | 185,000 | $ | 186,443 | $ | 975,000 | $ | 982,605 | $ | — | $ | 1,160,000 | $ | 1,169,048 | ||||||||||||||
JPMorgan Chase & Co., 7.9% to 2018, FRN to 2049 | 175,000 | 186,023 | 930,000 | 988,581 | — | 1,105,000 | 1,174,604 | |||||||||||||||||||||
Royal Bank of Scotland Group PLC, 7.648% to 2031, FRN to 2049 | 345,000 | 288,506 | 1,855,000 | 1,551,244 | — | 2,200,000 | 1,839,750 | |||||||||||||||||||||
Royal Bank of Scotland Group PLC, 6.99% to 2017, FRN to 2049 (d)(n) | — | — | 320,000 | 246,400 | — | 320,000 | 246,400 | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
$ | 660,972 | $ | 3,768,830 | $ | — | $ | 4,429,802 | |||||||||||||||||||||
|
|
|
|
|
|
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|
Table of Contents
Portfolio of Investments and Pro Forma Combined Portfolio of Investments (unaudited)
December 31, 2010
High Yield | MFS High Yield | Pro Forma | ||||||||||||||||||||||||||
Variable Account | Portfolio | Pro Forma | Combined Fund | |||||||||||||||||||||||||
Issuer | Shares/Par | Value ($) | Shares/Par | Value ($) | Adjustments | Shares/Par | Value ($) | |||||||||||||||||||||
Medical & Health Technology & Services | ||||||||||||||||||||||||||||
Biomet, Inc., 10%, 2017 | $ | 170,000 | $ | 185,725 | $ | 530,000 | $ | 579,025 | $ | — | $ | 700,000 | $ | 764,750 | ||||||||||||||
Biomet, Inc., 10.375%, 2017 (p) | 55,000 | 60,088 | 295,000 | 322,287 | — | 350,000 | 382,375 | |||||||||||||||||||||
Biomet, Inc., 11.625%, 2017 | — | — | 575,000 | 635,375 | — | 575,000 | 635,375 | |||||||||||||||||||||
Community Health Systems, Inc., 8.875%, 2015 | 220,000 | 231,000 | 1,160,000 | 1,218,000 | — | 1,380,000 | 1,449,000 | |||||||||||||||||||||
Cooper Cos., Inc., 7.125%, 2015 | 130,000 | 133,900 | 370,000 | 381,100 | — | 500,000 | 515,000 | |||||||||||||||||||||
Davita, Inc., 6.375%, 2018 | 105,000 | 104,475 | 580,000 | 577,100 | — | 685,000 | 681,575 | |||||||||||||||||||||
Davita, Inc., 6.625%, 2020 | 50,000 | 49,500 | 285,000 | 282,150 | — | 335,000 | 331,650 | |||||||||||||||||||||
Fresenius Medical Care AG & Co. KGaA, 9%, 2015 (n) | 125,000 | 143,125 | 595,000 | 681,275 | — | 720,000 | 824,400 | |||||||||||||||||||||
HCA, Inc., 9.25%, 2016 | 455,000 | 485,428 | 2,440,000 | 2,603,175 | — | 2,895,000 | 3,088,603 | |||||||||||||||||||||
HCA, Inc., 8.5%, 2019 | 105,000 | 114,975 | 625,000 | 684,375 | — | 730,000 | 799,350 | |||||||||||||||||||||
HealthSouth Corp., 8.125%, 2020 | 195,000 | 209,625 | 1,055,000 | 1,134,125 | — | 1,250,000 | 1,343,750 | |||||||||||||||||||||
Tenet Healthcare Corp., 9.25%, 2015 | 195,000 | 207,675 | 1,065,000 | 1,134,225 | — | 1,260,000 | 1,341,900 | |||||||||||||||||||||
Tenet Healthcare Corp., 8%, 2020 (n) | 40,000 | 40,600 | 240,000 | 243,600 | — | 280,000 | 284,200 | |||||||||||||||||||||
United Surgical Partners International, Inc., 8.875%, 2017 | 65,000 | 66,950 | 215,000 | 221,450 | — | 280,000 | 288,400 | |||||||||||||||||||||
United Surgical Partners International, Inc., 9.25%, 2017 (p) | 90,000 | 93,600 | 335,000 | 348,400 | — | 425,000 | 442,000 | |||||||||||||||||||||
Universal Hospital Services, Inc., 8.5%, 2015 (p) | 175,000 | 179,813 | 1,195,000 | 1,227,862 | — | 1,370,000 | 1,407,675 | |||||||||||||||||||||
Universal Hospital Services, Inc., FRN, 3.834%, 2015 | 45,000 | 41,175 | 290,000 | 265,350 | — | 335,000 | 306,525 | |||||||||||||||||||||
Vanguard Health Systems, Inc., 8%, 2018 | 130,000 | 133,250 | 715,000 | 732,875 | — | 845,000 | 866,125 | |||||||||||||||||||||
VWR Funding, Inc., 10.25%, 2015 (p) | 147,375 | 154,744 | 799,531 | 839,508 | — | 946,906 | 994,252 | |||||||||||||||||||||
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|
| |||||||||||||||||||||
$ | 2,635,648 | $ | 14,111,257 | $ | — | $ | 16,746,905 | |||||||||||||||||||||
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|
| |||||||||||||||||||||
Metals & Mining | ||||||||||||||||||||||||||||
Arch Coal, Inc., 7.25%, 2020 | $ | 55,000 | $ | 58,025 | $ | 295,000 | $ | 311,225 | $ | — | $ | 350,000 | $ | 369,250 | ||||||||||||||
Arch Western Finance LLC, 6.75%, 2013 | 57,000 | 57,570 | 313,000 | 316,130 | — | 370,000 | 373,700 | |||||||||||||||||||||
Cloud Peak Energy, Inc., 8.25%, 2017 | 120,000 | 128,850 | 675,000 | 724,781 | — | 795,000 | 853,631 | |||||||||||||||||||||
Cloud Peak Energy, Inc., 8.5%, 2019 | 130,000 | 142,350 | 865,000 | 947,175 | — | 995,000 | 1,089,525 | |||||||||||||||||||||
CONSOL Energy, Inc., 8%, 2017 (n) | 85,000 | 90,525 | 470,000 | 500,550 | — | 555,000 | 591,075 | |||||||||||||||||||||
CONSOL Energy, Inc., 8.25%, 2020 (n) | 55,000 | 59,400 | 315,000 | 340,200 | — | 370,000 | 399,600 | |||||||||||||||||||||
Novelis, Inc., 8.375%, 2017 (z) | 60,000 | 62,100 | 340,000 | 351,900 | — | 400,000 | 414,000 | |||||||||||||||||||||
Novelis, Inc., 8.75%, 2020 (z) | 30,000 | 31,125 | 165,000 | 171,188 | — | 195,000 | 202,313 | |||||||||||||||||||||
Peabody Energy Corp., 5.875%, 2016 | — | — | 570,000 | 572,850 | — | 570,000 | 572,850 | |||||||||||||||||||||
Peabody Energy Corp., 7.375%, 2016 | 165,000 | 183,150 | — | — | — | 165,000 | 183,150 | |||||||||||||||||||||
U.S. Steel Corp., 7.375%, 2020 | 60,000 | 61,500 | 320,000 | 328,000 | — | 380,000 | 389,500 | |||||||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||||
$ | 874,595 | $ | 4,563,999 | $ | — | $ | 5,438,594 | |||||||||||||||||||||
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| |||||||||||||||||||||
Natural Gas - Distribution | ||||||||||||||||||||||||||||
AmeriGas Partners LP, 7.125%, 2016 | $ | 145,000 | $ | 150,075 | $ | 865,000 | $ | 895,275 | $ | — | $ | 1,010,000 | $ | 1,045,350 | ||||||||||||||
Ferrellgas Partners LP, 8.625%, 2020 | 120,000 | 129,000 | 660,000 | 709,500 | — | 780,000 | 838,500 | |||||||||||||||||||||
Inergy LP, 6.875%, 2014 | 120,000 | 121,800 | 680,000 | 690,200 | — | 800,000 | 812,000 | |||||||||||||||||||||
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|
|
|
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|
| |||||||||||||||||||||
$ | 400,875 | $ | 2,294,975 | $ | — | $ | 2,695,850 | |||||||||||||||||||||
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Natural Gas - Pipeline | ||||||||||||||||||||||||||||
Atlas Pipeline Partners LP, 8.125%, 2015 | $ | 65,000 | $ | 66,950 | $ | 185,000 | $ | 190,550 | $ | — | $ | 250,000 | $ | 257,500 | ||||||||||||||
Atlas Pipeline Partners LP, 8.75%, 2018 | 90,000 | 94,050 | 470,000 | 491,150 | — | 560,000 | 585,200 | |||||||||||||||||||||
Crosstex Energy, Inc., 8.875%, 2018 | 125,000 | 133,906 | 710,000 | 760,588 | — | 835,000 | 894,494 | |||||||||||||||||||||
El Paso Corp., 7%, 2017 | 175,000 | 184,680 | 1,020,000 | 1,076,421 | — | 1,195,000 | 1,261,101 | |||||||||||||||||||||
El Paso Corp., 7.75%, 2032 | 60,000 | 59,684 | 350,000 | 348,156 | — | 410,000 | 407,840 | |||||||||||||||||||||
Energy Transfer Equity LP, 7.5%, 2020 | 185,000 | 190,550 | 1,005,000 | 1,035,150 | — | 1,190,000 | 1,225,700 | |||||||||||||||||||||
Enterprise Products Partners LP, FRN, 8.375%, 2066 | 73,000 | 78,384 | 392,000 | 420,910 | — | 465,000 | 499,294 | |||||||||||||||||||||
Enterprise Products Partners LP, FRN, 7.034%, 2068 | 44,000 | 45,650 | 243,000 | 252,112 | — | 287,000 | 297,762 | |||||||||||||||||||||
MarkWest Energy Partners LP, 8.75%, 2018 | 30,000 | 32,475 | 180,000 | 194,850 | — | 210,000 | 227,325 | |||||||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||||
$ | 886,329 | $ | 4,769,887 | $ | — | $ | 5,656,216 | |||||||||||||||||||||
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|
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|
|
| |||||||||||||||||||||
Network & Telecom | ||||||||||||||||||||||||||||
CenturyLink, Inc., 7.6%, 2039 | $ | 80,000 | $ | 80,632 | $ | 430,000 | $ | 433,396 | $ | — | $ | 510,000 | $ | 514,028 | ||||||||||||||
Cincinnati Bell, Inc., 8.25%, 2017 | 35,000 | 34,650 | 195,000 | 193,050 | — | 230,000 | 227,700 | |||||||||||||||||||||
Cincinnati Bell, Inc., 8.75%, 2018 | 140,000 | 131,250 | 770,000 | 721,875 | — | 910,000 | 853,125 | |||||||||||||||||||||
Citizens Communications Co., 9%, 2031 | 50,000 | 51,375 | 280,000 | 287,700 | — | 330,000 | 339,075 | |||||||||||||||||||||
Frontier Communications Corp., 8.25%, 2017 | 30,000 | 32,925 | 175,000 | 192,063 | — | 205,000 | 224,988 |
Table of Contents
Portfolio of Investments and Pro Forma Combined Portfolio of Investments (unaudited)
December 31, 2010
High Yield | MFS High Yield | Pro Forma | ||||||||||||||||||||||||||
Variable Account | Portfolio | Pro Forma | Combined Fund | |||||||||||||||||||||||||
Issuer | Shares/Par | Value ($) | Shares/Par | Value ($) | Adjustments | Shares/Par | Value ($) | |||||||||||||||||||||
Frontier Communications Corp., 8.5%, 2020 | 140,000 | 152,950 | 275,000 | 300,438 | — | 415,000 | 453,388 | |||||||||||||||||||||
Qwest Communications International, Inc., 8%, 2015 | 55,000 | 59,125 | 335,000 | 360,125 | — | 390,000 | 419,250 | |||||||||||||||||||||
Qwest Communications International, Inc., 7.125%, 2018 (n) | 185,000 | 191,475 | 1,050,000 | 1,086,750 | — | 1,235,000 | 1,278,225 | |||||||||||||||||||||
Windstream Corp., 8.625%, 2016 | 270,000 | 284,175 | 1,205,000 | 1,268,262 | — | 1,475,000 | 1,552,437 | |||||||||||||||||||||
Windstream Corp., 8.125%, 2018 | 20,000 | 21,000 | 130,000 | 136,500 | — | 150,000 | 157,500 | |||||||||||||||||||||
Windstream Corp., 7.75%, 2020 | 60,000 | 61,800 | 335,000 | 345,050 | — | 395,000 | 406,850 | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
$ | 1,101,357 | $ | 5,325,209 | $ | — | $ | 6,426,566 | |||||||||||||||||||||
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|
|
|
| |||||||||||||||||||||
Oil Services | ||||||||||||||||||||||||||||
Basic Energy Services, Inc., 7.125%, 2016 | $ | 35,000 | $ | 33,950 | $ | 190,000 | $ | 184,300 | $ | — | $ | 225,000 | $ | 218,250 | ||||||||||||||
Edgen Murray Corp., 12.25%, 2015 | 75,000 | 65,250 | 385,000 | 334,950 | — | 460,000 | 400,200 | |||||||||||||||||||||
Expro Finance Luxembourg, 8.5%, 2016 (n) | 200,000 | 191,000 | 940,000 | 897,700 | — | 1,140,000 | 1,088,700 | |||||||||||||||||||||
McJunkin Red Man Holding Corp., 9.5%, 2016 (n) | 65,000 | 61,425 | 355,000 | 335,475 | — | 420,000 | 396,900 | |||||||||||||||||||||
Pioneer Drilling Co., 9.875%, 2018 | 125,000 | 132,188 | 655,000 | 692,663 | — | 780,000 | 824,851 | |||||||||||||||||||||
Trinidad Drilling Ltd., 7.875%, 2019 (z) | 60,000 | 60,600 | 335,000 | 338,350 | — | 395,000 | 398,950 | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
$ | 544,413 | $ | 2,783,438 | $ | — | $ | 3,327,851 | |||||||||||||||||||||
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|
|
|
|
| |||||||||||||||||||||
Oils | ||||||||||||||||||||||||||||
Petroplus Holdings AG, 9.375%, 2019 (n) | $ | 100,000 | $ | 92,500 | $ | 335,000 | $ | 309,875 | $ | — | $ | 435,000 | $ | 402,375 | ||||||||||||||
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|
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| |||||||||||||||||||||
Other Banks & Diversified Financials | ||||||||||||||||||||||||||||
Capital One Financial Corp., 10.25%, 2039 | $ | 150,000 | $ | 160,500 | $ | 825,000 | $ | 882,750 | $ | — | $ | 975,000 | $ | 1,043,250 | ||||||||||||||
Citigroup Capital XXI, 8.3% to 2037, FRN to 2057 | 240,000 | 249,600 | 1,120,000 | 1,164,800 | — | 1,360,000 | 1,414,400 | |||||||||||||||||||||
Groupe BPCE S.A., 12.5% to 2019, FRN to 2049 (n) | 100,000 | 114,934 | 445,000 | 511,456 | — | 545,000 | 626,390 | |||||||||||||||||||||
LBG Capital No.1 PLC, 7.875%, 2020 (n) | 100,000 | 91,000 | 605,000 | 550,550 | — | 705,000 | 641,550 | |||||||||||||||||||||
Santander UK PLC, 8.963% to 2030, FRN to 2049 | 210,000 | 221,550 | 1,131,000 | 1,193,205 | — | 1,341,000 | 1,414,755 | |||||||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||||
$ | 837,584 | $ | 4,302,761 | $ | — | $ | 5,140,345 | |||||||||||||||||||||
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|
| |||||||||||||||||||||
Pharmaceuticals | ||||||||||||||||||||||||||||
Valeant Pharmaceuticals International, Inc., 6.75%, 2017 (n) | $ | 35,000 | $ | 34,825 | $ | 200,000 | $ | 199,000 | $ | — | $ | 235,000 | $ | 233,825 | ||||||||||||||
Valeant Pharmaceuticals International, Inc., 7%, 2020 (n) | 10,000 | 9,875 | 55,000 | 54,313 | — | 65,000 | 64,188 | |||||||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||||
$ | 44,700 | $ | 253,313 | $ | — | $ | 298,013 | |||||||||||||||||||||
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|
| |||||||||||||||||||||
Printing & Publishing | ||||||||||||||||||||||||||||
American Media, Inc., 13.5%, 2018 (z) | $ | 14,489 | $ | 14,721 | $ | 85,857 | $ | 87,231 | $ | — | $ | 100,346 | $ | 101,952 | ||||||||||||||
McClatchy Co., 11.5%, 2017 | 35,000 | 39,331 | 175,000 | 196,656 | — | 210,000 | 235,987 | |||||||||||||||||||||
Nielsen Finance LLC, 11.5%, 2016 | 100,000 | 115,500 | 340,000 | 392,700 | — | 440,000 | 508,200 | |||||||||||||||||||||
Nielsen Finance LLC, 0% to 2011, 12.5% to 2016 | 28,000 | 29,400 | 216,000 | 226,800 | — | 244,000 | 256,200 | |||||||||||||||||||||
Nielsen Finance LLC, 7.75%, 2018 (n) | 50,000 | 51,750 | 280,000 | 289,800 | — | 330,000 | 341,550 | |||||||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||||
$ | 250,702 | $ | 1,193,187 | $ | — | $ | 1,443,889 | |||||||||||||||||||||
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|
|
|
| |||||||||||||||||||||
Railroad & Shipping | ||||||||||||||||||||||||||||
Kansas City Southern Railway, 8%, 2015 | $ | 155,000 | $ | 166,625 | $ | 860,000 | $ | 924,500 | $ | — | $ | 1,015,000 | $ | 1,091,125 | ||||||||||||||
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|
|
| |||||||||||||||||||||
Real Estate | ||||||||||||||||||||||||||||
CB Richard Ellis Group, Inc., REIT, 11.625%,2017 | $ | 45,000 | $ | 52,144 | $ | 285,000 | $ | 330,244 | $ | — | $ | 330,000 | $ | 382,388 | ||||||||||||||
Developers Diversified Realty Corp., REIT, 7.875%, 2020 | 45,000 | 50,394 | 290,000 | 324,759 | — | 335,000 | 375,153 | |||||||||||||||||||||
Entertainment Properties Trust, REIT, 7.75%, 2020 (n) | 130,000 | 137,475 | 700,000 | 740,250 | — | 830,000 | 877,725 | |||||||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||||
$ | 240,013 | $ | 1,395,253 | $ | — | $ | 1,635,266 | |||||||||||||||||||||
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|
| |||||||||||||||||||||
Restaurants | ||||||||||||||||||||||||||||
Dunkin Finance Corp., 9.625%, 2018 (n) | $ | 55,000 | $ | 55,550 | $ | 285,000 | $ | 287,850 | $ | — | $ | 340,000 | $ | 343,400 | ||||||||||||||
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| |||||||||||||||||||||
Retailers | ||||||||||||||||||||||||||||
Express LLC/Express Finance Corp., 8.75%, 2018 | $ | 75,000 | $ | 79,688 | $ | 405,000 | $ | 430,313 | $ | — | $ | 480,000 | $ | 510,001 |
Table of Contents
Portfolio of Investments and Pro Forma Combined Portfolio of Investments (unaudited)
December 31, 2010
High Yield Variable Account | MFS High Yield Portfolio | Pro Forma | Pro Forma Combined Fund | |||||||||||||||||||||||||
Issuer | Shares/Par | Value ($) | Shares/Par | Value ($) | Adjustments | Shares/Par | Value ($) | |||||||||||||||||||||
Limited Brands, Inc., 6.9%, 2017 | 85,000 | 90,313 | 465,000 | 494,062 | — | 550,000 | 584,375 | |||||||||||||||||||||
Limited Brands, Inc., 6.95%, 2033 | 50,000 | 46,750 | 280,000 | 261,800 | — | 330,000 | 308,550 | |||||||||||||||||||||
Neiman Marcus Group, Inc., 10.375%, 2015 | 115,000 | 121,469 | 490,000 | 517,562 | — | 605,000 | 639,031 | |||||||||||||||||||||
QVC, Inc., 7.375%, 2020 (n) | 135,000 | 141,413 | 310,000 | 324,725 | — | 445,000 | 466,138 | |||||||||||||||||||||
Rent-A-Center, Inc., 6.625%, 2020 | 20,000 | 19,900 | 115,000 | 114,425 | — | 135,000 | 134,325 | |||||||||||||||||||||
Sally Beauty Holdings, Inc., 10.5%, 2016 | 145,000 | 159,863 | 725,000 | 799,312 | — | 870,000 | 959,175 | |||||||||||||||||||||
Toys “R” Us Property Co. II LLC, 8.5%, 2017 | 75,000 | 80,625 | 440,000 | 473,000 | — | 515,000 | 553,625 | |||||||||||||||||||||
Toys “R” Us, Inc., 10.75%, 2017 | 215,000 | 245,100 | 865,000 | 986,100 | — | 1,080,000 | 1,231,200 | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
$ | 985,121 | $ | 4,401,299 | $ | — | $ | 5,386,420 | |||||||||||||||||||||
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|
|
|
| |||||||||||||||||||||
Specialty Stores | ||||||||||||||||||||||||||||
Giraffe Acquisition Corp., 9.125%, 2018 (n) | $ | 75,000 | $ | 78,188 | $ | 415,000 | $ | 432,638 | $ | — | $ | 490,000 | $ | 510,826 | ||||||||||||||
Michaels Stores, Inc., 11.375%, 2016 | 80,000 | 87,200 | 450,000 | 490,500 | — | 530,000 | 577,700 | |||||||||||||||||||||
Michaels Stores, Inc., 7.75%, 2018 (n) | 85,000 | 84,788 | 455,000 | 453,863 | — | 540,000 | 538,651 | |||||||||||||||||||||
Payless ShoeSource, Inc., 8.25%, 2013 | 142,000 | 144,485 | 937,000 | 953,397 | — | 1,079,000 | 1,097,882 | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
$ | 394,661 | $ | 2,330,398 | $ | — | $ | 2,725,059 | |||||||||||||||||||||
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|
| |||||||||||||||||||||
Telecommunications - Wireless | ||||||||||||||||||||||||||||
Clearwire Corp., 12%, 2015 (n) | $ | 230,000 | $ | 247,825 | $ | 1,265,000 | $ | 1,363,038 | $ | — | $ | 1,495,000 | $ | 1,610,863 | ||||||||||||||
Cricket Communications, Inc., 7.75%, 2016 | 95,000 | 98,563 | 580,000 | 601,750 | — | 675,000 | 700,313 | |||||||||||||||||||||
Crown Castle International Corp., 9%, 2015 | 75,000 | 82,688 | 750,000 | 826,875 | — | 825,000 | 909,563 | |||||||||||||||||||||
Crown Castle International Corp., 7.125%, 2019 | 190,000 | 200,925 | 525,000 | 555,187 | — | 715,000 | 756,112 | |||||||||||||||||||||
Digicel Group Ltd., 12%, 2014 (n) | — | — | 140,000 | 162,750 | — | 140,000 | 162,750 | |||||||||||||||||||||
Digicel Group Ltd., 8.25%, 2017 (n) | 135,000 | 138,375 | 760,000 | 779,000 | — | 895,000 | 917,375 | |||||||||||||||||||||
Digicel Group Ltd., 10.5%, 2018 (n) | 130,000 | 143,000 | 150,000 | 165,000 | — | 280,000 | 308,000 | |||||||||||||||||||||
MetroPCS Wireless, Inc., 7.875%, 2018 | 50,000 | 51,875 | 290,000 | 300,875 | — | 340,000 | 352,750 | |||||||||||||||||||||
Nextel Communications, 7.375%, 2015 | 110,000 | 110,138 | 585,000 | 585,731 | — | 695,000 | 695,869 | |||||||||||||||||||||
NII Holdings, Inc., 10%, 2016 | 115,000 | 127,363 | 675,000 | 747,562 | — | 790,000 | 874,925 | |||||||||||||||||||||
NII Holdings, Inc., 8.875%, 2019 | 65,000 | 70,038 | 350,000 | 377,125 | — | 415,000 | 447,163 | |||||||||||||||||||||
SBA Communications Corp., 8%, 2016 | 40,000 | 43,300 | 255,000 | 276,038 | — | 295,000 | 319,338 | |||||||||||||||||||||
SBA Communications Corp., 8.25%, 2019 | 75,000 | 81,938 | 430,000 | 469,775 | — | 505,000 | 551,713 | |||||||||||||||||||||
Sprint Capital Corp., 6.875%, 2028 | 60,000 | 52,500 | 330,000 | 288,750 | — | 390,000 | 341,250 | |||||||||||||||||||||
Sprint Nextel Corp., 8.375%, 2017 | 230,000 | 246,675 | 920,000 | 986,700 | — | 1,150,000 | 1,233,375 | |||||||||||||||||||||
Sprint Nextel Corp., 8.75%, 2032 | 140,000 | 141,400 | 680,000 | 686,800 | — | 820,000 | 828,200 | |||||||||||||||||||||
Wind Acquisition Finance S.A., 7.25%, 2018 (n) | 200,000 | 203,500 | 555,000 | 564,713 | — | 755,000 | 768,213 | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
$ | 2,040,103 | $ | 9,737,669 | $ | — | $ | 11,777,772 | |||||||||||||||||||||
|
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|
|
|
|
|
| |||||||||||||||||||||
Telephone Services | ||||||||||||||||||||||||||||
Frontier Communications Corp., 8.125%, 2018 | $ | 135,000 | $ | 148,163 | $ | 765,000 | $ | 839,587 | $ | — | $ | 900,000 | $ | 987,750 | ||||||||||||||
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| |||||||||||||||||||||
Transportation - Services | ||||||||||||||||||||||||||||
American Petroleum Tankers LLC, 10.25%, 2015 (n) | $ | 60,000 | $ | 62,100 | $ | 335,000 | $ | 346,725 | $ | — | $ | 395,000 | $ | 408,825 | ||||||||||||||
Commercial Barge Line Co., 12.5%, 2017 | 195,000 | 225,225 | 1,065,000 | 1,230,075 | — | 1,260,000 | 1,455,300 | |||||||||||||||||||||
Hertz Corp., 8.875%, 2014 | 129,000 | 131,903 | 752,000 | 768,920 | — | 881,000 | 900,823 | |||||||||||||||||||||
Hertz Corp., 7.5%, 2018 (n) | 80,000 | 83,000 | 430,000 | 446,125 | — | 510,000 | 529,125 | |||||||||||||||||||||
Hertz Corp., 7.375%, 2021 (z) | 110,000 | 111,100 | 580,000 | 585,800 | — | 690,000 | 696,900 | |||||||||||||||||||||
Navios Maritime Acquisition Corp., 8.625%, 2017 (n) | 50,000 | 51,125 | 275,000 | 281,188 | — | 325,000 | 332,313 | |||||||||||||||||||||
Navios Maritime Holdings, Inc., 8.875%, 2017 | 60,000 | 64,950 | — | — | — | 60,000 | 64,950 | |||||||||||||||||||||
Swift Services Holdings, Inc., 10%, 2018 (z) | 80,000 | 83,800 | 450,000 | 471,375 | — | 530,000 | 555,175 | |||||||||||||||||||||
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| |||||||||||||||||||||
$ | 813,203 | $ | 4,130,208 | $ | — | $ | 4,943,411 | |||||||||||||||||||||
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| |||||||||||||||||||||
Utilities - Electric Power | ||||||||||||||||||||||||||||
AES Corp., 8%, 2017 | $ | 285,000 | $ | 301,388 | $ | 1,470,000 | $ | 1,554,525 | $ | — | $ | 1,755,000 | $ | 1,855,913 | ||||||||||||||
Calpine Corp., 8%, 2016 (n) | 130,000 | 138,125 | 770,000 | 818,125 | — | 900,000 | 956,250 | |||||||||||||||||||||
Calpine Corp., 7.875%, 2020 (n) | 65,000 | 65,813 | 270,000 | 273,375 | — | 335,000 | 339,188 | |||||||||||||||||||||
Covanta Holding Corp., 7.25%, 2020 | 50,000 | 50,689 | 275,000 | 278,789 | — | 325,000 | 329,478 | |||||||||||||||||||||
Dynegy Holdings, Inc., 7.75%, 2019 | 155,000 | 103,463 | 825,000 | 550,687 | — | 980,000 | 654,150 | |||||||||||||||||||||
Edison Mission Energy, 7%, 2017 | 200,000 | 158,500 | 1,070,000 | 847,975 | — | 1,270,000 | 1,006,475 | |||||||||||||||||||||
EDP Finance B.V., 6%, 2018 (n) | — | — | 135,000 | 126,181 | — | 135,000 | 126,181 | |||||||||||||||||||||
Energy Future Holdings Corp., 10%, 2020 (n) | 145,000 | 149,172 | 805,000 | 828,162 | — | 950,000 | 977,334 | |||||||||||||||||||||
Energy Future Holdings Corp., 10%, 2020 | 225,000 | 232,036 | 1,240,000 | 1,278,779 | — | 1,465,000 | 1,510,815 | |||||||||||||||||||||
Genon Escrow Corp., 9.875%, 2020 (n) | 155,000 | 153,838 | 810,000 | 803,925 | — | 965,000 | 957,763 |
Table of Contents
Portfolio of Investments and Pro Forma Combined Portfolio of Investments (unaudited)
December 31, 2010
High Yield Variable Account | MFS High Yield Portfolio | Pro Forma | Pro Forma Combined Fund | |||||||||||||||||||||||||
Issuer | Shares/Par | Value ($) | Shares/Par | Value ($) | Adjustments | Shares/Par | Value ($) | |||||||||||||||||||||
NRG Energy, Inc., 7.375%, 2016 | 115,000 | 117,875 | 610,000 | 625,250 | — | 725,000 | 743,125 | |||||||||||||||||||||
Texas Competitive Electric Holdings LLC, 10.25%,2015 | 120,000 | 67,800 | 630,000 | 355,950 | — | 750,000 | 423,750 | |||||||||||||||||||||
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| |||||||||||||||||||||
$ | 1,538,699 | $ | 8,341,723 | $ | — | $ | 9,880,422 | |||||||||||||||||||||
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| |||||||||||||||||||||
Total Bonds (Identified Cost, $37,519,628, $205,695,455, and $243,215,083, respectively) | $ | 38,515,810 | $ | 206,317,127 | $ | — | $ | 244,832,937 | ||||||||||||||||||||
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FLOATING RATE LOANS (g)(r) (1.4%, 1.5%, and 1.5%, respectively) | ||||||||||||||||||||||||||||
Aerospace | ||||||||||||||||||||||||||||
Hawker Beechcraft Acquisition Co. LLC, Term Loan, 10.5%, 2014 | $ | 77,272 | $ | 76,740 | $ | 466,120 | $ | 462,916 | $ | — | $ | 543,392 | $ | 539,656 | ||||||||||||||
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Automotive | ||||||||||||||||||||||||||||
Ford Motor Co., Term Loan B-1, 3.02%,2013 | $ | 75,104 | $ | 74,739 | $ | 402,564 | $ | 400,604 | $ | — | $ | 477,668 | $ | 475,343 | ||||||||||||||
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| |||||||||||||||||||||
Broadcasting | ||||||||||||||||||||||||||||
Gray Television, Inc., Term Loan B, 3.78%,2014 | $ | 52,038 | $ | 50,685 | $ | 307,291 | $ | 299,301 | $ | — | $ | 359,329 | $ | 349,986 | ||||||||||||||
Local TV Finance LLC, Term Loan B, 2.31%,2013 | 11,694 | 11,090 | 68,300 | 64,771 | — | 79,994 | 75,861 | |||||||||||||||||||||
New Young Broadcasting Holding Co., Inc., Term Loan, 8%, 2015 | 55,005 | 55,074 | 358,980 | 359,429 | — | 413,985 | 414,503 | |||||||||||||||||||||
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| |||||||||||||||||||||
$ | 116,849 | $ | 723,501 | $ | — | $ | 840,350 | |||||||||||||||||||||
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Building | ||||||||||||||||||||||||||||
Goodman Global Holdings, Inc., 2nd Lien Term Loan, 9%, 2017 | $ | 6,641 | $ | 6,839 | $ | 37,044 | $ | 38,146 | $ | — | $ | 43,685 | $ | 44,985 | ||||||||||||||
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| |||||||||||||||||||||
Consumer Services | ||||||||||||||||||||||||||||
Realogy Corp., Letter of Credit, 3.3%, 2013 | $ | 7,791 | $ | 7,291 | $ | 42,123 | $ | 39,422 | $ | — | $ | 49,914 | $ | 46,713 | ||||||||||||||
Realogy Corp., Term Loan, 3.28%, 2013 | 57,192 | 53,524 | 309,232 | 289,403 | — | 366,424 | 342,927 | |||||||||||||||||||||
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| |||||||||||||||||||||
$ | 60,815 | $ | 328,825 | $ | — | $ | 389,640 | |||||||||||||||||||||
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| |||||||||||||||||||||
Financial Institutions | ||||||||||||||||||||||||||||
American General Financial Corp., Term Loan B, 7.25%, 2015 | $ | 21,917 | $ | 22,205 | $ | 123,382 | $ | 125,001 | $ | — | $ | 145,299 | $ | 147,206 | ||||||||||||||
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| |||||||||||||||||||||
Gaming & Lodging | ||||||||||||||||||||||||||||
Green Valley Ranch Gaming LLC, Second Lien Term Loan, 3.5%, 2014 (d) | $ | 248,868 | $ | 4,355 | $ | 1,601,789 | $ | 28,031 | $ | — | $ | 1,850,657 | $ | 32,386 | ||||||||||||||
MGM Mirage, Term Loan, 7%, 2014 (o) | 163,529 | 154,413 | 879,986 | 830,927 | — | 1,043,515 | 985,340 | |||||||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||||
$ | 158,768 | $ | 858,958 | $ | — | $ | 1,017,726 | |||||||||||||||||||||
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| |||||||||||||||||||||
Utilities - Electric Power | ||||||||||||||||||||||||||||
Texas Competitive Electric Holdings Co. LLC, Term Loan B-2, 3.76%, 2014 | $ | 98,785 | $ | 76,200 | $ | 522,044 | $ | 402,686 | $ | — | $ | 620,829 | $ | 478,886 | ||||||||||||||
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|
|
|
|
| |||||||||||||||||||||
Total Floating Rate Loans (Identified Cost, $722,990, $4,246,236, and $4,969,226, respectively) | $ | 593,155 | $ | 3,340,637 | $ | — | $ | 3,933,792 | ||||||||||||||||||||
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| |||||||||||||||||||||
COMMON STOCKS (0.5%, 0.6%, and 0.6%, respectively) | ||||||||||||||||||||||||||||
Automotive | ||||||||||||||||||||||||||||
Accuride Corp. (a) | 2,953 | $ | 46,894 | 16,071 | $ | 255,207 | $ | — | 19,024 | $ | 302,101 | |||||||||||||||||
Oxford Automotive, Inc. (a) | 53 | 0 | 21 | 0 | — | 74 | 0 | |||||||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||||
$ | 46,894 | $ | 255,207 | $ | — | $ | 302,101 | |||||||||||||||||||||
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| |||||||||||||||||||||
Broadcasting | ||||||||||||||||||||||||||||
New Young Broadcasting Holding Co., Inc. (a) | 25 | $ | 59,375 | 161 | $ | 382,375 | $ | — | 186 | $ | 441,750 | |||||||||||||||||
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Construction | ||||||||||||||||||||||||||||
Nortek, Inc. (a) | 764 | $ | 27,504 | 4,027 | $ | 144,972 | $ | — | 4,791 | $ | 172,476 | |||||||||||||||||
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Gaming & Lodging | ||||||||||||||||||||||||||||
Ameristar Casinos, Inc | 1,600 | $ | 25,008 | 9,100 | $ | 142,233 | $ | — | 10,700 | $ | 167,241 | |||||||||||||||||
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Table of Contents
Portfolio of Investments and Pro Forma Combined Portfolio of Investments (unaudited)
December 31, 2010
High Yield Variable Account | MFS High Yield Portfolio | Pro Forma | Pro Forma Combined Fund | |||||||||||||||||||||||||||||||||
Issuer | Shares/Par | Value ($) | Shares/Par | Value ($) | Adjustments | Shares/Par | Value ($) | |||||||||||||||||||||||||||||
Printing & Publishing | ||||||||||||||||||||||||||||||||||||
American Media Operations, Inc. (a) | 3,713 | $ | 52,985 | 22,002 | $ | 313,969 | $ | — | 25,715 | $ | 366,954 | |||||||||||||||||||||||||
Golden Books Family Entertainment, Inc. (a) | 21,250 | 0 | 17,708 | 0 | — | 38,958 | 0 | |||||||||||||||||||||||||||||
Quad/Graphics, Inc. (a) | 156 | 6,437 | 1,190 | 49,099 | — | 1,346 | 55,536 | |||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||
$ | 59,422 | $ | 363,068 | $ | — | $ | 422,490 | |||||||||||||||||||||||||||||
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Special Products & Services | ||||||||||||||||||||||||||||||||||||
Mark IV Industries LLC, Common Units, “A” (a) | 113 | $ | 5,664 | 663 | $ | 33,233 | $ | — | 776 | $ | 38,897 | |||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||
Total Common Stocks (Identified Cost, $335,835, $2,247,700, and $2,583,535, respectively) | $ | 223,867 | $ | 1,321,088 | $ | — | $ | 1,544,955 | ||||||||||||||||||||||||||||
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CONVERTIBLE PREFERRED STOCKS (0.3%, 0.3%, and 0.3%, respectively) | ||||||||||||||||||||||||||||||||||||
Automotive | ||||||||||||||||||||||||||||||||||||
General Motors Co., 4.75% (Identified Cost, $111,000, $602,500, and $713,500, respectively) | 2,220 | $ | 120,124 | 12,050 | $ | 652,026 | $ | — | 14,270 | $ | 772,150 | |||||||||||||||||||||||||
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PREFERRED STOCKS (0.1%, 0.1%, and 0.1%, respectively) | ||||||||||||||||||||||||||||||||||||
Other Banks & Diversified Financials | ||||||||||||||||||||||||||||||||||||
Citigroup Capital XIII, 7.875% (Identified Cost, $23,750, $126,875, and $150,625, respectively) | 950 | $ | 25,565 | 5,075 | $ | 136,568 | $ | — | 6,025 | $ | 162,133 | |||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||
Strike Price | First Exercise | |||||||||||||||||||||||||||||||||||
WARRANTS (0.4%, 0.4%, and 0.5%, respectively) | ||||||||||||||||||||||||||||||||||||
Broadcasting | ||||||||||||||||||||||||||||||||||||
New Young Broadcasting Holding Co., Inc. (1 share for 1 warrant) (Identified Cost, $131,145, $827,810, and $958,955, respectively) (a) | $ | 0.10 | 7/14/10 | 67 | $ | 159,125 | 437 | $ | 1,037,875 | $ | — | 504 | $ | 1,197,000 | ||||||||||||||||||||||
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|
| |||||||||||||||||||||||||||||
Number of Contracts | Number of Contracts | |||||||||||||||||||||||||||||||||||
Issuer/Expiration Date/Strike Price | ||||||||||||||||||||||||||||||||||||
CALL OPTIONS PURCHASED (0.2%, 0.1%, and 0.2%, respectively) | ||||||||||||||||||||||||||||||||||||
S&P 500 Index - March 2011 @ $1,225 (Premiums Paid, $46,836, 241,986, and $288,822, respectively) | 12 | $ | 69,600 | 62 | $ | 359,600 | $ | — | 74 | $ | 429,200 | |||||||||||||||||||||||||
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|
|
| |||||||||||||||||||||||||||||
Shares/Par | Shares/Par | |||||||||||||||||||||||||||||||||||
MONEY MARKET FUNDS (v) (1.1%, 2.1%, and 2.0%, respectively) | ||||||||||||||||||||||||||||||||||||
MFS Institutional Money Market Portfolio, 0.18%, at Cost and Net Asset Value | 459,698 | $ | 459,698 | 4,748,268 | $ | 4,748,268 | $ | — | 5,207,966 | $ | 5,207,966 | |||||||||||||||||||||||||
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|
|
|
|
|
| |||||||||||||||||||||||||||||
Total Investments (Identified Cost, $39,350,882, $218,736,830, and $258,087,712, respectively) | $ | 40,166,944 | $ | 217,913,189 | $ | — | $ | 258,080,133 | ||||||||||||||||||||||||||||
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|
| |||||||||||||||||||||||||||||
OTHER ASSETS, LESS LIABILITIES (1.8%, 2.7%, and 2.5%, respectively) | $ | 726,503 | $ | 5,941,241 | $ | 4,193 | (b) | $ | 6,671,937 | |||||||||||||||||||||||||||
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|
|
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|
| |||||||||||||||||||||||||||||
NET ASSETS - 100.0% | $ | 40,893,447 | $ | 223,854,430 | $ | 4,193 | $ | 264,752,070 | ||||||||||||||||||||||||||||
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Table of Contents
(a) | Non-income producing security. |
(b) | Adjustment is the result of elimination of certain insurance related payables to the sponsor following MFS High Yield Portfolio’s acquisition of High Yield Variable Account. See footnote (a) of The Pro Forma Fund’s Statement of Assets and Liabilities for further details. |
(d) | Non-income producing security - in default. |
(g) | The rate shown represents a weighted average coupon rate on settled positions at period end, unless otherwise indicated. |
(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 $58,068,623 representing 21.2% of pro forma fund combined net assets. |
(o) | All or a portion of this position has not settled. Upon settlement date, interest rates for unsettled amounts will be determined. The rate shown represents the weighted average coupon rate for settled amounts. |
(p) | Payment-in-kind security. |
(r) | Remaining maturities of floating rate loans may be less than stated maturities shown as a result of contractual or optional prepayments by the borrower. Such prepayments cannot be predicted with certainty. These loans may be subject to restrictions on resale. Floating rate loans generally have rates of interest which are determined periodically by reference to a base lending rate plus a premium. |
(v) | Underlying affiliated fund that is available only to investment companies managed by MFS. The rate quoted is the annualized seven-day yield of the fund at period end. |
(z) | Restricted securities are not registered under the Securities Act of 1933 and are subject to legal restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are subsequently registered. Disposal of these securities may involve time-consuming negotiations and prompt sale at an acceptable price may be difficult. The pro forma combined fund holds the following restricted securities: |
Restricted Securities | Acquisition Date | Cost | Value | |||||||
AMC Entertainment, Inc., 9.75%, 2020 | 12/1/2010 | $ | 390,000 | $ | 405,600 | |||||
Airlie LCDO Ltd., CDO, FRN, 2.2%, 2011 | 10/13/06 | 701,221 | 315,599 | |||||||
American Media, Inc., 13.5%, 2018 | 12/22/2010 | 101,949 | 101,952 | |||||||
Anthracite Ltd., CDO, 6%, 2037 | 5/14/02 | 908,320 | 390,000 | |||||||
Arbor Realty Mortgage Securities, CDO, FRN, 2.589%, 2038 | 12/20/05 | 577,317 | 75,051 | |||||||
ARCap REIT, Inc., CDO, “H”, 6.078%, 2045 | 9/21/2004 | 145,354 | 9,520 | |||||||
Bonten Media Acquisition Co., 9%, 2015 | 5/22/07 - 11/15/10 | 216,153 | 112,566 | |||||||
Bresnan Broadband Holdings LLC, 8%, 2018 | 12/1/2010 | 195,000 | 200,850 | |||||||
CWCapital Cobalt Ltd., CDO, 6.23%, 2045 | 3/20/06 | 964,912 | 21,501 | |||||||
CWCapital Cobalt Ltd., CDO, “F”, FRN, 1.588%, 2050 | 4/12/06 | 508,349 | 10,167 | |||||||
Citadel Broadcasting Corp., 7.75%, 2018 | 12/6/2010 | 125,000 | 129,375 | |||||||
Energy XXI Gulf Coast, Inc., 9.25%, 2017 | 12/3/2010 | 835,000 | 868,400 | |||||||
Hertz Corp., 7.375%, 2021 | 12/6/2010 | 690,000 | 696,900 | |||||||
LBI Media, Inc., 8.5%, 2017 | 7/18/2007 | 730,869 | 601,250 | |||||||
Local TV Finance LLC, 9.25%, 2015 | 11/09/07 - 11/30/10 | 911,538 | 843,704 | |||||||
NAI Entertainment Holdings LLC, 8.25%, 2017 | 12/02/10 - 12/20/10 | 340,898 | 346,500 | |||||||
Nationstar Mortgage LLC, 10.875%, 2015 | 3/23/10 - 12/08/10 | 473,046 | 476,513 | |||||||
Nortek, Inc., 10%, 2018 | 11/18/2010 | 225,000 | 232,313 | |||||||
Novelis, Inc., 8.375%, 2017 | 12/10/2010 | 403,061 | 414,000 | |||||||
Novelis, Inc., 8.75%, 2020 | 12/10/2010 | 195,000 | 202,313 | |||||||
Polypore International, Inc., 7.5%, 2017 | 11/10/2010 | 130,000 | 132,600 | |||||||
SIRIUS XM Radio, Inc., 13%, 2013 | 12/15/2010 | 243,318 | 243,950 | |||||||
Sappi Papier Holding GmbH, 6.75%, 2012 | 7/29/10 - 8/02/10 | 377,071 | 384,546 | |||||||
Scotts Miracle-Gro Co., 6.625%, 2020 | 12/13/2010 | 130,000 | 130,000 | |||||||
Swift Services Holdings, Inc., 10%, 2018 | 12/15/2010 | 530,000 | 555,175 | |||||||
Syniverse Holdings, Inc., 9.125%, 2019 | 12/16/2010 | 520,220 | 526,575 | |||||||
Trinidad Drilling Ltd., 7.875%, 2019 | 12/9/2010 | 392,033 | 398,950 | |||||||
USI Holdings Corp., 9.75%, 2015 | 4/26/07 - 11/28/07 | 1,153,661 | 1,161,500 | |||||||
Wachovia Credit, CDO, FRN, 1.652%, 2026 | 6/8/2006 | 626,000 | 219,100 | |||||||
|
| |||||||||
Total Restricted Securities | $ | 10,206,470 | ||||||||
|
| |||||||||
% of Pro Forma Fund Combined Net Assets | 3.9 | % | ||||||||
|
|
The following abbreviations are used in this report and are defined:
CLO | Collateralized Loan Obligation |
FRN | Floating Rate Note. Interest rate resets periodically and may not be the rate reported at period end. |
PLC | Public Limited Company |
REIT | Real Estate Investment Trust |
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:
EUR Euro
As of the date of the Pro Forma Combined Portfolio of Investments, the securities held by the acquired fund are consistent with the investment objectives, strategies and policies of the acquiring fund. However, it is anticipated certain portfolio securities received from the acquired fund in the reorganization will subsequently be sold by the acquiring fund. Any such transactions are not reflected in these pro forma financial statements.
Table of Contents
Derivative Contracts at 12/31/10
High Yield Variable Account
Forward Foreign Currency Exchange Contracts at 12/31/10
Type | Currency | Counterparty | Contracts to Deliver/Receive | Settlement Date Range | In Exchange For | Contracts at Value | Net Unrealized Appreciation (Depreciation) | |||||||||||||||||||
Liability Derivatives | ||||||||||||||||||||||||||
SELL | EUR | UBS AG | 179,478 | 3/15/2011 | $ | 237,040 | $ | 239,781 | $ | (2,741 | ) |
MFS High Yield Portfolio
Forward Foreign Currency Exchange Contracts at 12/31/10
Type | Currency | Counterparty | Contracts to Deliver/Receive | Settlement Date Range | In Exchange For | Contracts at Value | Net Unrealized Appreciation (Depreciation) | |||||||||||||||||||
Liability Derivatives | ||||||||||||||||||||||||||
SELL | EUR | UBS AG | 925,379 | 3/15/2011 | $ | 1,222,169 | $ | 1,236,294 | $ | (14,125 | ) |
Pro Forma Combined Fund
Forward Foreign Currency Exchange Contracts at 12/31/10
Type | Currency | Counterparty | Contracts to Deliver/Receive | Settlement Date Range | In Exchange For | Contracts at Value | Net Unrealized Appreciation (Depreciation) | |||||||||||||||||||
Liability Derivatives | ||||||||||||||||||||||||||
SELL | EUR | UBS AG | 1,104,857 | 3/15/2011 | $ | 1,459,209 | $ | 1,476,075 | (16,866 | ) |
High Yield Variable Account
Futures Contracts Outstanding at 12/31/10
Description | Currency | Contracts | Value | Expiration | Unrealized Appreciation (Depreciation) | |||||||||||||
Asset Derivatives | ||||||||||||||||||
Interest Rate Futures | ||||||||||||||||||
U.S. Treasury Note 10 yr (Short) | USD | 3 | $ | 361,313 | March -2011 | $ | 11,966 |
MFS High Yield Portfolio
Futures Contracts Outstanding at 12/31/10
Description | Currency | Contracts | Value | Expiration | Unrealized Appreciation (Depreciation) | |||||||||||||
Asset Derivatives | ||||||||||||||||||
Interest Rate Futures | ||||||||||||||||||
U.S. Treasury Note 10 yr (Short) | USD | 14 | $ | 1,686,125 | March -2011 | $ | 55,842 |
Pro Forma Combined Fund
Futures Contracts Outstanding at 12/31/10
Description | Currency | Contracts | Value | Expiration | Unrealized Appreciation (Depreciation) | |||||||||||||
Asset Derivatives | ||||||||||||||||||
Interest Rate Futures | ||||||||||||||||||
U.S. Treasury Note 10 yr (Short) | USD | 17 | $ | 2,047,438 | March -2011 | $ | 67,808 |
At December 31, 2010, the pro forma combined fund had sufficient cash and/or other liquid securities to cover any commitments under these derivative contracts.
See Notes to Financial Statements
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Pro Forma Combined Statement of Assets and Liabilities (unaudited)
December 31, 2010
High Yield Variable Account | MFS High Yield Portfolio | Pro Forma Adjustments | Pro Forma Combined Fund | |||||||||||||
Assets: | ||||||||||||||||
Investments- | ||||||||||||||||
Non-affiliated issuers, at value (identified cost, $38,891,184, $213,988,562, and $252,879,746 respectively) | $ | 39,707,246 | $ | 213,164,921 | $ | — | $ | 252,872,167 | ||||||||
Underlying affiliated funds, at cost and value | 459,698 | 4,748,268 | — | 5,207,966 | ||||||||||||
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Total Investments, at value (identified cost, $39,350,882, $218,736,830 and $258,087,712, respectively) | $ | 40,166,944 | $ | 217,913,189 | $ | — | $ | 258,080,133 | ||||||||
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Cash | $ | 31,291 | $ | 172,943 | $ | 204,234 | ||||||||||
Restricted Cash | 4,800 | 22,400 | — | 27,200 | ||||||||||||
Receivables for | ||||||||||||||||
Investments sold | 80,291 | 468,937 | — | 549,228 | ||||||||||||
Units/Fund shares sold | — | 1,998,527 | — | 1,998,527 | ||||||||||||
Interest and dividends | 715,081 | 3,817,815 | — | 4,532,896 | ||||||||||||
Receivable from investment adviser | 8,681 | — | — | 8,681 | ||||||||||||
Other assets | 1,645 | 6,945 | — | 8,590 | ||||||||||||
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Total assets | $ | 41,008,733 | $ | 224,400,756 | $ | — | $ | 265,409,489 | ||||||||
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Liabilities: | ||||||||||||||||
Payables for | ||||||||||||||||
Forward foreign currency exchange contracts | $ | 2,741 | $ | 14,125 | — | 16,866 | ||||||||||
Daily variation margin on open futures contracts | 1,359 | 6,344 | — | 7,703 | ||||||||||||
Investments purchased | 53,969 | 289,568 | — | 343,537 | ||||||||||||
Units surrendered/Fund shares reacquired | 6,111 | 138,770 | — | 144,881 | ||||||||||||
Payable to affiliates | ||||||||||||||||
Investment adviser | 1,567 | 8,541 | — | 10,108 | ||||||||||||
Distribution and/or service fees | — | 1,385 | — | 1,385 | ||||||||||||
Administrative services fee | 94 | 438 | — | 532 | ||||||||||||
Payable for managers/trustees’ compensation | 40 | 249 | — | 289 | ||||||||||||
Payable to sponsor | 4,193 | — | (4,193 | ) (a) | — | |||||||||||
Accrued expenses and other liabilities | 45,212 | 86,906 | — | 132,118 | ||||||||||||
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Total liabilities | $ | 115,286 | $ | 546,326 | $ | (4,193 | ) | $ | 657,419 | |||||||
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Net assets | $ | 40,893,447 | $ | 223,854,430 | $ | 4,193 | $ | 264,752,070 | ||||||||
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Net assets consist of: | ||||||||||||||||
Paid-in capital | $ | — | $ | 255,655,339 | $ | 40,072,340 | $ | 295,727,679 | ||||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | — | (781,859 | ) | 825,300 | 43,441 | |||||||||||
Accumulated net realized gain (loss) on investments and foreign currency transactions | — | (47,948,715 | ) | — | (47,948,715 | ) | ||||||||||
Undistributed net investment income | — | 16,929,665 | — | 16,929,665 | ||||||||||||
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Net assets | $ | — | $ | 223,854,430 | $ | 40,897,640 | (b) | $ | 264,752,070 | |||||||
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Units/Shares of beneficial interest outstanding | 1,096,227 | 37,689,342 | 6,862,020 | 44,551,362 | ||||||||||||
Net assets: | ||||||||||||||||
Contract Level 2/Initial Class | $ | 32,524,937 | (c) | $ | 122,665,835 | 40,897,640 | $ | 163,563,475 | ||||||||
Contract Level 3/Service Class | 217,938 | (c) | 101,188,595 | — | 101,188,595 | |||||||||||
Contract Level 3-2 | 8,150,572 | (c) | — | — | — | |||||||||||
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Total | $ | 40,893,447 | $ | 223,854,430 | $ | 40,897,640 | $ | 264,752,070 | ||||||||
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Accumulation Units/Shares outstanding: | ||||||||||||||||
Contract Level 2/Initial Class | 662,038 | 20,565,184 | 6,862,020 | (e) | 27,427,204 | |||||||||||
Contract Level 3/Service Class | 6,206 | 17,124,158 | — | 17,124,158 | ||||||||||||
Contract Level 3-2 | 427,983 | — | — | — | ||||||||||||
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Total | 1,096,227 | 37,689,342 | 6,862,020 | 44,551,362 | ||||||||||||
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Accumulation Unit Value/Net Asset Value: | ||||||||||||||||
Contract Level 2/Initial Class | $ | 48.077 | (d) | $ | 5.96 | $ | — | $ | 5.96 | |||||||
Contract Level 3/Service Class | 35.117 | (d) | 5.91 | — | 5.91 | |||||||||||
Contract Level 3-2 | 18.963 | (d) | — | — | — |
(a) | Insurance related payable to sponsor to be eliminated for High Yield Variable Account by the sponsor following MFS High Yield Portfolio’s acquisition of High Yield Variable Account. |
(b) | Net Assets of the High Yield Variable Account acquired by MFS High Yield Portfolio. |
(c) | Contract Level net assets also include the net assets associated with the contract level reserve. |
(d) | Accumulation Unit Value does not reflect net assets associated with the reserve of each contract level. |
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(e) | If the reorganization had taken place on December 31, 2010, the High Yield Variable Account would have received 6,862,020 Initial Class Shares of the MFS High Yield Portfolio. No assurances can be given as to the number of Reorganization Shares the High Yield Variable Account will receive on the Exchange Date. The foregoing is merely an example of what the High Yield Variable Account would have received and distributed had the reorganization been consummated on December 31, 2010, and should not be relied upon to reflect the amount that will be actually received on or after the Exchange Date. |
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Pro Forma Combined Statement of Operations (unaudited)
For the year ended December 31, 2010
High Yield Variable Account | MFS High Yield Portfolio | Pro Forma Adjustments | Pro Forma Combined Fund | |||||||||||||
Net investment income: | ||||||||||||||||
Income | ||||||||||||||||
Interest | $ | 3,444,320 | $ | 18,192,059 | $ | — | $ | 21,636,379 | ||||||||
Dividends | 8,069 | 47,056 | — | 55,125 | ||||||||||||
Dividends from underlying affiliated funds | 2,045 | 9,116 | — | 11,161 | ||||||||||||
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Total investment income | $ | 3,454,434 | $ | 18,248,231 | $ | — | 21,702,665 | |||||||||
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Expenses | ||||||||||||||||
Management fee | $ | 304,333 | $ | 1,658,576 | $ | — | $ | 1,962,909 | ||||||||
Mortality and expense risk charges | 510,966 | — | (510,966 | ) (a) | — | |||||||||||
Distribution expense risk charge | 341 | — | (341 | ) (a) | — | |||||||||||
Distribution and/or service fees | — | 254,995 | — | 254,995 | ||||||||||||
Administrative services fee | 17,086 | 79,246 | 1,879 | (b) | 98,211 | |||||||||||
Managers/Trustees’ compensation | 5,447 | 30,407 | — | 35,854 | ||||||||||||
Custodian fee | 25,348 | 48,671 | (12,674 | ) (c) | 61,345 | |||||||||||
Printing/Shareholder communications | 10,362 | 26,793 | (2,072 | ) (c) | 35,083 | |||||||||||
Auditing fees | 55,596 | 65,372 | (55,596 | ) (c) | 65,372 | |||||||||||
Legal fees | 8,022 | 6,429 | (7,220 | ) (c) | 7,231 | |||||||||||
Miscellaneous | 8,249 | 25,089 | (7,425 | ) (c) | 25,913 | |||||||||||
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Total expenses | $ | 945,750 | $ | 2,195,578 | $ | (594,415 | ) | $ | 2,546,913 | |||||||
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Fees paid indirectly | (72 | ) | (322 | ) | — | (394 | ) | |||||||||
Reduction of expenses by investment adviser | (68,650 | ) | (110,572 | ) | 48,361 | (d) | (130,861 | ) | ||||||||
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Net expenses | $ | 877,028 | $ | 2,084,684 | $ | (546,054 | ) | $ | 2,415,658 | |||||||
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Net investment income | $ | 2,577,406 | $ | 16,163,547 | $ | 546,054 | $ | 19,287,007 | ||||||||
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Realized and unrealized gain (loss) on investments and foreign currency transactions | ||||||||||||||||
Realized gain (loss) (identified cost basis) | ||||||||||||||||
Investment transactions | $ | 1,215,259 | $ | 3,373,303 | $ | — | $ | 4,588,562 | ||||||||
Futures contracts | 15,154 | 100,003 | — | 115,157 | ||||||||||||
Foreign currency transactions | 32,370 | 185,593 | — | 217,963 | ||||||||||||
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Net realized gain (loss) on investments and foreign currency transactions | $ | 1,262,783 | $ | 3,658,899 | $ | — | $ | 4,921,682 | ||||||||
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Change in unrealized appreciation (depreciation) | ||||||||||||||||
Investments | $ | 1,264,758 | $ | 11,527,375 | $ | — | $ | 12,792,133 | ||||||||
Futures contracts | 11,966 | 55,842 | — | 67,808 | ||||||||||||
Translation of assets and liabilities in foreign currencies | (9,531 | ) | (55,935 | ) | — | (65,466 | ) | |||||||||
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Net unrealized gain (loss) on investments and foreign currency translation | $ | 1,267,193 | $ | 11,527,282 | $ | — | $ | 12,794,475 | ||||||||
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Net realized and unrealized gain (loss) on investments and foreign currency | $ | 2,529,976 | $ | 15,186,181 | $ | — | $ | 17,716,157 | ||||||||
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Change in net assets from operations | $ | 5,107,382 | $ | 31,349,728 | $ | 546,054 | $ | 37,003,164 | ||||||||
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(a) | Insurance related mortality and expense risk charge and distribution expense risk charge to be borne directly by contract owners following MFS High Yield Portfolio’s acquisition of High Yield Variable Account. |
(b) | Expenditures are adjusted as a result of the current administrative services fee rates in effect for the pro forma combined fund. |
(c) | Expenditures are reduced as a result of several factors such as the elimination of duplicative functions and changes to the allocation of expenses. |
(d) | Expense reductions, which include expense cap reimbursement and management fee waivers, have been adjusted to reflect annualized contractual expense caps of the pro forma combined fund. |
Table of Contents
MFS High Yield Portfolio and
High Yield Variable Account
Notes to Pro Forma Combined Financial Statements
December 31, 2010
(Unaudited)
(1) Description of the Fund
MFS High Yield Portfolio (Acquiring Fund), a series of MFS Variable Insurance Trust II (the trust), is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. 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 Acquiring Fund consists of 2 classes of shares: Initial Class and Service Class. The Acquiring 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.
(2) Basis for the Combination
The accompanying pro forma financial statements are presented to show the effect of the proposed reorganization of High Yield Variable Account (Target Fund) into the Acquiring Fund, (Acquiring Fund and Target Fund are referred to herein as the fund), as if such reorganization had taken place as of December 31, 2010, the annual period of the Acquiring Fund. The following notes refer to the accompanying pro forma financial statements as if the reorganization of the Target Fund with and into the Acquiring Fund had taken place as of December 31, 2010, at the respective net asset value on that date. The Acquiring Fund will be the accounting survivor, based upon an analysis of factors including surviving fund portfolio manager, investment objectives and policies, expense ratio structures and portfolio composition and size.
The accompanying pro forma financial statements should be read in conjunction with the financial statements of the Acquiring Fund and Target Fund included in their respective annual reports dated December 31, 2010.
(3) Accounting Estimates
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 revenues and expenses during the reporting period. Actual results could differ from those estimates.
Table of Contents
(4) Portfolio Valuation
Debt instruments and floating rate loans (other than short-term instruments), 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 generally are valued at amortized cost, which approximates market value. Exchange-traded options are generally valued at the last sale or official closing price as provided by a third-party pricing service on the exchange on which such options are primarily traded. Exchange-traded options for which there were no sales reported that day are generally valued at the last daily bid quotation as provided by a third-party pricing service on the exchange on which such options are primarily traded. 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 as provided by a third-party pricing service on the market on which they are primarily traded. Futures contracts for which there were no trades that day for a particular position are generally valued at the closing bid quotation as provided by a third-party pricing service on the market on which such futures contracts are primarily traded. Forward foreign currency 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.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of each 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 each 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 each 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. 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
Table of Contents
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 each 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 each fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that each fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which each fund determines its net asset value per share.
Various inputs are used in determining the value of each 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. Each 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 not reflected in total investments, such as forwards. The following is a summary of the levels used as of December 31, 2010 in valuing each fund’s assets or liabilities:
High Yield Variable Account
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities | $ | 321,132 | $ | 277,149 | $ | 0 | $ | 598,281 | ||||||||
Non-U.S. Sovereign Debt | — | 36,157 | — | 36,157 | ||||||||||||
Corporate Bonds | — | 33,124,092 | 14,721 | 33,138,813 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 403,755 | — | 403,755 | ||||||||||||
Asset-Backed Securities (including CDOs) | — | 104,992 | — | 104,992 | ||||||||||||
Foreign Bonds | — | 4,832,093 | — | 4,832,093 | ||||||||||||
Floating Rate Loans | — | 593,155 | — | 593,155 | ||||||||||||
Mutual Funds | 459,698 | — | — | 459,698 | ||||||||||||
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Total Investments | $ | 780,830 | $ | 39,371,393 | $ | 14,721 | $ | 40,166,944 | ||||||||
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Other Financial Instruments | ||||||||||||||||
Futures | $ | 11,966 | $ | — | $ | — | $ | 11,966 | ||||||||
Forward Currency Contracts | — | (2,741 | ) | — | (2,741 | ) |
Table of Contents
MFS High Yield Portfolio
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities | $ | 1,739,706 | $ | 1,767,451 | $ | 0 | $ | 3,507,157 | ||||||||
Non-U.S. Sovereign Debt | — | 228,020 | — | 228,020 | ||||||||||||
Corporate Bonds | — | 177,740,810 | 87,231 | 177,828,041 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 2,383,546 | — | 2,383,546 | ||||||||||||
Asset-Backed Securities (including CDOs) | — | 1,149,244 | 315,599 | 1,464,843 | ||||||||||||
Foreign Bonds | — | 24,412,677 | — | 24,412,677 | ||||||||||||
Floating Rate Loans | — | 3,340,637 | — | 3,340,637 | ||||||||||||
Mutual Funds | 4,748,268 | — | — | 4,748,268 | ||||||||||||
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Total Investments | $ | 6,487,974 | $ | 211,022,385 | $ | 402,830 | $ | 217,913,189 | ||||||||
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Other Financial Instruments | ||||||||||||||||
Futures | $ | 55,842 | $ | — | $ | — | $ | 55,842 | ||||||||
Forward Currency Contracts | — | (14,125 | ) | — | (14,125 | ) |
Pro Forma Combined Fund
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities | $ | 2,060,838 | $ | 2,044,600 | $ | 0 | $ | 4,105,438 | ||||||||
Non-U.S. Sovereign Debt | — | 264,177 | — | 264,177 | ||||||||||||
Corporate Bonds | — | 210,864,902 | 101,952 | 210,966,854 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 2,787,301 | — | 2,787,301 | ||||||||||||
Asset-Backed Securities (including CDOs) | — | 1,254,236 | 315,599 | 1,569,835 | ||||||||||||
Foreign Bonds | — | 29,244,770 | — | 29,244,770 | ||||||||||||
Floating Rate Loans | — | 3,933,792 | — | 3,933,792 | ||||||||||||
Mutual Funds | 5,207,966 | — | — | 5,207,966 | ||||||||||||
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Total Investments | $ | 7,268,804 | $ | 250,393,778 | $ | 417,551 | $ | 258,080,133 | ||||||||
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Other Financial Instruments | ||||||||||||||||
Futures | $ | 67,808 | $ | — | $ | — | $ | 67,808 | ||||||||
Forward Currency Contracts | — | (16,866 | ) | — | (16,866 | ) |
For further information regarding security characteristics, see the Portfolios of Investments.
Table of Contents
The following is a reconciliation of level 3 assets for which significant unobservable inputs were used to determine fair value. The table presents the activity of level 3 securities held at the beginning and the end of the period.
High Yield Variable Account
Equity Securities | Corporate Bonds | Total | ||||||||||
Balance as of 12/31/09 | $ | 6,948 | $ | — | $ | 6,948 | ||||||
Accrued discounts/premiums | — | — | — | |||||||||
Realized gain (loss) | (5,181 | ) | — | (5,181 | ) | |||||||
Change in unrealized appreciation (depreciation) | (1,767 | ) | — | (1,767 | ) | |||||||
Purchases | — | — | — | |||||||||
Sales | — | — | — | |||||||||
Transfers into Level 3 | — | 14,721 | 14,721 | |||||||||
Transfers out of Level 3 | — | — | — | |||||||||
Balance as of 12/31/10 | $ | 0 | $ | 14,721 | $ | 14,721 |
MFS High Yield Portfolio
Equity Securities | Corporate Bonds | Asset-Backed Securities (including CDO’s) | Total | |||||||||||||
Balance as of 12/31/09 | $ | 41,163 | $ | — | $ | 343,598 | $ | 384,761 | ||||||||
Accrued discounts/premiums | — | — | — | — | ||||||||||||
Realized gain (loss) | (30,692 | ) | — | — | (30,692 | ) | ||||||||||
Change in unrealized appreciation (depreciation) | (10,471 | ) | — | (27,999 | ) | (38,470 | ) | |||||||||
Purchases | — | — | — | — | ||||||||||||
Sales | — | — | — | — | ||||||||||||
Transfers into Level 3 | — | 87,231 | — | 87,231 | ||||||||||||
Transfers out of Level 3 | — | — | — | — | ||||||||||||
Balance as of 12/31/10 | $ | 0 | $ | 87,231 | $ | 315,599 | $ | 402,830 |
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Pro Forma Combined Fund
Equity Securities | Corporate Bonds | Asset-Backed Securities (including CDO’s) | Total | |||||||||||||
Balance as of 12/31/09 | $ | 48,111 | $ | — | $ | 343,598 | $ | 391,709 | ||||||||
Accrued discounts/premiums | — | — | — | — | ||||||||||||
Realized gain (loss) | (35,873 | ) | — | — | (35,873 | ) | ||||||||||
Change in unrealized appreciation (depreciation) | (12,238 | ) | — | (27,999 | ) | (40,237 | ) | |||||||||
Purchases | — | — | — | — | ||||||||||||
Sales | — | — | — | — | ||||||||||||
Transfers into Level 3 | — | 101,952 | — | 101,952 | ||||||||||||
Transfers out of Level 3 | — | — | — | — | ||||||||||||
Balance as of 12/31/10 | $ | 0 | $ | 101,952 | $ | 315,599 | $ | 417,551 |
The net change in unrealized appreciation (depreciation) from pro forma combined fund investments still held as level 3 at December 31, 2010 is $(27,999).
(5) Reorganization Costs
MFS has agreed to bear all costs associated with the proposed reorganization as well as the following proposed reorganizations:
Target Fund | Acquiring Fund | |
Capital Appreciaion Variable Account | MFS Massachusetts Investors Growth Stock Portfolio | |
Global Governments Variable Account | MFS Global Governments Portfolio | |
Government Securities Variable Account | MFS Government Securities Portfolio | |
Money Market Variable Account | MFS Money Market Portfolio | |
Total Return Variable Account | MFS Total Return Portfolio |
These aggregate costs for all proposed reorganizations are estimated at $205,000.
(6) Capital Shares
The pro forma combined shares of beneficial interest outstanding represent those shares that would have been outstanding on December 31, 2010, had the acquisition taken place on December 31, 2010. In exchange for the net assets of the Target Fund the initial class of shares of the Acquiring Fund would have been issued based upon the per share net asset value as follows:
Table of Contents
Initial Class | ||||
Net assets – Target Fund | $ | 40,897,640 | ||
Shares – Acquiring Fund | 6,862,020 | |||
Net asset value – Acquiring Fund | $ | 5.96 |
(7) Transactions in Underlying Affiliated Funds-Affiliated Issuers
An affiliated issuer may be considered one in which the each owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, each fund assumes the following to be affiliated issuers:
For the year ended December 31, 2010:
High Yield Variable Account Underlying Affiliated Funds | Beginning Shares / Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares / Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 996,965 | 17,139,907 | (17,677,174 | ) | 459,698 | |||||||||||
Underlying Affiliated Funds | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $ | — | $ | — | $ | 2,045 | $ | 459,698 | ||||||||
MFS High Yield Portfolio Underlying Affiliated Funds | Beginning Shares / Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares / Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 3,286,982 | 89,605,358 | (88,144,072 | ) | 4,748,268 | |||||||||||
Underlying Affiliated Funds | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $ | — | $ | — | $ | 9,116 | $ | 4,748,268 |
Table of Contents
Pro Forma Combined Fund Underlying Affiliated Funds | Beginning Shares / Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares / Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 4,283,947 | 106,745,265 | (105,821,246 | ) | 5,207,966 | |||||||||||
Underlying Affiliated Funds | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $ | — | $ | — | $ | 11,161 | $ | 5,207,966 |
(8) Federal Income Taxes
The fund’s policy is to comply with the provision of the Internal Revenue Code applicable to regulated investment companies and to distribute to shareholders all of its net taxable income, including any net realized gain on investments. Accordingly, no provision for federal income or excise tax is provided. Under the terms of the Agreement and Plan of Reorganization, the transfer between the Acquiring Fund and the Target Fund should be treated as a tax-free transfer to a controlled corporation.
Table of Contents
Portfolio of Investments and Pro Forma Combined Portfolio of Investments (unaudited)
December 31, 2010
Capital Appreciation Variable Account | MFS Massachusetts Investors Growth Stock Portfolio | Pro Forma | Pro Forma Combined Fund | |||||||||||||||||||||||||
Issuer | Shares | Value ($) | Shares | Value ($) | Adjustments | Shares | Value ($) | |||||||||||||||||||||
COMMON STOCKS (98.9%, 98.8%, and 98.9% respectively) | ||||||||||||||||||||||||||||
Aerospace | ||||||||||||||||||||||||||||
Precision Castparts Corp. | 3,780 | $ | 526,210 | 14,390 | $ | 2,003,230 | $ | — | 18,170 | $ | 2,529,440 | |||||||||||||||||
United Technologies Corp. | 44,090 | 3,470,765 | 169,530 | 13,345,402 | — | 213,620 | 16,816,167 | |||||||||||||||||||||
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| |||||||||||||||||||||
$ | 3,996,975 | $ | 15,348,632 | $ | — | $ | 19,345,607 | |||||||||||||||||||||
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Alcoholic Beverages | ||||||||||||||||||||||||||||
Companhia de Bebidas das Americas, ADR | 31,200 | $ | 968,136 | 119,100 | $ | 3,695,673 | $ | — | 150,300 | $ | 4,663,809 | |||||||||||||||||
Diageo PLC | 88,778 | 1,640,202 | 344,202 | 6,359,244 | — | 432,980 | 7,999,446 | |||||||||||||||||||||
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| |||||||||||||||||||||
$ | 2,608,338 | $ | 10,054,917 | $ | — | $ | 12,663,255 | |||||||||||||||||||||
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Apparel Manufacturers | ||||||||||||||||||||||||||||
LVMH Moet Hennessy Louis Vuitton S.A. | 8,657 | $ | 1,424,064 | 34,114 | $ | 5,611,703 | $ | — | 42,771 | $ | 7,035,767 | |||||||||||||||||
NIKE, Inc., “B” | 22,580 | 1,928,784 | 86,170 | 7,360,641 | — | 108,750 | 9,289,425 | |||||||||||||||||||||
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| |||||||||||||||||||||
$ | 3,352,848 | $ | 12,972,344 | $ | — | $ | 16,325,192 | |||||||||||||||||||||
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| |||||||||||||||||||||
Broadcasting | ||||||||||||||||||||||||||||
Omnicom Group, Inc. | 10,440 | $ | 478,152 | 39,930 | $ | 1,828,794 | $ | — | 50,370 | $ | 2,306,946 | |||||||||||||||||
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| |||||||||||||||||||||
Brokerage & Asset Managers | ||||||||||||||||||||||||||||
Charles Schwab Corp. | 123,910 | $ | 2,120,100 | 473,710 | $ | 8,105,178 | $ | — | 597,620 | $ | 10,225,278 | |||||||||||||||||
CME Group, Inc. | 6,800 | 2,187,900 | 26,490 | 8,523,158 | — | 33,290 | 10,711,058 | |||||||||||||||||||||
Franklin Resources, Inc. | 13,660 | 1,519,129 | 52,510 | 5,839,637 | — | 66,170 | 7,358,766 | |||||||||||||||||||||
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|
|
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| |||||||||||||||||||||
$ | 5,827,129 | $ | 22,467,973 | $ | — | $ | 28,295,102 | |||||||||||||||||||||
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Business Services | ||||||||||||||||||||||||||||
Accenture Ltd., “A” | 90,430 | $ | 4,384,951 | 349,110 | $ | 16,928,344 | $ | — | 439,540 | $ | 21,313,295 | |||||||||||||||||
Automatic Data Processing, Inc. | 7,880 | 364,686 | 30,600 | 1,416,168 | — | 38,480 | 1,780,854 | |||||||||||||||||||||
Dun & Bradstreet Corp. | 35,800 | 2,938,822 | 137,440 | 11,282,450 | — | 173,240 | 14,221,272 | |||||||||||||||||||||
MSCI, Inc., “A” (a) | 58,350 | 2,273,316 | 224,340 | 8,740,286 | — | 282,690 | 11,013,602 | |||||||||||||||||||||
Verisk Analytics, Inc., “A” (a) | 72,400 | 2,467,392 | 278,730 | 9,499,118 | — | 351,130 | 11,966,510 | |||||||||||||||||||||
Western Union Co. | 30,660 | 569,356 | 115,510 | 2,145,021 | — | 146,170 | 2,714,377 | |||||||||||||||||||||
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| |||||||||||||||||||||
$ | 12,998,523 | $ | 50,011,387 | $ | — | $ | 63,009,910 | |||||||||||||||||||||
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Cable TV | ||||||||||||||||||||||||||||
DIRECTV, “A” (a) | 41,500 | $ | 1,657,095 | 159,300 | $ | 6,360,849 | $ | — | 200,800 | $ | 8,017,944 | |||||||||||||||||
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Chemicals | ||||||||||||||||||||||||||||
Monsanto Co. | 21,610 | $ | 1,504,920 | 83,170 | $ | 5,791,959 | $ | — | 104,780 | $ | 7,296,879 | |||||||||||||||||
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Table of Contents
Portfolio of Investments and Pro Forma Combined Portfolio of Investments (unaudited)
December 31, 2010
Capital Appreciation Variable Account | MFS Massachusetts Investors Growth Stock Portfolio | Pro Forma | Pro Forma Combined Fund | |||||||||||||||||||||||||
Issuer | Shares | Value ($) | Shares | Value ($) | Adjustments | Shares | Value ($) | |||||||||||||||||||||
Computer Software | ||||||||||||||||||||||||||||
Autodesk, Inc. (a) | 43,780 | $ | 1,672,396 | 167,440 | $ | 6,396,208 | $ | — | 211,220 | $ | 8,068,604 | |||||||||||||||||
Oracle Corp. (s) | 179,830 | 5,628,679 | 691,380 | 21,640,194 | — | 871,210 | 27,268,873 | |||||||||||||||||||||
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| |||||||||||||||||||||
$ | 7,301,075 | $ | 28,036,402 | $ | — | $ | 35,337,477 | |||||||||||||||||||||
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| |||||||||||||||||||||
Computer Software - Systems | ||||||||||||||||||||||||||||
Apple, Inc. (a) | 13,380 | $ | 4,315,853 | 51,140 | $ | 16,495,718 | $ | — | 64,520 | $ | 20,811,571 | |||||||||||||||||
EMC Corp. (a) | 64,140 | 1,468,806 | 243,730 | 5,581,417 | — | 307,870 | 7,050,223 | |||||||||||||||||||||
Hewlett-Packard Co. | 49,390 | 2,079,319 | 189,750 | 7,988,475 | — | 239,140 | 10,067,794 | |||||||||||||||||||||
International Business Machines Corp. | 27,570 | 4,046,173 | 105,840 | 15,533,078 | — | 133,410 | 19,579,251 | |||||||||||||||||||||
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|
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| |||||||||||||||||||||
$ | 11,910,151 | $ | 45,598,688 | $ | — | $ | 57,508,839 | |||||||||||||||||||||
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Consumer Products | ||||||||||||||||||||||||||||
Church & Dwight Co., Inc. | 21,510 | $ | 1,484,620 | 82,060 | $ | 5,663,781 | $ | — | 103,570 | $ | 7,148,401 | |||||||||||||||||
Colgate-Palmolive Co. | 42,950 | 3,451,892 | 164,230 | 13,199,165 | — | 207,180 | 16,651,057 | |||||||||||||||||||||
Procter & Gamble Co. | 40,060 | 2,577,060 | 153,461 | 9,872,146 | — | 193,521 | 12,449,206 | |||||||||||||||||||||
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| |||||||||||||||||||||
$ | 7,513,572 | $ | 28,735,092 | $ | — | $ | 36,248,664 | |||||||||||||||||||||
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Electrical Equipment | ||||||||||||||||||||||||||||
Danaher Corp. (s) | 112,170 | $ | 5,291,059 | 431,940 | $ | 20,374,610 | $ | — | 544,110 | $ | 25,665,669 | |||||||||||||||||
W.W. Grainger, Inc. | 4,310 | 595,254 | 16,990 | 2,346,489 | — | 21,300 | 2,941,743 | |||||||||||||||||||||
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| |||||||||||||||||||||
$ | 5,886,313 | $ | 22,721,099 | $ | — | $ | 28,607,412 | |||||||||||||||||||||
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Electronics | ||||||||||||||||||||||||||||
Microchip Technology, Inc. | 72,930 | $ | 2,494,935 | 280,120 | $ | 9,582,905 | $ | — | 353,050 | $ | 12,077,840 | |||||||||||||||||
Samsung Electronics Co. Ltd., GDR | 1,668 | 703,729 | 6,502 | 2,743,194 | — | 8,170 | 3,446,923 | |||||||||||||||||||||
Taiwan Semiconductor Manufacturing Co. Ltd., ADR | 235,766 | 2,956,506 | 904,443 | 11,341,715 | — | 1,140,209 | 14,298,221 | |||||||||||||||||||||
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| |||||||||||||||||||||
$ | 6,155,170 | $ | 23,667,814 | $ | — | $ | 29,822,984 | |||||||||||||||||||||
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| |||||||||||||||||||||
Energy - Integrated | ||||||||||||||||||||||||||||
Chevron Corp. | 12,090 | $ | 1,103,213 | 46,000 | $ | 4,197,500 | $ | — | 58,090 | $ | 5,300,713 | |||||||||||||||||
Exxon Mobil Corp. | 18,570 | 1,357,838 | 71,610 | 5,236,123 | — | 90,180 | 6,593,961 | |||||||||||||||||||||
Hess Corp. | 10,140 | 776,116 | 38,560 | 2,951,382 | — | 48,700 | 3,727,498 | |||||||||||||||||||||
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| |||||||||||||||||||||
$ | 3,237,167 | $ | 12,385,005 | $ | — | $ | 15,622,172 | |||||||||||||||||||||
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Food & Beverages | ||||||||||||||||||||||||||||
Groupe Danone | 29,995 | $ | 1,884,671 | 114,872 | $ | 7,217,732 | $ | — | 144,867 | $ | 9,102,403 | |||||||||||||||||
Mead Johnson Nutrition Co., “A” | 11,070 | 689,108 | 42,230 | 2,628,818 | — | 53,300 | 3,317,926 | |||||||||||||||||||||
PepsiCo, Inc. | 43,720 | 2,856,228 | 167,890 | 10,968,254 | — | 211,610 | 13,824,482 | |||||||||||||||||||||
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| |||||||||||||||||||||
$ | 5,430,007 | $ | 20,814,804 | $ | — | $ | 26,244,811 | |||||||||||||||||||||
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Food & Drug Stores | ||||||||||||||||||||||||||||
CVS Caremark Corp. | 34,679 | $ | 1,205,789 | 132,007 | $ | 4,589,883 | $ | — | 166,686 | $ | 5,795,672 | |||||||||||||||||
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Table of Contents
Portfolio of Investments and Pro Forma Combined Portfolio of Investments (unaudited)
December 31, 2010
Capital Appreciation Variable Account | MFS Massachusetts Investors Growth Stock Portfolio | Pro Forma | Pro Forma Combined Fund | |||||||||||||||||||||||||
Issuer | Shares | Value ($) | Shares | Value ($) | Adjustments | Shares | Value ($) | |||||||||||||||||||||
General Merchandise | ||||||||||||||||||||||||||||
Kohl’s Corp. (a) | 34,550 | $ | 1,877,447 | 133,130 | $ | 7,234,284 | $ | — | 167,680 | $ | 9,111,731 | |||||||||||||||||
Target Corp. | 29,620 | 1,781,051 | 113,450 | 6,821,749 | — | 143,070 | 8,602,800 | |||||||||||||||||||||
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| |||||||||||||||||||||
$ | 3,658,498 | $ | 14,056,033 | $ | — | $ | 17,714,531 | |||||||||||||||||||||
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Internet | ||||||||||||||||||||||||||||
eBay, Inc. (a) | 25,530 | $ | 710,500 | 99,760 | $ | 2,776,321 | $ | — | 125,290 | $ | 3,486,821 | |||||||||||||||||
Google, Inc., “A” (a) | 4,160 | 2,470,915 | 15,920 | 9,456,002 | — | 20,080 | 11,926,917 | |||||||||||||||||||||
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| |||||||||||||||||||||
$ | 3,181,415 | $ | 12,232,323 | $ | — | $ | 15,413,738 | |||||||||||||||||||||
Major Banks | ||||||||||||||||||||||||||||
Bank of New York Mellon Corp. | 20,854 | $ | 629,791 | 80,155 | $ | 2,420,681 | $ | — | 101,009 | $ | 3,050,472 | |||||||||||||||||
State Street Corp. | 48,500 | 2,247,490 | 185,710 | 8,605,801 | — | 234,210 | 10,853,291 | |||||||||||||||||||||
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| |||||||||||||||||||||
$ | 2,877,281 | $ | 11,026,482 | $ | — | $ | 13,903,763 | |||||||||||||||||||||
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Medical & Health Technology & Services | ||||||||||||||||||||||||||||
Medco Health Solutions, Inc. (a) | 8,340 | $ | 510,992 | 31,880 | $ | 1,953,288 | $ | — | 40,220 | $ | 2,464,280 | |||||||||||||||||
Patterson Cos., Inc. | 31,380 | 961,169 | 120,850 | 3,701,636 | — | 152,230 | 4,662,805 | |||||||||||||||||||||
VCA Antech, Inc. (a) | 16,450 | 383,121 | 62,300 | 1,450,967 | — | 78,750 | 1,834,088 | |||||||||||||||||||||
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| |||||||||||||||||||||
$ | 1,855,282 | $ | 7,105,891 | $ | — | $ | 8,961,173 | |||||||||||||||||||||
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Medical Equipment | ||||||||||||||||||||||||||||
Becton, Dickinson & Co. | 20,130 | $ | 1,701,388 | 76,550 | $ | 6,470,006 | $ | — | 96,680 | $ | 8,171,394 | |||||||||||||||||
DENTSPLY International, Inc. | 78,110 | 2,669,019 | 300,410 | 10,265,010 | — | 378,520 | 12,934,029 | |||||||||||||||||||||
Medtronic, Inc. | 46,970 | 1,742,117 | 180,820 | 6,706,614 | — | 227,790 | 8,448,731 | |||||||||||||||||||||
St. Jude Medical, Inc. (a) | 15,470 | 661,343 | 59,000 | 2,522,250 | — | 74,470 | 3,183,593 | |||||||||||||||||||||
Synthes, Inc. | 8,966 | 1,211,129 | 34,378 | 4,643,788 | — | 43,344 | 5,854,917 | |||||||||||||||||||||
Thermo Fisher Scientific, Inc. (a) | 61,240 | 3,390,246 | 233,500 | 12,926,560 | — | 294,740 | 16,316,806 | |||||||||||||||||||||
Waters Corp. (a) | 12,070 | 937,960 | 46,870 | 3,642,268 | — | 58,940 | 4,580,228 | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
$ | 12,313,202 | $ | 47,176,496 | $ | — | $ | 59,489,698 | |||||||||||||||||||||
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| |||||||||||||||||||||
Metals & Mining | ||||||||||||||||||||||||||||
BHP Billiton Ltd., ADR | 12,200 | $ | 1,133,624 | 47,190 | $ | 4,384,895 | $ | — | 59,390 | $ | 5,518,519 | |||||||||||||||||
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Network & Telecom | ||||||||||||||||||||||||||||
Cisco Systems, Inc. (a)(s) | 236,490 | $ | 4,784,193 | 908,287 | $ | 18,374,646 | $ | — | 1,144,777 | $ | 23,158,839 | |||||||||||||||||
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Oil Services | ||||||||||||||||||||||||||||
National Oilwell Varco, Inc. | 40,130 | $ | 2,698,743 | 154,070 | $ | 10,361,208 | $ | — | 194,200 | $ | 13,059,951 | |||||||||||||||||
Schlumberger Ltd. | 43,740 | 3,652,290 | 167,530 | 13,988,755 | — | 211,270 | 17,641,045 | |||||||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||||
$ | 6,351,033 | $ | 24,349,963 | $ | — | $ | 30,700,996 | |||||||||||||||||||||
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| |||||||||||||||||||||
Other Banks & Diversified Financials | ||||||||||||||||||||||||||||
MasterCard, Inc., “A” | 5,920 | $ | 1,326,731 | 22,340 | $ | 5,006,617 | $ | — | 28,260 | $ | 6,333,348 | |||||||||||||||||
Visa, Inc., “A” | 48,330 | 3,401,465 | 184,990 | 13,019,596 | — | 233,320 | 16,421,061 |
Table of Contents
Portfolio of Investments and Pro Forma Combined Portfolio of Investments (unaudited)
December 31, 2010
Capital Appreciation Variable Account | MFS Massachusetts Investors Growth Stock Portfolio | Pro Forma | Pro Forma Combined Fund | |||||||||||||||||||||||||
Issuer | Shares | Value ($) | Shares | Value ($) | Adjustments | Shares | Value ($) | |||||||||||||||||||||
$ | 4,728,196 | $ | 18,026,213 | $ | — | $ | 22,754,409 | |||||||||||||||||||||
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Pharmaceuticals | ||||||||||||||||||||||||||||
Abbott Laboratories | 22,510 | $ | 1,078,454 | 86,380 | $ | 4,138,466 | $ | — | 108,890 | $ | 5,216,920 | |||||||||||||||||
Allergan, Inc. | 11,560 | 793,825 | 43,420 | 2,981,651 | — | 54,980 | 3,775,476 | |||||||||||||||||||||
Johnson & Johnson | 35,860 | 2,217,941 | 137,630 | 8,512,416 | — | 173,490 | 10,730,357 | |||||||||||||||||||||
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|
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|
| |||||||||||||||||||||
$ | 4,090,220 | $ | 15,632,533 | $ | — | $ | 19,722,753 | |||||||||||||||||||||
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| |||||||||||||||||||||
Specialty Chemicals | ||||||||||||||||||||||||||||
Praxair, Inc. | 16,840 | $ | 1,607,715 | 64,840 | $ | 6,190,275 | $ | — | 81,680 | $ | 7,797,990 | |||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Specialty Stores | ||||||||||||||||||||||||||||
Staples, Inc. | 45,400 | $ | 1,033,758 | 172,900 | $ | 3,936,933 | $ | — | 218,300 | $ | 4,970,691 | |||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total Common Stocks (Identified Cost, $103,507,920, $435,370,463, and $538,878,383, respectively) | $ | 128,677,641 | $ | 493,878,325 | $ | — | $ | 622,555,966 | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
MONEY MARKET FUNDS (v) (1.2%, 1.2%, and 1.2%, respectively) | ||||||||||||||||||||||||||||
MFS Institutional Money Market Portfolio, 0.18%, at Cost and Net Asset Value | 1,555,872 | $ | 1,555,872 | 5,979,449 | $ | 5,979,449 | $ | — | 7,535,321 | $ | 7,535,321 | |||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total Investments (Identified Cost, $105,063,792, $441,349,912, and $546,413,704, respectively) | $ | 130,233,513 | $ | 499,857,774 | $ | — | $ | 630,091,287 | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Other Assets, Less Liabilities ((0.0)%, (0.0)%, and (0.0)%, respectively) | $ | (89,483 | ) | $ | (218,124 | ) | $ | (5,790 | )(b) | $ | (313,397 | ) | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net Assets - 100.0% | $ | 130,144,030 | $ | 499,639,650 | $ | (5,790 | ) | $ | 629,777,890 | |||||||||||||||||||
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|
|
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|
|
Table of Contents
(a) | Non-income producing security. |
(b) | Adjustment is the result of elimination of certain insurance related receivables from the sponsor following MFS Massachusetts Investors Growth Stock Portfolio’s acquisition of Capital Appreciation Variable Account. See The Pro Forma Fund’s Statement of Assets and Liabilities for further details. |
(s) | For the MFS Massachusetts Investors Growth Stock Portfolio, the security or a portion of the security was pledged to cover collateral requirements for securities sold short. At December 31, 2010, the value of securities pledged amounted to $171,421. At December 31, 2010, the fund had no short sales outstanding. |
(v) | Underlying affiliated fund that is available only to investment companies managed by MFS. The rate quoted is the annualized seven-day yield of the fund at period end. |
The following abbreviations are used in this report and are defined:
ADR American Depository Receipt
GDR Global Depository Receipt
PLC Public Limited Company
As of the date of the Pro Forma Combined Portfolio of Investments, the securities held by the acquired fund are consistent with the investment objectives, strategies and policies of the acquiring fund. However, it is anticipated certain portfolio securities received from the acquired fund in the reorganization will subsequently be sold by the acquiring fund. Any such transactions are not reflected in these pro forma financial statements.
See Notes to Financial Statements
Table of Contents
Pro Forma Combined Statement of Assets and Liabilities (unaudited)
December 31, 2010
Capital Appreciation Variable Account | MFS Massachusetts Investors Growth Stock Portfolio | Pro Forma Adjustments | Pro Forma Combined Fund | |||||||||||||
Assets: | ||||||||||||||||
Investments- | ||||||||||||||||
Non-affiliated issuers, at value (identified cost, $103,507,920, $435,370,463, and $538,878,383, respectively) | $ | 128,677,641 | $ | 493,878,325 | $ | — | $ | 622,555,966 | ||||||||
Underlying affiliated funds, at cost and value | 1,555,872 | 5,979,449 | — | 7,535,321 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments, at value (identified cost, $105,063,792, $441,349,912, and $546,413,704, respectively) | $ | 130,233,513 | $ | 499,857,774 | $ | — | $ | 630,091,287 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Receivables for | ||||||||||||||||
Units/Fund shares sold | 26,435 | 188,905 | — | 215,340 | ||||||||||||
Interest and dividends | 117,475 | 277,067 | — | 394,542 | ||||||||||||
Receivable from investment adviser | 6,783 | 42,577 | — | 49,360 | ||||||||||||
Receivable from sponsor | 5,790 | — | (5,790 | )(a) | — | |||||||||||
Other assets | 4,193 | 14,514 | — | 18,707 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total assets | $ | 130,394,189 | $ | 500,380,837 | $ | (5,790 | ) | $ | 630,769,236 | |||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities: | ||||||||||||||||
Payables for | ||||||||||||||||
Units surrendered/Fund shares reacquired | $ | 208,672 | $ | 629,404 | $ | — | $ | 838,076 | ||||||||
Payable to affiliates | ||||||||||||||||
Investment adviser | 5,368 | 20,594 | — | 25,962 | ||||||||||||
Distribution and/or service fees | — | 957 | — | 957 | ||||||||||||
Administrative services fee | 264 | 964 | — | 1,228 | ||||||||||||
Payable for manager/trustees’ compensation | 148 | 623 | — | 771 | ||||||||||||
Accrued expenses and other liabilities | 35,707 | 88,645 | — | 124,352 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total liabilities | $ | 250,159 | $ | 741,187 | $ | — | $ | 991,346 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net assets | $ | 130,144,030 | $ | 499,639,650 | $ | (5,790 | ) | $ | 629,777,890 | |||||||
|
|
|
|
|
|
|
| |||||||||
Net assets consist of: | ||||||||||||||||
Paid-in capital | $ | — | $ | 552,254,523 | $ | 104,954,675 | $ | 657,209,198 | ||||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | — | 58,518,470 | 25,183,565 | 83,702,035 | ||||||||||||
Accumulated net realized gain (loss) on investments and foreign currency transactions | — | (113,635,453 | ) | — | (113,635,453 | ) | ||||||||||
Undistributed net investment income | — | 2,502,110 | — | 2,502,110 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net assets | $ | — | $ | 499,639,650 | $ | 130,138,240 | (b) | $ | 629,777,890 | |||||||
|
|
|
|
|
|
|
| |||||||||
Units/Shares of beneficial interest outstanding | 3,967,561 | 43,760,715 | 11,385,673 | 55,146,388 | ||||||||||||
Net assets: | ||||||||||||||||
Contract Level 2/Initial Class | $ | 85,332,486 | (c) | $ | 429,925,381 | 130,138,240 | $ | 560,063,621 | ||||||||
Contract Level 3/Service Class | 806,530 | (c) | 69,714,269 | — | 69,714,269 | |||||||||||
Contract Level 3-2 | 44,005,014 | (c) | — | — | — | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 130,144,030 | $ | 499,639,650 | $ | 130,138,240 | $ | 629,777,890 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Accumulation Units/Shares outstanding: | ||||||||||||||||
Contract Level 2/Initial Class | 1,359,806 | 37,613,815 | 11,385,673 | (e) | 48,999,488 | |||||||||||
Contract Level 3/Service Class | 20,021 | 6,146,900 | — | 6,146,900 | ||||||||||||
Contract Level 3-2 | 2,587,734 | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 3,967,561 | 43,760,715 | 11,385,673 | 55,146,388 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Accumulation Unit Value/Net Asset Value: | ||||||||||||||||
Contract Level 2/Initial Class | $ | 61.454 | (d) | $ | 11.43 | $ | 11.43 | |||||||||
Contract Level 3/Service Class | 40.282 | (d) | 11.34 | 11.34 | ||||||||||||
Contract Level 3-2 | 16.917 | (d) | — | — |
(a) | Insurance related receivable from sponsor to be eliminated for Capital Appreciation Variable Account by the sponsor following MFS Massachusetts Investors Growth Stock Portfolio’s acquisition of Capital Appreciation Variable Account. |
(b) | Net Assets of the Capital Appreication Variable Account acquired by MFS Massachusetts Investors Growth Stock Portfolio. |
(c) | Contract Level net assets also include the net assets associated with the contract level reserve. |
(d) | Accumulation Unit Value does not reflect net assets associated with the reserve of each contract level. |
Table of Contents
(e) | If the reorganization had taken place on December 31, 2010, the Capital Appreciation Variable Account would have received 11,385,673 Initial Class Shares of the MFS Massachusetts Investors Growth Stock Portfolio, which would be available for distribution to its contract holders. No assurances can be given as to the number of Reorganization Shares the Capital Appreciation Variable Account will receive on the Exchange Date. The foregoing is merely an example of what the Capital Appreciation Variable Account would have received and distributed had the reorganization been consummated on December 31, 2010, and should not be relied upon to reflect the amount that will be actually received on or after the Exchange Date. |
Table of Contents
Pro Forma Combined Statement of Operations (unaudited)
For the year ended December 31, 2010
Capital Appreciation Variable Account | MFS Massachusetts Investors Growth Stock Portfolio | Pro Forma Adjustments | Pro Forma Combined Fund | |||||||||||||
Net investment income: | ||||||||||||||||
Income | ||||||||||||||||
Dividends | $ | 1,735,411 | $ | 6,819,810 | — | $ | 8,555,221 | |||||||||
Interest | — | 18,347 | — | 18,347 | ||||||||||||
Dividends from underlying affiliated funds | 2,430 | 10,404 | — | 12,834 | ||||||||||||
Foreign taxes withheld | (37,108 | ) | (146,723 | ) | — | (183,831 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Total investment income | $ | 1,700,733 | $ | 6,701,838 | $ | — | 8,402,571 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Expenses | ||||||||||||||||
Management fee | $ | 936,614 | $ | 3,675,503 | $ | — | $ | 4,612,117 | ||||||||
Mortality and expense risk charges | 1,568,703 | — | (1,568,703 | )(a) | — | |||||||||||
Distribution expense risk charge | 1,234 | — | (1,234 | )(a) | — | |||||||||||
Distribution and/or service fees | — | 181,148 | — | 181,148 | ||||||||||||
Administrative services fee | 46,140 | 171,973 | 9,050 | (b) | 227,163 | |||||||||||
Managers/Trustees’ compensation | 17,450 | 69,813 | — | 87,263 | ||||||||||||
Custodian fee | 30,606 | 91,608 | (15,303 | )(c) | 106,911 | |||||||||||
Printing/Shareholder communications | 7,821 | 97,602 | (1,564 | )(c) | 103,859 | |||||||||||
Auditing fees | 38,616 | 44,217 | (38,616 | )(c) | 44,217 | |||||||||||
Legal fees | 7,166 | 7,502 | (6,449 | )(c) | 8,219 | |||||||||||
Miscellaneous | 14,221 | 43,326 | (12,800 | )(c) | 44,747 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total expenses | $ | 2,668,571 | $ | 4,382,692 | $ | (1,635,619 | ) | $ | 5,415,644 | |||||||
|
|
|
|
|
|
|
| |||||||||
Fees paid indirectly | (6 | ) | (31 | ) | — | (37 | ) | |||||||||
Reduction of expenses by investment adviser | (73,102 | ) | (176,815 | ) | 57,917 | (d) | (192,000 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net expenses | $ | 2,595,463 | $ | 4,205,846 | $ | (1,577,702 | ) | $ | 5,223,607 | |||||||
|
|
|
|
|
|
|
| |||||||||
Net investment income | $ | (894,730 | ) | $ | 2,495,992 | $ | 1,577,702 | $ | 3,178,964 | |||||||
|
|
|
|
|
|
|
| |||||||||
Realized and unrealized gain (loss) on investments and foreign currency transactions | ||||||||||||||||
Realized gain (loss) (identified cost basis) | ||||||||||||||||
Investment transactions (s) | $ | 9,743,275 | $ | 43,641,163 | $ | — | $ | 53,384,438 | ||||||||
Foreign currency transactions | (3,604 | ) | 7,779 | — | 4,175 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Net realized gain (loss) on investments and foreign currency transactions | $ | 9,739,671 | $ | 43,648,942 | $ | — | $ | 53,388,613 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Change in unrealized appreciation (depreciation) | ||||||||||||||||
Investments | $ | 4,764,399 | $ | 12,940,699 | $ | — | $ | 17,705,098 | ||||||||
Translation of assets and liabilities in foreign currencies | 7,021 | 3,932 | — | 10,953 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net unrealized gain (loss) on investments and foreign currency translation | $ | 4,771,420 | $ | 12,944,631 | $ | — | $ | 17,716,051 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $ | 14,511,091 | $ | 56,593,573 | $ | — | $ | 71,104,664 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Change in net assets from operations | $ | 13,616,361 | $ | 59,089,565 | $ | 1,577,702 | $ | 74,283,628 | ||||||||
|
|
|
|
|
|
|
|
(a) | Insurance related mortality and expense risk charge and distribution risk charge to be borne directly by contract owners following MFS Massachusetts Investors Growth Stock Portfolio’s acquisition of Capital Appreciation Variable Account. |
(b) | Expenditures are adjusted as a result of the current administrative services fee rates in effect for the pro forma combined fund. |
(c) | Expenditures are reduced as a result of several factors such as the elimination of duplicative functions and changes to the allocation of expenses. |
(d) | Expense reduction adjusted to reflect annualized contractual expense caps of the pro forma combined fund. |
(s) | For the MFS Massachusetts Investors Growth Stock Portfolio, realized gain (loss) on investment transactions includes proceeds received from a non-recurring cash settlement in the amount of $2,471,274 from a litigation settlement against Tyco International Ltd. |
Table of Contents
MFS Massachusetts Investors Growth Stock Portfolio and
Capital Appreciation Variable Account
Notes to Pro Forma Combined Financial Statements
December 31, 2010
(Unaudited)
(1) Description of the Fund
MFS Massachusetts Investors Growth Stock Portfolio (Acquiring Fund), a series of MFS Variable Insurance Trust II (the trust), is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. 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 Acquiring Fund consists of 2 classes of shares: Initial Class and Service Class. The Acquiring 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.
(2) Basis for the Combination
The accompanying pro forma financial statements are presented to show the effect of the proposed reorganization of Capital Appreciation Variable Account (Target Fund) into the Acquiring Fund, (Acquiring Fund and Target Fund are referred to herein as the fund), as if such reorganization had taken place as of December 31, 2010, the annual period of the Acquiring Fund. The following notes refer to the accompanying pro forma financial statements as if the reorganization of the Target Fund with and into the Acquiring Fund had taken place as of December 31, 2010, at the respective net asset value on that date. The Acquiring Fund will be the accounting survivor, based upon an analysis of factors including surviving fund portfolio manager, investment objectives and policies, expense ratio structures and portfolio composition and size.
The accompanying pro forma financial statements should be read in conjunction with the financial statements of the Acquiring Fund and Target Fund included in their respective annual reports dated December 31, 2010.
(3) Accounting Estimates
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 revenues and expenses during the reporting period. Actual results could differ from those estimates.
Table of Contents
(4) Portfolio Valuation
Equity securities, including restricted equity securities, are generally valued at the last sale or official closing price as provided by a third-party pricing service on the market or exchange on which they are primarily traded. Equity securities, for which there were no sales reported that day, are generally valued at the last quoted daily bid quotation as provided by a third-party pricing service on the market or exchange on which such securities are primarily traded. Equity securities held short, for which there were no sales reported for that day, are generally valued at the last quoted daily ask quotation as provided by a third-party pricing service on the market or exchange on which such securities are primarily traded. Short-term instruments with a maturity at issuance of 60 days or less generally are 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 each 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 each 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 each 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 each fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, each 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
2
Table of Contents
calculating each 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 each 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 each 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. Each 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, 2010 in valuing each fund’s assets or liabilities:
Capital Appreciation Variable Account
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities | $ | 128,677,641 | $ | — | $ | — | $ | 128,677,641 | ||||||||
Mutual Funds | 1,555,872 | — | — | 1,555,872 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments | $ | 130,233,513 | $ | — | $ | — | $ | 130,233,513 | ||||||||
|
|
|
|
|
|
|
|
MFS Massachusetts Investors Growth Stock Portfolio
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities | $ | 493,878,325 | $ | — | $ | — | $ | 493,878,325 | ||||||||
Mutual Funds | 5,979,449 | — | — | 5,979,449 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments | $ | 499,857,774 | $ | — | $ | — | $ | 499,857,774 | ||||||||
|
|
|
|
|
|
|
|
Pro Forma Combined Fund
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities | $ | 622,555,966 | $ | — | $ | — | $ | 622,555,966 | ||||||||
Mutual Funds | 7,535,321 | — | — | 7,535,321 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments | $ | 630,091,287 | $ | — | $ | — | $ | 630,091,287 | ||||||||
|
|
|
|
|
|
|
|
For further information regarding security characteristics, see the Portfolios of Investments.
(5) Reorganization Costs
MFS has agreed to bear all costs associated with the proposed reorganization as well as the following proposed reorganizations:
3
Table of Contents
Target Fund | Acquiring Fund | |
Global Governments Variable Account | MFS Global Governments Portfolio | |
Government Securities Variable Account | MFS Government Securities Portfolio | |
High Yield Variable Account | MFS High Yield Portfolio | |
Money Market Variable Account | MFS Money Market Portfolio | |
Total Return Variable Account | MFS Total Return Portfolio |
These agregate costs for all proposed reorganizations are estimated at $205,000.
(6) Capital Shares
The pro forma combined shares of beneficial interest outstanding represent those shares that would have been outstanding on December 31, 2010, had the acquisition taken place on December 31, 2010. In exchange for the net assets of the Target Fund the initial class of shares of the Acquiring Fund would have been issued based upon the per share net asset value as follows:
Initial Class | ||||
Net assets – Target Fund | $ | 130,138,240 | ||
Shares – Acquiring Fund | 11,385,673 | |||
Net asset value – Acquiring Fund | $ | 11.43 |
(7) Transactions in Underlying Affiliated Funds-Affiliated Issuers
An affiliated issuer may be considered one in which the each owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, each fund assumes the following to be affiliated issuers:
For the year ended December 31, 2010:
4
Table of Contents
Capital Appreciation | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 1,026,944 | 20,629,778 | (20,100,850 | ) | 1,555,872 | |||||||||||
Underlying Affiliated Funds | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $ | — | $ | — | $ | 2,430 | $ | 1,555,872 | ||||||||
MFS Massachusetts Investors | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 4,308,898 | 93,712,731 | (92,042,180 | ) | 5,979,449 | |||||||||||
Underlying Affiliated Funds | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $ | — | $ | — | $ | 10,404 | $ | 5,979,449 | ||||||||
Pro Forma Combined Fund | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 5,335,842 | 114,342,509 | (112,143,030 | ) | 7,535,321 | |||||||||||
Underlying Affiliated Funds | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $ | — | $ | — | $ | 12,834 | $ | 7,535,321 |
(8) Federal Income Taxes
The fund’s policy is to comply with the provision of the Internal Revenue Code applicable to regulated investment companies and to distribute to shareholders all of its net taxable income, including any net realized gain on investments. Accordingly, no provision for federal income or excise tax is provided. Under the terms of the Agreement and Plan of Reorganization, the transfer between the Acquiring Fund and the Target Fund should be treated as a tax-free transfer to a controlled corporation.
5
Table of Contents
Portfolio of Investments and Pro Forma Combined Portfolio of Investments (unaudited)
December 31, 2010
Global Governments Variable Account | MFS Global Governments Portfolio | Pro Forma | Pro Forma Combined Fund | |||||||||||||||||||||||||
Issuer | Shares/Par | Value ($) | Shares/Par | Value ($) | Adjustments | Shares/Par | Value ($) | |||||||||||||||||||||
BONDS (97.0%, 93.9%, and 94.4%, respectively) | ||||||||||||||||||||||||||||
Foreign Bonds | ||||||||||||||||||||||||||||
Austria | ||||||||||||||||||||||||||||
Republic of Austria, 4.65%, 2018 | EUR | 40,000 | $ | 59,021 | EUR | 206,000 | $ | 303,959 | $ | — | EUR | 246,000 | $ | 362,980 | ||||||||||||||
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Belgium | ||||||||||||||||||||||||||||
Kingdom of Belgium, 5.5%, 2017 | EUR | 17,000 | $ | 25,235 | EUR | 98,000 | $ | 145,474 | $ | — | EUR | 115,000 | $ | 170,709 | ||||||||||||||
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Canada | ||||||||||||||||||||||||||||
Bayview Commercial Asset Trust, | ||||||||||||||||||||||||||||
FRN, 1.687%, 2023 (z) | CAD | 30,000 | $ | 24,689 | CAD | 150,000 | $ | 123,444 | $ | — | CAD | 180,000 | $ | 148,133 | ||||||||||||||
Canada Housing Trust, 4.6%, 2011 (n) | 57,000 | 58,603 | 280,000 | 287,877 | — | 337,000 | 346,480 | |||||||||||||||||||||
Government of Canada, 4.25%, 2018 | 72,000 | 79,152 | 367,000 | 403,456 | — | 439,000 | 482,608 | |||||||||||||||||||||
Government of Canada, 5.75%, 2033 | 10,000 | 13,452 | 47,000 | 63,224 | — | 57,000 | 76,676 | |||||||||||||||||||||
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$ | 175,896 | $ | 878,001 | $ | — | $ | 1,053,897 | |||||||||||||||||||||
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Finland | ||||||||||||||||||||||||||||
Republic of Finland, 3.875%, 2017 | EUR | 109,000 | $ | 157,041 | EUR | 591,000 | $ | 851,480 | $ | — | EUR | 700,000 | $ | 1,008,521 | ||||||||||||||
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France | ||||||||||||||||||||||||||||
Republic of France, 6%, 2025 | EUR | 49,000 | $ | 82,827 | EUR | 260,000 | $ | 439,488 | $ | — | EUR | 309,000 | $ | 522,315 | ||||||||||||||
Republic of France, 4.75%, 2035 | 45,000 | 68,137 | 225,000 | 340,686 | — | 270,000 | 408,823 | |||||||||||||||||||||
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$ | 150,964 | $ | 780,174 | $ | — | $ | 931,138 | |||||||||||||||||||||
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Germany | ||||||||||||||||||||||||||||
Federal Republic of Germany, 3.75%,2013 | EUR | 185,000 | $ | 263,843 | EUR | 1,043,000 | $ | 1,487,505 | $ | — | EUR | 1,228,000 | $ | 1,751,348 | ||||||||||||||
Federal Republic of Germany, 3.75%,2015 | 104,000 | 150,363 | 548,000 | 792,296 | — | 652,000 | 942,659 | |||||||||||||||||||||
Federal Republic of Germany, 4.25%,2018 | 32,000 | 47,315 | 168,000 | 248,405 | — | 200,000 | 295,720 | |||||||||||||||||||||
Federal Republic of Germany, 6.25%,2030 | 33,000 | 60,738 | 165,000 | 303,691 | — | 198,000 | 364,429 | |||||||||||||||||||||
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$ | 522,259 | $ | 2,831,897 | $ | — | $ | 3,354,156 | |||||||||||||||||||||
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Ireland | ||||||||||||||||||||||||||||
Irish Life & Permanent PLC, 3.6%,2013 (e)(n) | $ | — | $ | — | $ | 200,000 | $ | 179,404 | $ | — | $ | 200,000 | $ | 179,404 | ||||||||||||||
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Italy | ||||||||||||||||||||||||||||
Republic of Italy, 4.75%, 2013 | EUR | 241,000 | $ | 333,758 | EUR | 1,212,000 | $ | 1,678,484 | $ | — | EUR | 1,453,000 | $ | 2,012,242 | ||||||||||||||
Republic of Italy, 5.25%, 2017 | 226,000 | 319,731 | 1,156,000 | 1,635,440 | — | 1,382,000 | 1,955,171 | |||||||||||||||||||||
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$ | 653,489 | $ | 3,313,924 | $ | — | $ | 3,967,413 | |||||||||||||||||||||
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Japan | ||||||||||||||||||||||||||||
Government of Japan, 1.7%, 2017 | JPY | 65,550,000 | $ | 862,383 | JPY | 331,450,000 | $ | 4,360,594 | $ | — | JPY | 397,000,000 | $ | 5,222,977 | ||||||||||||||
Government of Japan, 2.1%, 2024 | 19,050,000 | 252,415 | 122,000,000 | 1,616,519 | — | 141,050,000 | 1,868,934 | |||||||||||||||||||||
Government of Japan, 2.2%, 2027 | 20,000,000 | 263,603 | 103,000,000 | 1,357,558 | — | 123,000,000 | 1,621,161 | |||||||||||||||||||||
Government of Japan, 2.4%, 2037 | 8,000,000 | 107,134 | 41,000,000 | 549,062 | — | 49,000,000 | 656,196 | |||||||||||||||||||||
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$ | 1,485,535 | $ | 7,883,733 | $ | — | $ | 9,369,268 | |||||||||||||||||||||
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Netherlands | ||||||||||||||||||||||||||||
Kingdom of the Netherlands, 3.75%,2014 | EUR | 129,000 | $ | 185,749 | EUR | 658,000 | $ | 947,465 | $ | — | EUR | 787,000 | $ | 1,133,214 | ||||||||||||||
Kingdom of the Netherlands, 5.5%,2028 | 19,000 | 31,692 | 113,000 | 188,487 | — | 132,000 | 220,179 | |||||||||||||||||||||
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$ | 217,441 | $ | 1,135,952 | $ | — | $ | 1,353,393 | |||||||||||||||||||||
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Norway | ||||||||||||||||||||||||||||
Eksportfinans A.S.A., 1.875%, 2013 | $ | 35,000 | $ | 35,408 | $ | 170,000 | $ | 171,982 | $ | — | $ | 205,000 | $ | 207,390 | ||||||||||||||
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Spain | ||||||||||||||||||||||||||||
Kingdom of Spain, 4.6%, 2019 | EUR | 22,000 | $ | 27,938 | EUR | 238,000 | $ | 302,235 | $ | — | EUR | 260,000 | $ | 330,173 | ||||||||||||||
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Table of Contents
Portfolio of Investments and Pro Forma Combined Portfolio of Investments (unaudited)
December 31, 2010
Global Governments Variable Account | MFS Global Governments Portfolio | Pro Forma | Pro Forma Combined Fund | |||||||||||||||||||||||||
Issuer | Shares/Par | Value ($) | Shares/Par | Value ($) | Adjustments | Shares/Par | Value ($) | |||||||||||||||||||||
United Kingdom | ||||||||||||||||||||||||||||
United Kingdom Treasury, 8%, 2015 | GBP 43,000 | $ | 85,104 | GBP 228,000 | $ | 451,247 | $ | — | GBP | 271,000 | $ | 536,351 | ||||||||||||||||
United Kingdom Treasury, 8%, 2021 | 5,100 | 11,076 | 112,000 | 243,234 | — | 117,100 | 254,310 | |||||||||||||||||||||
United Kingdom Treasury, 4.25%, 2027 | 51,000 | 81,573 | 259,000 | 414,265 | — | 310,000 | 495,838 | |||||||||||||||||||||
United Kingdom Treasury, 4.25%, 2036 | 66,000 | 103,621 | 313,000 | 491,414 | — | 379,000 | 595,035 | |||||||||||||||||||||
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$ | 281,374 | $ | 1,600,160 | $ | — | $ | 1,881,534 | |||||||||||||||||||||
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Total Foreign Bonds | $ | 3,791,601 | $ | 20,378,375 | $ | — | $ | 24,169,976 | ||||||||||||||||||||
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U.S. Bonds | ||||||||||||||||||||||||||||
Asset-Backed & Securitized | ||||||||||||||||||||||||||||
Commercial Mortgage Asset Trust, FRN, 0.84%,2032 (i)(z) | $ | 857,191 | $ | 16,536 | $ | 4,996,200 | $ | 96,379 | $ | — | $ | 5,853,391 | $ | 112,915 | ||||||||||||||
Commercial Mortgage Pass-Through Certificates, FRN, 0.45%, 2017 (n) | 59,000 | 56,564 | 331,000 | 317,332 | — | 390,000 | 373,896 | |||||||||||||||||||||
First Union National Bank Commercial Mortgage Trust, FRN, 0.738%, 2043 (i)(n) | 572,575 | 2,277 | 3,126,323 | 12,434 | — | 3,698,898 | 14,711 | |||||||||||||||||||||
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$ | 75,377 | $ | 426,145 | $ | — | $ | 501,522 | |||||||||||||||||||||
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Local Authorities | ||||||||||||||||||||||||||||
University of California Rev. (Build America Bonds), 5.77%, 2043 | $ | 15,000 | $ | 14,133 | $ | 70,000 | $ | 65,954 | $ | — | $ | 85,000 | $ | 80,087 | ||||||||||||||
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Mortgage-Backed | ||||||||||||||||||||||||||||
Fannie Mae, 4.771%, 2012 | $ | 37,163 | $ | 38,746 | $ | 173,428 | $ | 180,816 | $ | — | $ | 210,591 | $ | 219,562 | ||||||||||||||
Fannie Mae, 5.371%, 2013 | 23,380 | 24,564 | 93,519 | 98,254 | — | 116,899 | 122,818 | |||||||||||||||||||||
Fannie Mae, 4.7%, 2015 | — | — | 44,091 | 47,413 | — | 44,091 | 47,413 | |||||||||||||||||||||
Fannie Mae, 4.78%, 2015 | 22,928 | 24,727 | 68,783 | 74,181 | — | 91,711 | 98,908 | |||||||||||||||||||||
Fannie Mae, 5.5%, 2015 | 8,914 | 9,795 | 39,617 | 43,532 | — | 48,531 | 53,327 | |||||||||||||||||||||
Fannie Mae, 5.09%, 2016 | 25,000 | 27,139 | 59,000 | 64,047 | — | 84,000 | 91,186 | |||||||||||||||||||||
Fannie Mae, 5.424%, 2016 | 22,984 | 25,157 | 68,032 | 74,464 | — | 91,016 | 99,621 | |||||||||||||||||||||
Fannie Mae, 5.05%, 2017 | — | — | 53,362 | 57,917 | — | 53,362 | 57,917 | |||||||||||||||||||||
Fannie Mae, 5.161%, 2018 | 23,911 | 26,050 | 117,314 | 127,806 | — | 141,225 | 153,856 | |||||||||||||||||||||
Fannie Mae, 5.1%, 2019 | 10,784 | 11,587 | 52,940 | 56,883 | — | 63,724 | 68,470 | |||||||||||||||||||||
Fannie Mae, 5.18%, 2019 | 10,788 | 11,611 | 52,958 | 56,999 | — | 63,746 | 68,610 | |||||||||||||||||||||
Fannie Mae, 6.16%, 2019 | 9,328 | 10,448 | 44,889 | 50,282 | — | 54,217 | 60,730 | |||||||||||||||||||||
Freddie Mac, 5.085%, 2019 | 10,000 | 10,573 | 33,000 | 34,891 | — | 43,000 | 45,464 | |||||||||||||||||||||
Freddie Mac, 5%, 2025 - 2028 | 15,901 | 16,217 | 75,551 | 77,051 | — | 91,452 | 93,268 | |||||||||||||||||||||
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$ | 236,614 | $ | 1,044,536 | $ | — | $ | 1,281,150 | |||||||||||||||||||||
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U.S. Government Agencies and Equivalents | ||||||||||||||||||||||||||||
Aid-Egypt, 4.45%, 2015 | $ | 49,000 | $ | 53,707 | $ | 252,000 | $ | 276,207 | $ | — | $ | 301,000 | $ | 329,914 | ||||||||||||||
Small Business Administration, 4.57%,2025 | 29,147 | 30,732 | — | — | — | 29,147 | 30,732 | |||||||||||||||||||||
Small Business Administration, 5.09%,2025 | — | — | 35,022 | 37,510 | — | 35,022 | 37,510 | |||||||||||||||||||||
Small Business Administration, 5.21%,2026 | 80,885 | 86,826 | 404,424 | 434,128 | — | 485,309 | 520,954 | |||||||||||||||||||||
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$ | 171,265 | $ | 747,845 | $ | — | $ | 919,110 | |||||||||||||||||||||
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U.S. Treasury Obligations | ||||||||||||||||||||||||||||
U.S. Treasury Bonds, 6.875%, 2025 | $ | 133,000 | $ | 177,784 | $ | 758,000 | $ | 1,013,233 | $ | — | $ | 891,000 | $ | 1,191,017 | ||||||||||||||
U.S. Treasury Bonds, 5.25%, 2029 | 86,000 | 98,631 | 526,000 | 603,256 | — | 612,000 | 701,887 | |||||||||||||||||||||
U.S. Treasury Bonds, 4.5%, 2039 | 17,100 | 17,560 | 86,300 | 88,619 | — | 103,400 | 106,179 | |||||||||||||||||||||
U.S. Treasury Notes, 4.75%, 2012 | 318,000 | 332,956 | 1,130,000 | 1,183,145 | — | 1,448,000 | 1,516,101 | |||||||||||||||||||||
U.S. Treasury Notes, 4.125%, 2015 | 165,000 | 181,693 | 991,000 | 1,091,261 | — | 1,156,000 | 1,272,954 | |||||||||||||||||||||
U.S. Treasury Notes, 4.75%, 2017 | 380,000 | 430,914 | 2,297,000 | 2,604,761 | — | 2,677,000 | 3,035,675 | |||||||||||||||||||||
U.S. Treasury Notes, 3.5%, 2020 | 208,000 | 213,071 | 1,025,000 | 1,049,990 | — | 1,233,000 | 1,263,061 | |||||||||||||||||||||
U.S. Treasury Notes, TIPS, 1.25%, 2020 | 159,456 | 163,268 | 812,325 | 831,744 | — | 971,781 | 995,012 | |||||||||||||||||||||
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$ | 1,615,877 | $ | 8,466,009 | $ | — | $ | 10,081,886 | |||||||||||||||||||||
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Table of Contents
Portfolio of Investments and Pro Forma Combined Portfolio of Investments (unaudited)
December 31, 2010
Global Governments Variable Account | MFS Global Governments Portfolio | Pro Forma | Pro Forma Combined Fund | |||||||||||||||||||||||||
Issuer | Shares/Par | Value ($) | Shares/Par | Value ($) | Adjustments | Shares/Par | Value ($) | |||||||||||||||||||||
Total U.S. Bonds | $ | 2,113,266 | $ | 10,750,489 | $ | — | $ | 12,863,755 | ||||||||||||||||||||
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Total Bonds (Identified Cost, $5,573,857, $29, 643, 345, and $35,217,202, respectively) | $ | 5,904,867 | $ | 31,128,864 | $ | — | $ | 37,033,731 | ||||||||||||||||||||
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MONEY MARKET FUNDS (v) (4.0%, -%, and 0.6%, respectively) | ||||||||||||||||||||||||||||
MFS Institutional Money Market Portfolio, 0.18%, at Cost and Net Asset Value | 246,397 | $ | 246,397 | $ | — | — | $ | — | 246,397 | $ | 246,397 | |||||||||||||||||
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SHORT-TERM OBLIGATIONS (y) (-%, 3.0%, and 2.5%, respectively) | ||||||||||||||||||||||||||||
Abbey National North America LLC, 0.14%, due 1/03/11, at Amortized Cost and Value | $ | — | $ | — | $ | 989,000 | $ | 988,992 | $ | — | $ | 989,000 | $ | 988,992 | ||||||||||||||
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REPURCHASE AGREEMENTS (-%, 2.3%, and 2.0%, respectively) | ||||||||||||||||||||||||||||
Goldman Sachs, 0.15%, dated 12/31/10, due 1/03/11, total to be received $770,010 (secured by U.S. Treasury and Federal Agency obligations valued at $785,403 in a jointly traded account), at Cost | $ | — | $ | — | $ | 770,000 | $ | 770,000 | $ | — | $ | 770,000 | $ | 770,000 | ||||||||||||||
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Total Investments | ||||||||||||||||||||||||||||
(Identified Cost, $5,820,254, $31,402,337, and $37, 222, 591, respectively) | $ | 6,151,264 | $ | 32,887,856 | $ | — | $ | 39,039,120 | ||||||||||||||||||||
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OTHER ASSETS, | ||||||||||||||||||||||||||||
LESS LIABILITIES ((1.0)%, 0.8%, and 0.5%, respectively) | $ | (60,454 | ) | $ | 252,121 | $ | 148 | (a) | $ | 191,815 | ||||||||||||||||||
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NET ASSETS - 100.0% | $ | 6,090,810 | $ | 33,139,977 | $ | 148 | $ | 39,230,935 | ||||||||||||||||||||
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Table of Contents
(a) | Adjustment is the result of elimination of certain insurance related payables to the sponsor following MFS Global Governments Portfolio’s acquisition of Global Governments Variable Account. See The Pro Forma Fund’s Statement of Assets and Liabilities for further details. |
(e) | Guaranteed by Minister for Finance of Ireland. |
(i) | Interest only security for which the pro forma combined 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 $914,491, representing 2.3% of pro forma combined fund. |
(v) | Underlying affliated fund that is available only to investment companies managed by MFS. The rate quoted is the annualized seven-day yield of the fund at period end. |
(y) | The rate shown represents an annualized yield at time of purchase. |
(z) | Restricted securities are not registered under the Securities Act of 1933 and are subject to legal restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are subsequently registered. Disposal of these securities may involve time-consuming negotiations and prompt sale at an acceptable price may be difficult. The pro forma combined fund holds the following restricted securities: |
Restricted Securities | Acquisition Date | Cost | Value | |||||||||
Bayview Commercial Asset Trust, FRN, 1.687%, 2023 | 5/25/06 | $ | 162,749 | $ | 148,133 | |||||||
Commercial Mortgage Asset Trust, FRN, 0.84%, 2032 | 8/25/03 | 110,369 | 112,915 | |||||||||
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Total Restricted Securities | $ | 261,048 | ||||||||||
% of Pro Forma Combined Fund Net Assets | 0.7 | % | ||||||||||
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The following abbreviations are used in this report and are defined:
FRN | Floating Rate Note. Interest rate resets periodically and may not be the rate reported at period end. |
PLC | Public Limited Company |
TIPS | Treasury Inflation Protected Security |
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 | |
CLP | Chilean Peso | |
CNY | Chinese Yuan Renminbi | |
DKK | Danish Krone | |
EUR | Euro | |
GBP | British Pound | |
IDR | Indonesian Rupiah | |
JPY | Japanese Yen | |
KRW | Korean Won | |
MXN | Mexican Peso | |
NOK | Norwegian Krone | |
NZD | New Zealand Dollar | |
PHP | Philippine Peso | |
SEK | Swedish Krona | |
SGD | Singapore Dollar | |
TRY | Turkish Lira | |
TWD | Taiwan Dollar | |
ZAR | South African Rand |
As of the date of the Pro Forma Combined Portfolio of Investments, the securities held by the acquired fund are consistent with the investment objectives, strategies and policies of the acquiring fund. However, it is anticipated certain portfolio securities received from the acquired fund in the reorganization will subsequently be sold by the acquiring fund. Any such transactions are not reflected in these pro forma financial statements.
Table of Contents
Derivative Contracts at 12/31/10
Forward Foreign Currency Exchange Contracts at 12/31/10
Global Governments Variable Account
Contracts to Deliver/Receive | Settlement Date Range | In Exchange For | Contracts at Value | Net Unrealized Appreciation (Depreciation) | ||||||||||||||||||
Type | Currency | Counterparty | ||||||||||||||||||||
Asset Derivatives | ||||||||||||||||||||||
BUY | AUD | Citibank N.A. | 7,000 | 1/12/11 | 6,873 | 7,153 | 280 | |||||||||||||||
BUY | AUD | Credit Suisse Group | 7,000 | 1/12/11 | 6,869 | 7,153 | 284 | |||||||||||||||
BUY | AUD | Westpac Banking Corp | 46,965 | 1/12/11 | 45,649 | 47,995 | 2,346 | |||||||||||||||
BUY | CAD | Goldman Sachs International | 35,889 | 1/12/11 | 35,081 | 36,089 | 1,008 | |||||||||||||||
BUY | CAD | UBS AG | 7,000 | 1/12/11 | 6,919 | 7,039 | 120 | |||||||||||||||
BUY | CLP | Barclays Bank PLC | 7,406,000 | 1/10/11 | 15,526 | 15,817 | 291 | |||||||||||||||
BUY | CNY | JPMorgan Chase Bank N.A. | 102,000 | 1/14/11-4/18/11 | 15,417 | 15,478 | 61 | |||||||||||||||
SELL | DKK | Royal Bank of Scotland PLC | 44,000 | 1/12/11 | 8,031 | 7,888 | 143 | |||||||||||||||
BUY | EUR | Citibank N.A. | 15,000 | 1/12/11 | 19,838 | 20,044 | 206 | |||||||||||||||
BUY | EUR | Deutsche Bank AG | 24,000 | 1/12/11 | 31,498 | 32,071 | 573 | |||||||||||||||
BUY | EUR | HSBC Bank | 29,754 | 1/12/11 | 39,527 | 39,759 | 232 | |||||||||||||||
BUY | EUR | JPMorgan Chase Bank N.A. | 15,558 | 1/12/11 | 20,282 | 20,790 | 508 | |||||||||||||||
BUY | EUR | UBS AG | 12,000 | 1/12/11 | 15,915 | 16,036 | 121 | |||||||||||||||
SELL | EUR | Barclays Bank PLC | 8,000 | 1/12/11 | 11,009 | 10,690 | 319 | |||||||||||||||
SELL | EUR | Credit Suisse Group | 5,000 | 1/12/11 | 6,787 | 6,681 | 106 | |||||||||||||||
SELL | EUR | Deutsche Bank AG | 2,000 | 1/12/11 | 2,717 | 2,673 | 44 | |||||||||||||||
SELL | EUR | Goldman Sachs International | 9,000 | 1/12/11 | 12,449 | 12,026 | 423 | |||||||||||||||
SELL | EUR | HSBC Bank | 36,000 | 1/12/11 | 49,393 | 48,106 | 1,287 | |||||||||||||||
SELL | EUR | JPMorgan Chase Bank N.A. | 48,000 | 1/12/11 | 67,464 | 64,142 | 3,322 | |||||||||||||||
SELL | EUR | UBS AG | 18,500 | 1/12/11 | 25,237 | 24,721 | 516 | |||||||||||||||
BUY | GBP | Barclays Bank PLC | 1,000 | 1/12/11 | 1,541 | 1,559 | 18 | |||||||||||||||
SELL | GBP | Barclays Bank PLC | 2,000 | 1/12/11 | 3,151 | 3,118 | 33 | |||||||||||||||
SELL | GBP | Goldman Sachs International | 16,000 | 1/12/11 | 25,420 | 24,945 | 475 | |||||||||||||||
SELL | GBP | UBS AG | 13,000 | 1/12/11 | 20,912 | 20,267 | 645 | |||||||||||||||
BUY | JPY | Barclays Bank PLC | 176,000 | 1/12/11 | 2,125 | 2,168 | 43 | |||||||||||||||
BUY | JPY | Credit Suisse Group | 568,000 | 1/12/11 | 6,931 | 6,996 | 65 | |||||||||||||||
BUY | JPY | HSBC Bank | 2,137,820 | 1/12/11 | 25,870 | 26,333 | 463 | |||||||||||||||
BUY | JPY | JPMorgan Chase Bank N.A. | 49,121,539 | 1/12/11 | 600,633 | 605,065 | 4,432 | |||||||||||||||
BUY | JPY | UBS AG | 1,743,000 | 1/12/11 | 20,839 | 21,470 | 631 | |||||||||||||||
SELL | JPY | HSBC Bank | 3,610,000 | 1/12/11 | 44,488 | 44,467 | 21 | |||||||||||||||
SELL | JPY | UBS AG | 935,000 | 1/12/11 | 11,617 | 11,517 | 100 | |||||||||||||||
SELL | KRW | JPMorgan Chase Bank N.A. | 299,000 | 1/18/11 | 264 | 263 | 1 | |||||||||||||||
BUY | MXN | HSBC Bank | 191,000 | 1/12/11 | 15,371 | 15,457 | 86 | |||||||||||||||
BUY | NZD | Barclays Bank PLC | 9,000 | 1/12/11 | 6,812 | 7,009 | 197 |
Table of Contents
BUY | PHP | JPMorgan Chase Bank N.A. | 367,000 | 1/28/11 | 8,313 | 8,379 | 66 | |||||||||||||||
SELL | SEK | Barclays Bank PLC | 26,000 | 1/12/11 | 3,872 | 3,865 | 7 | |||||||||||||||
BUY | SGD | HSBC Bank | 23,000 | 1/12/11 | 17,773 | 17,922 | 149 | |||||||||||||||
BUY | SGD | JPMorgan Chase Bank N.A. | 20,000 | 2/07/11 | 15,316 | 15,585 | 269 | |||||||||||||||
SELL | TRY | Barclays Bank PLC | 19,000 | 1/26/11 | 12,506 | 12,273 | 233 | |||||||||||||||
SELL | TRY | Deutsche Bank AG | 40,000 | 2/22/11 | 26,585 | 25,750 | 835 | |||||||||||||||
BUY | TWD | Barclays Bank PLC | 503,000 | 1/27/11 | 16,565 | 17,263 | 698 | |||||||||||||||
BUY | ZAR | Deutsche Bank AG | 1,000 | 1/18/11 | 141 | 152 | 11 | |||||||||||||||
|
| |||||||||||||||||||||
$ | 21,668 | |||||||||||||||||||||
|
| |||||||||||||||||||||
Liability Derivatives | ||||||||||||||||||||||
SELL | AUD | Citibank N.A. | 15,000 | 1/12/11 | 14,689 | 15,328 | (639 | ) | ||||||||||||||
SELL | CAD | Barclays Bank PLC | 15,000 | 1/12/11 | 14,850 | 15,084 | (234 | ) | ||||||||||||||
SELL | CAD | Credit Suisse Group | 82,381 | 1/12/11 | 81,909 | 82,841 | (932 | ) | ||||||||||||||
BUY | DKK | Credit Suisse Group | 257,472 | 1/12/11 | 48,046 | 46,158 | (1,888 | ) | ||||||||||||||
BUY | EUR | Deutsche Bank AG | 14,000 | 1/12/11 | 19,414 | 18,708 | (706 | ) | ||||||||||||||
BUY | EUR | Goldman Sachs International | 28,311 | 1/12/11 | 39,289 | 37,831 | (1,458 | ) | ||||||||||||||
BUY | EUR | JPMorgan Chase Bank N.A. | 169,764 | 1/12/11 | 236,704 | 226,853 | (9,851 | ) | ||||||||||||||
BUY | EUR | UBS AG | 16,643 | 1/12/11 | 23,640 | 22,240 | (1,400 | ) | ||||||||||||||
SELL | EUR | Barclays Bank PLC | 16,000 | 1/12/11 | 20,814 | 21,381 | (567 | ) | ||||||||||||||
SELL | EUR | Citibank N.A. | 8,000 | 1/12/11 | 10,585 | 10,690 | (105 | ) | ||||||||||||||
SELL | EUR | Deutsche Bank AG | 20,000 | 1/12/11 | 26,573 | 26,725 | (152 | ) | ||||||||||||||
SELL | EUR | UBS AG | 338,227 | 3/15/11 | 446,744 | 451,867 | (5,123 | ) | ||||||||||||||
BUY | GBP | Barclays Bank PLC | 23,475 | 1/12/11 | 37,325 | 36,598 | (727 | ) | ||||||||||||||
BUY | GBP | Credit Suisse Group | 4,000 | 1/12/11 | 6,376 | 6,236 | (140 | ) | ||||||||||||||
BUY | GBP | Deutsche Bank AG | 60,964 | 1/12/11 | 96,217 | 95,043 | (1,174 | ) | ||||||||||||||
BUY | GBP | Royal Bank of Scotland PLC | 6,000 | 1/12/11 | 9,627 | 9,354 | (273 | ) | ||||||||||||||
BUY | GBP | UBS AG | 1,000 | 1/12/11 | 1,581 | 1,559 | (22 | ) | ||||||||||||||
BUY | IDR | Barclays Bank PLC | 152,286,000 | 4/01/11 | 16,790 | 16,676 | (114 | ) | ||||||||||||||
BUY | IDR | JPMorgan Chase Bank N.A. | 108,538,000 | 1/14/11 | 12,069 | 12,028 | (41 | ) | ||||||||||||||
SELL | IDR | JPMorgan Chase Bank N.A. | 261,103,000 | 1/14/11 | 28,864 | 28,935 | (71 | ) | ||||||||||||||
BUY | JPY | Barclays Bank PLC | 6,000 | 1/12/11 | 75 | 74 | (1 | ) | ||||||||||||||
BUY | JPY | Goldman Sachs International | 3,208,241 | 1/12/11 | 39,539 | 39,520 | (19 | ) | ||||||||||||||
SELL | JPY | Barclays Bank PLC | 1,887,000 | 1/12/11 | 22,727 | 23,243 | (516 | ) | ||||||||||||||
SELL | JPY | Citibank N.A. | 2,610,000 | 1/12/11 | 31,534 | 32,149 | (615 | ) | ||||||||||||||
SELL | JPY | Credit Suisse Group | 100,000 | 1/12/11 | 1,230 | 1,231 | (1 | ) | ||||||||||||||
SELL | JPY | Goldman Sachs International | 668,000 | 1/12/11 | 8,176 | 8,228 | (52 | ) | ||||||||||||||
SELL | JPY | HSBC Bank | 5,558,000 | 1/12/11 | 66,333 | 68,462 | (2,129 | ) | ||||||||||||||
SELL | JPY | Royal Bank of Scotland PLC | 833,000 | 1/12/11 | 10,202 | 10,261 | (59 | ) | ||||||||||||||
SELL | JPY | UBS AG | 1,080,000 | 1/12/11 | 13,279 | 13,303 | (24 | ) | ||||||||||||||
BUY | KRW | Barclays Bank PLC | 28,689,000 | 1/05/11-1/18/11 | 25,545 | 25,266 | (279 | ) |
Table of Contents
BUY | KRW | JPMorgan Chase Bank N.A. | 299,000 | 1/05/11 | 265 | 264 | (1 | ) | ||||||||||||||
SELL | KRW | Barclays Bank PLC | 28,659,000 | 1/05/11-1/18/11 | 24,533 | 25,239 | (706 | ) | ||||||||||||||
SELL | NOK | Deutsche Bank AG | 1,000 | 1/12/11 | 161 | 171 | (10 | ) | ||||||||||||||
SELL | NZD | Barclays Bank PLC | 9,000 | 1/12/11 | 6,940 | 7,010 | (70 | ) | ||||||||||||||
BUY | PHP | JPMorgan Chase Bank N.A. | 1,109,000 | 1/06/11-1/26/11 | 25,526 | 25,318 | (208 | ) | ||||||||||||||
SELL | PHP | JPMorgan Chase Bank N.A. | 773,000 | 1/26/11 | 17,379 | 17,649 | (270 | ) | ||||||||||||||
BUY | SEK | Credit Suisse Group | 506,807 | 1/12/11 | 75,574 | 75,334 | (240 | ) | ||||||||||||||
SELL | SEK | Barclays Bank PLC | 34,000 | 1/12/11 | 4,934 | 5,054 | (120 | ) | ||||||||||||||
BUY | SGD | Deutsche Bank AG | 10,000 | 1/12/11 | 7,798 | 7,792 | (6 | ) | ||||||||||||||
SELL | SGD | Deutsche Bank AG | 12,000 | 1/12/11 | 9,070 | 9,350 | (280 | ) | ||||||||||||||
BUY | TRY | HSBC Bank | 17,000 | 2/22/11 | 11,597 | 10,944 | (653 | ) | ||||||||||||||
BUY | TRY | JPMorgan Chase Bank N.A. | 42,000 | 1/26/11-2/22/11 | 28,322 | 27,093 | (1,229 | ) | ||||||||||||||
SELL | TWD | Credit Suisse Group | 484,400 | 1/27/11 | 16,000 | 16,624 | (624 | ) | ||||||||||||||
SELL | TWD | JPMorgan Chase Bank N.A. | 24,000 | 1/27/11 | 817 | 825 | (8 | ) | ||||||||||||||
|
| |||||||||||||||||||||
$ | (33,737 | ) | ||||||||||||||||||||
|
|
MFS Global Governments Portfolio
Contracts to Deliver/Receive | Settlement Date Range | In Exchange For | Contracts at Value | Net Unrealized Appreciation (Depreciation) | ||||||||||||||||||
Type | Currency | Counterparty | ||||||||||||||||||||
Asset Derivatives | ||||||||||||||||||||||
BUY | AUD | Citibank N.A. | 36,000 | 1/12/11 | 35,347 | 36,789 | 1,442 | |||||||||||||||
BUY | AUD | Credit Suisse Group | 36,000 | 1/12/11 | 35,329 | 36,789 | 1,460 | |||||||||||||||
BUY | AUD | Goldman Sachs International | 8,000 | 1/12/11 | 7,890 | 8,175 | 285 | |||||||||||||||
BUY | AUD | Westpac Banking Corp. | 236,866 | 1/12/11 | 230,227 | 242,057 | 11,830 | |||||||||||||||
BUY | CAD | Barclays Bank PLC | 5,000 | 1/12/11 | 4,958 | 5,028 | 70 | |||||||||||||||
BUY | CAD | Goldman Sachs International | 199,923 | 1/12/11 | 195,422 | 201,039 | 5,617 | |||||||||||||||
BUY | CAD | UBS AG | 36,000 | 1/12/11 | 35,585 | 36,201 | 616 | |||||||||||||||
BUY | CLP | Barclays Bank PLC | 39,701,000 | 1/10/11 | 83,231 | 84,791 | 1,560 | |||||||||||||||
BUY | CNY | JPMorgan Chase Bank N.A. | 544,000 | 1/14/11-4/18/11 | 82,178 | 82,551 | 373 | |||||||||||||||
SELL | DKK | Royal Bank of Scotland PLC | 180,000 | 1/12/11 | 32,854 | 32,269 | 585 | |||||||||||||||
BUY | EUR | Citibank N.A. | 68,000 | 1/12/11 | 89,902 | 90,867 | 965 | |||||||||||||||
BUY | EUR | Deutsche Bank AG | 126,000 | 1/12/11 | 165,363 | 168,372 | 3,009 | |||||||||||||||
BUY | EUR | JPMorgan Chase Bank N.A. | 272,796 | 1/12/11 | 355,623 | 364,532 | 8,909 | |||||||||||||||
BUY | EUR | UBS AG | 62,000 | 1/12/11 | 82,226 | 82,849 | 623 | |||||||||||||||
SELL | EUR | Credit Suisse Group | 18,000 | 1/12/11 | 24,433 | 24,053 | 380 | |||||||||||||||
SELL | EUR | Deutsche Bank AG | 30,000 | 1/12/11 | 40,753 | 40,088 | 665 | |||||||||||||||
SELL | EUR | HSBC Bank | 187,000 | 1/12/11 | 256,569 | 249,885 | 6,684 | |||||||||||||||
SELL | EUR | JPMorgan Chase Bank N.A. | 248,000 | 1/12/11 | 348,564 | 331,398 | 17,166 | |||||||||||||||
SELL | EUR | UBS AG | 93,665 | 1/12/11 | 129,132 | 125,163 | 3,969 |
Table of Contents
BUY | GBP | Barclays Bank PLC | 8,000 | 1/12/11 | 12,328 | 12,472 | 144 | |||||||||||||||
SELL | GBP | Barclays Bank PLC | 20,000 | 1/12/11 | 31,513 | 31,180 | 333 | |||||||||||||||
SELL | GBP | Goldman Sachs International | 70,000 | 1/12/11 | 111,288 | 109,131 | 2,157 | |||||||||||||||
SELL | GBP | UBS AG | 31,000 | 1/12/11 | 49,542 | 48,330 | 1,212 | |||||||||||||||
BUY | JPY | Barclays Bank PLC | 13,119,000 | 1/12/11 | 157,595 | 161,596 | 4,001 | |||||||||||||||
BUY | JPY | Citibank N.A. | 4,030,000 | 1/12/11 | 48,163 | 49,640 | 1,477 | |||||||||||||||
BUY | JPY | Credit Suisse Group | 5,743,000 | 1/12/11 | 70,152 | 70,741 | 589 | |||||||||||||||
BUY | JPY | Goldman Sachs International | 1,681,000 | 1/12/11 | 20,575 | 20,706 | 131 | |||||||||||||||
BUY | JPY | JPMorgan Chase Bank N.A. | 249,786,592 | 1/12/11 | 3,054,261 | 3,076,800 | 22,539 | |||||||||||||||
BUY | JPY | UBS AG | 5,006,000 | 1/12/11 | 59,850 | 61,663 | 1,813 | |||||||||||||||
SELL | KRW | JPMorgan Chase Bank N.A. | 439,000 | 1/05/11 | 389 | 387 | 2 | |||||||||||||||
BUY | MXN | HSBC Bank | 1,025,000 | 1/12/11 | 82,488 | 82,952 | 464 | |||||||||||||||
BUY | NZD | Barclays Bank PLC | 47,000 | 1/12/11 | 35,576 | 36,605 | 1,029 | |||||||||||||||
BUY | PHP | JPMorgan Chase Bank N.A. | 1,885,000 | 1/28/11 | 42,695 | 43,038 | 343 | |||||||||||||||
SELL | SEK | Barclays Bank PLC | 97,000 | 1/12/11 | 14,446 | 14,419 | 27 | |||||||||||||||
BUY | SGD | HSBC Bank | 115,000 | 1/12/11 | 88,865 | 89,610 | 745 | |||||||||||||||
BUY | SGD | JPMorgan Chase Bank N.A. | 107,000 | 2/07/11 | 81,939 | 83,379 | 1,440 | |||||||||||||||
SELL | TRY | Barclays Bank PLC | 99,000 | 1/26/11 | 65,162 | 63,950 | 1,212 | |||||||||||||||
SELL | TRY | Deutsche Bank AG | 206,000 | 2/22/11 | 136,913 | 132,615 | 4,298 | |||||||||||||||
BUY | TWD | Barclays Bank PLC | 2,700,000 | 1/27/11 | 88,918 | 92,662 | 3,744 | |||||||||||||||
BUY | ZAR | Deutsche Bank AG | 1,000 | 1/18/11 | 140 | 151 | 11 | |||||||||||||||
|
| |||||||||||||||||||||
$ | 113,919 | |||||||||||||||||||||
|
| |||||||||||||||||||||
Liability Derivatives | ||||||||||||||||||||||
SELL | AUD | Citibank N.A. | 66,000 | 1/12/11 | 64,633 | 67,446 | (2,813 | ) | ||||||||||||||
SELL | CAD | Barclays Bank PLC | 52,000 | 1/12/11 | 51,480 | 52,290 | (810 | ) | ||||||||||||||
SELL | CAD | Credit Suisse Group | 419,916 | 1/12/11 | 417,507 | 422,260 | (4,753 | ) | ||||||||||||||
BUY | DKK | Credit Suisse Group | 1,304,922 | 1/12/11 | 243,505 | 233,934 | (9,571 | ) | ||||||||||||||
BUY | EUR | Deutsche Bank AG | 142,000 | 1/12/11 | 193,540 | 189,752 | (3,788 | ) | ||||||||||||||
BUY | EUR | Goldman Sachs International | 18,000 | 1/12/11 | 24,788 | 24,053 | (735 | ) | ||||||||||||||
BUY | EUR | JPMorgan Chase Bank N.A. | 1,097,257 | 1/12/11 | 1,529,427 | 1,466,244 | (63,183 | ) | ||||||||||||||
SELL | EUR | Barclays Bank PLC | 62,000 | 1/12/11 | 80,477 | 82,849 | (2,372 | ) | ||||||||||||||
SELL | EUR | Deutsche Bank AG | 2,000 | 1/12/11 | 2,658 | 2,673 | (15 | ) | ||||||||||||||
SELL | EUR | Goldman Sachs International | 56,000 | 1/12/11 | 74,810 | 74,832 | (22 | ) | ||||||||||||||
SELL | EUR | HSBC Bank | 189,745 | 1/12/11 | 252,684 | 253,553 | (869 | ) | ||||||||||||||
SELL | EUR | UBS AG | 1,805,247 | 1/12/11-3/15/11 | 2,384,594 | 2,411,793 | (27,199 | ) | ||||||||||||||
BUY | GBP | Barclays Bank PLC | 149,484 | 1/12/11 | 237,557 | 233,049 | (4,508 | ) | ||||||||||||||
BUY | GBP | Credit Suisse Group | 3,000 | 1/12/11 | 4,782 | 4,677 | (105 | ) | ||||||||||||||
BUY | GBP | Deutsche Bank AG | 211,484 | 1/12/11 | 335,589 | 329,708 | (5,881 | ) | ||||||||||||||
BUY | GBP | Royal Bank of Scotland PLC | 31,000 | 1/12/11 | 49,738 | 48,330 | (1,408 | ) | ||||||||||||||
BUY | GBP | UBS AG | 18,000 | 1/12/11 | 28,459 | 28,062 | (397 | ) |
Table of Contents
BUY | IDR | Barclays Bank PLC | 773,536,000 | 4/01/11 | 85,285 | 84,704 | (581 | ) | ||||||||||||||
BUY | IDR | JPMorgan Chase Bank N.A. | 488,100,000 | 1/14/11 | 54,276 | 54,090 | (186 | ) | ||||||||||||||
SELL | IDR | JPMorgan Chase Bank N.A. | 1,260,865,000 | 1/14/11 | 139,384 | 139,726 | (342 | ) | ||||||||||||||
BUY | JPY | Barclays Bank PLC | 1,283,000 | 1/12/11 | 15,827 | 15,804 | (23 | ) | ||||||||||||||
SELL | JPY | Barclays Bank PLC | 3,714,000 | 1/12/11 | 45,664 | 45,748 | (84 | ) | ||||||||||||||
SELL | JPY | Citibank N.A. | 274,000 | 1/12/11 | 3,310 | 3,375 | (65 | ) | ||||||||||||||
SELL | JPY | Credit Suisse Group | 4,491,000 | 1/12/11 | 55,299 | 55,319 | (20 | ) | ||||||||||||||
SELL | JPY | HSBC Bank | 32,621,000 | 1/12/11 | 389,380 | 401,816 | (12,436 | ) | ||||||||||||||
SELL | JPY | Royal Bank of Scotland PLC | 4,253,000 | 1/12/11 | 52,088 | 52,387 | (299 | ) | ||||||||||||||
SELL | JPY | UBS AG | 14,440,000 | 1/12/11 | 173,870 | 177,868 | (3,998 | ) | ||||||||||||||
BUY | KRW | Barclays Bank PLC | 146,277,000 | 1/05/11-1/18/11 | 130,246 | 128,822 | (1,424 | ) | ||||||||||||||
BUY | KRW | JPMorgan Chase Bank N.A. | 439,000 | 1/18/11 | 389 | 387 | (2 | ) | ||||||||||||||
SELL | KRW | Barclays Bank PLC | 146,167,000 | 1/05/11-1/18/11 | 125,123 | 128,725 | (3,602 | ) | ||||||||||||||
SELL | NOK | Deutsche Bank AG | 14,000 | 1/12/11 | 2,257 | 2,398 | (141 | ) | ||||||||||||||
SELL | NZD | Barclays Bank PLC | 46,000 | 1/12/11 | 35,471 | 35,826 | (355 | ) | ||||||||||||||
BUY | PHP | JPMorgan Chase Bank N.A. | 5,650,000 | 1/06/11-1/26/11 | 130,045 | 128,988 | (1,057 | ) | ||||||||||||||
SELL | PHP | JPMorgan Chase Bank N.A. | 3,814,000 | 1/26/11 | 85,746 | 87,079 | (1,333 | ) | ||||||||||||||
BUY | SEK | Credit Suisse Group | 2,551,650 | 1/12/11 | 380,497 | 379,291 | (1,206 | ) | ||||||||||||||
SELL | SEK | Barclays Bank PLC | 87,000 | 1/12/11 | 12,626 | 12,932 | (306 | ) | ||||||||||||||
BUY | SGD | Deutsche Bank AG | 56,000 | 1/12/11 | 43,671 | 43,636 | (35 | ) | ||||||||||||||
SELL | SGD | Deutsche Bank AG | 62,000 | 1/12/11 | 46,864 | 48,312 | (1,448 | ) | ||||||||||||||
BUY | TRY | HSBC Bank | 89,000 | 2/22/11 | 60,716 | 57,295 | (3,421 | ) | ||||||||||||||
BUY | TRY | JPMorgan Chase Bank N.A. | 216,000 | 1/26/11-2/22/11 | 145,674 | 139,332 | (6,342 | ) | ||||||||||||||
SELL | TWD | Credit Suisse Group | 2,482,550 | 1/27/11 | 82,000 | 85,199 | (3,199 | ) | ||||||||||||||
SELL | TWD | JPMorgan Chase Bank N.A. | 191,000 | 1/27/11 | 6,499 | 6,556 | (57 | ) | ||||||||||||||
|
| |||||||||||||||||||||
$ | (170,391 | ) | ||||||||||||||||||||
|
|
Pro Forma Combined Fund
Contracts to | Settlement Date | Contracts | Net Unrealized Appreciation | |||||||||||||||||||
Type | Currency | Counterparty | Deliver/Receive | Range | In Exchange For | at Value | (Depreciation) | |||||||||||||||
Asset Derivatives | ||||||||||||||||||||||
BUY | AUD | Citibank N.A. | 43,000 | 1/12/11 | 42,220 | 43,942 | 1,722 | |||||||||||||||
BUY | AUD | Credit Suisse Group | 43,000 | 1/12/11 | 42,198 | 43,942 | 1,744 | |||||||||||||||
BUY | AUD | Goldman Sachs International | 8,000 | 1/12/11 | 7,890 | 8,175 | 285 | |||||||||||||||
BUY | AUD | Westpac Banking Corp | 283,831 | 1/12/11 | 275,876 | 290,052 | 14,176 | |||||||||||||||
BUY | CAD | Barclays Bank PLC | 5,000 | 1/12/11 | 4,958 | 5,028 | 70 | |||||||||||||||
BUY | CAD | Goldman Sachs International | 235,812 | 1/12/11 | 230,503 | 237,128 | 6,625 | |||||||||||||||
BUY | CAD | UBS AG | 43,000 | 1/12/11 | 42,504 | 43,240 | 736 | |||||||||||||||
BUY | CLP | Barclays Bank PLC | 47,107,000 | 1/10/11 | 98,757 | 100,608 | 1,851 |
Table of Contents
BUY | CNY | JPMorgan Chase Bank N.A. | 646,000 | 1/14/11-4/18/11 | 97,595 | 98,029 | 434 | |||||||||||||||
SELL | DKK | Royal Bank of Scotland PLC | 224,000 | 1/12/11 | 40,885 | 40,157 | 728 | |||||||||||||||
BUY | EUR | Citibank N.A. | 83,000 | 1/12/11 | 109,740 | 110,911 | 1,171 | |||||||||||||||
BUY | EUR | Deutsche Bank AG | 150,000 | 1/12/11 | 196,861 | 200,443 | 3,582 | |||||||||||||||
BUY | EUR | HSBC Bank | 29,754 | 1/12/11 | 39,527 | 39,759 | 232 | |||||||||||||||
BUY | EUR | JPMorgan Chase Bank N.A. | 288,354 | 1/12/11 | 375,905 | 385,322 | 9,417 | |||||||||||||||
BUY | EUR | UBS AG | 74,000 | 1/12/11 | 98,141 | 98,885 | 744 | |||||||||||||||
SELL | EUR | Barclays Bank PLC | 8,000 | 1/12/11 | 11,009 | 10,690 | 319 | |||||||||||||||
SELL | EUR | Credit Suisse Group | 23,000 | 1/12/11 | 31,220 | 30,734 | 486 | |||||||||||||||
SELL | EUR | Deutsche Bank AG | 32,000 | 1/12/11 | 43,470 | 42,761 | 709 | |||||||||||||||
SELL | EUR | Goldman Sachs International | 9,000 | 1/12/11 | 12,449 | 12,026 | 423 | |||||||||||||||
SELL | EUR | HSBC Bank | 223,000 | 1/12/11 | 305,962 | 297,991 | 7,971 | |||||||||||||||
SELL | EUR | JPMorgan Chase Bank N.A. | 296,000 | 1/12/11 | 416,028 | 395,540 | 20,488 | |||||||||||||||
SELL | EUR | UBS AG | 112,165 | 1/12/11 | 154,369 | 149,884 | 4,485 | |||||||||||||||
BUY | GBP | Barclays Bank PLC | 9,000 | 1/12/11 | 13,869 | 14,031 | 162 | |||||||||||||||
SELL | GBP | Barclays Bank PLC | 22,000 | 1/12/11 | 34,664 | 34,298 | 366 | |||||||||||||||
SELL | GBP | Goldman Sachs International | 86,000 | 1/12/11 | 136,708 | 134,076 | 2,632 | |||||||||||||||
SELL | GBP | UBS AG | 44,000 | 1/12/11 | 70,454 | 68,597 | 1,857 | |||||||||||||||
BUY | JPY | Barclays Bank PLC | 13,295,000 | 1/12/11 | 159,720 | 163,764 | 4,044 | |||||||||||||||
BUY | JPY | Citibank N.A. | 4,030,000 | 1/12/11 | 48,163 | 49,640 | 1,477 | |||||||||||||||
BUY | JPY | Credit Suisse Group | 6,311,000 | 1/12/11 | 77,083 | 77,737 | 654 | |||||||||||||||
BUY | JPY | Goldman Sachs International | 1,681,000 | 1/12/11 | 20,575 | 20,706 | 131 | |||||||||||||||
BUY | JPY | HSBC Bank | 2,137,820 | 1/12/11 | 25,870 | 26,333 | 463 | |||||||||||||||
BUY | JPY | JPMorgan Chase Bank N.A. | 298,908,131 | 1/12/11 | 3,654,894 | 3,681,865 | 26,971 | |||||||||||||||
BUY | JPY | UBS AG | 6,749,000 | 1/12/11 | 80,689 | 83,133 | 2,444 | |||||||||||||||
SELL | JPY | HSBC Bank | 3,610,000 | 1/12/11 | 44,488 | 44,467 | 21 | |||||||||||||||
SELL | JPY | UBS AG | 935,000 | 1/12/11 | 11,617 | 11,517 | 100 | |||||||||||||||
SELL | KRW | JPMorgan Chase Bank N.A. | 738,000 | 1/05/11 -1/18/11 | 653 | 650 | 3 | |||||||||||||||
BUY | MXN | HSBC Bank | 1,216,000 | 1/12/11 | 97,859 | 98,409 | 550 | |||||||||||||||
BUY | NZD | Barclays Bank PLC | 56,000 | 1/12/11 | 42,388 | 43,614 | 1,226 | |||||||||||||||
BUY | PHP | JPMorgan Chase Bank N.A. | 2,252,000 | 1/28/11 | 51,008 | 51,417 | 409 | |||||||||||||||
SELL | SEK | Barclays Bank PLC | 123,000 | 1/12/11 | 18,318 | 18,284 | 34 | |||||||||||||||
BUY | SGD | HSBC Bank | 138,000 | 1/12/11 | 106,638 | 107,532 | 894 | |||||||||||||||
BUY | SGD | JPMorgan Chase Bank N.A. | 127,000 | 2/07/11 | 97,255 | 98,964 | 1,709 | |||||||||||||||
SELL | TRY | Barclays Bank PLC | 118,000 | 1/26/11 | 77,668 | 76,223 | 1,445 | |||||||||||||||
SELL | TRY | Deutsche Bank AG | 246,000 | 2/22/11 | 163,498 | 158,365 | 5,133 | |||||||||||||||
BUY | TWD | Barclays Bank PLC | 3,203,000 | 1/27/11 | 105,483 | 109,925 | 4,442 | |||||||||||||||
BUY | ZAR | Deutsche Bank AG | 2,000 | 1/18/11 | 281 | 303 | 22 | |||||||||||||||
|
| |||||||||||||||||||||
$ | 135,587 | |||||||||||||||||||||
|
|
Table of Contents
Liability Derivatives | ||||||||||||||||||||||
SELL | AUD | Citibank N.A. | 81,000 | 1/12/11 | 79,322 | 82,774 | (3,452 | ) | ||||||||||||||
SELL | CAD | Barclays Bank PLC | 67,000 | 1/12/11 | 66,330 | 67,374 | (1,044 | ) | ||||||||||||||
SELL | CAD | Credit Suisse Group | 502,297 | 1/12/11 | 499,416 | 505,101 | (5,685 | ) | ||||||||||||||
BUY | DKK | Credit Suisse Group | 1,562,394 | 1/12/11 | 291,551 | 280,092 | (11,459 | ) | ||||||||||||||
BUY | EUR | Deutsche Bank AG | 156,000 | 1/12/11 | 212,954 | 208,460 | (4,494 | ) | ||||||||||||||
BUY | EUR | Goldman Sachs International | 46,311 | 1/12/11 | 64,077 | 61,884 | (2,193 | ) | ||||||||||||||
BUY | EUR | JPMorgan Chase Bank N.A. | 1,267,021 | 1/12/11 | 1,766,131 | 1,693,097 | (73,034 | ) | ||||||||||||||
BUY | EUR | UBS AG | 16,643 | 1/12/11 | 23,640 | 22,240 | (1,400 | ) | ||||||||||||||
SELL | EUR | Barclays Bank PLC | 78,000 | 1/12/11 | 101,291 | 104,230 | (2,939 | ) | ||||||||||||||
SELL | EUR | Citibank N.A. | 8,000 | 1/12/11 | 10,585 | 10,690 | (105 | ) | ||||||||||||||
SELL | EUR | Deutsche Bank AG | 22,000 | 1/12/11 | 29,231 | 29,398 | (167 | ) | ||||||||||||||
SELL | EUR | Goldman Sachs International | 56,000 | 1/12/11 | 74,810 | 74,832 | (22 | ) | ||||||||||||||
SELL | EUR | HSBC Bank | 189,745 | 1/12/11 | 252,684 | 253,553 | (869 | ) | ||||||||||||||
SELL | EUR | UBS AG | 2,143,474 | 3/15/11 | 2,831,338 | 2,863,660 | (32,322 | ) | ||||||||||||||
BUY | GBP | Barclays Bank PLC | 172,959 | 1/12/11 | 274,882 | 269,647 | (5,235 | ) | ||||||||||||||
BUY | GBP | Credit Suisse Group | 7,000 | 1/12/11 | 11,158 | 10,913 | (245 | ) | ||||||||||||||
BUY | GBP | Deutsche Bank AG | 272,448 | 1/12/11 | 431,806 | 424,751 | (7,055 | ) | ||||||||||||||
BUY | GBP | Royal Bank of Scotland PLC | 37,000 | 1/12/11 | 59,365 | 57,684 | (1,681 | ) | ||||||||||||||
BUY | GBP | UBS AG | 19,000 | 1/12/11 | 30,040 | 29,621 | (419 | ) | ||||||||||||||
BUY | IDR | Barclays Bank PLC | 925,822,000 | 4/01/11 | 102,075 | 101,380 | (695 | ) | ||||||||||||||
BUY | IDR | JPMorgan Chase Bank N.A. | 596,638,000 | 1/14/11 | 66,345 | 66,118 | (227 | ) | ||||||||||||||
SELL | IDR | JPMorgan Chase Bank N.A. | 1,521,968,000 | 1/14/11 | 168,248 | 168,661 | (413 | ) | ||||||||||||||
BUY | JPY | Barclays Bank PLC | 1,289,000 | 1/12/11 | 15,902 | 15,878 | (24 | ) | ||||||||||||||
BUY | JPY | Goldman Sachs International | 3,208,241 | 1/12/11 | 39,539 | 39,520 | (19 | ) | ||||||||||||||
SELL | JPY | Barclays Bank PLC | 5,601,000 | 1/12/11 | 68,391 | 68,991 | (600 | ) | ||||||||||||||
SELL | JPY | Citibank N.A. | 2,884,000 | 1/12/11 | 34,844 | 35,524 | (680 | ) | ||||||||||||||
SELL | JPY | Credit Suisse Group | 4,591,000 | 1/12/11 | 56,529 | 56,550 | (21 | ) | ||||||||||||||
SELL | JPY | Goldman Sachs International | 668,000 | 1/12/11 | 8,176 | 8,228 | (52 | ) | ||||||||||||||
SELL | JPY | HSBC Bank | 38,179,000 | 1/12/11 | 455,713 | 470,278 | (14,565 | ) | ||||||||||||||
SELL | JPY | Royal Bank of Scotland PLC | 5,086,000 | 1/12/11 | 62,290 | 62,648 | (358 | ) | ||||||||||||||
SELL | JPY | UBS AG | 15,520,000 | 1/12/11 | 187,149 | 191,171 | (4,022 | ) | ||||||||||||||
BUY | KRW | Barclays Bank PLC | 174,966,000 | 1/05/11-1/18/11 | 155,791 | 154,088 | (1,703 | ) | ||||||||||||||
BUY | KRW | JPMorgan Chase Bank N.A. | 738,000 | 1/05/11-1/18/11 | 654 | 651 | (3 | ) | ||||||||||||||
SELL | KRW | Barclays Bank PLC | 174,826,000 | 1/05/11-1/18/11 | 149,656 | 153,964 | (4,308 | ) | ||||||||||||||
SELL | NOK | Deutsche Bank AG | 15,000 | 1/12/11 | 2,418 | 2,569 | (151 | ) | ||||||||||||||
SELL | NZD | Barclays Bank PLC | 55,000 | 1/12/11 | 42,411 | 42,836 | (425 | ) | ||||||||||||||
BUY | PHP | JPMorgan Chase Bank N.A. | 6,759,000 | 1/06/11-1/26/11 | 155,571 | 154,306 | (1,265 | ) |
Table of Contents
SELL | PHP | JPMorgan Chase Bank N.A. | 4,587,000 | 1/26/11 | 103,125 | 104,728 | (1,603 | ) | ||||||||||||||
BUY | SEK | Credit Suisse Group | 3,058,457 | 1/12/11 | 456,071 | 454,625 | (1,446 | ) | ||||||||||||||
SELL | SEK | Barclays Bank PLC | 121,000 | 1/12/11 | 17,560 | 17,986 | (426 | ) | ||||||||||||||
BUY | SGD | Deutsche Bank AG | 66,000 | 1/12/11 | 51,469 | 51,428 | (41 | ) | ||||||||||||||
SELL | SGD | Deutsche Bank AG | 74,000 | 1/12/11 | 55,934 | 57,662 | (1,728 | ) | ||||||||||||||
BUY | TRY | HSBC Bank | 106,000 | 2/22/11 | 72,313 | 68,239 | (4,074 | ) | ||||||||||||||
BUY | TRY | JPMorgan Chase Bank N.A. | 258,000 | 1/26/11-2/22/11 | 173,996 | 166,425 | (7,571 | ) | ||||||||||||||
SELL | TWD | Credit Suisse Group | 2,966,950 | 1/27/11 | 98,000 | 101,823 | (3,823 | ) | ||||||||||||||
SELL | TWD | JPMorgan Chase Bank N.A. | 215,000 | 1/27/11 | 7,316 | 7,381 | (65 | ) | ||||||||||||||
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| |||||||||||||||||||||
$ | (204,128 | ) | ||||||||||||||||||||
|
|
At December 31, 2010, the pro forma combined fund had sufficient cash and/or securities to cover any commitments under these derivative contracts.
See Notes to Financial Statements
Table of Contents
Pro Forma Combined Statement of Assets and Liabilities (unaudited)
December 31, 2010
Global Governments Variable Account | MFS Global Governments Portfolio | Pro Forma Adjustments | Pro Forma Combined Fund | |||||||||||||
Assets: | ||||||||||||||||
Investments- | ||||||||||||||||
Non-affiliated issuers, at value (identified cost, $5,573,857, $31,402,337, and $36,976,194, respectively) | $ | 5,904,867 | $ | 32,887,856 | $ | — | $ | 38,792,723 | ||||||||
Underlying affiliated funds, at cost and value | 246,397 | — | — | 246,397 | ||||||||||||
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|
|
| |||||||||
Total Investments, at value (identified cost, $5,820,254, $31,402,337, and $37,222,591, respectively) | $ | 6,151,264 | $ | 32,887,856 | $ | — | $ | 39,039,120 | ||||||||
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| |||||||||
Cash | — | 990 | — | 990 | ||||||||||||
Foreign currency, at value (identified cost, $45, $226, and $271, respectively) | 46 | 230 | — | 276 | ||||||||||||
Receivables for | ||||||||||||||||
Forward foreign currency exchange contracts | 21,668 | 113,919 | — | 135,587 | ||||||||||||
Interest | 75,171 | 397,139 | — | 472,310 | ||||||||||||
Receivable from investment adviser | 8,029 | 3,059 | — | 11,088 | ||||||||||||
Other assets | 397 | 1,444 | — | 1,841 | ||||||||||||
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|
|
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| |||||||||
Total assets | $ | 6,256,575 | $ | 33,404,637 | $ | — | $ | 39,661,212 | ||||||||
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| |||||||||
Liabilities: | ||||||||||||||||
Payables for | ||||||||||||||||
Forward foreign currency exchange contracts | $ | 33,737 | $ | 170,391 | — | 204,128 | ||||||||||
Units surrendered/ Fund shares reacquired | 91,623 | 40,092 | — | 131,715 | ||||||||||||
Payable to affiliates | — | |||||||||||||||
Investment adviser | 252 | 1,353 | — | 1,605 | ||||||||||||
Distribution and/or service fees | — | 42 | — | 42 | ||||||||||||
Administrative services fee | 55 | 79 | — | 134 | ||||||||||||
Payable for Manager/Trustees’ compensation | 10 | 40 | — | 50 | ||||||||||||
Payable to sponsor | 148 | — | (148 | )(a) | — | |||||||||||
Accrued expenses and other liabilities | 39,940 | 52,663 | — | 92,603 | ||||||||||||
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| |||||||||
Total liabilities | $ | 165,765 | $ | 264,660 | $ | (148 | ) | $ | 430,277 | |||||||
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| |||||||||
Net assets | $ | 6,090,810 | $ | 33,139,977 | $ | 148 | $ | 39,230,935 | ||||||||
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| |||||||||
Net assets consist of: | ||||||||||||||||
Paid-in capital | $ | — | $ | 31,386,558 | $ | 5,771,649 | $ | 37,158,207 | ||||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | — | 1,430,414 | 319,309 | 1,749,723 | ||||||||||||
Accumulated distributions in excess of net realized gain (loss) on investments and foreign currency transactions | — | (182,623 | ) | — | (182,623 | ) | ||||||||||
Undistributed net investment income | — | 505,628 | — | 505,628 | ||||||||||||
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| |||||||||
Net assets | $ | — | $ | 33,139,977 | $ | 6,090,958 | (b) | $ | 39,230,935 | |||||||
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Units/Shares of beneficial interest outstanding | 290,420 | 3,016,903 | 553,723 | 3,570,626 | ||||||||||||
Net assets: | ||||||||||||||||
Contract Level 2/Initial Class | $ | 1,742,393 | (c) | $ | 30,046,688 | 6,090,958 | $ | 36,137,646 | ||||||||
Contract Level 3/Service Class | 174,922 | (c) | 3,093,289 | — | 3,093,289 | |||||||||||
Contract Level 3-2 | 4,173,495 | (c) | — | — | — | |||||||||||
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| |||||||||
Total | $ | 6,090,810 | $ | 33,139,977 | $ | 6,090,958 | $ | 39,230,935 | ||||||||
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| |||||||||
Accumulation Units/Shares outstanding: | ||||||||||||||||
Contract Level 2/Initial Class | 55,035 | 2,731,783 | 553,723 | (e) | 3,285,506 | |||||||||||
Contract Level 3/Service Class | 5,750 | 285,120 | — | 285,120 | ||||||||||||
Contract Level 3-2 | 229,635 | — | — | — | ||||||||||||
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| |||||||||
Total | 290,420 | 3,016,903 | 553,723 | 3,570,626 | ||||||||||||
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| |||||||||
Accumulation Unit Value/Net Asset Value: | ||||||||||||||||
Contract Level 2/Initial Class | $ | 31.477 | (d) | $ | 11.00 | $ | 11.00 | |||||||||
Contract Level 3/Service Class | 30.421 | (d) | 10.85 | 10.85 | ||||||||||||
Contract Level 3-2 | 18.003 | (d) | — | — |
(a) | Insurance related payable to sponsor to be eliminated for Global Governments Variable Account by the sponsor following MFS Global Governments Portfolio’s acquisition of Global Governments Variable Account. |
(b) | Net Assets of the Global Governments Variable Account acquired by MFS Global Governments Portfolio. |
(c) | Contract Level net assets also include the net assets associated with the contract level reserve. |
(d) | Accumulation Unit Value does not reflect net assets associated with the reserve of each contract level. |
(e) | If the reorganization had taken place on December 31, 2010, the Global Governments Variable Account would have received 553,723 Initial Class Shares of the MFS Global Governments Portfolio, which would be available for distribution to its contract holders. No assurances can be given as to the number of Reorganization Shares the Global Governments Variable Account will receive on the Exchange Date. The foregoing is merely an example of what the Global Governments Variable Account would have received and distributed had the reorganization been consummated on December 31, 2010, and should not be relied upon to reflect the amount that will be actually received on or after the Exchange Date. |
Table of Contents
Pro Forma Combined Statement of Operations (unaudited)
For the year ended December 31, 2010
Global Governments Variable Account | MFS Global Governments Portfolio | Pro Forma Adjustments | Pro Forma Combined Fund | |||||||||||||||||
Net investment income: | ||||||||||||||||||||
Income | ||||||||||||||||||||
Interest | $ | 171,764 | $ | 898,730 | $ | — | $ | 1,070,494 | ||||||||||||
Dividends from underlying affiliated funds | 786 | — | — | 786 | ||||||||||||||||
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|
|
|
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| |||||||||||||
Total investment income | $ | 172,550 | $ | 898,730 | $ | — | 1,071,280 | |||||||||||||
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| |||||||||||||
Expenses | ||||||||||||||||||||
Management fee | $ | 51,054 | $ | 255,445 | $ | — | $ | 306,499 | ||||||||||||
Mortality and expense risk charges | 83,848 | — | (83,848 | ) | (a | ) | — | |||||||||||||
Distribution expense risk charge | 244 | — | (244 | ) | (a | ) | — | |||||||||||||
Distribution and/or service fees | — | 7,983 | — | 7,983 | ||||||||||||||||
Administrative services fee | 10,000 | 14,844 | (7,231 | ) | (b | ) | 17,613 | |||||||||||||
Managers/Trustees’ compensation | 1,006 | 4,714 | — | 5,720 | ||||||||||||||||
Custodian fee | 27,624 | 31,240 | (13,812 | ) | (b | ) | 45,052 | |||||||||||||
Printing/Shareholder communications | 10,744 | 6,996 | (2,149 | ) | (b | ) | 15,591 | |||||||||||||
Auditing fees | 49,706 | 58,800 | (49,706 | ) | (b | ) | 58,800 | |||||||||||||
Legal fees | 7,102 | 7,119 | (6,392 | ) | (b | ) | 7,829 | |||||||||||||
Miscellaneous | 5,605 | 11,989 | (5,045 | ) | (b | ) | 12,549 | |||||||||||||
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|
|
|
|
|
|
| |||||||||||||
Total expenses | $ | 246,933 | $ | 399,130 | $ | (168,427 | ) | $ | 477,636 | |||||||||||
|
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|
|
|
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|
| |||||||||||||
Fees paid indirectly | (1 | ) | (7 | ) | — | (8 | ) | |||||||||||||
Reduction of expenses by investment adviser | (77,670 | ) | (50,433 | ) | 67,030 | (c | ) | (61,073 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Net expenses | $ | 169,262 | $ | 348,690 | $ | (101,397 | ) | $ | 416,555 | |||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Net investment income | $ | 3,288 | $ | 550,040 | $ | 101,397 | $ | 654,725 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Realized and unrealized gain (loss) on investments and foreign currency transactions | ||||||||||||||||||||
Realized gain (loss) (identified cost basis) | ||||||||||||||||||||
Investment transactions | $ | 84,091 | $ | (54,618 | ) | $ | — | $ | 29,473 | |||||||||||
Foreign currency transactions | 88,922 | 468,130 | — | 557,052 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Net realized gain (loss) on investments and foreign currency transactions | $ | 173,013 | $ | 413,512 | $ | — | $ | 586,525 | ||||||||||||
|
|
|
|
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|
|
| |||||||||||||
Change in unrealized appreciation (depreciation) | ||||||||||||||||||||
Investments | $ | 29,949 | $ | 473,005 | $ | — | $ | 502,954 | ||||||||||||
Translation of assets and liabilities in foreign currencies | 11,749 | 57,550 | — | 69,299 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Net unrealized gain (loss) on investments and foreign currency translation | $ | 41,698 | $ | 530,555 | $ | — | $ | 572,253 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $ | 214,711 | $ | 944,067 | $ | — | $ | 1,158,778 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Change in net assets from operations | $ | 217,999 | $ | 1,494,107 | $ | 101,397 | $ | 1,813,503 | ||||||||||||
|
|
|
|
|
|
|
|
(a) | Insurance related mortality and expense risk charge and distribution risk charge to be borne directly by contract owners following MFS Global Governments Portfolio’s acquisition of Global Governments Variable Account. |
(b) | Expenditures are reduced as a result of several factors such as the elimination of duplicative functions and changes to the allocation of expenses. |
(c) | Expense reduction adjusted to reflect annualized contractual expense caps of the pro forma combined fund. |
Table of Contents
MFS Global Governments Portfolio and
Global Governments Variable Account
Notes to Pro Forma Combined Financial Statements
December 31, 2010
(Unaudited)
(1) Description of the Fund
MFS Global Governments Portfolio (Acquiring Fund), a series of MFS Variable Insurance Trust II (the trust), is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. 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 Acquiring Fund consists of 2 classes of shares: Initial Class and Service Class. The Acquiring 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.
(2) Basis for the Combination
The accompanying pro forma financial statements are presented to show the effect of the proposed reorganization of Global Governments Variable Account (Target Fund) into the Acquiring Fund, (Acquiring Fund and Target Fund are referred to herein as the fund), as if such reorganization had taken place as of December 31, 2010, the annual period of the Acquiring Fund. The following notes refer to the accompanying pro forma financial statements as if the reorganization of the Target Fund with and into the Acquiring Fund had taken place as of December 31, 2010, at the respective net asset value on that date. The Acquiring Fund will be the accounting survivor, based upon an analysis of factors including surviving fund portfolio manager, investment objectives and policies, expense ratio structures and portfolio composition and size.
The accompanying pro forma financial statements should be read in conjunction with the financial statements of the Acquiring Fund and Target Fund included in their respective annual reports dated December 31, 2010.
(3) Accounting Estimates
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 revenues and expenses during the reporting period. Actual results could differ from those estimates.
Table of Contents
(4) Portfolio Valuation
Debt instruments and floating rate loans (other than short-term instruments), 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 generally are valued at amortized cost, which approximates market value. Forward foreign currency 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.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of each 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 each 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 each 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. 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 each 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 each 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.
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Various inputs are used in determining the value of each 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. Each 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 not reflected in total investments, such as forwards. The following is a summary of the levels used as of December 31, 2010 in valuing each fund’s assets or liabilities:
Global Governments Variable Account
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
U.S. Treasury Bonds & U.S. Government Agency & Equivalents | $ | — | $ | 1,787,142 | $ | — | $ | 1,787,142 | ||||||||
Non-U.S. Sovereign Debt | — | 3,766,912 | — | 3,766,912 | ||||||||||||
Corporate Bonds | — | 14,133 | — | 14,133 | ||||||||||||
Residential Mortgage-Backed Securities | — | 236,614 | — | 236,614 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 100,066 | — | 100,066 | ||||||||||||
Mutual Funds | 246,397 | — | — | $ | 246,397 | |||||||||||
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|
|
|
|
|
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| |||||||||
Total Investments | $ | 246,397 | $ | 5,094,867 | $ | — | $ | 6,151,264 | ||||||||
|
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Other Financial Instruments | ||||||||||||||||
Forward Currency Contracts | $ | — | $ | (12,069 | ) | $ | — | $ | (12,069 | ) |
MFS Global Governments Portfolio
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
U.S. Treasury Bonds & U.S. Government Agency & Equivalents | $ | — | $ | 9,213,854 | $ | — | $ | 9,213,854 | ||||||||
Non-U.S. Sovereign Debt | — | 20,254,931 | — | 20,254,931 |
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Corporate Bonds | — | 65,954 | — | 65,954 | ||||||||||||
Residential Mortgage-Backed Securities | — | 1,044,536 | — | 1,044,536 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 549,589 | — | 549,589 | ||||||||||||
Short Term Securities | — | 1,758,992 | — | 1,758,992 | ||||||||||||
|
|
|
|
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|
|
| |||||||||
Total Investments | $ | — | $ | 32,887,856 | $ | — | $ | 32,887,856 | ||||||||
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|
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|
|
| |||||||||
Other Financial Instruments | ||||||||||||||||
Forward Currency Contracts | $ | — | $ | (56,472 | ) | $ | — | $ | (56,472 | ) |
Pro Forma Combined Fund
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
U.S. Treasury Bonds & U.S. Government Agency & Equivalents | $ | — | $ | 11,000,996 | $ | — | $ | 11,000,996 | ||||||||
Non-U.S. Sovereign Debt | — | 24,021,843 | — | 24,021,843 | ||||||||||||
Corporate Bonds | — �� | 80,087 | — | 80,087 | ||||||||||||
Residential Mortgage-Backed Securities | — | 1,281,150 | — | 1,281,150 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 649,655 | — | 649,655 | ||||||||||||
Mutual Funds | 246,397 | — | — | 246,397 | ||||||||||||
Short Term Securities | — | 1,758,992 | — | 1,758,992 | ||||||||||||
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|
|
| |||||||||
Total Investments | $ | 246,397 | $ | 38,792,723 | $ | — | $ | 39,039,120 | ||||||||
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|
|
|
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Other Financial Instruments | ||||||||||||||||
Forward Currency Contracts | $ | — | $ | (68,541 | ) | $ | — | $ | (68,541 | ) |
For further information regarding security characteristics, see the Portfolios of Investments.
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(5) Reorganization Costs
MFS has agreed to bear all costs associated with the proposed reorganization as well as the following proposed reorganizations:
Target Fund | Acquiring Fund | |
Capital Appreciation Variable Account | MFS Massachusetts Investor Growth Stock Portfolio | |
Government Securities Variable Account | MFS Government Securities Portfolio | |
High Yield Variable Account | MFS High Yield Portfolio | |
Money Market Variable Account | MFS Money Market Portfolio | |
Total Return Variable Account | MFS Total Return Portfolio |
These agregate costs for all proposed reorganizations are estimated at $205,000.
(6) Capital Shares
The pro forma combined shares of beneficial interest outstanding represent those shares that would have been outstanding on December 31, 2010, had the acquisition taken place on December 31, 2010. In exchange for the net assets of the Target Fund the initial class of shares of the Acquiring Fund would have been issued based upon the per share net asset value as follows:
Initial Class | ||||
Net assets – Target Fund | $ | 6,090,958 | ||
Shares – Acquiring Fund | 553,723 | |||
Net asset value – Acquiring Fund | $ | 11.00 |
(7) Transactions in Underlying Affiliated Funds-Affiliated Issuers
An affiliated issuer may be considered one in which the each owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, each fund assumes the following to be affiliated issuers:
For the year ended December 31, 2010:
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Global Governments Variable Account Underlying Affiliated Funds | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 444,688 | 3,532,631 | (3,730,922 | ) | 246,397 |
Underlying Affiliated Funds | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $ | — | $ | — | $ | 786 | $ | 246,397 |
Pro Forma Combined Fund Underlying Affiliated Funds | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares /Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 444,688 | 3,532,631 | (3,730,922 | ) | 246,397 | |||||||||||
Underlying Affiliated Funds | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $ | — | $ | — | $ | 786 | $ | 246,397 |
(8) Federal Income Taxes
The fund’s policy is to comply with the provision of the Internal Revenue Code applicable to regulated investment companies and to distribute to shareholders all of its net taxable income, including any net realized gain on investments. Accordingly, no provision for federal income or excise tax is provided. Under the terms of the Agreement and Plan of Reorganization, the transfer between the Acquiring Fund and the Target Fund should be treated as a tax-free transfer to a controlled corporation.
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PROXY TABULATOR]
[Address]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF MANAGERS
[VARIABLE ACCOUNT NAME HERE]
PROXY FOR A SPECIAL MEETING OF CONTRACT OWNERS, NOVEMBER 17, 2011
The undersigned, revoking prior proxies, hereby appoints Mark N. Polebaum, Susan S. Newton, John M. Corcoran, Christopher R. Bohane, Susan A. Pereira, Timothy M. Fagan and Brian E. Langenfeld (each, a “Holder”), and each of them, proxies with several powers of substitution, to vote for the undersigned at the Special Meeting of contract owners of [VARIABLE ACCOUNT NAME HERE] to be held at 500 Boylston Street, 24th Floor, Boston, Massachusetts, on Thursday, November 17, 2011, notice of which meeting and the Prospectus/Proxy Statement accompanying the same have been received by the undersigned, or at any adjournment thereof, upon the following matters as described in the Notice of Meeting and accompanying Prospectus/Proxy Statement.
When properly executed, this proxy will be voted in the manner directed herein by the undersigned contract owner. All proposals (set forth on the reverse of this proxy card) have been proposed by the Board of Managers. If no direction is given on these proposals, this proxy card will be voted “for” Proposals 1 and 2. The proxy will be voted in accordance with the Holder’s best judgment as to any other matters.
Please be sure to sign and date this card.
[VARIABLE ACCOUNT NAME PRINTS HERE]
Date
Please sign this proxy exactly as your name or names appear hereon. Trustees and other fiduciaries should indicate the capacity in which they sign, and where more than one name appears, a majority must sign. If a corporation, this signature should be that of an authorized officer who should state his or her title.
CONTRACT OWNER SIGNS HERE |
Please fold and detach card at perforation before mailing
Table of Contents
[VARIABLE ACCOUNT NAME HERE]
WHEN THIS PROXY IS PROPERLY EXECTUED, THE UNITS REPRESENTED HEREBY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSAL SET FORTH BELOW:
PLEASE MARK A BOX BELOW IN BLUE OR BLACK INK AS FOLLOWS.
PROPOSAL: For ¨ Against ¨ Abstain ¨
Proposals 1: | To approve an Agreement and Plan of Reorganization providing for the transfer of certain assets of [VARIABLE ACCOUNT NAME HERE] (the “Account”) to [VIT II-PORTFOLIO NAME HERE] (the “Fund”), a series of MFS Variable Insurance Trust II, in exchange solely for shares of beneficial interest in the Fund and the assumption by the Fund of certain liabilities of the Account, the distribution of Fund shares to the Account and to restructure the Account into a unit investment trust. | |||||||||
Proposal 2: | To elect managers to the Account’s Board of Managers, each to hold office until he or she dies, resigns or is removed or, if sooner, until the next meeting of contract owners called for the purpose of electing managers and until the election and qualification of his or her successor.
To withhold authority to vote for any individual nominee(s) mark the “For All Except” and write the nominee number(s) on the line provided.
| |||||||||
01. Robert E. Butler | 02. Maureen R. Goldfarb | 03. David H. Gunning | 04. William R. Gutow | 05. Michael Hegarty | ||||||
06. John P. Kavanaugh | 07. Robert J. Manning | 08. J. Dale Sherratt | 09. Laurie J. Thomsen | 10. Robert W. Uek |
For All ¨ | Withhold All ¨ | For All Except ¨ |
Proposal 3: | To transact such other business as may properly come before the meeting or any adjournments or postponements thereof. |
Please be sure to sign and date this card.
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MFS VARIABLE INSURANCE TRUST II
On behalf of MFS Global Governments Portfolio
MFS Government Securities Portfolio
MFS High Yield Portfolio
MFS® Massachusetts Investors Growth Stock Portfolio
MFS Money Market Portfolio
MFS Total Return Portfolio
PART C
OTHER INFORMATION
Item 15. Indemnification
Reference is hereby made to (a) Article V of the Registrant’s Amended and Restated Declaration of Trust, dated August 12, 2003, incorporated by reference to Registrant’s Post-Effective Amendment No. 33, filed with the SEC via EDGAR on February 27, 2004 and (b) the undertaking of the Registrant regarding indemnification set forth in Registrant’s Post-Effective Amendment No. 21, filed with the SEC via EDGAR on February 13, 1998.
The Trustees and officers of the Registrant and the personnel of the Registrant’s investment adviser are insured under an errors and omissions liability insurance policy. The Registrant and its officers are also insured under the fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940.
Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in such Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a trustee, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the securities being registered hereby, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in such Act and will be governed by the final adjudication of such issue.
Item 16. Exhibits
(1) | a | Amended and Restated Declaration of Trust, dated August 12, 2003. (4) | ||
b | Amendment to the Declaration of Trust, dated September 9, 2003, to terminate two series. (4) | |||
c | Amendment to the Amended and Restated Declaration of Trust on April 30, 2004 – Redesignation of Research Growth and Income Series as Core Equity Series. (11) | |||
d | Amendment to the Declaration of Trust, dated April 29, 2005, to terminate Managed Sectors Series. (7) | |||
e | Amendment to the Declaration of Trust, dated June 22, 2007 - Redesignation of Massachusetts Investors Trust Series as Blended Research Core Equity Series. (13) |
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f | Amendment to the Declaration of Trust, dated June 22, 2007, to terminate Capital Opportunities Series and Strategic Growth Series. (13) |
g | Amendment to the Declaration of Trust, dated October 3, 2007, - Establishment and Designation of Blended Research Growth Series and Blended Research Value Series. (13) |
h | Amendment to the Declaration of Trust, dated December 28, 2007, - Redesignation of Trust and Series. (14) |
i | Amendment to the Declaration of Trust, dated February 29, 2008 - Redesignation of MFS Emerging Market Equity Portfolio as MFS Emerging Markets Equity Portfolio. (15) |
j | Amendment to the Declaration of Trust, dated April 29, 2008 - Redesignation of MFS Emerging Growth Portfolio as MFS Growth Portfolio. (16) |
k | Amendment to the Declaration of Trust, dated September 16, 2008 - Redesignation of MFS Research Portfolio as MFS Global Research Portfolio. (16) |
l | Amendment to the Declaration of Trust, dated August 7, 2009, to terminate MFS Strategic Value Portfolio. (17) |
m | Amendment to the Declaration of Trust, dated December 29, 2009 – Termination of MFS Capital Appreciation Portfolio. (17) |
n | Amendment to the Declaration of Trust, dated December 29, 2009 – Termination of MFS Mid Cap Value Portfolio. (17) |
o | Amendment to the Declaration of Trust, dated February 8, 2010 – Redesignation of MFS Global Total Return Portfolio to MFS Global Tactical Allocation Portfolio. (17) |
(2) | Amended and Restated By-Laws, dated October 25, 2002 as revised August 6, 2004.(11) |
(3) | Not Applicable. |
(4) | Form of Agreement and Plan of Reorganization; included as Exhibit A to Prospectus/Proxy Statement set forth in Part A to the Registration Statement on Form N-14, filed herewith. |
(5) | Copies of instruments defining the rights of shareholders, including the relevant portions of: the Amended and Restated Declaration of Trust, dated August 12, 2003, as amended through February 8, 2010, (See Exhibit A, section 6.2) and the Amended and Restated By-Laws, dated October 25, 2002 as revised August 6, 2004 (See Article III). (8) |
(6) | a | Investment Advisory Agreement between Registrant and Massachusetts Financial Services Company dated May 24, 1985. (3)
|
b | Investment Advisory Agreement between Registrant and Massachusetts Financial Services Company dated July 23, 1986. (3) |
c | Amendment, relating to the Government Securities Series, dated September 1, 2005, to the Investment Advisory Agreement, dated July 23, 1986, between Registrant and Massachusetts Financial Services Company. (7) |
d | Investment Advisory Agreement between Registrant and Massachusetts Financial Services Company dated January 26, 1988. (3) |
e | Investment Advisory Agreement between Registrant and Massachusetts Financial Services Company relating to the Global Growth Series (formerly, World Growth Series) dated November 1, 1993. (3) |
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f | Amendment, dated January 1, 2004, to the Investment Advisory Agreement by and between the Registrant and Massachusetts Financial Services Company on behalf of Global Growth Series. (4) |
g | Investment Advisory Agreement between Registrant and Massachusetts Financial Services Company relating to the Utilities Series dated November 1, 1993. (3) |
h | Investment Advisory Agreement between Registrant and Massachusetts Financial Services Company relating to the Research Series dated September 16, 1994. (3) |
i | Investment Advisory Agreement between Registrant and Massachusetts Financial Services Company relating to the World Total Return Series dated September 16, 1994. (3) |
j | Investment Advisory Agreement between Registrant and Massachusetts Financial Services Company relating to the Emerging Growth Series dated May 1, 1995. (3) |
k | Investment Advisory Agreement between Registrant and Massachusetts Financial Services Company relating to the International Growth Series (formerly, MFS/Foreign & Colonial International Growth Series) dated September 1, 1995. (3) |
l | Amendment, dated January 1, 2004, to the Investment Advisory Agreement by and between the Registrant and Massachusetts Financial Services Company on behalf of International Growth Series. (4) |
m | Investment Advisory Agreement between Registrant and Massachusetts Financial Services Company relating to the International Value Series (formerly, MFS/Foreign & Colonial International Growth and Income Series) dated September 1, 1995. (3) |
n | Amendment, dated January 1, 2004, to the Investment Advisory Agreement by and between the Registrant and Massachusetts Financial Services Company on behalf of the International Value Series. (4) |
o | Investment Advisory Agreement between Registrant and Massachusetts Financial Services Company relating to the Emerging Markets Equity Series (formerly, MFS/Foreign & Colonial Emerging Markets Equity Series) dated September 1, 1995. (3) |
p | Amendment, dated January 1, 2004, to the Investment Advisory Agreement by and between the Registrant and Massachusetts Financial Services Company on behalf of the Emerging Markets Equity Series. (4) |
q | Investment Advisory Agreement between Registrant and Massachusetts Financial Services Company relating to the Value Series dated May 1, 1998. (3) |
r | Amendment, dated September 1, 2005, to the Investment Advisory Agreement, dated May 1, 1998, by and between the Registrant and Massachusetts Financial Services Company on behalf of the Value Series. (7) |
s | Investment Advisory Agreement between Registrant, on behalf of the Research Growth and Income Series, and Massachusetts Financial Services Company dated May 12, 1997. (3) |
t | Amendment, dated September 1, 2005, to the Investment Advisory Agreement, dated May 12, 1997, by and between the Registrant and Massachusetts Financial Services Company on behalf of the Core Equity Series (formerly, Research Growth and Income Series). (7) |
u | Amendment to the Investment Advisory Agreement by and between Massachusetts Financial Services Company and the Registrant relating to the Capital Appreciation Series dated January 1, 1997. (1) |
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v | Investment Advisory Agreement between Registrant, on behalf of the Bond Series, and Massachusetts Financial Services Company dated May 1, 1998. (5) |
w | Investment Advisory Agreement between Registrant, on behalf of the Equity Income Series, and Massachusetts Financial Services Company dated May 1, 1998. (5) |
x | Investment Advisory Agreement between Registrant, on behalf of the Massachusetts Investors Growth Stock Series, and Massachusetts Financial Services Company dated May 1, 1998. (5) |
y | Investment Advisory Agreement between Registrant, on behalf of the New Discovery Series, and Massachusetts Financial Services Company dated May 1, 1998. (5) |
z | Amendment, dated September 1, 2005, to the Investment Advisory Agreement, dated May 1, 1998, by and between the Registrant and Massachusetts Financial Services Company on behalf of the New Discovery Series. (7) |
aa | Investment Advisory Agreement between Registrant, on behalf of the Research International Series, and Massachusetts Financial Services Company dated May 1, 1998. (5) |
bb | Amendment, dated January 1, 2004, to the Investment Advisory Agreement by and between the Registrant and Massachusetts Financial Services Company on behalf of the Research International Series. (4) |
cc | Investment Advisory Agreement between Registrant, on behalf of the Strategic Income Series, and Massachusetts Financial Services Company dated May 1, 1998. (5) |
dd | Amendment, dated September 1, 2005, to the Investment Advisory Agreement, dated May 1, 1998, by and between the Registrant and Massachusetts Financial Services Company on behalf of the Strategic Income Series. (7) |
ee | Investment Advisory Agreement between Registrant, on behalf of Technology Series, and Massachusetts Financial Services Company, dated June 16, 2000. (10) |
ff | Amendment, dated September 1, 2005, to the Investment Advisory Agreement, June 16, 2000, by and between the Registrant and Massachusetts Financial Services Company on behalf of the Technology Series. (7) |
gg | Investment Advisory Agreement between Registrant, on behalf of Mid Cap Growth Series, and Massachusetts Financial Services Company, dated August 31, 2000. (10) |
hh | Amendment, dated September 1, 2005, to the Investment Advisory Agreement, dated August 31, 2000, by and between the Registrant and Massachusetts Financial Services Company on behalf of the Mid Cap Growth Series. (7) |
ii | Investment Advisory Agreement between Registrant, on behalf of International New Discovery Series, and Massachusetts Financial Services Company, dated May 1, 1998. (12) |
jj | Amendment, dated September 1, 2005, to the Investment Advisory Agreement, dated February 28, 2001, by and between the Registrant and Massachusetts Financial Services Company on behalf of the Mid Cap Value Series (formerly International New Discovery Series). (7) |
kk | Investment Advisory Agreement between Registrant and Massachusetts Financial Services Company relating to the Global Health Sciences Series, dated February 28, 2001. (7) |
ll | Amendment, dated September 1, 2005, to the Investment Advisory Agreement, dated February 28, 2001, by and between the Registrant and Massachusetts Financial Services |
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Company on behalf of the Strategic Value Series (formerly, Global Health Sciences Series). (7) |
mm | Investment Advisory Agreement between Registrant and Massachusetts Financial Services Company on behalf of the Blended Research Growth Series and the Blended Research Value Series, dated December 19, 2007. (14) |
(7) | Amended and Restated Distribution Agreement, dated September 1, 2005. (7) |
(8) | Not Applicable. |
(9) | a | Custodian Agreement between the Registrant and State Street Bank & Trust Company, dated December 18, 2006. (9) |
b | Appendix A, as of March 30, 2011, to the Custodian Agreement between Registrant and State Street Bank and Trust Company, dated December 18, 2006. (18) |
c | Fund Accounting Agreement between the Registrant and State Street Bank & Trust Company, dated December 18, 2006. (9) |
d | Appendix A, as of March 30, 2011 to the Fund Accounting Agreement between the Registrant and State Street Bank and Trust Company, dated December 18, 2006. (18) |
e | Special Custody Agreement between State Street Bank and Trust Company, each MFS U.S. registered investment company (listed on Exhibit A) and Morgan Stanley & Co. Incorporated dated March 22, 2000. (13) |
f | Amendment, dated July 30, 2007, to the Special Custody Account Agreement. (13) |
(10) | a | Service Class Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act of 1940 effective July 13, 2001. (6) |
b | Schedule A, dated February 8, 2010, to the Service Class Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act of 1940 effective July 13, 2001. (20) |
c | Plan pursuant to Rule 18f-3(d) under the Investment Company Act of 1940, dated July 13, 2001. (6) |
(11) | Opinion of Susan Newton, including consent, dated August 19, 2011; filed herewith. |
(12) | Form of Opinion of Morgan, Lewis & Bockius as to tax matters, including consent; filed herewith. |
(13) | a | Shareholder Servicing Agent Agreement between Registrant and MFS Service Center, Inc., dated August 1, 1985. (3) |
b | Amendment (Massachusetts Privacy Provision), dated February 15, 2011, to the Shareholder Servicing Agent Agreement, dated August 1, 1985; (20). |
c | Master Administrative Services Agreement (Compass), dated March 1, 1997, as amended and restated January 1, 2008. (15) |
d | Amendment (Massachusetts Privacy Provision), dated February 15, 2011, to the Master Administrative Services Agreement (Compass), dated March 1, 1997, as amended and restated January 1, 2008. (19) |
e | Exhibit A, as revised November 1, 2010, to the Master Administrative Services Agreement (Compass), dated March 1, 1997, as amended and restated January 1, 2008. (19) |
(14) | Consent of Deloitte & Touche LLP, dated August 19, 2011; filed herewith. |
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(15) | Not applicable. |
(16) | a Power of Attorney, dated July 13, 2011; filed herewith (Dwyer) (Corcoran) |
b | Power of Attorney, dated July 13, 2011; filed herewith (Trustees) |
(17) | a | MFS Global Governments Portfolio’s Prospectus (Initial Class) and Statement of Additional Information, dated April 30, 2011. (20) |
b | MFS Government Securities Portfolio’s Prospectus (Initial Class) and Statement of Additional Information, dated April 30, 2011. (20) |
c | MFS High Yield Portfolio’s Prospectus (Initial Class) and Statement of Additional Information, dated April 30, 2011. (20) |
d | MFS Massachusetts Investors Growth Stock Portfolio’s Prospectus (Initial Class) and Statement of Additional Information, dated April 30, 2011. (20) |
e | MFS Money Market Portfolio’s Prospectus (Initial Class) and Statement of Additional Information, dated April 30, 2011. (20) |
f | MFS Total Return Portfolio’s Prospectus (Initial Class) and Statement of Additional Information, dated April 30, 2011. (20) |
g | MFS Global Governments Portfolio’s Annual Report to Shareholders for the fiscal year ended December 31, 2010. (22) |
h | MFS Government Securities Portfolio’s Annual Report to Shareholders for the fiscal year ended December 31, 2010. (22) |
i | MFS High Yield Portfolio’s Annual Report to Shareholders for the fiscal year ended December 31, 2010. (22) |
j | MFS Massachusetts Investors Growth Stock Portfolio’s Annual Report to Shareholders for the fiscal year ended December 31, 2010. (22) |
k | MFS Money Market Portfolio’s Annual Report to Shareholders for the fiscal year ended December 31, 2010. (22) |
l | MFS Total Return Portfolio’s Annual Report to Shareholders for the fiscal year ended December 31, 2010. (22) |
m | MFS Global Governments Portfolio’s Semi-Annual Report to Shareholders for the period ended June 30, 2011. (23) |
n | MFS Government Securities Portfolio’s Semi-Annual Report to Shareholders for the period ended June 30, 2011. (23) |
o | MFS High Yield Portfolio’s Semi-Annual Report to Shareholders for the period ended June 30, 2011. (23) |
p | MFS Massachusetts Investors Growth Stock Portfolio’s Semi-Annual Report to Shareholders for the period ended June 30, 2011. (23) |
q | MFS Money Market Portfolio’s Semi-Annual Report to Shareholders for the period ended June 30, 2011. (23) |
r | MFS Total Return Portfolio’s Semi-Annual Report to Shareholders for the period ended June 30, 2011. (23) |
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s | Compass 2 Prospectus and Statement of Additional Information (with respect to Capital Appreciation Variable Account, Global Governments Variable Account, Government Securities Variable Account, High Yield Variable Account, Money Market Variable Account and Total Return Variable Account), dated April 30, 2011 (19) |
t | Compass 3 Prospectus and Statement of Additional Information (with respect to Capital Appreciation Variable Account, Global Governments Variable Account, Government Securities Variable Account, High Yield Variable Account, Money Market Variable Account and Total Return Variable Account), dated April 30, 2011 (21) |
u | Annual Report to Contract Owners for the fiscal year ended December 31, 2010 of Capital Appreciation Variable Account, Global Governments Variable Account, Government Securities Variable Account, High Yield Variable Account, Money Market Variable Account and Total Return Variable Account. (24) |
v | Semi-Annual Report to Contract Owners for the period ended June 30, 2011 of Capital Appreciation Variable Account, Global Governments Variable Account, Government Securities Variable Account, High Yield Variable Account, Money Market Variable Account and Total Return Variable Account. (25) |
(1) | Incorporated by reference to Post-Effective Amendment No. 20, (Exhibit 5 (v)), to the Registrant’s Registration Statement filed with the SEC via EDGAR on April 29, 1997. |
(2) | Incorporated by reference to MFS Series Trust II (File Nos. 33-7637 and 811-4775) Post-Effective Amendment No. 40, (Exhibit 2 & Exhibit 3 (p)) filed with the SEC via EDGAR on March 27, 2008. |
(3) | Incorporated by reference to Post-Effective Amendment No. 21, (Exhibits 5 (a), 5 (b), 5 (c), 5 (d), 5 (e), 5 (f), 5 (h), 5 (i), 5 (j), 5 (k), 5 (l), 5 (s), 5 (t) and Exhibit 9 (a)) to the Registrant’s Registration Statement filed with the SEC via EDGAR on February 13, 1998. |
(4) | Incorporated by reference to Post-Effective Amendment No. 33, (Exhibits 1 (a) & 1 (b), Exhibits 4 (e), 4 (k), 4 (m), 4 (o) & 4 (x)) to the Registrant’s Registration Statement filed with the SEC via EDGAR on February 27, 2004. |
(5) | Incorporated by reference to Post-Effective Amendment No. 23, (Exhibits 4 (v), 4 (w), 4 (x), 4 (y) & 4 (z), & 4 (aa)), to the Registrant’s Registration Statement filed with the SEC via EDGAR on February 22, 1999. |
(6) | Incorporated by reference to Post-Effective Amendment No. 31, (Exhibits 13 & 15), to the Registrant’s Registration Statement filed with the SEC via EDGAR on March 1, 2002. |
(7) | Incorporated by reference to Registrant’s Post-Effective Amendment No. 36, (Exhibit 1 (d), Exhibits 4 (c), 4 (r), 4 (t), 4 (z), 4 (dd), 4 (hh), 4 (jj), 4 (ll), 4 (mm), 4 (nn) & Exhibit 5), filed with the SEC via EDGAR on March 1, 2006. |
(8) | Amended and Restated Declaration of Trust, dated August 12, 2003, as amended through April 29, 2005, incorporated by reference to Post-Effective Amendment No. 33 to the Registrant’s Registration Statement filed with the SEC via EDGAR on February 27, 2004; Amended and Restated By-Laws, dated October 25, 2002, as revised August 6, 2004 incorporated by reference to Registrant’s Post-Effective Amendment No. 34 filed with the SEC via EDGAR on February 25, 2005. |
(9) | Incorporated by reference to MFS Series Trust XII (File Nos. 333-126328 and 811-21780) Post-Effective Amendment No. 7, (Exhibits 7 (a) & 7 (b)), filed with the SEC via EDGAR on June 28, 2007. |
(10) | Incorporated by reference to Post-Effective Amendment No. 28, (Exhibits 4 (cc) & 4 (ee), to the Registrant’s Registration Statement filed with the SEC via EDGAR on December 13, 2000. |
(11) | Incorporated by reference to Registrant’s Post-Effective Amendment No. 34, (Exhibit 1 (c) & |
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Exhibit 2), filed with the SEC via EDGAR on February 25, 2005. |
(12) | Incorporated by reference to Post-Effective Amendment No. 30, (Exhibit 4 (gg), to the Registrant’s Registration Statement filed with the SEC via EDGAR on May 29, 2001. |
(13) | Incorporated by reference to Registrant’s Post-Effective Amendment No. 40, (Exhibits 1 (e), 1 (f), & 1 (g), Exhibits 7 (g) & 7 (h) & Exhibit 9), filed with the SEC via EDGAR on October 3, 2007. |
(14) | Incorporated by reference to Registrant’s Post-Effective Amendment No. 41, (Exhibit a (8), Exhibit d (41) & Exhibit (m) 2), filed with the SEC via EDGAR on February 8, 2008. |
(15) | Incorporated by reference to Registrant’s Post-Effective Amendment No. 42, (Exhibit a (9) & Exhibit (h) 2), filed with the SEC via EDGAR on April 28, 2008. |
(16) | Incorporated by reference to Registrant’s Post-Effective Amendment No. 43, (Exhibits (a) 10 & (a) 11), filed with the SEC via EDGAR on February 6, 2009. |
(17) | Incorporated by reference to Registrant’s Post-Effective Amendment No. 45, (Exhibit (a) 12, 13, 14, 15 (h) 3), filed with the SEC via EDGAR on February 26, 2010. |
(18) | Incorporated by reference to MFS Series Trust XIII (File Nos. 2-74959 and 811-3327) Post-Effective Amendment No. 46, (Exhibit (g) 2, 4,) filed with the SEC via EDGAR on April 28, 2011. |
(19) | Incorporated by reference to Money Market Variable Account (File Nos. 2-79141 and 811-3563) Post-Effective Amendment No. 43, (Part A and Exhibit (k) 3 & 4) filed with the SEC via EDGAR on April 28, 2011. |
(20) | Incorporated by reference to Registrant’s Post-Effective Amendment No. 47 (Part A and Exhibits (h) 2 & (m) 2) filed with the SEC via EDGAR on April 28, 2011 |
(21) | Incorporated by reference to Money Market Variable Account (File Nos. 33-19628 and 811-3563) Post-Effective Amendment No. 43 (Part A) filed with the SEC via EDGAR on April 28, 2011 |
(22) | Incorporated by reference to Registrant’s Form N-CSR filed with the SEC via EDGAR on February 28, 2011. |
(23) | Incorporated by reference to Registrant’s Form N-CSRS filed with the SEC via EDGAR on August 19, 2011. |
(24) | Incorporated by reference to Money Market Variable Account’s (File No. 811-3563) Form N-CSR filed with the SEC via EDGAR on February 28, 2011. |
(25) | Incorporated by reference to Money Market Variable Account’s (File No. 811-3563) Form N-CSRS filed with the SEC via EDGAR on August 19, 2011 |
Item 17. Undertakings
(a) | The undersigned Registrant agrees that prior to any public reoffering of the securities registered through the use of a prospectus which is a part of this Registration Statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) under the Securities Act, the reoffering prospectus will contain the information called for by the applicable registration form for reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. |
(b) | The undersigned Registrant agrees that every prospectus that is filed under paragraph (a) above will be filed as a part of an amendment to this Registration Statement and will not be used until the amendment is effective, and that, in determining any liability under the 1933 Act, each post-effective amendment shall be deemed to be a new Registration Statement for the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them. |
(c) | The Registrant agrees to file an executed copy of an opinion of counsel supporting the tax consequences of the proposed reorganization as an amendment to this Registration Statement within a reasonable time after receipt of such opinion. |
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NOTICE
A copy of the Amended and Restated Declaration of Trust, as amended, is on file with the Secretary of State of The Commonwealth of Massachusetts, and notice is hereby given that this Registration Statement has been 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 Registration Statement are not binding upon any of the Trustees, officers, or shareholders of the Registrant individually, but are binding only upon the assets and property of the Registrant.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of Boston and The Commonwealth of Massachusetts on the 19th day of August 2011.
MFS® VARIABLE INSURANCE TRUST II | ||
By: | MARIA F. DWYER* | |
Name: | Maria F. Dwyer | |
Title: | President |
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement on Form N-14 has been signed below by the following persons in the capacities indicated on August 19, 2011.
SIGNATURE | TITLE | |
MARIA F. DWYER* Maria F. Dwyer | President (Principal Executive officer) | |
JOHN M. CORCORAN* John M. Corcoran | Principal Financial and Accounting Officer | |
J. KERMIT BIRCHFIELD* J. Kermit Birchfield | Trustee | |
ROBERT C. BISHOP* Robert C. Bishop | Trustee | |
FREDERICK H. DULLES* Frederick H. Dulles | Trustee | |
DAVID D. HORN* David D. Horn | Trustee | |
MARCIA A. KEAN* Marcia A. Kean | Trustee | |
RONALD G. STEINHART* Ronald G. Steinhart | Trustee | |
HAVILAND WRIGHT* Haviland Wright | Trustee |
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*By: | SUSAN S. NEWTON | |
Name: | Susan S. Newton | |
as Attorney-in-fact | ||
Executed by Susan S. Newton on behalf of those indicated pursuant to a Power of Attorney, dated July 13, 2011 (Dwyer) (Corcoran) and a Power of Attorney, dated July 13, 2011 (Trustees); filed herewith. |
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INDEX TO EXHIBITS
EXHIBIT NO. | DESCRIPTION OF EXHIBIT | |
4 | Form of Agreement and Plan of Reorganization; included as Exhibit A to Prospectus/Proxy Statement set forth in Part A to the Registration Statement on Form N-14. | |
11 | Opinion of Susan Newton, including consent, dated August 19, 2011. | |
12 | Form of Opinion of Morgan, Lewis & Bockius as to tax matters, including consent. | |
14 | Consent of Deloitte & Touche LLP, dated August 19, 2011. | |
16(a) | Power of Attorney, dated July 13, 2011 (Dwyer) (Corcoran). | |
(b) | Power of Attorney, dated July 13, 2011 (Trustees). |