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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-8326
MFS VARIABLE INSURANCE TRUST
(Exact name of registrant as specified in charter)
500 Boylston Street, Boston, Massachusetts 02116
(Address of principal executive offices) (Zip code)
Susan S. Newton
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
(Name and address of agents for service)
Registrant’s telephone number, including area code: (617) 954-5000
Date of fiscal year end: December 31
Date of reporting period: June 30, 2011
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ITEM 1. | REPORTS TO STOCKHOLDERS. |
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MFS® Research Series
MFS® Variable Insurance Trust
SEMIANNUAL REPORT
June 30, 2011
VFR-SEM
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MFS® RESEARCH SERIES
The report is prepared for the general information of contract owners. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED Ÿ MAY LOSE VALUE Ÿ NO BANK OR CREDIT UNION GUARANTEE Ÿ
NOT A DEPOSIT Ÿ NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
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MFS Research Series
Dear Contract Owners:
After about a year of almost uninterrupted macroeconomic and financial market improvement following the global credit crisis, investors grew more cautious in the middle of 2010 as fears grew that some European countries would default on their debt and as economic data showed a weakening
trend in the global economy. As a result asset prices fell significantly.
Last September the U.S. Federal Reserve Board’s promises to make lending conditions easier helped assuage market fears and drive asset prices off their recent lows. A combination of solid earnings and improving economic data gave an additional boost to investor sentiment.
In the following months, the renewed positive market mood, coupled with indications of better global macroeconomic activity, pushed many asset valuations to post-crisis highs. At the same time, global sovereign
bond yields initially rose as investors became concerned about inflationary pressures, driven by higher prices for oil as well as other commodities. However, by the end of the second quarter of 2011, a weakening macroeconomic backdrop and renewed concerns over debt problems in some eurozone countries pushed equities lower.
For the remainder of 2011, we are cautiously optimistic that economic growth will continue to improve and that the global economies will recover from the shocks of the past few years. We expect the pace of recovery worldwide to be uneven and volatile and acknowledge the elevated uncertainty created by events in Japan, Europe, the Middle East, as well as that created by the U.S. debate over raising the debt ceiling and the downgrade by Standard & Poor’s of the U.S. long-term credit rating.
As always, we continue to be mindful of the many economic challenges faced at the local, national, and international levels. It is in times such as these that we want to remind investors of the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with their advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2011
The opinions expressed in this letter are subject to change, may not be relied upon for investment advice, and no forecasts can be guaranteed.
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MFS Research Series
Portfolio structure (i)
Top ten holdings (i) | ||||
Apple, Inc. | 3.8% | |||
Exxon Mobil Corp. | 2.5% | |||
Danaher Corp. | 2.4% | |||
Oracle Corp. | 1.9% | |||
Occidental Petroleum Corp. | 1.8% | |||
Target Corp. | 1.8% | |||
McDonald’s Corp. | 1.7% | |||
JPMorgan Chase & Co. | 1.7% | |||
EMC Corp. | 1.6% | |||
Fluor Corp. | 1.5% |
Global equity sectors (i) | ||||
Technology | 17.0% | |||
Capital Goods | 16.7% | |||
Energy | 15.9% | |||
Financial Services | 15.1% | |||
Health Care | 11.2% | |||
Consumer Cyclicals | 11.2% | |||
Consumer Staples | 8.3% | |||
Telecommunications/Cable Television | 4.2% |
(i) | For purposes of this presentation, the components include the market value of securities, less any securities sold short, and reflect the impact of the equivalent exposure of derivative positions, if applicable. These amounts may be negative from time to time. Equivalent exposure is a calculated amount that translates the derivative position into a reasonable approximation of the amount of the underlying asset that the portfolio would have to hold at a given point in time to have the same price sensitivity that results from the portfolio’s ownership of the derivative contract. When dealing with derivatives, equivalent exposure is a more representative measure of the potential impact of a position on portfolio performance than market value. |
Percentages are based on net assets as of 6/30/11.
The portfolio is actively managed and current holdings may be different.
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MFS Research Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2011 through June 30, 2011
As a contract holder of the fund, you incur ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2011 through June 30, 2011.
Actual Expenses
The first line for each share class in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the following table provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight the fund’s ongoing costs only and do not take into account the fees and expenses imposed under the variable contracts through which your investment in the fund is made. Therefore, the second line for each share class in the table is useful in comparing ongoing costs associated with an investment in vehicles (such as the fund) which fund benefits under variable annuity and variable life insurance contracts and to qualified pension and retirement plans only, and will not help you determine the relative total costs of investing in the fund through variable annuity and variable life insurance contracts. If the fees and expenses imposed under the variable contracts were included, your costs would have been higher.
Share Class | Annualized Expense Ratio | Beginning Account Value 1/01/11 | Ending Account Value | Expenses Paid During Period (p) 1/01/11-6/30/11 | ||||||||||||||
Initial Class | Actual | 0.87% | $1,000.00 | $1,049.37 | $4.42 | |||||||||||||
Hypothetical (h) | 0.87% | $1,000.00 | $1,020.48 | $4.36 | ||||||||||||||
Service Class | Actual | 1.12% | $1,000.00 | $1,047.54 | $5.69 | |||||||||||||
Hypothetical (h) | 1.12% | $1,000.00 | $1,019.24 | $5.61 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid is equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
Expenses Impacting Table
Expense ratios include 0.01% of investment related expenses from short sale dividend and interest expenses.
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MFS Research Series
PORTFOLIO OF INVESTMENTS – 6/30/11 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 99.0% | ||||||||
Aerospace – 2.4% | ||||||||
Goodrich Corp. | 7,160 | $ | 683,774 | |||||
Honeywell International, Inc. | 28,960 | 1,725,726 | ||||||
Precision Castparts Corp. | 14,900 | 2,453,285 | ||||||
$ | 4,862,785 | |||||||
Apparel Manufacturers – 0.8% | ||||||||
NIKE, Inc., “B” | 10,080 | $ | 906,998 | |||||
Phillips-Van Heusen Corp. | 9,840 | 644,225 | ||||||
$ | 1,551,223 | |||||||
Automotive – 1.1% | ||||||||
General Motors Co. (a) | 35,430 | $ | 1,075,655 | |||||
Johnson Controls, Inc. | 26,690 | 1,111,905 | ||||||
$ | 2,187,560 | |||||||
Biotechnology – 1.3% | ||||||||
Amgen, Inc. (a) | 22,450 | $ | 1,309,958 | |||||
Gilead Sciences, Inc. (a) | 33,720 | 1,396,345 | ||||||
$ | 2,706,303 | |||||||
Broadcasting – 2.0% | ||||||||
Viacom, Inc., “B” | 39,450 | $ | 2,011,950 | |||||
Walt Disney Co. | 49,110 | 1,917,254 | ||||||
$ | 3,929,204 | |||||||
Brokerage & Asset Managers – 3.3% | ||||||||
Affiliated Managers Group, Inc. (a) | 14,020 | $ | 1,422,329 | |||||
Blackrock, Inc. | 7,190 | 1,379,114 | ||||||
CME Group, Inc. | 2,870 | 836,863 | ||||||
Franklin Resources, Inc. | 16,560 | 2,174,162 | ||||||
GFI Group, Inc. | 162,070 | 743,901 | ||||||
$ | 6,556,369 | |||||||
Business Services – 1.2% | ||||||||
Accenture PLC, “A” | 27,100 | $ | 1,637,382 | |||||
FleetCor Technologies, Inc. (a) | 24,300 | 720,252 | ||||||
$ | 2,357,634 | |||||||
Cable TV – 1.6% | ||||||||
Comcast Corp., “Special A” | 82,440 | $ | 1,997,521 | |||||
DIRECTV, “A” (a) | 18,220 | 925,940 | ||||||
Virgin Media, Inc. | 10,780 | 322,645 | ||||||
$ | 3,246,106 | |||||||
Chemicals – 2.3% | ||||||||
Celanese Corp. | 41,670 | $ | 2,221,428 | |||||
Ecolab, Inc. | 18,660 | 1,052,051 | ||||||
Monsanto Co. | 18,330 | 1,329,658 | ||||||
$ | 4,603,137 | |||||||
Computer Software – 4.3% | ||||||||
Autodesk, Inc. (a) | 33,870 | $ | 1,307,382 | |||||
Check Point Software Technologies Ltd. (a) | 25,410 | 1,444,559 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Computer Software – continued | ||||||||
Oracle Corp. | 118,300 | $ | 3,893,253 | |||||
Red Hat, Inc. (a) | 26,990 | 1,238,841 | ||||||
VeriSign, Inc. | 21,260 | 711,360 | ||||||
$ | 8,595,395 | |||||||
Computer Software – Systems – 6.3% | ||||||||
Apple, Inc. (a) | 22,950 | $ | 7,703,627 | |||||
EMC Corp. (a) | 115,690 | 3,187,260 | ||||||
International Business Machines Corp. | 9,710 | 1,665,751 | ||||||
$ | 12,556,638 | |||||||
Construction – 1.0% | ||||||||
Owens Corning (a) | 53,610 | $ | 2,002,334 | |||||
Consumer Products – 1.5% | ||||||||
Avon Products, Inc. | 84,980 | $ | 2,379,440 | |||||
Newell Rubbermaid, Inc. | 35,550 | 560,979 | ||||||
$ | 2,940,419 | |||||||
Electrical Equipment – 2.4% | ||||||||
Danaher Corp. | 89,980 | $ | 4,768,040 | |||||
Electronics – 2.9% | ||||||||
Advanced Micro Devices, Inc. (a) | 135,489 | $ | 947,068 | |||||
ASML Holding N.V. | 32,530 | 1,202,309 | ||||||
First Solar, Inc. (a)(l) | 7,580 | 1,002,607 | ||||||
Hittite Microwave Corp. (a) | 6,580 | 407,368 | ||||||
JDS Uniphase Corp. (a) | 25,670 | 427,662 | ||||||
Microchip Technology, Inc. | 27,340 | 1,036,459 | ||||||
Samsung Electronics Co. Ltd., GDR | 2,331 | 903,496 | ||||||
$ | 5,926,969 | |||||||
Energy – Independent – 4.5% | ||||||||
Apache Corp. | 19,160 | $ | 2,364,152 | |||||
Cabot Oil & Gas Corp. | 15,160 | 1,005,260 | ||||||
CONSOL Energy, Inc. | 5,880 | 285,062 | ||||||
EOG Resources, Inc. | 17,370 | 1,816,034 | ||||||
Occidental Petroleum Corp. | 34,710 | 3,611,228 | ||||||
$ | 9,081,736 | |||||||
Energy – Integrated – 5.5% | ||||||||
BP PLC, ADR | 27,390 | $ | 1,213,103 | |||||
Chevron Corp. | 23,500 | 2,416,740 | ||||||
EQT Corp. | 18,870 | 991,052 | ||||||
Exxon Mobil Corp. (s) | 61,490 | 5,004,056 | ||||||
QEP Resources, Inc. | 35,460 | 1,483,292 | ||||||
$ | 11,108,243 | |||||||
Engineering – Construction – 1.5% | ||||||||
Fluor Corp. | 47,910 | $ | 3,097,861 | |||||
Food & Beverages – 3.6% | ||||||||
Bunge Ltd. | 20,300 | $ | 1,399,685 | |||||
General Mills, Inc. | 60,020 | 2,233,944 |
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Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Food & Beverages – continued | ||||||||
Groupe Danone | 16,297 | $ | 1,215,922 | |||||
PepsiCo, Inc. (s) | 34,700 | 2,443,921 | ||||||
$ | 7,293,472 | |||||||
Food & Drug Stores – 0.9% | ||||||||
CVS Caremark Corp. | 26,170 | $ | 983,469 | |||||
METRO, Inc., “A” | 15,900 | 791,167 | ||||||
$ | 1,774,636 | |||||||
General Merchandise – 2.8% | ||||||||
Dollar General Corp. (a) | 23,160 | $ | 784,892 | |||||
Kohl’s Corp. | 25,470 | 1,273,755 | ||||||
Target Corp. | 76,290 | 3,578,764 | ||||||
$ | 5,637,411 | |||||||
Health Maintenance Organizations – 0.7% | ||||||||
WellPoint, Inc. | 17,990 | $ | 1,417,072 | |||||
Insurance – 4.2% | ||||||||
ACE Ltd. | 24,870 | $ | 1,636,943 | |||||
Aon Corp. | 23,670 | 1,214,271 | ||||||
Chubb Corp. | 24,030 | 1,504,518 | ||||||
MetLife, Inc. | 58,070 | 2,547,531 | ||||||
Prudential Financial, Inc. | 24,190 | 1,538,242 | ||||||
$ | 8,441,505 | |||||||
Internet – 1.3% | ||||||||
Google, Inc., “A” (a) | 5,300 | $ | 2,683,814 | |||||
Machinery & Tools – 1.0% | ||||||||
Cummins, Inc. | 11,420 | $ | 1,181,856 | |||||
Regal Beloit Corp. | 12,000 | 801,240 | ||||||
$ | 1,983,096 | |||||||
Major Banks – 4.6% | ||||||||
Bank of America Corp. | 176,480 | $ | 1,934,221 | |||||
Comerica, Inc. | 24,860 | 859,410 | ||||||
Goldman Sachs Group, Inc. | 16,070 | 2,138,756 | ||||||
JPMorgan Chase & Co. (s) | 81,740 | 3,346,436 | ||||||
SunTrust Banks, Inc. | 39,440 | 1,017,552 | ||||||
$ | 9,296,375 | |||||||
Medical & Health Technology & Services – 1.3% | ||||||||
AmerisourceBergen Corp. | 18,510 | $ | 766,314 | |||||
Quest Diagnostics, Inc. | 15,070 | 890,637 | ||||||
VCA Antech, Inc. (a) | 46,190 | 979,228 | ||||||
$ | 2,636,179 | |||||||
Medical Equipment – 3.7% | ||||||||
Becton, Dickinson & Co. | 13,390 | $ | 1,153,816 | |||||
Covidien PLC | 32,950 | 1,753,929 | ||||||
Medtronic, Inc. | 47,950 | 1,847,514 | ||||||
St. Jude Medical, Inc. | 7,720 | 368,090 | ||||||
Thermo Fisher Scientific, Inc. (a) | 35,910 | 2,312,245 | ||||||
$ | 7,435,594 | |||||||
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Metals & Mining – 1.0% | ||||||||
Teck Resources Ltd., “B” | 39,029 | $ | 1,983,723 | |||||
Natural Gas – Distribution – 0.6% | ||||||||
AGL Resources, Inc. | 29,370 | $ | 1,195,653 | |||||
Natural Gas – Pipeline – 0.3% | ||||||||
Kinder Morgan, Inc. | 20,990 | $ | 603,043 | |||||
Network & Telecom – 1.0% | ||||||||
Cisco Systems, Inc. | 26,690 | $ | 416,631 | |||||
F5 Networks, Inc. (a) | 10,680 | 1,177,470 | ||||||
Finisar Corp. (a) | 22,620 | 407,839 | ||||||
$ | 2,001,940 | |||||||
Oil Services – 3.0% | ||||||||
Cameron International Corp. (a) | 23,090 | $ | 1,161,196 | |||||
Halliburton Co. | 36,850 | 1,879,350 | ||||||
Schlumberger Ltd. | 24,090 | 2,081,376 | ||||||
Transocean, Inc. | 12,630 | 815,393 | ||||||
$ | 5,937,315 | |||||||
Other Banks & Diversified Financials – 3.0% | ||||||||
Citigroup, Inc. | 62,605 | $ | 2,606,872 | |||||
Discover Financial Services | 33,520 | 896,660 | ||||||
Visa, Inc., “A” | 30,400 | 2,561,504 | ||||||
$ | 6,065,036 | |||||||
Pharmaceuticals – 4.2% | ||||||||
Abbott Laboratories | 56,390 | $ | 2,967,242 | |||||
Hospira, Inc. (a) | 12,630 | 715,616 | ||||||
Johnson & Johnson | 22,000 | 1,463,440 | ||||||
Pfizer, Inc. | 97,010 | 1,998,406 | ||||||
Teva Pharmaceutical Industries Ltd., ADR | 28,480 | 1,373,306 | ||||||
$ | 8,518,010 | |||||||
Pollution Control – 0.6% | ||||||||
Republic Services, Inc. | 39,210 | $ | 1,209,629 | |||||
Railroad & Shipping – 0.9% | ||||||||
CSX Corp. | 66,200 | $ | 1,735,764 | |||||
Restaurants – 1.7% | ||||||||
McDonald’s Corp. | 40,090 | $ | 3,380,389 | |||||
Specialty Chemicals – 1.3% | ||||||||
Airgas, Inc. | 36,150 | $ | 2,531,946 | |||||
Specialty Stores – 2.8% | ||||||||
Abercrombie & Fitch Co., “A” | 9,250 | $ | 619,010 | |||||
Amazon.com, Inc. (a) | 2,430 | 496,911 | ||||||
PetSmart, Inc. | 30,680 | 1,391,952 | ||||||
Ross Stores, Inc. | 9,970 | 798,796 | ||||||
Tiffany & Co. | 18,980 | 1,490,310 | ||||||
Urban Outfitters, Inc. (a) | 30,820 | 867,583 | ||||||
$ | 5,664,562 | |||||||
Telecommunications – Wireless – 0.3% | ||||||||
SBA Communications Corp. (a) | 10,450 | $ | 399,086 | |||||
Sprint Nextel Corp. (a) | 40,970 | 220,828 | ||||||
$ | 619,914 | |||||||
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Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Telephone Services – 2.3% | ||||||||
American Tower Corp., “A” (a) | 18,430 | $ | 964,442 | |||||
AT&T, Inc. | 79,270 | 2,489,871 | ||||||
CenturyLink, Inc. | 12,370 | 500,119 | ||||||
Verizon Communications, Inc. | 19,160 | 713,327 | ||||||
|
| |||||||
$ | 4,667,759 | |||||||
|
| |||||||
Tobacco – 3.2% | ||||||||
Altria Group, Inc. | 87,910 | $ | 2,321,703 | |||||
Philip Morris International, Inc. | 39,690 | 2,650,101 | ||||||
Reynolds American, Inc. | 41,770 | 1,547,579 | ||||||
|
| |||||||
$ | 6,519,383 | |||||||
|
| |||||||
Trucking – 1.1% | ||||||||
Expeditors International of Washington, Inc. | 42,250 | $ | 2,162,778 | |||||
|
| |||||||
Utilities – Electric Power – 1.7% | ||||||||
AES Corp. (a) | 78,930 | $ | 1,005,568 | |||||
American Electric Power Co., Inc. | 41,770 | 1,573,894 | ||||||
CMS Energy Corp. | 42,950 | 845,686 | ||||||
|
| |||||||
$ | 3,425,148 | |||||||
|
| |||||||
Total Common Stocks (Identified Cost, $178,537,177) | $ | 198,899,102 | ||||||
|
| |||||||
CONVERTIBLE PREFERRED STOCKS – 0.3% | ||||||||
Utilities – Electric Power – 0.3% | ||||||||
PPL Corp., 9.5% (Identified Cost, $558,777) | 10,930 | $ | 610,987 | |||||
|
| |||||||
Issuer/Expiration Date/Strike Price | Number of Contracts | |||||||
CALL OPTIONS PURCHASED – 0.0% | ||||||||
Specialty Stores – 0.0% | ||||||||
Best Buy Co., Inc. – September 2011 @ $33 | 339 | $ | 39,324 | |||||
|
| |||||||
Construction – 0.0% | ||||||||
Lennar Corp., “A” – August 2011 @ $20 | 190 | $ | 4,560 | |||||
|
| |||||||
Total Call Options Purchased (Premiums Paid, $49,471) | $ | 43,884 | ||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
MONEY MARKET FUNDS (v) – 0.7% | ||||||||
MFS Institutional Money Market Portfolio, 0.1%, at Cost and Net Asset Value | 1,288,227 | $ | 1,288,227 | |||||
|
| |||||||
COLLATERAL FOR SECURITIES LOANED – 0.3% | ||||||||
Navigator Securities Lending Prime Portfolio, 0.23%, at Cost and Net Asset Value (j) | 674,475 | $ | 674,475 | |||||
|
| |||||||
Total Investments (Identified Cost, $181,108,127) | $ | 201,516,675 | ||||||
|
| |||||||
Issuer/Expiration Date/Strike Price | Number of Contracts | |||||||
PUT OPTIONS WRITTEN – 0.0% | ||||||||
Lennar Corp., “A” – August 2011 @ $16 (Premiums Received, $11,780) | (190 | ) | $ | (4,180 | ) | |||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – (0.3)% | (631,190 | ) | ||||||
|
| |||||||
Net Assets – 100.0% | $ | 200,881,305 | ||||||
|
|
(a) | Non-income producing security. |
(j) | The rate quoted is the annualized seven-day yield of the portfolio at period end. |
(l) | A portion of this security is on loan. |
(s) | Security or a portion of the security was pledged to cover collateral requirements for written options. At June 30, 2011, the value of securities pledged amounted to $498,575. |
(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 |
See Notes to Financial Statements
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FINANCIAL STATEMENTS | STATEMENT OF ASSETS AND LIABILITIES (unaudited)
This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
At 6/30/11 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $179,819,900) | $200,228,448 | |||||||
Underlying affiliated funds, at cost and value | 1,288,227 | |||||||
Total investments, at value, including $674,577 of securities on loan (identified cost, $181,108,127) | $201,516,675 | |||||||
Restricted cash | 2,866 | |||||||
Receivables for | ||||||||
Investments sold | 1,063,523 | |||||||
Fund shares sold | 144,034 | |||||||
Interest and dividends | 208,956 | |||||||
Other assets | 1,032 | |||||||
Total assets | $202,937,086 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Investments purchased | $1,066,722 | |||||||
Fund shares reacquired | 218,164 | |||||||
Written options outstanding, at value (premiums received, $11,780) | 4,180 | |||||||
Collateral for securities loaned, at value | 674,475 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 8,366 | |||||||
Shareholder servicing costs | 300 | |||||||
Distribution and/or service fees | 286 | |||||||
Payable for independent Trustees’ compensation | 236 | |||||||
Accrued expenses and other liabilities | 83,052 | |||||||
Total liabilities | $2,055,781 | |||||||
Net assets | $200,881,305 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $212,892,321 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 20,416,277 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency transactions | (34,747,777 | ) | ||||||
Undistributed net investment income | 2,320,484 | |||||||
Net assets | $200,881,305 | |||||||
Shares of beneficial interest outstanding | 10,063,788 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $179,711,053 | 8,996,351 | $19.98 | |||||||||
Service Class | 21,170,252 | 1,067,437 | 19.83 |
See Notes to Financial Statements
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MFS Research Series
FINANCIAL STATEMENTS | STATEMENT OF OPERATIONS (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
Six months ended 6/30/11 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $1,617,267 | |||||||
Interest | 13,913 | |||||||
Dividends from underlying affiliated funds | 855 | |||||||
Foreign taxes withheld | (12,453 | ) | ||||||
Total investment income | $1,619,582 | |||||||
Expenses | ||||||||
Management fee | $754,194 | |||||||
Distribution and/or service fees | 26,008 | |||||||
Shareholder servicing costs | 11,794 | |||||||
Administrative services fee | 19,589 | |||||||
Independent Trustees’ compensation | 4,118 | |||||||
Custodian fee | 15,520 | |||||||
Shareholder communications | 30,249 | |||||||
Auditing fees | 24,602 | |||||||
Legal fees | 1,727 | |||||||
Dividend and interest expense on securities sold short | 4,341 | |||||||
Miscellaneous | 8,072 | |||||||
Total expenses | $900,214 | |||||||
Fees paid indirectly | (6 | ) | ||||||
Reduction of expenses by investment adviser | (576 | ) | ||||||
Net expenses | $899,632 | |||||||
Net investment income | $719,950 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency transactions | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investment transactions | $11,061,987 | |||||||
Written option transactions | 10,304 | |||||||
Securities sold short | (74,563 | ) | ||||||
Foreign currency transactions | (5,861 | ) | ||||||
Net realized gain (loss) on investments and foreign currency transactions | $10,991,867 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $(1,931,095 | ) | ||||||
Written options | 7,600 | |||||||
Securities sold short | 57,701 | |||||||
Translation of assets and liabilities in foreign currencies | 69 | |||||||
Net unrealized gain (loss) on investments and foreign currency translation | $(1,865,725 | ) | ||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $9,126,142 | |||||||
Change in net assets from operations | $9,846,092 |
See Notes to Financial Statements
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FINANCIAL STATEMENTS | STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
| Six months ended 6/30/11 (unaudited | ) | | Year ended 12/31/10 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $719,950 | $1,602,546 | ||||||
Net realized gain (loss) on investments and foreign currency transactions | 10,991,867 | 14,848,081 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | (1,865,725 | ) | 11,656,177 | |||||
Change in net assets from operations | $9,846,092 | $28,106,804 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(1,762,583 | ) | |||||
Change in net assets from fund share transactions | $(11,684,435 | ) | $(21,049,435 | ) | ||||
Total change in net assets | $(1,838,343 | ) | $5,294,786 | |||||
Net assets | ||||||||
At beginning of period | 202,719,648 | 197,424,862 | ||||||
At end of period (including undistributed net investment income of $2,320,484 and | $200,881,305 | $202,719,648 |
See Notes to Financial Statements
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FINANCIAL STATEMENTS | FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund’s financial performance for the semiannual period and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
Initial Class | Six months | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $19.04 | $16.57 | $12.90 | $20.28 | $18.04 | $16.41 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.07 | $0.15 | $0.15 | $0.18 | $0.09 | $0.12 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 0.87 | 2.47 | 3.72 | (7.47 | ) | 2.28 | 1.59 | |||||||||||||||||
Total from investment operations | $0.94 | $2.62 | $3.87 | $(7.29 | ) | $2.37 | $1.71 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.15 | ) | $(0.20 | ) | $(0.09 | ) | $(0.13 | ) | $(0.08 | ) | |||||||||||||
Net asset value, end of period | $19.98 | $19.04 | $16.57 | $12.90 | $20.28 | $18.04 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 4.94 | (n) | 15.90 | 30.54 | (36.09 | ) | 13.20 | 10.48 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.87 | (a) | 0.89 | 0.90 | 0.88 | 0.88 | 0.90 | |||||||||||||||||
Expenses after expense reductions (f) | 0.87 | (a) | 0.89 | 0.90 | 0.88 | 0.88 | 0.89 | |||||||||||||||||
Net investment income | 0.74 | (a) | 0.86 | 1.05 | 1.04 | 0.46 | 0.71 | |||||||||||||||||
Portfolio turnover | 33 | 71 | 107 | 123 | 87 | 90 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $179,711 | $182,895 | $180,229 | $149,517 | $281,339 | $267,602 | ||||||||||||||||||
Supplemental Ratios (%): | ||||||||||||||||||||||||
Ratio of expenses to average net assets after expense reductions excluding short sale dividend and interest expense (f) | 0.86 | (a) | 0.89 | 0.90 | N/A | N/A | N/A |
See Notes to Financial Statements
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Financial Highlights – continued
Service Class | Six months ended 6/30/11 | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $18.93 | $16.48 | $12.82 | $20.16 | $17.94 | $16.33 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.05 | $0.10 | $0.11 | $0.13 | $0.05 | $0.09 | ||||||||||||||||||
Net realized and unrealized gain (loss) on | 0.85 | 2.47 | 3.71 | (7.42 | ) | 2.26 | 1.57 | |||||||||||||||||
Total from investment operations | $0.90 | $2.57 | $3.82 | $(7.29 | ) | $2.31 | $1.66 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.12 | ) | $(0.16 | ) | $(0.05 | ) | $(0.09 | ) | $(0.05 | ) | |||||||||||||
Net asset value, end of period | $19.83 | $18.93 | $16.48 | $12.82 | $20.16 | $17.94 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 4.75 | (n) | 15.64 | 30.20 | (36.25 | ) | 12.93 | 10.20 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.12 | (a) | 1.14 | 1.15 | 1.14 | 1.13 | 1.14 | |||||||||||||||||
Expenses after expense reductions (f) | 1.12 | (a) | 1.14 | 1.15 | 1.13 | 1.13 | 1.14 | |||||||||||||||||
Net investment income | 0.50 | (a) | 0.61 | 0.80 | 0.78 | 0.23 | 0.51 | |||||||||||||||||
Portfolio turnover | 33 | 71 | 107 | 123 | 87 | 90 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $21,170 | $19,825 | $17,196 | $12,951 | $21,116 | $16,674 | ||||||||||||||||||
Supplemental Ratios (%): | ||||||||||||||||||||||||
Ratio of expenses to average net assets after | 1.11 | (a) | 1.14 | 1.15 | N/A | N/A | N/A |
(a) | Annualized. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(k) | The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown. |
(n) | Not annualized. |
(r) | Certain expenses have been reduced without which performance would have been lower. |
(s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. Excluding the effect of the proceeds received from a non-recurring litigation settlement against Enron Corp., the Initial Class and Service Class total returns for the year ended December 31, 2008 would have each been lower by approximately 0.82%. Excluding the effect of the proceeds received from a non-recurring litigation settlement against Tyco International Ltd., the Initial Class and Service Class total returns for the year ended December 31, 2010 would have each been lower by approximately 0.60%. |
See Notes to Financial Statements
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NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) | Business and Organization |
MFS Research Series (the fund) is a series of MFS Variable Insurance Trust (the trust). The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The shareholders of each series of the trust are separate accounts of insurance companies, which offer variable annuity and/or life insurance products, and qualified retirement and pension plans.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued.
Investment Valuations – 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. 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. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. Values obtained from third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
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Notes to Financial Statements (unaudited) – continued
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. Other financial instruments are derivative instruments not reflected in total investments, such as written options. The following is a summary of the levels used as of June 30, 2011 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities | $199,553,973 | $— | $— | $199,553,973 | ||||||||||||
Mutual Funds | 1,962,702 | — | — | 1,962,702 | ||||||||||||
Total Investments | $201,516,675 | $— | $— | $201,516,675 | ||||||||||||
Written Options | $(4,180 | ) | $— | $— | $(4,180 | ) |
For further information regarding security characteristics, see the Portfolio of Investments.
Foreign Currency Translation – Purchases and sales of foreign investments, income, and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions or on the reporting date for foreign denominated receivables and payables. Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Gains and losses attributable to foreign exchange rate movements on receivables, payables, income and expenses are recorded for financial statement purposes as foreign currency transaction gains and losses. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.
Derivatives – The fund uses derivatives for different purposes, including to earn income and enhance returns, to increase or decrease exposure to a particular market, to manage or adjust the risk profile of the fund, or as alternatives to direct investments. Derivatives are used for hedging or non-hedging purposes. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. When the fund uses derivatives as an investment to increase market exposure, or for hedging purposes, gains and losses from derivative instruments may be substantially greater than the derivative’s original cost.
The derivative instruments used by the fund were written options and purchased options. The fund’s period end derivatives, as presented in the Portfolio of Investments, generally are indicative of the volume of its derivative activity during the period.
The following table presents, by major type of derivative contract, the fair value, on a gross basis, of the asset and liability components of derivatives held by the fund at June 30, 2011 as reported in the Statement of Assets and Liabilities:
Fair Value (a) | ||||||||||
Risk | Derivative Contracts | Asset Derivatives | Liability Derivatives | |||||||
Equity | Purchased Equity Options | $43,884 | $— | |||||||
Equity | Written Equity Options | — | (4,180 | ) | ||||||
Total | $43,884 | $(4,180 | ) |
(a) | The value of purchased options outstanding is included in total investments, at value, within the fund’s Statement of Assets and Liabilities. |
The following table presents, by major type of derivative contract, the realized gain (loss) on derivatives held by the fund for the six months ended June 30, 2011 as reported in the Statement of Operations:
Risk | Investment Transactions (Purchased Options) | Written Options | ||||||
Equity | $(11,408 | ) | $10,304 |
The following table presents, by major type of derivative contract, the change in unrealized appreciation (depreciation) on derivatives held by the fund for the six months ended June 30, 2011 as reported in the Statement of Operations:
Risk | Investments (Purchased Options) | Written Options | ||||||
Equity | $(5,587 | ) | $7,600 |
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Notes to Financial Statements (unaudited) – continued
Derivative counterparty credit risk is managed through formal evaluation of the creditworthiness of all potential counterparties. On certain over-the-counter derivatives, the fund attempts to reduce its exposure to counterparty credit risk whenever possible by entering into an International Swaps and Derivatives Association (ISDA) Master Agreement on a bilateral basis with each of the counterparties with whom it undertakes a significant volume of transactions. The ISDA Master Agreement gives each party to the agreement the right to terminate all transactions traded under such agreement if there is a certain deterioration in the credit quality of the other party. The ISDA Master Agreement gives the fund the right, upon an event of default by the applicable counterparty or a termination of the agreement, to close out all transactions traded under such agreement and to net amounts owed under each transaction to one net amount payable by one party to the other. This right to close out and net payments across all transactions traded under the ISDA Master Agreement could result in a reduction of the fund’s credit risk to such counterparty equal to any amounts payable by the fund under the applicable transactions, if any. However, absent an event of default by the counterparty or a termination of the agreement, the ISDA Master Agreement does not result in an offset of reported amounts of assets and liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty.
Collateral requirements differ by type of derivative. Collateral or margin requirements are set by the broker or exchange clearing house for exchange traded derivatives (i.e., futures and exchange-traded options) while collateral terms are contract specific for over-the-counter traded derivatives (i.e., forward foreign currency exchange contracts, swaps and over-the-counter options). For derivatives traded under an ISDA Master Agreement, the collateral requirements are netted across all transactions traded under such agreement and one amount is posted from one party to the other to collateralize such obligations. Cash collateral that has been pledged to cover obligations of the fund under derivative contracts, if any, will be reported separately on the Statement of Assets and Liabilities as restricted cash. Securities collateral pledged for the same purpose, if any, is noted in the Portfolio of Investments.
Written Options – In exchange for a premium, the fund wrote put options and used the premium to purchase call options on securities that it anticipated the price would increase. At the time the option was written, the fund believed the premium received exceeded the potential loss that could result from adverse price changes in the options’ underlying securities. In a written option, the fund as the option writer grants the buyer the right to purchase from, or sell to, the fund a specified number of shares or units of a particular security, currency or index at a specified price within a specified period of time.
The premium received is initially recorded as a liability on the Statement of Assets and Liabilities. The option is subsequently marked-to-market daily with the difference between the premium received and the market value of the written option being recorded as unrealized appreciation or depreciation. When a written option expires, the fund realizes a gain equal to the amount of the premium received. The difference between the premium received and the amount paid on effecting a closing transaction is considered a realized gain or loss. When a written put option is exercised, the premium reduces the cost basis of the security purchased by the fund.
At the initiation of the written option contract, for exchange traded options, the fund is required to deposit securities or cash as collateral with the custodian for the benefit of the broker. For over-the-counter options, the fund may post collateral subject to the terms of an ISDA Master Agreement as generally described above if the market value of the options contract moves against it. The fund, as writer of an option, may have no control over whether the underlying securities may be sold (call) or purchased (put) and, as a result, bears the market risk of an unfavorable change in the price of the securities underlying the written option. Losses from writing options can exceed the premium received and can exceed the potential loss from an ordinary buy and sell transaction. Although the fund’s market risk may be significant, the maximum counterparty credit risk to the fund is equal to the market value of any collateral posted to the broker. For over-the-counter options, this risk is mitigated in cases where there is an ISDA Master Agreement between the fund and the counterparty providing for netting as described above.
Written Option Transactions
Number of contracts | Premiums received | |||||||
Outstanding, beginning of period | — | $— | ||||||
Options written | 969 | 24,583 | ||||||
Options closed | — | — | ||||||
Options exercised | (43 | ) | (2,499 | ) | ||||
Options expired | (736} | (10,304 | ) | |||||
Outstanding, end of period | 190 | $11,780 |
Purchased Options – The fund purchased call options for a premium. Purchased call options entitle the holder to buy a specified number of shares or units of a particular security, currency or index at a specified price at a specified date or within a
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Notes to Financial Statements (unaudited) – continued
specified period of time. Purchasing call options may be used to hedge against an anticipated increase in the dollar cost of securities or currency to be acquired or to increase the fund’s exposure to an underlying instrument.
The premium paid is initially recorded as an investment in the Statement of Assets and Liabilities. That investment is subsequently marked-to-market daily with the difference between the premium paid and the market value of the purchased option being recorded as unrealized appreciation or depreciation. Premiums paid for purchased call options which have expired are treated as realized losses on investments in the Statement of Operations. Upon the exercise or closing of a purchased call option, the premium paid is added to the cost of the security or financial instrument.
The risk in purchasing an option is that the fund pays a premium whether or not the option is exercised. The fund’s maximum risk of loss due to counterparty credit risk is limited to the market value of the option. For over-the-counter options, this risk is mitigated in cases where there is an ISDA Master Agreement between the fund and the counterparty providing for netting as described above and for posting of collateral by the counterparty to the fund to cover the fund’s exposure to the counterparty under such ISDA Master Agreement.
Short Sales – The fund entered into short sales whereby it sells a security it does not own in anticipation of a decline in the value of that security. The fund will realize a gain if the security price decreases and a loss if the security price increases between the date of the short sale and the date on which the fund replaces the borrowed security. Losses from short sales can exceed the proceeds of the security sold; and they can also exceed the potential loss from an ordinary buy and sell transaction. The amount of any premium, dividends, or interest the fund may be required to pay in connection with a short sale will be recognized as a fund expense. During the six months ended June 30, 2011, this expense amounted to $4,341. The fund segregates cash or marketable securities in an amount that, when combined with the amount of proceeds from the short sale deposited with the broker, at least equals the current market value of the security sold short. At June 30, 2011, the fund had no short sales outstanding.
Security Loans – State Street Bank and Trust Company (“State Street”), as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. The loans are collateralized by cash and/or U.S. Treasury and federal agency obligations in an amount typically at least equal to the market value of the securities loaned. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. State Street provides the fund with indemnification against Borrower default. The fund bears the risk of loss with respect to the investment of cash collateral. On loans collateralized by cash, the cash collateral is invested in a money market fund or short-term securities. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the fund and the lending agent. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the Borrower, and is allocated between the fund and the lending agent. Income from securities lending is included in interest income on the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income.
Indemnifications – Under the fund’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund’s maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.
Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend and interest payments received in additional securities are recorded on the ex-dividend or ex-interest date in an amount equal to the value of the security on such date.
The fund may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
Fees Paid Indirectly – The fund’s custody fee may be reduced according to an arrangement that measures the value of cash deposited with the custodian by the fund. This amount, for the six months ended June 30, 2011, is shown as a reduction of total expenses on the Statement of Operations.
15
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Notes to Financial Statements (unaudited) – continued
Tax Matters and Distributions – The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to expiration of capital loss carryforwards and wash sale loss deferrals.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/10 | ||||
Ordinary income (including any short-term capital gains) | $1,762,583 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/11 | ||||
Cost of investments | $181,222,820 | |||
Gross appreciation | 26,342,739 | |||
Gross depreciation | (6,048,884 | ) | ||
Net unrealized appreciation (depreciation) | $20,293,855 | |||
As of 12/31/10 | ||||
Undistributed ordinary income | 1,600,534 | |||
Capital loss carryforwards | (45,624,952 | ) | ||
Other temporary differences | (57,641 | ) | ||
Net unrealized appreciation (depreciation) | 22,224,951 |
The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.
As of December 31, 2010, the fund had capital loss carryforwards available to offset future realized gains. Such losses expire as follows:
12/31/16 | $ (20,169,637 | ) | ||
12/31/17 | (25,455,315 | ) | ||
Total | $(45,624,952 | ) |
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and/or service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported on the Statements of Changes in Net Assets are presented by class as follows:
From net investment income | ||||||||
Six months ended 6/30/11 | Year ended 12/31/10 | |||||||
Initial Class | $— | $1,635,301 | ||||||
Service Class | — | 127,282 | ||||||
Total | $— | $1,762,583 |
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MFS Research Series
Notes to Financial Statements (unaudited) – continued
(3) | Transactions with Affiliates |
Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates:
First $1 billion of average daily net assets | 0.75% | |||
Average daily net assets in excess of $1 billion | 0.65% |
The management fee incurred for the six months ended June 30, 2011 was equivalent to an annual effective rate of 0.75% of the fund’s average daily net assets.
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, is the distributor of shares of the fund. The Trustees have adopted a distribution plan for the Service Class shares pursuant to Rule 12b-1 under the Investment Company Act of 1940.
The fund’s distribution plan provides that the fund will pay MFD distribution and/or service fees equal to 0.25% per annum of its average daily net assets attributable to Service Class shares as partial consideration for services performed and expenses incurred by MFD and financial intermediaries (including participating insurance companies that invest in the fund to fund variable annuity and variable life insurance contracts, sponsors of qualified retirement and pension plans that invest in the fund, and affiliates of these participating insurance companies and plan sponsors) in connection with the sale and distribution of the Service Class shares. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries.
Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent. For the six months ended June 30, 2011, the fee was $11,221, which equated to 0.0112% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses paid by MFSC on behalf of the fund. For the six months ended June 30, 2011, these costs amounted to $573.
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund partially reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the six months ended June 30, 2011 was equivalent to an annual effective rate of 0.0195% of the fund’s average daily net assets.
Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – This fund and certain other funds managed by MFS (the funds) have entered into services agreements (the Agreements) which provide for payment of fees by the funds to Tarantino LLC and Griffin Compliance LLC in return for the provision of services of an Independent Chief Compliance Officer (ICCO) and Assistant ICCO, respectively, for the funds. The ICCO and Assistant ICCO are officers of the funds and the sole members of Tarantino LLC and Griffin Compliance LLC, respectively. The funds can terminate the Agreements with Tarantino LLC and Griffin Compliance LLC at any time under the terms of the Agreements. For the six months ended June 30, 2011, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $711 and are included in miscellaneous expense on the Statement of Operations. MFS has agreed to reimburse the fund for a portion of the payments made by the fund in the amount of $576, which is shown as a reduction of total expenses in the Statement of Operations. Additionally, MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ICCO and Assistant ICCO.
The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks a high level of current income consistent with preservation of capital and liquidity. Income earned on this investment is included in dividends from underlying affiliated funds on the Statement of Operations. This money market fund does not pay a management fee to MFS.
(4) | Portfolio Securities |
Purchases and sales of investments, other than U.S. Government securities, purchased option transactions, short sales, and short-term obligations, aggregated $66,164,921 and $76,861,360, respectively.
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MFS Research Series
Notes to Financial Statements (unaudited) – continued
(5) | Shares of Beneficial Interest |
The fund’s Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
Six months ended 6/30/11 | Year ended 12/31/10 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 533,095 | $10,404,395 | 973,297 | $16,519,125 | ||||||||||||
Service Class | 92,520 | 1,812,264 | 169,991 | 2,837,140 | ||||||||||||
625,615 | $12,216,659 | 1,143,288 | $19,356,265 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 91,154 | $1,635,301 | ||||||||||||
Service Class | — | — | 7,123 | 127,282 | ||||||||||||
— | $— | 98,277 | $1,762,583 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (1,143,284 | ) | $(22,480,616 | ) | (2,337,513 | ) | $(39,290,944 | ) | ||||||||
Service Class | (72,604 | ) | (1,420,478 | ) | (173,170 | ) | (2,877,339 | ) | ||||||||
(1,215,888 | ) | $(23,901,094 | ) | (2,510,683 | ) | $(42,168,283 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (610,189 | ) | $(12,076,221 | ) | (1,273,062 | ) | $(21,136,518 | ) | ||||||||
Service Class | 19,916 | 391,786 | 3,944 | 87,083 | ||||||||||||
(590,273 | ) | $(11,684,435 | ) | (1,269,118 | ) | $(21,049,435 | ) |
(6) | Line of Credit |
The fund and certain other funds managed by MFS participate in a $1.1 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Federal Reserve funds rate or one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Federal Reserve funds rate plus an agreed upon spread. For the six months ended June 30, 2011, the fund’s commitment fee and interest expense were $958 and $0, respectively, and are included in miscellaneous expense on the Statement of Operations.
(7) | Transactions in Underlying Affiliated Funds – Affiliated Issuers |
An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the fund assumes the following to be affiliated issuers:
Underlying Affiliated Funds | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||
MFS Institutional Money Market Portfolio | 1,282,271 | 22,441,168 | (22,435,212 | ) | 1,288,227 | |||||||||
Underlying Affiliated Funds | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $855 | $1,288,227 |
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MFS Research Series
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board’s most recent review and renewal of the fund’s Investment Advisory Agreement with MFS will be available on or about November 1, 2011 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds’ proxy voting policies and procedures is available without charge, upon request, by calling
1-800-225-2606, by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the Securities and Exchange Commission (the Commission) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. The fund’s Form N-Q is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and copies of this information may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
From time to time, MFS may post important information about the fund or the MFS funds on the MFS web site (mfs.com). This information is available by visiting the “News & Commentary” section of mfs.com or by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of mfs.com.
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rev. 3/11
FACTS | WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION? |
Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
What? | The types of personal information we collect and share depend on the product or service you have with us. This information can include:
• Social Security number and account balances • Account transactions and transaction history • Checking account information and wire transfer instructions
When you are no longer our customer, we continue to share your information as described in this notice. |
How? | All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons MFS chooses to share; and whether you can limit this sharing. |
Reasons we can share your personal information | Does MFS share? | Can you limit this sharing? | ||
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus | Yes | No | ||
For our marketing purposes – to offer our products and services to you | No | We don’t share | ||
For joint marketing with other financial companies | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your transactions and experiences | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your creditworthiness | No | We don’t share | ||
For nonaffiliates to market to you | No | We don’t share |
Questions? | Call 800-225-2606 or go to mfs.com. |
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Page 2 |
Who we are | ||
Who is providing this notice? | MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., MFS Fund Distributors, Inc., MFS Heritage Trust Company, and MFS Service Center, Inc. |
What we do | ||
How does MFS protect my personal information? | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you. | |
How does MFS collect my personal information? | We collect your personal information, for example, when you
• open an account or provide account information • direct us to buy securities or direct us to sell your securities • make a wire transfer
We also collect your personal information from others, such as credit bureaus, affiliates and other companies. | |
Why can’t I limit all sharing? | Federal law gives you the right to limit only
• sharing for affiliates’ everyday business purposes – information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you
State laws and individual companies may give you additional rights to limit sharing. |
Definitions | ||
Affiliates | Companies related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice. | |
Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share with nonaffiliates so they can market to you. | |
Joint Marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you.
• MFS doesn’t jointly market. |
Other important information | ||
If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours. |
21
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Table of Contents
MFS® Research International Series
MFS® Variable Insurance Trust
SEMIANNUAL REPORT
June 30, 2011
VRI-SEM
Table of Contents
MFS® RESEARCH INTERNATIONAL SERIES
The report is prepared for the general information of contract owners.
It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED Ÿ MAY LOSE VALUE Ÿ NO BANK OR CREDIT UNION GUARANTEE Ÿ NOT A DEPOSIT Ÿ NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
Table of Contents
MFS Research International Series
Dear Contract Owners:
After about a year of almost uninterrupted macroeconomic and financial market improvement following the global credit crisis, investors grew more cautious in the middle of 2010 as fears grew that some European countries would default on their debt and as economic data showed a weakening
trend in the global economy. As a result asset prices fell significantly.
Last September the U.S. Federal Reserve Board’s promises to make lending conditions easier helped assuage market fears and drive asset prices off their recent lows. A combination of solid earnings and improving economic data gave an additional boost to investor sentiment.
In the following months, the renewed positive market mood, coupled with indications of better global macroeconomic activity, pushed many asset valuations to post-crisis highs. At the same time, global sovereign
bond yields initially rose as investors became concerned about inflationary pressures, driven by higher prices for oil as well as other commodities. However, by the end of the second quarter of 2011, a weakening macroeconomic backdrop and renewed concerns over debt problems in some eurozone countries pushed equities lower.
For the remainder of 2011, we are cautiously optimistic that economic growth will continue to improve and that the global economies will recover from the shocks of the past few years. We expect the pace of recovery worldwide to be uneven and volatile and acknowledge the elevated uncertainty created by events in Japan, Europe, the Middle East, as well as that created by the U.S. debate over raising the debt ceiling and the downgrade by Standard & Poor’s of the U.S. long-term credit rating.
As always, we continue to be mindful of the many economic challenges faced at the local, national, and international levels. It is in times such as these that we want to remind investors of the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with their advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2011
The opinions expressed in this letter are subject to change, may not be relied upon for investment advice, and no forecasts can be guaranteed.
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MFS Research International Series
Portfolio structure
Top ten holdings | ||||
Nestle S.A. | 2.8% | |||
Royal Dutch Shell PLC, “A” | 2.5% | |||
Rio Tinto Ltd. | 2.2% | |||
Roche Holding AG | 2.2% | |||
BNP Paribas | 2.1% | |||
Siemens AG | 2.1% | |||
HSBC Holdings PLC | 1.9% | |||
Linde AG | 1.7% | |||
Groupe Danone | 1.7% | |||
Vodafone Group PLC | 1.7% |
Currency exposure weightings (y) | ||||
Euro | 31.1% | |||
Japan | 19.4% | |||
United Kingdom | 17.2% | |||
Switzerland | 9.7% | |||
Hong Kong | 5.0% | |||
Australia | 3.1% | |||
United States | 2.5% | |||
India | 2.4% | |||
Sweden | 1.9% | |||
Other Countries | 7.7% |
Global equity sectors | ||||
Capital Goods | 25.7% | |||
Financial Services | 23.7% | |||
Energy | 12.6% | |||
Health Care | 8.7% | |||
Consumer Staples | 8.1% | |||
Consumer Cyclicals | 7.7% | |||
Technology | 7.7% | |||
Telecommunications/Cable Television | 5.9% |
Issuer country weightings (x) | ||||
Japan | 19.4% | |||
United Kingdom | 17.2% | |||
France | 10.1% | |||
Switzerland | 9.8% | |||
Germany | 9.2% | |||
Netherlands | 6.0% | |||
Australia | 3.1% | |||
Hong Kong | 2.7% | |||
India | 2.4% | |||
Other Countries | 20.1% |
(x) | Represents the portfolio’s exposure to issuer countries as a percentage of a portfolio’s total net assets. |
(y) | Represents the portfolio’s exposure to a particular currency as a percentage of a portfolio’s total net assets. |
From time to time “Cash & Other Net Assets” may be negative due to timing of cash receipts and/or equivalent exposure from any derivative holdings.
Percentages are based on net assets as of 6/30/11.
The portfolio is actively managed and current holdings may be different.
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Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2011 through June 30, 2011
As a contract holder of the fund, you incur ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2011 through June 30, 2011.
Actual Expenses
The first line for each share class in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the following table provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight the fund’s ongoing costs only and do not take into account the fees and expenses imposed under the variable contracts through which your investment in the fund is made. Therefore, the second line for each share class in the table is useful in comparing ongoing costs associated with an investment in vehicles (such as the fund) which fund benefits under variable annuity and variable life insurance contracts and to qualified pension and retirement plans only, and will not help you determine the relative total costs of investing in the fund through variable annuity and variable life insurance contracts. If the fees and expenses imposed under the variable contracts were included, your costs would have been higher.
Share Class | Annualized Expense Ratio | Beginning Account Value 1/01/11 | Ending Account Value 6/30/11 | Expenses Paid During Period (p) 1/01/11-6/30/11 | ||||||||||||||
Initial Class | Actual | 1.07% | $1,000.00 | $1,065.11 | $5.48 | |||||||||||||
Hypothetical (h) | 1.07% | $1,000.00 | $1,019.49 | $5.36 | ||||||||||||||
Service Class | Actual | 1.32% | $1,000.00 | $1,064.78 | $6.76 | |||||||||||||
Hypothetical (h) | 1.32% | $1,000.00 | $1,018.25 | $6.61 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid is equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
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MFS Research International Series
PORTFOLIO OF INVESTMENTS – 6/30/11 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 100.1% | ||||||||
Aerospace – 0.6% | ||||||||
Rolls Royce Holdings PLC | 94,092 | $ | 974,034 | |||||
Alcoholic Beverages – 1.5% | ||||||||
Heineken N.V. | 42,584 | $ | 2,560,904 | |||||
Apparel Manufacturers – 1.5% | ||||||||
Li & Fung Ltd. | 302,000 | $ | 607,390 | |||||
LVMH Moet Hennessy Louis Vuitton S.A. | 10,436 | 1,878,100 | ||||||
$ | 2,485,490 | |||||||
Automotive – 3.7% | ||||||||
Bayerische Motoren Werke AG | 23,127 | $ | 2,307,723 | |||||
DENSO Corp. | 41,200 | 1,529,701 | ||||||
GKN PLC | 138,079 | 513,692 | ||||||
Honda Motor Co. Ltd. | 44,700 | 1,722,898 | ||||||
$ | 6,074,014 | |||||||
Broadcasting – 1.6% | ||||||||
Nippon Television Network Corp. | 7,410 | $ | 1,054,444 | |||||
Publicis Groupe S.A. (l) | 29,580 | 1,649,329 | ||||||
$ | 2,703,773 | |||||||
Brokerage & Asset Managers – 1.3% | ||||||||
BM&F Bovespa S.A. | 16,700 | $ | 110,538 | |||||
Deutsche Boerse AG | 19,122 | 1,453,040 | ||||||
Nomura Holdings, Inc. | 132,500 | 655,559 | ||||||
$ | 2,219,137 | |||||||
Business Services – 2.0% | ||||||||
Cognizant Technology Solutions Corp., “A” (a) | 11,880 | $ | 871,279 | |||||
Compass Group PLC | 35,260 | 340,109 | ||||||
Mitsubishi Corp. | 56,400 | 1,413,099 | ||||||
Nomura Research, Inc. | 34,900 | 763,884 | ||||||
$ | 3,388,371 | |||||||
Chemicals – 0.8% | ||||||||
Monsanto Co. | 7,380 | $ | 535,345 | |||||
Nufarm Ltd. (a) | 162,731 | 786,820 | ||||||
$ | 1,322,165 | |||||||
Computer Software – 0.8% | ||||||||
Dassault Systems S.A. (l) | 14,989 | $ | 1,276,138 | |||||
Computer Software – Systems – 2.3% | ||||||||
Acer, Inc. | 694,978 | $ | 1,217,931 | |||||
Canon, Inc. | 21,700 | 1,034,804 | ||||||
Konica Minolta Holdings, Inc. | 195,500 | 1,631,201 | ||||||
$ | 3,883,936 | |||||||
Conglomerates – 0.6% | ||||||||
Hutchison Whampoa Ltd. | 87,000 | $ | 943,253 | |||||
Consumer Products – 1.4% | ||||||||
Kimberly-Clark de Mexico S.A. de C.V., “A” | 110,340 | $ | 726,019 | |||||
Reckitt Benckiser Group PLC | 29,531 | 1,630,416 | ||||||
$ | 2,356,435 | |||||||
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Electrical Equipment – 3.8% | ||||||||
Legrand S.A. | 13,456 | $ | 566,761 | |||||
Schneider Electric S.A. | 13,928 | 2,326,773 | ||||||
Siemens AG | 25,126 | 3,450,533 | ||||||
$ | 6,344,067 | |||||||
Electronics – 1.5% | ||||||||
Samsung Electronics Co. Ltd. | 1,400 | $ | 1,088,135 | |||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 589,174 | 1,491,244 | ||||||
$ | 2,579,379 | |||||||
Energy – Independent – 2.5% | ||||||||
Bankers Petroleum Ltd. (a) | 71,736 | $ | 511,736 | |||||
Cairn Energy PLC (a) | 72,007 | 479,375 | ||||||
INPEX Corp. | 325 | 2,399,387 | ||||||
Reliance Industries Ltd. | 40,188 | 810,219 | ||||||
$ | 4,200,717 | |||||||
Energy – Integrated – 5.0% | ||||||||
BG Group PLC | 65,050 | $ | 1,476,245 | |||||
BP PLC | 358,280 | 2,637,338 | ||||||
Royal Dutch Shell PLC, “A” | 118,112 | 4,204,529 | ||||||
$ | 8,318,112 | |||||||
Engineering – Construction – 2.2% | ||||||||
JGC Corp. | 70,000 | $ | 1,917,055 | |||||
Keppel Corp. Ltd. | 109,900 | 994,405 | ||||||
Outotec Oyj | 11,805 | 671,065 | ||||||
$ | 3,582,525 | |||||||
Food & Beverages – 4.4% | ||||||||
Groupe Danone | 37,046 | $ | 2,764,009 | |||||
Nestle S.A. | 73,731 | 4,582,153 | ||||||
$ | 7,346,162 | |||||||
Food & Drug Stores – 2.1% | ||||||||
Lawson, Inc. | 31,500 | $ | 1,654,384 | |||||
Tesco PLC | 273,305 | 1,763,337 | ||||||
$ | 3,417,721 | |||||||
Gaming & Lodging – 0.9% | ||||||||
MGM China Holdings Ltd. (a) | 76,800 | $ | 141,329 | |||||
Sands China Ltd. (a) | 504,000 | 1,373,238 | ||||||
$ | 1,514,567 | |||||||
Insurance – 4.5% | ||||||||
AIA Group Ltd. (a) | 127,000 | $ | 442,009 | |||||
Amlin PLC | 43,273 | 282,041 | ||||||
China Pacific Insurance Co. Ltd. | 138,200 | 575,271 | ||||||
Hiscox Ltd. | 100,270 | 674,129 | ||||||
ING Groep N.V. (a) | 209,377 | 2,577,498 | ||||||
SNS REAAL Groep N.V. (a) | 121,521 | 542,593 | ||||||
Swiss Re Ltd. | 41,025 | 2,303,646 | ||||||
$ | 7,397,187 | |||||||
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MFS Research International Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Machinery & Tools – 2.8% | ||||||||
BEML Ltd. | 16,545 | $ | 214,740 | |||||
Glory Ltd. | 53,300 | 1,199,742 | ||||||
Joy Global, Inc. | 6,390 | 608,584 | ||||||
MAN SE | 6,083 | 811,203 | ||||||
Schindler Holding AG | 11,457 | 1,392,692 | ||||||
Sinotruk Hong Kong Ltd. | 496,500 | 348,014 | ||||||
$ | 4,574,975 | |||||||
Major Banks – 11.8% | ||||||||
Barclays PLC | 355,232 | $ | 1,462,098 | |||||
BNP Paribas | 44,831 | 3,460,571 | ||||||
Credit Suisse Group AG | 47,499 | 1,847,419 | ||||||
Erste Group Bank AG | 29,652 | 1,554,444 | ||||||
HSBC Holdings PLC | 318,832 | 3,164,413 | ||||||
Julius Baer Group Ltd. | 25,649 | 1,059,518 | ||||||
KBC Group N.V. (l) | 24,875 | 977,564 | ||||||
Mitsubishi UFJ Financial Group, Inc. | 154,100 | 750,201 | ||||||
Standard Chartered PLC | 73,169 | 1,923,547 | ||||||
Sumitomo Mitsui Financial Group, Inc. | 53,700 | 1,652,668 | ||||||
Westpac Banking Corp. | 76,330 | 1,831,017 | ||||||
$ | 19,683,460 | |||||||
Medical & Health Technology & Services – 2.4% | ||||||||
Diagnosticos da America S.A. | 54,800 | $ | 737,385 | |||||
Miraca Holdings, Inc. | 43,400 | 1,760,753 | ||||||
Rhoen-Klinikum AG | 59,794 | 1,442,859 | ||||||
$ | 3,940,997 | |||||||
Medical Equipment – 0.8% | ||||||||
Sonova Holding AG | 6,110 | $ | 570,485 | |||||
Synthes, Inc. (n) | 4,750 | 835,593 | ||||||
$ | 1,406,078 | |||||||
Metals & Mining – 4.6% | ||||||||
Iluka Resources Ltd. | 78,818 | $ | 1,429,864 | |||||
Rio Tinto Ltd. | 50,030 | 3,605,678 | ||||||
Steel Authority of India Ltd. | 112,583 | 346,846 | ||||||
Sumitomo Metal Industries Ltd. | 189,000 | 425,093 | ||||||
Teck Resources Ltd., “B” | 36,237 | 1,841,814 | ||||||
$ | 7,649,295 | |||||||
Natural Gas – Distribution – 0.8% | ||||||||
Tokyo Gas Co. Ltd. | 292,000 | $ | 1,320,907 | |||||
Network & Telecom – 1.1% | ||||||||
Ericsson, Inc., “B” | 125,861 | $ | 1,814,729 | |||||
Oil Services – 0.9% | ||||||||
AMEC PLC | 37,910 | $ | 661,979 | |||||
Technip | 7,210 | 772,981 | ||||||
$ | 1,434,960 | |||||||
Other Banks & Diversified Financials – 5.3% | ||||||||
Aeon Credit Service Co. Ltd. | 72,500 | $ | 988,821 | |||||
Banco Santander Brasil S.A., ADR | 93,730 | 1,097,578 | ||||||
China Construction Bank | 1,268,780 | 1,056,035 | ||||||
HDFC Bank Ltd., ADR | 5,530 | 975,437 | ||||||
ICICI Bank Ltd. | 68,680 | 1,683,411 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Other Banks & Diversified Financials – continued | ||||||||
Komercni Banka A.S. | 4,422 | $ | 1,078,405 | |||||
Sberbank of Russia | 365,470 | 1,344,930 | ||||||
United Overseas Bank Ltd. | 41,000 | 658,724 | ||||||
$ | 8,883,341 | |||||||
Pharmaceuticals – 5.5% | ||||||||
Bayer AG | 22,962 | $ | 1,846,060 | |||||
Roche Holding AG | 21,516 | 3,600,715 | ||||||
Sanofi-Aventis | 25,830 | 2,076,636 | ||||||
Santen, Inc. | 40,600 | 1,650,411 | ||||||
$ | 9,173,822 | |||||||
Precious Metals & Minerals – 0.7% | ||||||||
Newcrest Mining Ltd. | 27,915 | $ | 1,133,085 | |||||
Railroad & Shipping – 0.5% | ||||||||
East Japan Railway Co. | 14,900 | $ | 856,215 | |||||
Real Estate – 0.8% | ||||||||
GSW Immobilien AG (a) | 13,817 | $ | 473,868 | |||||
Hang Lung Properties Ltd. | 224,000 | 927,803 | ||||||
$ | 1,401,671 | |||||||
Specialty Chemicals – 4.3% | ||||||||
Akzo Nobel N.V. | 42,978 | $ | 2,711,116 | |||||
Chugoku Marine Paints Ltd. | 58,000 | 453,164 | ||||||
Linde AG | 16,048 | 2,813,585 | ||||||
Nippon Paint Co. Ltd. | 63,000 | 504,838 | ||||||
Symrise AG | 19,688 | 627,541 | ||||||
$ | 7,110,244 | |||||||
Specialty Stores – 1.6% | ||||||||
Hennes & Mauritz AB, “B” | 40,440 | $ | 1,394,417 | |||||
Industria de Diseno Textil S.A. | 13,570 | 1,236,599 | ||||||
$ | 2,631,016 | |||||||
Telecommunications – Wireless – 3.0% | ||||||||
KDDI Corp. | 257 | $ | 1,849,141 | |||||
Tim Participacoes S.A., ADR | 6,670 | 328,231 | ||||||
Vodafone Group PLC | 1,038,572 | 2,755,315 | ||||||
$ | 4,932,687 | |||||||
Telephone Services – 2.9% | ||||||||
China Unicom Ltd. | 898,000 | $ | 1,818,412 | |||||
Royal KPN N.V. | 111,535 | 1,622,277 | ||||||
Telecom Italia S.p.A. | 339,528 | 472,426 | ||||||
Telecom Italia S.p.A. | 746,696 | 868,964 | ||||||
$ | 4,782,079 | |||||||
Tobacco – 0.8% | ||||||||
Japan Tobacco, Inc. | 334 | $ | 1,288,983 | |||||
Trucking – 1.1% | ||||||||
Yamato Holdings Co. Ltd. | 116,500 | $ | 1,829,849 | |||||
Utilities – Electric Power – 3.4% | ||||||||
CEZ AS | 24,314 | $ | 1,251,143 | |||||
Energias de Portugal S.A. | 509,127 | 1,808,122 | ||||||
Fortum Corp. | 49,147 | 1,423,272 |
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Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Utilities – Electric Power – continued | ||||||||
Red Electrica de Espana | 9,829 | $ | 593,303 | |||||
Tractebel Energia S.A. | 32,820 | 578,317 | ||||||
|
| |||||||
$ | 5,654,157 | |||||||
|
| |||||||
Total Common Stocks (Identified Cost, $158,464,130) | $ | 166,390,637 | ||||||
|
| |||||||
MONEY MARKET FUNDS (v) – 0.0% | ||||||||
MFS Institutional Money Market Portfolio, 0.1%, at Cost and Net Asset Value | 5 | $ | 5 | |||||
|
| |||||||
COLLATERAL FOR SECURITIES LOANED – 1.8% | ||||||||
Navigator Securities Lending Prime Portfolio, 0.23%, at Cost and Net Asset Value (j) | 2,947,319 | $ | 2,947,319 | |||||
|
| |||||||
Total Investments (Identified Cost, $161,411,454) | $ | 169,337,961 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – (1.9)% | (3,221,302 | ) | ||||||
|
| |||||||
Net Assets – 100.0% | $ | 166,116,659 | ||||||
|
|
(a) | Non-income producing security. |
(j) | The rate quoted is the annualized seven-day yield of the portfolio at period end. |
(l) | A portion of this security is on loan. |
(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 $835,593, representing 0.5% of net assets. |
(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 |
PLC | Public Limited Company |
See Notes to Financial Statements
6
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FINANCIAL STATEMENTS | STATEMENT OF ASSETS AND LIABILITIES (unaudited)
This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
At 6/30/11 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $161,411,449) | $169,337,956 | |||||||
Underlying affiliated funds, at cost and value | 5 | |||||||
Total investments, at value, including $2,852,838 of securities on loan (identified cost, $161,411,454) | $169,337,961 | |||||||
Foreign currency, at value (identified cost, $173,186) | 174,233 | |||||||
Receivables for | ||||||||
Investments sold | 5,213,853 | |||||||
Fund shares sold | 1,615 | |||||||
Interest and dividends | 776,683 | |||||||
Other assets | 981 | |||||||
Total assets | $175,505,326 | |||||||
Liabilities | ||||||||
Payable to custodian | $1,760,193 | |||||||
Payables for | ||||||||
Investments purchased | 3,888,099 | |||||||
Fund shares reacquired | 669,933 | |||||||
Collateral for securities loaned, at value | 2,947,319 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 8,238 | |||||||
Shareholder servicing costs | 209 | |||||||
Distribution and/or service fees | 484 | |||||||
Payable for independent Trustees’ compensation | 806 | |||||||
Accrued expenses and other liabilities | 113,386 | |||||||
Total liabilities | $9,388,667 | |||||||
Net assets | $166,116,659 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $177,377,748 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 7,933,708 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency transactions | (24,507,849 | ) | ||||||
Undistributed net investment income | 5,313,052 | |||||||
Net assets | $166,116,659 | |||||||
Shares of beneficial interest outstanding | 12,554,822 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $130,088,477 | 9,814,986 | $13.25 | |||||||||
Service Class | 36,028,182 | 2,739,836 | 13.15 |
See Notes to Financial Statements
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FINANCIAL STATEMENTS | STATEMENT OF OPERATIONS (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
Six months ended 6/30/11 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $4,101,770 | |||||||
Interest | 102,156 | |||||||
Dividends from underlying affiliated funds | 996 | |||||||
Foreign taxes withheld | (424,831 | ) | ||||||
Total investment income | $3,780,091 | |||||||
Expenses | ||||||||
Management fee | $841,588 | |||||||
Distribution and/or service fees | 49,348 | |||||||
Shareholder servicing costs | 10,797 | |||||||
Administrative services fee | 18,574 | |||||||
Independent Trustees’ compensation | 2,908 | |||||||
Custodian fee | 68,327 | |||||||
Shareholder communications | 22,107 | |||||||
Auditing fees | 27,213 | |||||||
Legal fees | 1,579 | |||||||
Miscellaneous | 12,268 | |||||||
Total expenses | $1,054,709 | |||||||
Fees paid indirectly | (2 | ) | ||||||
Reduction of expenses by investment adviser | (541 | ) | ||||||
Net expenses | $1,054,166 | |||||||
Net investment income | $2,725,925 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency transactions | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investment transactions | $13,210,119 | |||||||
Foreign currency transactions | (8,551 | ) | ||||||
Net realized gain (loss) on investments and foreign currency transactions | $13,201,568 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $(4,140,699 | ) | ||||||
Translation of assets and liabilities in foreign currencies | (6,158 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $(4,146,857 | ) | ||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $9,054,711 | |||||||
Change in net assets from operations | $11,780,636 |
See Notes to Financial Statements
8
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FINANCIAL STATEMENTS | STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
| Six months ended 6/30/11 (unaudited | ) | | Year ended 12/31/10 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $2,725,925 | $2,675,705 | ||||||
Net realized gain (loss) on investments and foreign currency transactions | 13,201,568 | (817,258 | ) | |||||
Net unrealized gain (loss) on investments and foreign currency translation | (4,146,857 | ) | 15,512,104 | |||||
Change in net assets from operations | $11,780,636 | $17,370,551 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(2,782,073 | ) | |||||
Change in net assets from fund share transactions | $(33,231,259 | ) | $(7,280,966 | ) | ||||
Total change in net assets | $(21,450,623 | ) | $7,307,512 | |||||
Net assets | ||||||||
At beginning of period | 187,567,282 | 180,259,770 | ||||||
At end of period (including undistributed net investment income of $5,313,052 and | $166,116,659 | $187,567,282 |
See Notes to Financial Statements
9
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FINANCIAL STATEMENTS | FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund’s financial performance for the semiannual period and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
Initial Class | Six months ended 6/30/11 | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $12.44 | $11.40 | $8.89 | $16.12 | $14.44 | $11.84 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.19 | $0.18 | $0.17 | $0.25 | $0.17 | $0.18 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 0.62 | 1.03 | 2.51 | (6.82 | ) | 1.67 | 2.85 | |||||||||||||||||
Total from investment operations | $0.81 | $1.21 | $2.68 | $(6.57 | ) | $1.84 | $3.03 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.17 | ) | $(0.17 | ) | $(0.10 | ) | $— | $(0.13 | ) | ||||||||||||||
From net realized gain on investments | — | — | — | (0.56 | ) | (0.16 | ) | (0.30 | ) | |||||||||||||||
Total distributions declared to shareholders | $— | $(0.17 | ) | $(0.17 | ) | $(0.66 | ) | $(0.16 | ) | $(0.43 | ) | |||||||||||||
Net asset value, end of period | $13.25 | $12.44 | $11.40 | $8.89 | $16.12 | $14.44 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 6.51 | (n) | 10.81 | 30.86 | (42.39 | ) | 12.82 | 25.67 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.07 | (a) | 1.15 | 1.23 | 1.35 | 1.56 | 2.77 | |||||||||||||||||
Expenses after expense reductions (f) | 1.07 | (a) | 1.10 | 1.10 | 1.10 | 1.10 | 1.10 | |||||||||||||||||
Net investment income | 2.98 | (a)(l) | 1.60 | 1.78 | 2.06 | 1.14 | 1.36 | |||||||||||||||||
Portfolio turnover | 26 | 61 | 92 | 77 | 64 | 130 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $130,088 | $145,085 | $146,044 | $115,944 | $81,987 | $32,437 |
See Notes to Financial Statements
10
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MFS Research International Series
Financial Highlights – continued
Service Class | Six months ended 6/30/11 | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $12.35 | $11.33 | $8.83 | $16.02 | $14.39 | $11.83 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.17 | $0.14 | $0.15 | $0.25 | $0.16 | $0.06 | ||||||||||||||||||
Net realized and unrealized gain (loss) on | 0.63 | 1.03 | 2.49 | (6.81 | ) | 1.63 | 2.91 | |||||||||||||||||
Total from investment operations | $0.80 | $1.17 | $2.64 | $(6.56 | ) | $1.79 | $2.97 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.15 | ) | $(0.14 | ) | $(0.07 | ) | $— | $(0.11 | ) | ||||||||||||||
From net realized gain on investments | — | — | — | (0.56 | ) | (0.16 | ) | (0.30 | ) | |||||||||||||||
Total distributions declared to shareholders | $— | $(0.15 | ) | $(0.14 | ) | $(0.63 | ) | $(0.16 | ) | $(0.41 | ) | |||||||||||||
Net asset value, end of period | $13.15 | $12.35 | $11.33 | $8.83 | $16.02 | $14.39 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 6.48 | (n) | 10.48 | 30.57 | (42.52 | ) | 12.52 | 25.21 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.32 | (a) | 1.40 | 1.49 | 1.58 | 1.81 | 2.86 | |||||||||||||||||
Expenses after expense reductions (f) | 1.32 | (a) | 1.35 | 1.35 | 1.35 | 1.35 | 1.35 | |||||||||||||||||
Net investment income | 2.65 | (a)(l) | 1.27 | 1.56 | 2.01 | 1.03 | 0.41 | |||||||||||||||||
Portfolio turnover | 26 | 61 | 92 | 77 | 64 | 130 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $36,028 | $42,482 | $34,215 | $22,000 | $29,238 | $13,707 |
(a) | Annualized. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(k) | The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown. |
(l) | Recognition of net investment income by the fund may be affected by the timing of the declaration of dividends by companies in which the fund invests and the actual annual net investment income ratio may differ. |
(n) | Not annualized. |
(r) | Certain expenses have been reduced without which performance would have been lower. |
(s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
See Notes to Financial Statements
11
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MFS Research International Series
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) | Business and Organization |
MFS Research International Series (the fund) is a series of MFS Variable Insurance Trust (the trust). The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The shareholders of each series of the trust are separate accounts of insurance companies, which offer variable annuity and/or life insurance products, and qualified retirement and pension plans.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued. The fund invests in foreign securities, including securities of emerging market issuers. Investments in foreign securities are vulnerable to the effects of changes in the relative values of the local currency and the U.S. dollar and to the effects of changes in each country’s legal, political, and economic environment. The markets of emerging markets countries are generally more volatile than the markets of developed countries with more mature economies. All of the risks of investing in foreign securities previously described are heightened when investing in emerging markets countries.
Investment Valuations – 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 the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
12
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MFS Research International Series
Notes to Financial Statements (unaudited) – continued
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. The following is a summary of the levels used as of June 30, 2011 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
Japan | $1,441,985 | $30,865,220 | $— | $32,307,205 | ||||||||||||
United Kingdom | 28,548,275 | — | — | 28,548,275 | ||||||||||||
France | 16,771,299 | — | — | 16,771,299 | ||||||||||||
Switzerland | 16,192,220 | — | — | 16,192,220 | ||||||||||||
Germany | 15,226,411 | — | — | 15,226,411 | ||||||||||||
Netherlands | 10,014,388 | — | — | 10,014,388 | ||||||||||||
Australia | — | 5,180,786 | — | 5,180,786 | ||||||||||||
Hong Kong | 141,328 | 4,293,692 | — | 4,435,020 | ||||||||||||
India | 1,190,177 | 2,840,477 | — | 4,030,654 | ||||||||||||
Other Countries | 24,436,207 | 9,248,172 | — | 33,684,379 | ||||||||||||
Mutual Funds | 2,947,324 | — | — | 2,947,324 | ||||||||||||
Total Investments | $116,909,614 | $52,428,347 | $— | $169,337,961 |
For further information regarding security characteristics, see the Portfolio of Investments.
Of the level 2 investments presented above, equity investments amounting to $41,610,052 would have been considered level 1 investments at the beginning of the period. The primary reason for changes in the classifications between levels 1 and 2 occurs when foreign equity securities are fair valued using other observable market-based inputs in place of the closing exchange price due to events occurring after the close of the exchange or market on which the investment is principally traded. The fund’s foreign equity securities may often be valued at fair value. The fund’s policy is to recognize transfers between the levels as of the end of the period.
Foreign Currency Translation – Purchases and sales of foreign investments, income, and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions or on the reporting date for foreign denominated receivables and payables. Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Gains and losses attributable to foreign exchange rate movements on receivables, payables, income and expenses are recorded for financial statement purposes as foreign currency transaction gains and losses. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.
Security Loans – State Street Bank and Trust Company (“State Street”), as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. The loans are collateralized by cash and/or U.S. Treasury and federal agency obligations in an amount typically at least equal to the market value of the securities loaned. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. State Street provides the fund with indemnification against Borrower default. The fund bears the risk of loss with respect to the investment of cash collateral. On loans collateralized by cash, the cash collateral is invested in a money market fund or short-term securities. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the fund and the lending agent. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the Borrower, and is allocated between the fund and the lending agent. Income from securities lending is included in interest income on the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income.
Indemnifications – Under the fund’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund’s maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.
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MFS Research International Series
Notes to Financial Statements (unaudited) – continued
Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend and interest payments received in additional securities are recorded on the ex-dividend or ex-interest date in an amount equal to the value of the security on such date.
The fund may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
Fees Paid Indirectly – The fund’s custody fee may be reduced according to an arrangement that measures the value of cash deposited with the custodian by the fund. This amount, for the six months ended June 30, 2011, is shown as a reduction of total expenses on the Statement of Operations.
Tax Matters and Distributions – The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to wash sale loss deferrals.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/10 | ||||
Ordinary income (including any short-term capital gains) | $2,782,073 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/11 | ||||
Cost of investments | $162,558,469 | |||
Gross appreciation | 15,581,413 | |||
Gross depreciation | (8,801,921 | ) | ||
Net unrealized appreciation (depreciation) | $6,779,492 | |||
As of 12/31/10 | ||||
Undistributed ordinary income | 2,591,844 | |||
Capital loss carryforwards | (36,562,402 | ) | ||
Other temporary differences | 8,642 | |||
Net unrealized appreciation (depreciation) | 10,920,191 |
The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.
As of December 31, 2010, the fund had capital loss carryforwards available to offset future realized gains. Such losses expire as follows:
12/31/16 | $(31,373,068 | ) | ||
12/31/17 | (3,004,405 | ) | ||
12/31/18 | (2,184,929 | ) | ||
Total | $(36,562,402 | ) |
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and/or service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per
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MFS Research International Series
Notes to Financial Statements (unaudited) – continued
share dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported on the Statements of Changes in Net Assets are presented by class as follows:
From net investment income | ||||||||
Six months ended 6/30/11 | Year ended 12/31/10 | |||||||
Initial Class | $— | $2,316,559 | ||||||
Service Class | — | 465,514 | ||||||
Total | $— | $2,782,073 |
(3) | Transactions with Affiliates |
Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at an annual rate of 0.90% of the fund’s average daily net assets.
The investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, exclusive of interest, taxes, extraordinary expenses, brokerage and transaction costs and investment-related expenses, such that total annual operating expenses do not exceed 1.10% of average daily net assets for the Initial Class shares and 1.35% of average daily net assets for the Service Class shares. This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until April 30, 2013. For the six months ended June 30, 2011, the fund’s actual operating expenses did not exceed the limit and therefore, the investment adviser did not pay any portion of the fund’s expenses related to this agreement.
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, is the distributor of shares of the fund. The Trustees have adopted a distribution plan for the Service Class shares pursuant to Rule 12b-1 under the Investment Company Act of 1940.
The fund’s distribution plan provides that the fund will pay MFD distribution and/or service fees equal to 0.25% per annum of its average daily net assets attributable to Service Class shares as partial consideration for services performed and expenses incurred by MFD and financial intermediaries (including participating insurance companies that invest in the fund to fund variable annuity and variable life insurance contracts, sponsors of qualified retirement and pension plans that invest in the fund, and affiliates of these participating insurance companies and plan sponsors) in connection with the sale and distribution of the Service Class shares. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries.
Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent. For the six months ended June 30, 2011, the fee was $10,445, which equated to 0.0112% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses paid by MFSC on behalf of the fund. For the six months ended June 30, 2011, these costs amounted to $352.
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund partially reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the six months ended June 30, 2011 was equivalent to an annual effective rate of 0.0199% of the fund’s average daily net assets.
Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – This fund and certain other funds managed by MFS (the funds) have entered into services agreements (the Agreements) which provide for payment of fees by the funds to Tarantino LLC and Griffin Compliance LLC in return for the provision of services of an Independent Chief Compliance Officer (ICCO) and Assistant ICCO, respectively, for the funds. The ICCO and Assistant ICCO are officers of the funds and the sole members of Tarantino LLC and Griffin Compliance LLC, respectively. The funds can terminate the Agreements with Tarantino LLC and Griffin Compliance LLC at any time under the terms of the Agreements. For the six months ended June 30, 2011, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $668 and are included in miscellaneous expense on the Statement of Operations. MFS has agreed
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MFS Research International Series
Notes to Financial Statements (unaudited) – continued
to reimburse the fund for a portion of the payments made by the fund in the amount of $541, which is shown as a reduction of total expenses in the Statement of Operations. Additionally, MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ICCO and Assistant ICCO.
The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks a high level of current income consistent with preservation of capital and liquidity. Income earned on this investment is included in dividends from underlying affiliated funds on the Statement of Operations. This money market fund does not pay a management fee to MFS.
(4) | Portfolio Securities |
Purchases and sales of investments, other than U.S. Government securities, purchased option transactions, and short-term obligations, aggregated $48,590,006 and $77,834,189, respectively.
(5) | Shares of Beneficial Interest |
The fund’s Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
Six months ended 6/30/11 | Year ended 12/31/10 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 656,703 | $8,426,083 | 1,581,983 | $17,741,458 | ||||||||||||
Service Class | 217,293 | 2,795,474 | 2,142,666 | 23,508,973 | ||||||||||||
873,996 | $11,221,557 | 3,724,649 | $41,250,431 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 205,551 | $2,316,559 | ||||||||||||
Service Class | — | — | 41,527 | 465,514 | ||||||||||||
— | $— | 247,078 | $2,782,073 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (2,508,186 | ) | $(32,712,495 | ) | (2,935,655 | ) | $(31,859,343 | ) | ||||||||
Service Class | (916,798 | ) | (11,740,321 | ) | (1,765,813 | ) | (19,454,127 | ) | ||||||||
(3,424,984 | ) | $(44,452,816 | ) | (4,701,468 | ) | $(51,313,470 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (1,851,483 | ) | $(24,286,412 | ) | (1,148,121 | ) | $(11,801,326 | ) | ||||||||
Service Class | (699,505 | ) | (8,944,847 | ) | 418,380 | 4,520,360 | ||||||||||
(2,550,988 | ) | $(33,231,259 | ) | (729,741 | ) | $(7,280,966 | ) |
(6) | Line of Credit |
The fund and certain other funds managed by MFS participate in a $1.1 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Federal Reserve funds rate or one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Federal Reserve funds rate plus an agreed upon spread. For the six months ended June 30, 2011, the fund’s commitment fee and interest expense were $888 and $0, respectively, and are included in miscellaneous expense on the Statement of Operations.
(7) | Transactions in Underlying Affiliated Funds – Affiliated Issuers |
An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the fund assumes the following to be affiliated issuers:
Underlying Affiliated Funds | Beginning Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 208,772 | 19,074,657 | (19,283,424 | ) | 5 | |||||||||||
Underlying Affiliated Funds | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $996 | $5 |
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MFS Research International Series
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board’s most recent review and renewal of the fund’s Investment Advisory Agreement with MFS will be available on or about November 1, 2011 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds’ proxy voting policies and procedures is available without charge, upon request, by calling
1-800-225-2606, by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the Securities and Exchange Commission (the Commission) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. The fund’s Form N-Q is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and copies of this information may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
From time to time, MFS may post important information about the fund or the MFS funds on the MFS web site (mfs.com). This information is available by visiting the “News & Commentary” section of mfs.com or by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of mfs.com.
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rev. 3/11
FACTS | WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION? |
Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
What? | The types of personal information we collect and share depend on the product or service you have with us. This information can include:
• Social Security number and account balances • Account transactions and transaction history • Checking account information and wire transfer instructions
When you are no longer our customer, we continue to share your information as described in this notice. |
How? | All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons MFS chooses to share; and whether you can limit this sharing. |
Reasons we can share your personal information | Does MFS share? | Can you limit this sharing? | ||
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus | Yes | No | ||
For our marketing purposes – to offer our products and services to you | No | We don’t share | ||
For joint marketing with other financial companies | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your transactions and experiences | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your creditworthiness | No | We don’t share | ||
For nonaffiliates to market to you | No | We don’t share |
Questions? | Call 800-225-2606 or go to mfs.com. |
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Page 2 |
Who we are | ||
Who is providing this notice? | MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., MFS Fund Distributors, Inc., MFS Heritage Trust Company, and MFS Service Center, Inc. |
What we do | ||
How does MFS protect my personal information? | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you. | |
How does MFS collect my personal information? | We collect your personal information, for example, when you
• open an account or provide account information • direct us to buy securities or direct us to sell your securities • make a wire transfer
We also collect your personal information from others, such as credit bureaus, affiliates and other companies. | |
Why can’t I limit all sharing? | Federal law gives you the right to limit only
• sharing for affiliates’ everyday business purposes – information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you
State laws and individual companies may give you additional rights to limit sharing. |
Definitions | ||
Affiliates | Companies related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice. | |
Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share with nonaffiliates so they can market to you. | |
Joint Marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you.
• MFS doesn’t jointly market. |
Other important information | ||
If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours. |
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Table of Contents
MFS® Growth Series
MFS® Variable Insurance Trust
SEMIANNUAL REPORT
June 30, 2011
VEG-SEM
Table of Contents
MFS® GROWTH SERIES
The report is prepared for the general information of contract owners.
It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED Ÿ MAY LOSE VALUE Ÿ NO BANK OR CREDIT UNION GUARANTEE Ÿ NOT A DEPOSIT Ÿ NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
Table of Contents
MFS Growth Series
Dear Contract Owners:
After about a year of almost uninterrupted macroeconomic and financial market improvement following the global credit crisis, investors grew more cautious in the middle of 2010 as fears grew that some European countries would default on their debt and as economic data showed a weakening
trend in the global economy. As a result asset prices fell significantly.
Last September the U.S. Federal Reserve Board’s promises to make lending conditions easier helped assuage market fears and drive asset prices off their recent lows. A combination of solid earnings and improving economic data gave an additional boost to investor sentiment.
In the following months, the renewed positive market mood, coupled with indications of better global macroeconomic activity, pushed many asset valuations to post-crisis highs. At the same time, global sovereign
bond yields initially rose as investors became concerned about inflationary pressures, driven by higher prices for oil as well as other commodities. However, by the end of the second quarter of 2011, a weakening macroeconomic backdrop and renewed concerns over debt problems in some eurozone countries pushed equities lower.
For the remainder of 2011, we are cautiously optimistic that economic growth will continue to improve and that the global economies will recover from the shocks of the past few years. We expect the pace of recovery worldwide to be uneven and volatile and acknowledge the elevated uncertainty created by events in Japan, Europe, the Middle East, as well as that created by the U.S. debate over raising the debt ceiling and the downgrade by Standard & Poor’s of the U.S. long-term credit rating.
As always, we continue to be mindful of the many economic challenges faced at the local, national, and international levels. It is in times such as these that we want to remind investors of the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with their advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2011
The opinions expressed in this letter are subject to change, may not be relied upon for investment advice, and no forecasts can be guaranteed.
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Table of Contents
MFS Growth Series
Portfolio structure
Top ten holdings | ||||
Apple, Inc. | 5.1% | |||
Danaher Corp. | 3.2% | |||
EMC Corp. | 3.0% | |||
Oracle Corp. | 2.9% | |||
Google, Inc., “A” | 2.4% | |||
Qualcomm, Inc. | 2.1% | |||
American Tower Corp., “A” | 2.0% | |||
Precision Castparts Corp. | 1.8% | |||
Thermo Fisher Scientific, Inc. | 1.8% | |||
Viacom, Inc., “B” | 1.7% |
Equity sectors | ||||
Technology | 24.9% | |||
Health Care | 11.5% | |||
Energy | 9.4% | |||
Industrial Goods & Services | 9.3% | |||
Retailing | 8.5% | |||
Leisure | 8.3% | |||
Consumer Staples | 6.5% | |||
Special Products & Services | 5.0% | |||
Financial Services | 5.0% | |||
Basic Materials | 4.2% | |||
Autos & Housing | 2.3% | |||
Transportation | 2.2% | |||
Utilities & Communications | 2.0% |
Percentages are based on net assets as of 6/30/11.
The portfolio is actively managed and current holdings may be different.
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MFS Growth Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2011 through June 30, 2011
As a contract holder of the fund, you incur ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2011 through June 30, 2011.
Actual Expenses
The first line for each share class in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the following table provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight the fund’s ongoing costs only and do not take into account the fees and expenses imposed under the variable contracts through which your investment in the fund is made. Therefore, the second line for each share class in the table is useful in comparing ongoing costs associated with an investment in vehicles (such as the fund) which fund benefits under variable annuity and variable life insurance contracts and to qualified pension and retirement plans only, and will not help you determine the relative total costs of investing in the fund through variable annuity and variable life insurance contracts. If the fees and expenses imposed under the variable contracts were included, your costs would have been higher.
Share Class | Annualized Expense Ratio | Beginning Account Value 1/01/11 | Ending Account Value | Expenses Paid During Period (p) 1/01/11-6/30/11 | ||||||||||||||
Initial Class | Actual | 0.83% | $1,000.00 | $1,046.17 | $4.21 | |||||||||||||
Hypothetical (h) | 0.83% | $1,000.00 | $1,020.68 | $4.16 | ||||||||||||||
Service Class | Actual | 1.08% | $1,000.00 | $1,044.91 | $5.48 | |||||||||||||
Hypothetical (h) | 1.08% | $1,000.00 | $1,019.44 | $5.41 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid is equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
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MFS Growth Series
PORTFOLIO OF INVESTMENTS – 6/30/11 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 99.1% | ||||||||
Aerospace – 4.0% | ||||||||
Goodrich Corp. | 40,645 | $ | 3,881,594 | |||||
Honeywell International, Inc. | 130,600 | 7,782,454 | ||||||
Precision Castparts Corp. | 61,525 | 10,130,091 | ||||||
|
| |||||||
$ | 21,794,139 | |||||||
|
| |||||||
Alcoholic Beverages – 1.0% | ||||||||
Diageo PLC | 271,850 | $ | 5,554,174 | |||||
|
| |||||||
Apparel Manufacturers – 1.0% | ||||||||
LVMH Moet Hennessy Louis Vuitton S.A. | 13,040 | $ | 2,346,725 | |||||
NIKE, Inc., “B” | 19,996 | 1,799,240 | ||||||
Phillips-Van Heusen Corp. | 18,300 | 1,198,101 | ||||||
|
| |||||||
$ | 5,344,066 | |||||||
|
| |||||||
Automotive – 1.1% | ||||||||
Johnson Controls, Inc. | 141,960 | $ | 5,914,054 | |||||
|
| |||||||
Biotechnology – 1.4% | ||||||||
Alexion Pharmaceuticals, Inc. (a) | 83,340 | $ | 3,919,480 | |||||
Celgene Corp. (a) | 63,380 | 3,823,082 | ||||||
|
| |||||||
$ | 7,742,562 | |||||||
|
| |||||||
Broadcasting – 4.1% | ||||||||
Discovery Communications, Inc., “A” (a) | 56,490 | $ | 2,313,830 | |||||
Interpublic Group of Cos., Inc. | 306,460 | 3,830,750 | ||||||
Viacom, Inc., “B” | 185,660 | 9,468,660 | ||||||
Walt Disney Co. | 175,860 | 6,865,574 | ||||||
|
| |||||||
$ | 22,478,814 | |||||||
|
| |||||||
Brokerage & Asset Managers – 1.9% | ||||||||
Affiliated Managers Group, Inc. (a) | 71,420 | $ | 7,245,559 | |||||
Blackrock, Inc. | 15,526 | 2,978,042 | ||||||
|
| |||||||
$ | 10,223,601 | |||||||
|
| |||||||
Business Services – 4.1% | ||||||||
Accenture PLC, “A” | 96,030 | $ | 5,802,133 | |||||
Cognizant Technology Solutions Corp., “A” (a) | 78,390 | 5,749,123 | ||||||
FleetCor Technologies, Inc. (a) | 46,060 | 1,365,218 | ||||||
Jones Lang LaSalle, Inc. | 42,280 | 3,987,004 | ||||||
MSCI, Inc., “A” (a) | 38,380 | 1,446,158 | ||||||
Verisk Analytics, Inc., “A” | 128,370 | 4,444,169 | ||||||
|
| |||||||
$ | 22,793,805 | |||||||
|
| |||||||
Cable TV – 1.3% | ||||||||
Comcast Corp., “Special A” | 182,770 | $ | 4,428,517 | |||||
DIRECTV, “A” (a) | 54,210 | 2,754,952 | ||||||
|
| |||||||
$ | 7,183,469 | |||||||
|
| |||||||
Chemicals – 2.5% | ||||||||
Celanese Corp. | 85,230 | $ | 4,543,611 | |||||
Ecolab, Inc. | 61,700 | 3,478,646 | ||||||
Monsanto Co. | 77,120 | 5,594,285 | ||||||
|
| |||||||
$ | 13,616,542 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Computer Software – 7.7% | ||||||||
Autodesk, Inc. (a) | 139,810 | $ | 5,396,666 | |||||
Check Point Software Technologies Ltd. (a) | 139,360 | 7,922,616 | ||||||
Intuit, Inc. (a) | 79,980 | 4,147,763 | ||||||
Oracle Corp. | 485,640 | 15,982,412 | ||||||
Red Hat, Inc. (a) | 72,160 | 3,312,144 | ||||||
Salesforce.com, Inc. (a) | 11,150 | 1,661,127 | ||||||
VeriSign, Inc. | 114,823 | 3,841,978 | ||||||
|
| |||||||
$ | 42,264,706 | |||||||
|
| |||||||
Computer Software – Systems – 9.8% | ||||||||
Apple, Inc. (a) | 83,908 | $ | 28,165,398 | |||||
EMC Corp. (a) | 597,280 | 16,455,064 | ||||||
International Business Machines Corp. | 46,290 | 7,941,050 | ||||||
Verifone Systems, Inc. | 28,390 | 1,259,097 | ||||||
|
| |||||||
$ | 53,820,609 | |||||||
|
| |||||||
Construction – 1.2% | ||||||||
Owens Corning (a) | 90,550 | $ | 3,382,043 | |||||
Stanley Black & Decker, Inc. | 44,090 | 3,176,685 | ||||||
|
| |||||||
$ | 6,558,728 | |||||||
|
| |||||||
Consumer Products – 1.3% | ||||||||
Avon Products, Inc. | 77,700 | $ | 2,175,600 | |||||
Colgate-Palmolive Co. | 55,170 | 4,822,410 | ||||||
|
| |||||||
$ | 6,998,010 | |||||||
|
| |||||||
Consumer Services – 0.9% | ||||||||
Priceline.com, Inc. (a) | 6,510 | $ | 3,332,664 | |||||
Sotheby’s | 41,960 | 1,825,260 | ||||||
|
| |||||||
$ | 5,157,924 | |||||||
|
| |||||||
Electrical Equipment – 3.2% | ||||||||
Danaher Corp. | 333,730 | $ | 17,684,353 | |||||
|
| |||||||
Electronics – 2.6% | ||||||||
Advanced Micro Devices, Inc. (a) | 256,804 | $ | 1,795,060 | |||||
Agilent Technologies, Inc. (a) | 64,460 | 3,294,551 | ||||||
ASML Holding N.V. | 89,101 | 3,293,173 | ||||||
Broadcom Corp., “A” | 99,750 | 3,355,590 | ||||||
First Solar, Inc. (a)(l) | 12,230 | 1,617,662 | ||||||
JDS Uniphase Corp. (a) | 42,480 | 707,717 | ||||||
|
| |||||||
$ | 14,063,753 | |||||||
|
| |||||||
Energy – Independent – 4.2% | ||||||||
Apache Corp. | 20,326 | $ | 2,508,025 | |||||
EOG Resources, Inc. | 47,760 | 4,993,308 | ||||||
Newfield Exploration Co. (a) | 33,250 | 2,261,665 | ||||||
Noble Energy, Inc. | 47,270 | 4,236,810 | ||||||
Occidental Petroleum Corp. | 88,310 | 9,187,772 | ||||||
|
| |||||||
$ | 23,187,580 | |||||||
|
| |||||||
Energy – Integrated – 0.2% | ||||||||
EQT Corp. | 25,980 | $ | 1,364,470 | |||||
|
|
4
Table of Contents
MFS Growth Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Engineering – Construction – 1.2% | ||||||||
Fluor Corp. | 98,120 | $ | 6,344,439 | |||||
Food & Beverages – 3.2% | ||||||||
Coca-Cola Co. | 90,470 | $ | 6,087,726 | |||||
Green Mountain Coffee Roasters, Inc. (a) | 30,610 | 2,732,249 | ||||||
Groupe Danone | 39,819 | 2,970,904 | ||||||
Mead Johnson Nutrition Co., “A” | 85,630 | 5,784,307 | ||||||
$ | 17,575,186 | |||||||
Gaming & Lodging – 0.9% | ||||||||
Carnival Corp. | 44,940 | $ | 1,691,092 | |||||
Las Vegas Sands Corp. (a) | 27,570 | 1,163,730 | ||||||
Wynn Resorts Ltd. | 14,020 | 2,012,431 | ||||||
$ | 4,867,253 | |||||||
General Merchandise – 3.4% | ||||||||
Costco Wholesale Corp. | 63,620 | $ | 5,168,489 | |||||
Dollar General Corp. (a) | 65,720 | 2,227,251 | ||||||
Kohl’s Corp. | 80,840 | 4,042,808 | ||||||
Target Corp. | 159,300 | 7,472,763 | ||||||
$ | 18,911,311 | |||||||
Health Maintenance Organizations – 0.7% | ||||||||
WellPoint, Inc. | 52,020 | $ | 4,097,615 | |||||
Internet – 2.7% | ||||||||
Google, Inc., “A” (a) | 25,670 | $ | 12,998,775 | |||||
LinkedIn Corp., “A” (a)(l) | 21,610 | 1,946,845 | ||||||
$ | 14,945,620 | |||||||
Machinery & Tools – 0.6% | ||||||||
Joy Global, Inc. | 15,080 | $ | 1,436,219 | |||||
Polypore International, Inc. (a) | 25,390 | 1,722,458 | ||||||
$ | 3,158,677 | |||||||
Major Banks – 1.0% | ||||||||
Goldman Sachs Group, Inc. | 20,570 | $ | 2,737,661 | |||||
JPMorgan Chase & Co. | 66,560 | 2,724,966 | ||||||
$ | 5,462,627 | |||||||
Medical & Health Technology & Services – 3.3% | ||||||||
AmerisourceBergen Corp. | 124,080 | $ | 5,136,912 | |||||
Cerner Corp. (a) | 51,270 | 3,133,110 | ||||||
Express Scripts, Inc. (a) | 95,190 | 5,138,356 | ||||||
IDEXX Laboratories, Inc. (a) | 22,070 | 1,711,749 | ||||||
Stericycle, Inc. | 35,300 | 3,145,936 | ||||||
$ | 18,266,063 | |||||||
Medical Equipment – 3.8% | ||||||||
Becton, Dickinson & Co. | 46,597 | $ | 4,015,263 | |||||
Cooper Cos., Inc. | 17,700 | 1,402,548 | ||||||
Covidien PLC | 101,680 | 5,412,426 | ||||||
Thermo Fisher Scientific, Inc. (a) | 156,630 | 10,085,406 | ||||||
$ | 20,915,643 | |||||||
Metals & Mining – 0.2% | ||||||||
Teck Resources Ltd., “B” | 23,000 | $ | 1,167,020 | |||||
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Network & Telecom – 2.1% | ||||||||
Qualcomm, Inc. | 202,480 | $ | 11,498,839 | |||||
Oil Services – 5.0% | ||||||||
Cameron International Corp. (a) | 137,510 | $ | 6,915,378 | |||||
Dresser-Rand Group, Inc. (a) | 56,260 | 3,023,975 | ||||||
FMC Technologies, Inc. (a) | 30,830 | 1,380,876 | ||||||
Halliburton Co. | 88,280 | 4,502,280 | ||||||
National Oilwell Varco, Inc. | 46,150 | 3,609,392 | ||||||
Schlumberger Ltd. | 91,080 | 7,869,312 | ||||||
$ | 27,301,213 | |||||||
Other Banks & Diversified Financials – 2.1% | ||||||||
MasterCard, Inc., “A” | 22,700 | $ | 6,840,418 | |||||
Visa, Inc., “A” | 53,367 | 4,496,703 | ||||||
$ | 11,337,121 | |||||||
Pharmaceuticals – 2.3% | ||||||||
Abbott Laboratories | 95,930 | $ | 5,047,837 | |||||
Allergan, Inc. | 38,890 | 3,237,593 | ||||||
Teva Pharmaceutical Industries Ltd., ADR | 91,300 | 4,402,486 | ||||||
$ | 12,687,916 | |||||||
Pollution Control – 0.3% | ||||||||
Republic Services, Inc. | 56,020 | $ | 1,728,217 | |||||
Printing & Publishing – 0.6% | ||||||||
Moody’s Corp. | 85,310 | $ | 3,271,639 | |||||
Railroad & Shipping – 1.3% | ||||||||
CSX Corp. | 128,400 | $ | 3,366,648 | |||||
Kansas City Southern Co. (a) | 66,330 | 3,935,359 | ||||||
$ | 7,302,007 | |||||||
Restaurants – 1.4% | ||||||||
McDonald’s Corp. | 48,940 | $ | 4,126,621 | |||||
Starbucks Corp. | 91,910 | 3,629,526 | ||||||
$ | 7,756,147 | |||||||
Specialty Chemicals – 1.5% | ||||||||
Airgas, Inc. | 40,250 | $ | 2,819,110 | |||||
Praxair, Inc. | 47,820 | 5,183,210 | ||||||
$ | 8,002,320 | |||||||
Specialty Stores – 4.1% | ||||||||
Abercrombie & Fitch Co., “A” | 37,060 | $ | 2,480,055 | |||||
Amazon.com, Inc. (a) | 40,370 | 8,255,261 | ||||||
Industria de Diseno Textil S.A. | 19,519 | 1,778,716 | ||||||
PetSmart, Inc. | 41,920 | 1,901,910 | ||||||
Ross Stores, Inc. | 41,100 | 3,292,932 | ||||||
Tiffany & Co. | 42,880 | 3,366,938 | ||||||
Urban Outfitters, Inc. (a) | 43,240 | 1,217,206 | ||||||
$ | 22,293,018 | |||||||
Telephone Services – 2.0% | ||||||||
American Tower Corp., “A” (a) | 209,663 | $ | 10,971,665 | |||||
Tobacco – 1.0% | ||||||||
Philip Morris International, Inc. | 80,680 | $ | 5,387,004 | |||||
5
Table of Contents
MFS Growth Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Trucking – 0.9% | ||||||||
Expeditors International of Washington, Inc. | 92,150 | $ | 4,717,159 | |||||
|
| |||||||
Total Common Stocks (Identified Cost, $452,386,821) | $ | 543,711,078 | ||||||
|
| |||||||
MONEY MARKET FUNDS (v) – 1.0% | ||||||||
MFS Institutional Money Market Portfolio, 0.1%, at Cost and Net Asset Value | 5,458,161 | $ | 5,458,161 | |||||
|
| |||||||
COLLATERAL FOR SECURITIES LOANED – 0.5% | ||||||||
Navigator Securities Lending Prime Portfolio, 0.23%, at Cost and Net Asset Value (j) | 2,602,221 | $ | 2,602,221 | |||||
|
| |||||||
Total Investments (Identified Cost, $460,447,203) | $ | 551,771,460 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – (0.6)% | (3,156,314 | ) | ||||||
|
| |||||||
Net Assets – 100.0% | $ | 548,615,146 | ||||||
|
|
(a) | Non-income producing security. |
(j) | The rate quoted is the annualized seven-day yield of the portfolio at period end. |
(l) | A portion of this security is on loan. |
(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 |
PLC | Public Limited Company |
See Notes to Financial Statements
6
Table of Contents
MFS Growth Series
FINANCIAL STATEMENTS | STATEMENT OF ASSETS AND LIABILITIES (unaudited)
This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
At 6/30/11 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $454,989,042) | $546,313,299 | |||||||
Underlying affiliated funds, at cost and value | 5,458,161 | |||||||
Total investments, at value, including $2,607,764 of securities on loan (identified cost, $460,447,203) | $551,771,460 | |||||||
Receivables for | ||||||||
Investments sold | 6,864,703 | |||||||
Fund shares sold | 835,800 | |||||||
Interest and dividends | 349,900 | |||||||
Other assets | 2,327 | |||||||
Total assets | $559,824,190 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Investments purchased | $7,502,151 | |||||||
Fund shares reacquired | 960,971 | |||||||
Collateral for securities loaned, at value | 2,602,221 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 22,709 | |||||||
Shareholder servicing costs | 635 | |||||||
Distribution and/or service fees | 634 | |||||||
Payable for independent Trustees’ compensation | 2,671 | |||||||
Accrued expenses and other liabilities | 117,052 | |||||||
Total liabilities | $11,209,044 | |||||||
Net assets | $548,615,146 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $504,733,075 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 91,324,584 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency transactions | (48,635,101 | ) | ||||||
Undistributed net investment income | 1,192,588 | |||||||
Net assets | $548,615,146 | |||||||
Shares of beneficial interest outstanding | 21,274,908 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $501,555,507 | 19,419,009 | $25.83 | |||||||||
Service Class | 47,059,639 | 1,855,899 | 25.36 |
See Notes to Financial Statements
7
Table of Contents
MFS Growth Series
FINANCIAL STATEMENTS | STATEMENT OF OPERATIONS (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
Six months ended 6/30/11 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $2,621,251 | |||||||
Interest | 23,635 | |||||||
Dividends from underlying affiliated funds | 10,273 | |||||||
Foreign taxes withheld | (27,218 | ) | ||||||
Total investment income | $2,627,941 | |||||||
Expenses | ||||||||
Management fee | $2,091,481 | |||||||
Distribution and/or service fees | 58,139 | |||||||
Shareholder servicing costs | 32,127 | |||||||
Administrative services fee | 45,265 | |||||||
Independent Trustees’ compensation | 9,598 | |||||||
Custodian fee | 34,604 | |||||||
Shareholder communications | 55,922 | |||||||
Auditing fees | 24,602 | |||||||
Legal fees | 4,570 | |||||||
Miscellaneous | 14,346 | |||||||
Total expenses | $2,370,654 | |||||||
Fees paid indirectly | (13 | ) | ||||||
Reduction of expenses by investment adviser | (1,590 | ) | ||||||
Net expenses | $2,369,051 | |||||||
Net investment income | $258,890 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency transactions | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investment transactions | $33,246,549 | |||||||
Foreign currency transactions | (15,242 | ) | ||||||
Net realized gain (loss) on investments and foreign currency transactions | $33,231,307 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $(8,528,512 | ) | ||||||
Translation of assets and liabilities in foreign currencies | (2,061 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $(8,530,573 | ) | ||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $24,700,734 | |||||||
Change in net assets from operations | $24,959,624 |
See Notes to Financial Statements
8
Table of Contents
MFS Growth Series
FINANCIAL STATEMENTS | STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
| Six months ended 6/30/11 (unaudited | ) | | Year ended 12/31/10 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $258,890 | $1,150,455 | ||||||
Net realized gain (loss) on investments and foreign currency transactions | 33,231,307 | 41,498,031 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | (8,530,573 | ) | 30,240,826 | |||||
Change in net assets from operations | $24,959,624 | $72,889,312 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(550,091 | ) | |||||
Change in net assets from fund share transactions | $(23,002,999 | ) | $(55,829,691 | ) | ||||
Total change in net assets | $1,956,625 | $16,509,530 | ||||||
Net assets | ||||||||
At beginning of period | 546,658,521 | 530,148,991 | ||||||
At end of period (including undistributed net investment income of $1,192,588 and | $548,615,146 | $546,658,521 |
See Notes to Financial Statements
9
Table of Contents
MFS Growth Series
FINANCIAL STATEMENTS | FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund’s financial performance for the semiannual period and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
Initial Class | Six months ended 6/30/11 | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $24.69 | $21.43 | $15.62 | $25.01 | $20.64 | $19.13 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (loss) (d) | $0.01 | $0.05 | $0.03 | $0.05 | $0.05 | $(0.03 | ) | |||||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 1.13 | 3.24 | 5.83 | (9.39 | ) | 4.32 | 1.54 | |||||||||||||||||
Total from investment operations | $1.14 | $3.29 | $5.86 | $(9.34 | ) | $4.37 | $1.51 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.03 | ) | $(0.05 | ) | $(0.05 | ) | $— | $— | |||||||||||||||
Net asset value, end of period | $25.83 | $24.69 | $21.43 | $15.62 | $25.01 | $20.64 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 4.62 | (n) | 15.34 | 37.67 | (37.42 | ) | 21.17 | 7.89 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.83 | (a) | 0.85 | 0.86 | 0.84 | 0.87 | 0.87 | |||||||||||||||||
Expenses after expense reductions (f) | 0.83 | (a) | 0.85 | 0.86 | 0.84 | 0.87 | 0.87 | |||||||||||||||||
Net investment income (loss) | 0.11 | (a) | 0.24 | 0.14 | 0.25 | 0.20 | (0.14 | ) | ||||||||||||||||
Portfolio turnover | 41 | 100 | 100 | 129 | 84 | 127 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $501,556 | $503,497 | $498,288 | $389,813 | $711,418 | $667,776 |
See Notes to Financial Statements
10
Table of Contents
MFS Growth Series
Financial Highlights – continued
Service Class | Six months ended 6/30/11 | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $24.27 | $21.10 | �� | $15.37 | $24.61 | $20.36 | $18.92 | |||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (loss) (d) | $(0.02 | ) | $0.00 | (w) | $(0.02 | ) | $0.00 | (w) | $(0.01 | ) | $(0.07 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 1.11 | 3.17 | 5.76 | (9.24 | ) | 4.26 | 1.51 | |||||||||||||||||
Total from investment operations | $1.09 | $3.17 | $5.74 | $(9.24 | ) | $4.25 | $1.44 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $— | $(0.01 | ) | $— | $— | $— | |||||||||||||||||
Net asset value, end of period | $25.36 | $24.27 | $21.10 | $15.37 | $24.61 | $20.36 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 4.49 | (n) | 15.02 | 37.33 | (37.55 | ) | 20.87 | 7.61 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.08 | (a) | 1.10 | 1.10 | 1.09 | 1.12 | 1.12 | |||||||||||||||||
Expenses after expense reductions (f) | 1.08 | (a) | 1.10 | 1.10 | 1.08 | 1.12 | 1.12 | |||||||||||||||||
Net investment income (loss) | (0.13 | )(a) | 0.02 | (0.11 | ) | 0.01 | (0.05 | ) | (0.39 | ) | ||||||||||||||
Portfolio turnover | 41 | 100 | 100 | 129 | 84 | 127 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $47,060 | $43,161 | $31,861 | $18,684 | $30,698 | $34,595 |
(a) | Annualized. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(k) | The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown. |
(n) | Not annualized. |
(r) | Certain expenses have been reduced without which performance would have been lower. |
(s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
(w) | Per share amount was less than $0.01. |
See Notes to Financial Statements
11
Table of Contents
MFS Growth Series
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) | Business and Organization |
MFS Growth Series (the fund) is a series of MFS Variable Insurance Trust (the trust). The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The shareholders of each series of the trust are separate accounts of insurance companies, which offer variable annuity and/or life insurance products, and qualified retirement and pension plans.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued. The fund invests in foreign securities, including securities of emerging market issuers. Investments in foreign securities are vulnerable to the effects of changes in the relative values of the local currency and the U.S. dollar and to the effects of changes in each country’s legal, political, and economic environment. The markets of emerging markets countries are generally more volatile than the markets of developed countries with more mature economies. All of the risks of investing in foreign securities previously described are heightened when investing in emerging markets countries.
Investment Valuations – 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 the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
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MFS Growth Series
Notes to Financial Statements (unaudited) – continued
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. The following is a summary of the levels used as of June 30, 2011 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities | $543,711,078 | $— | $— | $543,711,078 | ||||||||||||
Mutual Funds | 8,060,382 | — | — | 8,060,382 | ||||||||||||
Total Investments | $551,771,460 | $— | $— | $551,771,460 |
For further information regarding security characteristics, see the Portfolio of Investments.
Foreign Currency Translation – Purchases and sales of foreign investments, income, and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions or on the reporting date for foreign denominated receivables and payables. Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Gains and losses attributable to foreign exchange rate movements on receivables, payables, income and expenses are recorded for financial statement purposes as foreign currency transaction gains and losses. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.
Security Loans – State Street Bank and Trust Company (“State Street”), as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. The loans are collateralized by cash and/or U.S. Treasury and federal agency obligations in an amount typically at least equal to the market value of the securities loaned. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. State Street provides the fund with indemnification against Borrower default. The fund bears the risk of loss with respect to the investment of cash collateral. On loans collateralized by cash, the cash collateral is invested in a money market fund or short-term securities. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the fund and the lending agent. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the Borrower, and is allocated between the fund and the lending agent. Income from securities lending is included in interest income on the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income.
Indemnifications – Under the fund’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund’s maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.
Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend and interest payments received in additional securities are recorded on the ex-dividend or ex-interest date in an amount equal to the value of the security on such date. The fund may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
Fees Paid Indirectly – The fund’s custody fee may be reduced according to an arrangement that measures the value of cash deposited with the custodian by the fund. This amount, for the six months ended June 30, 2011, is shown as a reduction of total expenses on the Statement of Operations.
Tax Matters and Distributions – The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no
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MFS Growth Series
Notes to Financial Statements (unaudited) – continued
provision for federal income tax is required. The fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to expiration of capital loss carryforwards, wash sale loss deferrals and straddle loss deferrals.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/10 | ||||
Ordinary income (including any short-term capital gains) | $550,091 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/11 | ||||
Cost of investments | $461,677,909 | |||
Gross appreciation | 95,190,408 | |||
Gross depreciation | (5,096,857 | ) | ||
Net unrealized appreciation (depreciation) | $90,093,551 | |||
As of 12/31/10 | ||||
Undistributed ordinary income | 933,698 | |||
Capital loss carryforwards | (80,449,076 | ) | ||
Other temporary differences | (184,238 | ) | ||
Net unrealized appreciation (depreciation) | 98,622,063 |
The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.
As of December 31, 2010, the fund had capital loss carryforwards available to offset future realized gains. Such losses expire as follows:
12/31/16 | $(52,541,803 | ) | ||
12/31/17 | (27,907,273 | ) | ||
Total | $(80,449,076 | ) |
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and/or service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported on the Statements of Changes in Net Assets are presented by class as follows:
From net investment income | ||||||||
Six months ended 6/30/11 | Year ended 12/31/10 | |||||||
Initial Class | $— | $550,091 |
(3) Transactions with Affiliates
Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund.
The management fee is computed daily and paid monthly at the following annual rates:
First $1 billion of average daily net assets | 0.75% | |||
Average daily net assets in excess of $1 billion | 0.65% |
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MFS Growth Series
Notes to Financial Statements (unaudited) – continued
The management fee incurred for the six months ended June 30, 2011 was equivalent to an annual effective rate of 0.75% of the fund’s average daily net assets.
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, is the distributor of shares of the fund. The Trustees have adopted a distribution plan for the Service Class shares pursuant to Rule 12b-1 under the Investment Company Act of 1940.
The fund’s distribution plan provides that the fund will pay MFD distribution and/or service fees equal to 0.25% per annum of its average daily net assets attributable to Service Class shares as partial consideration for services performed and expenses incurred by MFD and financial intermediaries (including participating insurance companies that invest in the fund to fund variable annuity and variable life insurance contracts, sponsors of qualified retirement and pension plans that invest in the fund, and affiliates of these participating insurance companies and plan sponsors) in connection with the sale and distribution of the Service Class shares. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries.
Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent. For the six months ended June 30, 2011, the fee was $31,128, which equated to 0.0112% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses paid by MFSC on behalf of the fund. For the six months ended June 30, 2011, these costs amounted to $999.
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund partially reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the six months ended June 30, 2011 was equivalent to an annual effective rate of 0.0162% of the fund’s average daily net assets.
Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – This fund and certain other funds managed by MFS (the funds) have entered into services agreements (the Agreements) which provide for payment of fees by the funds to Tarantino LLC and Griffin Compliance LLC in return for the provision of services of an Independent Chief Compliance Officer (ICCO) and Assistant ICCO, respectively, for the funds. The ICCO and Assistant ICCO are officers of the funds and the sole members of Tarantino LLC and Griffin Compliance LLC, respectively. The funds can terminate the Agreements with Tarantino LLC and Griffin Compliance LLC at any time under the terms of the Agreements. For the six months ended June 30, 2011, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $1,963 and are included in miscellaneous expense on the Statement of Operations. MFS has agreed to reimburse the fund for a portion of the payments made by the fund in the amount of $1,590, which is shown as a reduction of total expenses in the Statement of Operations. Additionally, MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ICCO and Assistant ICCO.
The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks a high level of current income consistent with preservation of capital and liquidity. Income earned on this investment is included in dividends from underlying affiliated funds on the Statement of Operations. This money market fund does not pay a management fee to MFS.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. Government securities, purchased option transactions, and short-term obligations, aggregated $226,075,470 and $235,799,791, respectively.
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MFS Growth Series
Notes to Financial Statements (unaudited) – continued
(5) Shares of Beneficial Interest
The fund’s Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
Six months ended 6/30/11 | Year ended 12/31/10 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 1,343,178 | $34,078,406 | 2,960,888 | $65,574,689 | ||||||||||||
Service Class | 475,772 | 11,842,260 | 686,815 | 14,790,994 | ||||||||||||
1,818,950 | $45,920,666 | 3,647,703 | $80,365,683 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 23,650 | $550,091 | ||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (2,317,712 | ) | $(58,985,299 | ) | (5,842,314 | ) | $(127,766,833 | ) | ||||||||
Service Class | (398,348 | ) | (9,938,366 | ) | (418,686 | ) | (8,978,632 | ) | ||||||||
(2,716,060 | ) | $(68,923,665 | ) | (6,261,000 | ) | $(136,745,465 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (974,534 | ) | $(24,906,893 | ) | (2,857,776 | ) | $(61,642,053 | ) | ||||||||
Service Class | 77,424 | 1,903,894 | 268,129 | 5,812,362 | ||||||||||||
(897,110 | ) | $(23,002,999 | ) | (2,589,647 | ) | $(55,829,691 | ) |
(6) Line of Credit
The fund and certain other funds managed by MFS participate in a $1.1 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Federal Reserve funds rate or one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Federal Reserve funds rate plus an agreed upon spread. For the six months ended June 30, 2011, the fund’s commitment fee and interest expense were $2,568 and $0, respectively, and are included in miscellaneous expense on the Statement of Operations.
(7) Transactions in Underlying Affiliated Funds – Affiliated Issuers
An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the fund assumes the following to be affiliated issuers:
Underlying Affiliated Funds | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 9,944,359 | 86,791,216 | (91,277,414 | ) | 5,458,161 | |||||||||||
Underlying Affiliated Funds | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $10,273 | $5,458,161 |
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MFS Growth Series
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board’s most recent review and renewal of the fund’s Investment Advisory Agreement with MFS will be available on or about November 1, 2011 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds’ proxy voting policies and procedures is available without charge, upon request, by calling
1-800-225-2606, by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the Securities and Exchange Commission (the Commission) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. The fund’s Form N-Q is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and copies of this information may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
From time to time, MFS may post important information about the fund or the MFS funds on the MFS web site (mfs.com). This information is available by visiting the “News & Commentary” section of mfs.com or by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of mfs.com.
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rev. 3/11
FACTS | WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION? |
Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
What? | The types of personal information we collect and share depend on the product or service you have with us. This information can include:
• Social Security number and account balances • Account transactions and transaction history • Checking account information and wire transfer instructions
When you are no longer our customer, we continue to share your information as described in this notice. |
How? | All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons MFS chooses to share; and whether you can limit this sharing. |
Reasons we can share your personal information | Does MFS share? | Can you limit this sharing? | ||
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus | Yes | No | ||
For our marketing purposes – to offer our products and services to you | No | We don’t share | ||
For joint marketing with other financial companies | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your transactions and experiences | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your creditworthiness | No | We don’t share | ||
For nonaffiliates to market to you | No | We don’t share |
Questions? | Call 800-225-2606 or go to mfs.com. |
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Page 2 |
Who we are | ||
Who is providing this notice? | MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., MFS Fund Distributors, Inc., MFS Heritage Trust Company, and MFS Service Center, Inc. |
What we do | ||
How does MFS protect my personal information? | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you. | |
How does MFS collect my personal information? | We collect your personal information, for example, when you
• open an account or provide account information • direct us to buy securities or direct us to sell your securities • make a wire transfer
We also collect your personal information from others, such as credit bureaus, affiliates and other companies. | |
Why can’t I limit all sharing? | Federal law gives you the right to limit only
• sharing for affiliates’ everyday business purposes – information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you
State laws and individual companies may give you additional rights to limit sharing. |
Definitions | ||
Affiliates | Companies related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice. | |
Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share with nonaffiliates so they can market to you. | |
Joint Marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you.
• MFS doesn’t jointly market. |
Other important information | ||
If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours. |
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Table of Contents
MFS® Investors Trust Series
MFS® Variable Insurance Trust
SEMIANNUAL REPORT
June 30, 2011
VGI-SEM
Table of Contents
MFS® INVESTORS TRUST SERIES
The report is prepared for the general information of contract owners. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED Ÿ MAY LOSE VALUE Ÿ NO BANK OR CREDIT UNION GUARANTEE Ÿ NOT A DEPOSIT Ÿ NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
Table of Contents
MFS Investors Trust Series
Dear Contract Owners:
After about a year of almost uninterrupted macroeconomic and financial market improvement following the global credit crisis, investors grew more cautious in the middle of 2010 as fears grew that some European countries would default on their debt and as economic data showed a weakening
trend in the global economy. As a result asset prices fell significantly.
Last September the U.S. Federal Reserve Board’s promises to make lending conditions easier helped assuage market fears and drive asset prices off their recent lows. A combination of solid earnings and improving economic data gave an additional boost to investor sentiment.
In the following months, the renewed positive market mood, coupled with indications of better global macroeconomic activity, pushed many asset valuations to post-crisis highs. At the same time, global sovereign
bond yields initially rose as investors became concerned about inflationary pressures, driven by higher prices for oil as well as other commodities. However, by the end of the second quarter of 2011, a weakening macroeconomic backdrop and renewed concerns over debt problems in some eurozone countries pushed equities lower.
For the remainder of 2011, we are cautiously optimistic that economic growth will continue to improve and that the global economies will recover from the shocks of the past few years. We expect the pace of recovery worldwide to be uneven and volatile and acknowledge the elevated uncertainty created by events in Japan, Europe, the Middle East, as well as that created by the U.S. debate over raising the debt ceiling and the downgrade by Standard & Poor’s of the U.S. long-term credit rating.
As always, we continue to be mindful of the many economic challenges faced at the local, national, and international levels. It is in times such as these that we want to remind investors of the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with their advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2011
The opinions expressed in this letter are subject to change, may not be relied upon for investment advice, and no forecasts can be guaranteed.
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Table of Contents
MFS Investors Trust Series
Portfolio structure
Top ten holdings | ||||
Apple, Inc. | 2.9% | |||
Oracle Corp. | 2.8% | |||
JPMorgan Chase & Co. | 2.5% | |||
Danaher Corp. | 2.4% | |||
EMC Corp. | 2.3% | |||
United Technologies Corp. | 2.2% | |||
Walt Disney Co. | 2.2% | |||
Procter & Gamble Co. | 2.0% | |||
Abbott Laboratories | 1.9% | |||
Chevron Corp. | 1.8% |
Equity sectors | ||||
Financial Services | 18.7% | |||
Technology | 15.2% | |||
Energy | 12.1% | |||
Health Care | 11.5% | |||
Consumer Staples | 11.0% | |||
Industrial Goods & Services | 5.7% | |||
Retailing | 5.6% | |||
Basic Materials | 5.0% | |||
Utilities & Communications | 4.6% | |||
Autos & Housing | 3.7% | |||
Leisure | 3.4% | |||
Transportation | 1.5% | |||
Special Products & Services | 1.1% |
Percentages are based on net assets as of 6/30/11.
The portfolio is actively managed and current holdings may be different.
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MFS Investors Trust Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2011 through June 30, 2011
As a contract holder of the fund, you incur ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2011 through June 30, 2011.
Actual Expenses
The first line for each share class in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the following table provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight the fund’s ongoing costs only and do not take into account the fees and expenses imposed under the variable contracts through which your investment in the fund is made. Therefore, the second line for each share class in the table is useful in comparing ongoing costs associated with an investment in vehicles (such as the fund) which fund benefits under variable annuity and variable life insurance contracts and to qualified pension and retirement plans only, and will not help you determine the relative total costs of investing in the fund through variable annuity and variable life insurance contracts. If the fees and expenses imposed under the variable contracts were included, your costs would have been higher.
Share Class | Annualized Expense Ratio | Beginning Account Value 1/01/11 | Ending Account Value 6/30/11 | Expenses Paid During Period (p) 1/01/11-6/30/11 | ||||||||||||||
Initial Class | Actual | 0.82% | $1,000.00 | $1,052.40 | $4.17 | |||||||||||||
Hypothetical (h) | 0.82% | $1,000.00 | $1,020.73 | $4.11 | ||||||||||||||
Service Class | Actual | 1.07% | $1,000.00 | $1,050.63 | $5.44 | |||||||||||||
Hypothetical (h) | 1.07% | $1,000.00 | $1,019.49 | $5.36 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid is equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
3
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MFS Investors Trust Series
PORTFOLIO OF INVESTMENTS – 6/30/11 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 99.1% | ||||||||
Aerospace – 2.2% | ||||||||
United Technologies Corp. | 160,950 | $ | 14,245,685 | |||||
|
| |||||||
Alcoholic Beverages – 2.3% | ||||||||
Diageo PLC | 282,195 | $ | 5,765,533 | |||||
Heineken N.V. | 150,728 | 9,064,436 | ||||||
|
| |||||||
$ | 14,829,969 | |||||||
|
| |||||||
Apparel Manufacturers – 2.2% | ||||||||
LVMH Moet Hennessy Louis Vuitton S.A. | 34,916 | $ | 6,283,608 | |||||
NIKE, Inc., “B” | 84,630 | 7,615,007 | ||||||
|
| |||||||
$ | 13,898,615 | |||||||
|
| |||||||
Automotive – 1.0% | ||||||||
Bayerische Motoren Werke AG | 61,388 | $ | 6,125,589 | |||||
|
| |||||||
Biotechnology – 1.1% | ||||||||
Gilead Sciences, Inc. (a) | 163,230 | $ | 6,759,354 | |||||
|
| |||||||
Broadcasting – 3.2% | ||||||||
Viacom, Inc., “B” | 129,120 | $ | 6,585,120 | |||||
Walt Disney Co. | 358,610 | 14,000,134 | ||||||
|
| |||||||
$ | 20,585,254 | |||||||
|
| |||||||
Brokerage & Asset Managers – 3.0% | ||||||||
Blackrock, Inc. | 32,995 | $ | 6,328,771 | |||||
Charles Schwab Corp. | 261,530 | 4,302,169 | ||||||
Franklin Resources, Inc. | 63,180 | 8,294,902 | ||||||
|
| |||||||
$ | 18,925,842 | |||||||
|
| |||||||
Business Services – 1.1% | ||||||||
Accenture PLC, “A” | 121,650 | $ | 7,350,093 | |||||
|
| |||||||
Chemicals – 2.6% | ||||||||
3M Co. | 101,880 | $ | 9,663,318 | |||||
Celanese Corp. | 76,260 | 4,065,421 | ||||||
Monsanto Co. | 36,100 | 2,618,694 | ||||||
|
| |||||||
$ | 16,347,433 | |||||||
|
| |||||||
Computer Software – 4.2% | ||||||||
Check Point Software Technologies Ltd. (a) | 101,270 | $ | 5,757,200 | |||||
Oracle Corp. | 545,070 | 17,938,254 | ||||||
VeriSign, Inc. | 93,760 | 3,137,210 | ||||||
|
| |||||||
$ | 26,832,664 | |||||||
|
| |||||||
Computer Software – Systems – 6.0% | ||||||||
Apple, Inc. (a) | 54,770 | $ | 18,384,646 | |||||
EMC Corp. (a) | 523,670 | 14,427,109 | ||||||
International Business Machines Corp. | 33,570 | 5,758,934 | ||||||
|
| |||||||
$ | 38,570,689 | |||||||
|
| |||||||
Construction – 2.7% | ||||||||
Owens Corning (a) | 158,470 | $ | 5,918,854 | |||||
Sherwin-Williams Co. | 81,930 | 6,871,469 | ||||||
Stanley Black & Decker, Inc. | 61,990 | 4,466,379 | ||||||
|
| |||||||
$ | 17,256,702 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Consumer Products – 4.3% | ||||||||
Colgate-Palmolive Co. | 72,080 | $ | 6,300,513 | |||||
Procter & Gamble Co. | 203,000 | 12,904,710 | ||||||
Reckitt Benckiser Group PLC | 149,682 | 8,263,990 | ||||||
|
| |||||||
$ | 27,469,213 | |||||||
|
| |||||||
Electrical Equipment – 2.4% | ||||||||
Danaher Corp. | 293,750 | $ | 15,565,813 | |||||
|
| |||||||
Electronics – 1.9% | ||||||||
ASML Holding N.V. | 61,223 | $ | 2,262,802 | |||||
Microchip Technology, Inc. | 207,730 | 7,875,044 | ||||||
Samsung Electronics Co. Ltd., GDR | 5,992 | 2,322,499 | ||||||
|
| |||||||
$ | 12,460,345 | |||||||
|
| |||||||
Energy – Independent – 3.2% | ||||||||
Apache Corp. | 51,860 | $ | 6,399,005 | |||||
EOG Resources, Inc. | 53,440 | 5,587,152 | ||||||
Occidental Petroleum Corp. | 80,090 | 8,332,564 | ||||||
|
| |||||||
�� | $ | 20,318,721 | ||||||
|
| |||||||
Energy – Integrated – 5.0% | ||||||||
Chevron Corp. | 114,460 | $ | 11,771,066 | |||||
Exxon Mobil Corp. | 99,810 | 8,122,538 | ||||||
Hess Corp. | 98,800 | 7,386,288 | ||||||
QEP Resources, Inc. | 117,650 | 4,921,299 | ||||||
|
| |||||||
$ | 32,201,191 | |||||||
|
| |||||||
Engineering – Construction – 1.1% | ||||||||
Fluor Corp. | 113,310 | $ | 7,326,625 | |||||
|
| |||||||
Food & Beverages – 2.7% | ||||||||
General Mills, Inc. | 103,330 | $ | 3,845,943 | |||||
Groupe Danone | 71,219 | 5,313,664 | ||||||
PepsiCo, Inc. | 115,351 | 8,124,171 | ||||||
|
| |||||||
$ | 17,283,778 | |||||||
|
| |||||||
Gaming & Lodging – 0.2% | ||||||||
Ladbrokes PLC | 626,249 | $ | 1,531,771 | |||||
|
| |||||||
General Merchandise – 2.8% | ||||||||
Kohl’s Corp. | 133,350 | $ | 6,668,834 | |||||
Nordstrom, Inc. | 40,110 | 1,882,763 | ||||||
Target Corp. | 204,720 | 9,603,415 | ||||||
|
| |||||||
$ | 18,155,012 | |||||||
|
| |||||||
Insurance – 2.3% | ||||||||
ACE Ltd. | 68,310 | $ | 4,496,164 | |||||
Aon Corp. | 118,010 | 6,053,913 | ||||||
MetLife, Inc. | 102,690 | 4,505,010 | ||||||
|
| |||||||
$ | 15,055,087 | |||||||
|
| |||||||
Internet – 1.5% | ||||||||
Google, Inc., “A” (a) | 18,930 | $ | 9,585,773 | |||||
|
|
4
Table of Contents
MFS Investors Trust Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Major Banks – 9.4% | ||||||||
Bank of America Corp. | 909,850 | $ | 9,971,956 | |||||
Bank of New York Mellon Corp. | 222,663 | 5,704,626 | ||||||
Goldman Sachs Group, Inc. | 73,390 | 9,767,475 | ||||||
JPMorgan Chase & Co. | 387,050 | 15,845,827 | ||||||
State Street Corp. | 112,390 | 5,067,665 | ||||||
SunTrust Banks, Inc. | 111,160 | 2,867,928 | ||||||
Wells Fargo & Co. | 396,370 | 11,122,142 | ||||||
|
| |||||||
$ | 60,347,619 | |||||||
|
| |||||||
Medical & Health Technology & Services – 0.2% | ||||||||
VCA Antech, Inc. (a) | 46,888 | $ | 994,026 | |||||
|
| |||||||
Medical Equipment – 5.7% | ||||||||
Baxter International, Inc. | 76,140 | $ | 4,544,797 | |||||
Becton, Dickinson & Co. | 89,190 | 7,685,502 | ||||||
Medtronic, Inc. | 193,310 | 7,448,234 | ||||||
St. Jude Medical, Inc. | 190,450 | 9,080,656 | ||||||
Thermo Fisher Scientific, Inc. (a) | 119,840 | 7,716,498 | ||||||
|
| |||||||
$ | 36,475,687 | |||||||
|
| |||||||
Natural Gas – Pipeline – 0.3% | ||||||||
Kinder Morgan, Inc. | 66,670 | $ | 1,915,429 | |||||
|
| |||||||
Network & Telecom – 1.6% | ||||||||
Cisco Systems, Inc. | 639,172 | $ | 9,977,475 | |||||
|
| |||||||
Oil Services – 3.9% | ||||||||
Cameron International Corp. (a) | 110,780 | $ | 5,571,126 | |||||
Halliburton Co. | 131,740 | 6,718,740 | ||||||
National Oilwell Varco, Inc. | 78,970 | 6,176,244 | ||||||
Schlumberger Ltd. | 76,830 | 6,638,112 | ||||||
|
| |||||||
$ | 25,104,222 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 4.0% | ||||||||
American Express Co. | 152,130 | $ | 7,865,121 | |||||
MasterCard, Inc., “A” | 24,260 | 7,310,508 | ||||||
Visa, Inc., “A” | 85,900 | 7,237,934 | ||||||
Zions Bancorporation | 138,390 | 3,322,744 | ||||||
|
| |||||||
$ | 25,736,307 | |||||||
|
| |||||||
Pharmaceuticals – 4.5% | ||||||||
Abbott Laboratories | 230,460 | $ | 12,126,805 | |||||
Johnson & Johnson | 172,896 | 11,501,042 | ||||||
Teva Pharmaceutical Industries Ltd., ADR | 106,990 | 5,159,058 | ||||||
|
| |||||||
$ | 28,786,905 | |||||||
|
| |||||||
Railroad & Shipping – 1.1% | ||||||||
Canadian National Railway Co. | 90,530 | $ | 7,233,347 | |||||
|
| |||||||
Specialty Chemicals – 2.4% | ||||||||
Linde AG | 49,542 | $ | 8,685,857 | |||||
Praxair, Inc. | 60,930 | 6,604,203 | ||||||
|
| |||||||
$ | 15,290,060 | |||||||
|
| |||||||
Specialty Stores – 0.6% | ||||||||
Hennes & Mauritz AB, “B” | 117,790 | $ | 4,061,531 | |||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Telephone Services – 2.1% | ||||||||
American Tower Corp., “A” (a) | 129,790 | $ | 6,791,911 | |||||
AT&T, Inc. | 203,890 | 6,404,185 | ||||||
|
| |||||||
$ | 13,196,096 | |||||||
|
| |||||||
Tobacco – 1.7% | ||||||||
Philip Morris International, Inc. | 161,500 | $ | 10,783,355 | |||||
|
| |||||||
Trucking – 0.4% | ||||||||
Expeditors International of Washington, Inc. | 46,560 | $ | 2,383,406 | |||||
|
| |||||||
Utilities – Electric Power – 2.2% | ||||||||
Alliant Energy Corp. | 105,730 | $ | 4,298,982 | |||||
American Electric Power Co., Inc. | 114,900 | 4,329,432 | ||||||
Wisconsin Energy Corp. | 172,410 | 5,405,053 | ||||||
|
| |||||||
$ | 14,033,467 | |||||||
|
| |||||||
Total Common Stocks (Identified Cost, $541,070,484) | $ | 635,000,150 | ||||||
|
| |||||||
MONEY MARKET FUNDS (v) – 0.8% | ||||||||
MFS Institutional Money Market Portfolio, 0.1%, at Cost and Net Asset Value | 5,393,174 | $ | 5,393,174 | |||||
|
| |||||||
Total Investments (Identified Cost, $546,463,658) | $ | 640,393,324 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – 0.1% | 669,166 | |||||||
|
| |||||||
Net Assets – 100.0% | $ | 641,062,490 | ||||||
|
|
(a) | Non-income producing security. |
(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 |
See Notes to Financial Statements
5
Table of Contents
MFS Investors Trust Series
FINANCIAL STATEMENTS | STATEMENT OF ASSETS AND LIABILITIES (unaudited)
This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
At 6/30/11 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $541,070,484) | $635,000,150 | |||||||
Underlying affiliated funds, at cost and value | 5,393,174 | |||||||
Total investments, at value (identified cost, $546,463,658) | $640,393,324 | |||||||
Cash | 26,351 | |||||||
Receivables for | ||||||||
Investments sold | 3,136,663 | |||||||
Fund shares sold | 168,913 | |||||||
Interest and dividends | 460,719 | |||||||
Other assets | 2,926 | |||||||
Total assets | $644,188,896 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Investments purchased | $2,261,679 | |||||||
Fund shares reacquired | 726,671 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 26,526 | |||||||
Shareholder servicing costs | 515 | |||||||
Distribution and/or service fees | 1,011 | |||||||
Payable for independent Trustees’ compensation | 2,793 | |||||||
Accrued expenses and other liabilities | 107,211 | |||||||
Total liabilities | $3,126,406 | |||||||
Net assets | $641,062,490 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $585,049,888 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 93,933,393 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency transactions | (46,420,918 | ) | ||||||
Undistributed net investment income | 8,500,127 | |||||||
Net assets | $641,062,490 | |||||||
Shares of beneficial interest outstanding | 30,418,738 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $566,003,936 | 26,837,935 | $21.09 | |||||||||
Service Class | 75,058,554 | 3,580,803 | 20.96 |
See Notes to Financial Statements
6
Table of Contents
MFS Investors Trust Series
FINANCIAL STATEMENTS | STATEMENT OF OPERATIONS (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
Six months ended 6/30/11 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $5,939,328 | |||||||
Interest | 4,666 | |||||||
Dividends from underlying affiliated funds | 3,470 | |||||||
Foreign taxes withheld | (136,945 | ) | ||||||
Total investment income | $5,810,519 | |||||||
Expenses | ||||||||
Management fee | $2,455,584 | |||||||
Distribution and/or service fees | 86,153 | |||||||
Shareholder servicing costs | 36,984 | |||||||
Administrative services fee | 52,256 | |||||||
Independent Trustees’ compensation | 9,883 | |||||||
Custodian fee | 36,234 | |||||||
Shareholder communications | 54,470 | |||||||
Auditing fees | 23,497 | |||||||
Legal fees | 5,735 | |||||||
Miscellaneous | 16,708 | |||||||
Total expenses | $2,777,504 | |||||||
Reduction of expenses by investment adviser | (1,882 | ) | ||||||
Net expenses | $2,775,622 | |||||||
Net investment income | $3,034,897 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency transactions | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investment transactions | $23,146,876 | |||||||
Foreign currency transactions | 4,515 | |||||||
Net realized gain (loss) on investments and foreign currency transactions | $23,151,391 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $7,521,230 | |||||||
Translation of assets and liabilities in foreign currencies | (7,252 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $7,513,978 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $30,665,369 | |||||||
Change in net assets from operations | $33,700,266 |
See Notes to Financial Statements
7
Table of Contents
MFS Investors Trust Series
FINANCIAL STATEMENTS | STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
| Six months ended 6/30/11 (unaudited | ) | | Year ended 12/31/10 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $3,034,897 | $5,467,583 | ||||||
Net realized gain (loss) on investments and foreign currency transactions | 23,151,391 | 22,401,863 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 7,513,978 | 41,402,512 | ||||||
Change in net assets from operations | $33,700,266 | $69,271,958 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(7,580,322 | ) | |||||
Change in net assets from fund share transactions | $(58,225,815 | ) | $(79,178,737 | ) | ||||
Total change in net assets | $(24,525,549 | ) | $(17,487,101 | ) | ||||
Net assets | ||||||||
At beginning of period | 665,588,039 | 683,075,140 | ||||||
At end of period (including undistributed net investment income of $8,500,127 and | $641,062,490 | $665,588,039 |
See Notes to Financial Statements
8
Table of Contents
MFS Investors Trust Series
FINANCIAL STATEMENTS | FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund’s financial performance for the semiannual period and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
Initial Class | Six months ended 6/30/11 | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $20.04 | $18.24 | $14.64 | $23.52 | $21.69 | $19.29 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.10 | $0.16 | $0.19 | $0.24 | $0.17 | $0.19 | ||||||||||||||||||
Net realized and unrealized gain (loss) on | 0.95 | 1.86 | 3.67 | (7.54 | ) | 2.04 | 2.31 | |||||||||||||||||
Total from investment operations | $1.05 | $2.02 | $3.86 | $(7.30 | ) | $2.21 | $2.50 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.22 | ) | $(0.26 | ) | $(0.17 | ) | $(0.19 | ) | $(0.10 | ) | |||||||||||||
From net realized gain on investments | — | — | — | (1.41 | ) | (0.19 | ) | — | ||||||||||||||||
Total distributions declared to shareholders | $— | $(0.22 | ) | $(0.26 | ) | $(1.58 | ) | $(0.38 | ) | $(0.10 | ) | |||||||||||||
Net asset value, end of period | $21.09 | $20.04 | $18.24 | $14.64 | $23.52 | $21.69 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 5.24 | (n) | 11.10 | 26.90 | (33.08 | ) | 10.31 | 12.99 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.82 | (a) | 0.83 | 0.86 | 0.84 | 0.85 | 0.86 | |||||||||||||||||
Expenses after expense reductions (f) | 0.82 | (a) | 0.83 | 0.86 | 0.84 | 0.85 | 0.86 | |||||||||||||||||
Net investment income | 0.95 | (a) | 0.87 | 1.25 | 1.25 | 0.74 | 0.93 | |||||||||||||||||
Portfolio turnover | 14 | 22 | 34 | 29 | 37 | 46 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $566,004 | $603,279 | $636,809 | $560,356 | $917,158 | $820,583 |
See Notes to Financial Statements
9
Table of Contents
MFS Investors Trust Series
Financial Highlights – continued
Service Class | Six months ended 6/30/11 | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $19.95 | $18.16 | $14.56 | $23.39 | $21.57 | $19.19 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.07 | $0.11 | $0.15 | $0.19 | $0.11 | $0.14 | ||||||||||||||||||
Net realized and unrealized gain (loss) on | 0.94 | 1.86 | 3.65 | (7.51 | ) | 2.03 | 2.29 | |||||||||||||||||
Total from investment operations | $1.01 | $1.97 | $3.80 | $(7.32 | ) | $2.14 | $2.43 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.18 | ) | $(0.20 | ) | $(0.10 | ) | $(0.13 | ) | $(0.05 | ) | |||||||||||||
From net realized gain on investments | — | — | — | (1.41 | ) | (0.19 | ) | — | ||||||||||||||||
Total distributions declared to shareholders | $— | $(0.18 | ) | $(0.20 | ) | $(1.51 | ) | $(0.32 | ) | $(0.05 | ) | |||||||||||||
Net asset value, end of period | $20.96 | $19.95 | $18.16 | $14.56 | $23.39 | $21.57 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 5.06 | (n) | 10.88 | 26.56 | (33.25 | ) | 10.03 | 12.69 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.07 | (a) | 1.08 | 1.11 | 1.09 | 1.11 | 1.11 | |||||||||||||||||
Expenses after expense reductions (f) | 1.07 | (a) | 1.08 | 1.11 | 1.09 | 1.11 | 1.11 | |||||||||||||||||
Net investment income | 0.71 | (a) | 0.63 | 0.99 | 1.00 | 0.49 | 0.69 | |||||||||||||||||
Portfolio turnover | 14 | 22 | 34 | 29 | 37 | 46 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $75,059 | $62,309 | $46,267 | $38,259 | $65,180 | $79,976 |
(a) | Annualized. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(k) | The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown. |
(n) | Not annualized. |
(r) | Certain expenses have been reduced without which performance would have been lower. |
(s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
See Notes to Financial Statements
10
Table of Contents
MFS Investors Trust Series
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) | Business and Organization |
MFS Investors Trust Series (the fund) is a series of MFS Variable Insurance Trust (the trust). The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The shareholders of each series of the trust are separate accounts of insurance companies, which offer variable annuity and/or life insurance products, and qualified retirement and pension plans.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued. The fund invests in foreign securities. Investments in foreign securities are vulnerable to the effects of changes in the relative values of the local currency and the U.S. dollar and to the effects of changes in each country’s legal, political, and economic environment.
Investment Valuations – 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 the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair
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MFS Investors Trust Series
Notes to Financial Statements (unaudited) – continued
value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. The following is a summary of the levels used as of June 30, 2011 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities | $635,000,150 | $— | $— | $635,000,150 | ||||||||||||
Mutual Funds | 5,393,174 | — | — | 5,393,174 | ||||||||||||
Total Investments | $640,393,324 | $— | $— | $640,393,324 |
For further information regarding security characteristics, see the Portfolio of Investments.
Foreign Currency Translation – Purchases and sales of foreign investments, income, and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions or on the reporting date for foreign denominated receivables and payables. Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Gains and losses attributable to foreign exchange rate movements on receivables, payables, income and expenses are recorded for financial statement purposes as foreign currency transaction gains and losses. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.
Security Loans – State Street Bank and Trust Company (“State Street”), as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. The loans are collateralized by cash and/or U.S. Treasury and federal agency obligations in an amount typically at least equal to the market value of the securities loaned. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. State Street provides the fund with indemnification against Borrower default. The fund bears the risk of loss with respect to the investment of cash collateral. On loans collateralized by cash, the cash collateral is invested in a money market fund or short-term securities. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the fund and the lending agent. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the Borrower, and is allocated between the fund and the lending agent. Income from securities lending is included in interest income on the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income.
Indemnifications – Under the fund’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund’s maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.
Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend and interest payments received in additional securities are recorded on the ex-dividend or ex-interest date in an amount equal to the value of the security on such date.
The fund may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
Fees Paid Indirectly – The fund’s custody fee may be reduced according to an arrangement that measures the value of cash deposited with the custodian by the fund. For the six months ended June 30, 2011, custody fees were not reduced.
Tax Matters and Distributions – The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements.
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MFS Investors Trust Series
Notes to Financial Statements (unaudited) – continued
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to wash sale loss deferrals.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/10 | ||||
Ordinary income (including any short-term capital gains) | $7,580,322 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/11 | ||||
Cost of investments | $548,333,016 | |||
Gross appreciation | 115,684,698 | |||
Gross depreciation | (23,624,390 | ) | ||
Net unrealized appreciation (depreciation) | $92,060,308 | |||
As of 12/31/10 | ||||
Undistributed ordinary income | 5,465,230 | |||
Capital loss carryforwards | (67,702,951 | ) | ||
Other temporary differences | 10,979 | |||
Net unrealized appreciation (depreciation) | 84,539,078 |
The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.
As of December 31, 2010, the fund had capital loss carryforwards available to offset future realized gains. Such losses expire as follows:
12/31/16 | $(14,214,265 | ) | ||
12/31/17 | (53,488,686 | ) | ||
Total | $(67,702,951 | ) |
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and/or service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported on the Statements of Changes in Net Assets are presented by class as follows:
From net investment income | ||||||||
Six months ended 6/30/11 | Year ended 12/31/10 | |||||||
Initial Class | $— | $7,105,436 | ||||||
Service Class | — | 474,886 | ||||||
Total | $— | $7,580,322 |
(3) | Transactions with Affiliates |
Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates:
First $1 billion of average daily net assets | 0.75% | |||
Average daily net assets in excess of $1 billion | 0.65% |
Effective May 1, 2011, the investment adviser has agreed in writing to reduce its management fee to 0.60% of average daily net assets in excess of $2.5 billion. This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until April 30, 2013. For the period May 1, 2011 through June 30, 2011, the fund’s average daily net assets did not exceed $2.5 billion and therefore, the management fee was not reduced.
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MFS Investors Trust Series
Notes to Financial Statements (unaudited) – continued
The management fee incurred for the six months ended June 30, 2011 was equivalent to an annual effective rate of 0.75% of the fund’s average daily net assets.
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, is the distributor of shares of the fund. The Trustees have adopted a distribution plan for the Service Class shares pursuant to Rule 12b-1 under the Investment Company Act of 1940.
The fund’s distribution plan provides that the fund will pay MFD distribution and/or service fees equal to 0.25% per annum of its average daily net assets attributable to Service Class shares as partial consideration for services performed and expenses incurred by MFD and financial intermediaries (including participating insurance companies that invest in the fund to fund variable annuity and variable life insurance contracts, sponsors of qualified retirement and pension plans that invest in the fund, and affiliates of these participating insurance companies and plan sponsors) in connection with the sale and distribution of the Service Class shares. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries.
Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent. For the six months ended June 30, 2011, the fee was $36,537, which equated to 0.0112% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses paid by MFSC on behalf of the fund. For the six months ended June 30, 2011, these costs amounted to $447.
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund partially reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the six months ended June 30, 2011 was equivalent to an annual effective rate of 0.0160% of the fund’s average daily net assets.
Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – This fund and certain other funds managed by MFS (the funds) have entered into services agreements (the Agreements) which provide for payment of fees by the funds to Tarantino LLC and Griffin Compliance LLC in return for the provision of services of an Independent Chief Compliance Officer (ICCO) and Assistant ICCO, respectively, for the funds. The ICCO and Assistant ICCO are officers of the funds and the sole members of Tarantino LLC and Griffin Compliance LLC, respectively. The funds can terminate the Agreements with Tarantino LLC and Griffin Compliance LLC at any time under the terms of the Agreements. For the six months ended June 30, 2011, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $2,323 and are included in miscellaneous expense on the Statement of Operations. MFS has agreed to reimburse the fund for a portion of the payments made by the fund in the amount of $1,882, which is shown as a reduction of total expenses in the Statement of Operations. Additionally, MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ICCO and Assistant ICCO.
The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks a high level of current income consistent with preservation of capital and liquidity. Income earned on this investment is included in dividends from underlying affiliated funds on the Statement of Operations. This money market fund does not pay a management fee to MFS.
(4) | Portfolio Securities |
Purchases and sales of investments, other than U.S. Government securities, purchased option transactions, and short-term obligations, aggregated $92,768,110 and $148,996,364, respectively.
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MFS Investors Trust Series
Notes to Financial Statements (unaudited) – continued
(5) | Shares of Beneficial Interest |
The fund’s Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
Six months ended 6/30/11 | Year ended 12/31/10 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 194,767 | $4,056,612 | 1,482,988 | $25,496,825 | ||||||||||||
Service Class | 802,841 | 16,642,682 | 1,096,120 | 20,064,145 | ||||||||||||
997,608 | $20,699,294 | 2,579,108 | $45,560,970 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 364,756 | $7,105,436 | ||||||||||||
Service Class | — | — | 24,453 | 474,886 | ||||||||||||
— | $— | 389,209 | $7,580,322 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (3,454,937 | ) | $(71,763,890 | ) | (6,663,657 | ) | $(122,417,272 | ) | ||||||||
Service Class | (345,824 | ) | (7,161,219 | ) | (544,147 | ) | (9,902,757 | ) | ||||||||
(3,800,761 | ) | $(78,925,109 | ) | (7,207,804 | ) | $(132,320,029 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (3,260,170 | ) | $(67,707,278 | ) | (4,815,913 | ) | $(89,815,011 | ) | ||||||||
Service Class | 457,017 | 9,481,463 | 576,426 | 10,636,274 | ||||||||||||
(2,803,153 | ) | $(58,225,815 | ) | (4,239,487 | ) | $(79,178,737 | ) |
(6) | Line of Credit |
The fund and certain other funds managed by MFS participate in a $1.1 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Federal Reserve funds rate or one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Federal Reserve funds rate plus an agreed upon spread. For the six months ended June 30, 2011, the fund’s commitment fee and interest expense were $3,182 and $0, respectively, and are included in miscellaneous expense on the Statement of Operations.
(7) | Transactions in Underlying Affiliated Funds – Affiliated Issuers |
An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the fund assumes the following to be affiliated issuers:
Underlying Affiliated Funds | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||
MFS Institutional Money Market Portfolio | 4,905,692 | 69,482,823 | (68,995,341 | ) | 5,393,174 | |||||||||
Underlying Affiliated Funds | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $3,470 | $5,393,174 |
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MFS Investors Trust Series
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board’s most recent review and renewal of the fund’s Investment Advisory Agreement with MFS will be available on or about November 1, 2011 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds’ proxy voting policies and procedures is available without charge, upon request, by calling
1-800-225-2606, by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the Securities and Exchange Commission (the Commission) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. The fund’s Form N-Q is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and copies of this information may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
From time to time, MFS may post important information about the fund or the MFS funds on the MFS web site (mfs.com). This information is available by visiting the “News & Commentary” section of mfs.com or by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of mfs.com.
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rev. 3/11
FACTS | WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION? |
Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
What? | The types of personal information we collect and share depend on the product or service you have with us. This information can include:
• Social Security number and account balances • Account transactions and transaction history • Checking account information and wire transfer instructions
When you are no longer our customer, we continue to share your information as described in this notice. |
How? | All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons MFS chooses to share; and whether you can limit this sharing. |
Reasons we can share your personal information | Does MFS share? | Can you limit this sharing? | ||
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus | Yes | No | ||
For our marketing purposes – to offer our products and services to you | No | We don’t share | ||
For joint marketing with other financial companies | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your transactions and experiences | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your creditworthiness | No | We don’t share | ||
For nonaffiliates to market to you | No | We don’t share |
Questions? | Call 800-225-2606 or go to mfs.com. |
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Page 2 |
Who we are | ||
Who is providing this notice? | MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., MFS Fund Distributors, Inc., MFS Heritage Trust Company, and MFS Service Center, Inc. |
What we do | ||
How does MFS protect my personal information? | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you. | |
How does MFS collect my personal information? | We collect your personal information, for example, when you
• open an account or provide account information • direct us to buy securities or direct us to sell your securities • make a wire transfer
We also collect your personal information from others, such as credit bureaus, affiliates and other companies. | |
Why can’t I limit all sharing? | Federal law gives you the right to limit only
• sharing for affiliates’ everyday business purposes – information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you
State laws and individual companies may give you additional rights to limit sharing. |
Definitions | ||
Affiliates | Companies related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice. | |
Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share with nonaffiliates so they can market to you. | |
Joint Marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you.
• MFS doesn’t jointly market. |
Other important information | ||
If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours. |
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Table of Contents
MFS® Value Series
MFS® Variable Insurance Trust
SEMIANNUAL REPORT
June 30, 2011
VLU-SEM
Table of Contents
MFS® VALUE SERIES
The report is prepared for the general information of contract owners.
It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED Ÿ MAY LOSE VALUE Ÿ NO BANK OR CREDIT UNION GUARANTEE Ÿ NOT A DEPOSIT Ÿ NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
Table of Contents
MFS Value Series
Dear Contract Owners:
After about a year of almost uninterrupted macroeconomic and financial market improvement following the global credit crisis, investors grew more cautious in the middle of 2010 as fears grew that some European countries would default on their debt and as economic data showed a weakening
trend in the global economy. As a result asset prices fell significantly.
Last September the U.S. Federal Reserve Board’s promises to make lending conditions easier helped assuage market fears and drive asset prices off their recent lows. A combination of solid earnings and improving economic data gave an additional boost to investor sentiment.
In the following months, the renewed positive market mood, coupled with indications of better global macroeconomic activity, pushed many asset valuations to post-crisis highs. At the same time, global sovereign
bond yields initially rose as investors became concerned about inflationary pressures, driven by higher prices for oil as well as other commodities. However, by the end of the second quarter of 2011, a weakening macroeconomic backdrop and renewed concerns over debt problems in some eurozone countries pushed equities lower.
For the remainder of 2011, we are cautiously optimistic that economic growth will continue to improve and that the global economies will recover from the shocks of the past few years. We expect the pace of recovery worldwide to be uneven and volatile and acknowledge the elevated uncertainty created by events in Japan, Europe, the Middle East, as well as that created by the U.S. debate over raising the debt ceiling and the downgrade by Standard & Poor’s of the U.S. long-term credit rating.
As always, we continue to be mindful of the many economic challenges faced at the local, national, and international levels. It is in times such as these that we want to remind investors of the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with their advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2011
The opinions expressed in this letter are subject to change, may not be relied upon for investment advice, and no forecasts can be guaranteed.
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MFS Value Series
Portfolio structure
Top ten holdings | ||||
Lockheed Martin Corp. | 3.6% | |||
Philip Morris International, Inc. | 3.4% | |||
AT&T, Inc. | 2.9% | |||
Goldman Sachs Group, Inc. | 2.9% | |||
JPMorgan Chase & Co. | 2.7% | |||
Johnson & Johnson | 2.7% | |||
Pfizer, Inc. | 2.5% | |||
MetLife, Inc. | 2.4% | |||
International Business Machines Corp. | 2.4% | |||
Chevron Corp. | 2.3% |
Equity sectors | ||||
Financial Services | 21.9% | |||
Health Care | 12.7% | |||
Consumer Staples | 11.8% | |||
Industrial Goods & Services | 11.3% | |||
Energy | 8.9% | |||
Technology | 6.5% | |||
Utilities & Communications | 6.5% | |||
Leisure | 5.4% | |||
Basic Materials | 3.7% | |||
Special Products & Services | 3.3% | |||
Autos & Housing | 3.2% | |||
Retailing | 3.0% | |||
Transportation | 0.6% |
Percentages are based on net assets as of 6/30/11.
The portfolio is actively managed and current holdings may be different.
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MFS Value Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2011 through June 30, 2011
As a contract holder of the fund, you incur ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2011 through June 30, 2011.
Actual Expenses
The first line for each share class in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the following table provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight the fund’s ongoing costs only and do not take into account the fees and expenses imposed under the variable contracts through which your investment in the fund is made. Therefore, the second line for each share class in the table is useful in comparing ongoing costs associated with an investment in vehicles (such as the fund) which fund benefits under variable annuity and variable life insurance contracts and to qualified pension and retirement plans only, and will not help you determine the relative total costs of investing in the fund through variable annuity and variable life insurance contracts. If the fees and expenses imposed under the variable contracts were included, your costs would have been higher.
Share Class | Annualized Expense Ratio | Beginning Account Value 1/01/11 | Ending Account Value 6/30/11 | Expenses Paid During Period (p) 1/01/11-6/30/11 | ||||||||||||||
Initial Class | Actual | 0.80% | $1,000.00 | $1,056.24 | $4.08 | |||||||||||||
Hypothetical (h) | 0.80% | $1,000.00 | $1,020.83 | $4.01 | ||||||||||||||
Service Class | Actual | 1.05% | $1,000.00 | $1,055.34 | $5.35 | |||||||||||||
Hypothetical (h) | 1.05% | $1,000.00 | $1,019.59 | $5.26 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid is equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
3
Table of Contents
MFS Value Series
PORTFOLIO OF INVESTMENTS – 6/30/11 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 98.6% | ||||||||
Aerospace – 8.9% | ||||||||
Honeywell International, Inc. | 319,410 | $ | 19,033,636 | |||||
Huntington Ingalls Industries, Inc. (a) | 37,403 | 1,290,404 | ||||||
Lockheed Martin Corp. | 534,710 | 43,295,469 | ||||||
Northrop Grumman Corp. | 224,700 | 15,582,945 | ||||||
United Technologies Corp. | 312,250 | 27,637,248 | ||||||
|
| |||||||
$ | 106,839,702 | |||||||
|
| |||||||
Alcoholic Beverages – 1.5% | ||||||||
Diageo PLC | 884,111 | $ | 18,063,295 | |||||
|
| |||||||
Automotive – 1.1% | ||||||||
General Motors Co. (a) | 100,680 | $ | 3,056,645 | |||||
Johnson Controls, Inc. | 243,240 | 10,133,378 | ||||||
|
| |||||||
$ | 13,190,023 | |||||||
|
| |||||||
Broadcasting – 3.5% | ||||||||
Omnicom Group, Inc. | 269,780 | $ | 12,992,605 | |||||
Viacom, Inc., “B” | 226,820 | 11,567,820 | ||||||
Walt Disney Co. | 431,030 | 16,827,411 | ||||||
|
| |||||||
$ | 41,387,836 | |||||||
|
| |||||||
Brokerage & Asset Managers – 0.5% | ||||||||
Blackrock, Inc. | 31,267 | $ | 5,997,323 | |||||
|
| |||||||
Business Services – 3.3% | ||||||||
Accenture PLC, “A” | 427,210 | $ | 25,812,028 | |||||
Dun & Bradstreet Corp. | 83,420 | 6,301,547 | ||||||
Western Union Co. | 359,320 | 7,197,180 | ||||||
|
| |||||||
$ | 39,310,755 | |||||||
|
| |||||||
Cable TV – 0.4% | ||||||||
Comcast Corp., “Special A” | 202,460 | $ | 4,905,606 | |||||
|
| |||||||
Chemicals – 2.6% | ||||||||
3M Co. | 164,610 | $ | 15,613,259 | |||||
PPG Industries, Inc. | 165,066 | 14,986,342 | ||||||
|
| |||||||
$ | 30,599,601 | |||||||
|
| |||||||
Computer Software – 2.0% | ||||||||
Oracle Corp. | 734,620 | $ | 24,176,344 | |||||
|
| |||||||
Computer Software – Systems – 2.9% | ||||||||
Hewlett-Packard Co. | 176,150 | $ | 6,411,860 | |||||
International Business Machines Corp. | 165,780 | 28,439,559 | ||||||
|
| |||||||
$ | 34,851,419 | |||||||
|
| |||||||
Construction – 2.1% | ||||||||
Pulte Homes, Inc. (a) | 302,660 | $ | 2,318,376 | |||||
Sherwin-Williams Co. | 132,010 | 11,071,679 | ||||||
Stanley Black & Decker, Inc. | 165,303 | 11,910,081 | ||||||
|
| |||||||
$ | 25,300,136 | |||||||
|
| |||||||
Consumer Products – 0.7% | ||||||||
Avon Products, Inc. | 94,500 | $ | 2,646,000 | |||||
Procter & Gamble Co. | 89,274 | 5,675,148 | ||||||
|
| |||||||
$ | 8,321,148 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Electrical Equipment – 1.5% | ||||||||
Danaher Corp. | 238,570 | $ | 12,641,824 | |||||
Tyco International Ltd. | 112,000 | 5,536,160 | ||||||
|
| |||||||
$ | 18,177,984 | |||||||
|
| |||||||
Electronics – 1.0% | ||||||||
Intel Corp. | 550,390 | $ | 12,196,642 | |||||
|
| |||||||
Energy – Independent – 3.6% | ||||||||
Apache Corp. | 145,210 | $ | 17,917,462 | |||||
EOG Resources, Inc. | 88,490 | 9,251,630 | ||||||
Occidental Petroleum Corp. | 149,270 | 15,530,051 | ||||||
|
| |||||||
$ | 42,699,143 | |||||||
|
| |||||||
Energy – Integrated – 4.7% | ||||||||
Chevron Corp. | 269,730 | $ | 27,739,033 | |||||
Exxon Mobil Corp. | 257,348 | 20,942,980 | ||||||
Hess Corp. | 104,120 | 7,784,011 | ||||||
|
| |||||||
$ | 56,466,024 | |||||||
|
| |||||||
Engineering – Construction – 0.2% | ||||||||
Fluor Corp. | 34,530 | $ | 2,232,710 | |||||
|
| |||||||
Food & Beverages – 5.0% | ||||||||
General Mills, Inc. | 464,460 | $ | 17,287,201 | |||||
J.M. Smucker Co. | 67,979 | 5,196,315 | ||||||
Kellogg Co. | 165,530 | 9,157,120 | ||||||
Nestle S.A. | 249,261 | 15,490,797 | ||||||
PepsiCo, Inc. | 185,558 | 13,068,850 | ||||||
|
| |||||||
$ | 60,200,283 | |||||||
|
| |||||||
Food & Drug Stores – 0.6% | ||||||||
CVS Caremark Corp. | 202,801 | $ | 7,621,262 | |||||
|
| |||||||
General Merchandise – 1.6% | ||||||||
Kohl’s Corp. | 80,870 | $ | 4,044,309 | |||||
Target Corp. | 318,590 | 14,945,057 | ||||||
|
| |||||||
$ | 18,989,366 | |||||||
|
| |||||||
Insurance – 7.7% | ||||||||
ACE Ltd. | 146,920 | $ | 9,670,274 | |||||
Aon Corp. | 248,150 | 12,730,095 | ||||||
Chubb Corp. | 132,410 | 8,290,190 | ||||||
MetLife, Inc. | 655,253 | 28,745,949 | ||||||
Prudential Financial, Inc. | 288,355 | 18,336,494 | ||||||
Travelers Cos., Inc. | 245,670 | 14,342,215 | ||||||
|
| |||||||
$ | 92,115,217 | |||||||
|
| |||||||
Leisure & Toys – 0.7% | ||||||||
Hasbro, Inc. | 175,520 | $ | 7,710,594 | |||||
|
| |||||||
Machinery & Tools – 0.7% | ||||||||
Eaton Corp. | 157,570 | $ | 8,106,977 | |||||
|
| |||||||
Major Banks – 12.7% | ||||||||
Bank of America Corp. | 1,455,020 | $ | 15,947,019 | |||||
Bank of New York Mellon Corp. | 915,150 | 23,446,143 |
4
Table of Contents
MFS Value Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Major Banks – continued | ||||||||
Goldman Sachs Group, Inc. | 260,322 | $ | 34,646,255 | |||||
JPMorgan Chase & Co. | 803,450 | 32,893,243 | ||||||
PNC Financial Services Group, Inc. | 154,780 | 9,226,436 | ||||||
State Street Corp. | 252,570 | 11,388,381 | ||||||
SunTrust Banks, Inc. | 78,500 | 2,025,300 | ||||||
Wells Fargo & Co. | 783,930 | 21,997,076 | ||||||
$ | 151,569,853 | |||||||
Medical & Health Technology & Services – 0.6% | ||||||||
Quest Diagnostics, Inc. | 114,750 | $ | 6,781,725 | |||||
Medical Equipment – 3.6% | ||||||||
Becton, Dickinson & Co. | 139,620 | $ | 12,031,055 | |||||
Medtronic, Inc. | 414,260 | 15,961,438 | ||||||
St. Jude Medical, Inc. | 187,490 | 8,939,523 | ||||||
Thermo Fisher Scientific, Inc. (a) | 98,660 | 6,352,717 | ||||||
$ | 43,284,733 | |||||||
Network & Telecom – 0.6% | ||||||||
Cisco Systems, Inc. | 487,030 | $ | 7,602,538 | |||||
Oil Services – 0.6% | ||||||||
Transocean, Inc. | 115,560 | $ | 7,460,554 | |||||
Other Banks & Diversified Financials – 1.0% | ||||||||
MasterCard, Inc., “A” | 40,854 | $ | 12,310,944 | |||||
Pharmaceuticals – 8.5% | ||||||||
Abbott Laboratories | 451,950 | $ | 23,781,609 | |||||
GlaxoSmithKline PLC | 236,837 | 5,070,691 | ||||||
Johnson & Johnson | 491,240 | 32,677,285 | ||||||
Merck & Co., Inc. | 130,830 | 4,616,991 | ||||||
Pfizer, Inc. | 1,447,146 | 29,811,208 | ||||||
Roche Holding AG | 36,732 | 6,147,122 | ||||||
$ | 102,104,906 | |||||||
Railroad & Shipping – 0.6% | ||||||||
Canadian National Railway Co. | 83,860 | $ | 6,700,414 | |||||
Restaurants – 0.8% | ||||||||
McDonald’s Corp. | 107,650 | $ | 9,077,048 | |||||
Specialty Chemicals – 1.1% | ||||||||
Air Products & Chemicals, Inc. | 137,126 | $ | 13,106,503 | |||||
Specialty Stores – 0.8% | ||||||||
Advance Auto Parts, Inc. | 109,000 | $ | 6,375,410 | |||||
Staples, Inc. | 227,100 | 3,588,180 | ||||||
$ | 9,963,590 | |||||||
Telecommunications – Wireless – 1.3% | ||||||||
Vodafone Group PLC | 5,879,596 | $ | 15,598,474 | |||||
Telephone Services – 2.9% | ||||||||
AT&T, Inc. | 1,119,050 | $ | 35,149,361 | |||||
Tobacco – 4.6% | ||||||||
Altria Group, Inc. | 293,911 | $ | 7,762,190 | |||||
Philip Morris International, Inc. | 607,311 | 40,550,155 | ||||||
Reynolds American, Inc. | 182,720 | 6,769,776 | ||||||
$ | 55,082,121 | |||||||
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Utilities – Electric Power – 2.1% | ||||||||
Dominion Resources, Inc. | 61,522 | $ | 2,969,667 | |||||
PG&E Corp. | 276,200 | 11,608,686 | ||||||
PPL Corp. | 140,820 | 3,919,021 | ||||||
Public Service Enterprise Group, Inc. | 207,320 | 6,766,925 | ||||||
$ | 25,264,299 | |||||||
Total Common Stocks (Identified Cost, $1,027,654,654) | $ | 1,180,516,453 | ||||||
CONVERTIBLE PREFERRED STOCKS – 0.2% | ||||||||
Utilities – Electric Power – 0.2% | ||||||||
PPL Corp., 9.5% (Identified Cost, $1,688,500) | 33,770 | $ | 1,887,743 | |||||
MONEY MARKET FUNDS (v) – 1.1% | ||||||||
MFS Institutional Money Market Portfolio, 0.1%, at Cost and Net Asset Value | 12,814,196 | $ | 12,814,196 | |||||
Total Investments (Identified Cost, $1,042,157,350) | $ | 1,195,218,392 | ||||||
OTHER ASSETS, LESS LIABILITIES – 0.1% | 1,482,470 | |||||||
Net Assets – 100.0% | $ | 1,196,700,862 | ||||||
(a) | Non-income producing security. |
(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:
PLC | Public Limited Company |
See Notes to Financial Statements
5
Table of Contents
MFS Value Series
FINANCIAL STATEMENTS | STATEMENT OF ASSETS AND LIABILITIES (unaudited)
This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
At 6/30/11 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $1,029,343,154) | $1,182,404,196 | |||||||
Underlying affiliated funds, at cost and value | 12,814,196 | |||||||
Total investments, at value (identified cost, $1,042,157,350) | $1,195,218,392 | |||||||
Cash | 24,078 | |||||||
Receivables for | ||||||||
Investments sold | 3,879,609 | |||||||
Fund shares sold | 412,255 | |||||||
Interest and dividends | 2,232,119 | |||||||
Other assets | 4,966 | |||||||
Total assets | $1,201,771,419 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Investments purchased | $3,550,732 | |||||||
Fund shares reacquired | 1,267,945 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 48,554 | |||||||
Shareholder servicing costs | 812 | |||||||
Distribution and/or service fees | 10,959 | |||||||
Payable for independent Trustees’ compensation | 1,987 | |||||||
Accrued expenses and other liabilities | 189,568 | |||||||
Total liabilities | $5,070,557 | |||||||
Net assets | $1,196,700,862 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $1,013,747,896 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 153,059,122 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency transactions | 6,066,049 | |||||||
Undistributed net investment income | 23,827,795 | |||||||
Net assets | $1,196,700,862 | |||||||
Shares of beneficial interest outstanding | 88,057,459 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $386,903,130 | 28,229,129 | $13.71 | |||||||||
Service Class | 809,797,732 | 59,828,330 | 13.54 |
See Notes to Financial Statements
6
Table of Contents
MFS Value Series
FINANCIAL STATEMENTS | STATEMENT OF OPERATIONS (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
Six months ended 6/30/11 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $14,195,939 | |||||||
Interest | 5,212 | |||||||
Dividends from underlying affiliated funds | 11,780 | |||||||
Foreign taxes withheld | (124,522 | ) | ||||||
Total investment income | $14,088,409 | |||||||
Expenses | ||||||||
Management fee | $4,324,563 | |||||||
Distribution and/or service fees | 981,168 | |||||||
Shareholder servicing costs | 66,146 | |||||||
Administrative services fee | 89,928 | |||||||
Independent Trustees’ compensation | 13,096 | |||||||
Custodian fee | 56,432 | |||||||
Shareholder communications | 96,980 | |||||||
Auditing fees | 23,858 | |||||||
Legal fees | 9,732 | |||||||
Miscellaneous | 23,616 | |||||||
Total expenses | $5,685,519 | |||||||
Fees paid indirectly | (4 | ) | ||||||
Reduction of expenses by investment adviser | (3,352 | ) | ||||||
Net expenses | $5,682,163 | |||||||
Net investment income | $8,406,246 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency transactions | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investment transactions | $7,148,927 | |||||||
Foreign currency transactions | 24,453 | |||||||
Net realized gain (loss) on investments and foreign currency transactions | $7,173,380 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $46,837,479 | |||||||
Translation of assets and liabilities in foreign currencies | (10,992 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $46,826,487 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $53,999,867 | |||||||
Change in net assets from operations | $62,406,113 |
See Notes to Financial Statements
7
Table of Contents
MFS Value Series
FINANCIAL STATEMENTS | STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
| Six months ended 6/30/11 (unaudited | ) | | Year ended 12/31/10 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $8,406,246 | $15,384,815 | ||||||
Net realized gain (loss) on investments and foreign currency transactions | 7,173,380 | 57,234,860 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 46,826,487 | 45,163,437 | ||||||
Change in net assets from operations | $62,406,113 | $117,783,112 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(14,600,065 | ) | |||||
Change in net assets from fund share transactions | $(4,806,123 | ) | $50,503,547 | |||||
Total change in net assets | $57,599,990 | $153,686,594 | ||||||
Net assets | ||||||||
At beginning of period | 1,139,100,872 | 985,414,278 | ||||||
At end of period (including undistributed net investment income of $23,827,795 and | $1,196,700,862 | $1,139,100,872 |
See Notes to Financial Statements
8
Table of Contents
MFS Value Series
FINANCIAL STATEMENTS | FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund’s financial performance for the semiannual period and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
Initial Class | Six months ended 6/30/11 | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $12.98 | $11.80 | $9.76 | $15.25 | $14.52 | $12.52 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.11 | $0.19 | $0.20 | $0.22 | $0.21 | $0.22 | ||||||||||||||||||
Net realized and unrealized gain (loss) on | 0.62 | 1.16 | 1.98 | (4.98 | ) | 0.92 | 2.32 | |||||||||||||||||
Total from investment operations | $0.73 | $1.35 | $2.18 | $(4.76 | ) | $1.13 | $2.54 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.17 | ) | $(0.14 | ) | $(0.17 | ) | $(0.15 | ) | $(0.14 | ) | |||||||||||||
From net realized gain on investments | — | — | — | (0.56 | ) | (0.25 | ) | (0.40 | ) | |||||||||||||||
Total distributions declared to shareholders | $— | $(0.17 | ) | $(0.14 | ) | $(0.73 | ) | $(0.40 | ) | $(0.54 | ) | |||||||||||||
Net asset value, end of period | $13.71 | $12.98 | $11.80 | $9.76 | $15.25 | $14.52 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 5.62 | (n) | 11.53 | 22.71 | (32.58 | ) | 7.91 | 20.84 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.80 | (a) | 0.83 | 0.84 | 0.84 | 0.86 | 0.88 | |||||||||||||||||
Expenses after expense reductions (f) | 0.80 | (a) | 0.83 | 0.84 | 0.84 | 0.86 | 0.88 | |||||||||||||||||
Net investment income | 1.59 | (a) | 1.60 | 1.99 | 1.77 | 1.41 | 1.65 | |||||||||||||||||
Portfolio turnover | 10 | 28 | 26 | 36 | 23 | 25 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $386,903 | $389,052 | $367,676 | $295,721 | $390,346 | $256,529 |
See Notes to Financial Statements
9
Table of Contents
MFS Value Series
Financial Highlights – continued
Service Class | Six months ended 6/30/11 | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $12.83 | $11.68 | $9.67 | $15.12 | $14.42 | $12.44 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.09 | $0.16 | $0.18 | $0.19 | $0.17 | $0.18 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 0.62 | 1.15 | 1.95 | (4.94 | ) | 0.91 | 2.32 | |||||||||||||||||
Total from investment operations | $0.71 | $1.31 | $2.13 | $(4.75 | ) | $1.08 | $2.50 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.16 | ) | $(0.12 | ) | $(0.14 | ) | $(0.13 | ) | $(0.12 | ) | |||||||||||||
From net realized gain on investments | — | — | — | (0.56 | ) | (0.25 | ) | (0.40 | ) | |||||||||||||||
Total distributions declared to shareholders | $— | $(0.16 | ) | $(0.12 | ) | $(0.70 | ) | $(0.38 | ) | $(0.52 | ) | |||||||||||||
Net asset value, end of period | $13.54 | $12.83 | $11.68 | $9.67 | $15.12 | $14.42 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 5.53 | (n) | 11.22 | 22.45 | (32.74 | ) | 7.59 | 20.60 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.05 | (a) | 1.08 | 1.09 | 1.09 | 1.11 | 1.13 | |||||||||||||||||
Expenses after expense reductions (f) | 1.05 | (a) | 1.08 | 1.09 | 1.09 | 1.11 | 1.13 | |||||||||||||||||
Net investment income | 1.34 | (a) | 1.35 | 1.75 | 1.57 | 1.16 | 1.40 | |||||||||||||||||
Portfolio turnover | 10 | 28 | 26 | 36 | 23 | 25 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $809,798 | $750,049 | $617,739 | $218,528 | $197,844 | $140,135 |
(a) | Annualized. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(k) | The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown. |
(n) | Not annualized. |
(r) | Certain expenses have been reduced without which performance would have been lower. |
(s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
See Notes to Financial Statements
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MFS Value Series
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) | Business and Organization |
MFS Value Series (the fund) is a series of MFS Variable Insurance Trust (the trust). The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The shareholders of each series of the trust are separate accounts of insurance companies, which offer variable annuity and/or life insurance products, and qualified retirement and pension plans.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued. The fund invests in foreign securities. Investments in foreign securities are vulnerable to the effects of changes in the relative values of the local currency and the U.S. dollar and to the effects of changes in each country’s legal, political, and economic environment.
Investment Valuations – 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 the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair
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MFS Value Series
Notes to Financial Statements (unaudited) – continued
value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. The following is a summary of the levels used as of June 30, 2011 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities | $1,182,404,196 | $— | $— | $1,182,404,196 | ||||||||||||
Mutual Funds | 12,814,196 | — | — | 12,814,196 | ||||||||||||
Total Investments | $1,195,218,392 | $— | $— | $1,195,218,392 |
For further information regarding security characteristics, see the Portfolio of Investments.
Foreign Currency Translation – Purchases and sales of foreign investments, income, and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions or on the reporting date for foreign denominated receivables and payables. Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Gains and losses attributable to foreign exchange rate movements on receivables, payables, income and expenses are recorded for financial statement purposes as foreign currency transaction gains and losses. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.
Security Loans – State Street Bank and Trust Company (“State Street”), as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. The loans are collateralized by cash and/or U.S. Treasury and federal agency obligations in an amount typically at least equal to the market value of the securities loaned. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. State Street provides the fund with indemnification against Borrower default. The fund bears the risk of loss with respect to the investment of cash collateral. On loans collateralized by cash, the cash collateral is invested in a money market fund or short-term securities. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the fund and the lending agent. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the Borrower, and is allocated between the fund and the lending agent. Income from securities lending is included in interest income on the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income.
Indemnifications – Under the fund’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund’s maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.
Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend and interest payments received in additional securities are recorded on the ex-dividend or ex-interest date in an amount equal to the value of the security on such date.
The fund may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
Fees Paid Indirectly – The fund’s custody fee may be reduced according to an arrangement that measures the value of cash deposited with the custodian by the fund. This amount, for the six months ended June 30, 2011, is shown as a reduction of total expenses on the Statement of Operations.
Tax Matters and Distributions – The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements.
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MFS Value Series
Notes to Financial Statements (unaudited) – continued
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to wash sale loss deferrals.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/10 | ||||
Ordinary income (including any short-term capital gains) | $14,600,065 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/11 | ||||
Cost of investments | $1,047,911,460 | |||
Gross appreciation | 182,627,899 | |||
Gross depreciation | (35,320,967 | ) | ||
Net unrealized appreciation (depreciation) | $147,306,932 | |||
As of 12/31/10 | ||||
Undistributed ordinary income | 15,421,549 | |||
Undistributed long-term capital gain | 4,646,779 | |||
Other temporary differences | 9,072 | |||
Net unrealized appreciation (depreciation) | 100,469,453 |
The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and/or service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported on the Statements of Changes in Net Assets are presented by class as follows:
From net investment income | ||||||||
Six months ended 6/30/11 | Year ended 12/31/10 | |||||||
Initial Class | $— | $5,462,462 | ||||||
Service Class | — | 9,137,603 | ||||||
Total | $— | $14,600,065 |
(3) | Transactions with Affiliates |
Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund.
The management fee is computed daily and paid monthly at the following annual rates:
First $1 billion of average daily net assets | 0.75% | |||
Average daily net assets in excess of $1 billion | 0.65% |
Effective May 1, 2011, the investment adviser has agreed in writing to reduce its management fee to 0.60% of average daily net assets in excess of $2.5 billion. This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until April 30, 2013. For the period May 1, 2011 through June 30, 2011, the fund’s average daily net assets did not exceed $2.5 billion and therefore, the management fee was not reduced.
The management fee incurred for the six months ended June 30, 2011 was equivalent to an annual effective rate of 0.73% of the fund’s average daily net assets.
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MFS Value Series
Notes to Financial Statements (unaudited) – continued
The investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, exclusive of interest, taxes, extraordinary expenses, brokerage and transaction costs and investment-related expenses, such that total annual operating expenses do not exceed 0.90% of average daily net assets for the Initial Class shares and 1.15% of average daily net assets for the Service Class shares. This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until April 30, 2013. For the six months ended June 30, 2011, the fund’s actual operating expenses did not exceed the limit and therefore, the investment adviser did not pay any portion of the fund’s expenses related to this agreement.
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, is the distributor of shares of the fund. The Trustees have adopted a distribution plan for the Service Class shares pursuant to Rule 12b-1 under the Investment Company Act of 1940.
The fund’s distribution plan provides that the fund will pay MFD distribution and/or service fees equal to 0.25% per annum of its average daily net assets attributable to Service Class shares as partial consideration for services performed and expenses incurred by MFD and financial intermediaries (including participating insurance companies that invest in the fund to fund variable annuity and variable life insurance contracts, sponsors of qualified retirement and pension plans that invest in the fund, and affiliates of these participating insurance companies and plan sponsors) in connection with the sale and distribution of the Service Class shares. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries.
Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent. For the six months ended June 30, 2011, the fee was $65,762, which equated to 0.0112% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses paid by MFSC on behalf of the fund. For the six months ended June 30, 2011, these costs amounted to $384.
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund partially reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the six months ended June 30, 2011 was equivalent to an annual effective rate of 0.0153% of the fund’s average daily net assets.
Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – This fund and certain other funds managed by MFS (the funds) have entered into services agreements (the Agreements) which provide for payment of fees by the funds to Tarantino LLC and Griffin Compliance LLC in return for the provision of services of an Independent Chief Compliance Officer (ICCO) and Assistant ICCO, respectively, for the funds. The ICCO and Assistant ICCO are officers of the funds and the sole members of Tarantino LLC and Griffin Compliance LLC, respectively. The funds can terminate the Agreements with Tarantino LLC and Griffin Compliance LLC at any time under the terms of the Agreements. For the six months ended June 30, 2011, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $4,138 and are included in miscellaneous expense on the Statement of Operations. MFS has agreed to reimburse the fund for a portion of the payments made by the fund in the amount of $3,352, which is shown as a reduction of total expenses in the Statement of Operations. Additionally, MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ICCO and Assistant ICCO.
The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks a high level of current income consistent with preservation of capital and liquidity. Income earned on this investment is included in dividends from underlying affiliated funds on the Statement of Operations. This money market fund does not pay a management fee to MFS.
(4) | Portfolio Securities |
Purchases and sales of investments, other than U.S. Government securities, purchased option transactions, and short-term obligations, aggregated $116,739,193 and $117,291,339, respectively.
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MFS Value Series
Notes to Financial Statements (unaudited) – continued
(5) | Shares of Beneficial Interest |
The fund’s Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
Six months ended 6/30/11 | Year ended 12/31/10 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 931,203 | $12,681,952 | 2,731,825 | $32,016,435 | ||||||||||||
Service Class | 6,340,003 | 84,975,684 | 16,546,554 | 194,242,416 | ||||||||||||
7,271,206 | $97,657,636 | 19,278,379 | $226,258,851 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 435,603 | $5,462,462 | ||||||||||||
Service Class | — | — | 735,717 | 9,137,603 | ||||||||||||
— | $— | 1,171,320 | $14,600,065 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (2,677,302 | ) | $(36,340,368 | ) | (4,351,822 | ) | $(51,701,985 | ) | ||||||||
Service Class | (4,956,030 | ) | (66,123,391 | ) | (11,728,496 | ) | (138,653,384 | ) | ||||||||
(7,633,332 | ) | $(102,463,759 | ) | (16,080,318 | ) | $(190,355,369 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (1,746,099 | ) | $(23,658,416 | ) | (1,184,394 | ) | $(14,223,088 | ) | ||||||||
Service Class | 1,383,973 | 18,852,293 | 5,553,775 | 64,726,635 | ||||||||||||
(362,126 | ) | $(4,806,123 | ) | 4,369,381 | $50,503,547 |
(6) | Line of Credit |
The fund and certain other funds managed by MFS participate in a $1.1 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Federal Reserve funds rate or one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Federal Reserve funds rate plus an agreed upon spread. For the six months ended June 30, 2011, the fund’s commitment fee and interest expense were $5,444 and $0, respectively, and are included in miscellaneous expense on the Statement of Operations.
(7) | Transactions in Underlying Affiliated Funds – Affiliated Issuers |
An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the fund assumes the following to be affiliated issuers:
Underlying Affiliated Funds | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 11,364,410 | 71,182,390 | (69,732,604 | ) | 12,814,196 | |||||||||||
Underlying Affiliated Funds | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $11,780 | $12,814,196 |
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MFS Value Series
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board’s most recent review and renewal of the fund’s Investment Advisory Agreement with MFS will be available on or about November 1, 2011 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds’ proxy voting policies and procedures is available without charge, upon request, by calling
1-800-225-2606, by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the Securities and Exchange Commission (the Commission) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. The fund’s Form N-Q is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and copies of this information may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
From time to time, MFS may post important information about the fund or the MFS funds on the MFS web site (mfs.com). This information is available by visiting the “News & Commentary” section of mfs.com or by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of mfs.com.
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rev. 3/11
FACTS | WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION? |
Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
What? | The types of personal information we collect and share depend on the product or service you have with us. This information can include:
• Social Security number and account balances • Account transactions and transaction history • Checking account information and wire transfer instructions
When you are no longer our customer, we continue to share your information as described in this notice. |
How? | All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons MFS chooses to share; and whether you can limit this sharing. |
Reasons we can share your personal information | Does MFS share? | Can you limit this sharing? | ||
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus | Yes | No | ||
For our marketing purposes – to offer our products and services to you | No | We don’t share | ||
For joint marketing with other financial companies | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your transactions and experiences | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your creditworthiness | No | We don’t share | ||
For nonaffiliates to market to you | No | We don’t share |
Questions? | Call 800-225-2606 or go to mfs.com. |
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Page 2 |
Who we are | ||
Who is providing this notice? | MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., MFS Fund Distributors, Inc., MFS Heritage Trust Company, and MFS Service Center, Inc. |
What we do | ||
How does MFS protect my personal information? | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you. | |
How does MFS collect my personal information? | We collect your personal information, for example, when you
• open an account or provide account information • direct us to buy securities or direct us to sell your securities • make a wire transfer
We also collect your personal information from others, such as credit bureaus, affiliates and other companies. | |
Why can’t I limit all sharing? | Federal law gives you the right to limit only
• sharing for affiliates’ everyday business purposes – information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you
State laws and individual companies may give you additional rights to limit sharing. |
Definitions | ||
Affiliates | Companies related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice. | |
Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share with nonaffiliates so they can market to you. | |
Joint Marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you.
• MFS doesn’t jointly market. |
Other important information | ||
If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours. |
18
Table of Contents
Table of Contents
MFS® Mid Cap Growth Series
MFS® Variable Insurance Trust
SEMIANNUAL REPORT
June 30, 2011
VMG-SEM
Table of Contents
MFS® MID CAP GROWTH SERIES
The report is prepared for the general information of contract owners.
It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED Ÿ MAY LOSE VALUE Ÿ NO BANK OR CREDIT UNION GUARANTEE Ÿ NOT A DEPOSIT Ÿ NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
Table of Contents
MFS Mid Cap Growth Series
Dear Contract Owners:
After about a year of almost uninterrupted macroeconomic and financial market improvement following the global credit crisis, investors grew more cautious in the middle of 2010 as fears grew that some European countries would default on their debt and as economic data showed a weakening
trend in the global economy. As a result asset prices fell significantly.
Last September the U.S. Federal Reserve Board’s promises to make lending conditions easier helped assuage market fears and drive asset prices off their recent lows. A combination of solid earnings and improving economic data gave an additional boost to investor sentiment.
In the following months, the renewed positive market mood, coupled with indications of better global macroeconomic activity, pushed many asset valuations to post-crisis highs. At the same time, global sovereign
bond yields initially rose as investors became concerned about inflationary pressures, driven by higher prices for oil as well as other commodities. However, by the end of the second quarter of 2011, a weakening macroeconomic backdrop and renewed concerns over debt problems in some eurozone countries pushed equities lower.
For the remainder of 2011, we are cautiously optimistic that economic growth will continue to improve and that the global economies will recover from the shocks of the past few years. We expect the pace of recovery worldwide to be uneven and volatile and acknowledge the elevated uncertainty created by events in Japan, Europe, the Middle East, as well as that created by the U.S. debate over raising the debt ceiling and the downgrade by Standard & Poor’s of the U.S. long-term credit rating.
As always, we continue to be mindful of the many economic challenges faced at the local, national, and international levels. It is in times such as these that we want to remind investors of the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with their advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2011
The opinions expressed in this letter are subject to change, may not be relied upon for investment advice, and no forecasts can be guaranteed.
1
Table of Contents
MFS Mid Cap Growth Series
Portfolio structure
Top ten holdings | ||||
AMETEK, Inc. | 1.8% | |||
Dresser-Rand Group, Inc. | 1.6% | |||
American Tower Corp., “A” | 1.6% | |||
Check Point Software Technologies Ltd. | 1.6% | |||
Affiliated Managers Group, Inc. | 1.5% | |||
Newfield Exploration Co. | 1.4% | |||
Mead Johnson Nutrition Co., “A” | 1.3% | |||
Celanese Corp. | 1.3% | |||
Alexion Pharmaceuticals, Inc. | 1.3% | |||
Ross Stores, Inc. | 1.3% |
Equity sectors | ||||
Technology | 19.8% | |||
Health Care | 13.3% | |||
Industrial Goods & Services | 12.9% | |||
Retailing | 8.6% | |||
Energy | 7.8% | |||
Special Products & Services | 7.7% | |||
Leisure | 6.0% | |||
Financial Services | 5.8% | |||
Basic Materials | 5.0% | |||
Autos & Housing | 4.0% | |||
Consumer Staples | 3.4% | |||
Transportation | 3.1% | |||
Utilities & Communications | 2.4% |
Percentages are based on net assets as of 6/30/11.
The portfolio is actively managed and current holdings may be different.
2
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MFS Mid Cap Growth Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2011 through June 30, 2011
As a contract holder of the fund, you incur ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2011 through June 30, 2011.
Actual Expenses
The first line for each share class in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the following table provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight the fund’s ongoing costs only and do not take into account the fees and expenses imposed under the variable contracts through which your investment in the fund is made. Therefore, the second line for each share class in the table is useful in comparing ongoing costs associated with an investment in vehicles (such as the fund) which fund benefits under variable annuity and variable life insurance contracts and to qualified pension and retirement plans only, and will not help you determine the relative total costs of investing in the fund through variable annuity and variable life insurance contracts. If the fees and expenses imposed under the variable contracts were included, your costs would have been higher.
Share Class | Annualized Expense Ratio | Beginning Account Value 1/01/11 | Ending Account Value 6/30/11 | Expenses Paid During Period (p) 1/01/11-6/30/11 | ||||||||||||||
Initial Class | Actual | 0.87% | $1,000.00 | $1,056.76 | $4.44 | |||||||||||||
Hypothetical (h) | 0.87% | $1,000.00 | $1,020.48 | $4.36 | ||||||||||||||
Service Class | Actual | 1.12% | $1,000.00 | $1,056.51 | $5.71 | |||||||||||||
Hypothetical (h) | 1.12% | $1,000.00 | $1,019.24 | $5.61 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid is equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
3
Table of Contents
MFS Mid Cap Growth Series
PORTFOLIO OF INVESTMENTS – 6/30/11 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 99.8% | ||||||||
Aerospace – 2.2% | ||||||||
BE Aerospace, Inc. (a) | 29,510 | $ | 1,204,303 | |||||
Goodrich Corp. | 17,550 | 1,676,020 | ||||||
Moog, Inc., “A” (a) | 8,750 | 380,800 | ||||||
|
| |||||||
$ | 3,261,123 | |||||||
|
| |||||||
Alcoholic Beverages – 0.2% | ||||||||
Tsingtao Brewery Co. Ltd., “H” | 54,000 | $ | 313,308 | |||||
|
| |||||||
Apparel Manufacturers – 0.9% | ||||||||
Li & Fung Ltd. | 140,000 | $ | 281,572 | |||||
Phillips-Van Heusen Corp. | 15,480 | 1,013,476 | ||||||
|
| |||||||
$ | 1,295,048 | |||||||
|
| |||||||
Automotive – 0.7% | ||||||||
BorgWarner Transmission Systems, Inc. (a) | 11,960 | $ | 966,248 | |||||
|
| |||||||
Biotechnology – 2.5% | ||||||||
Alexion Pharmaceuticals, Inc. (a) | 41,350 | $ | 1,944,691 | |||||
Dendreon Corp. (a) | 23,870 | 941,433 | ||||||
Gen-Probe, Inc. (a) | 11,590 | 801,449 | ||||||
|
| |||||||
$ | 3,687,573 | |||||||
|
| |||||||
Broadcasting – 1.6% | ||||||||
Discovery Communications, Inc., “A” (a) | 30,530 | $ | 1,250,509 | |||||
Interpublic Group of Cos., Inc. | 93,400 | 1,167,500 | ||||||
|
| |||||||
$ | 2,418,009 | |||||||
|
| |||||||
Brokerage & Asset Managers – 3.0% | ||||||||
Affiliated Managers Group, Inc. (a) | 21,960 | $ | 2,227,842 | |||||
Evercore Partners, Inc. | 11,440 | 381,181 | ||||||
GFI Group, Inc. | 62,520 | 286,967 | ||||||
IntercontinentalExchange, Inc. (a) | 8,190 | 1,021,375 | ||||||
Lazard Ltd. | 16,220 | 601,762 | ||||||
|
| |||||||
$ | 4,519,127 | |||||||
|
| |||||||
Business Services – 6.0% | ||||||||
Cognizant Technology Solutions Corp., “A” (a) | 23,580 | $ | 1,729,357 | |||||
Concur Technologies, Inc. (a) | 25,630 | 1,283,294 | ||||||
FleetCor Technologies, Inc. (a) | 21,550 | 638,742 | ||||||
Gartner, Inc. (a) | 32,120 | 1,294,115 | ||||||
Jones Lang LaSalle, Inc. | 14,450 | 1,362,635 | ||||||
MSCI, Inc., “A” (a) | 24,800 | 934,464 | ||||||
Verisk Analytics, Inc., “A” (a) | 49,990 | 1,730,654 | ||||||
|
| |||||||
$ | 8,973,261 | |||||||
|
| |||||||
Chemicals – 1.9% | ||||||||
Celanese Corp. | 36,990 | $ | 1,971,937 | |||||
Ecolab, Inc. | 15,020 | 846,828 | ||||||
|
| |||||||
$ | 2,818,765 | |||||||
|
| |||||||
Computer Software – 8.4% | ||||||||
Ariba, Inc. (a) | 13,020 | $ | 448,799 | |||||
Autodesk, Inc. (a) | 39,340 | 1,518,524 | ||||||
Autonomy Corp. PLC (a) | 47,507 | 1,301,526 | ||||||
Check Point Software Technologies Ltd. (a) | 41,600 | 2,364,960 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Computer Software – continued | ||||||||
Informatica Corp. (a) | 4,540 | $ | 265,272 | |||||
Intuit, Inc. (a) | 21,240 | 1,101,506 | ||||||
Parametric Technology Corp. (a) | 77,390 | 1,774,553 | ||||||
Red Hat, Inc. (a) | 32,790 | 1,505,061 | ||||||
SuccessFactors, Inc. (a) | 25,450 | 748,230 | ||||||
Symantec Corp. (a) | 22,760 | 448,827 | ||||||
VeriSign, Inc. | 30,900 | 1,033,914 | ||||||
|
| |||||||
$ | 12,511,172 | |||||||
|
| |||||||
Computer Software – Systems – 3.0% | ||||||||
MICROS Systems, Inc. (a) | 32,900 | $ | 1,635,459 | |||||
NICE Systems Ltd., ADR (a) | 28,650 | 1,041,714 | ||||||
Qlik Technologies, Inc. (a) | 30,100 | 1,025,206 | ||||||
Verifone Systems, Inc. (a) | 18,720 | 830,232 | ||||||
|
| |||||||
$ | 4,532,611 | |||||||
|
| |||||||
Construction – 3.3% | ||||||||
Beacon Roofing Supply, Inc. (a) | 25,040 | $ | 571,413 | |||||
NVR, Inc. (a) | 1,120 | 812,538 | ||||||
Owens Corning (a) | 32,250 | 1,204,538 | ||||||
Sherwin-Williams Co. | 11,320 | 949,408 | ||||||
Stanley Black & Decker, Inc. | 19,498 | 1,404,831 | ||||||
|
| |||||||
$ | 4,942,728 | |||||||
|
| |||||||
Consumer Products – 0.6% | ||||||||
Avon Products, Inc. | 33,450 | $ | 936,600 | |||||
|
| |||||||
Consumer Services – 1.7% | ||||||||
Anhanguera Educacional Participacoes S.A. | 36,300 | $ | 772,682 | |||||
HomeAway, Inc. (a) | 3,100 | 119,970 | ||||||
Priceline.com, Inc. (a) | 1,750 | 895,878 | ||||||
Sotheby’s | 18,530 | 806,055 | ||||||
|
| |||||||
$ | 2,594,585 | |||||||
|
| |||||||
Containers – 1.0% | ||||||||
Ball Corp. | 40,300 | $ | 1,549,938 | |||||
|
| |||||||
Electrical Equipment – 3.6% | ||||||||
AMETEK, Inc. | 59,225 | $ | 2,659,203 | |||||
Danaher Corp. | 19,390 | 1,027,476 | ||||||
Mettler-Toledo International, Inc. (a) | 6,060 | 1,022,140 | ||||||
MSC Industrial Direct Co., Inc., “A” | 10,880 | 721,453 | ||||||
|
| |||||||
$ | 5,430,272 | |||||||
|
| |||||||
Electronics – 3.6% | ||||||||
Advanced Micro Devices, Inc. (a) | 86,060 | $ | 601,559 | |||||
ARM Holdings PLC | 75,626 | 713,691 | ||||||
First Solar, Inc. (a)(l) | 2,990 | 395,487 | ||||||
Hittite Microwave Corp. (a) | 15,000 | 928,650 | ||||||
JDS Uniphase Corp. (a) | 22,370 | 372,684 | ||||||
Linear Technology Corp. | 27,600 | 911,352 | ||||||
Microchip Technology, Inc. | 27,400 | 1,038,734 | ||||||
NetLogic Microsystems, Inc. (a) | 11,000 | 444,620 | ||||||
|
| |||||||
$ | 5,406,777 | |||||||
|
|
4
Table of Contents
MFS Mid Cap Growth Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Energy – Independent – 3.0% | ||||||||
Concho Resources, Inc. (a) | 15,150 | $ | 1,391,528 | |||||
Newfield Exploration Co. (a) | 30,470 | 2,072,569 | ||||||
Whiting Petroleum Corp. (a) | 17,430 | 991,941 | ||||||
$ | 4,456,038 | |||||||
Energy – Integrated – 0.9% | ||||||||
EQT Corp. | 9,920 | $ | 520,998 | |||||
QEP Resources, Inc. | 19,350 | 809,411 | ||||||
$ | 1,330,409 | |||||||
Engineering – Construction – 1.0% | ||||||||
Fluor Corp. | 22,920 | $ | 1,482,007 | |||||
Food & Beverages – 2.6% | ||||||||
Green Mountain Coffee Roasters, Inc. (a) | 17,900 | $ | 1,597,754 | |||||
Mead Johnson Nutrition Co., “A” | 29,790 | 2,012,315 | ||||||
Want Want China Holdings Ltd. | 337,000 | 327,798 | ||||||
$ | 3,937,867 | |||||||
Food & Drug Stores – 0.5% | ||||||||
Whole Foods Market, Inc. | 11,260 | $ | 714,447 | |||||
Gaming & Lodging – 1.3% | ||||||||
Pinnacle Entertainment, Inc. (a) | 45,290 | $ | 674,821 | |||||
Royal Caribbean Cruises Ltd. (a) | 34,730 | 1,307,237 | ||||||
$ | 1,982,058 | |||||||
General Merchandise – 0.7% | ||||||||
Dollar General Corp. (a) | 29,240 | $ | 990,944 | |||||
Insurance – 0.6% | ||||||||
Allied World Assurance Co. | 8,180 | $ | 471,004 | |||||
Willis Group Holdings PLC | 11,310 | 464,954 | ||||||
$ | 935,958 | |||||||
Internet – 1.8% | ||||||||
LinkedIn Corp., “A” (a)(l) | 11,670 | $ | 1,051,350 | |||||
OpenTable, Inc. (a) | 6,130 | 509,526 | ||||||
Shutterfly, Inc. (a) | 19,100 | 1,096,722 | ||||||
$ | 2,657,598 | |||||||
Leisure & Toys – 0.7% | ||||||||
Hasbro, Inc. | 24,370 | $ | 1,070,574 | |||||
Machinery & Tools – 5.3% | ||||||||
Finning International, Inc. | 36,960 | $ | 1,096,019 | |||||
Flowserve Corp. | 13,780 | 1,514,284 | ||||||
Joy Global, Inc. | 7,400 | 704,776 | ||||||
Kennametal, Inc. | 15,400 | 650,034 | ||||||
Polypore International, Inc. (a) | 20,280 | 1,375,795 | ||||||
Regal Beloit Corp. | 7,590 | 506,784 | ||||||
United Rentals, Inc. (a) | 18,790 | 477,266 | ||||||
WABCO Holdings, Inc. (a) | 22,090 | 1,525,535 | ||||||
$ | 7,850,493 | |||||||
Medical & Health Technology & Services – 6.4% | ||||||||
AmerisourceBergen Corp. | 25,040 | $ | 1,036,656 | |||||
Cerner Corp. (a) | 24,820 | 1,516,750 | ||||||
DaVita, Inc. (a) | 19,750 | 1,710,548 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Medical & Health Technology & Services – continued | ||||||||
Diagnosticos da America S.A. | 67,800 | $ | 912,312 | |||||
Health Management Associates, Inc., “A” (a) | 47,320 | 510,110 | ||||||
IDEXX Laboratories, Inc. (a) | 15,550 | 1,206,058 | ||||||
LifePoint Hospitals, Inc. (a) | 12,530 | 489,672 | ||||||
Patterson Cos., Inc. | 34,120 | 1,122,207 | ||||||
Stericycle, Inc. (a) | 11,740 | 1,046,269 | ||||||
$ | 9,550,582 | |||||||
Medical Equipment – 3.5% | ||||||||
Cooper Cos., Inc. | 16,410 | $ | 1,300,328 | |||||
Edwards Lifesciences Corp. (a) | 11,360 | 990,365 | ||||||
NxStage Medical, Inc. (a) | 14,250 | 296,685 | ||||||
Pall Corp. | 21,830 | 1,227,501 | ||||||
Sonova Holding AG | 3,052 | 284,962 | ||||||
Thermo Fisher Scientific, Inc. (a) | 17,120 | 1,102,357 | ||||||
$ | 5,202,198 | |||||||
Metals & Mining – 0.4% | ||||||||
Teck Resources Ltd., “B” | 12,340 | $ | 626,132 | |||||
Network & Telecom – 3.0% | ||||||||
Acme Packet, Inc. (a) | 9,190 | $ | 644,495 | |||||
Ciena Corp. (a) | 36,070 | 662,967 | ||||||
F5 Networks, Inc. (a) | 4,140 | 456,435 | ||||||
Finisar Corp. (a) | 20,980 | 378,269 | ||||||
Fortinet, Inc. (a) | 23,080 | 629,853 | ||||||
Polycom, Inc. (a) | 20,990 | 1,349,657 | ||||||
Trimble Navigation Ltd. (a) | 10,450 | 414,238 | ||||||
$ | 4,535,914 | |||||||
Oil Services – 3.9% | ||||||||
Cameron International Corp. (a) | 37,360 | $ | 1,878,834 | |||||
Dresser-Rand Group, Inc. (a) | 45,390 | 2,439,713 | ||||||
FMC Technologies, Inc. (a) | 16,810 | 752,920 | ||||||
Lufkin Industries, Inc. | 9,110 | 783,916 | ||||||
$ | 5,855,383 | |||||||
Other Banks & Diversified Financials – 2.2% | ||||||||
BankUnited, Inc. | 14,540 | $ | 385,892 | |||||
MasterCard, Inc., “A” | 5,930 | 1,786,946 | ||||||
Wintrust Financial Corp. | 12,360 | 397,745 | ||||||
Zions Bancorporation | 32,200 | 773,122 | ||||||
$ | 3,343,705 | |||||||
Pharmaceuticals – 0.9% | ||||||||
Genomma Lab Internacional S.A., “B” (a) | 348,900 | $ | 889,198 | |||||
Hospira, Inc. (a) | 6,640 | 376,222 | ||||||
$ | 1,265,420 | |||||||
Pollution Control – 0.8% | ||||||||
Waste Connections, Inc. | 39,050 | $ | 1,239,057 | |||||
Printing & Publishing – 1.6% | ||||||||
Lamar Advertising Co., “A” (a) | 23,750 | $ | 650,038 | |||||
Moody’s Corp. | 45,140 | 1,731,119 | ||||||
$ | 2,381,157 | |||||||
5
Table of Contents
MFS Mid Cap Growth Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Railroad & Shipping – 0.9% | ||||||||
Kansas City Southern Co. (a) | 21,760 | $ | 1,291,021 | |||||
|
| |||||||
Restaurants – 0.8% | ||||||||
P.F. Chang’s China Bistro, Inc. | 28,480 | $ | 1,146,035 | |||||
|
| |||||||
Specialty Chemicals – 1.7% | ||||||||
Airgas, Inc. | 23,800 | $ | 1,666,952 | |||||
Rockwood Holdings, Inc. (a) | 14,500 | 801,705 | ||||||
|
| |||||||
$ | 2,468,657 | |||||||
|
| |||||||
Specialty Stores – 6.5% | ||||||||
Abercrombie & Fitch Co., “A” | 25,730 | $ | 1,721,852 | |||||
Dick’s Sporting Goods, Inc. (a) | 46,570 | 1,790,617 | ||||||
PetSmart, Inc. | 16,120 | 731,364 | ||||||
Ross Stores, Inc. | 23,920 | 1,916,470 | ||||||
Tiffany & Co. | 20,080 | 1,576,682 | ||||||
Tractor Supply Co. | 13,370 | 894,186 | ||||||
Urban Outfitters, Inc. (a) | 34,660 | 975,679 | ||||||
|
| |||||||
$ | 9,606,850 | |||||||
|
| |||||||
Telecommunications – Wireless – 0.3% | ||||||||
NII Holdings, Inc. (a) | 9,190 | $ | 389,472 | |||||
|
| |||||||
Telephone Services – 1.6% | ||||||||
American Tower Corp., “A” (a) | 46,030 | $ | 2,408,750 | |||||
|
| |||||||
Trucking – 2.2% | ||||||||
Atlas Air Worldwide Holdings, Inc. (a) | 6,490 | $ | 386,220 | |||||
Expeditors International of Washington, Inc. | 26,030 | 1,332,476 | ||||||
Landstar System, Inc. | 34,810 | 1,617,969 | ||||||
|
| |||||||
$ | 3,336,665 | |||||||
|
| |||||||
Utilities – Electric Power – 0.5% | ||||||||
CMS Energy Corp. | 34,300 | $ | 675,367 | |||||
|
| |||||||
Total Common Stocks (Identified Cost, $119,860,191) | $ | 148,887,903 | ||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
MONEY MARKET FUNDS (v) – 1.4% | ||||||||
MFS Institutional Money Market Portfolio, 0.1%, at Cost and Net Asset Value | 2,027,642 | $ | 2,027,642 | |||||
|
| |||||||
COLLATERAL FOR SECURITIES LOANED – 0.7% | ||||||||
Navigator Securities Lending Prime Portfolio, 0.23%, at Cost and Net Asset Value (j) | 1,053,150 | $ | 1,053,150 | |||||
|
| |||||||
Total Investments (Identified Cost, $122,940,983) | $ | 151,968,695 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – (1.9)% | (2,844,503 | ) | ||||||
|
| |||||||
Net Assets – 100.0% | $ | 149,124,192 | ||||||
|
|
(a) | Non-income producing security. |
(j) | The rate quoted is the annualized seven-day yield of the portfolio at period end. |
(l) | A portion of this security is on loan. |
(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 |
PLC | Public Limited Company |
See Notes to Financial Statements
6
Table of Contents
MFS Mid Cap Growth Series
FINANCIAL STATEMENTS | STATEMENT OF ASSETS AND LIABILITIES (unaudited)
This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
At 6/30/11 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $120,913,341) | $149,941,053 | |||||||
Underlying affiliated funds, at cost and value | 2,027,642 | |||||||
Total investments, at value, including $1,056,090 of securities on loan (identified cost, $122,940,983) | $151,968,695 | |||||||
Foreign currency, at value (identified cost, $4,364) | 4,356 | |||||||
Receivables for | ||||||||
Investments sold | 1,752,727 | |||||||
Fund shares sold | 4,149 | |||||||
Interest and dividends | 46,631 | |||||||
Other assets | 880 | |||||||
Total assets | $153,777,438 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Investments purchased | $3,336,369 | |||||||
Fund shares reacquired | 207,957 | |||||||
Collateral for securities loaned, at value | 1,053,150 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 6,238 | |||||||
Shareholder servicing costs | 177 | |||||||
Distribution and/or service fees | 479 | |||||||
Payable for independent Trustees’ compensation | 809 | |||||||
Accrued expenses and other liabilities | 48,067 | |||||||
Total liabilities | $4,653,246 | |||||||
Net assets | $149,124,192 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $140,345,214 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 29,027,772 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency transactions | (20,002,378 | ) | ||||||
Accumulated net investment loss | (246,416 | ) | ||||||
Net assets | $149,124,192 | |||||||
Shares of beneficial interest outstanding | 23,715,123 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $113,881,870 | 17,999,235 | $6.33 | |||||||||
Service Class | 35,242,322 | 5,715,888 | 6.17 |
See Notes to Financial Statements
7
Table of Contents
MFS Mid Cap Growth Series
FINANCIAL STATEMENTS | STATEMENT OF OPERATIONS (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
Six months ended 6/30/11 | ||||||||
Net Investment loss | ||||||||
Income | ||||||||
Dividends | $480,619 | |||||||
Interest | 5,017 | |||||||
Dividends from underlying affiliated funds | 1,817 | |||||||
Foreign taxes withheld | (3,197 | ) | ||||||
Total investment income | $484,256 | |||||||
Expenses | ||||||||
Management fee | $591,835 | |||||||
Distribution and/or service fees | 45,052 | |||||||
Shareholder servicing costs | 9,053 | |||||||
Administrative services fee | 16,472 | |||||||
Independent Trustees’ compensation | 2,849 | |||||||
Custodian fee | 18,752 | |||||||
Shareholder communications | 14,185 | |||||||
Auditing fees | 23,747 | |||||||
Legal fees | 1,378 | |||||||
Miscellaneous | 7,819 | |||||||
Total expenses | $731,142 | |||||||
Fees paid indirectly | (12 | ) | ||||||
Reduction of expenses by investment adviser | (458 | ) | ||||||
Net expenses | $730,672 | |||||||
Net investment loss | $(246,416 | ) | ||||||
Realized and unrealized gain (loss) on investments and foreign currency transactions | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investment transactions | $20,346,765 | |||||||
Foreign currency transactions | (6,610 | ) | ||||||
Net realized gain (loss) on investments and foreign currency transactions | $20,340,155 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $(11,156,487 | ) | ||||||
Translation of assets and liabilities in foreign currencies | (187 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $(11,156,674 | ) | ||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $9,183,481 | |||||||
Change in net assets from operations | $8,937,065 |
See Notes to Financial Statements
8
Table of Contents
MFS Mid Cap Growth Series
FINANCIAL STATEMENTS | STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
| Six months ended 6/30/11 (unaudited | ) | | Year ended 12/31/10 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income (loss) | $(246,416 | ) | $55,677 | |||||
Net realized gain (loss) on investments and foreign currency transactions | 20,340,155 | 23,011,639 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | (11,156,674 | ) | 15,736,099 | |||||
Change in net assets from operations | $8,937,065 | $38,803,415 | ||||||
Change in net assets from fund share transactions | $(33,102,201 | ) | $(3,027,435 | ) | ||||
Total change in net assets | $(24,165,136 | ) | $35,775,980 | |||||
Net assets | ||||||||
At beginning of period | 173,289,328 | 137,513,348 | ||||||
At end of period (including accumulated net investment loss of $246,416 and | $149,124,192 | $173,289,328 |
See Notes to Financial Statements
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MFS Mid Cap Growth Series
FINANCIAL STATEMENTS | FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund’s financial performance for the semiannual period and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
Initial Class | Six months 6/30/11 | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $5.99 | $4.62 | $3.27 | $7.66 | $7.25 | $7.30 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (loss) (d) | $(0.01 | ) | $(0.00 | )(w) | $(0.00 | )(w) | $0.01 | $(0.01 | ) | $0.01 | ||||||||||||||
Net realized and unrealized gain (loss) on | 0.35 | 1.37 | 1.36 | (3.55 | ) | 0.71 | 0.18 | |||||||||||||||||
Total from investment operations | $0.34 | $1.37 | $1.36 | $(3.54 | ) | $0.70 | $0.19 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $— | $(0.01 | ) | $— | $(0.01 | ) | $— | ||||||||||||||||
From net realized gain on investments | — | — | — | (0.85 | ) | (0.28 | ) | (0.24 | ) | |||||||||||||||
From tax return of capital | — | — | (0.00 | )(w) | — | — | — | |||||||||||||||||
Total distributions declared to shareholders | $— | $— | $(0.01 | ) | $(0.85 | ) | $(0.29 | ) | $(0.24 | ) | ||||||||||||||
Net asset value, end of period | $6.33 | $5.99 | $4.62 | $3.27 | $7.66 | $7.25 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 5.68 | (n) | 29.65 | 41.78 | (51.56 | ) | 9.82 | 2.55 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.87 | (a) | 0.88 | 0.90 | 0.87 | 0.91 | 0.90 | |||||||||||||||||
Expenses after expense reductions (f) | 0.87 | (a) | 0.88 | 0.90 | 0.87 | 0.91 | 0.89 | |||||||||||||||||
Net investment income (loss) | (0.26 | )(a) | 0.09 | (0.09 | ) | 0.21 | (0.10 | ) | 0.19 | |||||||||||||||
Portfolio turnover | 34 | 91 | 114 | 104 | 91 | 141 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $113,882 | $137,567 | $107,989 | $73,066 | $173,048 | $190,684 |
See Notes to Financial Statements
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MFS Mid Cap Growth Series
Financial Highlights – continued
Service Class | Six months ended 6/30/11 | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $5.84 | $4.52 | $3.20 | $7.52 | $7.13 | $7.20 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (loss) (d) | $(0.01 | ) | $(0.01 | ) | $(0.01 | ) | $(0.00 | )(w) | $(0.03 | ) | $(0.00 | )(w) | ||||||||||||
Net realized and unrealized gain (loss) on | 0.34 | 1.33 | 1.33 | (3.47 | ) | 0.70 | 0.17 | |||||||||||||||||
Total from investment operations | $0.33 | $1.32 | $1.32 | $(3.47 | ) | $0.67 | $0.17 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net realized gain on investments | $— | $— | $— | $(0.85 | ) | $(0.28 | ) | $(0.24 | ) | |||||||||||||||
Net asset value, end of period | $6.17 | $5.84 | $4.52 | $3.20 | $7.52 | $7.13 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 5.65 | (n) | 29.20 | 41.25 | (51.59 | ) | 9.51 | 2.30 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.12 | (a) | 1.13 | 1.16 | 1.12 | 1.16 | 1.15 | |||||||||||||||||
Expenses after expense reductions (f) | 1.12 | (a) | 1.13 | 1.15 | 1.12 | 1.16 | 1.15 | |||||||||||||||||
Net investment loss | (0.49 | )(a) | (0.16 | ) | (0.33 | ) | (0.05 | ) | (0.35 | ) | (0.02 | ) | ||||||||||||
Portfolio turnover | 34 | 91 | 114 | 104 | 91 | 141 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $35,242 | $35,722 | $29,524 | $22,511 | $48,209 | $41,929 |
(a) | Annualized. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(k) | The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown. |
(n) | Not annualized. |
(r) | Certain expenses have been reduced without which performance would have been lower. |
(s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
(w) | Per share amount was less than $0.01. |
See Notes to Financial Statements
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MFS Mid Cap Growth Series
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) | Business and Organization |
MFS Mid Cap Growth Series (the fund) is a series of MFS Variable Insurance Trust (the trust). The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The shareholders of each series of the trust are separate accounts of insurance companies, which offer variable annuity and/or life insurance products, and qualified retirement and pension plans.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued.
Investment Valuations – 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 the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active
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MFS Mid Cap Growth Series
Notes to Financial Statements (unaudited) – continued
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 June 30, 2011 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $137,962,029 | $— | $— | $137,962,029 | ||||||||||||
Israel | 3,406,674 | — | — | 3,406,674 | ||||||||||||
United Kingdom | 2,015,217 | — | — | 2,015,217 | ||||||||||||
Canada | 1,722,151 | — | — | 1,722,151 | ||||||||||||
Brazil | 1,684,994 | — | — | 1,684,994 | ||||||||||||
Mexico | 889,198 | — | — | 889,198 | ||||||||||||
China | — | 641,106 | — | 641,106 | ||||||||||||
Switzerland | 284,962 | — | — | 284,962 | ||||||||||||
Hong Kong | — | 281,572 | — | 281,572 | ||||||||||||
Mutual Funds | 3,080,792 | — | — | 3,080,792 | ||||||||||||
Total Investments | $151,046,017 | $922,678 | $— | $151,968,695 |
For further information regarding security characteristics, see the Portfolio of Investments.
Foreign Currency Translation – Purchases and sales of foreign investments, income, and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions or on the reporting date for foreign denominated receivables and payables. Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Gains and losses attributable to foreign exchange rate movements on receivables, payables, income and expenses are recorded for financial statement purposes as foreign currency transaction gains and losses. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.
Security Loans – State Street Bank and Trust Company (“State Street”), as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. The loans are collateralized by cash and/or U.S. Treasury and federal agency obligations in an amount typically at least equal to the market value of the securities loaned. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. State Street provides the fund with indemnification against Borrower default. The fund bears the risk of loss with respect to the investment of cash collateral. On loans collateralized by cash, the cash collateral is invested in a money market fund or short-term securities. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the fund and the lending agent. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the Borrower, and is allocated between the fund and the lending agent. Income from securities lending is included in interest income on the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income.
Indemnifications – Under the fund’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund’s maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.
Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend and interest payments received in additional securities are recorded on the ex-dividend or ex-interest date in an amount equal to the value of the security on such date.
The fund may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
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MFS Mid Cap Growth Series
Notes to Financial Statements (unaudited) – continued
Fees Paid Indirectly – The fund’s custody fee may be reduced according to an arrangement that measures the value of cash deposited with the custodian by the fund. This amount, for the six months ended June 30, 2011, is shown as a reduction of total expenses on the Statement of Operations.
Tax Matters and Distributions – The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
During the year ended December 31, 2010, there were no significant adjustments due to differences between book and tax accounting.
The fund declared no distributions for the current period or for the year ended December 31, 2010.
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/11 | ||||
Cost of investments | $122,991,596 | |||
Gross appreciation | 30,938,073 | |||
Gross depreciation | (1,960,974 | ) | ||
Net unrealized appreciation (depreciation) | $28,977,099 | |||
As of 12/31/10 | ||||
Capital loss carryforwards | (40,292,029 | ) | ||
Other temporary differences | 356 | |||
Net unrealized appreciation (depreciation) | 40,133,586 |
The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.
As of December 31, 2010, the fund had capital loss carryforwards available to offset future realized gains. Such losses expire as follows:
12/31/16 | $(30,850,869 | ) | ||
12/31/17 | (9,441,160 | ) | ||
Total | $(40,292,029 | ) |
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and/or service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses.
(3) | Transactions with Affiliates |
Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates:
First $1 billion of average daily net assets | 0.75% | |||
Average daily net assets in excess of $1 billion | 0.70% |
The management fee incurred for the six months ended June 30, 2011 was equivalent to an annual effective rate of 0.75% of the fund’s average daily net assets.
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MFS Mid Cap Growth Series
Notes to Financial Statements (unaudited) – continued
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, is the distributor of shares of the fund. The Trustees have adopted a distribution plan for the Service Class shares pursuant to Rule 12b-1 under the Investment Company Act of 1940.
The fund’s distribution plan provides that the fund will pay MFD distribution and/or service fees equal to 0.25% per annum of its average daily net assets attributable to Service Class shares as partial consideration for services performed and expenses incurred by MFD and financial intermediaries (including participating insurance companies that invest in the fund to fund variable annuity and variable life insurance contracts, sponsors of qualified retirement and pension plans that invest in the fund, and affiliates of these participating insurance companies and plan sponsors) in connection with the sale and distribution of the Service Class shares. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries.
Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent. For the six months ended June 30, 2011, the fee was $8,804, which equated to 0.0112% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses paid by MFSC on behalf of the fund. For the six months ended June 30, 2011, these costs amounted to $249.
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund partially reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the six months ended June 30, 2011 was equivalent to an annual effective rate of 0.0209% of the fund’s average daily net assets.
Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – This fund and certain other funds managed by MFS (the funds) have entered into services agreements (the Agreements) which provide for payment of fees by the funds to Tarantino LLC and Griffin Compliance LLC in return for the provision of services of an Independent Chief Compliance Officer (ICCO) and Assistant ICCO, respectively, for the funds. The ICCO and Assistant ICCO are officers of the funds and the sole members of Tarantino LLC and Griffin Compliance LLC, respectively. The funds can terminate the Agreements with Tarantino LLC and Griffin Compliance LLC at any time under the terms of the Agreements. For the six months ended June 30, 2011, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $565 and are included in miscellaneous expense on the Statement of Operations. MFS has agreed to reimburse the fund for a portion of the payments made by the fund in the amount of $458, which is shown as a reduction of total expenses in the Statement of Operations. Additionally, MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ICCO and Assistant ICCO.
The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks a high level of current income consistent with preservation of capital and liquidity. Income earned on this investment is included in dividends from underlying affiliated funds on the Statement of Operations. This money market fund does not pay a management fee to MFS.
(4) | Portfolio Securities |
Purchases and sales of investments, other than U.S. Government securities, purchased option transactions, and short-term obligations, aggregated $53,331,038 and $85,120,203, respectively.
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MFS Mid Cap Growth Series
Notes to Financial Statements (unaudited) – continued
(5) | Shares of Beneficial Interest |
The fund’s Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
Six months ended 6/30/11 | Year ended 12/31/10 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 514,515 | $3,237,972 | 4,425,094 | $22,756,008 | ||||||||||||
Service Class | 695,079 | 4,212,238 | 1,591,878 | 7,971,128 | ||||||||||||
1,209,594 | $7,450,210 | 6,016,972 | $30,727,136 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (5,478,698 | ) | $(33,955,966 | ) | (4,818,822 | ) | $(23,803,385 | ) | ||||||||
Service Class | (1,090,977 | ) | (6,596,445 | ) | (2,008,946 | ) | (9,951,186 | ) | ||||||||
(6,569,675 | ) | $(40,552,411 | ) | (6,827,768 | ) | $(33,754,571 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (4,964,183 | ) | $(30,717,994 | ) | (393,728 | ) | $(1,047,377 | ) | ||||||||
Service Class | (395,898 | ) | (2,384,207 | ) | (417,068 | ) | (1,980,058 | ) | ||||||||
(5,360,081 | ) | $(33,102,201 | ) | (810,796 | ) | $(3,027,435 | ) |
(6) | Line of Credit |
The fund and certain other funds managed by MFS participate in a $1.1 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Federal Reserve funds rate or one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Federal Reserve funds rate plus an agreed upon spread. For the six months ended June 30, 2011, the fund’s commitment fee and interest expense were $785 and $0, respectively, and are included in miscellaneous expense on the Statement of Operations.
(7) | Transactions in Underlying Affiliated Funds – Affiliated Issuers |
An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the fund assumes the following to be affiliated issuers:
Underlying Affiliated Funds | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 2,545,260 | 28,105,281 | (28,622,899 | ) | 2,027,642 | |||||||||||
Underlying Affiliated Funds | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $1,817 | $2,027,642 |
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MFS Mid Cap Growth Series
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board’s most recent review and renewal of the fund’s Investment Advisory Agreement with MFS will be available on or about November 1, 2011 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds’ proxy voting policies and procedures is available without charge, upon request, by calling
1-800-225-2606, by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the Securities and Exchange Commission (the Commission) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. The fund’s Form N-Q is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and copies of this information may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
From time to time, MFS may post important information about the fund or the MFS funds on the MFS web site (mfs.com). This information is available by visiting the “News & Commentary” section of mfs.com or by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of mfs.com.
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rev. 3/11
FACTS | WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION? |
Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
What? | The types of personal information we collect and share depend on the product or service you have with us. This information can include:
• Social Security number and account balances • Account transactions and transaction history • Checking account information and wire transfer instructions
When you are no longer our customer, we continue to share your information as described in this notice. |
How? | All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons MFS chooses to share; and whether you can limit this sharing. |
Reasons we can share your personal information | Does MFS share? | Can you limit this sharing? | ||
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus | Yes | No | ||
For our marketing purposes – to offer our products and services to you | No | We don’t share | ||
For joint marketing with other financial companies | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your transactions and experiences | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your creditworthiness | No | We don’t share | ||
For nonaffiliates to market to you | No | We don’t share |
Questions? | Call 800-225-2606 or go to mfs.com. |
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Page 2 |
Who we are | ||
Who is providing this notice? | MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., MFS Fund Distributors, Inc., MFS Heritage Trust Company, and MFS Service Center, Inc. |
What we do | ||
How does MFS protect my personal information? | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you. | |
How does MFS collect my personal information? | We collect your personal information, for example, when you
• open an account or provide account information • direct us to buy securities or direct us to sell your securities • make a wire transfer
We also collect your personal information from others, such as credit bureaus, affiliates and other companies. | |
Why can’t I limit all sharing? | Federal law gives you the right to limit only
• sharing for affiliates’ everyday business purposes – information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you
State laws and individual companies may give you additional rights to limit sharing. |
Definitions | ||
Affiliates | Companies related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice. | |
Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share with nonaffiliates so they can market to you. | |
Joint Marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you.
• MFS doesn’t jointly market. |
Other important information | ||
If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours. |
19
Table of Contents
Table of Contents
MFS® New Discovery Series
MFS® Variable Insurance Trust
SEMIANNUAL REPORT
June 30, 2011
VND-SEM
Table of Contents
MFS® NEW DISCOVERY SERIES
The report is prepared for the general information of contract owners.
It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED Ÿ MAY LOSE VALUE Ÿ NO BANK OR CREDIT UNION GUARANTEE Ÿ NOT A DEPOSIT Ÿ NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
Table of Contents
MFS New Discovery Series
Dear Contract Owners:
After about a year of almost uninterrupted macroeconomic and financial market improvement following the global credit crisis, investors grew more cautious in the middle of 2010 as fears grew that some European countries would default on their debt and as economic data showed a weakening
trend in the global economy. As a result asset prices fell significantly.
Last September the U.S. Federal Reserve Board’s promises to make lending conditions easier helped assuage market fears and drive asset prices off their recent lows. A combination of solid earnings and improving economic data gave an additional boost to investor sentiment.
In the following months, the renewed positive market mood, coupled with indications of better global macroeconomic activity, pushed many asset valuations to post-crisis highs. At the same time, global sovereign
bond yields initially rose as investors became concerned about inflationary pressures, driven by higher prices for oil as well as other commodities. However, by the end of the second quarter of 2011, a weakening macroeconomic backdrop and renewed concerns over debt problems in some eurozone countries pushed equities lower.
For the remainder of 2011, we are cautiously optimistic that economic growth will continue to improve and that the global economies will recover from the shocks of the past few years. We expect the pace of recovery worldwide to be uneven and volatile and acknowledge the elevated uncertainty created by events in Japan, Europe, the Middle East, as well as that created by the U.S. debate over raising the debt ceiling and the downgrade by Standard & Poor’s of the U.S. long-term credit rating.
As always, we continue to be mindful of the many economic challenges faced at the local, national, and international levels. It is in times such as these that we want to remind investors of the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with their advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2011
The opinions expressed in this letter are subject to change, may not be relied upon for investment advice, and no forecasts can be guaranteed.
1
Table of Contents
MFS New Discovery Series
Portfolio structure
Top ten holdings | ||||
QuinStreet, Inc. | 1.9% | |||
LinkedIn Corp., “A” | 1.8% | |||
P.F. Chang’s China Bistro, Inc. | 1.8% | |||
Polypore International, Inc. | 1.7% | |||
F5 Networks, Inc. | 1.6% | |||
Brookdale Senior Living, Inc. | 1.6% | |||
WebMD Health Corp. | 1.6% | |||
Green Mountain Coffee Roasters, Inc. | 1.5% | |||
Cabot Oil & Gas Corp. | 1.5% | |||
SuccessFactors, Inc. | 1.4% |
Equity sectors | ||||
Technology | 34.0% | |||
Health Care | 12.3% | |||
Industrial Goods & Services | 7.9% | |||
Energy | 7.3% | |||
Special Products & Services | 6.5% | |||
Financial Services | 6.1% | |||
Retailing | 5.8% | |||
Autos & Housing | 5.4% | |||
Leisure | 4.9% | |||
Transportation | 4.9% | |||
Basic Materials | 3.2% | |||
Consumer Staples | 2.0% |
From time to time “Cash & Other Net Assets” may be negative due to timing of cash receipts and/or equivalent exposure from any derivative holdings.
Percentages are based on net assets as of 6/30/11.
The portfolio is actively managed and current holdings may be different.
2
Table of Contents
MFS New Discovery Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2011 through June 30, 2011
As a contract holder of the fund, you incur ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2011 through June 30, 2011.
Actual Expenses
The first line for each share class in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the following table provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight the fund’s ongoing costs only and do not take into account the fees and expenses imposed under the variable contracts through which your investment in the fund is made. Therefore, the second line for each share class in the table is useful in comparing ongoing costs associated with an investment in vehicles (such as the fund) which fund benefits under variable annuity and variable life insurance contracts and to qualified pension and retirement plans only, and will not help you determine the relative total costs of investing in the fund through variable annuity and variable life insurance contracts. If the fees and expenses imposed under the variable contracts were included, your costs would have been higher.
Share Class | Annualized Expense Ratio | Beginning Account Value 1/01/11 | Ending Account Value 6/30/11 | Expenses Paid During Period (p) 1/01/11-6/30/11 | ||||||||||||||
Initial Class | Actual | 0.97% | $1,000.00 | $1,105.95 | $5.06 | |||||||||||||
Hypothetical (h) | 0.97% | $1,000.00 | $1,019.98 | $4.86 | ||||||||||||||
Service Class | Actual | 1.22% | $1,000.00 | $1,104.85 | $6.37 | |||||||||||||
Hypothetical (h) | 1.22% | $1,000.00 | $1,018.74 | $6.11 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid is equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
3
Table of Contents
MFS New Discovery Series
PORTFOLIO OF INVESTMENTS – 6/30/11 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 100.3% | ||||||||
Aerospace – 0.4% | ||||||||
HEICO Corp. | 62,995 | $ | 3,448,338 | |||||
Airlines – 2.6% | ||||||||
Allegiant Travel Co. (a) | 146,680 | $ | 7,260,660 | |||||
Spirit Airlines, Inc. (a) | 788,910 | 9,459,031 | ||||||
United Continental Holdings, Inc. (a) | 281,960 | 6,380,755 | ||||||
$ | 23,100,446 | |||||||
Apparel Manufacturers – 1.1% | ||||||||
Arezzo Industria e Comercio S.A. (a) | 534,560 | $ | 7,484,148 | |||||
Phillips-Van Heusen Corp. | 30,970 | 2,027,606 | ||||||
$ | 9,511,754 | |||||||
Biotechnology – 0.9% | ||||||||
Alimera Sciences, Inc. (a) | 91,460 | $ | 745,399 | |||||
Anacor Pharmaceuticals, Inc. (a) | 433,060 | 2,797,568 | ||||||
Pacific Biosciences of California, Inc. (a) | 177,900 | 2,081,430 | ||||||
SEQUENOM, Inc. (a) | 350,320 | 2,644,916 | ||||||
$ | 8,269,313 | |||||||
Broadcasting – 1.9% | ||||||||
QuinStreet, Inc. (a) | 1,326,318 | $ | 17,215,608 | |||||
Business Services – 4.8% | ||||||||
Calix, Inc. (a) | 311,810 | $ | 6,491,884 | |||||
Concur Technologies, Inc. (a) | 137,140 | 6,866,600 | ||||||
Constant Contact, Inc. (a) | 198,370 | 5,034,631 | ||||||
FleetCor Technologies, Inc. (a) | 361,320 | 10,709,525 | ||||||
Jones Lang LaSalle, Inc. | 70,840 | 6,680,212 | ||||||
LPS Brasil – Consultoria de Imoveis S.A. | 100,600 | 2,449,492 | ||||||
Ultimate Software Group, Inc. (a) | 84,610 | 4,605,322 | ||||||
$ | 42,837,666 | |||||||
Computer Software – 6.2% | ||||||||
Ariba, Inc. (a) | 206,650 | $ | 7,123,226 | |||||
Check Point Software Technologies Ltd. (a) | 121,100 | 6,884,535 | ||||||
CommVault Systems, Inc. (a) | 112,660 | 5,007,737 | ||||||
Nuance Communications, Inc. (a) | 290,134 | 6,229,177 | ||||||
Red Hat, Inc. (a) | 172,550 | 7,920,045 | ||||||
SolarWinds, Inc. (a) | 327,890 | 8,571,045 | ||||||
SuccessFactors, Inc. (a) | 437,840 | 12,872,496 | ||||||
$ | 54,608,261 | |||||||
Computer Software – Systems – 10.0% | ||||||||
Active Network, Inc. (a) | 417,190 | $ | 7,342,544 | |||||
BroadSoft, Inc. (a) | 142,090 | 5,417,892 | ||||||
Cornerstone OnDemand, Inc. (a) | 251,440 | 4,437,916 | ||||||
DemandTec, Inc. (a) | 413,530 | 3,763,123 | ||||||
Fusion-io, Inc. (a) | 193,773 | 5,830,630 | ||||||
IntraLinks Holdings, Inc. (a) | 409,600 | 7,077,888 | ||||||
MICROS Systems, Inc. (a) | 90,300 | 4,488,813 | ||||||
National Instruments Corp. | 334,980 | 9,945,556 | ||||||
PROS Holdings, Inc. (a) | 545,300 | 9,537,297 | ||||||
Qlik Technologies, Inc. (a) | 294,190 | 10,020,111 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Computer Software – Systems – continued | ||||||||
SciQuest, Inc. (a) | 467,030 | $ | 7,981,543 | |||||
ServiceSource International, Inc. (a) | 265,040 | 5,889,189 | ||||||
Velti PLC (a) | 269,140 | 4,551,157 | ||||||
Verifone Systems, Inc. (a) | 52,140 | 2,312,409 | ||||||
$ | 88,596,068 | |||||||
Construction – 4.6% | ||||||||
Beacon Roofing Supply, Inc. (a) | 472,020 | $ | 10,771,496 | |||||
Eagle Materials, Inc. | 351,830 | 9,805,502 | ||||||
NVR, Inc. (a) | 14,850 | 10,773,378 | ||||||
Owens Corning (a) | 263,590 | 9,845,087 | ||||||
$ | 41,195,463 | |||||||
Consumer Products – 0.5% | ||||||||
L’Occitane International S.A. | 1,617,500 | $ | 4,323,477 | |||||
Consumer Services – 1.7% | ||||||||
Anhanguera Educacional Participacoes S.A. | 179,800 | $ | 3,827,223 | |||||
HomeAway, Inc. (a) | 292,750 | 11,329,425 | ||||||
$ | 15,156,648 | |||||||
Electrical Equipment – 1.5% | ||||||||
Acuity Brands, Inc. | 113,950 | $ | 6,356,131 | |||||
MSC Industrial Direct Co., Inc., “A” | 32,690 | 2,167,674 | ||||||
Sensata Technologies Holding B.V. (a) | 125,380 | 4,720,557 | ||||||
$ | 13,244,362 | |||||||
Electronics – 7.8% | ||||||||
Aeroflex Holding Corp. (a) | 321,110 | $ | 5,828,147 | |||||
DynaVox, Inc., “A” (a) | 550,680 | 4,185,168 | ||||||
Entegris, Inc. (a) | 451,850 | 4,572,722 | ||||||
Fabrinet (a) | 457,730 | 11,113,684 | ||||||
Hittite Microwave Corp. (a) | 171,950 | 10,645,425 | ||||||
Inphi Corp. (a) | 256,560 | 4,464,144 | ||||||
Monolithic Power Systems, Inc. (a) | 461,880 | 7,122,190 | ||||||
Semtech Corp. (a) | 253,950 | 6,942,993 | ||||||
Stratasys, Inc. (a) | 142,680 | 4,808,316 | ||||||
Veeco Instruments, Inc. (a)(l) | 187,810 | 9,091,882 | ||||||
$ | 68,774,671 | |||||||
Energy – Independent – 6.1% | ||||||||
Brigham Exploration Co. (a) | 333,000 | $ | 9,966,690 | |||||
Cabot Oil & Gas Corp. | 199,540 | 13,231,497 | ||||||
Energy XXI (Bermuda) Ltd. (a) | 258,100 | 8,574,082 | ||||||
Oasis Petroleum LLC (a) | 335,290 | 9,951,407 | ||||||
Petrohawk Energy Corp. (a) | 513,150 | 12,659,411 | ||||||
$ | 54,383,087 | |||||||
Food & Beverages – 1.5% | ||||||||
Green Mountain Coffee Roasters, Inc. (a) | 150,200 | $ | 13,406,852 | |||||
Forest & Paper Products – 0.8% | ||||||||
Universal Forest Products, Inc. | 281,050 | $ | 6,733,958 | |||||
4
Table of Contents
MFS New Discovery Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Furniture & Appliances – 0.8% | ||||||||
SodaStream International Ltd. (a) | 120,480 | $ | 7,326,389 | |||||
Gaming & Lodging – 0.7% | ||||||||
Morgans Hotel Group Co. (a) | 847,908 | $ | 6,096,459 | |||||
General Merchandise – 0.6% | ||||||||
Lojas Renner S.A. | 134,200 | $ | 5,116,394 | |||||
Health Maintenance Organizations – 0.2% | ||||||||
OdontoPrev S.A. | 127,500 | $ | 2,124,115 | |||||
Insurance – 1.3% | ||||||||
Brazil Insurance Participacoes e Administracao S.A. | 9,200 | $ | 11,495,210 | |||||
Internet – 6.4% | ||||||||
Demand Media, Inc. (a) | 242,950 | $ | 3,291,973 | |||||
LinkedIn Corp., “A” (a)(l) | 176,430 | 15,894,579 | ||||||
LogMeIn, Inc. (a) | 106,510 | 4,108,091 | ||||||
OpenTable, Inc. (a) | 148,610 | 12,352,463 | ||||||
Shutterfly, Inc. (a) | 40,410 | 2,320,342 | ||||||
TechTarget, Inc. (a) | 646,816 | 4,896,397 | ||||||
WebMD Health Corp. (a) | 303,550 | 13,835,809 | ||||||
$ | 56,699,654 | |||||||
Machinery & Tools – 6.0% | ||||||||
Douglas Dynamics, Inc. | 184,870 | $ | 2,919,097 | |||||
Finning International, Inc. | 290,820 | 8,624,037 | ||||||
Herman Miller, Inc. | 327,030 | 8,901,757 | ||||||
Joy Global, Inc. | 49,330 | 4,698,189 | ||||||
Polypore International, Inc. (a) | 218,312 | 14,810,286 | ||||||
Thermon Group Holdings, Inc. (a) | 439,070 | 5,268,840 | ||||||
United Rentals, Inc. (a) | 221,880 | 5,635,752 | ||||||
WABCO Holdings, Inc. (a) | 32,410 | 2,238,235 | ||||||
$ | 53,096,193 | |||||||
Medical & Health Technology & Services – 5.1% | ||||||||
Allscripts Healthcare Solutions, Inc. (a) | 309,910 | $ | 6,018,452 | |||||
Brookdale Senior Living, Inc. (a) | 577,715 | 14,009,589 | ||||||
Cerner Corp. (a) | 147,570 | 9,018,003 | ||||||
Health Management Associates, Inc., “A” (a) | 632,120 | 6,814,254 | ||||||
IPC The Hospitalist Co., Inc. (a) | 69,660 | 3,228,741 | ||||||
LifePoint Hospitals, Inc. (a) | 153,220 | 5,987,838 | ||||||
$ | 45,076,877 | |||||||
Medical Equipment – 6.1% | ||||||||
DexCom, Inc. (a) | 322,900 | $ | 4,678,821 | |||||
Heartware International, Inc. (a) | 61,550 | 4,559,624 | ||||||
IMRIS, Inc. (a) | 279,890 | 1,911,649 | ||||||
Masimo Corp. | 377,750 | 11,211,620 | ||||||
NxStage Medical, Inc. (a) | 498,407 | 10,376,834 | ||||||
Thoratec Corp. (a) | 279,630 | 9,177,457 | ||||||
Uroplasty, Inc. (a) | 611,910 | 4,589,325 | ||||||
Volcano Corp. (a) | 246,500 | 7,959,485 | ||||||
$ | 54,464,815 | |||||||
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Metals & Mining – 0.8% | ||||||||
Globe Specialty Metals, Inc. | 102,330 | $ | 2,294,239 | |||||
Molycorp, Inc. (a) | 83,740 | 5,113,164 | ||||||
$ | 7,407,403 | |||||||
Network & Telecom – 3.6% | ||||||||
Acme Packet, Inc. (a) | 34,470 | $ | 2,417,381 | |||||
Ciena Corp. (a) | 184,470 | 3,390,559 | ||||||
F5 Networks, Inc. (a) | 127,710 | 14,080,028 | ||||||
Finisar Corp. (a) | 287,410 | 5,182,002 | ||||||
Polycom, Inc. (a) | 110,800 | 7,124,440 | ||||||
$ | 32,194,410 | |||||||
Oil Services – 1.2% | ||||||||
Dresser-Rand Group, Inc. (a) | 203,240 | $ | 10,924,150 | |||||
Other Banks & Diversified Financials – 4.6% | ||||||||
Air Lease Corp. (a) | 234,620 | $ | 5,698,920 | |||||
BankUnited, Inc. | 220,790 | 5,859,767 | ||||||
First Interstate BancSystem, Inc. | 418,740 | 6,172,228 | ||||||
First Republic Bank (a) | 66,600 | 2,149,848 | ||||||
Metro Bancorp, Inc. (a) | 401,570 | 4,585,929 | ||||||
PacWest Bancorp | 294,920 | 6,066,504 | ||||||
Wintrust Financial Corp. | 172,620 | 5,554,912 | ||||||
Zipcar, Inc. (a) | 225,080 | 4,593,883 | ||||||
$ | 40,681,991 | |||||||
Precious Metals & Minerals – 0.9% | ||||||||
Stillwater Mining Co. (a) | 344,970 | $ | 7,592,790 | |||||
Real Estate – 0.2% | ||||||||
Chesapeake Lodging Trust, REIT | 78,395 | $ | 1,337,419 | |||||
Restaurants – 2.3% | ||||||||
Arcos Dorados Holdings, Inc. | 219,430 | $ | 4,627,779 | |||||
P.F. Chang’s China Bistro, Inc. | 393,070 | 15,817,137 | ||||||
$ | 20,444,916 | |||||||
Specialty Chemicals – 0.7% | ||||||||
KiOR, Inc. “A” (a) | 134,560 | $ | 2,038,584 | |||||
Rockwood Holdings, Inc. (a) | 82,390 | 4,555,343 | ||||||
$ | 6,593,927 | |||||||
Specialty Stores – 4.1% | ||||||||
Citi Trends, Inc. (a) | 626,380 | $ | 9,445,810 | |||||
Ethan Allen Interiors, Inc. | 292,860 | 6,234,989 | ||||||
Monro Muffler Brake, Inc. | 244,515 | 9,117,964 | ||||||
Urban Outfitters, Inc. (a) | 422,540 | 11,894,501 | ||||||
$ | 36,693,264 | |||||||
Trucking – 2.3% | ||||||||
Atlas Air Worldwide Holdings, Inc. (a) | 131,870 | $ | 7,847,584 | |||||
Landstar System, Inc. | 97,440 | 4,529,011 | ||||||
Swift Transportation Co. (a) | 573,700 | 7,773,635 | ||||||
$ | 20,150,230 | |||||||
Total Common Stocks (Identified Cost, $824,922,982) | $ | 890,322,578 | ||||||
5
Table of Contents
MFS New Discovery Series
Portfolio of Investments (unaudited) – continued
Strike Price | First Exercise | Shares/Par | Value ($) | |||||||||||||
WARRANTS – 0.0% | ||||||||||||||||
Alcoholic Beverages – 0.0% | ||||||||||||||||
Castle Brands, Inc. (1 share for 1 warrant) (Identified Cost, $166,679) (a)(z) | $ | 6.57 | 5/08/07 | 118,680 | $ | 0 | ||||||||||
|
| |||||||||||||||
RIGHTS – 0.0% | ||||||||||||||||
Business Services – 0.0% | ||||||||||||||||
LPS Brasil Consultoria de Imoveis S.A. (1 share for 1 right) (Identified Cost, $0) (a) | BRL | 39.43 | 6/30/11 | 1,216 | $ | 0 | ||||||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
MONEY MARKET FUNDS (v) – 0.0% | ||||||||
MFS Institutional Money Market Portfolio, 0.1%, at Cost and Net Asset Value | 325 | $ | 325 | |||||
|
| |||||||
COLLATERAL FOR SECURITIES LOANED – 1.5% | ||||||||
Navigator Securities Lending Prime Portfolio, 0.23%, at Cost and Net Asset Value (j) | 13,199,332 | $ | 13,199,332 | |||||
|
| |||||||
Total Investments (Identified Cost, $838,289,318) | $ | 903,522,235 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – (1.8)% | (15,625,405 | ) | ||||||
|
| |||||||
Net Assets – 100.0% | $ | 887,896,830 | ||||||
|
|
(a) | Non-income producing security. |
(j) | The rate quoted is the annualized seven-day yield of the portfolio at period end. |
(l) | A portion of this security is on loan. |
(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 fund holds the following restricted securities: |
Restricted Securities | Acquisition Date | Cost | Value | |||||||
Castle Brands, Inc. (Warrants) | 4/18/07 | $166,679 | $0 | |||||||
% of Net Assets | 0.0% |
The following abbreviations are used in this report and are defined:
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:
BRL | Brazilian Real |
See Notes to Financial Statements
6
Table of Contents
MFS New Discovery Series
FINANCIAL STATEMENTS | STATEMENT OF ASSETS AND LIABILITIES (unaudited)
This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
At 6/30/11 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $838,288,993) | $903,521,910 | |||||||
Underlying affiliated funds, at cost and value | 325 | |||||||
Total investments, at value, including $13,257,131 of securities on loan (identified cost, $838,289,318) | $903,522,235 | |||||||
Cash | 305,755 | |||||||
Receivables for | ||||||||
Investments sold | 18,473,608 | |||||||
Fund shares sold | 1,140,018 | |||||||
Interest and dividends | 212,472 | |||||||
Other assets | 3,296 | |||||||
Total assets | $923,657,384 | |||||||
Liabilities | ||||||||
Payable to custodian | $1,720,067 | |||||||
Payables for | ||||||||
Investments purchased | 20,122,580 | |||||||
Fund shares reacquired | 490,652 | |||||||
Collateral for securities loaned, at value | 13,199,332 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 44,035 | |||||||
Shareholder servicing costs | 795 | |||||||
Distribution and/or service fees | 5,290 | |||||||
Payable for independent Trustees’ compensation | 2,640 | |||||||
Accrued expenses and other liabilities | 175,163 | |||||||
Total liabilities | $35,760,554 | |||||||
Net assets | $887,896,830 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $627,593,643 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 65,234,315 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency transactions | 198,233,542 | |||||||
Accumulated net investment loss | (3,164,670 | ) | ||||||
Net assets | $887,896,830 | |||||||
Shares of beneficial interest outstanding | 44,477,846 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $497,581,244 | 24,565,860 | $20.25 | |||||||||
Service Class | 390,315,586 | 19,911,986 | 19.60 |
See Notes to Financial Statements
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MFS New Discovery Series
FINANCIAL STATEMENTS | STATEMENT OF OPERATIONS (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
Six months ended 6/30/11 | ||||||||
Net Investment loss | ||||||||
Income | ||||||||
Dividends | $1,610,213 | |||||||
Interest | 12,623 | |||||||
Dividends from underlying affiliated funds | 4,619 | |||||||
Foreign taxes withheld | (42,536 | ) | ||||||
Total investment income | $1,584,919 | |||||||
Expenses | ||||||||
Management fee | $3,962,714 | |||||||
Distribution and/or service fees | 456,696 | |||||||
Shareholder servicing costs | 50,099 | |||||||
Administrative services fee | 68,512 | |||||||
Independent Trustees’ compensation | 10,196 | |||||||
Custodian fee | 78,592 | |||||||
Shareholder communications | 65,135 | |||||||
Auditing fees | 32,230 | |||||||
Legal fees | 6,423 | |||||||
Miscellaneous | 21,639 | |||||||
Total expenses | $4,752,236 | |||||||
Fees paid indirectly | (133 | ) | ||||||
Reduction of expenses by investment adviser | (2,514 | ) | ||||||
Net expenses | $4,749,589 | |||||||
Net investment loss | $(3,164,670 | ) | ||||||
Realized and unrealized gain (loss) on investments and foreign currency transactions | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investment transactions (net of $65 country tax) | $105,452,891 | |||||||
Foreign currency transactions | (498,831 | ) | ||||||
Net realized gain (loss) on investments and foreign currency transactions | $104,954,060 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $(15,813,879 | ) | ||||||
Translation of assets and liabilities in foreign currencies | 1,603 | |||||||
Net unrealized gain (loss) on investments and foreign currency translation | $(15,812,276 | ) | ||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $89,141,784 | |||||||
Change in net assets from operations | $85,977,114 |
See Notes to Financial Statements
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MFS New Discovery Series
FINANCIAL STATEMENTS | STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
| Six months ended 6/30/11 (unaudited | ) | | Year ended 12/31/10 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment loss | $(3,164,670 | ) | $(4,219,907 | ) | ||||
Net realized gain (loss) on investments and foreign currency transactions | 104,954,060 | 199,637,306 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | (15,812,276 | ) | 19,102,181 | |||||
Change in net assets from operations | $85,977,114 | $214,519,580 | ||||||
Change in net assets from fund share transactions | $(21,657,902 | ) | $(33,965,430 | ) | ||||
Total change in net assets | $64,319,212 | $180,554,150 | ||||||
Net assets | ||||||||
At beginning of period | 823,577,618 | 643,023,468 | ||||||
At end of period (including accumulated net investment loss of $3,164,670 and | $887,896,830 | $823,577,618 |
See Notes to Financial Statements
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MFS New Discovery Series
FINANCIAL STATEMENTS | FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund’s financial performance for the semiannual period and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
Initial Class | Six months 6/30/11 | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $18.31 | $13.43 | $8.23 | $16.63 | $17.42 | $15.65 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment loss (d) | $(0.06 | ) | $(0.08 | ) | $(0.06 | ) | $(0.04 | ) | $(0.09 | ) | $(0.10 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 2.00 | 4.96 | 5.26 | (5.54 | ) | 0.58 | 2.16 | |||||||||||||||||
Total from investment operations | $1.94 | $4.88 | $5.20 | $(5.58 | ) | $0.49 | $2.06 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net realized gain on investments | $— | $— | $— | $(2.82 | ) | $(1.28 | ) | $(0.29 | ) | |||||||||||||||
Net asset value, end of period | $20.25 | $18.31 | $13.43 | $8.23 | $16.63 | $17.42 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 10.60 | (n) | 36.34 | 63.18 | (39.33 | ) | 2.52 | 13.22 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.97 | (a) | 1.01 | 1.03 | 1.01 | 1.01 | 1.03 | |||||||||||||||||
Expenses after expense reductions (f) | 0.97 | (a) | 1.01 | 1.03 | 1.01 | 1.01 | 1.03 | |||||||||||||||||
Net investment loss | (0.62 | )(a) | (0.54 | ) | (0.57 | ) | (0.36 | ) | (0.50 | ) | (0.63 | ) | ||||||||||||
Portfolio turnover | 105 | 195 | 158 | 121 | 95 | 106 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $497,581 | $499,020 | $423,042 | $289,596 | $520,726 | $533,322 |
See Notes to Financial Statements
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Financial Highlights – continued
Service Class | Six months 6/30/11 | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $17.74 | $13.05 | $8.01 | $16.31 | $17.15 | $15.45 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment loss (d) | $(0.08 | ) | $(0.11 | ) | $(0.08 | ) | $(0.07 | ) | $(0.13 | ) | $(0.14 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 1.94 | 4.80 | 5.12 | (5.41 | ) | 0.57 | 2.13 | |||||||||||||||||
Total from investment operations | $1.86 | $4.69 | $5.04 | $(5.48 | ) | $0.44 | $1.99 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net realized gain on investments | $— | $— | $— | $(2.82 | ) | $(1.28 | ) | $(0.29 | ) | |||||||||||||||
Net asset value, end of period | $19.60 | $17.74 | $13.05 | $8.01 | $16.31 | $17.15 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 10.48 | (n) | 35.94 | 62.92 | (39.52 | ) | 2.25 | 12.93 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.22 | (a) | 1.26 | 1.28 | 1.26 | 1.26 | 1.28 | |||||||||||||||||
Expenses after expense reductions (f) | 1.22 | (a) | 1.26 | 1.28 | 1.26 | 1.26 | 1.28 | |||||||||||||||||
Net investment loss | (0.86 | )(a) | (0.79 | ) | (0.82 | ) | (0.60 | ) | (0.75 | ) | (0.88 | ) | ||||||||||||
Portfolio turnover | 105 | 195 | 158 | 121 | 95 | 106 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $390,316 | $324,557 | $219,982 | $125,421 | $242,510 | $285,511 |
(a) | Annualized. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(k) | The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown. |
(n) | Not annualized. |
(r) | Certain expenses have been reduced without which performance would have been lower. |
(s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
See Notes to Financial Statements
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MFS New Discovery Series
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) | Business and Organization |
MFS New Discovery Series (the fund) is a series of MFS Variable Insurance Trust (the trust). The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The shareholders of each series of the trust are separate accounts of insurance companies, which offer variable annuity and/or life insurance products, and qualified retirement and pension plans.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued.
Investment Valuations – 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 the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted
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MFS New Discovery Series
Notes to Financial Statements (unaudited) – continued
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 June 30, 2011 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities | $890,322,578 | $— | $— | $890,322,578 | ||||||||||||
Mutual Funds | 13,199,657 | — | — | 13,199,657 | ||||||||||||
Total Investments | $903,522,235 | $— | $— | $903,522,235 |
For further information regarding security characteristics, see the Portfolio of Investments.
Foreign Currency Translation – Purchases and sales of foreign investments, income, and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions or on the reporting date for foreign denominated receivables and payables. Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Gains and losses attributable to foreign exchange rate movements on receivables, payables, income and expenses are recorded for financial statement purposes as foreign currency transaction gains and losses. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.
Security Loans – State Street Bank and Trust Company (“State Street”), as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. The loans are collateralized by cash and/or U.S. Treasury and federal agency obligations in an amount typically at least equal to the market value of the securities loaned. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. State Street provides the fund with indemnification against Borrower default. The fund bears the risk of loss with respect to the investment of cash collateral. On loans collateralized by cash, the cash collateral is invested in a money market fund or short-term securities. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the fund and the lending agent. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the Borrower, and is allocated between the fund and the lending agent. Income from securities lending is included in interest income on the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income.
Indemnifications – Under the fund’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund’s maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.
Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend and interest payments received in additional securities are recorded on the ex-dividend or ex-interest date in an amount equal to the value of the security on such date.
The fund may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
Fees Paid Indirectly – The fund’s custody fee may be reduced according to an arrangement that measures the value of cash deposited with the custodian by the fund. This amount, for the six months ended June 30, 2011, is shown as a reduction of total expenses on the Statement of Operations.
Tax Matters and Distributions – The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital
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MFS New Discovery Series
Notes to Financial Statements (unaudited) – continued
accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to net operating losses and wash sale loss deferrals.
The fund declared no distributions for the current period or for the year ended December 31, 2010.
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/11 | ||||
Cost of investments | $839,305,580 | |||
Gross appreciation | 104,206,274 | |||
Gross depreciation | (39,989,619 | ) | ||
Net unrealized appreciation (depreciation) | $64,216,655 | |||
As of 12/31/10 | ||||
Undistributed ordinary income | 29,757,086 | |||
Undistributed long-term capital gain | 64,538,658 | |||
Other temporary differences | (205 | ) | ||
Net unrealized appreciation (depreciation) | 80,030,534 |
The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and/or service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses.
(3) | Transactions with Affiliates |
Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates:
First $1 billion of average daily net assets | 0.90% | |||
Average daily net assets in excess of $1 billion | 0.80% |
The management fee incurred for the six months ended June 30, 2011 was equivalent to an annual effective rate of 0.90% of the fund’s average daily net assets.
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, is the distributor of shares of the fund. The Trustees have adopted a distribution plan for the Service Class shares pursuant to Rule 12b-1 under the Investment Company Act of 1940.
The fund’s distribution plan provides that the fund will pay MFD distribution and/or service fees equal to 0.25% per annum of its average daily net assets attributable to Service Class shares as partial consideration for services performed and expenses incurred by MFD and financial intermediaries (including participating insurance companies that invest in the fund to fund variable annuity and variable life insurance contracts, sponsors of qualified retirement and pension plans that invest in the fund, and affiliates of these participating insurance companies and plan sponsors) in connection with the sale and distribution of the Service Class shares. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries.
Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent. For the six months ended June 30, 2011, the fee was $49,171, which equated to 0.0112% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses paid by MFSC on behalf of the fund. For the six months ended June 30, 2011, these costs amounted to $928.
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund partially reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the six months ended June 30, 2011 was equivalent to an annual effective rate of 0.0155% of the fund’s average daily net assets.
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MFS New Discovery Series
Notes to Financial Statements (unaudited) – continued
Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – This fund and certain other funds managed by MFS (the funds) have entered into services agreements (the Agreements) which provide for payment of fees by the funds to Tarantino LLC and Griffin Compliance LLC in return for the provision of services of an Independent Chief Compliance Officer (ICCO) and Assistant ICCO, respectively, for the funds. The ICCO and Assistant ICCO are officers of the funds and the sole members of Tarantino LLC and Griffin Compliance LLC, respectively. The funds can terminate the Agreements with Tarantino LLC and Griffin Compliance LLC at any time under the terms of the Agreements. For the six months ended June 30, 2011, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $3,104 and are included in miscellaneous expense on the Statement of Operations. MFS has agreed to reimburse the fund for a portion of the payments made by the fund in the amount of $2,514, which is shown as a reduction of total expenses in the Statement of Operations. Additionally, MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ICCO and Assistant ICCO.
The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks a high level of current income consistent with preservation of capital and liquidity. Income earned on this investment is included in dividends from underlying affiliated funds on the Statement of Operations. This money market fund does not pay a management fee to MFS.
(4) | Portfolio Securities |
Purchases and sales of investments, other than U.S. Government securities, purchased option transactions, and short-term obligations, aggregated $930,980,059 and $946,251,352, respectively.
(5) | Shares of Beneficial Interest |
The fund’s Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
Six months ended 6/30/11 | Year ended 12/31/10 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 3,341,683 | $64,850,201 | 4,536,652 | $68,573,896 | ||||||||||||
Service Class | 4,298,687 | 81,842,229 | 6,201,547 | 92,202,328 | ||||||||||||
7,640,370 | $146,692,430 | 10,738,199 | $160,776,224 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (6,026,188 | ) | $(117,503,108 | ) | (8,777,202 | ) | $(127,128,602 | ) | ||||||||
Service Class | (2,677,393 | ) | (50,847,224 | ) | (4,768,360 | ) | (67,613,052 | ) | ||||||||
(8,703,581 | ) | $(168,350,332 | ) | (13,545,562 | ) | $(194,741,654 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (2,684,505 | ) | $(52,652,907 | ) | (4,240,550 | ) | $(58,554,706 | ) | ||||||||
Service Class | 1,621,294 | 30,995,005 | 1,433,187 | 24,589,276 | ||||||||||||
(1,063,211 | ) | $(21,657,902 | ) | (2,807,363 | ) | $(33,965,430 | ) |
(6) | Line of Credit |
The fund and certain other funds managed by MFS participate in a $1.1 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Federal Reserve funds rate or one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Federal Reserve funds rate plus an agreed upon spread. For the six months ended June 30, 2011, the fund’s commitment fee and interest expense were $3,769 and $0, respectively, and are included in miscellaneous expense on the Statement of Operations.
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MFS New Discovery Series
Notes to Financial Statements (unaudited) – continued
(7) | Transactions in Underlying Affiliated Funds – Affiliated Issuers |
An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the fund assumes the following to be affiliated issuers:
Underlying Affiliated Funds | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 3,550,969 | 218,838,147 | (222,388,791 | ) | 325 | |||||||||||
Underlying Affiliated Funds | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $4,619 | $325 |
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MFS New Discovery Series
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board’s most recent review and renewal of the fund’s Investment Advisory Agreement with MFS will be available on or about November 1, 2011 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds’ proxy voting policies and procedures is available without charge, upon request, by calling
1-800-225-2606, by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the Securities and Exchange Commission (the Commission) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. The fund’s Form N-Q is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and copies of this information may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
From time to time, MFS may post important information about the fund or the MFS funds on the MFS web site (mfs.com). This information is available by visiting the “News & Commentary” section of mfs.com or by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of mfs.com.
17
Table of Contents
rev. 3/11
FACTS | WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION? |
Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
What? | The types of personal information we collect and share depend on the product or service you have with us. This information can include:
• Social Security number and account balances • Account transactions and transaction history • Checking account information and wire transfer instructions
When you are no longer our customer, we continue to share your information as described in this notice. |
How? | All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons MFS chooses to share; and whether you can limit this sharing. |
Reasons we can share your personal information | Does MFS share? | Can you limit this sharing? | ||
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus | Yes | No | ||
For our marketing purposes – to offer our products and services to you | No | We don’t share | ||
For joint marketing with other financial companies | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your transactions and experiences | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your creditworthiness | No | We don’t share | ||
For nonaffiliates to market to you | No | We don’t share |
Questions? | Call 800-225-2606 or go to mfs.com. |
18
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Page 2 |
Who we are | ||
Who is providing this notice? | MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., MFS Fund Distributors, Inc., MFS Heritage Trust Company, and MFS Service Center, Inc. |
What we do | ||
How does MFS protect my personal information? | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you. | |
How does MFS collect my personal information? | We collect your personal information, for example, when you
• open an account or provide account information • direct us to buy securities or direct us to sell your securities • make a wire transfer
We also collect your personal information from others, such as credit bureaus, affiliates and other companies. | |
Why can’t I limit all sharing? | Federal law gives you the right to limit only
• sharing for affiliates’ everyday business purposes – information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you
State laws and individual companies may give you additional rights to limit sharing. |
Definitions | ||
Affiliates | Companies related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice. | |
Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share with nonaffiliates so they can market to you. | |
Joint Marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you.
• MFS doesn’t jointly market. |
Other important information | ||
If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours. |
19
Table of Contents
Table of Contents
MFS® Core Equity Series
MFS® Variable Insurance Trust
SEMIANNUAL REPORT
June 30, 2011
VVS-SEM
Table of Contents
MFS® CORE EQUITY SERIES
The report is prepared for the general information of contract owners.
It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED Ÿ MAY LOSE VALUE Ÿ NO BANK OR CREDIT UNION GUARANTEE Ÿ NOT A DEPOSIT Ÿ NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
Table of Contents
MFS Core Equity Series
Dear Contract Owners:
After about a year of almost uninterrupted macroeconomic and financial market improvement following the global credit crisis, investors grew more cautious in the middle of 2010 as fears grew that some European countries would default on their debt and as economic data showed a weakening
trend in the global economy. As a result asset prices fell significantly.
Last September the U.S. Federal Reserve Board’s promises to make lending conditions easier helped assuage market fears and drive asset prices off their recent lows. A combination of solid earnings and improving economic data gave an additional boost to investor sentiment.
In the following months, the renewed positive market mood, coupled with indications of better global macroeconomic activity, pushed many asset valuations to post-crisis highs. At the same time, global sovereign
bond yields initially rose as investors became concerned about inflationary pressures, driven by higher prices for oil as well as other commodities. However, by the end of the second quarter of 2011, a weakening macroeconomic backdrop and renewed concerns over debt problems in some eurozone countries pushed equities lower.
For the remainder of 2011, we are cautiously optimistic that economic growth will continue to improve and that the global economies will recover from the shocks of the past few years. We expect the pace of recovery worldwide to be uneven and volatile and acknowledge the elevated uncertainty created by events in Japan, Europe, the Middle East, as well as that created by the U.S. debate over raising the debt ceiling and the downgrade by Standard & Poor’s of the U.S. long-term credit rating.
As always, we continue to be mindful of the many economic challenges faced at the local, national, and international levels. It is in times such as these that we want to remind investors of the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with their advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2011
The opinions expressed in this letter are subject to change, may not be relied upon for investment advice, and no forecasts can be guaranteed.
1
Table of Contents
MFS Core Equity Series
Portfolio structure (i)
Top ten holdings (i) | ||||
Apple, Inc. | 3.4% | |||
Exxon Mobil Corp. | 3.0% | |||
Abbott Laboratories | 1.9% | |||
Fluor Corp. | 1.7% | |||
Chevron Corp. | 1.7% | |||
Danaher Corp. | 1.7% | |||
JPMorgan Chase & Co. | 1.6% | |||
International Business Machines Corp. | 1.5% | |||
Oracle Corp. | 1.5% | |||
EMC Corp. | 1.4% |
Equity sectors (i) | ||||
Financial Services | 15.9% | |||
Technology | 15.4% | |||
Health Care | 12.0% | |||
Energy | 11.4% | |||
Industrial Goods & Services | 8.3% | |||
Consumer Staples | 7.4% | |||
Utilities & Communications | 6.3% | |||
Retailing | 6.1% | |||
Leisure | 6.0% | |||
Basic Materials | 4.8% | |||
Transportation | 2.2% | |||
Special Products & Services | 2.1% | |||
Autos & Housing | 1.3% |
(i) | For purposes of this presentation, the components include the market value of securities, less any securities sold short, and reflect the impact of the equivalent exposure of derivative positions, if applicable. These amounts may be negative from time to time. Equivalent exposure is a calculated amount that translates the derivative position into a reasonable approximation of the amount of the underlying asset that the portfolio would have to hold at a given point in time to have the same price sensitivity that results from the portfolio’s ownership of the derivative contract. When dealing with derivatives, equivalent exposure is a more representative measure of the potential impact of a position on portfolio performance than market value. |
Percentages are based on net assets as of 6/30/11.
The portfolio is actively managed and current holdings may be different.
2
Table of Contents
MFS Core Equity Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2011 through June 30, 2011
As a contract holder of the fund, you incur ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2011 through June 30, 2011.
Actual Expenses
The first line for each share class in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the following table provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight the fund’s ongoing costs only and do not take into account the fees and expenses imposed under the variable contracts through which your investment in the fund is made. Therefore, the second line for each share class in the table is useful in comparing ongoing costs associated with an investment in vehicles (such as the fund) which fund benefits under variable annuity and variable life insurance contracts and to qualified pension and retirement plans only, and will not help you determine the relative total costs of investing in the fund through variable annuity and variable life insurance contracts. If the fees and expenses imposed under the variable contracts were included, your costs would have been higher.
Share Class | Annualized Expense Ratio | Beginning Account Value 1/01/11 | Ending Account Value | Expenses Paid During Period (p) 1/01/11-6/30/11 | ||||||||||||||
Initial Class | Actual | 0.91% | $1,000.00 | $1,052.40 | $4.63 | |||||||||||||
Hypothetical (h) | 0.91% | $1,000.00 | $1,020.28 | $4.56 | ||||||||||||||
Service Class | Actual | 1.16% | $1,000.00 | $1,050.67 | $5.90 | |||||||||||||
Hypothetical (h) | 1.16% | $1,000.00 | $1,019.04 | $5.81 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid is equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
Expenses Impacting Table
Expense ratios include 0.01% of investment related expenses from short sales that are outside of the expense cap arrangement (See Note 3 of the Notes to Financial Statements).
3
Table of Contents
MFS Core Equity Series
PORTFOLIO OF INVESTMENTS – 6/30/11 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 98.5% | ||||||||
Aerospace – 2.9% | ||||||||
Boeing Co. | 2,370 | $ | 175,203 | |||||
Goodrich Corp. | 2,480 | 236,840 | ||||||
Honeywell International, Inc. | 7,900 | 470,761 | ||||||
Precision Castparts Corp. | 1,900 | 312,835 | ||||||
Textron, Inc. | 7,490 | 176,839 | ||||||
United Technologies Corp. | 6,760 | 598,328 | ||||||
|
| |||||||
$ | 1,970,806 | |||||||
|
| |||||||
Apparel Manufacturers – 0.6% | ||||||||
NIKE, Inc., “B” | 3,280 | $ | 295,134 | |||||
Phillips-Van Heusen Corp. | 1,830 | 119,810 | ||||||
|
| |||||||
$ | 414,944 | |||||||
|
| |||||||
Automotive – 0.8% | ||||||||
General Motors Co. (a) | 13,130 | $ | 398,627 | |||||
Magna International, Inc. | 2,670 | 144,287 | ||||||
|
| |||||||
$ | 542,914 | |||||||
|
| |||||||
Biotechnology – 1.8% | ||||||||
Amgen, Inc. (a) | 12,540 | $ | 731,709 | |||||
Anacor Pharmaceuticals, Inc. (a) | 14,460 | 93,412 | ||||||
Gilead Sciences, Inc. (a) | 9,420 | 390,082 | ||||||
|
| |||||||
$ | 1,215,203 | |||||||
|
| |||||||
Broadcasting – 1.8% | ||||||||
Viacom, Inc., “B” | 9,750 | $ | 497,250 | |||||
Walt Disney Co. | 17,680 | 690,227 | ||||||
|
| |||||||
$ | 1,187,477 | |||||||
|
| |||||||
Brokerage & Asset Managers – 1.3% | ||||||||
Affiliated Managers Group, Inc. (a) | 1,290 | $ | 130,871 | |||||
Blackrock, Inc. | 412 | 79,026 | ||||||
Charles Schwab Corp. | 8,250 | 135,713 | ||||||
CME Group, Inc. | 530 | 154,543 | ||||||
Cowen Group, Inc. “A” (a) | 8,612 | 32,381 | ||||||
Franklin Resources, Inc. | 1,650 | 216,629 | ||||||
GFI Group, Inc. | 21,380 | 98,134 | ||||||
|
| |||||||
$ | 847,297 | |||||||
|
| |||||||
Business Services – 1.6% | ||||||||
Accenture PLC, “A” | 4,480 | $ | 270,682 | |||||
FleetCor Technologies, Inc. (a) | 11,630 | 344,713 | ||||||
Jones Lang LaSalle, Inc. | 1,650 | 155,595 | ||||||
Paychex, Inc. | 10,740 | 329,933 | ||||||
|
| |||||||
$ | 1,100,923 | |||||||
|
| |||||||
Cable TV – 1.3% | ||||||||
Comcast Corp., “Special A” | 18,590 | $ | 450,436 | |||||
DIRECTV, “A” (a) | 7,760 | 394,363 | ||||||
|
| |||||||
$ | 844,799 | |||||||
|
| |||||||
Chemicals – 2.0% | ||||||||
Celanese Corp. | 15,270 | $ | 814,044 | |||||
Ecolab, Inc. | 3,480 | 196,202 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Chemicals – continued | ||||||||
Monsanto Co. | 4,800 | $ | 348,192 | |||||
|
| |||||||
$ | 1,358,438 | |||||||
|
| |||||||
Computer Software – 4.3% | ||||||||
Autodesk, Inc. (a) | 11,720 | $ | 452,392 | |||||
Check Point Software Technologies Ltd. (a) | 7,170 | 407,615 | ||||||
Nuance Communications, Inc. (a) | 4,710 | 101,124 | ||||||
Oracle Corp. | 30,180 | 993,224 | ||||||
Red Hat, Inc. (a) | 8,970 | 411,723 | ||||||
Symantec Corp. (a) | 10,950 | 215,934 | ||||||
VeriSign, Inc. | 8,260 | 276,380 | ||||||
|
| |||||||
$ | 2,858,392 | |||||||
|
| |||||||
Computer Software – Systems – 6.7% | ||||||||
Apple, Inc. (a) | 6,700 | $ | 2,248,989 | |||||
EMC Corp. (a) | 34,950 | 962,873 | ||||||
International Business Machines Corp. | 5,990 | 1,027,585 | ||||||
NICE Systems Ltd., ADR (a) | 6,420 | 233,431 | ||||||
|
| |||||||
$ | 4,472,878 | |||||||
|
| |||||||
Construction – 0.5% | ||||||||
Lennox International, Inc. | 3,460 | $ | 149,022 | |||||
Owens Corning (a) | 5,720 | 213,642 | ||||||
|
| |||||||
$ | 362,664 | |||||||
|
| |||||||
Consumer Products – 1.3% | ||||||||
Avon Products, Inc. | 24,370 | $ | 682,360 | |||||
Newell Rubbermaid, Inc. | 11,940 | 188,413 | ||||||
|
| |||||||
$ | 870,773 | |||||||
|
| |||||||
Consumer Services – 0.5% | ||||||||
DeVry, Inc. | 1,990 | $ | 117,669 | |||||
Priceline.com, Inc. (a) | 420 | 215,011 | ||||||
|
| |||||||
$ | 332,680 | |||||||
|
| |||||||
Electrical Equipment – 2.2% | ||||||||
Danaher Corp. | 20,930 | $ | 1,109,081 | |||||
Sensata Technologies Holding B.V. (a) | 9,540 | 359,181 | ||||||
|
| |||||||
$ | 1,468,262 | |||||||
|
| |||||||
Electronics – 2.4% | ||||||||
Advanced Micro Devices, Inc. (a) | 70,491 | $ | 492,732 | |||||
First Solar, Inc. (a)(l) | 3,170 | 419,296 | ||||||
Hittite Microwave Corp. (a) | 1,200 | 74,292 | ||||||
Linear Technology Corp. | 4,220 | 139,344 | ||||||
Microchip Technology, Inc. | 11,090 | 420,422 | ||||||
Oclaro, Inc. (a) | 4,960 | 33,331 | ||||||
|
| |||||||
$ | 1,579,417 | �� | ||||||
|
| |||||||
Energy – Independent – 3.3% | ||||||||
Apache Corp. | 3,560 | $ | 439,268 | |||||
Arch Coal, Inc. | 3,480 | 92,777 | ||||||
Canadian Natural Resources Ltd. | 2,340 | 98,093 | ||||||
CONSOL Energy, Inc. | 1,390 | 67,387 |
4
Table of Contents
MFS Core Equity Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Energy – Integrated – continued | ||||||||
EOG Resources, Inc. | 3,740 | $ | 391,017 | |||||
Newfield Exploration Co. (a) | 3,100 | 210,862 | ||||||
Occidental Petroleum Corp. | 7,390 | 768,856 | ||||||
Peabody Energy Corp. | 1,590 | 93,667 | ||||||
Walter Energy, Inc. | 660 | 76,428 | ||||||
$ | 2,238,355 | |||||||
Energy – Integrated – 5.6% | ||||||||
Chevron Corp. | 10,920 | $ | 1,123,013 | |||||
EQT Corp. | 2,550 | 133,926 | ||||||
Exxon Mobil Corp. (s) | 25,040 | 2,037,755 | ||||||
Marathon Oil Corp. | 5,370 | 282,892 | ||||||
QEP Resources, Inc. | 4,740 | 198,274 | ||||||
$ | 3,775,860 | |||||||
Engineering – Construction – 1.7% | ||||||||
Fluor Corp. | 17,870 | $ | 1,155,474 | |||||
Food & Beverages – 3.4% | ||||||||
Bunge Ltd. | 1,950 | $ | 134,453 | |||||
Coca-Cola Co. | 6,410 | 431,329 | ||||||
General Mills, Inc. | 16,730 | 622,691 | ||||||
Mead Johnson Nutrition Co., “A” | 5,200 | 351,260 | ||||||
PepsiCo, Inc. (s) | 10,880 | 766,278 | ||||||
$ | 2,306,011 | |||||||
Food & Drug Stores – 0.9% | ||||||||
CVS Caremark Corp. | 11,500 | $ | 432,170 | |||||
Whole Foods Market, Inc. | 2,900 | 184,005 | ||||||
$ | 616,175 | |||||||
Gaming & Lodging – 0.9% | ||||||||
Carnival Corp. | 5,460 | $ | 205,460 | |||||
Las Vegas Sands Corp. (a) | 5,120 | 216,115 | ||||||
Marriott International, Inc., “A” | 5,480 | 194,485 | ||||||
$ | 616,060 | |||||||
General Merchandise – 2.3% | ||||||||
Kohl’s Corp. | 11,250 | $ | 562,613 | |||||
Target Corp. | 20,230 | 948,989 | ||||||
$ | 1,511,602 | |||||||
Health Maintenance Organizations – 1.1% | ||||||||
Aetna, Inc. | 3,430 | $ | 151,229 | |||||
WellPoint, Inc. | 7,080 | 557,692 | ||||||
$ | 708,921 | |||||||
Insurance �� 4.0% | ||||||||
ACE Ltd. | 13,770 | $ | 906,341 | |||||
Aflac, Inc. | 1,290 | 60,217 | ||||||
Allied World Assurance Co. | 1,720 | 99,038 | ||||||
Aon Corp. | 10,400 | 533,520 | ||||||
Chubb Corp. | 4,580 | 286,754 | ||||||
MetLife, Inc. | 8,520 | 373,772 | ||||||
Prudential Financial, Inc. | 3,770 | 239,734 | ||||||
Willis Group Holdings PLC | 4,090 | 168,140 | ||||||
$ | 2,667,516 | |||||||
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Internet – 1.0% | ||||||||
Google, Inc., “A” (a) | 1,330 | $ | 673,485 | |||||
Leisure & Toys – 0.1% | ||||||||
Mattel, Inc. | 2,620 | $ | 72,024 | |||||
Machinery & Tools – 1.1% | ||||||||
Finning International, Inc. | 8,110 | $ | 240,496 | |||||
Regal Beloit Corp. | 2,680 | 178,944 | ||||||
Thermon Group Holdings, Inc. (a) | 8,570 | 102,840 | ||||||
WABCO Holdings, Inc. (a) | 2,710 | 187,153 | ||||||
$ | 709,433 | |||||||
Major Banks – 4.8% | ||||||||
Bank of America Corp. | 53,140 | $ | 582,414 | |||||
Bank of New York Mellon Corp. | 9,148 | 234,372 | ||||||
Comerica, Inc. | 3,920 | 135,514 | ||||||
Goldman Sachs Group, Inc. | 4,680 | 622,861 | ||||||
JPMorgan Chase & Co. (s) | 26,770 | 1,095,964 | ||||||
KeyCorp | 28,810 | 239,987 | ||||||
SunTrust Banks, Inc. | 11,450 | 295,410 | ||||||
$ | 3,206,522 | |||||||
Medical & Health Technology & Services – 1.5% | ||||||||
AmerisourceBergen Corp. | 5,500 | $ | 227,700 | |||||
Cross Country Healthcare, Inc. (a) | 39,470 | 299,972 | ||||||
Henry Schein, Inc. (a) | 1,470 | 105,237 | ||||||
Medco Health Solutions, Inc. (a) | 5,150 | 291,078 | ||||||
Quest Diagnostics, Inc. | 1,810 | 106,971 | ||||||
$ | 1,030,958 | |||||||
Medical Equipment – 2.8% | ||||||||
Becton, Dickinson & Co. | 3,150 | $ | 271,436 | |||||
Covidien PLC | 4,320 | 229,954 | ||||||
Medtronic, Inc. | 10,700 | 412,271 | ||||||
NxStage Medical, Inc. (a) | 17,678 | 368,056 | ||||||
NxStage Medical, Inc. (a) | 4,850 | 100,977 | ||||||
St. Jude Medical, Inc. | 4,040 | 192,627 | ||||||
Thermo Fisher Scientific, Inc. (a) | 4,710 | 303,277 | ||||||
$ | 1,878,598 | |||||||
Metals & Mining – 1.0% | ||||||||
Cliffs Natural Resources, Inc. | 3,600 | $ | 332,820 | |||||
Teck Resources Ltd., “B” | 6,604 | 335,661 | ||||||
$ | 668,481 | |||||||
Natural Gas – Distribution – 0.4% | ||||||||
AGL Resources, Inc. | 6,120 | $ | 249,145 | |||||
Natural Gas – Pipeline – 0.4% | ||||||||
Kinder Morgan, Inc. | 9,740 | $ | 279,830 | |||||
Network & Telecom – 0.9% | ||||||||
Cisco Systems, Inc. | 8,440 | $ | 131,748 | |||||
F5 Networks, Inc. (a) | 2,860 | 315,315 | ||||||
Finisar Corp. (a) | 10,030 | 180,841 | ||||||
$ | 627,904 | |||||||
5
Table of Contents
MFS Core Equity Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Oil Services – 2.5% | ||||||||
Cameron International Corp. (a) | 9,040 | $ | 454,622 | |||||
Dresser-Rand Group, Inc. (a) | 2,530 | 135,988 | ||||||
Halliburton Co. | 11,050 | 563,550 | ||||||
Schlumberger Ltd. | 6,090 | 526,176 | ||||||
|
| |||||||
$ | 1,680,336 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 3.2% | ||||||||
American Express Co. | 2,540 | $ | 131,318 | |||||
Citigroup, Inc. | 12,434 | 517,752 | ||||||
Discover Financial Services | 3,670 | 98,173 | ||||||
EuroDekania Ltd. (a)(z) | 50,820 | 130,586 | ||||||
TCF Financial Corp. | 20,750 | 286,350 | ||||||
Visa, Inc., “A” | 6,120 | 515,671 | ||||||
Wintrust Financial Corp. | 4,810 | 154,786 | ||||||
Zions Bancorporation | 13,600 | 326,536 | ||||||
|
| |||||||
$ | 2,161,172 | |||||||
|
| |||||||
Pharmaceuticals – 4.8% | ||||||||
Abbott Laboratories | 23,990 | $ | 1,262,354 | |||||
Hospira, Inc. (a) | 4,570 | 258,936 | ||||||
Johnson & Johnson | 9,940 | 661,209 | ||||||
Pfizer, Inc. | 32,039 | 660,003 | ||||||
Teva Pharmaceutical Industries Ltd., ADR | 8,230 | 396,851 | ||||||
|
| |||||||
$ | 3,239,353 | |||||||
|
| |||||||
Pollution Control – 0.4% | ||||||||
Republic Services, Inc. | 9,700 | $ | 299,245 | |||||
|
| |||||||
Precious Metals & Minerals – 0.2% | ||||||||
Goldcorp, Inc. | 2,490 | $ | 120,192 | |||||
|
| |||||||
Printing & Publishing – 0.6% | ||||||||
Moody’s Corp. | 9,810 | $ | 376,214 | |||||
|
| |||||||
Railroad & Shipping – 1.2% | ||||||||
CSX Corp. | 15,480 | $ | 405,886 | |||||
Kansas City Southern Co. (a) | 6,430 | 381,492 | ||||||
|
| |||||||
$ | 787,378 | |||||||
|
| |||||||
Real Estate – 2.6% | ||||||||
Annaly Mortgage Management, Inc., REIT | 18,290 | $ | 329,952 | |||||
Cogdell Spencer, Inc., REIT | 22,650 | 135,674 | ||||||
Entertainment Properties Trust, REIT | 14,740 | 688,358 | ||||||
Kilroy Realty Corp., REIT | 7,430 | 293,411 | ||||||
Mack-Cali Realty Corp., REIT | 8,430 | 277,684 | ||||||
|
| |||||||
$ | 1,725,079 | |||||||
|
| |||||||
Restaurants – 1.3% | ||||||||
McDonald’s Corp. | 10,240 | $ | 863,437 | |||||
|
| |||||||
Specialty Chemicals – 1.6% | ||||||||
Airgas, Inc. | 9,450 | $ | 661,878 | |||||
Valspar Corp. | 4,280 | 154,337 | ||||||
W. R. Grace & Co. (a) | 5,630 | 256,897 | ||||||
|
| |||||||
$ | 1,073,112 | |||||||
|
| |||||||
Specialty Stores – 2.3% | ||||||||
Abercrombie & Fitch Co., “A” | 2,780 | $ | 186,038 | |||||
Amazon.com, Inc. (a) | 2,650 | 541,899 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Specialty Stores – continued | ||||||||
Dick’s Sporting Goods, Inc. (a) | 3,180 | $ | 122,271 | |||||
PetSmart, Inc. | 4,710 | 213,693 | ||||||
Tiffany & Co. | 4,360 | 342,347 | ||||||
Urban Outfitters, Inc. (a) | 6,040 | 170,026 | ||||||
|
| |||||||
$ | 1,576,274 | |||||||
|
| |||||||
Telecommunications – Wireless – 0.3% | ||||||||
SBA Communications Corp. (a) | 4,900 | $ | 187,131 | |||||
|
| |||||||
Telephone Services – 2.5% | ||||||||
American Tower Corp., “A” (a) | 6,640 | $ | 347,471 | |||||
AT&T, Inc. | 24,140 | 758,237 | ||||||
CenturyLink, Inc. | 4,982 | 201,422 | ||||||
Verizon Communications, Inc. | 9,700 | 361,131 | ||||||
|
| |||||||
$ | 1,668,261 | |||||||
|
| |||||||
Tobacco – 2.7% | ||||||||
Altria Group, Inc. | 28,590 | $ | 755,062 | |||||
Philip Morris International, Inc. | 10,930 | 729,796 | ||||||
Reynolds American, Inc. | 8,490 | 314,555 | ||||||
|
| |||||||
$ | 1,799,413 | |||||||
|
| |||||||
Trucking – 1.0% | ||||||||
Atlas Air Worldwide Holdings, Inc. (a) | 2,860 | $ | 170,199 | |||||
Expeditors International of Washington, Inc. | 6,080 | 311,235 | ||||||
Swift Transportation Co. (a) | 14,480 | 196,204 | ||||||
|
| |||||||
$ | 677,638 | |||||||
|
| |||||||
Utilities – Electric Power – 2.1% | ||||||||
American Electric Power Co., Inc. | 8,640 | $ | 325,555 | |||||
Calpine Corp. (a) | 7,230 | 116,620 | ||||||
CMS Energy Corp. | 13,350 | 262,862 | ||||||
PG&E Corp. | 5,130 | 215,614 | ||||||
Public Service Enterprise Group, Inc. | 8,200 | 267,648 | ||||||
Wisconsin Energy Corp. | 7,690 | 241,082 | ||||||
|
| |||||||
$ | 1,429,381 | |||||||
|
| |||||||
Total Common Stocks (Identified Cost, $59,463,204) | $ | 66,083,837 | ||||||
|
| |||||||
CONVERTIBLE PREFERRED STOCKS – 0.6% | ||||||||
Utilities – Electric Power – 0.6% | ||||||||
PPL Corp., 8.75% | 3,270 | $ | 179,556 | |||||
PPL Corp., 9.5% | 3,660 | 204,594 | ||||||
|
| |||||||
Total Convertible Preferred Stocks (Identified Cost, $352,234) | $ | 384,150 | ||||||
|
| |||||||
Issuer/Expiration Date/ Strike Price | Number of Contracts | |||||||
CALL OPTIONS PURCHASED – 0.0% | ||||||||
Construction – 0.0% | ||||||||
Lennar Corp., “A” – August 2011 @ $20 | 42 | $ | 1,008 | |||||
|
| |||||||
Network & Telecom – 0.0% | ||||||||
Finisar Corp. – July 2011 @ $26 | 48 | $ | 240 | |||||
|
| |||||||
Total Call Options Purchased (Premium Paid, $4,422) | $ | 1,248 | ||||||
|
|
6
Table of Contents
MFS Core Equity Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
MONEY MARKET FUNDS (v) – 0.8% | ||||||||
MFS Institutional Money Market Portfolio, 0.1%, at Cost and Net Asset Value | 523,893 | $ | 523,893 | |||||
|
| |||||||
COLLATERAL FOR SECURITIES LOANED – 0.5% | ||||||||
Navigator Securities Lending Prime Portfolio, 0.23%, at Cost and Net Asset Value (j) | 306,027 | $ | 306,027 | |||||
|
| |||||||
Total Investments (Identified Cost, $60,649,780) | $ | 67,299,155 | ||||||
|
|
Issuer/Expiration Date/ Strike Price | Number of Contracts | Value ($) | ||||||
PUT OPTIONS WRITTEN – 0.0% | ||||||||
Construction – 0.0% | ||||||||
Lennar Corp., “A” – August 2011 @ $16 | (42 | ) | $ | (924 | ) | |||
|
| |||||||
Network & Telecom – 0.0% | ||||||||
Finisar Corp. – July 2011 @ $18 | (48 | ) | $ | (3,360 | ) | |||
|
| |||||||
Total Put Options Written (Premium Received, $4,956) | $ | (4,284 | ) | |||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – (0.4)% | (239,344 | ) | ||||||
|
| |||||||
Net Assets – 100.0% | $ | 67,055,527 | ||||||
|
|
(a) | Non-income producing security. |
(j) | The rate quoted is the annualized seven-day yield of the portfolio at period end. |
(l) | A portion of this security is on loan. |
(s) | Security or a portion of the security was pledged to cover collateral requirements for written options. At June 30, 2011, the value of securities pledged amounted to $555,751. |
(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 fund holds the following restricted securities: |
Restricted Securities | Acquisition Date | Cost | Value | |||||||
EuroDekania Ltd. | 6/25/07 | $737,167 | $130,586 | |||||||
% of Net Assets | 0.2% |
The following abbreviations are used in this report and are defined:
ADR | American Depository Receipt |
PLC | Public Limited Company |
REIT | Real Estate Investment Trust |
See Notes to Financial Statements
7
Table of Contents
MFS Core Equity Series
FINANCIAL STATEMENTS | STATEMENT OF ASSETS AND LIABILITIES (unaudited)
This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
At 6/30/11 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $60,125,887) | $66,775,262 | |||||||
Underlying affiliated funds, at cost and value | 523,893 | |||||||
Total investments, at value, including $306,073 of securities on loan (identified cost, $60,649,780) | $67,299,155 | |||||||
Cash | 5,476 | |||||||
Restricted cash | 381 | |||||||
Receivables for | ||||||||
Investments sold | 265,501 | |||||||
Fund shares sold | 117,032 | |||||||
Interest and dividends | 94,283 | |||||||
Receivable from investment adviser | 3,099 | |||||||
Other assets | 443 | |||||||
Total assets | $67,785,370 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Investments purchased | $262,933 | |||||||
Fund shares reacquired | 99,099 | |||||||
Written options outstanding, at value (premiums received, $4,956) | 4,284 | |||||||
Collateral for securities loaned, at value | 306,027 | |||||||
Payable to affiliates | ||||||||
Shareholder servicing costs | 133 | |||||||
Distribution and/or service fees | 56 | |||||||
Payable for independent Trustees’ compensation | 465 | |||||||
Accrued expenses and other liabilities | 56,846 | |||||||
Total liabilities | $729,843 | |||||||
Net assets | $67,055,527 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $81,625,335 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 6,650,072 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency transactions | (22,080,558 | ) | ||||||
Undistributed net investment income | 860,678 | |||||||
Net assets | $67,055,527 | |||||||
Shares of beneficial interest outstanding | 4,073,091 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $62,932,065 | 3,821,397 | $16.47 | |||||||||
Service Class | 4,123,462 | 251,694 | 16.38 |
See Notes to Financial Statements
8
Table of Contents
MFS Core Equity Series
FINANCIAL STATEMENTS | STATEMENT OF OPERATIONS (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
Six months ended 6/30/11 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $588,123 | |||||||
Interest | 4,827 | |||||||
Dividends from underlying affiliated funds | 420 | |||||||
Foreign taxes withheld | (2,273 | ) | ||||||
Total investment income | $591,097 | |||||||
Expenses | ||||||||
Management fee | $253,659 | |||||||
Distribution and/or service fees | 5,341 | |||||||
Shareholder servicing costs | 4,048 | |||||||
Administrative services fee | 9,979 | |||||||
Independent Trustees’ compensation | 1,652 | |||||||
Custodian fee | 10,375 | |||||||
Shareholder communications | 19,658 | |||||||
Auditing fees | 24,594 | |||||||
Legal fees | 577 | |||||||
Dividend and interest expense on securities sold short | 2,755 | |||||||
Miscellaneous | 6,009 | |||||||
Total expenses | $338,647 | |||||||
Reduction of expenses by investment adviser | (25,679 | ) | ||||||
Net expenses | $312,968 | |||||||
Net investment income | $278,129 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency transactions | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investment transactions | $3,385,822 | |||||||
Securities sold short | (253,835 | ) | ||||||
Foreign currency transactions | (154 | ) | ||||||
Net realized gain (loss) on investments and foreign currency transactions | $3,131,833 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $(78,919 | ) | ||||||
Written options | 672 | |||||||
Securities sold short | 172,898 | |||||||
Translation of assets and liabilities in foreign currencies | 8 | |||||||
Net unrealized gain (loss) on investments and foreign currency translation | $94,659 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $3,226,492 | |||||||
Change in net assets from operations | $3,504,621 |
See Notes to Financial Statements
9
Table of Contents
MFS Core Equity Series
FINANCIAL STATEMENTS | STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
| Six months ended 6/30/11 (unaudited | ) | | Year ended 12/31/10 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $278,129 | $583,252 | ||||||
Net realized gain (loss) on investments and foreign currency transactions | 3,131,833 | 4,789,711 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 94,659 | 4,765,002 | ||||||
Change in net assets from operations | $3,504,621 | $10,137,965 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(705,029 | ) | |||||
Change in net assets from fund share transactions | $(3,673,912 | ) | $(8,847,188 | ) | ||||
Total change in net assets | $(169,291 | ) | $585,748 | |||||
Net assets | ||||||||
At beginning of period | 67,224,818 | 66,639,070 | ||||||
At end of period (including undistributed net investment income of $860,678 and | $67,055,527 | $67,224,818 |
See Notes to Financial Statements
10
Table of Contents
MFS Core Equity Series
FINANCIAL STATEMENTS | FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund’s financial performance for the semiannual period and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
Initial Class | Six months ended 6/30/11 | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $15.65 | $13.49 | $10.38 | $17.18 | $15.51 | $13.69 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.07 | $0.13 | $0.14 | $0.16 | $0.09 | $0.05 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 0.75 | 2.18 | 3.16 | (6.85 | ) | 1.64 | 1.83 | |||||||||||||||||
Total from investment operations | $0.82 | $2.31 | $3.30 | $(6.69 | ) | $1.73 | $1.88 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.15 | ) | $(0.19 | ) | $(0.11 | ) | $(0.06 | ) | $(0.06 | ) | |||||||||||||
Net asset value, end of period | $16.47 | $15.65 | $13.49 | $10.38 | $17.18 | $15.51 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 5.24 | (n) | 17.21 | 32.43 | (39.15 | ) | 11.15 | 13.80 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.99 | (a) | 1.01 | 1.01 | 0.95 | 1.03 | 0.92 | |||||||||||||||||
Expenses after expense reductions (f) | 0.91 | (a) | 0.91 | 0.90 | 0.90 | 0.90 | 0.90 | |||||||||||||||||
Net investment income | 0.84 | (a) | 0.93 | 1.20 | 1.13 | 0.53 | 0.35 | |||||||||||||||||
Portfolio turnover | 31 | 69 | 90 | 109 | 151 | 89 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $62,932 | $62,602 | $61,856 | $54,049 | $115,251 | $131,259 | ||||||||||||||||||
Supplemental Ratios (%): | ||||||||||||||||||||||||
Ratio of expenses to average net assets after expense | 0.90 | (a) | 0.90 | 0.90 | N/A | N/A | N/A |
See Notes to Financial Statements
11
Table of Contents
MFS Core Equity Series
Financial Highlights – continued
Service Class | Six months ended 6/30/11 | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $15.59 | $13.45 | $10.32 | $17.07 | $15.41 | $13.60 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.05 | $0.09 | $0.11 | $0.12 | $0.04 | $0.01 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.74 | 2.17 | 3.17 | (6.81 | ) | 1.63 | 1.82 | |||||||||||||||||
Total from investment operations | $0.79 | $2.26 | $3.28 | $(6.69 | ) | $1.67 | $1.83 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.12 | ) | $(0.15 | ) | $(0.06 | ) | $(0.01 | ) | $(0.02 | ) | |||||||||||||
Net asset value, end of period | $16.38 | $15.59 | $13.45 | $10.32 | $17.07 | $15.41 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 5.07 | (n) | 16.86 | 32.24 | (39.32 | ) | 10.87 | 13.50 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.23 | (a) | 1.26 | 1.26 | 1.20 | 1.27 | 1.17 | |||||||||||||||||
Expenses after expense reductions (f) | 1.16 | (a) | 1.16 | 1.15 | 1.15 | 1.15 | 1.15 | |||||||||||||||||
Net investment income | 0.59 | (a) | 0.67 | 0.95 | 0.87 | 0.25 | 0.10 | |||||||||||||||||
Portfolio turnover | 31 | 69 | 90 | 109 | 151 | 89 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $4,123 | $4,623 | $4,783 | $4,571 | $9,288 | $14,740 | ||||||||||||||||||
Supplemental Ratios (%): | ||||||||||||||||||||||||
Ratio of expenses to average net assets after expense | 1.15 | (a) | 1.15 | 1.15 | N/A | N/A | N/A |
(a) | Annualized. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(k) | The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown. |
(n) | Not annualized. |
(r) | Certain expenses have been reduced without which performance would have been lower. |
(s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. Excluding the effect of the proceeds received from a non-recurring litigation settlement against Enron Corp., the Initial Class and Service Class total returns for the year ended December 31, 2008 would have each been lower by approximately 0.87%. |
See Notes to Financial Statements
12
Table of Contents
MFS Core Equity Series
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) | Business and Organization |
MFS Core Equity Series (the fund) is a series of MFS Variable Insurance Trust (the trust). The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The shareholders of each series of the trust are separate accounts of insurance companies, which offer variable annuity and/or life insurance products, and qualified retirement and pension plans.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued. The fund invests in foreign securities. Investments in foreign securities are vulnerable to the effects of changes in the relative values of the local currency and the U.S. dollar and to the effects of changes in each country’s legal, political, and economic environment.
Investment Valuations – 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. 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. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. Values obtained from third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the
13
Table of Contents
MFS Core Equity Series
Notes to Financial Statements (unaudited) – continued
fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. Other financial instruments are derivative instruments not reflected in total investments, such as written options. The following is a summary of the levels used as of June 30, 2011 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $64,260,807 | $101,217 | $— | $64,362,024 | ||||||||||||
Israel | 1,037,896 | — | — | 1,037,896 | ||||||||||||
Canada | 938,729 | — | — | 938,729 | ||||||||||||
United Kingdom | — | — | 130,586 | 130,586 | ||||||||||||
Mutual Funds | 829,920 | — | — | 829,920 | ||||||||||||
Total Investments | $67,067,352 | $101,217 | $130,586 | $67,299,155 | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Written Options | $(4,284 | ) | $— | $— | $(4,284 | ) |
For further information regarding security characteristics, see the Portfolio of Investments.
The following is a reconciliation of level 3 assets for which significant unobservable inputs were used to determine fair value. The fund’s policy is to recognize transfers between the levels as of the end of the period. The table presents the activity of level 3 securities held at the beginning and the end of the period.
Equity Securities | ||||
Balance as of 12/31/10 | $78,293 | |||
Change in unrealized appreciation (depreciation) | 52,293 | |||
Balance as of 6/30/11 | $130,586 |
The net change in unrealized appreciation (depreciation) from investments still held as level 3 at June 30, 2011 is $52,293.
Foreign Currency Translation – Purchases and sales of foreign investments, income, and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions or on the reporting date for foreign denominated receivables and payables. Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Gains and losses attributable to foreign exchange rate movements on receivables, payables, income and expenses are recorded for financial statement purposes as foreign currency transaction gains and losses. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.
Derivatives – The fund uses derivatives for different purposes, including to earn income and enhance returns, to increase or decrease exposure to a particular market, to manage or adjust the risk profile of the fund, or as alternatives to direct investments. Derivatives are used for hedging or non-hedging purposes. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. When the fund uses derivatives as an investment to increase market exposure, or for hedging purposes, gains and losses from derivative instruments may be substantially greater than the derivative’s original cost.
The derivative instruments used by the fund were written options and purchased options. The fund’s period end derivatives, as presented in the Portfolio of Investments generally are indicative of the volume of its derivative activity during the period.
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MFS Core Equity Series
Notes to Financial Statements (unaudited) – continued
The following table presents, by major type of derivative contract, the fair value, on a gross basis, of the asset and liability components of derivatives held by the fund at June 30, 2011 as reported in the Statement of Assets and Liabilities:
Fair Value (a) | ||||||||||
Risk | Derivative Contracts | Asset Derivatives | Liability Derivatives | |||||||
Equity | Purchased Equity Options | $1,248 | $— | |||||||
Equity | Written Equity Options | — | (4,284 | ) | ||||||
Total | $1,248 | $(4,284 | ) |
(a) | The value of purchased options outstanding is included in total investments, at value, within the fund’s Statement of Assets and Liabilities. |
The following table presents, by major type of derivative contract, the realized gain (loss) on derivatives held by the fund for the six months ended June 30, 2011 as reported in the Statement of Operations:
Risk | Investment Transactions (Purchased Options) | |||
Equity | $(10,337 | ) |
The following table presents, by major type of derivative contract, the change in unrealized appreciation (depreciation) on derivatives held by the fund for the six months ended June 30, 2011 as reported in the Statement of Operations:
Risk | Investments (Purchased Options) | Written Options | ||||||
Equity | $(3,174 | ) | $672 |
Derivative counterparty credit risk is managed through formal evaluation of the creditworthiness of all potential counterparties. On certain over-the-counter derivatives, the fund attempts to reduce its exposure to counterparty credit risk whenever possible by entering into an International Swaps and Derivatives Association (ISDA) Master Agreement on a bilateral basis with each of the counterparties with whom it undertakes a significant volume of transactions. The ISDA Master Agreement gives each party to the agreement the right to terminate all transactions traded under such agreement if there is a certain deterioration in the credit quality of the other party. The ISDA Master Agreement gives the fund the right, upon an event of default by the applicable counterparty or a termination of the agreement, to close out all transactions traded under such agreement and to net amounts owed under each transaction to one net amount payable by one party to the other. This right to close out and net payments across all transactions traded under the ISDA Master Agreement could result in a reduction of the fund’s credit risk to such counterparty equal to any amounts payable by the fund under the applicable transactions, if any. However, absent an event of default by the counterparty or a termination of the agreement, the ISDA Master Agreement does not result in an offset of reported amounts of assets and liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty.
Collateral requirements differ by type of derivative. Collateral or margin requirements are set by the broker or exchange clearing house for exchange traded derivatives (i.e., futures and exchange-traded options) while collateral terms are contract specific for over-the-counter traded derivatives (i.e., forward foreign currency exchange contracts, swaps and over-the-counter options). For derivatives traded under an ISDA Master Agreement, the collateral requirements are netted across all transactions traded under such agreement and one amount is posted from one party to the other to collateralize such obligations. Cash collateral that has been pledged to cover obligations of the fund under derivative contracts, if any, will be reported separately on the Statement of Assets and Liabilities as restricted cash. Securities collateral pledged for the same purpose, if any, is noted in the Portfolio of Investments.
Written Options – In exchange for a premium, the fund wrote put options on securities that it anticipated the price would increase. At the time the option was written, the fund believed the premium received exceeded the potential loss that could result from adverse price changes in the options’ underlying securities. In a written option, the fund as the option writer grants the buyer the right to purchase from, or sell to, the fund a specified number of shares or units of a particular security, currency or index at a specified price within a specified period of time.
The premium received is initially recorded as a liability on the Statement of Assets and Liabilities. The option is subsequently marked-to-market daily with the difference between the premium received and the market value of the written option being recorded as unrealized appreciation or depreciation. When a written option expires, the fund realizes a gain equal to the amount of the premium received. The difference between the premium received and the amount paid on effecting a closing transaction is considered a realized gain or loss. When a written put option is exercised, the premium reduces the cost basis of the security purchased by the fund.
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MFS Core Equity Series
Notes to Financial Statements (unaudited) – continued
At the initiation of the written option contract, for exchange traded options, the fund is required to deposit securities or cash as collateral with the custodian for the benefit of the broker. For over-the-counter options, the fund may post collateral subject to the terms of an ISDA Master Agreement as generally described above if the market value of the options contract moves against it. The fund, as writer of an option, may have no control over whether the underlying securities may be sold (call) or purchased (put) and, as a result, bears the market risk of an unfavorable change in the price of the securities underlying the written option. Losses from writing options can exceed the premium received and can exceed the potential loss from an ordinary buy and sell transaction. Although the fund’s market risk may be significant, the maximum counterparty credit risk to the fund is equal to the market value of any collateral posted to the broker. For over-the-counter options, this risk is mitigated in cases where there is an ISDA Master Agreement between the fund and the counterparty providing for netting as described above.
Number of Contracts | Premiums Received | |||||||
Outstanding, beginning of period | — | $— | ||||||
Options written | 90 | 4,956 | ||||||
Options closed | — | — | ||||||
Options exercised | — | — | ||||||
Options expired | — | — | ||||||
Outstanding, end of period | 90 | $4,956 |
Purchased Options – The fund purchased call and put options for a premium. Purchased call and put options entitle the holder to buy and sell a specified number of shares or units of a particular security, currency or index at a specified price at a specified date or within a specified period of time. Purchasing call options may be used to hedge against an anticipated increase in the dollar cost of securities or currency to be acquired or to increase the fund’s exposure to an underlying instrument. Purchasing put options may hedge against a decline in the value of portfolio securities or currency.
The premium paid is initially recorded as an investment in the Statement of Assets and Liabilities. That investment is subsequently marked-to-market daily with the difference between the premium paid and the market value of the purchased option being recorded as unrealized appreciation or depreciation. Premiums paid for purchased call and put options which have expired are treated as realized losses on investments in the Statement of Operations. Upon the exercise or closing of a purchased call option, the premium paid is added to the cost of the security or financial instrument. Upon the exercise or closing of a purchased put option, the premium paid is offset against the proceeds on the sale of the underlying security or financial instrument in order to determine the realized gain or loss on investments.
The risk in purchasing an option is that the fund pays a premium whether or not the option is exercised. The fund’s maximum risk of loss due to counterparty credit risk is limited to the market value of the option. For over-the-counter options, this risk is mitigated in cases where there is an ISDA Master Agreement between the fund and the counterparty providing for netting as described above and for posting of collateral by the counterparty to the fund to cover the fund’s exposure to the counterparty under such ISDA Master Agreement.
Short Sales – The fund entered into short sales whereby it sells a security it does not own in anticipation of a decline in the value of that security. The fund will realize a gain if the security price decreases and a loss if the security price increases between the date of the short sale and the date on which the fund replaces the borrowed security. Losses from short sales can exceed the proceeds of the security sold; and they can also exceed the potential loss from an ordinary buy and sell transaction. The amount of any premium, dividends, or interest the fund may be required to pay in connection with a short sale will be recognized as a fund expense. During the six months ended June 30, 2011, this expense amounted to $2,755. The fund segregates cash or marketable securities in an amount that, when combined with the amount of proceeds from the short sale deposited with the broker, at least equals the current market value of the security sold short. At June 30, 2011, the fund had no short sales outstanding.
Security Loans – State Street Bank and Trust Company (“State Street”), as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. The loans are collateralized by cash and/or U.S. Treasury and federal agency obligations in an amount typically at least equal to the market value of the securities loaned. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. State Street provides the fund with indemnification against Borrower default. The fund bears the risk of loss with respect to the investment of cash collateral. On loans collateralized by cash, the cash collateral is invested in a money market fund or short-term securities. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the fund and the lending agent. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the Borrower, and is allocated between
16
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MFS Core Equity Series
Notes to Financial Statements (unaudited) – continued
the fund and the lending agent. Income from securities lending is included in interest income on the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income.
Indemnifications – Under the fund’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund’s maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.
Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend and interest payments received in additional securities are recorded on the ex-dividend or ex-interest date in an amount equal to the value of the security on such date.
The fund may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
Fees Paid Indirectly – The fund’s custody fee may be reduced according to an arrangement that measures the value of cash deposited with the custodian by the fund. For the six months ended June 30, 2011, custody fees were not reduced.
Tax Matters and Distributions – The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to expiration of capital loss carryforwards and wash sale loss deferrals.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/10 | ||||
Ordinary income (including any short-term capital gains) | $705,029 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/11 | ||||
Cost of investments | $60,751,616 | |||
Gross appreciation | 9,364,068 | |||
Gross depreciation | (2,816,529 | ) | ||
Net unrealized appreciation (depreciation) | $6,547,539 | |||
As of 12/31/10 | ||||
Undistributed ordinary income | 582,549 | |||
Capital loss carryforwards | (25,154,103 | ) | ||
Other temporary differences | (172,881 | ) | ||
Net unrealized appreciation (depreciation) | 6,670,006 |
The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.
17
Table of Contents
MFS Core Equity Series
Notes to Financial Statements (unaudited) – continued
As of December 31, 2010, the fund had capital loss carryforwards available to offset future realized gains. Such losses expire as follows:
12/31/16 | $(16,149,798 | ) | ||
12/31/17 | (9,004,305 | ) | ||
Total | $(25,154,103 | ) |
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and/or service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported on the Statements of Changes in Net Assets are presented by class as follows:
From net investment income | ||||||||
Six months ended 6/30/11 | Year ended 12/31/10 | |||||||
Initial Class | $— | $663,488 | ||||||
Service Class | — | 41,541 | ||||||
Total | $— | $705,029 |
(3) | Transactions with Affiliates |
Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund.
The management fee is computed daily and paid monthly at the following annual rates:
First $1 billion of average daily net assets | 0.75% | |||
Average daily net assets in excess of $1 billion | 0.65% |
The management fee incurred for the six months ended June 30, 2011 was equivalent to an annual effective rate of 0.75% of the fund’s average daily net assets.
The investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, exclusive of interest, taxes, extraordinary expenses, brokerage and transaction costs and investment-related expenses, such that total annual operating expenses do not exceed 0.90% of average daily net assets for the Initial Class shares and 1.15% of average daily net assets for the Service Class shares. This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until April 30, 2013. For the six months ended June 30, 2011, this reduction amounted to $25,485 and is reflected as a reduction of total expenses in the Statement of Operations.
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, is the distributor of shares of the fund. The Trustees have adopted a distribution plan for the Service Class shares pursuant to Rule 12b-1 under the Investment Company Act of 1940.
The fund’s distribution plan provides that the fund will pay MFD distribution and/or service fees equal to 0.25% per annum of its average daily net assets attributable to Service Class shares as partial consideration for services performed and expenses incurred by MFD and financial intermediaries (including participating insurance companies that invest in the fund to fund variable annuity and variable life insurance contracts, sponsors of qualified retirement and pension plans that invest in the fund, and affiliates of these participating insurance companies and plan sponsors) in connection with the sale and distribution of the Service Class shares. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries.
Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent. For the six months ended June 30, 2011, the fee was $3,774, which equated to 0.0112% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses paid by MFSC on behalf of the fund. For the six months ended June 30, 2011, these costs amounted to $274.
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund partially reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the six months ended June 30, 2011 was equivalent to an annual effective rate of 0.0295% of the fund’s average daily net assets.
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MFS Core Equity Series
Notes to Financial Statements (unaudited) – continued
Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – This fund and certain other funds managed by MFS (the funds) have entered into services agreements (the Agreements) which provide for payment of fees by the funds to Tarantino LLC and Griffin Compliance LLC in return for the provision of services of an Independent Chief Compliance Officer (ICCO) and Assistant ICCO, respectively, for the funds. The ICCO and Assistant ICCO are officers of the funds and the sole members of Tarantino LLC and Griffin Compliance LLC, respectively. The funds can terminate the Agreements with Tarantino LLC and Griffin Compliance LLC at any time under the terms of the Agreements. For the six months ended June 30, 2011, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $239 and are included in miscellaneous expense on the Statement of Operations. MFS has agreed to reimburse the fund for a portion of the payments made by the fund in the amount of $194, which is shown as a reduction of total expenses in the Statement of Operations. Additionally, MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ICCO and Assistant ICCO.
The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks a high level of current income consistent with preservation of capital and liquidity. Income earned on this investment is included in dividends from underlying affiliated funds on the Statement of Operations. This money market fund does not pay a management fee to MFS.
(4) | Portfolio Securities |
Purchases and sales of investments, other than U.S. Government securities, purchased option transactions, and short-term obligations, aggregated $20,884,133 and $24,888,968, respectively.
(5) | Shares of Beneficial Interest |
The fund’s Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
Six months ended 6/30/11 | Year ended 12/31/10 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 286,684 | $4,638,558 | 251,174 | $3,529,038 | ||||||||||||
Service Class | 13,383 | 220,743 | 19,762 | 274,095 | ||||||||||||
300,067 | $4,859,301 | 270,936 | $3,803,133 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 45,507 | $663,488 | ||||||||||||
Service Class | — | — | 2,855 | 41,541 | ||||||||||||
— | $— | 48,362 | $705,029 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (465,864 | ) | $(7,590,857 | ) | (880,123 | ) | $(12,221,995 | ) | ||||||||
Service Class | (58,291 | ) | (942,356 | ) | (81,719 | ) | (1,133,355 | ) | ||||||||
(524,155 | ) | $(8,533,213 | ) | (961,842 | ) | $(13,355,350 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (179,180 | ) | $(2,952,299 | ) | (583,442 | ) | $(8,029,469 | ) | ||||||||
Service Class | (44,908 | ) | (721,613 | ) | (59,102 | ) | (817,719 | ) | ||||||||
(224,088 | ) | $(3,673,912 | ) | (642,544 | ) | $(8,847,188 | ) |
(6) | Line of Credit |
The fund and certain other funds managed by MFS participate in a $1.1 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Federal Reserve funds rate or one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Federal Reserve funds rate plus an agreed upon spread. For the six months ended June 30, 2011, the fund’s commitment fee and interest expense were $322 and $0, respectively, and are included in miscellaneous expense on the Statement of Operations.
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MFS Core Equity Series
Notes to Financial Statements (unaudited) – continued
(7) | Transactions in Underlying Affiliated Funds – Affiliated Issuers |
An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the fund assumes the following to be affiliated issuers:
Underlying Affiliated Funds | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 104,440 | 7,879,950 | (7,460,497 | ) | 523,893 | |||||||||||
Underlying Affiliated Funds | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $420 | $523,893 |
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MFS Core Equity Series
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board’s most recent review and renewal of the fund’s Investment Advisory Agreement with MFS will be available on or about November 1, 2011 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds’ proxy voting policies and procedures is available without charge, upon request, by calling
1-800-225-2606, by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the Securities and Exchange Commission (the Commission) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. The fund’s Form N-Q is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and copies of this information may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
From time to time, MFS may post important information about the fund or the MFS funds on the MFS web site (mfs.com). This information is available by visiting the “News & Commentary” section of mfs.com or by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of mfs.com.
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Table of Contents
rev. 3/11
FACTS | WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION? |
Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
What? | The types of personal information we collect and share depend on the product or service you have with us. This information can include:
• Social Security number and account balances • Account transactions and transaction history • Checking account information and wire transfer instructions
When you are no longer our customer, we continue to share your information as described in this notice. |
How? | All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons MFS chooses to share; and whether you can limit this sharing. |
Reasons we can share your personal information | Does MFS share? | Can you limit this sharing? | ||
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus | Yes | No | ||
For our marketing purposes – to offer our products and services to you | No | We don’t share | ||
For joint marketing with other financial companies | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your transactions and experiences | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your creditworthiness | No | We don’t share | ||
For nonaffiliates to market to you | No | We don’t share |
Questions? | Call 800-225-2606 or go to mfs.com. |
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Page 2 |
Who we are | ||
Who is providing this notice? | MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., MFS Fund Distributors, Inc., MFS Heritage Trust Company, and MFS Service Center, Inc. |
What we do | ||
How does MFS protect my personal information? | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you. | |
How does MFS collect my personal information? | We collect your personal information, for example, when you
• open an account or provide account information • direct us to buy securities or direct us to sell your securities • make a wire transfer
We also collect your personal information from others, such as credit bureaus, affiliates and other companies. | |
Why can’t I limit all sharing? | Federal law gives you the right to limit only
• sharing for affiliates’ everyday business purposes – information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you
State laws and individual companies may give you additional rights to limit sharing. |
Definitions | ||
Affiliates | Companies related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice. | |
Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share with nonaffiliates so they can market to you. | |
Joint Marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you.
• MFS doesn’t jointly market. |
Other important information | ||
If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours. |
23
Table of Contents
Table of Contents
MFS® Utilities Series
MFS® Variable Insurance Trust
SEMIANNUAL REPORT
June 30, 2011
VUF-SEM
Table of Contents
MFS® UTILITIES SERIES
The report is prepared for the general information of contract owners. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED Ÿ MAY LOSE VALUE Ÿ NO BANK OR CREDIT UNION GUARANTEE Ÿ
NOT A DEPOSIT Ÿ NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
Table of Contents
MFS Utilities Series
Dear Contract Owners:
After about a year of almost uninterrupted macroeconomic and financial market improvement following the global credit crisis, investors grew more cautious in the middle of 2010 as fears grew that some European countries would default on their debt and as economic data showed a weakening
trend in the global economy. As a result asset prices fell significantly.
Last September the U.S. Federal Reserve Board’s promises to make lending conditions easier helped assuage market fears and drive asset prices off their recent lows. A combination of solid earnings and improving economic data gave an additional boost to investor sentiment.
In the following months, the renewed positive market mood, coupled with indications of better global macroeconomic activity, pushed many asset valuations to post-crisis highs. At the same time, global sovereign
bond yields initially rose as investors became concerned about inflationary pressures, driven by higher prices for oil as well as other commodities. However, by the end of the second quarter of 2011, a weakening macroeconomic backdrop and renewed concerns over debt problems in some eurozone countries pushed equities lower.
For the remainder of 2011, we are cautiously optimistic that economic growth will continue to improve and that the global economies will recover from the shocks of the past few years. We expect the pace of recovery worldwide to be uneven and volatile and acknowledge the elevated uncertainty created by events in Japan, Europe, the Middle East, as well as that created by the U.S. debate over raising the debt ceiling and the downgrade by Standard & Poor’s of the U.S. long-term credit rating.
As always, we continue to be mindful of the many economic challenges faced at the local, national, and international levels. It is in times such as these that we want to remind investors of the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with their advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2011
The opinions expressed in this letter are subject to change, may not be relied upon for investment advice, and no forecasts can be guaranteed.
1
Table of Contents
MFS Utilities Series
Portfolio structure (i)
Top ten holdings (i) | ||||
El Paso Corp. | 3.3% | |||
Williams Cos, Inc. | 3.0% | |||
Comcast Corp. | 2.9% | |||
CMS Energy Corp. | 2.8% | |||
Virgin Media, Inc. | 2.8% | |||
Nextera Energy, Inc. | 2.6% | |||
Public Service Enterprise Group, Inc. | 2.4% | |||
AES Corp. | 2.4% | |||
QEP Resources, Inc. | 2.4% | |||
EQT Corp. | 2.2% |
Top five industries (i) | ||||
Utilities – Electric Power | 49.1% | |||
Telephone Services | 10.7% | |||
Cable TV | 9.5% | |||
Telecommunications – Wireless | 8.8% | |||
Natural Gas – Pipeline | 8.4% |
Issuer country weightings (i)(x) | ||||
United States | 62.8% | |||
Brazil | 8.9% | |||
United Kingdom | 4.9% | |||
Portugal | 3.1% | |||
Spain | 3.0% | |||
Israel | 2.7% | |||
Czech Republic | 2.1% | |||
Chile | 2.0% | |||
Russia | 1.5% | |||
Other Countries | 9.0% |
(i) | For purposes of this presentation, the components include the market value of securities, and reflect the impact of the equivalent exposure of derivative positions, if applicable. These amounts may be negative from time to time. The bond component will include any accrued interest amounts. Equivalent exposure is a calculated amount that translates the derivative position into a reasonable approximation of the amount of the underlying asset that the portfolio would have to hold at a given point in time to have the same price sensitivity that results from the portfolio’s ownership of the derivative contract. When dealing with derivatives, equivalent exposure is a more representative measure of the potential impact of a position on portfolio performance than market value. Where the fund holds convertible bonds, these are treated as part of the equity portion of the portfolio. |
(x) | Represents the portfolio’s exposure to issuer countries as a percentage of a portfolio’s total net assets. |
Percentages are based on net assets as of 6/30/11.
The portfolio is actively managed and current holdings may be different.
2
Table of Contents
MFS Utilities Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2011 through June 30, 2011
As a contract holder of the fund, you incur ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2011 through June 30, 2011.
Actual Expenses
The first line for each share class in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the following table provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight the fund’s ongoing costs only and do not take into account the fees and expenses imposed under the variable contracts through which your investment in the fund is made. Therefore, the second line for each share class in the table is useful in comparing ongoing costs associated with an investment in vehicles (such as the fund) which fund benefits under variable annuity and variable life insurance contracts and to qualified pension and retirement plans only, and will not help you determine the relative total costs of investing in the fund through variable annuity and variable life insurance contracts. If the fees and expenses imposed under the variable contracts were included, your costs would have been higher.
Share Class | Annualized Expense Ratio | Beginning Account Value 1/01/11 | Ending Account Value 6/30/11 | Expenses Paid During Period (p) 1/01/11-6/30/11 | ||||||||||||||
Initial Class | Actual | 0.79% | $1,000.00 | $1,107.24 | $4.13 | |||||||||||||
Hypothetical (h) | 0.79% | $1,000.00 | $1,020.88 | $3.96 | ||||||||||||||
Service Class | Actual | 1.04% | $1,000.00 | $1,105.81 | $5.43 | |||||||||||||
Hypothetical (h) | 1.04% | $1,000.00 | $1,019.64 | $5.21 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid is equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
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Table of Contents
MFS Utilities Series
PORTFOLIO OF INVESTMENTS – 6/30/11 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 94.9% | ||||||||
Broadcasting – 0.4% | ||||||||
Viacom, Inc., “B” | 168,600 | $ | 8,598,600 | |||||
|
| |||||||
Cable TV – 8.8% | ||||||||
Comcast Corp., “Special A” | 2,498,170 | $ | 60,530,659 | |||||
DIRECTV, “A” (a) | 124,930 | 6,348,943 | ||||||
Telenet Group Holding N.V. | 588,061 | 27,979,596 | ||||||
Time Warner Cable, Inc. | 369,820 | 28,860,753 | ||||||
Virgin Media, Inc. | 1,955,280 | 58,521,530 | ||||||
|
| |||||||
$ | 182,241,481 | |||||||
|
| |||||||
Energy – Independent – 2.3% | ||||||||
Arch Coal, Inc. | 325,450 | $ | 8,676,497 | |||||
EOG Resources, Inc. | 59,850 | 6,257,318 | ||||||
Occidental Petroleum Corp. | 122,350 | 12,729,294 | ||||||
Williams Partners LP | 373,560 | 20,239,481 | ||||||
|
| |||||||
$ | 47,902,590 | |||||||
|
| |||||||
Energy – Integrated – 4.6% | ||||||||
EQT Corp. | 862,590 | $ | 45,303,227 | |||||
QEP Resources, Inc. | 1,166,520 | 48,795,532 | ||||||
|
| |||||||
$ | 94,098,759 | |||||||
|
| |||||||
Natural Gas – Distribution – 4.3% | ||||||||
AGL Resources, Inc. | 303,760 | $ | 12,366,070 | |||||
Centrica PLC | 1,362,856 | 7,071,596 | ||||||
NiSource, Inc. | 605,020 | 12,251,655 | ||||||
Questar Corp. | 566,300 | 10,029,173 | ||||||
Sempra Energy | 272,210 | 14,394,465 | ||||||
Spectra Energy Corp. | 881,730 | 24,168,219 | ||||||
UGI Corp. | 257,000 | 8,195,730 | ||||||
|
| |||||||
$ | 88,476,908 | |||||||
|
| |||||||
Natural Gas – Pipeline – 8.4% | ||||||||
El Paso Corp. | 3,392,657 | $ | 68,531,671 | |||||
Enagas S.A. | 1,181,848 | 28,638,542 | ||||||
Kinder Morgan, Inc. | 545,590 | 15,674,801 | ||||||
Williams Cos., Inc. | 2,018,205 | 61,050,701 | ||||||
|
| |||||||
$ | 173,895,715 | |||||||
|
| |||||||
Special Products & Services – 0.4% | ||||||||
Hutchison Port Holdings Trust, IEU (a) | 9,912,000 | $ | 8,375,640 | |||||
|
| |||||||
Telecommunications – Wireless – 8.4% | ||||||||
America Movil S.A.B. de C.V., “L”, ADR | 211,310 | $ | 11,385,383 | |||||
Cellcom Israel Ltd. | 1,158,313 | 32,108,436 | ||||||
Millicom International Cellular S.A. | 19,540 | 2,038,892 | ||||||
Mobile TeleSystems OJSC, ADR | 1,110,610 | 21,123,802 | ||||||
MTN Group Ltd. | 674,368 | 14,351,438 | ||||||
NII Holdings, Inc. (a) | 804,500 | 34,094,710 | ||||||
Partner Communication Co. Ltd., ADR | 643,300 | 9,598,036 | ||||||
SBA Communications Corp. (a) | 301,120 | 11,499,773 | ||||||
Tim Participacoes S.A., ADR | 414,300 | 20,387,703 | ||||||
Vodafone Group PLC | 6,552,450 | 17,383,545 | ||||||
|
| |||||||
$ | 173,971,718 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Telephone Services – 10.7% | ||||||||
American Tower Corp., “A” (a) | 494,810 | $ | 25,893,407 | |||||
AT&T, Inc. | 65,560 | 2,059,240 | ||||||
Bezeq – The Israel Telecommunication Corp. Ltd. | 5,965,360 | 15,097,099 | ||||||
CenturyLink, Inc. | 544,371 | 22,008,920 | ||||||
Crown Castle International Corp. (a) | 244,380 | 9,968,260 | ||||||
Deutsche Telekom AG | 1,074,060 | 16,844,879 | ||||||
Frontier Communications Corp. | 639,620 | 5,161,733 | ||||||
Kabel Deutschland Holding AG (a) | 85,390 | 5,250,319 | ||||||
Portugal Telecom, SGPS, S.A. | 1,298,975 | 12,878,913 | ||||||
PT XL Axiata Tbk | 17,961,000 | 12,880,899 | ||||||
Royal KPN N.V. | 1,273,647 | 18,525,197 | ||||||
TDC A/S (a) | 2,289,245 | 20,892,243 | ||||||
Telecom Italia S.p.A. | 10,067,193 | 11,715,647 | ||||||
Telecomunicacoes de Sao Paulo S.A., ADR | 1,451,058 | 43,096,423 | ||||||
|
| |||||||
$ | 222,273,179 | |||||||
|
| |||||||
Utilities – Electric Power – 46.6% | ||||||||
AES Corp. (a) | 3,872,380 | $ | 49,334,121 | |||||
AES Tiete S.A., IPS | 1,058,359 | 17,143,700 | ||||||
Aguas Andinas S.A. | 28,990,356 | 15,700,137 | ||||||
Alliant Energy Corp. | 174,780 | 7,106,555 | ||||||
American Electric Power Co., Inc. | 1,063,890 | 40,087,375 | ||||||
American Water Works Co., Inc. | 412,210 | 12,139,584 | ||||||
Calpine Corp. (a) | 1,695,150 | 27,342,769 | ||||||
CenterPoint Energy, Inc. | 1,589,790 | 30,762,436 | ||||||
CEZ AS | 844,530 | 43,457,589 | ||||||
China Hydroelectric Corp., ADR (a) | 482,890 | 1,970,191 | ||||||
CMS Energy Corp. | 2,985,160 | 58,777,800 | ||||||
Companhia de Saneamento de Minas Gerais – Copasa MG | 863,800 | 17,324,153 | ||||||
Companhia Paranaense de Energia, ADR | 371,670 | 10,094,557 | ||||||
Companhia Paranaense de Energia, IPS | 320,700 | 8,527,889 | ||||||
Constellation Energy Group, Inc. | 820,650 | 31,151,874 | ||||||
E-CL S.A. | 3,500,510 | 9,842,024 | ||||||
E.ON AG | 260,594 | 7,401,177 | ||||||
Edison International | 960,640 | 37,224,800 | ||||||
EDP Renovaveis S.A. (a) | 2,194,276 | 14,475,048 | ||||||
Eletropaulo Metropolitana S.A., IPS | 840,800 | 18,242,071 | ||||||
ENEL OGK-5 OAO (a) | 22,959,317 | 1,836,745 | ||||||
Energias de Portugal S.A. | 10,104,628 | 35,885,743 | ||||||
Enersis S.A., ADR | 721,380 | 16,663,878 | ||||||
EVN AG | 138,248 | 2,397,744 | ||||||
Federal Grid Co. of Unified Energy System JSC | 301,177,510 | 3,343,070 | ||||||
Fortum Corp. | 952,021 | 27,570,041 | ||||||
GenOn Energy, Inc. (a) | 1,084,110 | 4,184,665 | ||||||
Hawaiian Electric Industries, Inc. | 6,500 | 156,390 | ||||||
International Power PLC | 4,863,108 | 25,108,845 | ||||||
Light S.A. | 1,306,340 | 24,575,749 | ||||||
National Grid PLC | 2,938,619 | 28,887,579 | ||||||
NextEra Energy, Inc. | 919,080 | 52,810,337 |
4
Table of Contents
MFS Utilities Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Utilities – Electric Power – continued | ||||||||
Northeast Utilities | 458,793 | $ | 16,135,750 | |||||
NRG Energy, Inc. (a) | 953,914 | 23,447,206 | ||||||
NV Energy, Inc. | 663,140 | 10,179,199 | ||||||
OGE Energy Corp. | 492,020 | 24,758,446 | ||||||
OGK-4 OAO (a) | 20,994,883 | 1,763,570 | ||||||
PG&E Corp. | 861,010 | 36,188,250 | ||||||
PPL Corp. | 809,120 | 22,517,810 | ||||||
Public Service Enterprise Group, Inc. | 1,550,460 | 50,607,014 | ||||||
Red Electrica de Espana | 536,996 | 32,414,410 | ||||||
Scottish & Southern Energy PLC | 996,089 | 22,269,529 | ||||||
TGK International GmbH | 5,520,996,663 | 2,815,708 | ||||||
Tractebel Energia S.A. | 1,460,100 | 25,728,222 | ||||||
Wisconsin Energy Corp. | 129,200 | 4,050,420 | ||||||
Xcel Energy, Inc. | 380,440 | 9,244,692 | ||||||
|
| |||||||
$ | 963,646,862 | |||||||
|
| |||||||
Total Common Stocks (Identified Cost, $1,759,734,923) |
| $ | 1,963,481,452 | |||||
|
| |||||||
BONDS – 0.3% | ||||||||
Asset-Backed & Securitized – 0.0% | ||||||||
Falcon Franchise Loan LLC, FRN, 3.305%, 2023 (i)(z) | $ | 245,437 | $ | 14,726 | ||||
|
| |||||||
Utilities – Electric Power – 0.3% | ||||||||
GenOn Energy, Inc., 9.875%, 2020 | $ | 5,795,000 | $ | 6,055,775 | ||||
|
| |||||||
Total Bonds (Identified Cost, $5,840,820) | $ | 6,070,501 | ||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
CONVERTIBLE PREFERRED STOCKS – 2.2% | ||||||||
Utilities – Electric Power – 2.2% | ||||||||
Great Plains Energy, Inc., 12% | 141,030 | $ | 9,200,797 | |||||
NextEra Energy, Inc., 7% | 235,780 | 12,201,615 | ||||||
PPL Corp., 9.5% | 262,860 | 14,693,874 | ||||||
PPL Corp., 8.75% | 195,820 | 10,752,476 | ||||||
|
| |||||||
Total Convertible Preferred Stocks (Identified Cost, $44,181,874) | $ | 46,848,762 | ||||||
|
| |||||||
CONVERTIBLE BONDS – 1.0% | ||||||||
Cable TV – 0.7% | ||||||||
Virgin Media, Inc., 6.5%, 2016 | $ | 7,481,000 | $ | 13,381,639 | ||||
|
| |||||||
Telecommunications – Wireless – 0.3% | ||||||||
SBA Communications Corp., 4%, 2014 | $ | 5,093,000 | $ | 7,142,933 | ||||
|
| |||||||
Total Convertible Bonds (Identified Cost, $15,005,471) | $ | 20,524,572 | ||||||
|
| |||||||
MONEY MARKET FUNDS (v) – 1.4% | ||||||||
MFS Institutional Money Market Portfolio, 0.1%, at Cost and Net Asset Value | 28,424,317 | $ | 28,424,317 | |||||
|
| |||||||
Total Investments (Identified Cost, $1,853,187,405) | $ | 2,065,349,604 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – 0.2% | 3,473,594 | |||||||
|
| |||||||
Net Assets – 100.0% | $ | 2,068,823,198 | ||||||
|
|
(a) | Non-income producing security. |
(i) | Interest only security for which the series receives interest on notional principal (Par amount). Par amount shown is the notional principal and does not reflect the cost of the security. |
(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 fund holds the following restricted securities: |
Restricted Securities | Acquisition Date | Cost | Value | |||||||
Falcon Franchise Loan LLC, FRN, 3.305%, 2023 | 1/18/02 | $10,766 | $14,726 | |||||||
% of Net Assets | 0.00% |
The following abbreviations are used in this report and are defined:
ADR | American Depository Receipt |
FRN | Floating Rate Note. Interest rate resets periodically and may not be the rate reported at period end. |
IEU | International Equity Unit |
IPS | International Preference Stock |
PLC | Public Limited Company |
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:
BRL | Brazilian Real |
EUR | Euro |
GBP | British Pound |
5
Table of Contents
MFS Utilities Series
Portfolio of Investments (unaudited) – continued
Derivative Contracts at 6/30/11
Forward Foreign Currency Exchange Contracts at 6/30/11
Type | Currency | Counterparty | Contracts to Deliver/Receive | Settlement Date Range | In Exchange For | Contracts at Value | Net Unrealized Appreciation (Depreciation) | |||||||||||||||||
Asset Derivatives | ||||||||||||||||||||||||
BUY | EUR | Citibank N.A. | 313,599 | 7/12/11 | $ | 448,807 | $ | 454,676 | $ | 5,869 | ||||||||||||||
BUY | EUR | Credit Suisse Group | 6,262,274 | 7/12/11 | 8,999,788 | 9,079,465 | 79,677 | |||||||||||||||||
BUY | EUR | Deutsche Bank AG | 1,373,821 | 7/12/11 | 1,972,120 | 1,991,858 | 19,738 | |||||||||||||||||
BUY | EUR | HSBC Bank | 1,250,226 | 7/12/11 | 1,780,750 | 1,812,662 | 31,912 | |||||||||||||||||
BUY | EUR | Merrill Lynch International Bank | 1,649,464 | 7/12/11 | 2,347,358 | 2,391,503 | 44,145 | |||||||||||||||||
BUY | EUR | Morgan Stanley Capital Services, Inc. | 91,557 | 7/12/11 | 132,360 | 132,745 | 385 | |||||||||||||||||
SELL | EUR | Citibank N.A. | 511,037 | 7/12/11 | 743,560 | 740,936 | 2,624 | |||||||||||||||||
SELL | EUR | Credit Suisse Group | 4,591,972 | 7/12/11 | 6,704,243 | 6,657,750 | 46,493 | |||||||||||||||||
SELL | EUR | HSBC Bank | 667,002 | 7/12/11 | 978,685 | 967,064 | 11,621 | |||||||||||||||||
SELL | GBP | Barclays Bank PLC | 30,119,070 | 7/12/11 | 49,089,218 | 48,335,480 | 753,738 | |||||||||||||||||
SELL | GBP | Credit Suisse Group | 1,127,803 | 7/12/11 | 1,845,259 | 1,809,913 | 35,346 | |||||||||||||||||
SELL | GBP | Deutsche Bank AG | 30,617,047 | 7/12/11 | 49,912,038 | 49,134,640 | 777,398 | |||||||||||||||||
SELL | GBP | HSBC Bank | 579,829 | 7/12/11 | 941,584 | 930,517 | 11,067 | |||||||||||||||||
SELL | GBP | JPMorgan Chase Bank N.A. | 246,767 | 7/12/11 | 397,097 | 396,014 | 1,083 | |||||||||||||||||
SELL | GBP | Merrill Lynch International Bank | 745,215 | 7/12/11 | 1,219,567 | 1,195,931 | 23,636 | |||||||||||||||||
SELL | GBP | UBS AG | 422,496 | 7/12/11 | 693,437 | 678,027 | 15,410 | |||||||||||||||||
|
| |||||||||||||||||||||||
$ | 1,860,142 | |||||||||||||||||||||||
|
| |||||||||||||||||||||||
Liability Derivatives | ||||||||||||||||||||||||
SELL | BRL | Barclays Bank PLC | 5,384,000 | 8/02/11 | $ | 3,355,772 | $ | 3,427,134 | $ | (71,362 | ) | |||||||||||||
SELL | BRL | Credit Suisse Group | 21,984,672 | 8/02/11-11/04/11 | 13,639,481 | 13,857,388 | (217,907 | ) | ||||||||||||||||
SELL | BRL | Deutsche Bank AG | 34,857,000 | 9/02/11-11/04/11 | 21,568,575 | 21,923,439 | (354,864 | ) | ||||||||||||||||
SELL | BRL | Goldman Sachs International | 4,915,000 | 8/02/11 | 3,070,915 | 3,128,596 | (57,681 | ) | ||||||||||||||||
SELL | BRL | HSBC Bank | 30,743,288 | 8/02/11-11/07/11 | 18,746,444 | 19,388,175 | (641,731 | ) | ||||||||||||||||
SELL | BRL | JPMorgan Chase Bank N.A. | 66,849,077 | 8/02/11-11/04/11 | 41,250,739 | 42,371,433 | (1,120,694 | ) | ||||||||||||||||
SELL | BRL | Morgan Stanley Capital Services, Inc. | 15,890,000 | 8/02/11 | 9,899,400 | 10,114,629 | (215,229 | ) | ||||||||||||||||
SELL | BRL | UBS AG | 16,940,000 | 8/02/11 | 10,620,932 | 10,782,996 | (162,064 | ) | ||||||||||||||||
BUY | EUR | Citibank N.A. | 596,249 | 7/12/11 | 865,581 | 864,482 | (1,099 | ) | ||||||||||||||||
BUY | EUR | Credit Suisse Group | 2,873,976 | 7/12/11 | 4,200,603 | 4,166,883 | (33,720 | ) | ||||||||||||||||
BUY | EUR | Merrill Lynch International Bank | 507,561 | 7/12/11 | 740,075 | 735,896 | (4,179 | ) | ||||||||||||||||
SELL | EUR | Barclays Bank PLC | 233,858 | 7/12/11 | 331,559 | 339,063 | (7,504 | ) | ||||||||||||||||
SELL | EUR | Credit Suisse Group | 6,055,102 | 7/12/11 | 8,686,855 | 8,779,094 | (92,239 | ) | ||||||||||||||||
SELL | EUR | Deutsche Bank AG | 12,666,688 | 7/12/11 | 18,074,818 | 18,365,015 | (290,197 | ) | ||||||||||||||||
SELL | EUR | Goldman Sachs International | 389,104 | 7/12/11 | 557,746 | 564,150 | (6,404 | ) | ||||||||||||||||
SELL | EUR | HSBC Bank | 582,753 | 7/12/11 | 833,716 | 844,915 | (11,199 | ) | ||||||||||||||||
SELL | EUR | Merrill Lynch International Bank | 926,131 | 7/12/11 | 1,318,582 | 1,342,767 | (24,185 | ) | ||||||||||||||||
SELL | EUR | UBS AG | 95,227,551 | 7/12/11-9/15/11 | 137,155,502 | 137,819,892 | (664,390 | ) | ||||||||||||||||
BUY | GBP | Barclays Bank PLC | 464,284 | 7/12/11 | 746,225 | 745,089 | (1,136 | ) | ||||||||||||||||
BUY | GBP | HSBC Bank | 1,233,671 | 7/12/11 | 2,003,451 | 1,979,812 | (23,639 | ) | ||||||||||||||||
SELL | GBP | Barclays Bank PLC | 273,473 | 7/12/11 | 436,617 | 438,873 | (2,256 | ) | ||||||||||||||||
|
| |||||||||||||||||||||||
$ | (4,003,679 | ) | ||||||||||||||||||||||
|
|
At June 30, 2011, the fund had sufficient cash and/or securities to cover any commitments under these derivative contracts.
See Notes to Financial Statements
6
Table of Contents
MFS Utilities Series
FINANCIAL STATEMENTS | STATEMENT OF ASSETS AND LIABILITIES (unaudited)
This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
At 6/30/11 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $1,824,763,088) | $2,036,925,287 | |||||||
Underlying affiliated funds, at cost and value | 28,424,317 | |||||||
Total investments, at value (identified cost, $1,853,187,405) | $2,065,349,604 | |||||||
Cash | 1,684,097 | |||||||
Restricted cash | 480,000 | |||||||
Receivables for | ||||||||
Forward foreign currency exchange contracts | 1,860,142 | |||||||
Investments sold | 9,146,617 | |||||||
Fund shares sold | 654,181 | |||||||
Interest and dividends | 10,099,729 | |||||||
Other assets | 8,016 | |||||||
Total assets | $2,089,282,386 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Forward foreign currency exchange contracts | $4,003,679 | |||||||
Investments purchased | 14,819,099 | |||||||
Fund shares reacquired | 1,256,599 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 82,980 | |||||||
Shareholder servicing costs | 1,448 | |||||||
Distribution and/or service fees | 20,223 | |||||||
Payable for independent Trustees’ compensation | 5,887 | |||||||
Accrued expenses and other liabilities | 269,273 | |||||||
Total liabilities | $20,459,188 | |||||||
Net assets | $2,068,823,198 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $1,920,324,990 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 209,988,853 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency transactions | (164,799,524 | ) | ||||||
Undistributed net investment income | 103,308,879 | |||||||
Net assets | $2,068,823,198 | |||||||
Shares of beneficial interest outstanding | 74,686,422 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $577,404,677 | 20,635,389 | $27.98 | |||||||||
Service Class | 1,491,418,521 | 54,051,033 | 27.59 |
See Notes to Financial Statements
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MFS Utilities Series
FINANCIAL STATEMENTS | STATEMENT OF OPERATIONS (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
Six months ended 6/30/11 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $56,065,364 | |||||||
Interest | 424,881 | |||||||
Dividends from underlying affiliated funds | 20,554 | |||||||
Foreign taxes withheld | (3,835,710 | ) | ||||||
Total investment income | $52,675,089 | |||||||
Expenses | ||||||||
Management fee | $7,120,971 | |||||||
Distribution and/or service fees | 1,759,600 | |||||||
Shareholder servicing costs | 110,535 | |||||||
Administrative services fee | 146,496 | |||||||
Independent Trustees’ compensation | 21,508 | |||||||
Custodian fee | 188,223 | |||||||
Shareholder communications | 92,599 | |||||||
Auditing fees | 24,296 | |||||||
Legal fees | 16,002 | |||||||
Miscellaneous | 45,817 | |||||||
Total expenses | $9,526,047 | |||||||
Fees paid indirectly | (690 | ) | ||||||
Reduction of expenses by investment adviser | (5,567 | ) | ||||||
Net expenses | $9,519,790 | |||||||
Net investment income | $43,155,299 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency transactions | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investment transactions | $86,238,145 | |||||||
Foreign currency transactions | (16,473,204 | ) | ||||||
Net realized gain (loss) on investments and foreign currency transactions | $69,764,941 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $87,097,415 | |||||||
Translation of assets and liabilities in foreign currencies | (2,089,193 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $85,008,222 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $154,773,163 | |||||||
Change in net assets from operations | $197,928,462 |
See Notes to Financial Statements
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FINANCIAL STATEMENTS | STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
| Six months ended 6/30/11 (unaudited | ) | | Year ended 12/31/10 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $43,155,299 | $57,761,335 | ||||||
Net realized gain (loss) on investments and foreign currency transactions | 69,764,941 | 74,636,945 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 85,008,222 | 92,299,866 | ||||||
Change in net assets from operations | $197,928,462 | $224,698,146 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(53,910,218 | ) | |||||
Change in net assets from fund share transactions | $(6,063,304 | ) | $(68,416,700 | ) | ||||
Total change in net assets | $191,865,158 | $102,371,228 | ||||||
Net assets | ||||||||
At beginning of period | 1,876,958,040 | 1,774,586,812 | ||||||
At end of period (including undistributed net investment income of $103,308,879 and | $2,068,823,198 | $1,876,958,040 |
See Notes to Financial Statements
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MFS Utilities Series
FINANCIAL STATEMENTS | FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund’s financial performance for the semiannual period and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
Initial Class | Six months ended 6/30/11 | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $25.27 | $22.92 | $18.21 | $34.48 | $29.27 | $23.74 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.61 | $0.79 | $0.80 | $0.73 | $0.71 | $0.59 | ||||||||||||||||||
Net realized and unrealized gain (loss) on | 2.10 | 2.29 | 4.90 | (11.97 | ) | 7.10 | 6.47 | |||||||||||||||||
Total from investment operations | $2.71 | $3.08 | $5.70 | $(11.24 | ) | $7.81 | $7.06 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.73 | ) | $(0.99 | ) | $(0.44 | ) | $(0.32 | ) | $(0.53 | ) | |||||||||||||
From net realized gain on investments | — | — | — | (4.59 | ) | (2.28 | ) | (1.00 | ) | |||||||||||||||
Total distributions declared to shareholders | $— | $(0.73 | ) | $(0.99 | ) | $(5.03 | ) | $(2.60 | ) | $(1.53 | ) | |||||||||||||
Net asset value, end of period | $27.98 | $25.27 | $22.92 | $18.21 | $34.48 | $29.27 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 10.72 | (n) | 13.81 | 33.44 | (37.77 | ) | 27.90 | 31.26 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.79 | (a) | 0.81 | 0.83 | 0.84 | 0.85 | 0.87 | |||||||||||||||||
Expenses after expense reductions (f) | 0.79 | (a) | 0.81 | 0.83 | 0.81 | 0.82 | 0.86 | |||||||||||||||||
Net investment income | 4.56 | (a)(l) | 3.47 | 4.11 | 2.76 | 2.22 | 2.32 | |||||||||||||||||
Portfolio turnover | 26 | 56 | 70 | 68 | 84 | 94 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $577,405 | $541,653 | $564,822 | $495,297 | $969,404 | $710,341 |
See Notes to Financial Statements
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Financial Highlights – continued
Service Class | Six months ended 6/30/11 | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $24.95 | $22.65 | $17.98 | $34.11 | $29.01 | $23.56 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.57 | $0.73 | $0.73 | $0.66 | $0.62 | $0.53 | ||||||||||||||||||
Net realized and unrealized gain (loss) on | 2.07 | 2.25 | 4.86 | (11.82 | ) | 7.03 | 6.42 | |||||||||||||||||
Total from investment operations | $2.64 | $2.98 | $5.59 | $(11.16 | ) | $7.65 | $6.95 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.68 | ) | $(0.92 | ) | $(0.38 | ) | $(0.27 | ) | $(0.50 | ) | |||||||||||||
From net realized gain on investments | — | — | — | (4.59 | ) | (2.28 | ) | (1.00 | ) | |||||||||||||||
Total distributions declared to shareholders | $— | $(0.68 | ) | $(0.92 | ) | $(4.97 | ) | $(2.55 | ) | $(1.50 | ) | |||||||||||||
Net asset value, end of period | $27.59 | $24.95 | $22.65 | $17.98 | $34.11 | $29.01 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 10.58 | (n) | 13.51 | 33.09 | (37.91 | ) | 27.56 | 30.96 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.04 | (a) | 1.06 | 1.08 | 1.09 | 1.10 | 1.12 | |||||||||||||||||
Expenses after expense reductions (f) | 1.04 | (a) | 1.06 | 1.07 | 1.06 | 1.07 | 1.11 | |||||||||||||||||
Net investment income | 4.33 | (a)(l) | 3.23 | 3.83 | 2.54 | 1.96 | 2.11 | |||||||||||||||||
Portfolio turnover | 26 | 56 | 70 | 68 | 84 | 94 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $1,491,419 | $1,335,305 | $1,209,765 | $992,502 | $1,715,446 | $993,085 |
(a) | Annualized. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(k) | The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown. |
(l) | Recognition of net investment income by the fund may be affected by the timing of the declaration of dividends by companies in which the fund invests and the actual annual net investment income ratio may differ. |
(n) | Not annualized. |
(r) | Certain expenses have been reduced without which performance would have been lower. |
(s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
See Notes to Financial Statements
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MFS Utilities Series
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) | Business and Organization |
MFS Utilities Series (the fund) is a series of MFS Variable Insurance Trust (the trust). The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The shareholders of each series of the trust are separate accounts of insurance companies, which offer variable annuity and/or life insurance products, and qualified retirement and pension plans.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued. The fund invests primarily in securities of issuers in the utility industry. Issuers in a single industry can react similarly to market, economic, political and regulatory conditions and developments. The fund invests in foreign securities, including securities of emerging market issuers. Investments in foreign securities are vulnerable to the effects of changes in the relative values of the local currency and the U.S. dollar and to the effects of changes in each country’s legal, political, and economic environment. The markets of emerging markets countries are generally more volatile than the markets of developed countries with more mature economies. All of the risks of investing in foreign securities previously described are heightened when investing in emerging markets countries.
Investment Valuations – 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. 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 exchange contracts are generally valued at the mean of bid and asked prices for the time period interpolated from rates provided by a third-party pricing service for proximate time periods. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. Values obtained from third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the
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Notes to Financial Statements (unaudited) – continued
source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. Other financial instruments are derivative instruments not reflected in total investments, such as forward foreign currency exchange contracts. The following is a summary of the levels used as of June 30, 2011 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $1,237,266,617 | $— | $— | $1,237,266,617 | ||||||||||||
Brazil | 185,120,467 | — | — | 185,120,467 | ||||||||||||
United Kingdom | 100,721,093 | — | — | 100,721,093 | ||||||||||||
Portugal | 63,239,703 | — | — | 63,239,703 | ||||||||||||
Spain | 61,052,952 | — | — | 61,052,952 | ||||||||||||
Israel | 41,706,472 | 15,097,099 | — | 56,803,571 | ||||||||||||
Czech Republic | 43,457,589 | — | — | 43,457,589 | ||||||||||||
Chile | 42,206,040 | — | — | 42,206,040 | ||||||||||||
Russia | 30,882,896 | — | — | 30,882,896 | ||||||||||||
Other Countries | 189,579,286 | — | — | 189,579,286 | ||||||||||||
Corporate Bonds | — | 26,580,347 | — | 26,580,347 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 14,726 | — | 14,726 | ||||||||||||
Mutual Funds | 28,424,317 | — | — | 28,424,317 | ||||||||||||
Total Investments | $2,023,657,432 | $41,692,172 | $— | $2,065,349,604 | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Forward Currency Contracts | $— | $(2,143,537 | ) | $— | $(2,143,537 | ) |
For further information regarding security characteristics, see the Portfolio of Investments.
Foreign Currency Translation – Purchases and sales of foreign investments, income, and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions or on the reporting date for foreign denominated receivables and payables. Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Gains and losses attributable to foreign exchange rate movements on receivables, payables, income and expenses are recorded for financial statement purposes as foreign currency transaction gains and losses. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.
Derivatives – The fund uses derivatives for different purposes, including to earn income and enhance returns, to increase or decrease exposure to a particular market, to manage or adjust the risk profile of the fund, or as alternatives to direct investments. Derivatives are used for hedging or non-hedging purposes. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. When the fund uses derivatives as an investment to increase market exposure, or for hedging purposes, gains and losses from derivative instruments may be substantially greater than the derivative’s original cost.
The derivative instruments used by the fund were forward foreign currency exchange contracts. The fund’s period end derivatives, as presented in the Portfolio of Investments and the associated Derivative Contract Tables, generally are indicative of the volume of its derivative activity during the period.
The following table presents, by major type of derivative contract, the fair value, on a gross basis, of the asset and liability components of derivatives held by the fund at June 30, 2011 as reported in the Statement of Assets and Liabilities:
Fair Value | ||||||||||
Risk | Derivative Contracts | Asset Derivatives | Liability Derivatives | |||||||
Foreign Exchange | Forward Foreign Currency Exchange | $1,860,142 | $(4,003,679 | ) |
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MFS Utilities Series
Notes to Financial Statements (unaudited) – continued
The following table presents, by major type of derivative contract, the realized gain (loss) on derivatives held by the fund for the six months ended June 30, 2011 as reported in the Statement of Operations:
Risk | Foreign Currency Transactions | |||
Foreign Exchange | $(15,538,673 | ) |
The following table presents, by major type of derivative contract, the change in unrealized appreciation (depreciation) on derivatives held by the fund for the six months ended June 30, 2011 as reported in the Statement of Operations:
Risk | Translation of Assets and Liabilities in Foreign Currencies | |||
Foreign Exchange | $(2,048,795 | ) |
Derivative counterparty credit risk is managed through formal evaluation of the creditworthiness of all potential counterparties. On certain over-the-counter derivatives, the fund attempts to reduce its exposure to counterparty credit risk whenever possible by entering into an International Swaps and Derivatives Association (ISDA) Master Agreement on a bilateral basis with each of the counterparties with whom it undertakes a significant volume of transactions. The ISDA Master Agreement gives each party to the agreement the right to terminate all transactions traded under such agreement if there is a certain deterioration in the credit quality of the other party. The ISDA Master Agreement gives the fund the right, upon an event of default by the applicable counterparty or a termination of the agreement, to close out all transactions traded under such agreement and to net amounts owed under each transaction to one net amount payable by one party to the other. This right to close out and net payments across all transactions traded under the ISDA Master Agreement could result in a reduction of the fund’s credit risk to such counterparty equal to any amounts payable by the fund under the applicable transactions, if any. However, absent an event of default by the counterparty or a termination of the agreement, the ISDA Master Agreement does not result in an offset of reported amounts of assets and liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty.
Collateral requirements differ by type of derivative. Collateral or margin requirements are set by the broker or exchange clearing house for exchange traded derivatives (i.e., futures and exchange-traded options) while collateral terms are contract specific for over-the-counter traded derivatives (i.e., forward foreign currency exchange contracts, swaps and over-the-counter options). For derivatives traded under an ISDA Master Agreement, the collateral requirements are netted across all transactions traded under such agreement and one amount is posted from one party to the other to collateralize such obligations. Cash collateral that has been pledged to cover obligations of the fund under derivative contracts, if any, will be reported separately on the Statement of Assets and Liabilities as restricted cash. Securities collateral pledged for the same purpose, if any, is noted in the Portfolio of Investments.
Forward Foreign Currency Exchange Contracts – The fund entered into forward foreign currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. These contracts may be used to hedge the fund’s currency risk or for non-hedging purposes. For hedging purposes, the fund may enter into contracts to deliver or receive foreign currency that the fund will receive from or use in its normal investment activities. The fund may also use contracts to hedge against declines in the value of foreign currency denominated securities due to unfavorable exchange rate movements. For non-hedging purposes, the fund may enter into contracts with the intent of changing the relative exposure of the fund’s portfolio of securities to different currencies to take advantage of anticipated exchange rate changes.
Forward foreign currency exchange contracts are adjusted by the daily exchange rate of the underlying currency and any unrealized gains or losses are recorded as a receivable or payable for forward foreign currency exchange contracts until the contract settlement date. On contract settlement date, any gain or loss on the contract is recorded as realized gains or losses on foreign currency transactions.
Risks may arise upon entering into these contracts from unanticipated movements in the value of the contract and from the potential inability of counterparties to meet the terms of their contracts. Generally, the fund’s maximum risk due to counterparty credit risk is the unrealized gain on the contract due to the use of Continuous Linked Settlement, an industry accepted settlement system. This risk is mitigated in cases where there is an ISDA Master Agreement between the fund and the counterparty providing for netting as described above and for posting of collateral by the counterparty to the fund to cover the fund’s exposure to the counterparty under such ISDA Master Agreement.
Security Loans – State Street Bank and Trust Company (“State Street”), as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. The loans are collateralized by cash and/or U.S. Treasury
14
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MFS Utilities Series
Notes to Financial Statements (unaudited) – continued
and federal agency obligations in an amount typically at least equal to the market value of the securities loaned. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. State Street provides the fund with indemnification against Borrower default. The fund bears the risk of loss with respect to the investment of cash collateral. On loans collateralized by cash, the cash collateral is invested in a money market fund or short-term securities. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the fund and the lending agent. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the Borrower, and is allocated between the fund and the lending agent. Income from securities lending is included in interest income on the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income.
Indemnifications – Under the fund’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund’s maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.
Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. All premium and discount is amortized or accreted for financial statement purposes in accordance with U.S. generally accepted accounting principles. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend and interest payments received in additional securities are recorded on the ex-dividend or ex-interest date in an amount equal to the value of the security on such date.
The fund may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
Fees Paid Indirectly – The fund’s custody fee may be reduced according to an arrangement that measures the value of cash deposited with the custodian by the fund. This amount, for the six months ended June 30, 2011, is shown as a reduction of total expenses on the Statement of Operations.
Tax Matters and Distributions – The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to wash sale loss deferrals.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/10 | ||||
Ordinary income (including any short-term capital gains) | $53,910,218 |
15
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MFS Utilities Series
Notes to Financial Statements (unaudited) – continued
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/11 | ||||
Cost of investments | $1,872,712,881 | |||
Gross appreciation | 282,347,763 | |||
Gross depreciation | (89,711,040 | ) | ||
Net unrealized appreciation (depreciation) | $192,636,723 | |||
As of 12/31/10 | ||||
Undistributed ordinary income | 60,058,838 | |||
Capital loss carryforwards | (215,150,574 | ) | ||
Other temporary differences | 10,589 | |||
Net unrealized appreciation (depreciation) | 105,650,893 |
The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.
As of December 31, 2010, the fund had capital loss carryforwards available to offset future realized gains. Such losses expire as follows:
12/31/16 | $(95,096,618 | ) | ||
12/31/17 | (120,053,956 | ) | ||
Total | $(215,150,574 | ) |
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and/or service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported on the Statements of Changes in Net Assets are presented by class as follows:
From net investment income | ||||||||
Six months ended 6/30/11 | Year ended 12/31/10 | |||||||
Initial Class | $— | $17,038,959 | ||||||
Service Class | — | 36,871,259 | ||||||
Total | $— | $53,910,218 |
(3) | Transactions with Affiliates |
Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates:
First $1 billion of average daily net assets | 0.75% | |||
Average daily net assets in excess of $1 billion | 0.70% |
The management fee incurred for the six months ended June 30, 2011 was equivalent to an annual effective rate of 0.72% of the fund’s average daily net assets.
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, is the distributor of shares of the fund. The Trustees have adopted a distribution plan for the Service Class shares pursuant to Rule 12b-1 under the Investment Company Act of 1940.
The fund’s distribution plan provides that the fund will pay MFD distribution and/or service fees equal to 0.25% per annum of its average daily net assets attributable to Service Class shares as partial consideration for services performed and expenses incurred by MFD and financial intermediaries (including participating insurance companies that invest in the fund to fund variable annuity and variable life insurance contracts, sponsors of qualified retirement and pension plans that invest in the fund, and affiliates of these participating insurance companies and plan sponsors) in connection with the sale and distribution of the Service Class shares. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries.
Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent. For the six months ended June 30, 2011, the fee was $109,627, which equated to 0.0112% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses paid by MFSC on behalf of the fund. For the six months ended June 30, 2011, these costs amounted to $908.
16
Table of Contents
MFS Utilities Series
Notes to Financial Statements (unaudited) – continued
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund partially reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the six months ended June 30, 2011 was equivalent to an annual effective rate of 0.0149% of the fund’s average daily net assets.
Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – This fund and certain other funds managed by MFS (the funds) have entered into services agreements (the Agreements) which provide for payment of fees by the funds to Tarantino LLC and Griffin Compliance LLC in return for the provision of services of an Independent Chief Compliance Officer (ICCO) and Assistant ICCO, respectively, for the funds. The ICCO and Assistant ICCO are officers of the funds and the sole members of Tarantino LLC and Griffin Compliance LLC, respectively. The funds can terminate the Agreements with Tarantino LLC and Griffin Compliance LLC at any time under the terms of the Agreements. For the six months ended June 30, 2011, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $6,873 and are included in miscellaneous expense on the Statement of Operations. MFS has agreed to reimburse the fund for a portion of the payments made by the fund in the amount of $5,567, which is shown as a reduction of total expenses in the Statement of Operations. Additionally, MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ICCO and Assistant ICCO.
The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks a high level of current income consistent with preservation of capital and liquidity. Income earned on this investment is included in dividends from underlying affiliated funds on the Statement of Operations. This money market fund does not pay a management fee to MFS.
(4) | Portfolio Securities |
Purchases and sales of investments, other than U.S. Government securities, purchased option transactions, and short-term obligations, aggregated $548,912,564 and $516,874,540, respectively.
(5) | Shares of Beneficial Interest |
The fund’s Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
Six months ended 6/30/11 | Year ended 12/31/10 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 1,005,658 | $27,257,796 | 1,843,606 | $42,047,040 | ||||||||||||
Service Class | 3,200,281 | 85,108,413 | 5,744,719 | 129,754,840 | ||||||||||||
4,205,939 | $112,366,209 | 7,588,325 | $171,801,880 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 752,272 | $17,038,959 | ||||||||||||
Service Class | — | — | 1,646,038 | 36,871,259 | ||||||||||||
— | $— | 2,398,310 | $53,910,218 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (1,803,940 | ) | $(48,147,965 | ) | (5,803,553 | ) | $(131,670,247 | ) | ||||||||
Service Class | (2,665,991 | ) | (70,281,548 | ) | (7,287,517 | ) | (162,458,551 | ) | ||||||||
(4,469,931 | ) | $(118,429,513 | ) | (13,091,070 | ) | $(294,128,798 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (798,282 | ) | $(20,890,169 | ) | (3,207,675 | ) | $(72,584,248 | ) | ||||||||
Service Class | 534,290 | 14,826,865 | 103,240 | 4,167,548 | ||||||||||||
(263,992 | ) | $(6,063,304 | ) | (3,104,435 | ) | $(68,416,700 | ) |
(6) | Line of Credit |
The fund and certain other funds managed by MFS participate in a $1.1 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Federal Reserve funds rate or one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused
17
Table of Contents
MFS Utilities Series
Notes to Financial Statements (unaudited) – continued
portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Federal Reserve funds rate plus an agreed upon spread. For the six months ended June 30, 2011, the fund’s commitment fee and interest expense were $8,982 and $0, respectively, and are included in miscellaneous expense on the Statement of Operations.
(7) | Transactions in Underlying Affiliated Funds – Affiliated Issuers |
An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the fund assumes the following to be affiliated issuers:
Underlying Affiliated Funds | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par | ||||||||||||
MFS Institutional Money Market Portfolio | 28,020,520 | 247,164,854 | (246,761,057 | ) | 28,424,317 | |||||||||||
Underlying Affiliated Funds | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $20,554 | $28,424,317 |
18
Table of Contents
MFS Utilities Series
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board’s most recent review and renewal of the fund’s Investment Advisory Agreement with MFS will be available on or about November 1, 2011 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds’ proxy voting policies and procedures is available without charge, upon request, by calling
1-800-225-2606, by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the Securities and Exchange Commission (the Commission) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. The fund’s Form N-Q is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and copies of this information may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
From time to time, MFS may post important information about the fund or the MFS funds on the MFS web site (mfs.com). This information is available by visiting the “News & Commentary” section of mfs.com or by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of mfs.com.
19
Table of Contents
rev. 3/11
FACTS | WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION? |
Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
What? | The types of personal information we collect and share depend on the product or service you have with us. This information can include:
• Social Security number and account balances • Account transactions and transaction history • Checking account information and wire transfer instructions
When you are no longer our customer, we continue to share your information as described in this notice. |
How? | All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons MFS chooses to share; and whether you can limit this sharing. |
Reasons we can share your personal information | Does MFS share? | Can you limit this sharing? | ||
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus | Yes | No | ||
For our marketing purposes – to offer our products and services to you | No | We don’t share | ||
For joint marketing with other financial companies | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your transactions and experiences | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your creditworthiness | No | We don’t share | ||
For nonaffiliates to market to you | No | We don’t share |
Questions? | Call 800-225-2606 or go to mfs.com. |
20
Table of Contents
Page 2 |
Who we are | ||
Who is providing this notice? | MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., MFS Fund Distributors, Inc., MFS Heritage Trust Company, and MFS Service Center, Inc. |
What we do | ||
How does MFS protect my personal information? | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you. | |
How does MFS collect my personal information? | We collect your personal information, for example, when you
• open an account or provide account information • direct us to buy securities or direct us to sell your securities • make a wire transfer
We also collect your personal information from others, such as credit bureaus, affiliates and other companies. | |
Why can’t I limit all sharing? | Federal law gives you the right to limit only
• sharing for affiliates’ everyday business purposes – information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you
State laws and individual companies may give you additional rights to limit sharing. |
Definitions | ||
Affiliates | Companies related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice. | |
Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share with nonaffiliates so they can market to you. | |
Joint Marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you.
• MFS doesn’t jointly market. |
Other important information | ||
If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours. |
21
Table of Contents
Table of Contents
MFS® Investors Growth
Stock Series
MFS® Variable Insurance Trust
SEMIANNUAL REPORT
June 30, 2011
VGS-SEM
Table of Contents
MFS® INVESTORS GROWTH STOCK SERIES
The report is prepared for the general information of contract owners.
It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED Ÿ MAY LOSE VALUE Ÿ NO BANK OR CREDIT UNION GUARANTEE Ÿ NOT A DEPOSIT Ÿ NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
Table of Contents
MFS Investors Growth Stock Series
Dear Contract Owners:
After about a year of almost uninterrupted macroeconomic and financial market improvement following the global credit crisis, investors grew more cautious in the middle of 2010 as fears grew that some European countries would default on their debt and as economic data showed a weakening
trend in the global economy. As a result asset prices fell significantly.
Last September the U.S. Federal Reserve Board’s promises to make lending conditions easier helped assuage market fears and drive asset prices off their recent lows. A combination of solid earnings and improving economic data gave an additional boost to investor sentiment.
In the following months, the renewed positive market mood, coupled with indications of better global macroeconomic activity, pushed many asset valuations to post-crisis highs. At the same time, global sovereign
bond yields initially rose as investors became concerned about inflationary pressures, driven by higher prices for oil as well as other commodities. However, by the end of the second quarter of 2011, a weakening macroeconomic backdrop and renewed concerns over debt problems in some eurozone countries pushed equities lower.
For the remainder of 2011, we are cautiously optimistic that economic growth will continue to improve and that the global economies will recover from the shocks of the past few years. We expect the pace of recovery worldwide to be uneven and volatile and acknowledge the elevated uncertainty created by events in Japan, Europe, the Middle East, as well as that created by the U.S. debate over raising the debt ceiling and the downgrade by Standard & Poor’s of the U.S. long-term credit rating.
As always, we continue to be mindful of the many economic challenges faced at the local, national, and international levels. It is in times such as these that we want to remind investors of the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with their advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2011
The opinions expressed in this letter are subject to change, may not be relied upon for investment advice, and no forecasts can be guaranteed.
1
Table of Contents
MFS Investors Growth Stock Series
Portfolio structure
Top ten holdings | ||||
Oracle Corp. | 4.5% | |||
Danaher Corp. | 4.0% | |||
Apple, Inc. | 3.9% | |||
International Business Machines Corp. | 3.6% | |||
Accenture Ltd., “A” | 3.3% | |||
United Technologies Corp. | 3.0% | |||
Colgate-Palmolive Co. | 2.9% | |||
Schlumberger Ltd. | 2.9% | |||
Google, Inc., “A” | 2.5% | |||
PepsiCo, Inc. | 2.3% |
Equity sectors | ||||
Technology | 26.0% | |||
Industrial Goods & Services | 11.6% | |||
Health Care | 11.2% | |||
Consumer Staples | 11.1% | |||
Special Products & Services | 8.8% | |||
Financial Services | 8.2% | |||
Retailing | 7.9% | |||
Energy | 7.2% | |||
Basic Materials | 3.4% | |||
Autos & Housing | 1.6% | |||
Leisure | 1.6% | |||
Transportation | 0.7% |
Percentages are based on net assets as of 6/30/11.
The portfolio is actively managed and current holdings may be different.
2
Table of Contents
MFS Investors Growth Stock Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2011 through June 30, 2011
As a contract holder of the fund, you incur ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2011 through June 30, 2011.
Actual Expenses
The first line for each share class in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the following table provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight the fund’s ongoing costs only and do not take into account the fees and expenses imposed under the variable contracts through which your investment in the fund is made. Therefore, the second line for each share class in the table is useful in comparing ongoing costs associated with an investment in vehicles (such as the fund) which fund benefits under variable annuity and variable life insurance contracts and to qualified pension and retirement plans only, and will not help you determine the relative total costs of investing in the fund through variable annuity and variable life insurance contracts. If the fees and expenses imposed under the variable contracts were included, your costs would have been higher.
Share Class | Annualized Expense Ratio | Beginning Account Value 1/01/11 | Ending Account Value 6/30/11 | Expenses Paid During Period (p) 1/01/11-6/30/11 | ||||||||||||||
Initial Class | Actual | 0.84% | $1,000.00 | $1,063.58 | $4.30 | |||||||||||||
Hypothetical (h) | 0.84% | $1,000.00 | $1,020.63 | $4.21 | ||||||||||||||
Service Class | Actual | 1.09% | $1,000.00 | $1,063.20 | $5.58 | |||||||||||||
Hypothetical (h) | 1.09% | $1,000.00 | $1,019.39 | $5.46 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid is equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
3
Table of Contents
MFS Investors Growth Stock Series
PORTFOLIO OF INVESTMENTS – 6/30/11 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 99.3% | ||||||||
Aerospace – 3.6% | ||||||||
Precision Castparts Corp. | 14,560 | $ | 2,397,298 | |||||
United Technologies Corp. | 119,080 | 10,539,771 | ||||||
|
| |||||||
$ | 12,937,069 | |||||||
|
| |||||||
Alcoholic Beverages – 1.1% | ||||||||
Diageo PLC | 186,597 | $ | 3,812,368 | |||||
|
| |||||||
Apparel Manufacturers – 3.2% | ||||||||
LVMH Moet Hennessy Louis Vuitton S.A. | 22,682 | $ | 4,081,934 | |||||
NIKE, Inc., “B” | 83,340 | 7,498,933 | ||||||
|
| |||||||
$ | 11,580,867 | |||||||
|
| |||||||
Automotive – 1.6% | ||||||||
Johnson Controls, Inc. | 140,570 | $ | 5,856,146 | |||||
|
| |||||||
Broadcasting – 0.4% | ||||||||
Omnicom Group, Inc. | 27,550 | $ | 1,326,808 | |||||
|
| |||||||
Brokerage & Asset Managers – 4.3% | ||||||||
Charles Schwab Corp. | 222,360 | $ | 3,657,822 | |||||
CME Group, Inc. | 19,990 | 5,828,884 | ||||||
Franklin Resources, Inc. | 43,530 | 5,715,054 | ||||||
|
| |||||||
$ | 15,201,760 | |||||||
|
| |||||||
Business Services – 8.8% | ||||||||
Accenture PLC, “A” | 193,250 | $ | 11,676,165 | |||||
Dun & Bradstreet Corp. | 87,990 | 6,646,765 | ||||||
MSCI, Inc., “A” (a) | 188,760 | 7,112,477 | ||||||
Verisk Analytics, Inc., “A” (a) | 175,830 | 6,087,235 | ||||||
|
| |||||||
$ | 31,522,642 | |||||||
|
| |||||||
Cable TV – 1.2% | ||||||||
DIRECTV, “A” (a) | 82,580 | $ | 4,196,716 | |||||
|
| |||||||
Chemicals – 0.8% | ||||||||
Monsanto Co. | 39,210 | $ | 2,844,293 | |||||
|
| |||||||
Computer Software – 6.3% | ||||||||
Autodesk, Inc. (a) | 59,970 | $ | 2,314,842 | |||||
Check Point Software Technologies Ltd. (a) | 73,050 | 4,152,893 | ||||||
Oracle Corp. | 489,560 | 16,111,420 | ||||||
|
| |||||||
$ | 22,579,155 | |||||||
|
| |||||||
Computer Software – Systems – 10.6% | ||||||||
Apple, Inc. (a) | 41,250 | $ | 13,846,388 | |||||
EMC Corp. (a) | 231,320 | 6,372,866 | ||||||
Hewlett-Packard Co. | 134,770 | 4,905,628 | ||||||
International Business Machines Corp. | 74,680 | 12,811,354 | ||||||
|
| |||||||
$ | 37,936,236 | |||||||
|
| |||||||
Consumer Products – 5.6% | ||||||||
Church & Dwight Co., Inc. | 64,850 | $ | 2,629,019 | |||||
Colgate-Palmolive Co. | 119,250 | 10,423,643 | ||||||
Procter & Gamble Co. | 107,993 | 6,865,115 | ||||||
|
| |||||||
$ | 19,917,777 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Electrical Equipment – 8.0% | ||||||||
Amphenol Corp., “A” | 65,060 | $ | 3,512,589 | |||||
Danaher Corp. | 271,450 | 14,384,136 | ||||||
Sensata Technologies Holding B.V. (a) | 160,090 | 6,027,389 | ||||||
W.W. Grainger, Inc. | 30,450 | 4,678,643 | ||||||
|
| |||||||
$ | 28,602,757 | |||||||
|
| |||||||
Electronics – 4.6% | ||||||||
ASML Holding N.V. | 51,750 | $ | 1,912,680 | |||||
Microchip Technology, Inc. | 198,090 | 7,509,592 | ||||||
Taiwan Semiconductor Manufacturing Co. Ltd., ADR | 545,716 | 6,881,479 | ||||||
|
| |||||||
$ | 16,303,751 | |||||||
|
| |||||||
Energy – Integrated – 2.4% | ||||||||
Chevron Corp. | 22,100 | $ | 2,272,764 | |||||
Exxon Mobil Corp. | 50,780 | 4,132,476 | ||||||
Hess Corp. | 27,210 | 2,034,220 | ||||||
|
| |||||||
$ | 8,439,460 | |||||||
|
| |||||||
Food & Beverages – 4.4% | ||||||||
Groupe Danone | 73,040 | $ | 5,449,529 | |||||
Mead Johnson Nutrition Co., “A” | 29,670 | 2,004,209 | ||||||
PepsiCo, Inc. | 118,670 | 8,357,928 | ||||||
|
| |||||||
$ | 15,811,666 | |||||||
|
| |||||||
Food & Drug Stores – 0.6% | ||||||||
CVS Caremark Corp. | 54,353 | $ | 2,042,586 | |||||
|
| |||||||
General Merchandise – 2.9% | ||||||||
Kohl’s Corp. | 93,320 | $ | 4,666,933 | |||||
Target Corp. | 120,210 | 5,639,051 | ||||||
|
| |||||||
$ | 10,305,984 | |||||||
|
| |||||||
Internet – 3.2% | ||||||||
eBay, Inc. (a) | 68,870 | $ | 2,222,435 | |||||
Google, Inc., “A” (a) | 17,890 | 9,059,138 | ||||||
|
| |||||||
$ | 11,281,573 | |||||||
|
| |||||||
Major Banks – 0.6% | ||||||||
Bank of New York Mellon Corp. | 78,048 | $ | 1,999,590 | |||||
|
| |||||||
Medical & Health Technology & Services – 1.9% | ||||||||
Medco Health Solutions, Inc. (a) | 39,580 | $ | 2,237,062 | |||||
Patterson Cos., Inc. | 138,490 | 4,554,936 | ||||||
|
| |||||||
$ | 6,791,998 | |||||||
|
| |||||||
Medical Equipment – 6.5% | ||||||||
Becton, Dickinson & Co. | 70,720 | $ | 6,093,942 | |||||
DENTSPLY International, Inc. | 114,450 | 4,358,256 | ||||||
Medtronic, Inc. | 46,640 | 1,797,039 | ||||||
St. Jude Medical, Inc. | 42,070 | 2,005,898 | ||||||
Thermo Fisher Scientific, Inc. (a) | 101,230 | 6,518,200 | ||||||
Waters Corp. (a) | 24,890 | 2,382,969 | ||||||
|
| |||||||
$ | 23,156,304 | |||||||
|
|
4
Table of Contents
MFS Investors Growth Stock Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Metals & Mining – 0.9% | ||||||||
BHP Billiton Ltd., ADR | 32,900 | $ | 3,113,327 | |||||
|
| |||||||
Network & Telecom – 1.3% | ||||||||
Cisco Systems, Inc. | 291,320 | $ | 4,547,505 | |||||
|
| |||||||
Oil Services – 4.8% | ||||||||
National Oilwell Varco, Inc. | 88,570 | $ | 6,927,060 | |||||
Schlumberger Ltd. | 118,350 | 10,225,440 | ||||||
|
| |||||||
$ | 17,152,500 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 3.3% | ||||||||
MasterCard, Inc., “A” | 13,610 | $ | 4,101,237 | |||||
Visa, Inc., “A” | 90,390 | 7,616,261 | ||||||
|
| |||||||
$ | 11,717,498 | |||||||
|
| |||||||
Pharmaceuticals – 2.8% | ||||||||
Abbott Laboratories | 62,180 | $ | 3,271,912 | |||||
Allergan, Inc. | 30,400 | 2,530,800 | ||||||
Johnson & Johnson | 63,840 | 4,246,637 | ||||||
|
| |||||||
$ | 10,049,349 | |||||||
|
| |||||||
Railroad & Shipping – 0.7% | ||||||||
Kuehne & Nagel, Inc. AG | 15,280 | $ | 2,319,034 | |||||
|
| |||||||
Specialty Chemicals – 1.7% | ||||||||
Praxair, Inc. | 56,980 | $ | 6,176,062 | |||||
|
| |||||||
Specialty Stores – 1.2% | ||||||||
Industria de Diseno Textil S.A. | 26,664 | $ | 2,429,821 | |||||
Staples, Inc. | 122,195 | 1,930,681 | ||||||
|
| |||||||
$ | 4,360,502 | |||||||
|
| |||||||
Total Common Stocks (Identified Cost, $299,155,721) | $ | 353,883,283 | ||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
MONEY MARKET FUNDS (v) – 0.5% | ||||||||
MFS Institutional Money Market Portfolio, 0.1%, at Cost and Net Asset Value | 1,733,210 | $ | 1,733,210 | |||||
|
| |||||||
Total Investments (Identified Cost, $300,888,931) | $ | 355,616,493 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – 0.2% | 645,946 | |||||||
|
| |||||||
Net Assets – 100.0% | $ | 356,262,439 | ||||||
|
|
(a) | Non-income producing security. |
(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 |
PLC | Public Limited Company |
See Notes to Financial Statements
5
Table of Contents
MFS Investors Growth Stock Series
FINANCIAL STATEMENTS | STATEMENT OF ASSETS AND LIABILITIES (unaudited)
This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
At 6/30/11 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $299,155,721) | $353,883,283 | |||||||
Underlying affiliated funds, at cost and value | 1,733,210 | |||||||
Total investments, at value (identified cost, $300,888,931) | $355,616,493 | |||||||
Receivables for | ||||||||
Fund shares sold | 1,024,505 | |||||||
Dividends | 387,738 | |||||||
Other assets | 1,558 | |||||||
Total assets | $357,030,294 | |||||||
Liabilities | ||||||||
Payable for fund shares reacquired | $624,602 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 14,736 | |||||||
Shareholder servicing costs | 327 | |||||||
Distribution and/or service fees | 3,745 | |||||||
Payable for independent Trustees’ compensation | 1,640 | |||||||
Accrued expenses and other liabilities | 122,805 | |||||||
Total liabilities | $767,855 | |||||||
Net assets | $356,262,439 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $293,435,427 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 54,728,074 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency transactions | 6,227,546 | |||||||
Undistributed net investment income | 1,871,392 | |||||||
Net assets | $356,262,439 | |||||||
Shares of beneficial interest outstanding | 30,993,728 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $79,202,233 | 6,765,035 | $11.71 | |||||||||
Service Class | 277,060,206 | 24,228,693 | 11.44 |
See Notes to Financial Statements
6
Table of Contents
MFS Investors Growth Stock Series
FINANCIAL STATEMENTS | STATEMENT OF OPERATIONS (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
Six months ended 6/30/11 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $2,698,662 | |||||||
Interest | 13,302 | |||||||
Dividends from underlying affiliated funds | 3,186 | |||||||
Foreign taxes withheld | (99,949 | ) | ||||||
Total investment income | $2,615,201 | |||||||
Expenses | ||||||||
Management fee | $1,338,530 | |||||||
Distribution and/or service fees | 345,221 | |||||||
Shareholder servicing costs | 20,295 | |||||||
Administrative services fee | 30,808 | |||||||
Independent Trustees’ compensation | 5,798 | |||||||
Custodian fee | 21,886 | |||||||
Shareholder communications | 45,890 | |||||||
Auditing fees | 24,251 | |||||||
Legal fees | 3,272 | |||||||
Miscellaneous | 11,105 | |||||||
Total expenses | $1,847,056 | |||||||
Reduction of expenses by investment adviser | (1,022 | ) | ||||||
Net expenses | $1,846,034 | |||||||
Net investment income | $769,167 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency transactions | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investment transactions | $10,121,434 | |||||||
Foreign currency transactions | 6,554 | |||||||
Net realized gain (loss) on investments and foreign currency transactions | $10,127,988 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $11,007,094 | |||||||
Translation of assets and liabilities in foreign currencies | (2,539 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $11,004,555 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $21,132,543 | |||||||
Change in net assets from operations | $21,901,710 |
See Notes to Financial Statements
7
Table of Contents
MFS Investors Growth Stock Series
FINANCIAL STATEMENTS | STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
| Six months ended 6/30/11 (unaudited |
) | | Year ended 12/31/10 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $769,167 | $1,123,346 | ||||||
Net realized gain (loss) on investments and foreign currency transactions | 10,127,988 | 56,122,396 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 11,004,555 | (20,715,958 | ) | |||||
Change in net assets from operations | $21,901,710 | $36,529,784 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(1,540,410 | ) | |||||
Change in net assets from fund share transactions | $(25,771,113 | ) | $(173,907,368 | ) | ||||
Total change in net assets | $(3,869,403 | ) | $(138,917,994 | ) | ||||
Net assets | ||||||||
At beginning of period | 360,131,842 | 499,049,836 | ||||||
At end of period (including undistributed net investment income of $1,871,392 and | $356,262,439 | $360,131,842 |
See Notes to Financial Statements
8
Table of Contents
MFS Investors Growth Stock Series
FINANCIAL STATEMENTS | FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund’s financial performance for the semiannual period and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
Initial Class | Six months ended 6/30/11 | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $11.01 | $9.83 | $7.10 | $11.82 | $10.65 | $9.90 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | �� | $0.03 | $0.05 | $0.05 | $0.06 | $0.05 | $0.03 | |||||||||||||||||
Net realized and unrealized gain (loss) on | 0.67 | 1.17 | 2.74 | (4.24 | ) | 1.16 | 0.72 | |||||||||||||||||
Total from investment operations | $0.70 | $1.22 | $2.79 | $(4.18 | ) | $1.21 | $0.75 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.04 | ) | $(0.06 | ) | $(0.06 | ) | $(0.04 | ) | $— | ||||||||||||||
From net realized gain on investments | — | — | — | (0.48 | ) | — | — | |||||||||||||||||
Total distributions declared to shareholders | $— | $(0.04 | ) | $(0.06 | ) | $(0.54 | ) | $(0.04 | ) | $— | ||||||||||||||
Net asset value, end of period | $11.71 | $11.01 | $9.83 | $7.10 | $11.82 | $10.65 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 6.36 | (n) | 12.47 | 39.55 | (36.87 | ) | 11.36 | 7.58 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.84 | (a) | 0.88 | 0.86 | 0.85 | 0.86 | 0.87 | |||||||||||||||||
Expenses after expense reductions (f) | 0.84 | (a) | 0.88 | 0.86 | 0.85 | 0.86 | 0.87 | |||||||||||||||||
Net investment income | 0.62 | (a)(l) | 0.49 | 0.63 | 0.60 | 0.47 | 0.33 | |||||||||||||||||
Portfolio turnover | 15 | 44 | 50 | 50 | 63 | 80 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $79,202 | $83,355 | $93,011 | $75,444 | $148,096 | $161,081 |
See Notes to Financial Statements
9
Table of Contents
MFS Investors Growth Stock Series
Financial Highlights – continued
Service Class | Six months ended 6/30/11 | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $10.76 | $9.62 | $6.95 | $11.57 | $10.43 | $9.72 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.02 | $0.02 | $0.03 | $0.03 | $0.02 | $0.01 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 0.66 | 1.15 | 2.68 | (4.14 | ) | 1.13 | 0.70 | |||||||||||||||||
Total from investment operations | $0.68 | $1.17 | $2.71 | $(4.11 | ) | $1.15 | $0.71 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.03 | ) | $(0.04 | ) | $(0.03 | ) | $(0.01 | ) | $— | ||||||||||||||
From net realized gain on investments | — | — | — | (0.48 | ) | — | — | |||||||||||||||||
Total distributions declared to shareholders | $— | $(0.03 | ) | $(0.04 | ) | $(0.51 | ) | $(0.01 | ) | $— | ||||||||||||||
Net asset value, end of period | $11.44 | $10.76 | $9.62 | $6.95 | $11.57 | $10.43 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 6.32 | (n) | 12.15 | 39.10 | (36.98 | ) | 11.02 | 7.30 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.09 | (a) | 1.12 | 1.11 | 1.10 | 1.11 | 1.12 | |||||||||||||||||
Expenses after expense reductions (f) | 1.09 | (a) | 1.12 | 1.11 | 1.10 | 1.11 | 1.12 | |||||||||||||||||
Net investment income | 0.38 | (a)(l) | 0.23 | 0.38 | 0.35 | 0.22 | 0.08 | |||||||||||||||||
Portfolio turnover | 15 | 44 | 50 | 50 | 63 | 80 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $277,060 | $276,777 | $406,039 | $178,256 | $297,186 | $300,026 |
(a) | Annualized. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(k) | The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown. |
(l) | Recognition of net investment income by the fund may be affected by the timing of the declaration of dividends by companies in which the fund invests and the actual annual net investment income ratio may differ. |
(n) | Not annualized. |
(r) | Certain expenses have been reduced without which performance would have been lower. |
(s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
See Notes to Financial Statements
10
Table of Contents
MFS Investors Growth Stock Series
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) | Business and Organization |
MFS Investors Growth Stock Series (the fund) is a series of MFS Variable Insurance Trust (the trust). The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The shareholders of each series of the trust are separate accounts of insurance companies, which offer variable annuity and/or life insurance products, and qualified retirement and pension plans.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued. The fund invests in foreign securities. Investments in foreign securities are vulnerable to the effects of changes in the relative values of the local currency and the U.S. dollar and to the effects of changes in each country’s legal, political, and economic environment.
Investment Valuations – 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 the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair
11
Table of Contents
MFS Investors Growth Stock Series
Notes to Financial Statements (unaudited) – continued
value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. The following is a summary of the levels used as of June 30, 2011 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities | $353,883,283 | $— | $— | $353,883,283 | ||||||||||||
Mutual Funds | 1,733,210 | — | — | 1,733,210 | ||||||||||||
Total Investments | $355,616,493 | $— | $— | $355,616,493 |
For further information regarding security characteristics, see the Portfolio of Investments.
Foreign Currency Translation – Purchases and sales of foreign investments, income, and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions or on the reporting date for foreign denominated receivables and payables. Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Gains and losses attributable to foreign exchange rate movements on receivables, payables, income and expenses are recorded for financial statement purposes as foreign currency transaction gains and losses. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.
Security Loans – State Street Bank and Trust Company (“State Street”), as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. The loans are collateralized by cash and/or U.S. Treasury and federal agency obligations in an amount typically at least equal to the market value of the securities loaned. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. State Street provides the fund with indemnification against Borrower default. The fund bears the risk of loss with respect to the investment of cash collateral. On loans collateralized by cash, the cash collateral is invested in a money market fund or short-term securities. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the fund and the lending agent. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the Borrower, and is allocated between the fund and the lending agent. Income from securities lending is included in interest income on the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income.
Indemnifications – Under the fund’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund’s maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.
Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. All premium and discount is amortized or accreted for financial statement purposes in accordance with U.S. generally accepted accounting principles. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend and interest payments received in additional securities are recorded on the ex-dividend or ex-interest date in an amount equal to the value of the security on such date.
The fund may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
Fees Paid Indirectly – The fund’s custody fee may be reduced according to an arrangement that measures the value of cash deposited with the custodian by the fund. For the six months ended June 30, 2011, custody fees were not reduced.
Tax Matters and Distributions – The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements.
12
Table of Contents
MFS Investors Growth Stock Series
Notes to Financial Statements (unaudited) – continued
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to wash sale loss deferrals.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/10 | ||||
Ordinary income (including any short-term capital gains) | $1,540,410 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/11 | ||||
Cost of investments | $303,502,273 | |||
Gross appreciation | 62,323,673 | |||
Gross depreciation | (10,209,453 | ) | ||
Net unrealized appreciation (depreciation) | $52,114,220 | |||
As of 12/31/10 | ||||
Undistributed ordinary income | 1,102,225 | |||
Capital loss carryforwards | (1,287,100 | ) | ||
Other temporary differences | 3,051 | |||
Net unrealized appreciation (depreciation) | 41,107,126 |
The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.
As of December 31, 2010, the fund had capital loss carryforwards available to offset future realized gains. Such losses expire as follows:
12/31/17 | $(1,287,100 | ) |
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and/or service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported on the Statements of Changes in Net Assets are presented by class as follows:
From net investment income | ||||||||
Six months ended 6/30/11 | Year ended 12/31/10 | |||||||
Initial Class | $— | $384,738 | ||||||
Service Class | — | 1,155,672 | ||||||
Total | $— | $1,540,410 |
(3) | Transactions with Affiliates |
Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates:
First $1 billion of average daily net assets | 0.75% | |||
Average daily net assets in excess of $1 billion | 0.65% |
The management fee incurred for the six months ended June 30, 2011 was equivalent to an annual effective rate of 0.75% of the fund’s average daily net assets.
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, is the distributor of shares of the fund. The Trustees have adopted a distribution plan for the Service Class shares pursuant to Rule 12b-1 under the Investment Company Act of 1940.
13
Table of Contents
MFS Investors Growth Stock Series
Notes to Financial Statements (unaudited) – continued
The fund’s distribution plan provides that the fund will pay MFD distribution and/or service fees equal to 0.25% per annum of its average daily net assets attributable to Service Class shares as partial consideration for services performed and expenses incurred by MFD and financial intermediaries (including participating insurance companies that invest in the fund to fund variable annuity and variable life insurance contracts, sponsors of qualified retirement and pension plans that invest in the fund, and affiliates of these participating insurance companies and plan sponsors) in connection with the sale and distribution of the Service Class shares. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries.
Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent. For the six months ended June 30, 2011, the fee was $19,917, which equated to 0.0112% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses paid by MFSC on behalf of the fund. For the six months ended June 30, 2011, these costs amounted to $378.
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund partially reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the six months ended June 30, 2011 was equivalent to an annual effective rate of 0.0173% of the fund’s average daily net assets.
Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – This fund and certain other funds managed by MFS (the funds) have entered into services agreements (the Agreements) which provide for payment of fees by the funds to Tarantino LLC and Griffin Compliance LLC in return for the provision of services of an Independent Chief Compliance Officer (ICCO) and Assistant ICCO, respectively, for the funds. The ICCO and Assistant ICCO are officers of the funds and the sole members of Tarantino LLC and Griffin Compliance LLC, respectively. The funds can terminate the Agreements with Tarantino LLC and Griffin Compliance LLC at any time under the terms of the Agreements. For the six months ended June 30, 2011, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $1,261 and are included in miscellaneous expense on the Statement of Operations. MFS has agreed to reimburse the fund for a portion of the payments made by the fund in the amount of $1,022, which is shown as a reduction of total expenses in the Statement of Operations. Additionally, MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ICCO and Assistant ICCO.
The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks a high level of current income consistent with preservation of capital and liquidity. Income earned on this investment is included in dividends from underlying affiliated funds on the Statement of Operations. This money market fund does not pay a management fee to MFS.
(4) | Portfolio Securities |
Purchases and sales of investments, other than U.S. Government securities, purchased option transactions, and short-term obligations, aggregated $53,914,652 and $77,182,246, respectively.
(5) | Shares of Beneficial Interest |
The fund’s Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
Six months ended 6/30/11 | Year ended 12/31/10 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 150,092 | $1,738,116 | 269,399 | $2,657,412 | ||||||||||||
Service Class | 898,449 | 10,001,713 | 2,893,154 | 27,830,907 | ||||||||||||
1,048,541 | $11,739,829 | 3,162,553 | $30,488,319 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 37,066 | $384,738 | ||||||||||||
Service Class | — | — | 113,635 | 1,155,672 | ||||||||||||
— | $— | 150,701 | $1,540,410 |
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MFS Investors Growth Stock Series
Notes to Financial Statements (unaudited) – continued
Six months ended 6/30/11 | Year ended 12/31/10 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (959,104 | ) | $(10,942,966 | ) | (2,191,471 | ) | $(21,583,137 | ) | ||||||||
Service Class | (2,385,973 | ) | (26,567,976 | ) | (19,478,141 | ) | (184,352,960 | ) | ||||||||
(3,345,077 | ) | $(37,510,942 | ) | (21,669,612 | ) | $(205,936,097 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (809,012 | ) | $(9,204,850 | ) | (1,885,006 | ) | $(18,540,987 | ) | ||||||||
Service Class | (1,487,524 | ) | (16,566,263 | ) | (16,471,352 | ) | (155,366,381 | ) | ||||||||
(2,296,536 | ) | $(25,771,113 | ) | (18,356,358 | ) | $(173,907,368 | ) |
(6) | Line of Credit |
The fund and certain other funds managed by MFS participate in a $1.1 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Federal Reserve funds rate or one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Federal Reserve funds rate plus an agreed upon spread. For the six months ended June 30, 2011, the fund’s commitment fee and interest expense were $1,770 and $0, respectively, and are included in miscellaneous expense on the Statement of Operations.
(7) | Transactions in Underlying Affiliated Funds – Affiliated Issuers |
An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the fund assumes the following to be affiliated issuers:
Underlying Affiliated Funds | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 4,378,230 | 24,340,367 | (26,985,387 | ) | 1,733,210 | |||||||||||
Underlying Affiliated Funds | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $3,186 | $1,733,210 |
15
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MFS Investors Growth Stock Series
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board’s most recent review and renewal of the fund’s Investment Advisory Agreement with MFS will be available on or about November 1, 2011 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds’ proxy voting policies and procedures is available without charge, upon request, by calling
1-800-225-2606, by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the Securities and Exchange Commission (the Commission) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. The fund’s Form N-Q is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and copies of this information may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
From time to time, MFS may post important information about the fund or the MFS funds on the MFS web site (mfs.com). This information is available by visiting the “News & Commentary” section of mfs.com or by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of mfs.com.
16
Table of Contents
rev. 3/11
FACTS | WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION? |
Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
What? | The types of personal information we collect and share depend on the product or service you have with us. This information can include:
• Social Security number and account balances • Account transactions and transaction history • Checking account information and wire transfer instructions
When you are no longer our customer, we continue to share your information as described in this notice. |
How? | All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons MFS chooses to share; and whether you can limit this sharing. |
Reasons we can share your personal information | Does MFS share? | Can you limit this sharing? | ||
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus | Yes | No | ||
For our marketing purposes – to offer our products and services to you | No | We don’t share | ||
For joint marketing with other financial companies | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your transactions and experiences | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your creditworthiness | No | We don’t share | ||
For nonaffiliates to market to you | No | We don’t share |
Questions? | Call 800-225-2606 or go to mfs.com. |
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Page 2 |
Who we are | ||
Who is providing this notice? | MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., MFS Fund Distributors, Inc., MFS Heritage Trust Company, and MFS Service Center, Inc. |
What we do | ||
How does MFS protect my personal information? | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you. | |
How does MFS collect my personal information? | We collect your personal information, for example, when you
• open an account or provide account information • direct us to buy securities or direct us to sell your securities • make a wire transfer
We also collect your personal information from others, such as credit bureaus, affiliates and other companies. | |
Why can’t I limit all sharing? | Federal law gives you the right to limit only
• sharing for affiliates’ everyday business purposes – information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you
State laws and individual companies may give you additional rights to limit sharing. |
Definitions | ||
Affiliates | Companies related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice. | |
Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share with nonaffiliates so they can market to you. | |
Joint Marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you.
• MFS doesn’t jointly market. |
Other important information | ||
If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours. |
18
Table of Contents
Table of Contents
MFS® Global Equity Series
MFS® Variable Insurance Trust
SEMIANNUAL REPORT
June 30, 2011
VGE-SEM
Table of Contents
MFS® GLOBAL EQUITY SERIES
The report is prepared for the general information of contract owners.
It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED Ÿ MAY LOSE VALUE Ÿ NO BANK OR CREDIT UNION GUARANTEE Ÿ
NOT A DEPOSIT Ÿ NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
Table of Contents
MFS Global Equity Series
Dear Contract Owners:
After about a year of almost uninterrupted macroeconomic and financial market improvement following the global credit crisis, investors grew more cautious in the middle of 2010 as fears grew that some European countries would default on their debt and as economic data showed a weakening
trend in the global economy. As a result asset prices fell significantly.
Last September the U.S. Federal Reserve Board’s promises to make lending conditions easier helped assuage market fears and drive asset prices off their recent lows. A combination of solid earnings and improving economic data gave an additional boost to investor sentiment.
In the following months, the renewed positive market mood, coupled with indications of better global macroeconomic activity, pushed many asset valuations to post-crisis highs. At the same time, global sovereign
bond yields initially rose as investors became concerned about inflationary pressures, driven by higher prices for oil as well as other commodities. However, by the end of the second quarter of 2011, a weakening macroeconomic backdrop and renewed concerns over debt problems in some eurozone countries pushed equities lower.
For the remainder of 2011, we are cautiously optimistic that economic growth will continue to improve and that the global economies will recover from the shocks of the past few years. We expect the pace of recovery worldwide to be uneven and volatile and acknowledge the elevated uncertainty created by events in Japan, Europe, the Middle East, as well as that created by the U.S. debate over raising the debt ceiling and the downgrade by Standard & Poor’s of the U.S. long-term credit rating.
As always, we continue to be mindful of the many economic challenges faced at the local, national, and international levels. It is in times such as these that we want to remind investors of the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with their advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2011
The opinions expressed in this letter are subject to change, may not be relied upon for investment advice, and no forecasts can be guaranteed.
1
Table of Contents
MFS Global Equity Series
Portfolio structure
Top ten holdings | ||||
Linde AG | 3.3% | |||
Nestle S.A. | 3.2% | |||
Heineken N.V. | 2.8% | |||
Reckitt Benckiser Group PLC | 2.4% | |||
Walt Disney Co. | 2.2% | |||
Diageo PLC | 2.0% | |||
Oracle Corp. | 1.9% | |||
3M Co. | 1.9% | |||
Accenture PLC, “A” | 1.9% | |||
State Street Corp. | 1.9% |
Currency exposure weightings (t) | ||||
United States | 47.4% | |||
Euro | 24.2% | |||
United Kingdom | 10.3% | |||
Switzerland | 10.0% | |||
Japan | 4.7% | |||
Sweden | 1.6% | |||
South Korea | 1.0% | |||
India | 0.4% | |||
Czech Republic | 0.4% | |||
Other Countries (o) | 0.0% |
Equity sectors | ||||
Consumer Staples | 20.0% | |||
Financial Services | 15.3% | |||
Health Care | 12.2% | |||
Basic Materials | 10.9% | |||
Retailing | 9.8% | |||
Technology | 7.6% | |||
Industrial Goods & Services | 6.5% | |||
Leisure | 5.6% | |||
Transportation | 3.8% | |||
Special Products & Services | 3.2% | |||
Energy | 2.7% | |||
Autos & Housing | 1.2% | |||
Utilities & Communications | 0.3% |
Issuer country weightings (e) | ||||
United States | 45.0% | |||
United Kingdom | 10.3% | |||
France | 10.2% | |||
Switzerland | 10.0% | |||
Germany | 7.4% | |||
Netherlands | 5.2% | |||
Japan | 4.7% | |||
Canada | 1.8% | |||
Sweden | 1.6% | |||
Other Countries | 3.8% |
(e) | Represents the portfolio’s exposure to issuer countries as a percentage of a portfolio’s total net assets. |
(o) | Less than 0.1%. |
(t) | Represents the portfolio’s exposure to a particular currency as a percentage of a portfolio’s total net assets. |
Percentages are based on net assets as of 6/30/11.
The portfolio is actively managed and current holdings may be different.
2
Table of Contents
MFS Global Equity Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2011 through June 30, 2011
As a contract holder of the fund, you incur ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2011 through June 30, 2011.
Actual Expenses
The first line for each share class in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the following table provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight the fund’s ongoing costs only and do not take into account the fees and expenses imposed under the variable contracts through which your investment in the fund is made. Therefore, the second line for each share class in the table is useful in comparing ongoing costs associated with an investment in vehicles (such as the fund) which fund benefits under variable annuity and variable life insurance contracts and to qualified pension and retirement plans only, and will not help you determine the relative total costs of investing in the fund through variable annuity and variable life insurance contracts. If the fees and expenses imposed under the variable contracts were included, your costs would have been higher.
Share Class | Annualized Expense Ratio | Beginning Account Value 1/01/11 | Ending Account Value 6/30/11 | Expenses Paid During Period (p) 1/01/11-6/30/11 | ||||||||||||||
Initial Class | Actual | 1.15% | $1,000.00 | $1,078.36 | $5.93 | |||||||||||||
Hypothetical (h) | 1.15% | $1,000.00 | $1,019.09 | $5.76 | ||||||||||||||
Service Class | Actual | 1.40% | $1,000.00 | $1,077.04 | $7.21 | |||||||||||||
Hypothetical (h) | 1.40% | $1,000.00 | $1,017.85 | $7.00 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid is equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
3
Table of Contents
MFS Global Equity Series
PORTFOLIO OF INVESTMENTS – 6/30/11 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 99.1% | ||||||||
Aerospace – 2.8% | ||||||||
Honeywell International, Inc. | 13,230 | $ | 788,376 | |||||
United Technologies Corp. | 5,560 | 492,116 | ||||||
$ | 1,280,492 | |||||||
Alcoholic Beverages – 5.9% | ||||||||
Diageo PLC | 44,715 | $ | 913,573 | |||||
Heineken N.V. | 20,888 | 1,256,156 | ||||||
Pernod Ricard S.A. (l) | 4,918 | 484,751 | ||||||
$ | 2,654,480 | |||||||
Apparel Manufacturers – 4.9% | ||||||||
Burberry Group PLC | 8,696 | $ | 202,371 | |||||
Compagnie Financiere Richemont S.A. | 8,607 | 563,563 | ||||||
LVMH Moet Hennessy Louis Vuitton S.A. | 4,628 | 832,871 | ||||||
NIKE, Inc., “B” | 6,700 | 602,866 | ||||||
$ | 2,201,671 | |||||||
Automotive – 0.4% | ||||||||
Harley-Davidson, Inc. | 4,100 | $ | 167,977 | |||||
Broadcasting – 4.7% | ||||||||
Omnicom Group, Inc. | 12,470 | $ | 600,555 | |||||
Walt Disney Co. | 25,380 | 990,835 | ||||||
WPP Group PLC | 44,169 | 552,935 | ||||||
$ | 2,144,325 | |||||||
Brokerage & Asset Managers – 0.8% | ||||||||
Deutsche Boerse AG | 4,919 | $ | 373,784 | |||||
Business Services – 2.9% | ||||||||
Accenture PLC, “A” | 13,950 | $ | 842,859 | |||||
Compass Group PLC | 47,330 | 456,534 | ||||||
$ | 1,299,393 | |||||||
Chemicals – 3.0% | ||||||||
3M Co. | 8,900 | $ | 844,165 | |||||
Givaudan S.A. | 294 | 311,047 | ||||||
Monsanto Co. | 3,090 | 224,149 | ||||||
$ | 1,379,361 | |||||||
Computer Software – 2.9% | ||||||||
Autodesk, Inc. (a) | 2,840 | $ | 109,624 | |||||
Dassault Systems S.A. (l) | 3,914 | 333,231 | ||||||
Oracle Corp. | 25,840 | 850,394 | ||||||
$ | 1,293,249 | |||||||
Computer Software – Systems – 1.0% | ||||||||
Canon, Inc. | 9,900 | $ | 472,100 | |||||
Conglomerates – 0.3% | ||||||||
Smiths Group PLC | 8,142 | $ | 156,941 | |||||
Construction – 0.8% | ||||||||
Sherwin-Williams Co. | 4,250 | $ | 356,448 | |||||
Consumer Products – 6.6% | ||||||||
Beiersdorf AG | 3,476 | $ | 225,572 | |||||
Colgate-Palmolive Co. | 7,030 | 614,492 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Consumer Products – continued | ||||||||
Kao Corp. | 5,100 | $ | 134,032 | |||||
Procter & Gamble Co. | 6,663 | 423,567 | ||||||
Reckitt Benckiser Group PLC | 19,704 | 1,087,864 | ||||||
Svenska Cellulosa Aktiebolaget | 35,080 | 493,878 | ||||||
$ | 2,979,405 | |||||||
Electrical Equipment – 3.7% | ||||||||
Amphenol Corp., “A” | 3,410 | $ | 184,106 | |||||
Legrand S.A. | 13,742 | 578,808 | ||||||
Rockwell Automation, Inc. | 1,440 | 124,934 | ||||||
Schneider Electric S.A. | 4,849 | 810,061 | ||||||
$ | 1,697,909 | |||||||
Electronics – 2.4% | ||||||||
Hoya Corp. | 17,100 | $ | 379,022 | |||||
Intel Corp. | 10,210 | 226,254 | ||||||
Samsung Electronics Co. Ltd. | 598 | 464,789 | ||||||
$ | 1,070,065 | |||||||
Energy – Independent – 0.9% | ||||||||
INPEX Corp. | 56 | $ | 413,433 | |||||
Energy – Integrated – 0.4% | ||||||||
Royal Dutch Shell PLC, “A” (a) | 5,084 | $ | 180,480 | |||||
Food & Beverages – 7.5% | ||||||||
Dr Pepper Snapple Group, Inc. | 7,800 | $ | 327,054 | |||||
General Mills, Inc. | 3,950 | 147,019 | ||||||
Groupe Danone | 10,268 | 766,098 | ||||||
J.M. Smucker Co. | 5,155 | 394,048 | ||||||
Nestle S.A. | 23,656 | 1,470,147 | ||||||
PepsiCo, Inc. | 3,870 | 272,564 | ||||||
$ | 3,376,930 | |||||||
Food & Drug Stores – 2.6% | ||||||||
Lawson, Inc. | 2,400 | $ | 126,048 | |||||
Tesco PLC | 45,682 | 294,736 | ||||||
Walgreen Co. | 17,300 | 734,558 | ||||||
$ | 1,155,342 | |||||||
Gaming & Lodging – 0.9% | ||||||||
Ladbrokes PLC | 57,155 | $ | 139,798 | |||||
William Hill PLC | 70,325 | 257,791 | ||||||
$ | 397,589 | |||||||
General Merchandise – 1.0% | ||||||||
Target Corp. | 10,120 | $ | 474,729 | |||||
Insurance – 1.5% | ||||||||
AXA | 15,974 | $ | 362,991 | |||||
Swiss Re Ltd. | 5,431 | 304,963 | ||||||
$ | 667,954 | |||||||
Major Banks – 7.9% | ||||||||
Bank of New York Mellon Corp. | 26,990 | $ | 691,484 | |||||
Erste Group Bank AG | 8,981 | 470,810 |
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MFS Global Equity Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Major Banks – continued | ||||||||
Goldman Sachs Group, Inc. | 3,980 | $ | 529,698 | |||||
Julius Baer Group Ltd. | 10,888 | 449,765 | ||||||
Standard Chartered PLC | 22,898 | 601,968 | ||||||
State Street Corp. | 18,690 | 842,732 | ||||||
|
| |||||||
$ | 3,586,457 | |||||||
|
| |||||||
Medical Equipment – 7.5% | ||||||||
DENTSPLY International, Inc. | 10,190 | $ | 388,035 | |||||
Medtronic, Inc. | 17,630 | 679,284 | ||||||
Sonova Holding AG | 2,149 | 200,650 | ||||||
St. Jude Medical, Inc. | 13,840 | 659,891 | ||||||
Synthes, Inc. (n) | 801 | 140,907 | ||||||
Thermo Fisher Scientific, Inc. (a) | 9,530 | 613,637 | ||||||
Waters Corp. (a) | 5,830 | 558,164 | ||||||
Zimmer Holdings, Inc. (a) | 2,620 | 165,584 | ||||||
|
| |||||||
$ | 3,406,152 | |||||||
|
| |||||||
Network & Telecom – 1.3% | ||||||||
Cisco Systems, Inc. | 37,630 | $ | 587,404 | |||||
|
| |||||||
Oil Services – 1.4% | ||||||||
National Oilwell Varco, Inc. | 5,150 | $ | 402,782 | |||||
Schlumberger Ltd. | 2,860 | 247,104 | ||||||
|
| |||||||
$ | 649,886 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 5.1% | ||||||||
Aeon Credit Service Co. Ltd. | 9,100 | $ | 124,114 | |||||
American Express Co. | 8,310 | 429,627 | ||||||
Banco Santander Brasil S.A., ADR | 22,930 | 268,510 | ||||||
ICICI Bank Ltd. | 8,168 | 200,205 | ||||||
Komercni Banka A.S. | 749 | 182,661 | ||||||
UBS AG (a) | 29,105 | 530,692 | ||||||
Visa, Inc., “A” | 6,790 | 572,125 | ||||||
|
| |||||||
$ | 2,307,934 | |||||||
|
| |||||||
Pharmaceuticals – 4.7% | ||||||||
Bayer AG | 9,152 | $ | 735,787 | |||||
Johnson & Johnson | 6,200 | 412,424 | ||||||
Merck KGaA | 4,998 | 543,154 | ||||||
Roche Holding AG | 2,673 | 447,328 | ||||||
|
| |||||||
$ | 2,138,693 | |||||||
|
| |||||||
Railroad & Shipping – 2.1% | ||||||||
Canadian National Railway Co. | 10,414 | $ | 832,079 | |||||
Kuehne & Nagel, Inc. AG | 800 | 121,415 | ||||||
|
| |||||||
$ | 953,494 | |||||||
|
| |||||||
Specialty Chemicals – 7.9% | ||||||||
Akzo Nobel N.V. | 11,817 | $ | 745,434 | |||||
L’Air Liquide S.A. | 3,212 | 460,385 | ||||||
Linde AG | 8,483 | 1,487,266 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Specialty Chemicals – continued | ||||||||
Praxair, Inc. | 4,070 | $ | 441,147 | |||||
Shin-Etsu Chemical Co. Ltd. | 8,600 | 461,298 | ||||||
|
| |||||||
$ | 3,595,530 | |||||||
|
| |||||||
Specialty Stores – 1.3% | ||||||||
Abercrombie & Fitch Co., “A” | 1,070 | $ | 71,604 | |||||
Hennes & Mauritz AB, “B” | 6,750 | 232,748 | ||||||
Sally Beauty Holdings, Inc. (a) | 8,590 | 146,889 | ||||||
Urban Outfitters, Inc. (a) | 4,640 | 130,616 | ||||||
|
| |||||||
$ | 581,857 | |||||||
|
| |||||||
Trucking – 1.7% | ||||||||
TNT N.V. (a) | 15,315 | $ | 158,839 | |||||
United Parcel Service, Inc., “B” | 8,360 | 609,695 | ||||||
|
| |||||||
$ | 768,534 | |||||||
|
| |||||||
Utilities – Electric Power – 0.3% | ||||||||
Red Electrica de Espana | 2,401 | $ | 144,930 | |||||
|
| |||||||
Total Common Stocks (Identified Cost, $38,066,490) | $ | 44,914,928 | ||||||
|
| |||||||
MONEY MARKET FUNDS (v) – 0.5% | ||||||||
MFS Institutional Money Market Portfolio, 0.1%, at Cost and Net Asset Value | 246,256 | $ | 246,256 | |||||
|
| |||||||
COLLATERAL FOR SECURITIES LOANED – 1.4% | ||||||||
Navigator Securities Lending Prime Portfolio, 0.23%, at Cost and Net Asset Value (j) | 633,386 | $ | 633,386 | |||||
|
| |||||||
Total Investments (Identified Cost, $38,946,132) | $ | 45,794,570 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – (1.0)% | (456,914 | ) | ||||||
|
| |||||||
Net Assets – 100.0% | $ | 45,337,656 | ||||||
|
|
(a) | Non-income producing security. |
(j) | The rate quoted is the annualized seven-day yield of the portfolio at period end. |
(l) | A portion of this security is on loan. |
(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 $140,907, representing 0.3% of net assets. |
(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 |
PLC | Public Limited Company |
See Notes to Financial Statements
5
Table of Contents
MFS Global Equity Series
FINANCIAL STATEMENTS | STATEMENT OF ASSETS AND LIABILITIES (unaudited)
This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
At 6/30/11 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $38,699,876) | $45,548,314 | |||||||
Underlying affiliated funds, at cost and value | 246,256 | |||||||
Total investments, at value, including $607,528 of securities on loan (identified cost, $38,946,132) | $45,794,570 | |||||||
Cash | 2,974 | |||||||
Foreign currency, at value (identified cost, $14,486) | 14,544 | |||||||
Receivables for | ||||||||
Investments sold | 16,707 | |||||||
Fund shares sold | 135,150 | |||||||
Interest and dividends | 76,212 | |||||||
Receivable from investment adviser | 1,142 | |||||||
Other assets | 329 | |||||||
Total assets | $46,041,628 | |||||||
Liabilities | ||||||||
Payable for fund shares reacquired | $27,942 | |||||||
Collateral for securities loaned, at value | 633,386 | |||||||
Payable to affiliates | ||||||||
Shareholder servicing costs | 61 | |||||||
Distribution and/or service fees | 42 | |||||||
Payable for independent Trustees’ compensation | 220 | |||||||
Accrued expenses and other liabilities | 42,321 | |||||||
Total liabilities | $703,972 | |||||||
Net assets | $45,337,656 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $37,616,510 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets | 6,849,982 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency transactions | 162,603 | |||||||
Undistributed net investment income | 708,561 | |||||||
Net assets | $45,337,656 | |||||||
Shares of beneficial interest outstanding | 3,137,977 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $42,263,872 | 2,924,559 | $14.45 | |||||||||
Service Class | 3,073,784 | 213,418 | 14.40 |
See Notes to Financial Statements
6
Table of Contents
MFS Global Equity Series
FINANCIAL STATEMENTS | STATEMENT OF OPERATIONS (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
Six months ended 6/30/11 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $666,862 | |||||||
Interest | 10,990 | |||||||
Dividends from underlying affiliated funds | 320 | |||||||
Foreign taxes withheld | (54,356 | ) | ||||||
Total investment income | $623,816 | |||||||
Expenses | ||||||||
Management fee | $217,697 | |||||||
Distribution and/or service fees | 3,331 | |||||||
Shareholder servicing costs | 2,540 | |||||||
Administrative services fee | 8,679 | |||||||
Independent Trustees’ compensation | 759 | |||||||
Custodian fee | 21,087 | |||||||
Shareholder communications | 10,458 | |||||||
Auditing fees | 24,645 | |||||||
Legal fees | 357 | |||||||
Miscellaneous | 5,799 | |||||||
Total expenses | $295,352 | |||||||
Fees paid indirectly | (1 | ) | ||||||
Reduction of expenses by investment adviser | (41,290 | ) | ||||||
Net expenses | $254,061 | |||||||
Net investment income | $369,755 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency transactions | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investment transactions (net of $79 country tax) | $840,741 | |||||||
Foreign currency transactions | 3,096 | |||||||
Net realized gain (loss) on investments and foreign currency transactions | $843,837 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments (net of $7,143 decrease in deferred country tax) | $2,094,975 | |||||||
Translation of assets and liabilities in foreign currencies | (1,700 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $2,093,275 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $2,937,112 | |||||||
Change in net assets from operations | $3,306,867 |
See Notes to Financial Statements
7
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MFS Global Equity Series
FINANCIAL STATEMENTS | STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
| Six months ended 6/30/11 (unaudited | ) | | Year ended 12/31/10 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $369,755 | $347,329 | ||||||
Net realized gain (loss) on investments and foreign currency transactions | 843,837 | 1,783,785 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 2,093,275 | 2,560,351 | ||||||
Change in net assets from operations | $3,306,867 | $4,691,465 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(401,053 | ) | |||||
Change in net assets from fund share transactions | $(408,961 | ) | $(3,517,283 | ) | ||||
Total change in net assets | $2,897,906 | $773,129 | ||||||
Net assets | ||||||||
At beginning of period | 42,439,750 | 41,666,621 | ||||||
At end of period (including undistributed net investment income of $708,561 and | $45,337,656 | $42,439,750 |
See Notes to Financial Statements
8
Table of Contents
MFS Global Equity Series
FINANCIAL STATEMENTS | FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund’s financial performance for the semiannual period and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
Initial Class | Six months ended 6/30/11 | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $13.40 | $12.04 | $9.36 | $15.47 | $15.45 | $13.49 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.12 | $0.11 | $0.12 | $0.20 | $0.13 | $0.37 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.93 | 1.37 | 2.78 | (5.01 | ) | 1.22 | 2.76 | |||||||||||||||||
Total from investment operations | $1.05 | $1.48 | $2.90 | $(4.81 | ) | $1.35 | $3.13 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.12 | ) | $(0.22 | ) | $(0.14 | ) | $(0.32 | ) | $(0.07 | ) | |||||||||||||
From net realized gain on investments | — | — | — | (1.16 | ) | (1.01 | ) | (1.10 | ) | |||||||||||||||
Total distributions declared to shareholders | $— | $(0.12 | ) | $(0.22 | ) | $(1.30 | ) | $(1.33 | ) | $(1.17 | ) | |||||||||||||
Net asset value, end of period | $14.45 | $13.40 | $12.04 | $9.36 | $15.47 | $15.45 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 7.84 | (n) | 12.36 | 31.98 | (33.77 | ) | 9.19 | 24.41 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.34 | (a) | 1.38 | 1.52 | 1.36 | 1.41 | 1.49 | |||||||||||||||||
Expenses after expense reductions (f) | 1.15 | (a) | 1.15 | 1.15 | 1.15 | 1.15 | 1.15 | |||||||||||||||||
Net investment income | 1.71 | (a)(l) | 0.88 | 1.18 | 1.61 | 0.88 | 2.60 | |||||||||||||||||
Portfolio turnover | 8 | 18 | 23 | 28 | 38 | 37 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $42,264 | $39,966 | $39,418 | $33,523 | $56,246 | $53,388 |
See Notes to Financial Statements
9
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MFS Global Equity Series
Financial Highlights – continued
Service Class | Six months | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $13.37 | $12.03 | $9.35 | $15.47 | $15.47 | $13.53 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.11 | $0.08 | $0.08 | $0.16 | $0.09 | $0.31 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.92 | 1.36 | 2.81 | (5.01 | ) | 1.23 | 2.79 | |||||||||||||||||
Total from investment operations | $1.03 | $1.44 | $2.89 | $(4.85 | ) | $1.32 | $3.10 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.10 | ) | $(0.21 | ) | $(0.11 | ) | $(0.31 | ) | $(0.06 | ) | |||||||||||||
From net realized gain on investments | — | — | — | (1.16 | ) | (1.01 | ) | (1.10 | ) | |||||||||||||||
Total distributions declared to shareholders | $— | $(0.10 | ) | $(0.21 | ) | $(1.27 | ) | $(1.32 | ) | $(1.16 | ) | |||||||||||||
Net asset value, end of period | $14.40 | $13.37 | $12.03 | $9.35 | $15.47 | $15.47 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 7.70 | (n) | 12.05 | 31.80 | (33.97 | ) | 8.97 | 24.02 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.59 | (a) | 1.63 | 1.75 | 1.60 | 1.65 | 1.76 | |||||||||||||||||
Expenses after expense reductions (f) | 1.40 | (a) | 1.40 | 1.40 | 1.40 | 1.40 | 1.40 | |||||||||||||||||
Net investment income | 1.56 | (a)(l) | 0.64 | 0.82 | 1.32 | 0.60 | 2.29 | |||||||||||||||||
Portfolio turnover | 8 | 18 | 23 | 28 | 38 | 37 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $3,074 | $2,474 | $2,248 | $695 | $628 | $271 |
(a) | Annualized. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(k) | The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown. |
(l) | Recognition of net investment income by the fund may be affected by the timing of the declaration of dividends by companies in which the fund invests and the actual annual net investment income ratio may differ. |
(n) | Not annualized. |
(r) | Certain expenses have been reduced without which performance would have been lower. |
(s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
See Notes to Financial Statements
10
Table of Contents
MFS Global Equity Series
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) | Business and Organization |
MFS Global Equity Series (the fund) is a series of MFS Variable Insurance Trust (the trust). The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The shareholders of each series of the trust are separate accounts of insurance companies, which offer variable annuity and/or life insurance products, and qualified retirement and pension plans.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued. The fund invests in foreign securities. Investments in foreign securities are vulnerable to the effects of changes in the relative values of the local currency and the U.S. dollar and to the effects of changes in each country’s legal, political, and economic environment.
Investment Valuations – 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 the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair
11
Table of Contents
MFS Global Equity Series
Notes to Financial Statements (unaudited) – continued
value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. The following is a summary of the levels used as of June 30, 2011 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $19,973,616 | $— | $— | $19,973,616 | ||||||||||||
United Kingdom | 4,664,510 | — | — | 4,664,510 | ||||||||||||
France | 4,629,195 | — | — | 4,629,195 | ||||||||||||
Switzerland | 4,540,478 | — | — | 4,540,478 | ||||||||||||
Germany | 3,365,563 | — | — | 3,365,563 | ||||||||||||
Netherlands | 2,340,910 | — | — | 2,340,910 | ||||||||||||
Japan | 124,114 | 1,985,933 | — | 2,110,047 | ||||||||||||
Canada | 832,079 | — | — | 832,079 | ||||||||||||
Sweden | 726,625 | — | — | 726,625 | ||||||||||||
Other Countries | 1,066,911 | 664,994 | — | 1,731,905 | ||||||||||||
Mutual Funds | 879,642 | — | — | 879,642 | ||||||||||||
Total Investments | $43,143,643 | $2,650,927 | $— | $45,794,570 |
For further information regarding security characteristics, see the Portfolio of Investments.
Foreign Currency Translation – Purchases and sales of foreign investments, income, and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions or on the reporting date for foreign denominated receivables and payables. Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Gains and losses attributable to foreign exchange rate movements on receivables, payables, income and expenses are recorded for financial statement purposes as foreign currency transaction gains and losses. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.
Security Loans – State Street Bank and Trust Company (“State Street”), as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. The loans are collateralized by cash and/or U.S. Treasury and federal agency obligations in an amount typically at least equal to the market value of the securities loaned. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. State Street provides the fund with indemnification against Borrower default. The fund bears the risk of loss with respect to the investment of cash collateral. On loans collateralized by cash, the cash collateral is invested in a money market fund or short-term securities. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the fund and the lending agent. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the Borrower, and is allocated between the fund and the lending agent. Income from securities lending is included in interest income on the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income.
Indemnifications – Under the fund’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund’s maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.
Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend and interest payments received in additional securities are recorded on the ex-dividend or ex-interest date in an amount equal to the value of the security on such date.
The fund may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in
12
Table of Contents
MFS Global Equity Series
Notes to Financial Statements (unaudited) – continued
unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
Fees Paid Indirectly – The fund’s custody fee may be reduced according to an arrangement that measures the value of cash deposited with the custodian by the fund. This amount, for the six months ended June 30, 2011, is shown as a reduction of total expenses on the Statement of Operations.
Tax Matters and Distributions – The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to wash sale loss deferrals.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/10 | ||||
Ordinary income (including any short-term capital gains) | $401,053 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/11 | ||||
Cost of investments | $39,083,312 | |||
Gross appreciation | 9,286,014 | |||
Gross depreciation | (2,574,756 | ) | ||
Net unrealized appreciation (depreciation) | $6,711,258 | |||
As of 12/31/10 | ||||
Undistributed ordinary income | 339,310 | |||
Capital loss carryforwards | (544,054 | ) | ||
Other temporary differences | (4,403 | ) | ||
Net unrealized appreciation (depreciation) | 4,623,426 |
The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.
As of December 31, 2010, the fund had capital loss carryforwards available to offset future realized gains. Such losses expire as follows:
12/31/17 | $(544,054 | ) |
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and/or service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported on the Statements of Changes in Net Assets are presented by class as follows:
From net investment income | ||||||||
Six months ended 6/30/11 | Year ended 12/31/10 | |||||||
Initial Class | $— | $380,540 | ||||||
Service Class | — | 20,513 | ||||||
Total | $— | $401,053 |
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MFS Global Equity Series
Notes to Financial Statements (unaudited) – continued
(3) | Transactions with Affiliates |
Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates:
First $1 billion of average daily net assets | 1.00% | |||
Average daily net assets in excess of $1 billion | 0.90% |
Effective May 1, 2011, the investment adviser has agreed in writing to reduce its management fee to 0.90% of average daily net assets. This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until April 30, 2013. This management fee reduction amounted to $7,498, which is shown as a reduction of total expenses in the Statement of Operations. The management fee incurred for the six months ended June 30, 2011 was equivalent to an annual effective rate of 0.96% of the fund’s average daily net assets.
The investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, exclusive of interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses, such that total annual operating expenses do not exceed 1.15% of average daily net assets for the Initial Class shares and 1.40% of average daily net assets for the Service Class shares. This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until April 30, 2013. For the six months ended June 30, 2011, this reduction amounted to $33,668 and is reflected as a reduction of total expenses in the Statement of Operations.
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, is the distributor of shares of the fund. The Trustees have adopted a distribution plan for the Service Class shares pursuant to Rule 12b-1 under the Investment Company Act of 1940.
The fund’s distribution plan provides that the fund will pay MFD distribution and/or service fees equal to 0.25% per annum of its average daily net assets attributable to Service Class shares as partial consideration for services performed and expenses incurred by MFD and financial intermediaries (including participating insurance companies that invest in the fund to fund variable annuity and variable life insurance contracts, sponsors of qualified retirement and pension plans that invest in the fund, and affiliates of these participating insurance companies and plan sponsors) in connection with the sale and distribution of the Service Class shares. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries.
Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent. For the six months ended June 30, 2011, the fee was $2,430, which equated to 0.0112% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses paid by MFSC on behalf of the fund. For the six months ended June 30, 2011, these costs amounted to $110.
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund partially reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the six months ended June 30, 2011 was equivalent to an annual effective rate of 0.0398% of the fund’s average daily net assets.
Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – This fund and certain other funds managed by MFS (the funds) have entered into services agreements (the Agreements) which provide for payment of fees by the funds to Tarantino LLC and Griffin Compliance LLC in return for the provision of services of an Independent Chief Compliance Officer (ICCO) and Assistant ICCO, respectively, for the funds. The ICCO and Assistant ICCO are officers of the funds and the sole members of Tarantino LLC and Griffin Compliance LLC, respectively. The funds can terminate the Agreements with Tarantino LLC and Griffin Compliance LLC at any time under the terms of the Agreements. For the six months ended June 30, 2011, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $153 and are included in miscellaneous expense on the Statement of Operations. MFS has agreed to reimburse the fund for a portion of the payments made by the fund in the amount of $124, which is shown as a reduction of total expenses in the Statement of Operations. Additionally, MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ICCO and Assistant ICCO.
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MFS Global Equity Series
Notes to Financial Statements (unaudited) – continued
The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks a high level of current income consistent with preservation of capital and liquidity. Income earned on this investment is included in dividends from underlying affiliated funds on the Statement of Operations. This money market fund does not pay a management fee to MFS.
(4) | Portfolio Securities |
Purchases and sales of investments, other than U.S. Government securities, purchased option transactions, and short-term obligations, aggregated $3,455,138 and $3,589,381, respectively.
(5) | Shares of Beneficial Interest |
The fund’s Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
Six months ended 6/30/11 | Year ended 12/31/10 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 268,153 | $3,737,933 | 304,450 | $3,649,601 | ||||||||||||
Service Class | 73,814 | 1,018,228 | 66,276 | 803,097 | ||||||||||||
341,967 | $4,756,161 | 370,726 | $4,452,698 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 30,516 | $380,540 | ||||||||||||
Service Class | — | — | 1,646 | 20,513 | ||||||||||||
— | $— | 32,162 | $401,053 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (326,399 | ) | $(4,543,829 | ) | (625,414 | ) | $(7,517,887 | ) | ||||||||
Service Class | (45,488 | ) | (621,293 | ) | (69,781 | ) | (853,147 | ) | ||||||||
(371,887 | ) | $(5,165,122 | ) | (695,195 | ) | $(8,371,034 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (58,246 | ) | $(805,896 | ) | (290,448 | ) | $(3,487,746 | ) | ||||||||
Service Class | 28,326 | 396,935 | (1,859 | ) | (29,537 | ) | ||||||||||
(29,920 | ) | $(408,961 | ) | (292,307 | ) | $(3,517,283 | ) |
(6) | Line of Credit |
The fund and certain other funds managed by MFS participate in a $1.1 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Federal Reserve funds rate or one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Federal Reserve funds rate plus an agreed upon spread. For the six months ended June 30, 2011, the fund’s commitment fee and interest expense were $206 and $0, respectively, and are included in miscellaneous expense on the Statement of Operations.
(7) | Transactions in Underlying Affiliated Funds – Affiliated Issuers |
An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the fund assumes the following to be affiliated issuers:
Underlying Affiliated Funds | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 71,174 | 4,606,554 | (4,431,472 | ) | 246,256 | |||||||||||
Underlying Affiliated Funds | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $320 | $246,256 |
15
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MFS Global Equity Series
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board’s most recent review and renewal of the fund’s Investment Advisory Agreement with MFS will be available on or about November 1, 2011 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds’ proxy voting policies and procedures is available without charge, upon request, by calling
1-800-225-2606, by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the Securities and Exchange Commission (the Commission) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. The fund’s Form N-Q is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and copies of this information may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
From time to time, MFS may post important information about the fund or the MFS funds on the MFS web site (mfs.com). This information is available by visiting the “News & Commentary” section of mfs.com or by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of mfs.com.
16
Table of Contents
rev. 3/11
FACTS | WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION? |
Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
What? | The types of personal information we collect and share depend on the product or service you have with us. This information can include:
• Social Security number and account balances • Account transactions and transaction history • Checking account information and wire transfer instructions
When you are no longer our customer, we continue to share your information as described in this notice. |
How? | All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons MFS chooses to share; and whether you can limit this sharing. |
Reasons we can share your personal information | Does MFS share? | Can you limit this sharing? | ||
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus | Yes | No | ||
For our marketing purposes – to offer our products and services to you | No | We don’t share | ||
For joint marketing with other financial companies | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your transactions and experiences | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your creditworthiness | No | We don’t share | ||
For nonaffiliates to market to you | No | We don’t share |
Questions? | Call 800-225-2606 or go to mfs.com. |
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Page 2 |
Who we are | ||
Who is providing this notice? | MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., MFS Fund Distributors, Inc., MFS Heritage Trust Company, and MFS Service Center, Inc. |
What we do | ||
How does MFS protect my personal information? | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you. | |
How does MFS collect my personal information? | We collect your personal information, for example, when you
• open an account or provide account information • direct us to buy securities or direct us to sell your securities • make a wire transfer
We also collect your personal information from others, such as credit bureaus, affiliates and other companies. | |
Why can’t I limit all sharing? | Federal law gives you the right to limit only
• sharing for affiliates’ everyday business purposes – information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you
State laws and individual companies may give you additional rights to limit sharing. |
Definitions | ||
Affiliates | Companies related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice. | |
Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share with nonaffiliates so they can market to you. | |
Joint Marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you.
• MFS doesn’t jointly market. |
Other important information | ||
If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours. |
18
Table of Contents
Table of Contents
MFS® Total Return Series
MFS® Variable Insurance Trust
SEMIANNUAL REPORT
June 30, 2011
VTR-SEM
Table of Contents
MFS® TOTAL RETURN SERIES
The report is prepared for the general information of contract owners. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED Ÿ MAY LOSE VALUE Ÿ NO BANK OR CREDIT UNION GUARANTEE Ÿ
NOT A DEPOSIT Ÿ NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
Table of Contents
MFS Total Return Series
Dear Contract Owners:
After about a year of almost uninterrupted macroeconomic and financial market improvement following the global credit crisis, investors grew more cautious in the middle of 2010 as fears grew that some European countries would default on their debt and as economic data showed a weakening
trend in the global economy. As a result asset prices fell significantly.
Last September the U.S. Federal Reserve Board’s promises to make lending conditions easier helped assuage market fears and drive asset prices off their recent lows. A combination of solid earnings and improving economic data gave an additional boost to investor sentiment.
In the following months, the renewed positive market mood, coupled with indications of better global macroeconomic activity, pushed many asset valuations to post-crisis highs. At the same time, global sovereign
bond yields initially rose as investors became concerned about inflationary pressures, driven by higher prices for oil as well as other commodities. However, by the end of the second quarter of 2011, a weakening macroeconomic backdrop and renewed concerns over debt problems in some eurozone countries pushed equities lower.
For the remainder of 2011, we are cautiously optimistic that economic growth will continue to improve and that the global economies will recover from the shocks of the past few years. We expect the pace of recovery worldwide to be uneven and volatile and acknowledge the elevated uncertainty created by events in Japan, Europe, the Middle East, as well as that created by the U.S. debate over raising the debt ceiling and the downgrade by Standard & Poor’s of the U.S. long-term credit rating.
As always, we continue to be mindful of the many economic challenges faced at the local, national, and international levels. It is in times such as these that we want to remind investors of the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with their advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2011
The opinions expressed in this letter are subject to change, may not be relied upon for investment advice, and no forecasts can be guaranteed.
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Table of Contents
MFS Total Return Series
Portfolio structure (i)
Top ten holdings (i) | ||||
Fannie Mae, 5.5%, 30 Years | 2.3% | |||
U.S. Treasury Notes, 3.75%, 2018 | 2.2% | |||
JP Morgan Chase & Co. | 2.1% | |||
Exxon Mobil Corp. | 1.8% | |||
Philip Morris International Inc. | 1.7% | |||
Lockhead Martin Corp. | 1.6% | |||
United Technologies | 1.5% | |||
U.S. Treasury Notes, 2.75%, 2013 | 1.4% | |||
Johnson & Johnson | 1.4% | |||
Goldman Sachs | 1.3% |
Composition including fixed income credit quality (a)(i) | ||||
AAA | 2.2% | |||
AA | 1.8% | |||
A | 3.7% | |||
BBB | 4.9% | |||
BB | 0.2% | |||
B | 0.1% | |||
CCC (o) | 0.0% | |||
CC (o) | 0.0% | |||
D (o) | 0.0% | |||
U.S. Government | 12.3% | |||
Federal Agencies | 13.4% | |||
Not Rated (o) | 0.0% | |||
Non-Fixed Income | 60.2% | |||
Cash & Other | 1.2% |
Equity sectors | ||||
Financial Services | 12.9% | |||
Energy | 7.1% | |||
Consumer Staples | 6.9% | |||
Health Care | 6.8% | |||
Industrial Goods & Services | 6.3% | |||
Utilities & Communications | 4.7% | |||
Technology | 3.8% | |||
Leisure | 3.5% | |||
Basic Materials | 2.8% | |||
Retailing | 2.5% | |||
Autos & Housing | 1.4% | |||
Special Products & Services | 1.0% | |||
Transportation | 0.5% |
Fixed income sectors (i) | ||||
Mortgage-Backed Securities | 12.5% | |||
U.S. Treasury Securities | 12.3% | |||
High Grade Corporates | 9.1% | |||
Commercial Mortgage-Backed Securities | 2.0% | |||
U.S. Government Agencies | 0.8% | |||
Non-U.S. Government Bonds | 0.8% | |||
Emerging Markets Bonds | 0.5% | |||
High Yield Corporates | 0.2% | |||
Collateralized Debt Obligations | 0.2% | |||
Asset-Backed Securities | 0.2% |
(a) | For all securities other than those specifically described below, ratings are assigned to underlying securities utilizing ratings from Moody’s, Fitch, and Standard & Poor’s rating agencies and applying the following hierarchy: If all three agencies provide a rating, the middle rating (after dropping the highest and lowest ratings) is assigned; if two of the three agencies rate a security, the lower of the two is assigned. Ratings are shown in the S&P and Fitch scale (e.g., AAA). All ratings are subject to change. U.S. Government includes securities issued by the U.S. Department of the Treasury. Federal Agencies includes rated and unrated U.S. Agency fixed-income securities, U.S. Agency mortgage-backed securities, and collateralized mortgage obligations of U.S. Agency mortgage-backed securities. Not Rated includes fixed income securities, including fixed income futures, which have not been rated by any rating agency. Non-Fixed Income includes equity securities (including convertible bonds and equity derivatives) and commodities. Cash & Other includes cash, other assets less liabilities, offsets to derivative positions, and short-term securities. The fund may not hold all of these instruments. The fund itself has not been rated. |
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Table of Contents
MFS Total Return Series
Portfolio Composition – continued
(i) | For purposes of this presentation, the components include the market value of securities, and reflect the impact of the equivalent exposure of derivative positions, if applicable. These amounts may be negative from time to time. The bond component will include any accrued interest amounts. Equivalent exposure is a calculated amount that translates the derivative position into a reasonable approximation of the amount of the underlying asset that the portfolio would have to hold at a given point in time to have the same price sensitivity that results from the portfolio’s ownership of the derivative contract. When dealing with derivatives, equivalent exposure is a more representative measure of the potential impact of a position on portfolio performance than market value. Where the fund holds convertible bonds, these are treated as part of the equity portion of the portfolio. |
(o) | Less than 0.1%. |
Percentages are based on net assets as of 6/30/11.
The portfolio is actively managed and current holdings may be different.
3
Table of Contents
MFS Total Return Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2011 through June 30, 2011
As a contract holder of the fund, you incur ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2011 through June 30, 2011.
Actual Expenses
The first line for each share class in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the following table provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight the fund’s ongoing costs only and do not take into account the fees and expenses imposed under the variable contracts through which your investment in the fund is made. Therefore, the second line for each share class in the table is useful in comparing ongoing costs associated with an investment in vehicles (such as the fund) which fund benefits under variable annuity and variable life insurance contracts and to qualified pension and retirement plans only, and will not help you determine the relative total costs of investing in the fund through variable annuity and variable life insurance contracts. If the fees and expenses imposed under the variable contracts were included, your costs would have been higher.
Share Class | Annualized Expense Ratio | Beginning Account Value 1/01/11 | Ending Account Value 6/30/11 | Expenses Paid During Period (p) 1/01/11-6/30/11 | ||||||||||||||
Initial Class | Actual | 0.79% | $1,000.00 | $1,041.69 | $4.00 | |||||||||||||
Hypothetical (h) | 0.79% | $1,000.00 | $1,020.88 | $3.96 | ||||||||||||||
Service Class | Actual | 1.04% | $1,000.00 | $1,040.58 | $5.26 | |||||||||||||
Hypothetical (h) | 1.04% | $1,000.00 | $1,019.64 | $5.21 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid is equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
Expense Changes Impacting the Table
Changes to the fund’s fee arrangements occurred during the six month period. Had these fee changes been in effect throughout the entire six month period, the annualized expense ratios would have been 0.76% and 1.01% for Initial Class and Service Class shares, respectively; the actual expenses paid during the period would have been approximately $3.85 and $5.11 for Initial Class and Service Class shares, respectively; and the hypothetical expenses paid during the period would have been approximately $3.81 and $5.06 for Initial Class and Service Class shares, respectively. For further information about the fund’s fee arrangements and changes to those fee arrangements, please see Note 3 in the Notes to Financial Statements.
4
Table of Contents
MFS Total Return Series
PORTFOLIO OF INVESTMENTS 6/30/11 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 60.0% | ||||||||
Aerospace – 4.5% | ||||||||
Honeywell International, Inc. | 332,560 | $ | 19,817,242 | |||||
Huntington Ingalls Industries, Inc. (a) | 25,889 | 893,171 | ||||||
Lockheed Martin Corp. | 550,163 | 44,546,698 | ||||||
Northrop Grumman Corp. | 155,657 | 10,794,813 | ||||||
Precision Castparts Corp. | 31,660 | 5,212,819 | ||||||
United Technologies Corp. | 444,210 | 39,317,027 | ||||||
|
| |||||||
$ | 120,581,770 | |||||||
|
| |||||||
Alcoholic Beverages – 0.9% | ||||||||
Diageo PLC | 944,006 | $ | 19,287,011 | |||||
Heineken N.V. | 78,292 | 4,708,301 | ||||||
|
| |||||||
$ | 23,995,312 | |||||||
|
| |||||||
Apparel Manufacturers – 0.2% | ||||||||
NIKE, Inc., “B” | 46,396 | $ | 4,174,712 | |||||
|
| |||||||
Automotive – 0.7% | ||||||||
General Motors Co. (a) | 133,620 | $ | 4,056,703 | |||||
Johnson Controls, Inc. | 330,240 | 13,757,798 | ||||||
|
| |||||||
$ | 17,814,501 | |||||||
|
| |||||||
Broadcasting – 2.1% | ||||||||
Omnicom Group, Inc. | 319,160 | $ | 15,370,746 | |||||
Viacom, Inc., “B” | 385,780 | 19,674,780 | ||||||
Walt Disney Co. | 535,720 | 20,914,509 | ||||||
|
| |||||||
$ | 55,960,035 | |||||||
|
| |||||||
Brokerage & Asset Managers – 0.6% | ||||||||
Blackrock, Inc. | 32,163 | $ | 6,169,185 | |||||
Charles Schwab Corp. | 257,030 | 4,228,144 | ||||||
Franklin Resources, Inc. | 54,125 | 7,106,071 | ||||||
|
| |||||||
$ | 17,503,400 | |||||||
|
| |||||||
Business Services – 1.0% | ||||||||
Accenture PLC, “A” | 295,770 | $ | 17,870,423 | |||||
Dun & Bradstreet Corp. | 57,960 | 4,378,298 | ||||||
Western Union Co. | 245,540 | 4,918,166 | ||||||
|
| |||||||
$ | 27,166,887 | |||||||
|
| |||||||
Cable TV – 0.5% | ||||||||
Comcast Corp., “Special A” | 512,640 | $ | 12,421,267 | |||||
|
| |||||||
Chemicals – 2.0% | ||||||||
3M Co. | 235,870 | $ | 22,372,270 | |||||
Celanese Corp. | 127,570 | 6,800,757 | ||||||
E.I. du Pont de Nemours & Co. | 103,810 | 5,610,931 | ||||||
PPG Industries, Inc. | 208,030 | 18,887,044 | ||||||
|
| |||||||
$ | 53,671,002 | |||||||
|
| |||||||
Computer Software – 1.3% | ||||||||
Check Point Software Technologies Ltd. (a) | 85,920 | $ | 4,884,552 | |||||
Microsoft Corp. | 145,730 | 3,788,980 | ||||||
Oracle Corp. | 814,622 | 26,809,210 | ||||||
|
| |||||||
$ | 35,482,742 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Computer Software – Systems – 1.6% | ||||||||
Hewlett-Packard Co. | 373,111 | $ | 13,581,240 | |||||
International Business Machines Corp. | 165,520 | 28,394,956 | ||||||
|
| |||||||
$ | 41,976,196 | |||||||
|
| |||||||
Construction – 0.6% | ||||||||
Pulte Homes, Inc. (a) | 208,630 | $ | 1,598,106 | |||||
Sherwin-Williams Co. | 91,000 | 7,632,170 | ||||||
Stanley Black & Decker, Inc. | 113,379 | 8,168,957 | ||||||
|
| |||||||
$ | 17,399,233 | |||||||
|
| |||||||
Consumer Products – 1.0% | ||||||||
Avon Products, Inc. | 214,090 | $ | 5,994,520 | |||||
Procter & Gamble Co. | 248,001 | 15,765,424 | ||||||
Reckitt Benckiser Group PLC | 73,937 | 4,082,085 | ||||||
|
| |||||||
$ | 25,842,029 | |||||||
|
| |||||||
Electrical Equipment – 1.1% | ||||||||
Danaher Corp. | 510,680 | $ | 27,060,933 | |||||
Tyco International Ltd. | 77,220 | 3,816,985 | ||||||
|
| |||||||
$ | 30,877,918 | |||||||
|
| |||||||
Electronics – 0.5% | ||||||||
ASML Holding N.V. | 41,160 | $ | 1,521,274 | |||||
Intel Corp. | 378,508 | 8,387,737 | ||||||
Microchip Technology, Inc. | 114,090 | 4,325,152 | ||||||
|
| |||||||
$ | 14,234,163 | |||||||
|
| |||||||
Energy – Independent – 3.0% | ||||||||
Anadarko Petroleum Corp. | 76,170 | $ | 5,846,809 | |||||
Apache Corp. | 283,180 | 34,941,580 | ||||||
EOG Resources, Inc. | 109,950 | 11,495,273 | ||||||
Noble Energy, Inc. | 93,310 | 8,363,375 | ||||||
Occidental Petroleum Corp. | 192,310 | 20,007,932 | ||||||
|
| |||||||
$ | 80,654,969 | |||||||
|
| |||||||
Energy – Integrated – 3.8% | ||||||||
Chevron Corp. | 305,342 | $ | 31,401,371 | |||||
EQT Corp. | 101,720 | 5,342,334 | ||||||
Exxon Mobil Corp. | 594,952 | 48,417,194 | ||||||
Hess Corp. | 179,280 | 13,402,973 | ||||||
QEP Resources, Inc. | 74,630 | 3,121,773 | ||||||
|
| |||||||
$ | 101,685,645 | |||||||
|
| |||||||
Engineering – Construction – 0.3% | ||||||||
Fluor Corp. | 117,390 | $ | 7,590,437 | |||||
|
| |||||||
Food & Beverages – 2.7% | ||||||||
General Mills, Inc. | 319,080 | $ | 11,876,158 | |||||
Groupe Danone | 88,296 | 6,587,782 | ||||||
J.M. Smucker Co. | 47,065 | 3,597,649 | ||||||
Kellogg Co. | 115,077 | 6,366,060 | ||||||
Nestle S.A. | 388,622 | 24,151,650 | ||||||
PepsiCo, Inc. | 304,310 | 21,432,553 | ||||||
|
| |||||||
$ | 74,011,852 | |||||||
|
|
5
Table of Contents
MFS Total Return Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Food & Drug Stores – 0.8% | ||||||||
CVS Caremark Corp. | 344,730 | $ | 12,954,953 | |||||
Kroger Co. | 172,320 | 4,273,536 | ||||||
Walgreen Co. | 94,540 | 4,014,168 | ||||||
$ | 21,242,657 | |||||||
General Merchandise – 1.1% | ||||||||
Kohl’s Corp. | 206,310 | $ | 10,317,563 | |||||
Target Corp. | 399,560 | 18,743,360 | ||||||
$ | 29,060,923 | |||||||
Health Maintenance Organizations – 0.1% | ||||||||
WellPoint, Inc. | 29,980 | $ | 2,361,525 | |||||
Insurance – 4.2% | ||||||||
ACE Ltd. | 283,900 | $ | 18,686,298 | |||||
Aon Corp. | 268,020 | 13,749,426 | ||||||
Chubb Corp. | 89,790 | 5,621,752 | ||||||
MetLife, Inc. | 737,550 | 32,356,319 | ||||||
Prudential Financial, Inc. | 394,930 | 25,113,599 | ||||||
Travelers Cos., Inc. | 300,230 | 17,527,427 | ||||||
$ | 113,054,821 | |||||||
Leisure & Toys – 0.4% | ||||||||
Hasbro, Inc. | 199,070 | $ | 8,745,145 | |||||
Mattel, Inc. | 123,630 | 3,398,589 | ||||||
$ | 12,143,734 | |||||||
Machinery & Tools – 0.4% | ||||||||
Eaton Corp. | 225,630 | $ | 11,608,664 | |||||
Major Banks – 7.3% | ||||||||
Bank of America Corp. | 1,959,030 | $ | 21,470,969 | |||||
Bank of New York Mellon Corp. | 1,139,522 | 29,194,554 | ||||||
Goldman Sachs Group, Inc. | 272,100 | 36,213,789 | ||||||
JPMorgan Chase & Co. | 1,357,074 | 55,558,610 | ||||||
PNC Financial Services Group, Inc. | 175,830 | 10,481,226 | ||||||
State Street Corp. | 352,630 | 15,900,087 | ||||||
SunTrust Banks, Inc. | 91,690 | 2,365,602 | ||||||
Wells Fargo & Co. | 940,820 | 26,399,409 | ||||||
$ | 197,584,246 | |||||||
Medical & Health Technology & Services – 0.3% | ||||||||
AmerisourceBergen Corp. | 112,970 | $ | 4,676,958 | |||||
Quest Diagnostics, Inc. | 79,070 | 4,673,037 | ||||||
$ | 9,349,995 | |||||||
Medical Equipment – 2.3% | ||||||||
Becton, Dickinson & Co. | 168,510 | $ | 14,520,507 | |||||
Covidien PLC | 138,770 | 7,386,727 | ||||||
Medtronic, Inc. | 424,400 | 16,352,132 | ||||||
St. Jude Medical, Inc. | 251,330 | 11,983,414 | ||||||
Thermo Fisher Scientific, Inc. (a) | 188,610 | 12,144,598 | ||||||
$ | 62,387,378 | |||||||
Metals & Mining – 0.1% | ||||||||
Cliffs Natural Resources, Inc. | 39,870 | $ | 3,685,982 | |||||
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Natural Gas – Pipeline – 0.4% | ||||||||
Kinder Morgan, Inc. | 77,400 | $ | 2,223,702 | |||||
Williams Cos., Inc. | 259,898 | 7,861,915 | ||||||
$ | 10,085,617 | |||||||
Network & Telecom – 0.4% | ||||||||
Cisco Systems, Inc. | 644,950 | $ | 10,067,670 | |||||
Oil Services – 0.3% | ||||||||
Schlumberger Ltd. | 48,190 | $ | 4,163,616 | |||||
Transocean, Inc. | 79,970 | 5,162,863 | ||||||
$ | 9,326,479 | |||||||
Other Banks & Diversified Financials – 0.8% | ||||||||
MasterCard, Inc., “A” | 28,010 | $ | 8,440,533 | |||||
TCF Financial Corp. | 202,840 | 2,799,192 | ||||||
Visa, Inc., “A” | 81,520 | 6,868,875 | ||||||
Zions Bancorporation | 180,710 | 4,338,847 | ||||||
$ | 22,447,447 | |||||||
Pharmaceuticals – 4.1% | ||||||||
Abbott Laboratories | 524,420 | $ | 27,594,980 | |||||
Bayer AG | 50,625 | 4,070,063 | ||||||
GlaxoSmithKline PLC | 160,927 | 3,445,454 | ||||||
Johnson & Johnson | 555,620 | 36,959,842 | ||||||
Merck & Co., Inc. | 95,000 | 3,352,550 | ||||||
Pfizer, Inc. | 1,512,356 | 31,154,534 | ||||||
Roche Holding AG | 25,088 | 4,198,491 | ||||||
$ | 110,775,914 | |||||||
Railroad & Shipping – 0.3% | ||||||||
Canadian National Railway Co. | 57,790 | $ | 4,617,421 | |||||
CSX Corp. | 132,380 | 3,471,004 | ||||||
$ | 8,088,425 | |||||||
Restaurants – 0.5% | ||||||||
McDonald’s Corp. | 144,280 | $ | 12,165,690 | |||||
Specialty Chemicals – 0.7% | ||||||||
Air Products & Chemicals, Inc. | 185,110 | $ | 17,692,814 | |||||
Airgas, Inc. | 25,380 | 1,777,615 | ||||||
$ | 19,470,429 | |||||||
Specialty Stores – 0.4% | ||||||||
Advance Auto Parts, Inc. | 74,660 | $ | 4,366,863 | |||||
Staples, Inc. | 388,970 | 6,145,726 | ||||||
$ | 10,512,589 | |||||||
Telecommunications – Wireless – 0.7% | ||||||||
Vodafone Group PLC | 7,295,687 | $ | 19,355,340 | |||||
Telephone Services – 1.5% | ||||||||
AT&T, Inc. | 1,149,204 | $ | 36,096,498 | |||||
CenturyLink, Inc. | 111,831 | 4,521,327 | ||||||
$ | 40,617,825 | |||||||
Tobacco – 2.3% | ||||||||
Altria Group, Inc. | 203,323 | $ | 5,369,760 | |||||
Philip Morris International, Inc. | 695,110 | 46,412,495 | ||||||
Reynolds American, Inc. | 243,780 | 9,032,049 | ||||||
$ | 60,814,304 | |||||||
6
Table of Contents
MFS Total Return Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Trucking – 0.2% | ||||||||
United Parcel Service, Inc., “B” | 80,710 | $ | 5,886,180 | |||||
Utilities – Electric Power – 2.0% | ||||||||
American Electric Power Co., Inc. | 152,510 | $ | 5,746,577 | |||||
Dominion Resources, Inc. | 42,600 | 2,056,302 | ||||||
Entergy Corp. | 88,130 | 6,017,516 | ||||||
NextEra Energy, Inc. | 76,714 | 4,407,986 | ||||||
NRG Energy, Inc. (a) | 187,320 | 4,604,326 | ||||||
PG&E Corp. | 243,750 | 10,244,813 | ||||||
PPL Corp. | 341,270 | 9,497,544 | ||||||
Public Service Enterprise Group, Inc. | 380,030 | 12,404,179 | ||||||
$ | 54,979,243 | |||||||
Total Common Stocks (Identified Cost, $1,456,922,403) | $ | 1,620,117,147 | ||||||
BONDS – 38.3% | ||||||||
Agency – Other – 0.0% | ||||||||
Financing Corp., 9.65%, 2018 | $ | 740,000 | $ | 1,063,128 | ||||
Asset-Backed & Securitized – 2.3% | ||||||||
Anthracite Ltd., “A”, CDO, FRN, 0.635%, 2017 (z) | $ | 3,052,679 | $ | 2,961,099 | ||||
Bayview Financial Revolving Mortgage Loan Trust, FRN, 1.785%, 2040 (z) | 2,171,604 | 1,214,605 | ||||||
Capital Trust Realty Ltd., CDO, 5.16%, 2035 (z) | 2,292,200 | 2,304,807 | ||||||
Citigroup Commercial Mortgage Trust, FRN, 5.886%, 2049 | 5,000,000 | 5,459,031 | ||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust, 5.322%, 2049 | 6,624,280 | 7,028,644 | ||||||
Credit Suisse Mortgage Capital Certificate, FRN, 5.695%, 2040 | 3,818,128 | 4,047,401 | ||||||
GMAC Mortgage Corp. Loan Trust, FRN, 5.805%, 2036 | 1,535,446 | 1,009,745 | ||||||
Greenwich Capital Commercial Funding Corp., 5.475%, 2039 | 5,978,000 | 5,789,737 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., 4.78%, 2042 | 2,485,000 | 2,558,590 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., 5.552%, 2045 | 1,551,006 | 1,689,072 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 4.948%, 2037 | 2,548,000 | 2,568,149 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 5.388%, 2041 | 2,550,000 | 2,738,030 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 5.475%, 2043 | 4,339,145 | 4,726,710 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 6.067%, 2045 | 4,332,626 | 4,808,573 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 6.186%, 2051 | 5,259,422 | 5,595,247 | ||||||
Merrill Lynch Mortgage Trust, FRN, “A3”, 6.019%, 2050 | 808,563 | 865,584 | ||||||
Merrill Lynch/Countrywide Commercial Mortgage Trust, FRN, 5.81%, 2050 | 3,818,128 | 4,086,309 | ||||||
Morgan Stanley Capital I, Inc., FRN, 1.185%, 2030 (i)(z) | 3,377,188 | 85,105 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Asset-Backed & Securitized – continued | ||||||||
Residential Asset Mortgage Products, Inc., FRN, 4.97%, 2034 | $ | 655,557 | $ | 661,187 | ||||
Residential Funding Mortgage Securities, Inc., FRN, 5.32%, 2035 | 2,164,000 | 921,901 | ||||||
Spirit Master Funding LLC, 5.05%, 2023 (z) | 1,932,451 | 1,716,519 | ||||||
Structured Asset Securities Corp., FRN, 4.67%, 2035 | 79,237 | 79,087 | ||||||
$ | 62,915,132 | |||||||
Automotive – 0.1% | ||||||||
Toyota Motor Credit Corp., 3.2%, 2015 | $ | 1,430,000 | $ | 1,486,215 | ||||
Broadcasting – 0.1% | ||||||||
Hearst-Argyle Television, Inc., 7.5%, 2027 | $ | 1,871,000 | $ | 1,423,754 | ||||
News America, Inc., 8.5%, 2025 | 1,586,000 | 2,006,412 | ||||||
$ | 3,430,166 | |||||||
Cable TV – 0.4% | ||||||||
Cox Communications, Inc., 4.625%, 2013 | $ | 2,949,000 | $ | 3,131,360 | ||||
DIRECTV Holdings LLC, 4.6%, 2021 | 2,930,000 | 2,943,891 | ||||||
Time Warner Entertainment Co. LP, 8.375%, 2033 | 3,421,000 | 4,372,411 | ||||||
$ | 10,447,662 | |||||||
Conglomerates – 0.1% | ||||||||
Kennametal, Inc., 7.2%, 2012 | $ | 2,140,000 | $ | 2,257,015 | ||||
Consumer Services – 0.1% | ||||||||
Western Union Co., 5.4%, 2011 | $ | 3,514,000 | $ | 3,577,350 | ||||
Defense Electronics – 0.1% | ||||||||
BAE Systems Holdings, Inc., 5.2%, 2015 (n) | $ | 2,440,000 | $ | 2,649,113 | ||||
Electronics – 0.1% | ||||||||
Tyco Electronics Group S.A., 6.55%, 2017 | $ | 2,931,000 | $ | 3,453,445 | ||||
Emerging Market Quasi-Sovereign – 0.2% | ||||||||
Corporacion Nacional del Cobre de Chile, 3.75%, 2020 (n) | $ | 746,000 | $ | 708,754 | ||||
Petrobras International Finance Co., 6.75%, 2041 | 637,000 | 679,752 | ||||||
Petroleos Mexicanos, 8%, 2019 | 1,753,000 | 2,161,449 | ||||||
Ras Laffan Liquefied Natural Gas Co. Ltd., 5.832%, 2016 (n) | 2,281,958 | 2,487,334 | ||||||
$ | 6,037,289 | |||||||
Emerging Market Sovereign – 0.2% | ||||||||
Republic of Peru, 7.35%, 2025 | $ | 184,000 | $ | 224,756 | ||||
Russian Federation, 3.625%, 2015 (z) | 5,000,000 | 5,137,500 | ||||||
$ | 5,362,256 | |||||||
Energy – Independent – 0.1% | ||||||||
Anadarko Petroleum Corp., 6.45%, 2036 | $ | 3,000,000 | $ | 3,130,338 | ||||
Energy – Integrated – 0.5% | ||||||||
BP Capital Markets PLC, 4.5%, 2020 | $ | 683,000 | $ | 696,519 | ||||
BP Capital Markets PLC, 4.742%, 2021 | 2,950,000 | 3,043,226 | ||||||
Hess Corp., 8.125%, 2019 | 700,000 | 885,707 |
7
Table of Contents
MFS Total Return Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Energy – Integrated – continued | ||||||||
Husky Energy, Inc., 5.9%, 2014 | $ | 1,758,000 | $ | 1,956,631 | ||||
Husky Energy, Inc., 7.25%, 2019 | 1,793,000 | 2,148,898 | ||||||
Petro-Canada, 6.05%, 2018 | 3,647,000 | 4,129,199 | ||||||
|
| |||||||
$ | 12,860,180 | |||||||
|
| |||||||
Financial Institutions – 0.1% | ||||||||
General Electric Capital Corp., 5.45%, 2013 | $ | 1,963,000 | $ | 2,089,152 | ||||
General Electric Capital Corp., 4.625%, 2021 | 1,520,000 | 1,528,947 | ||||||
|
| |||||||
$ | 3,618,099 | |||||||
|
| |||||||
Food & Beverages – 0.4% | ||||||||
Anheuser-Busch InBev Worldwide, Inc., 8%, 2039 | $ | 2,880,000 | $ | 3,892,694 | ||||
Miller Brewing Co., 5.5%, 2013 (n) | 5,763,000 | 6,242,332 | ||||||
|
| |||||||
$ | 10,135,026 | |||||||
|
| |||||||
Food & Drug Stores – 0.1% | ||||||||
CVS Caremark Corp., 6.125%, 2016 | $ | 2,078,000 | $ | 2,382,219 | ||||
|
| |||||||
Gaming & Lodging – 0.1% | ||||||||
Wyndham Worldwide Corp., 6%, 2016 | $ | 1,997,000 | $ | 2,120,772 | ||||
|
| |||||||
Insurance – 0.2% | ||||||||
ING Groep N.V., 5.775% to 2015, FRN to 2049 | $ | 2,021,000 | $ | 1,859,320 | ||||
MetLife, Inc., 4.75%, 2021 | 740,000 | 754,367 | ||||||
Metropolitan Life Global Funding, 5.125%, 2013 (n) | 1,200,000 | 1,276,834 | ||||||
Metropolitan Life Global Funding, 5.125%, 2014 (n) | 1,060,000 | 1,158,114 | ||||||
Prudential Financial, Inc., 6.625%, 2040 | 980,000 | 1,058,080 | ||||||
|
| |||||||
$ | 6,106,715 | |||||||
|
| |||||||
Insurance – Property & Casualty – 0.2% | ||||||||
Chubb Corp., 6.375% to 2017, FRN to 2067 | $ | 5,036,000 | $ | 5,212,260 | ||||
ZFS Finance USA Trust IV, 5.875% to 2012, FRN to 2062 (n) | 243,000 | 245,299 | ||||||
ZFS Finance USA Trust V, 6.5% to 2017, FRN to 2067 (n) | 990,000 | 985,050 | ||||||
|
| |||||||
$ | 6,442,609 | |||||||
|
| |||||||
International Market Quasi-Sovereign – 0.7% | ||||||||
Achmea Hypotheekbank N.V., 3.2%, 2014 (n) | $ | 2,020,000 | $ | 2,120,196 | ||||
ING Bank N.V., 3.9%, 2014 (n) | 2,900,000 | 3,102,785 | ||||||
Irish Life & Permanent PLC, 3.6%, 2013 (e)(n) | 3,600,000 | 3,026,552 | ||||||
KFW International Finance, Inc., 4.875%, 2019 | 2,980,000 | 3,370,395 | ||||||
Royal Bank of Scotland Group PLC, 2.625%, 2012 (n) | 5,190,000 | 5,288,008 | ||||||
Societe Financement de l’ Economie Francaise, 3.375%, 2014 (n) | 1,664,000 | 1,764,887 | ||||||
|
| |||||||
$ | 18,672,823 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Local Authorities – 0.1% | ||||||||
New Jersey Turnpike Authority Rev. (Build America Bonds), “F”, 7.414%, 2040 | $ | 2,405,000 | $ | 2,902,931 | ||||
|
| |||||||
Machinery & Tools – 0.1% | ||||||||
Atlas Copco AB, 5.6%, 2017 (n) | $ | 3,117,000 | $ | 3,467,669 | ||||
|
| |||||||
Major Banks – 1.9% | ||||||||
ABN Amro Bank N.V., FRN, 2.042%, 2014 (n) | $ | 4,710,000 | $ | 4,807,780 | ||||
Bank of America Corp., 7.375%, 2014 | 1,160,000 | 1,304,067 | ||||||
Bank of America Corp., 5.49%, 2019 | 2,160,000 | 2,164,106 | ||||||
Bank of America Corp., 7.625%, 2019 | 1,640,000 | 1,899,763 | ||||||
BNP Paribas, 7.195% to 2037, FRN to 2049 (n) | 1,042,000 | 1,005,530 | ||||||
Commonwealth Bank of Australia, 5%, 2019 (n) | 1,620,000 | 1,685,788 | ||||||
Credit Suisse New York, 5.5%, 2014 | 3,360,000 | 3,690,439 | ||||||
Goldman Sachs Group, Inc., 5.625%, 2017 | 2,680,000 | 2,837,150 | ||||||
HSBC USA, Inc., 4.875%, 2020 | 1,700,000 | 1,673,708 | ||||||
JPMorgan Chase & Co., 6.3%, 2019 | 2,760,000 | 3,110,895 | ||||||
JPMorgan Chase Capital XXII, 6.45%, 2087 | 1,295,000 | 1,304,811 | ||||||
JPMorgan Chase Capital XXVII, 7%, 2039 | 339,000 | 338,580 | ||||||
Merrill Lynch & Co., Inc., 6.15%, 2013 | 2,480,000 | 2,662,860 | ||||||
Morgan Stanley, 5.75%, 2016 | 2,536,000 | 2,693,557 | ||||||
Morgan Stanley, 6.625%, 2018 | 1,980,000 | 2,181,154 | ||||||
PNC Funding Corp., 5.625%, 2017 | 2,078,000 | 2,288,102 | ||||||
Royal Bank of Scotland PLC, 6.125%, 2021 | 2,780,000 | 2,849,817 | ||||||
UniCredito Luxembourg Finance S.A., 6%, 2017 (n) | 3,820,000 | 3,670,959 | ||||||
Wachovia Corp., 5.25%, 2014 | 7,433,000 | 7,967,173 | ||||||
|
| |||||||
$ | 50,136,239 | |||||||
|
| |||||||
Medical & Health Technology & Services – 0.2% | ||||||||
CareFusion Corp., 6.375%, 2019 | $ | 2,550,000 | $ | 2,878,170 | ||||
Hospira, Inc., 6.05%, 2017 | 1,927,000 | 2,187,141 | ||||||
|
| |||||||
$ | 5,065,311 | |||||||
|
| |||||||
Metals & Mining – 0.2% | ||||||||
ArcelorMittal, 9.85%, 2019 | $ | 1,278,000 | $ | 1,620,160 | ||||
ArcelorMittal, 5.25%, 2020 | 2,440,000 | 2,412,509 | ||||||
Vale Overseas Ltd., 4.625%, 2020 | 669,000 | 665,346 | ||||||
Vale Overseas Ltd., 6.875%, 2039 | 525,000 | 570,560 | ||||||
|
| |||||||
$ | 5,268,575 | |||||||
|
| |||||||
Mortgage-Backed – 12.5% | ||||||||
Fannie Mae, 6.33%, 2011 | $ | 54,656 | $ | 54,629 | ||||
Fannie Mae, 4.775%, 2012 | 1,462,002 | 1,502,821 | ||||||
Fannie Mae, 4.01%, 2013 | 228,134 | 237,817 | ||||||
Fannie Mae, 4.02%, 2013 | 1,020,817 | 1,066,964 | ||||||
Fannie Mae, 4.767%, 2013 | 122,782 | 127,942 | ||||||
Fannie Mae, 4.845%, 2013 | 404,677 | 426,195 | ||||||
Fannie Mae, 5.37%, 2013 - 2018 | 2,512,241 | 2,704,762 | ||||||
Fannie Mae, 4.562%, 2014 | 1,003,817 | 1,069,765 | ||||||
Fannie Mae, 4.841%, 2014 | 1,716,074 | 1,836,681 | ||||||
Fannie Mae, 4.872%, 2014 | 890,934 | 940,778 | ||||||
Fannie Mae, 4.94%, 2015 | 379,000 | 413,111 |
8
Table of Contents
MFS Total Return Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Mortgage-Backed – continued | ||||||||
Fannie Mae, 5.19%, 2015 | $ | 414,031 | $ | 454,541 | ||||
Fannie Mae, 5.27%, 2016 | 1,118,046 | 1,218,957 | ||||||
Fannie Mae, 5.662%, 2016 | 315,371 | 354,018 | ||||||
Fannie Mae, 5.724%, 2016 | 705,420 | 782,968 | ||||||
Fannie Mae, 5.45%, 2017 | 787,685 | 860,729 | ||||||
Fannie Mae, 5.5%, 2017 - 2038 | 62,233,153 | 67,694,664 | ||||||
Fannie Mae, 6%, 2017 - 2037 | 31,992,005 | 35,390,108 | ||||||
Fannie Mae, 3.8%, 2018 | 334,464 | 346,481 | ||||||
Fannie Mae, 3.91%, 2018 | 488,455 | 508,732 | ||||||
Fannie Mae, 4.5%, 2018 - 2041 | 13,201,902 | 13,841,904 | ||||||
Fannie Mae, 5%, 2018 - 2041 | 32,915,364 | 35,206,519 | ||||||
Fannie Mae, 4.88%, 2020 | 974,508 | 1,038,177 | ||||||
Fannie Mae, 7.5%, 2030 - 2032 | 246,170 | 289,117 | ||||||
Fannie Mae, 6.5%, 2031 - 2037 | 8,756,042 | 9,943,219 | ||||||
Freddie Mac, 6%, 2016 - 2037 | 16,506,204 | 18,239,217 | ||||||
Freddie Mac, 5%, 2017 - 2039 | 23,996,339 | 25,673,861 | ||||||
Freddie Mac, 3.154%, 2018 | 274,000 | 273,164 | ||||||
Freddie Mac, 4.5%, 2018 - 2039 | 18,785,346 | 19,714,766 | ||||||
Freddie Mac, 5.085%, 2019 | 2,793,000 | 2,984,513 | ||||||
Freddie Mac, 5.5%, 2019 - 2037 | 10,830,185 | 11,777,776 | ||||||
Freddie Mac, 3.808%, 2020 | 2,402,000 | 2,412,539 | ||||||
Freddie Mac, 4%, 2024 | 4,992,528 | 5,212,015 | ||||||
Freddie Mac, 6.5%, 2034 - 2038 | 5,481,800 | 6,198,318 | ||||||
Freddie Mac, 4%, 2040 - 2041 | 15,495,700 | 15,505,229 | ||||||
Freddie Mac, FRN, 3.882%, 2017 | 839,798 | 877,994 | ||||||
Ginnie Mae, 6%, 2032 - 2038 | 6,155,019 | 6,879,471 | ||||||
Ginnie Mae, 4.5%, 2033 - 2040 | 11,903,217 | 12,628,671 | ||||||
Ginnie Mae, 5.5%, 2033 - 2035 | 7,176,649 | 7,943,236 | ||||||
Ginnie Mae, 5%, 2034 - 2039 | 13,305,170 | 14,447,530 | ||||||
Ginnie Mae, 4%, 2041 | 7,903,799 | 8,042,527 | ||||||
$ | 337,122,426 | |||||||
Natural Gas – Pipeline – 0.2% | ||||||||
Enterprise Products Operating LLC, 6.5%, 2019 | $ | 1,953,000 | $ | 2,237,140 | ||||
Kinder Morgan Energy Partners LP, 7.4%, 2031 | 219,000 | 249,462 | ||||||
Kinder Morgan Energy Partners LP, 7.75%, 2032 | 1,000,000 | 1,187,184 | ||||||
Spectra Energy Capital LLC, 8%, 2019 | 1,694,000 | 2,072,208 | ||||||
$ | 5,745,994 | |||||||
Network & Telecom – 0.5% | ||||||||
AT&T, Inc., 6.55%, 2039 | $ | 2,940,000 | $ | 3,224,680 | ||||
BellSouth Corp., 6.55%, 2034 | 2,642,000 | 2,842,694 | ||||||
Telecom Italia Capital, 5.25%, 2013 | 2,176,000 | 2,284,306 | ||||||
Verizon New York, Inc., 6.875%, 2012 | 5,030,000 | 5,253,941 | ||||||
$ | 13,605,621 | |||||||
Other Banks & Diversified Financials – 1.1% | ||||||||
American Express Co., 5.5%, 2016 | $ | 2,287,000 | $ | 2,549,358 | ||||
Banco Bradesco S.A., 6.75%, 2019 (n) | 1,391,000 | 1,495,325 | ||||||
Banco Santander U.S. Debt S.A.U., 3.781%, 2015 (n) | 1,100,000 | 1,060,682 | ||||||
Capital One Financial Corp., 6.15%, 2016 | 2,872,000 | 3,168,448 | ||||||
Citigroup, Inc., 5%, 2014 | 2,679,000 | 2,807,479 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Other Banks & Diversified Financials – continued | ||||||||
Groupe BPCE S.A., 12.5% to 2019, FRN to 2049 (n) | $ | 3,021,000 | $ | 3,457,112 | ||||
HSBC Holdings PLC, 5.1%, 2021 | 1,568,000 | 1,606,861 | ||||||
Lloyds TSB Bank PLC, 4.875%, 2016 | 2,560,000 | 2,618,294 | ||||||
Nordea Bank AB, 4.875%, 2021 (z) | 1,880,000 | 1,900,971 | ||||||
Nordea Bank AB, 5.424% to 2015, FRN to 2049 (n) | 862,000 | 818,900 | ||||||
Svenska Handelsbanken AB, 4.875%, 2014 (n) | 3,040,000 | 3,283,689 | ||||||
UBS Preferred Funding Trust V, 6.243% to 2016, FRN to 2049 | 4,738,000 | 4,643,240 | ||||||
$ | 29,410,359 | |||||||
Pharmaceuticals – 0.2% | ||||||||
Pfizer, Inc., 7.2%, 2039 | $ | 1,240,000 | $ | 1,556,785 | ||||
Roche Holdings, Inc., 6%, 2019 (n) | 4,080,000 | 4,700,817 | ||||||
$ | 6,257,602 | |||||||
Real Estate – 0.6% | ||||||||
Boston Properties, Inc., REIT, 5%, 2015 | $ | 1,871,000 | $ | 2,028,113 | ||||
HCP, Inc., REIT, 5.375%, 2021 | 1,703,000 | 1,756,520 | ||||||
HRPT Properties Trust, REIT, 6.25%, 2016 | 3,320,000 | 3,635,164 | ||||||
HRPT Properties Trust, REIT, 6.65%, 2018 | 1,620,000 | 1,800,844 | ||||||
Kimco Realty Corp., REIT, 6%, 2012 | 936,000 | 990,381 | ||||||
Simon Property Group, Inc., REIT, 5.875%, 2017 | 1,880,000 | 2,129,034 | ||||||
WEA Finance LLC, REIT, 6.75%, 2019 (n) | 837,000 | 949,152 | ||||||
WEA Finance LLC, REIT, 4.625%, 2021 (z) | 2,300,000 | 2,232,051 | ||||||
$ | 15,521,259 | |||||||
Retailers – 0.3% | ||||||||
Home Depot, Inc., 5.95%, 2041 | $ | 2,623,000 | $ | 2,701,234 | ||||
Limited Brands, Inc., 5.25%, 2014 | 779,000 | 814,055 | ||||||
Wal-Mart Stores, Inc., 5.25%, 2035 | 5,106,000 | 5,106,327 | ||||||
$ | 8,621,616 | |||||||
Supermarkets – 0.0% | ||||||||
Kroger Co., 5%, 2013 | $ | 1,045,000 | $ | 1,113,812 | ||||
Supranational – 0.1% | ||||||||
Asian Development Bank, 2.75%, 2014 | $ | 2,220,000 | $ | 2,324,011 | ||||
Telecommunications – Wireless – 0.3% | ||||||||
Crown Castle Towers LLC, 6.113%, 2020 (n) | $ | 1,605,000 | $ | 1,751,246 | ||||
Crown Castle Towers LLC, 4.883%, 2020 (n) | 830,000 | 834,586 | ||||||
Rogers Communications, Inc., 6.8%, 2018 | 3,340,000 | 3,941,100 | ||||||
$ | 6,526,932 | |||||||
Transportation – Services – 0.1% | ||||||||
Erac USA Finance Co., 7%, 2037 (n) | $ | 2,572,000 | $ | 2,830,041 | ||||
U.S. Government Agencies and Equivalents – 0.8% | ||||||||
Freddie Mac, 4.625%, 2012 | $ | 13,500,000 | $ | 14,258,309 | ||||
Small Business Administration, 4.77%, 2024 | 619,671 | 660,336 |
9
Table of Contents
MFS Total Return Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
U.S. Government Agencies and Equivalents – continued | ||||||||
Small Business Administration, 5.18%, 2024 | $ | 1,042,812 | $ | 1,117,607 | ||||
Small Business Administration, 4.99%, 2024 | 1,023,078 | 1,096,826 | ||||||
Small Business Administration, 5.11%, 2025 | 4,106,891 | 4,423,762 | ||||||
|
| |||||||
$ | 21,556,840 | |||||||
|
| |||||||
U.S. Treasury Obligations – 12.2% | ||||||||
U.S. Treasury Bonds, 2%, 2013 | $ | 4,762,000 | $ | 4,920,484 | ||||
U.S. Treasury Bonds, 8.5%, 2020 | 4,816,000 | 6,919,990 | ||||||
U.S. Treasury Bonds, 8%, 2021 | 2,560,000 | 3,645,199 | ||||||
U.S. Treasury Bonds, 6%, 2026 | 278,000 | 346,023 | ||||||
U.S. Treasury Bonds, 6.75%, 2026 | 2,129,000 | 2,841,217 | ||||||
U.S. Treasury Bonds, 5.25%, 2029 | 7,300,000 | 8,423,514 | ||||||
U.S. Treasury Bonds, 5.375%, 2031 | 8,423,000 | 9,872,017 | ||||||
U.S. Treasury Bonds, 4.5%, 2036 | 3,417,000 | 3,531,258 | ||||||
U.S. Treasury Bonds, 5%, 2037 | 6,508,000 | 7,228,963 | ||||||
U.S. Treasury Bonds, 4.5%, 2039 | 33,619,400 | 34,375,837 | ||||||
U.S. Treasury Notes, 1.375%, 2012 | 14,232,400 | 14,341,918 | ||||||
U.S. Treasury Notes, 1.375%, 2012 | 13,751,000 | 13,940,076 | ||||||
U.S. Treasury Notes, 1.375%, 2013 | 15,539,000 | 15,779,373 | ||||||
U.S. Treasury Notes, 1.375%, 2013 | 23,897,000 | 24,289,150 | ||||||
U.S. Treasury Notes, 3.5%, 2013 | 8,400,000 | 8,886,612 | ||||||
U.S. Treasury Notes, 3.125%, 2013 | 16,178,000 | 17,113,283 | ||||||
U.S. Treasury Notes, 2.75%, 2013 | 36,007,000 | 37,807,350 | ||||||
U.S. Treasury Notes, 1.5%, 2013 | 6,564,000 | 6,705,021 | ||||||
U.S. Treasury Notes, 1.875%, 2014 | 1,365,000 | 1,407,656 | ||||||
U.S. Treasury Notes, 4.125%, 2015 | 6,910,000 | 7,667,398 | ||||||
U.S. Treasury Notes, 9.875%, 2015 | 2,793,000 | 3,793,243 | ||||||
U.S. Treasury Notes, 2.625%, 2016 | 1,737,000 | 1,817,878 | ||||||
U.S. Treasury Notes, 4.875%, 2016 | 6,300,000 | 7,262,716 | ||||||
U.S. Treasury Notes, 3.75%, 2018 | 53,528,000 | 57,985,865 | ||||||
U.S. Treasury Notes, 2.75%, 2019 | 6,001,500 | 6,059,168 | ||||||
U.S. Treasury Notes, TIPS, 1.25%, 2020 | 21,295,932 | 22,527,092 | ||||||
|
| |||||||
$ | 329,488,301 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Utilities – Electric Power – 0.8% | ||||||||
Bruce Mansfield Unit, 6.85%, 2034 | $ | 4,837,832 | $ | 5,186,480 | ||||
EDP Finance B.V., 6%, 2018 (n) | 2,259,000 | 2,090,153 | ||||||
Enel Finance International S.A., 6.25%, 2017 (n) | 2,306,000 | 2,545,753 | ||||||
MidAmerican Funding LLC, 6.927%, 2029 | 387,000 | 446,442 | ||||||
Oncor Electric Delivery Co., 7%, 2022 | 3,162,000 | 3,769,781 | ||||||
PSEG Power LLC, 6.95%, 2012 | 3,745,000 | 3,948,391 | ||||||
PSEG Power LLC, 5.32%, 2016 | 1,603,000 | 1,766,952 | ||||||
System Energy Resources, Inc., 5.129%, 2014 (z) | 423,882 | 435,081 | ||||||
Waterford 3 Funding Corp., 8.09%, 2017 | 142,689 | 143,680 | ||||||
|
| |||||||
$ | 20,332,713 | |||||||
|
| |||||||
Total Bonds (Identified Cost, $986,502,502) | $ | 1,035,445,804 | ||||||
|
| |||||||
CONVERTIBLE PREFERRED STOCKS – 0.2% | ||||||||
Automotive – 0.1% | ||||||||
General Motors Co., 4.75% | 86,200 | $ | 4,201,388 | |||||
|
| |||||||
Utilities – Electric Power – 0.1% | ||||||||
PPL Corp., 9.5% | 25,670 | $ | 1,434,953 | |||||
|
| |||||||
Total Convertible Preferred Stocks (Identified Cost, $5,593,500) | $ | 5,636,341 | ||||||
|
| |||||||
MONEY MARKET FUNDS (v) – 1.2% | ||||||||
MFS Institutional Money Market Portfolio, 0.1%, at Cost and Net Asset Value | 31,946,919 | $ | 31,946,919 | |||||
|
| |||||||
Total Investments (Identified Cost, $2,480,965,324) | $ | 2,693,146,211 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – 0.3% | 8,384,025 | |||||||
|
| |||||||
Net Assets – 100.0% | $ | 2,701,530,236 | ||||||
|
|
(a) | Non-income producing security. |
(e) | Guaranteed by Minister for Finance of Ireland. |
(i) | Interest only security for which the fund receives interest on notional principal (Par amount). Par amount shown is the notional principal and does not reflect the cost of the security. |
(n) | Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be sold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. At period end, the aggregate value of these securities was $71,510,440, representing 2.7% of net assets. |
(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 fund holds the following restricted securities: |
Restricted Securities | Acquisition Date | Cost | Value | |||||||
Anthracite Ltd., “A”, CDO, FRN, 0.635%, 2017 | 3/19/10 | $2,861,836 | $2,961,099 | |||||||
Bayview Financial Revolving Mortgage Loan Trust, FRN, 1.785%, 2040 | 3/01/06 | 2,171,604 | 1,214,605 | |||||||
Capital Trust Realty Ltd., CDO, 5.16%, 2035 | 9/14/10 | 2,293,598 | 2,304,807 |
10
Table of Contents
MFS Total Return Series
Portfolio of Investments (unaudited) – continued
Restricted Securities - continued | Acquisition Date | Cost | Value | |||||||
Morgan Stanley Capital I, Inc., FRN, 1.185%, 2030 | 4/04/02 | $116,350 | $85,105 | |||||||
Nordea Bank AB, 4.875%, 2021 | 1/11/11 | 1,871,359 | 1,900,971 | |||||||
Russian Federation, 3.625%, 2015 | 4/22/10 | 4,979,480 | 5,137,500 | |||||||
Spirit Master Funding LLC, 5.05%, 2023 | 10/04/05 | 1,914,579 | 1,716,519 | |||||||
System Energy Resources, Inc., 5.129%, 2014 | 4/16/04-11/22/04 | 424,324 | 435,081 | |||||||
WEA Finance LLC, REIT, 4.625%, 2021 | 10/23/09-5/03/11 | 2,282,034 | 2,232,051 | |||||||
Total Restricted Securities | $17,987,738 | |||||||||
% of Net Assets | 0.7% |
The following abbreviations are used in this report and are defined:
CDO | Collateralized Debt 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 |
TIPS | Treasury Inflation Protected Security |
See Notes to Financial Statements
11
Table of Contents
MFS Total Return Series
FINANCIAL STATEMENTS | STATEMENT OF ASSETS AND LIABILITIES (unaudited)
This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
At 6/30/11 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $2,449,018,405) | $2,661,199,292 | |||||||
Underlying affiliated funds, at cost and value | 31,946,919 | |||||||
Total investments, at value (identified cost, $2,480,965,324) | $2,693,146,211 | |||||||
Cash | 16,592 | |||||||
Receivables for | ||||||||
Investments sold | 2,621,389 | |||||||
Fund shares sold | 167,320 | |||||||
Interest and dividends | 11,282,983 | |||||||
Other assets | 11,651 | |||||||
Total assets | $2,707,246,146 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Investments purchased | $2,324,872 | |||||||
Fund shares reacquired | 3,006,649 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 107,302 | |||||||
Shareholder servicing costs | 1,890 | |||||||
Distribution and/or service fees | 12,622 | |||||||
Payable for independent Trustees’ compensation | 8,054 | |||||||
Accrued expenses and other liabilities | 254,521 | |||||||
Total liabilities | $5,715,910 | |||||||
Net assets | $2,701,530,236 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $2,735,452,099 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 212,230,366 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency transactions | (341,604,667 | ) | ||||||
Undistributed net investment income | 95,452,438 | |||||||
Net assets | $2,701,530,236 | |||||||
Shares of beneficial interest outstanding | 139,247,988 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $1,773,198,158 | 90,981,769 | $19.49 | |||||||||
Service Class | 928,332,078 | 48,266,219 | 19.23 |
See Notes to Financial Statements
12
Table of Contents
MFS Total Return Series
FINANCIAL STATEMENTS | STATEMENT OF OPERATIONS (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
Six months ended 6/30/11 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Interest | $22,943,116 | |||||||
Dividends | 19,507,985 | |||||||
Dividends from underlying affiliated funds | 16,866 | |||||||
Foreign taxes withheld | (228,160 | ) | ||||||
Total investment income | $42,239,807 | |||||||
Expenses | ||||||||
Management fee | $10,322,373 | |||||||
Distribution and/or service fees | 1,162,282 | |||||||
Shareholder servicing costs | 154,631 | |||||||
Administrative services fee | 203,298 | |||||||
Independent Trustees’ compensation | 27,940 | |||||||
Custodian fee | 93,566 | |||||||
Shareholder communications | 144,746 | |||||||
Auditing fees | 30,328 | |||||||
Legal fees | 24,897 | |||||||
Miscellaneous | 51,597 | |||||||
Total expenses | $12,215,658 | |||||||
Fees paid indirectly | (191 | ) | ||||||
Reduction of expenses by investment adviser | (172,611 | ) | ||||||
Net expenses | $12,042,856 | |||||||
Net investment income | $30,196,951 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency transactions | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investment transactions | $53,794,054 | |||||||
Foreign currency transactions | 2,181 | |||||||
Net realized gain (loss) on investments and foreign currency transactions | $53,796,235 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $29,672,342 | |||||||
Translation of assets and liabilities in foreign currencies | 31,943 | |||||||
Net unrealized gain (loss) on investments and foreign currency translation | $29,704,285 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $83,500,520 | |||||||
Change in net assets from operations | $113,697,471 |
See Notes to Financial Statements
13
Table of Contents
MFS Total Return Series
FINANCIAL STATEMENTS | STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
| Six months ended 6/30/11 (unaudited | ) | | Year ended 12/31/10 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $30,196,951 | $61,744,159 | ||||||
Net realized gain (loss) on investments and foreign currency transactions | 53,796,235 | 95,935,731 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 29,704,285 | 100,356,225 | ||||||
Change in net assets from operations | $113,697,471 | $258,036,115 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(75,285,859 | ) | |||||
Change in net assets from fund share transactions | $(197,427,205 | ) | $(237,181,394 | ) | ||||
Total change in net assets | $(83,729,734 | ) | $(54,431,138 | ) | ||||
Net assets | ||||||||
At beginning of period | 2,785,259,970 | 2,839,691,108 | ||||||
At end of period (including undistributed net investment income of $95,452,438 and | $2,701,530,236 | $2,785,259,970 |
See Notes to Financial Statements
14
Table of Contents
MFS Total Return Series
FINANCIAL STATEMENTS | FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund’s financial performance for the semiannual period and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
Initial Class | Six months ended 6/30/11 | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $18.71 | $17.48 | $15.42 | $21.68 | $21.90 | $20.69 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.22 | $0.41 | $0.44 | $0.52 | $0.56 | $0.56 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.56 | 1.31 | 2.20 | (4.97 | ) | 0.34 | 1.81 | |||||||||||||||||
Total from investment operations | $0.78 | $1.72 | $2.64 | $(4.45 | ) | $0.90 | $2.37 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.49 | ) | $(0.58 | ) | $(0.61 | ) | $(0.57 | ) | $(0.50 | ) | |||||||||||||
From net realized gain on investments | — | — | — | (1.20 | ) | (0.55 | ) | (0.66 | ) | |||||||||||||||
Total distributions declared to shareholders | $— | $(0.49 | ) | $(0.58 | ) | $(1.81 | ) | $(1.12 | ) | $(1.16 | ) | |||||||||||||
Net asset value, end of period | $19.49 | $18.71 | $17.48 | $15.42 | $21.68 | $21.90 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 4.17 | (n) | 9.93 | 18.03 | (22.13 | ) | 4.17 | 11.95 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.80 | (a) | 0.81 | 0.82 | 0.82 | 0.83 | 0.85 | |||||||||||||||||
Expenses after expense reductions (f) | 0.79 | (a) | 0.81 | 0.82 | 0.80 | 0.80 | 0.83 | |||||||||||||||||
Net investment income | 2.28 | (a) | 2.30 | 2.80 | 2.80 | 2.55 | 2.68 | |||||||||||||||||
Portfolio turnover | 9 | 30 | 43 | 55 | 60 | 51 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $1,773,198 | $1,860,233 | $1,967,226 | $1,901,307 | $2,887,256 | $2,859,830 |
See Notes to Financial Statements
15
Table of Contents
MFS Total Return Series
Financial Highlights – continued
Service Class | Six months ended 6/30/11 | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $18.48 | $17.28 | $15.24 | $21.44 | $21.67 | $20.50 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.19 | $0.36 | $0.39 | $0.46 | $0.50 | $0.50 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.56 | 1.29 | 2.18 | (4.91 | ) | 0.34 | 1.78 | |||||||||||||||||
Total from investment operations | $0.75 | $1.65 | $2.57 | $(4.45 | ) | $0.84 | $2.28 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.45 | ) | $(0.53 | ) | $(0.55 | ) | $(0.52 | ) | $(0.45 | ) | |||||||||||||
From net realized gain on investments | — | — | — | (1.20 | ) | (0.55 | ) | (0.66 | ) | |||||||||||||||
Total distributions declared to shareholders | $— | $(0.45 | ) | $(0.53 | ) | $(1.75 | ) | $(1.07 | ) | $(1.11 | ) | |||||||||||||
Net asset value, end of period | $19.23 | $18.48 | $17.28 | $15.24 | $21.44 | $21.67 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 4.06 | (n) | 9.63 | 17.72 | (22.32 | ) | 3.94 | 11.62 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.05 | (a) | 1.06 | 1.07 | 1.07 | 1.08 | 1.10 | |||||||||||||||||
Expenses after expense reductions (f) | 1.04 | (a) | 1.06 | 1.07 | 1.05 | 1.05 | 1.09 | |||||||||||||||||
Net investment income | 2.03 | (a) | 2.05 | 2.54 | 2.55 | 2.30 | 2.44 | |||||||||||||||||
Portfolio turnover | 9 | 30 | 43 | 55 | 60 | 51 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $928,332 | $925,027 | $872,466 | $804,493 | $1,113,209 | $1,070,518 |
(a) | Annualized. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(k) | The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown. |
(n) | Not annualized. |
(r) | Certain expenses have been reduced without which performance would have been lower. |
(s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
See Notes to Financial Statements
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MFS Total Return Series
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) | Business and Organization |
MFS Total Return Series (the fund) is a series of MFS Variable Insurance Trust (the trust). The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The shareholders of each series of the trust are separate accounts of insurance companies, which offer variable annuity and/or life insurance products, and qualified retirement and pension plans.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued. The fund invests a significant portion of its assets in asset-backed and/or mortgage-backed securities. The value of these securities may depend, in part, on the issuer’s or borrower’s credit quality or ability to pay principal and interest when due and may fall if an issuer or borrower defaults on its obligation to pay principal or interest or if the instrument’s credit rating is downgraded by a credit rating agency. U.S. Government securities not supported as to the payment of principal or interest by the U.S. Treasury, such as those issued by Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, are subject to greater credit risk than are U.S. Government securities supported by the U.S. Treasury, such as those issued by Ginnie Mae.
Investment Valuations – 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. 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. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. Values obtained from third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the
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MFS Total Return Series
Notes to Financial Statements (unaudited) – continued
fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. The following is a summary of the levels used as of June 30, 2011 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities | $1,625,753,488 | $— | $— | $1,625,753,488 | ||||||||||||
U.S. Treasury Bonds & U.S. Government Agency & Equivalents | — | 352,108,269 | — | 352,108,269 | ||||||||||||
Non-U.S. Sovereign Debt | — | 32,396,379 | — | 32,396,379 | ||||||||||||
Corporate Bonds | — | 171,380,005 | — | 171,380,005 | ||||||||||||
Residential Mortgage-Backed Securities | — | 339,794,346 | — | 339,794,346 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 53,762,701 | — | 53,762,701 | ||||||||||||
Asset-Backed Securities (including CDOs) | — | 6,480,511 | — | 6,480,511 | ||||||||||||
Foreign Bonds | — | 79,523,593 | — | 79,523,593 | ||||||||||||
Mutual Funds | 31,946,919 | — | — | 31,946,919 | ||||||||||||
Total Investments | $1,657,700,407 | $1,035,445,804 | $— | $2,693,146,211 |
For further information regarding security characteristics, see the Portfolio of Investments.
Inflation-Adjusted Debt Securities – The fund invests in inflation-adjusted debt securities issued by the U.S. Treasury. The fund may also invest in inflation-adjusted debt securities issued by U.S. Government agencies and instrumentalities other than the U.S. Treasury and by other entities such as U.S. and foreign corporations and foreign governments. The principal value of these debt securities is adjusted through income according to changes in the Consumer Price Index or another general price or wage index. These debt securities typically pay a fixed rate of interest, but this fixed rate is applied to the inflation-adjusted principal amount. The principal paid at maturity of the debt security is typically equal to the inflation-adjusted principal amount, or the security’s original par value, whichever is greater. Other types of inflation-adjusted securities may use other methods to adjust for other measures of inflation.
Foreign Currency Translation – Purchases and sales of foreign investments, income, and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions or on the reporting date for foreign denominated receivables and payables. Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Gains and losses attributable to foreign exchange rate movements on receivables, payables, income and expenses are recorded for financial statement purposes as foreign currency transaction gains and losses. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.
Security Loans – State Street Bank and Trust Company (“State Street”), as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. The loans are collateralized by cash and/or U.S. Treasury and federal agency obligations in an amount typically at least equal to the market value of the securities loaned. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. State Street provides the fund with indemnification against Borrower default. The fund bears the risk of loss with respect to the investment of cash collateral. On loans collateralized by cash, the cash collateral is invested in a money market fund or short-term securities. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the fund and the lending agent. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the Borrower, and is allocated between the fund and the lending agent. Income from securities lending is included in interest income on the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income.
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MFS Total Return Series
Notes to Financial Statements (unaudited) – continued
Indemnifications – Under the fund’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund’s maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.
Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. All premium and discount is amortized or accreted for financial statement purposes in accordance with U.S. generally accepted accounting principles. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted upward or downward to the rate of inflation. Interest is accrued based on the principal value, which is adjusted for inflation. Any increase or decrease in the principal amount of an inflation-indexed bond is generally recorded as an increase or decrease in interest income, respectively, even though the adjusted principal is not received until maturity. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend and interest payments received in additional securities are recorded on the ex-dividend or ex-interest date in an amount equal to the value of the security on such date.
The fund may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
Fees Paid Indirectly – The fund’s custody fee may be reduced according to an arrangement that measures the value of cash deposited with the custodian by the fund. This amount, for the six months ended June 30, 2011, is shown as a reduction of total expenses on the Statement of Operations.
Tax Matters and Distributions – The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to amortization and accretion of debt securities and wash sale loss deferrals.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/10 | ||||
Ordinary income (including any short-term capital gains) | $75,285,859 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/11 | ||||
Cost of investments | $2,511,020,734 | |||
Gross appreciation | 254,861,476 | |||
Gross depreciation | (72,735,999 | ) | ||
Net unrealized appreciation (depreciation) | $182,125,477 | |||
As of 12/31/10 | ||||
Undistributed ordinary income | 65,255,487 | |||
Capital loss carryforwards | (364,175,353 | ) | ||
Other temporary differences | 17,536 | |||
Net unrealized appreciation (depreciation) | 151,282,996 |
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MFS Total Return Series
Notes to Financial Statements (unaudited) – continued
The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.
As of December 31, 2010, the fund had capital loss carryforwards available to offset future realized gains. Such losses expire as follows:
12/31/16 | $(303,515,965 | ) | ||
12/31/17 | (60,659,388 | ) | ||
Total | $(364,175,353 | ) |
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and/or service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported on the Statements of Changes in Net Assets are presented by class as follows:
From net investment income | ||||||||
Six months ended 6/30/11 | Year ended 12/31/10 | |||||||
Initial Class | $— | $52,744,422 | ||||||
Service Class | — | 22,541,437 | ||||||
Total | $— | $75,285,859 |
(3) | Transactions with Affiliates |
Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates:
First $3 billion of average daily net assets | 0.75% | |||
Next $2 billion of average daily net assets | 0.65% | |||
Average daily net assets in excess of $5 billion | 0.50% |
Effective May 1, 2011, the investment adviser has agreed in writing to reduce its management fee to 0.70% of average daily net assets in excess of $1 billion up to $2.5 billion, and 0.65% of average daily net assets in excess of $2.5 billion up to $3 billion. This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until April 30, 2013. For the six months ended June 30, 2011, this reduction amounted to $164,748 and is reflected as a reduction of total expenses in the Statement of Operations.
The management fee incurred for the six months ended June 30, 2011 was equivalent to an annual effective rate of 0.74% of the fund’s average daily net assets.
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, is the distributor of shares of the fund. The Trustees have adopted a distribution plan for the Service Class shares pursuant to Rule 12b-1 under the Investment Company Act of 1940.
The fund’s distribution plan provides that the fund will pay MFD distribution and/or service fees equal to 0.25% per annum of its average daily net assets attributable to Service Class shares as partial consideration for services performed and expenses incurred by MFD and financial intermediaries (including participating insurance companies that invest in the fund to fund variable annuity and variable life insurance contracts, sponsors of qualified retirement and pension plans that invest in the fund, and affiliates of these participating insurance companies and plan sponsors) in connection with the sale and distribution of the Service Class shares. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries.
Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent. For the six months ended June 30, 2011, the fee was $153,563, which equated to 0.0112% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses paid by MFSC on behalf of the fund. For the six months ended June 30, 2011, these costs amounted to $1,068.
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund partially reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the six months ended June 30, 2011 was equivalent to an annual effective rate of 0.0148% of the fund’s average daily net assets.
Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or
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MFS Total Return Series
Notes to Financial Statements (unaudited) – continued
officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – This fund and certain other funds managed by MFS (the funds) have entered into services agreements (the Agreements) which provide for payment of fees by the funds to Tarantino LLC and Griffin Compliance LLC in return for the provision of services of an Independent Chief Compliance Officer (ICCO) and Assistant ICCO, respectively, for the funds. The ICCO and Assistant ICCO are officers of the funds and the sole members of Tarantino LLC and Griffin Compliance LLC, respectively. The funds can terminate the Agreements with Tarantino LLC and Griffin Compliance LLC at any time under the terms of the Agreements. For the six months ended June 30, 2011, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $9,704 and are included in miscellaneous expense on the Statement of Operations. MFS has agreed to reimburse the fund for a portion of the payments made by the fund in the amount of $7,863, which is shown as a reduction of total expenses in the Statement of Operations. Additionally, MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ICCO and Assistant ICCO.
The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks a high level of current income consistent with preservation of capital and liquidity. Income earned on this investment is included in dividends from underlying affiliated funds on the Statement of Operations. This money market fund does not pay a management fee to MFS.
(4) | Portfolio Securities |
Purchases and sales of investments, other than purchased option transactions and short-term obligations, were as follows:
Purchases | Sales | |||||||
U.S. Government securities | $39,999,262 | $104,618,612 | ||||||
Investments (non-U.S. Government securities) | $204,585,752 | $318,369,076 |
(5) | Shares of Beneficial Interest |
The fund’s Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
Six months ended 6/30/11 | Year ended 12/31/10 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 1,477,139 | $28,416,001 | 2,578,398 | $45,549,752 | ||||||||||||
Service Class | 3,279,888 | 62,345,936 | 7,547,496 | 132,017,347 | ||||||||||||
4,757,027 | $90,761,937 | 10,125,894 | $177,567,099 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 2,935,137 | $52,744,422 | ||||||||||||
Service Class | — | — | 1,267,085 | 22,541,437 | ||||||||||||
— | $— | 4,202,222 | $75,285,859 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (9,937,322 | ) | $(191,837,174 | ) | (18,606,613 | ) | $(328,691,104 | ) | ||||||||
Service Class | (5,058,761 | ) | (96,351,968 | ) | (9,247,365 | ) | (161,343,248 | ) | ||||||||
(14,996,083 | ) | $(288,189,142 | ) | (27,853,978 | ) | $(490,034,352 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (8,460,183 | ) | $(163,421,173 | ) | (13,093,078 | ) | $(230,396,930 | ) | ||||||||
Service Class | (1,778,873 | ) | (34,006,032 | ) | (432,784 | ) | (6,784,464 | ) | ||||||||
(10,239,056 | ) | $(197,427,205 | ) | (13,525,862 | ) | $(237,181,394 | ) |
(6) | Line of Credit |
The fund and certain other funds managed by MFS participate in a $1.1 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Federal Reserve funds rate or one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Federal Reserve funds rate plus an agreed upon spread. For the six months ended June 30, 2011, the fund’s commitment fee and interest expense were $13,473 and $0, respectively, and are included in miscellaneous expense on the Statement of Operations.
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Notes to Financial Statements (unaudited) – continued
(7) | Transactions in Underlying Affiliated Funds – Affiliated Issuers |
An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the fund assumes the following to be affiliated issuers:
Underlying Affiliated Funds | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | �� | |||||||||||
MFS Institutional Money Market Portfolio | 41,354,810 | 205,387,448 | (214,795,339 | ) | 31,946,919 | |||||||||||
Underlying Affiliated Funds | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $16,866 | $31,946,919 |
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MFS Total Return Series
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board’s most recent review and renewal of the fund’s Investment Advisory Agreement with MFS will be available on or about November 1, 2011 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds’ proxy voting policies and procedures is available without charge, upon request, by calling
1-800-225-2606, by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the Securities and Exchange Commission (the Commission) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. The fund’s Form N-Q is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and copies of this information may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
From time to time, MFS may post important information about the fund or the MFS funds on the MFS web site (mfs.com). This information is available by visiting the “News & Commentary” section of mfs.com or by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of mfs.com.
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rev. 3/11
FACTS | WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION? |
Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
What? | The types of personal information we collect and share depend on the product or service you have with us. This information can include:
• Social Security number and account balances • Account transactions and transaction history • Checking account information and wire transfer instructions
When you are no longer our customer, we continue to share your information as described in this notice. |
How? | All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons MFS chooses to share; and whether you can limit this sharing. |
Reasons we can share your personal information | Does MFS share? | Can you limit this sharing? | ||
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus | Yes | No | ||
For our marketing purposes – to offer our products and services to you | No | We don’t share | ||
For joint marketing with other financial companies | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your transactions and experiences | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your creditworthiness | No | We don’t share | ||
For nonaffiliates to market to you | No | We don’t share |
Questions? | Call 800-225-2606 or go to mfs.com. |
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Page 2 |
Who we are | ||
Who is providing this notice? | MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., MFS Fund Distributors, Inc., MFS Heritage Trust Company, and MFS Service Center, Inc. |
What we do | ||
How does MFS protect my personal information? | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you. | |
How does MFS collect my personal information? | We collect your personal information, for example, when you
• open an account or provide account information • direct us to buy securities or direct us to sell your securities • make a wire transfer
We also collect your personal information from others, such as credit bureaus, affiliates and other companies. | |
Why can’t I limit all sharing? | Federal law gives you the right to limit only
• sharing for affiliates’ everyday business purposes – information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you
State laws and individual companies may give you additional rights to limit sharing. |
Definitions | ||
Affiliates | Companies related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice. | |
Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share with nonaffiliates so they can market to you. | |
Joint Marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you.
• MFS doesn’t jointly market. |
Other important information | ||
If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours. |
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Table of Contents
MFS® Research Bond Series
MFS® Variable Insurance Trust
SEMIANNUAL REPORT
June 30, 2011
VFB-SEM
Table of Contents
MFS® RESEARCH BOND SERIES
The report is prepared for the general information of contract owners. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED Ÿ MAY LOSE VALUE Ÿ NO BANK OR CREDIT UNION GUARANTEE Ÿ NOT A DEPOSIT Ÿ NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
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MFS Research Bond Series
Dear Contract Owners:
After about a year of almost uninterrupted macroeconomic and financial market improvement following the global credit crisis, investors grew more cautious in the middle of 2010 as fears grew that some European countries would default on their debt and as economic data showed a weakening
trend in the global economy. As a result asset prices fell significantly.
Last September the U.S. Federal Reserve Board’s promises to make lending conditions easier helped assuage market fears and drive asset prices off their recent lows. A combination of solid earnings and improving economic data gave an additional boost to investor sentiment.
In the following months, the renewed positive market mood, coupled with indications of better global macroeconomic activity, pushed many asset valuations to post-crisis highs. At the same time, global sovereign
bond yields initially rose as investors became concerned about inflationary pressures, driven by higher prices for oil as well as other commodities. However, by the end of the second quarter of 2011, a weakening macroeconomic backdrop and renewed concerns over debt problems in some eurozone countries pushed equities lower.
For the remainder of 2011, we are cautiously optimistic that economic growth will continue to improve and that the global economies will recover from the shocks of the past few years. We expect the pace of recovery worldwide to be uneven and volatile and acknowledge the elevated uncertainty created by events in Japan, Europe, the Middle East, as well as that created by the U.S. debate over raising the debt ceiling and the downgrade by Standard & Poor’s of the U.S. long-term credit rating.
As always, we continue to be mindful of the many economic challenges faced at the local, national, and international levels. It is in times such as these that we want to remind investors of the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with their advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2011
The opinions expressed in this letter are subject to change, may not be relied upon for investment advice, and no forecasts can be guaranteed.
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MFS Research Bond Series
Portfolio structure (i)
Fixed income sectors (i) | ||||
High Grade Corporates | 29.5% | |||
U.S. Treasury Securities | 24.2% | |||
Mortgage-Backed Securities | 21.1% | |||
High Yield Corporates | 6.6% | |||
Commercial Mortgage-Backed Securities | 6.1% | |||
U.S. Government Agencies | 4.6% | |||
Emerging Markets Bonds | 2.8% | |||
Collateralized Debt Obligations | 1.7% | |||
Non-U.S. Government Bonds | 1.1% | |||
Asset-Backed Securities | 0.8% | |||
Floating Rate Loans (o) | 0.0% |
Composition including fixed income credit quality (a)(i) | ||||
AAA | 5.6% | |||
AA | 3.1% | |||
A | 11.6% | |||
BBB | 20.7% | |||
BB | 6.5% | |||
B | 1.1% | |||
CCC (o) | 0.0% | |||
CC (o) | 0.0% | |||
C (o) | 0.0% | |||
D (o) | 0.0% | |||
U.S. Government | 24.2% | |||
Federal Agencies | 25.7% | |||
Not Rated (o) | 0.0% | |||
Cash & Other | 1.5% |
Portfolio facts (i) | ||||
Average Duration (d) | 4.8 | |||
Average Effective Maturity (m) | 6.9 yrs. |
(a) | For all securities other than those specifically described below, ratings are assigned to underlying securities utilizing ratings from Moody’s, Fitch, and Standard & Poor’s rating agencies and applying the following hierarchy: If all three agencies provide a rating, the middle rating (after dropping the highest and lowest ratings) is assigned; if two of the three agencies rate a security, the lower of the two is assigned. Ratings are shown in the S&P and Fitch scale (e.g., AAA). All ratings are subject to change. U.S. Government includes securities issued by the U.S. Department of the Treasury. Federal Agencies includes rated and unrated U.S. Agency fixed-income securities, U.S. Agency mortgage-backed securities, and collateralized mortgage obligations of U.S. Agency mortgage-backed securities. Not Rated includes fixed income securities, including fixed income futures, which have not been rated by any rating agency. Cash & Other includes cash, other assets less liabilities, offsets to derivative positions, and short-term securities. The fund may not hold all of these instruments. The fund itself has not been rated. |
(d) | Duration is a measure of how much a bond’s price is likely to fluctuate with general changes in interest rates, e.g., if rates rise 1.00%, a bond with a 5-year duration is likely to lose about 5.00% of its value due to the interest rate move. |
(i) | For purposes of this presentation, the components include the market value of securities, and reflect the impact of the equivalent exposure of derivative positions, if applicable. These amounts may be negative from time to time. The bond component will include any accrued interest amounts. Equivalent exposure is a calculated amount that translates the derivative position into a reasonable approximation of the amount of the underlying asset that the portfolio would have to hold at a given point in time to have the same price sensitivity that results from the portfolio’s ownership of the derivative contract. When dealing with derivatives, equivalent exposure is a more representative measure of the potential impact of a position on portfolio performance than market value. Where the fund holds convertible bonds, these are treated as part of the equity portion of the portfolio. |
(m) | In determining an instrument’s effective maturity for purposes of calculating the fund’s dollar-weighted average effective maturity, MFS uses the instrument’s stated maturity or, if applicable, an earlier date on which MFS believes it is probable that a maturity-shortening device (such as a put, pre-refunding or prepayment) will cause the instrument to be repaid. Such an earlier date can be substantially shorter than the instrument’s stated maturity. |
(o) | Less than 0.1%. |
Percentages are based on net assets as of 6/30/11.
The portfolio is actively managed and current holdings may be different.
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MFS Research Bond Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2011 through June 30, 2011
As a contract holder of the fund, you incur ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2011 through June 30, 2011.
Actual Expenses
The first line for each share class in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the following table provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight the fund’s ongoing costs only and do not take into account the fees and expenses imposed under the variable contracts through which your investment in the fund is made. Therefore, the second line for each share class in the table is useful in comparing ongoing costs associated with an investment in vehicles (such as the fund) which fund benefits under variable annuity and variable life insurance contracts and to qualified pension and retirement plans only, and will not help you determine the relative total costs of investing in the fund through variable annuity and variable life insurance contracts. If the fees and expenses imposed under the variable contracts were included, your costs would have been higher.
Share Class | Annualized Expense Ratio | Beginning Account Value 1/01/11 | Ending Account Value | Expenses Paid During Period (p) 1/01/11-6/30/11 | ||||||||||||||
Initial Class | Actual | 0.57% | $1,000.00 | $1,030.81 | $2.87 | |||||||||||||
Hypothetical (h) | 0.57% | $1,000.00 | $1,021.97 | $2.86 | ||||||||||||||
Service Class | Actual | 0.82% | $1,000.00 | $1,029.53 | $4.13 | |||||||||||||
Hypothetical (h) | 0.82% | $1,000.00 | $1,020.73 | $4.11 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid is equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
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PORTFOLIO OF INVESTMENTS – 6/30/11 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
BONDS – 97.6% | ||||||||
Aerospace – 0.2% | ||||||||
Bombardier, Inc., 7.75%, 2020 (n) | $ | 1,020,000 | $ | 1,147,500 | ||||
Apparel Manufacturers – 0.2% | ||||||||
Phillips-Van Heusen Corp., 7.375%, 2020 | $ | 1,455,000 | $ | 1,556,850 | ||||
Asset-Backed & Securitized – 8.6% | ||||||||
Anthracite Ltd., “A”, CDO, FRN, 0.545%, 2019 (z) | $ | 1,270,277 | $ | 1,105,141 | ||||
Anthracite Ltd., “B”, CDO, 5.488%, 2037 (z) | 700,000 | 694,260 | ||||||
Anthracite Ltd., “BFL”, CDO, FRN, 1.185%, 2037 (z) | 1,160,000 | 1,048,756 | ||||||
Anthracite Ltd., “CFL”, CDO, FRN, 1.435%, 2037 (z) | 263,618 | 243,873 | ||||||
Anthracite Ltd., CDO, FRN, 1.035%, 2037 (z) | 1,977,382 | 1,879,304 | ||||||
ARCap REIT, Inc., CDO, “F”, FRN, 6.054%, 2045 (q)(z) | 325,000 | 39,813 | ||||||
Bayview Commercial Asset Trust, FRN, 3.117%, 2036 (i)(z) | 1,070,724 | 70,614 | ||||||
Bayview Commercial Asset Trust, FRN, 3.086%, 2036 (i)(z) | 408,368 | 20,183 | ||||||
Bayview Commercial Asset Trust, FRN, 2.834%, 2036 (i)(z) | 517,129 | 20,955 | ||||||
Bayview Commercial Asset Trust, FRN, 2.93%, 2036 (i)(z) | 343,828 | 14,453 | ||||||
Bayview Commercial Asset Trust, FRN, 2.87%, 2035 (i)(z) | 559,387 | 17,381 | ||||||
Bayview Commercial Asset Trust, FRN, 3.231%, 2037 (i)(z) | 1,175,296 | 88,865 | ||||||
Bayview Commercial Asset Trust, FRN, 3.037%, 2036 (i)(z) | 546,243 | 37,831 | ||||||
Bayview Financial Acquisition Trust, FRN, 5.483%, 2041 | 45,726 | 45,896 | ||||||
Bayview Financial Acquisition Trust, FRN, 5.402%, 2035 | 2,524 | 2,524 | ||||||
Bayview Financial Revolving Mortgage Loan Trust, FRN, 1.785%, 2040 (z) | 180,426 | 100,914 | ||||||
Capital Trust Realty Ltd., CDO, 5.16%, 2035 (z) | 795,312 | 799,686 | ||||||
Capital Trust Realty Ltd., CDO, 5.267%, 2035 (z) | 1,677,300 | 1,643,754 | ||||||
Carey Commercial Mortgage Trust, 2002-1, “A”, 5.97%, 2019 (z) | 128,042 | 129,058 | ||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust, 5.322%, 2049 | 4,500,342 | 4,775,055 | ||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust, FRN, 5.393%, 2044 | 500,000 | 506,589 | ||||||
Commercial Mortgage Acceptance Corp., FRN, 2.046%, 2030 (i) | 174,425 | 7,915 | ||||||
Commercial Mortgage Pass-Through Certificates, “A4”, 5.306%, 2046 | 1,361,478 | 1,457,940 | ||||||
Credit Suisse Mortgage Capital Certificate, 5.311%, 2039 | 2,250,000 | 2,409,806 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Asset-Backed & Securitized – continued | ||||||||
Credit Suisse Mortgage Capital Certificate, FRN, 5.694%, 2040 | $ | 375,725 | $ | 391,110 | ||||
Credit-Based Asset Servicing & Securitization LLC, FRN, 5.303%, 2035 | 40,504 | 39,541 | ||||||
Crest Ltd., “A1” CDO, FRN, 0.726%, 2018 (z) | 1,045,910 | 962,237 | ||||||
Crest Ltd., “A2”, CDO, 4.669%, 2018 (z) | 358,861 | 336,432 | ||||||
Crest Ltd., “B”, CDO, FRN, 1.622%, 2035 (z) | 897,000 | 892,515 | ||||||
CWCapital LLC, 5.223%, 2048 | 600,000 | 635,692 | ||||||
Falcon Franchise Loan LLC, FRN, 3.948%, 2025 (i)(z) | 187,464 | 25,458 | ||||||
First Union-Lehman Brothers Commercial Mortgage Trust, 7%, 2029 (n) | 32,704 | 33,675 | ||||||
Ford Credit Auto Lease Trust, 1.04%, 2013 (n) | 81,778 | 81,802 | ||||||
FUEL Trust, 3.984%, 2016 (z) | 1,773,000 | 1,758,594 | ||||||
GE Equipment Transportation LLC, “A2”, 0.77%, 2013 | 1,175,000 | 1,175,000 | ||||||
GMAC LLC, FRN, 7.95%, 2034 (n) | 110,000 | 95,700 | ||||||
GMAC LLC, FRN, 6.02%, 2033 (z) | 27,894 | 28,920 | ||||||
Hertz Vehicle Financing LLC, 2010-1A, “A1”, 2.6%, 2015 (n) | 1,205,000 | 1,229,185 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., 5.552%, 2045 | 725,000 | 789,537 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., 5.42%, 2049 | 4,865,701 | 5,217,003 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 5.572%, 2042 (n) | 130,000 | 44,442 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 6.004%, 2049 | 3,564,937 | 3,786,059 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 6.004%, 2049 | 3,630,395 | 3,915,375 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 6.186%, 2051 | 4,621,335 | 4,916,417 | ||||||
KKR Financial CLO Ltd., “A1”, FRN, 0.543%, 2017 (z) | 1,000,000 | 972,470 | ||||||
Lehman Brothers Commercial Conduit Mortgage Trust, FRN, 1.072%, 2030 (i) | 180,724 | 3,651 | ||||||
Mach One Trust Commercial Mortgage, “B”, 5.43%, 2040 (z) | 851,000 | 868,020 | ||||||
Merrill Lynch Mortgage Trust, FRN, “A3”, 6.019%, 2050 | 3,575,513 | 3,827,665 | ||||||
Merrill Lynch/Countrywide Commercial Mortgage Trust, FRN, 5.81%, 2050 | 540,000 | 577,929 | ||||||
Morgan Stanley Capital I, Inc., FRN, 1.185%, 2030 (i)(z) | 269,761 | 6,798 | ||||||
Preferred Term Securities XIX Ltd., CDO, FRN, 0.597%, 2035 (z) | 464,966 | 310,365 | ||||||
Prudential Securities Secured Financing Corp., FRN, 7.325%, 2013 (z) | 125,000 | 125,524 | ||||||
Residential Funding Mortgage Securities, Inc., FRN, 5.32%, 2035 | 174,000 | 74,127 | ||||||
Smart Trust, “A2B”, FRN, 0.948%, 2013 (z) | 713,000 | 713,001 |
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Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Asset-Backed & Securitized – continued | ||||||||
Structured Asset Securities Corp., FRN, 0.425%, 2035 | $ | 315 | $ | 313 | ||||
Wachovia Bank Commercial Mortgage Trust, “A3”, FRN, 6.096%, 2051 | 3,431,440 | 3,647,885 | ||||||
Wachovia Bank Commercial Mortgage Trust, “A4”, FRN, 6.096%, 2051 | 4,231,834 | 4,603,989 | ||||||
$ | 59,246,997 | |||||||
Automotive – 1.1% | ||||||||
Ford Motor Credit Co. LLC, 8%, 2014 | $ | 1,350,000 | $ | 1,481,008 | ||||
Harley-Davidson Financial Services, 3.875%, 2016 (n) | 3,270,000 | 3,325,740 | ||||||
Lear Corp., 8.125%, 2020 | 1,495,000 | 1,610,863 | ||||||
RCI Banque S.A., 4.6%, 2016 (n) | 1,426,000 | 1,456,692 | ||||||
$ | 7,874,303 | |||||||
Banks & Diversified Financials (Covered Bonds) – 0.1% | ||||||||
Compagnie de Financement Foncier, 2.125%, 2013 (n) | $ | 900,000 | $ | 913,423 | ||||
Biotechnology – 0.2% | ||||||||
Life Technologies Corp., 5%, 2021 | $ | 1,542,000 | $ | 1,564,384 | ||||
Broadcasting – 0.9% | ||||||||
Discovery Communications, Inc., 4.375%, 2021 | $ | 1,666,000 | $ | 1,649,697 | ||||
Inmarsat Finance PLC, 7.375%, 2017 (n) | 1,525,000 | 1,616,500 | ||||||
NBC Universal, Inc., 5.95%, 2041 (n) | 1,594,000 | 1,620,926 | ||||||
News America, Inc., 8.5%, 2025 | 152,000 | 192,292 | ||||||
SIRIUS XM Radio, Inc., 13%, 2013 (n) | 1,215,000 | 1,424,588 | ||||||
$ | 6,504,003 | |||||||
Brokerage & Asset Managers – 0.2% | ||||||||
INVESCO PLC, 5.625%, 2012 | $ | 191,000 | $ | 198,476 | ||||
TD AMERITRADE Holding Corp., 5.6%, 2019 | 859,000 | 920,864 | ||||||
$ | 1,119,340 | |||||||
Building – 0.4% | ||||||||
Owens Corning, Inc., 6.5%, 2016 | $ | 2,292,000 | $ | 2,493,884 | ||||
Cable TV – 2.4% | ||||||||
CCO Holdings LLC, 7.875%, 2018 | $ | 1,630,000 | $ | 1,717,613 | ||||
Cox Communications, Inc., 9.375%, 2019 (n) | 2,492,000 | 3,312,105 | ||||||
CSC Holdings LLC, 8.5%, 2014 | 1,600,000 | 1,772,000 | ||||||
DIRECTV Holdings LLC, 5.2%, 2020 | 1,050,000 | 1,110,992 | ||||||
DIRECTV Holdings LLC, 7.625%, 2016 | 2,517,000 | 2,743,530 | ||||||
Myriad International Holdings B.V., 6.375%, 2017 (n) | 1,470,000 | 1,587,600 | ||||||
TCI Communications, Inc., 9.8%, 2012 | 72,000 | 75,715 | ||||||
Time Warner Cable, Inc., 5%, 2020 | 2,000,000 | 2,077,888 | ||||||
Time Warner Entertainment Co. LP, 8.375%, 2033 | 290,000 | 370,652 | ||||||
Virgin Media Finance PLC, 9.5%, 2016 | 1,350,000 | 1,525,500 | ||||||
Virgin Media Secured Finance PLC, 5.25%, 2021 (z) | 480,000 | 511,158 | ||||||
$ | 16,804,753 | |||||||
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Chemicals – 1.3% | ||||||||
Ashland, Inc., 9.125%, 2017 | $ | 2,120,000 | $ | 2,385,000 | ||||
Dow Chemical Co., 8.55%, 2019 | 2,300,000 | 2,965,721 | ||||||
Lyondell Chemical Co., 11%, 2018 | 1,275,000 | 1,428,000 | ||||||
Nalco Co., 8.25%, 2017 | 1,700,000 | 1,857,250 | ||||||
$ | 8,635,971 | |||||||
Consumer Products – 0.5% | ||||||||
Hasbro, Inc., 6.35%, 2040 | $ | 1,500,000 | $ | 1,550,550 | ||||
Newell Rubbermaid, Inc., 5.5%, 2013 | 1,971,000 | 2,109,717 | ||||||
$ | 3,660,267 | |||||||
Consumer Services – 0.2% | ||||||||
Western Union Co., 5.4%, 2011 | $ | 1,147,000 | $ | 1,167,678 | ||||
Containers – 0.2% | ||||||||
Greif, Inc., 7.75%, 2019 | $ | 1,575,000 | $ | 1,701,000 | ||||
Defense Electronics – 0.1% | ||||||||
BAE Systems Holdings, Inc., 6.375%, 2019 (n) | $ | 500,000 | $ | 568,221 | ||||
BAE Systems Holdings, Inc., 6.4%, 2011 (n) | 354,000 | 363,305 | ||||||
$ | 931,526 | |||||||
Electronics – 0.2% | ||||||||
Tyco Electronics Group S.A., 6.55%, 2017 | $ | 1,180,000 | $ | 1,390,333 | ||||
Emerging Market Quasi-Sovereign – 0.8% | ||||||||
Banco do Brasil S.A., 5.875%, 2022 (z) | $ | 1,702,000 | $ | 1,683,278 | ||||
CNPC (HK) Overseas Capital Ltd., 4.5%, 2021 (z) | 1,659,000 | 1,616,282 | ||||||
OJSC Russian Agricultural Bank, FRN, 6%, 2021 (z) | 2,026,000 | 2,034,921 | ||||||
Petroleos Mexicanos, 6.5%, 2041 (z) | 51,000 | 51,747 | ||||||
$ | 5,386,228 | |||||||
Emerging Market Sovereign – 0.2% | ||||||||
Republic of Hungary, 6.375%, 2021 | $ | 1,592,000 | $ | 1,679,560 | ||||
Energy – Independent – 1.6% | ||||||||
Anadarko Petroleum Corp., 6.45%, 2036 | $ | 1,280,000 | $ | 1,335,611 | ||||
Anadarko Petroleum Corp., 6.95%, 2019 | 1,460,000 | 1,705,296 | ||||||
Anadarko Petroleum Corp., 6.375%, 2017 | 653,000 | 748,556 | ||||||
Newfield Exploration Co., 6.625%, 2016 | 1,160,000 | 1,197,700 | ||||||
Newfield Exploration Co., 7.125%, 2018 | 740,000 | 784,400 | ||||||
Pioneer Natural Resources Co., 6.65%, 2017 | 1,760,000 | 1,916,950 | ||||||
Southwestern Energy Co., 7.5%, 2018 | 2,521,000 | 2,867,638 | ||||||
Talisman Energy, Inc., 7.75%, 2019 | 200,000 | 243,736 | ||||||
$ | 10,799,887 | |||||||
Energy – Integrated – 0.2% | ||||||||
BP Capital Markets PLC, 4.5%, 2020 | $ | 623,000 | $ | 635,332 | ||||
ConocoPhillips, 6%, 2020 | 740,000 | 865,349 | ||||||
$ | 1,500,681 | |||||||
Financial Institutions – 1.5% | ||||||||
CIT Group, Inc., 6.625%, 2018 (n) | $ | 1,641,000 | $ | 1,710,743 | ||||
General Electric Capital Corp., 6.375% to 2017, FRN to 2067 | 2,005,000 | 2,055,125 | ||||||
General Electric Capital Corp., 4.625%, 2021 | 1,830,000 | 1,840,771 |
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Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Financial Institutions – continued | ||||||||
International Lease Finance Corp., 5.75%, 2016 | $ | 1,205,000 | $ | 1,186,584 | ||||
International Lease Finance Corp., 7.125%, 2018 (n) | 1,190,000 | 1,273,300 | ||||||
SLM Corp., 6.25%, 2016 | 2,039,000 | 2,115,463 | ||||||
$ | 10,181,986 | |||||||
Food & Beverages – 1.3% | ||||||||
Anheuser-Busch InBev S.A., 7.75%, 2019 | $ | 2,667,000 | $ | 3,355,203 | ||||
Kraft Foods, Inc., 6.5%, 2040 | 1,351,000 | 1,500,656 | ||||||
Kraft Foods, Inc., 6.125%, 2018 | 550,000 | 632,739 | ||||||
Miller Brewing Co., 5.5%, 2013 (n) | 1,310,000 | 1,418,958 | ||||||
Tyson Foods, Inc., 6.85%, 2016 | 1,760,000 | 1,944,800 | ||||||
$ | 8,852,356 | |||||||
Food & Drug Stores – 0.2% | ||||||||
CVS Caremark Corp., 5.75%, 2041 | $ | 1,600,000 | $ | 1,573,176 | ||||
Forest & Paper Products – 0.4% | ||||||||
Fibria Overseas Finance, 6.75%, 2021 (n) | $ | 1,549,000 | $ | 1,622,578 | ||||
Georgia-Pacific Corp., 5.4%, 2020 (n) | 175,000 | 178,348 | ||||||
Inversiones CMPC S.A., 4.75%, 2018 (n) | 830,000 | 829,200 | ||||||
$ | 2,630,126 | |||||||
Gaming & Lodging – 0.5% | ||||||||
Wyndham Worldwide Corp., 7.375%, 2020 | $ | 600,000 | $ | 665,327 | ||||
Wyndham Worldwide Corp., 6%, 2016 | 2,905,000 | 3,085,049 | ||||||
$ | 3,750,376 | |||||||
Insurance – 1.1% | ||||||||
Aflac, Inc., 6.45%, 2040 | $ | 1,654,000 | $ | 1,641,185 | ||||
ING Groep N.V., 5.775% to 2015, FRN to 2049 | 2,198,000 | 2,022,160 | ||||||
Metropolitan Life Global Funding, 5.125%, 2013 (n) | 420,000 | 446,892 | ||||||
Metropolitan Life Global Funding, 5.125%, 2014 (n) | 290,000 | 316,842 | ||||||
Unum Group, 7.125%, 2016 | 290,000 | 332,872 | ||||||
UnumProvident Corp., 6.85%, 2015 (n) | 2,243,000 | 2,510,774 | ||||||
$ | 7,270,725 | |||||||
Insurance – Health – 0.7% | ||||||||
Humana, Inc., 7.2%, 2018 | $ | 2,482,000 | $ | 2,881,190 | ||||
Unitedhealth Group, Inc., 4.875%, 2013 | 2,000,000 | 2,114,898 | ||||||
$ | 4,996,088 | |||||||
Insurance – Property & Casualty – 1.3% | ||||||||
Allied World Assurance, 5.5%, 2020 | $ | 740,000 | $ | 748,686 | ||||
AXIS Capital Holdings Ltd., 5.75%, 2014 | 555,000 | 599,709 | ||||||
CNA Financial Corp., 5.875%, 2020 | 1,580,000 | 1,642,783 | ||||||
PartnerRe Ltd., 5.5%, 2020 | 1,083,000 | 1,093,715 | ||||||
QBE Capital Funding III Ltd., FRN, 7.25%, 2041 (n) | 1,670,000 | 1,675,635 | ||||||
XL Group PLC, 6.5% to 2017, FRN to 2049 | 1,504,000 | 1,379,920 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Insurance – Property & Casualty – continued | ||||||||
ZFS Finance USA Trust II, 6.45% to 2016, FRN to 2065 (n) | $ | 542,000 | $ | 550,130 | ||||
ZFS Finance USA Trust V, 6.5% to 2017, FRN to 2067 (n) | 1,452,000 | 1,444,740 | ||||||
$ | 9,135,318 | |||||||
International Market Quasi-Sovereign – 1.0% | ||||||||
Achmea Hypotheekbank N.V., 3.2%, 2014 (n) | $ | 1,150,000 | $ | 1,207,042 | ||||
FIH Erhvervsbank A.S., 1.75%, 2012 (z) | 766,000 | 778,570 | ||||||
ING Bank N.V., 3.9%, 2014 (n) | 1,500,000 | 1,604,889 | ||||||
NIBC Bank N.V., 2.8%, 2014 (z) | 1,500,000 | 1,561,541 | ||||||
Royal Bank of Scotland Group PLC, 2.625%, 2012 (n) | 1,080,000 | 1,100,395 | ||||||
Societe Financement de l’ Economie Francaise, 3.375%, 2014 (n) | 842,000 | 893,050 | ||||||
$ | 7,145,487 | |||||||
Machinery & Tools – 0.2% | ||||||||
Case New Holland, Inc., 7.875%, 2017 (n) | $ | 1,225,000 | $ | 1,347,500 | ||||
Major Banks – 6.0% | ||||||||
ABN AMRO Bank N.V., 3%, 2014 (n) | $ | 850,000 | $ | 868,308 | ||||
BAC Capital Trust XIV, 5.63% to 2012, FRN to 2049 | 120,000 | 89,250 | ||||||
Bank of America Corp., 5.65%, 2018 | 4,300,000 | 4,533,623 | ||||||
Bank of America Corp., 8% to 2018, FRN to 2049 | 1,884,000 | 1,967,480 | ||||||
Bank of America Corp., 5.625%, 2020 | 555,000 | 573,044 | ||||||
Bank of America Corp., 5.875%, 2021 | 1,670,000 | 1,752,623 | ||||||
BNP Paribas, 5%, 2021 | 1,120,000 | 1,126,056 | ||||||
Credit Suisse (USA), Inc., 6%, 2018 | 2,160,000 | 2,330,776 | ||||||
Goldman Sachs Group, Inc., 7.5%, 2019 | 1,438,000 | 1,673,175 | ||||||
Goldman Sachs Group, Inc., 5.625%, 2017 | 336,000 | 355,702 | ||||||
HSBC USA, Inc., 4.875%, 2020 | 1,090,000 | 1,073,142 | ||||||
JPMorgan Chase & Co., 4.25%, 2020 | 2,800,000 | 2,739,338 | ||||||
JPMorgan Chase & Co., 4.625%, 2021 | 2,630,000 | 2,608,721 | ||||||
JPMorgan Chase Bank N.A., 5.875%, 2016 | 250,000 | 276,731 | ||||||
JPMorgan Chase Capital XXII, 6.45%, 2087 | 845,000 | 851,402 | ||||||
JPMorgan Chase Capital XXVII, 7%, 2039 | 221,000 | 220,726 | ||||||
Macquarie Group Ltd., 6%, 2020 (n) | 1,073,000 | 1,075,957 | ||||||
Macquarie Group Ltd., 6.25%, 2021 (n) | 1,400,000 | 1,399,177 | ||||||
Merrill Lynch & Co., Inc., 6.15%, 2013 | 1,170,000 | 1,256,269 | ||||||
Merrill Lynch & Co., Inc., 6.05%, 2016 | 1,569,000 | 1,644,924 | ||||||
Morgan Stanley, 6.625%, 2018 | 2,260,000 | 2,489,600 | ||||||
Morgan Stanley, 5.5%, 2020 | 1,600,000 | 1,619,506 | ||||||
Morgan Stanley, 5.75%, 2021 | 1,680,000 | 1,699,873 | ||||||
Morgan Stanley, 5.75%, 2016 | 944,000 | 1,002,649 | ||||||
PNC Funding Corp., 5.625%, 2017 | 1,673,000 | 1,842,154 | ||||||
Royal Bank of Scotland PLC, 6.125%, 2021 | 1,660,000 | 1,701,689 | ||||||
Wachovia Corp., 6.605%, 2025 | 164,000 | 181,574 | ||||||
Wells Fargo & Co., 7.98% to 2018, FRN to 2049 | 2,012,000 | 2,172,960 | ||||||
$ | 41,126,429 | |||||||
6
Table of Contents
MFS Research Bond Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Medical & Health Technology & Services – 0.3% | ||||||||
HCA, Inc., 7.875%, 2020 | $ | 1,505,000 | $ | 1,632,925 | ||||
McKesson Corp., 5.7%, 2017 | 510,000 | 578,081 | ||||||
$ | 2,211,006 | |||||||
Metals & Mining – 1.6% | ||||||||
ArcelorMittal, 6.5%, 2014 | $ | 496,000 | $ | 550,027 | ||||
ArcelorMittal, 9.85%, 2019 | 1,410,000 | 1,787,501 | ||||||
Freeport-McMoRan Copper & Gold, Inc., 8.375%, 2017 | 1,542,000 | 1,684,635 | ||||||
Southern Copper Corp., 6.75%, 2040 | 2,040,000 | 1,984,530 | ||||||
Teck Resources Ltd., 10.25%, 2016 | 1,284,000 | 1,534,380 | ||||||
Teck Resources Ltd., 10.75%, 2019 | 1,167,000 | 1,474,796 | ||||||
Vale Overseas Ltd., 5.625%, 2019 | 1,210,000 | 1,291,383 | ||||||
Vedanta Resources PLC, 6.75%, 2016 (z) | 1,068,000 | 1,063,942 | ||||||
$ | 11,371,194 | |||||||
Mortgage-Backed – 21.0% | ||||||||
Fannie Mae, 4.55%, 2011 | $ | 111,390 | $ | 110,473 | ||||
Fannie Mae, 4.86%, 2012 - 2015 | 194,861 | 203,447 | ||||||
Fannie Mae, 5.12%, 2012 | 54,639 | 55,396 | ||||||
Fannie Mae, 3.81%, 2013 | 17,721 | 18,415 | ||||||
Fannie Mae, 4.517%, 2013 | 280,923 | 294,093 | ||||||
Fannie Mae, 4.845%, 2013 | 47,660 | 50,194 | ||||||
Fannie Mae, 5.159%, 2013 | 1,353,814 | 1,441,137 | ||||||
Fannie Mae, 4.562%, 2014 | 104,553 | 111,422 | ||||||
Fannie Mae, 4.6%, 2014 - 2015 | 102,723 | 110,085 | ||||||
Fannie Mae, 4.61%, 2014 | 66,538 | 71,434 | ||||||
Fannie Mae, 4.77%, 2014 - 2019 | 489,506 | 525,502 | ||||||
Fannie Mae, 4.88%, 2014 - 2020 | 204,596 | 220,091 | ||||||
Fannie Mae, 4.53%, 2015 | 99,936 | 107,570 | ||||||
Fannie Mae, 4.56%, 2015 | 52,120 | 55,991 | ||||||
Fannie Mae, 4.665%, 2015 | 35,703 | 38,466 | ||||||
Fannie Mae, 4.69%, 2015 | 155,101 | 167,080 | ||||||
Fannie Mae, 4.7%, 2015 | 327,550 | 353,940 | ||||||
Fannie Mae, 4.74%, 2015 | 46,717 | 50,501 | ||||||
Fannie Mae, 4.78%, 2015 | 99,883 | 108,333 | ||||||
Fannie Mae, 4.815%, 2015 | 52,268 | 56,675 | ||||||
Fannie Mae, 4.85%, 2015 | 165,816 | 179,373 | ||||||
Fannie Mae, 4.87%, 2015 | 32,327 | 35,079 | ||||||
Fannie Mae, 4.89%, 2015 | 91,549 | 99,553 | ||||||
Fannie Mae, 4.922%, 2015 | 68,150 | 74,095 | ||||||
Fannie Mae, 4.94%, 2015 | 120,000 | 130,800 | ||||||
Fannie Mae, 5.1%, 2015 | 275,000 | 293,070 | ||||||
Fannie Mae, 5.466%, 2015 | 787,747 | 870,295 | ||||||
Fannie Mae, 5.08%, 2016 | 354,729 | 388,532 | ||||||
Fannie Mae, 5.09%, 2016 | 115,646 | 126,641 | ||||||
Fannie Mae, 5.157%, 2016 | 3,395,734 | 3,732,549 | ||||||
Fannie Mae, 5.35%, 2016 - 2023 | 860,107 | 940,264 | ||||||
Fannie Mae, 5.395%, 2016 | 129,410 | 141,445 | ||||||
Fannie Mae, 5.424%, 2016 | 1,143,686 | 1,263,220 | ||||||
Fannie Mae, 5.724%, 2016 | 1,613,314 | 1,790,667 | ||||||
Fannie Mae, 3.308%, 2017 | 1,392,778 | 1,416,333 | ||||||
Fannie Mae, 4.99%, 2017 | 150,413 | 162,874 | ||||||
Fannie Mae, 5.05%, 2017 | 255,176 | 278,458 | ||||||
Fannie Mae, 5.28%, 2017 | 137,885 | 151,155 | ||||||
Fannie Mae, 5.488%, 2017 | 951,296 | 1,061,681 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Mortgage-Backed – continued | ||||||||
Fannie Mae, 5.5%, 2017 - 2040 | $ | 19,765,265 | $ | 21,433,477 | ||||
Fannie Mae, 5.54%, 2017 | 105,226 | 114,900 | ||||||
Fannie Mae, 5.65%, 2017 | 157,439 | 171,409 | ||||||
Fannie Mae, 3.84%, 2018 | 697,786 | 723,859 | ||||||
Fannie Mae, 3.99%, 2018 | 600,000 | 624,738 | ||||||
Fannie Mae, 5.341%, 2018 | 501,875 | 557,396 | ||||||
Fannie Mae, 5.18%, 2019 | 130,569 | 142,396 | ||||||
Fannie Mae, 5.51%, 2019 | 195,223 | 212,126 | ||||||
Fannie Mae, 5%, 2020 - 2040 | 13,524,733 | 14,426,905 | ||||||
Fannie Mae, 5.19%, 2020 | 192,601 | 206,886 | ||||||
Fannie Mae, 6%, 2022 - 2038 | 18,148,300 | 19,969,626 | ||||||
Fannie Mae, 4%, 2024 - 2025 | 2,376,572 | 2,482,251 | ||||||
Fannie Mae, 4.5%, 2024 - 2040 | 9,572,959 | 10,134,124 | ||||||
Fannie Mae, 4.5%, 2025 | 771,452 | 819,229 | ||||||
Fannie Mae, 6.5%, 2032 - 2033 | 30,661 | 34,893 | ||||||
Freddie Mac, 5%, 2017 - 2040 | 5,251,879 | 5,599,647 | ||||||
Freddie Mac, 3.154%, 2018 | 935,000 | 932,147 | ||||||
Freddie Mac, 5.5%, 2019 - 2038 | 4,544,259 | 4,939,274 | ||||||
Freddie Mac, 2.757%, 2020 | 1,427,549 | 1,437,742 | ||||||
Freddie Mac, 3.32%, 2020 | 2,922,614 | 3,006,913 | ||||||
Freddie Mac, 4.251%, 2020 | 807,000 | 841,491 | ||||||
Freddie Mac, 4%, 2025 - 2040 | 8,372,912 | 8,567,907 | ||||||
Freddie Mac, 4.5%, 2025 - 2028 | 2,338,069 | 2,447,092 | ||||||
Freddie Mac, 6%, 2034 - 2038 | 1,426,582 | 1,576,048 | ||||||
Freddie Mac, FRN, 3.882%, 2017 | 1,836,000 | 1,919,505 | ||||||
Ginnie Mae, 4%, 2032 - 2040 | 4,482,407 | 4,560,743 | ||||||
Ginnie Mae, 6%, 2036 - 2039 | 2,247,942 | 2,508,450 | ||||||
Ginnie Mae, 5.5%, 2038 - 2040 | 4,193,549 | 4,617,570 | ||||||
Ginnie Mae, 4.5%, 2039 - 2040 | 11,846,116 | 12,557,177 | ||||||
$ | 144,852,250 | |||||||
Natural Gas – Pipeline – 0.4% | ||||||||
Enterprise Products Operating LP, 5.65%, 2013 | $ | 227,000 | $ | 243,488 | ||||
Kinder Morgan Energy Partners LP, 7.4%, 2031 | 103,000 | 117,327 | ||||||
Kinder Morgan Energy Partners LP, 6.375%, 2041 | 1,740,000 | 1,781,148 | ||||||
Spectra Energy Capital LLC, 8%, 2019 | 613,000 | 749,860 | ||||||
$ | 2,891,823 | |||||||
Network & Telecom – 1.2% | ||||||||
AT&T, Inc., 5.35%, 2040 | $ | 1,770,000 | $ | 1,677,723 | ||||
Centurylink, Inc., 6.45%, 2021 | 1,860,000 | 1,838,738 | ||||||
Frontier Communications Corp., 8.5%, 2020 | 861,000 | 938,490 | ||||||
Telefonica Emisiones S.A.U., 5.134%, 2020 | 1,471,000 | 1,458,155 | ||||||
Telefonica Emisiones S.A.U., 5.462%, 2021 | 760,000 | 771,534 | ||||||
Verizon New York, Inc., 6.875%, 2012 | 1,317,000 | 1,375,634 | ||||||
$ | 8,060,274 | |||||||
Oil Services – 0.6% | ||||||||
Nabors Industries, Inc., 5%, 2020 | $ | 2,230,000 | $ | 2,256,394 | ||||
Transocean, Inc., 6%, 2018 | 610,000 | 675,381 | ||||||
Transocean, Inc., 6.5%, 2020 | 760,000 | 849,862 | ||||||
$ | 3,781,637 | |||||||
7
Table of Contents
MFS Research Bond Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Oils – 0.3% | ||||||||
LUKOIL International Finance B.V., 6.125%, 2020 (n) | $ | 1,980,000 | $ | 2,041,875 | ||||
Other Banks & Diversified Financials – 3.2% | ||||||||
Banco Santander U.S. Debt S.A.U., 3.781%, 2015 (n) | $ | 1,500,000 | $ | 1,446,384 | ||||
Capital One Financial Corp., 6.15%, 2016 | 1,970,000 | 2,173,343 | ||||||
Citigroup, Inc., 8.5%, 2019 | 2,400,000 | 2,975,172 | ||||||
Citigroup, Inc., 6.125%, 2018 | 1,810,000 | 1,993,226 | ||||||
Citigroup, Inc., 5.375%, 2020 | 1,700,000 | 1,774,057 | ||||||
Discover Bank, 7%, 2020 | 1,720,000 | 1,910,389 | ||||||
Groupe BPCE S.A., 12.5% to 2019, FRN to 2049 (n) | 472,000 | 540,138 | ||||||
HSBC Holdings PLC, 5.1%, 2021 | 2,481,000 | 2,542,489 | ||||||
Lloyds TSB Bank PLC, 4.875%, 2016 | 1,890,000 | 1,933,037 | ||||||
Santander Holdings USA, Inc., 4.625%, 2016 | 480,000 | 482,384 | ||||||
Santander UK PLC, 8.963% to 2030, FRN to 2049 | 1,070,000 | 1,182,350 | ||||||
Turkiye Garanti Bankasi A.S., 6.25%, 2021 (z) | 1,632,000 | 1,583,040 | ||||||
UBS Preferred Funding Trust V, 6.243% to 2016, FRN to 2049 | 1,249,000 | 1,224,020 | ||||||
$ | 21,760,029 | |||||||
Pharmaceuticals – 0.1% | ||||||||
Celgene Corp., 2.45%, 2015 | $ | 743,000 | $ | 738,563 | ||||
Pollution Control – 0.2% | ||||||||
Allied Waste North America, Inc., 6.875%, 2017 | $ | 1,250,000 | $ | 1,354,688 | ||||
Printing & Publishing – 0.0% | ||||||||
Pearson PLC, 5.5%, 2013 (n) | $ | 200,000 | $ | 214,051 | ||||
Real Estate – 1.4% | ||||||||
HCP, Inc., REIT, 5.375%, 2021 | $ | 1,134,000 | $ | 1,169,638 | ||||
HRPT Properties Trust, REIT, 6.25%, 2016 | 1,689,000 | 1,849,335 | ||||||
Kimco Realty Corp., REIT, 5.783%, 2016 | 1,794,000 | 1,981,430 | ||||||
Liberty Property LP, REIT, 5.5%, 2016 | 1,013,000 | 1,103,823 | ||||||
Simon Property Group, Inc., REIT, 10.35%, 2019 | 1,313,000 | 1,817,469 | ||||||
WEA Finance LLC, REIT, 6.75%, 2019 (n) | 1,510,000 | 1,712,329 | ||||||
$ | 9,634,024 | |||||||
Retailers – 0.4% | ||||||||
Home Depot, Inc., 5.95%, 2041 | $ | 1,524,000 | $ | 1,569,455 | ||||
Wesfarmers Ltd., 6.998%, 2013 (n) | 1,000,000 | 1,094,901 | ||||||
$ | 2,664,356 | |||||||
Specialty Stores – 0.5% | ||||||||
Advance Auto Parts, Inc., 5.75%, 2020 | $ | 1,512,000 | $ | 1,599,915 | ||||
Best Buy Co., Inc., 6.75%, 2013 | 1,660,000 | 1,813,482 | ||||||
$ | 3,413,397 | |||||||
Supranational – 0.0% | ||||||||
Corporacion Andina de Fomento, 6.875%, 2012 | $ | 61,000 | $ | 63,387 | ||||
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Telecommunications – Wireless – 0.8% | ||||||||
American Tower Corp., 4.5%, 2018 | $ | 2,620,000 | $ | 2,618,782 | ||||
Crown Castle Towers LLC, 6.113%, 2020 (n) | 1,096,000 | 1,195,866 | ||||||
Crown Castle Towers LLC, 4.883%, 2020 (n) | 900,000 | 904,973 | ||||||
Rogers Cable, Inc., 5.5%, 2014 | 734,000 | 808,286 | ||||||
$ | 5,527,907 | |||||||
Tobacco – 1.5% | ||||||||
Altria Group, Inc., 9.95%, 2038 | $ | 1,650,000 | $ | 2,318,326 | ||||
Lorillard Tobacco Co., 8.125%, 2019 | 3,555,000 | 4,140,693 | ||||||
Reynolds American, Inc., 7.25%, 2012 | 800,000 | 845,036 | ||||||
Reynolds American, Inc., 6.75%, 2017 | 2,900,000 | 3,348,273 | ||||||
$ | 10,652,328 | |||||||
Transportation – Services – 0.5% | ||||||||
Erac USA Finance Co., 7%, 2037 (n) | $ | 1,851,000 | $ | 2,036,705 | ||||
Hertz Corp., 7.5%, 2018 (n) | 1,036,000 | 1,067,080 | ||||||
$ | 3,103,785 | |||||||
U.S. Government Agencies and Equivalents – 4.6% | ||||||||
Bank of America Corp., FRN, 0.626%, 2012 (m) | $ | 2,353,000 | $ | 2,363,417 | ||||
Citigroup, Inc., FRN, 0.602%, 2012 (m) | 5,650,000 | 5,669,453 | ||||||
FDIC Structured Sale Guarantee Note, 0%, 2012 (n) | 396,000 | 390,064 | ||||||
General Electric Capital Corp., FRN, 0.218%, 2012 (m) | 3,034,000 | 3,034,601 | ||||||
Goldman Sachs Group, Inc., FRN, 0.447%, 2012 (m) | 1,157,000 | 1,159,521 | ||||||
JPMorgan Chase & Co., FRN, 0.496%, 2012 (m) | 5,650,000 | 5,675,431 | ||||||
Morgan Stanley, FRN, 0.596%, 2012 (m) | 5,173,000 | 5,195,415 | ||||||
National Credit Union Administration Guaranteed Note, 2.9%, 2020 | 980,000 | 978,169 | ||||||
PNC Funding Corp., FRN, 0.504%, 2012 (m) | 2,960,000 | 2,966,556 | ||||||
Small Business Administration, 4.34%, 2024 | 110,751 | 116,796 | ||||||
Small Business Administration, 4.43%, 2029 | 1,073,137 | 1,141,779 | ||||||
Small Business Administration, 4.99%, 2024 | 92,120 | 98,761 | ||||||
Small Business Administration, 4.86%, 2025 | 196,132 | 209,775 | ||||||
Small Business Administration, 4.625%, 2025 | 192,518 | 204,640 | ||||||
Small Business Administration, 5.11%, 2025 | 146,659 | 156,838 | ||||||
Small Business Administration, 4.93%, 2024 | 83,628 | 89,459 | ||||||
Small Business Administration, 3.25%, 2030 | 917,757 | 910,019 | ||||||
Wells Fargo & Co., FRN, 0.467%, 2012 (m) | 1,289,000 | 1,293,018 | ||||||
$ | 31,653,712 | |||||||
U.S. Treasury Obligations – 24.0% | ||||||||
U.S. Treasury Bonds, 6.25%, 2023 | $ | 177,000 | $ | 224,541 | ||||
U.S. Treasury Bonds, 6%, 2026 | 373,000 | 464,269 | ||||||
U.S. Treasury Bonds, 6.75%, 2026 | 19,000 | 25,356 | ||||||
U.S. Treasury Bonds, 5.25%, 2029 | 14,492,000 | 16,722,406 | ||||||
U.S. Treasury Bonds, 4.5%, 2036 | 116,000 | 119,879 | ||||||
U.S. Treasury Bonds, 5%, 2037 | 5,246,000 | 5,827,157 | ||||||
U.S. Treasury Bonds, 4.5%, 2039 | 20,040,600 | 20,491,514 | ||||||
U.S. Treasury Notes, 1.375%, 2012 | 42,733,800 | 43,062,637 |
8
Table of Contents
MFS Research Bond Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
U.S. Treasury Obligations – continued | ||||||||
U.S. Treasury Notes, 1.375%, 2012 | $ | 18,164,000 | $ | 18,347,057 | ||||
U.S. Treasury Notes, 3.125%, 2013 | 201,000 | 212,620 | ||||||
U.S. Treasury Notes, 1.875%, 2014 | 24,639,000 | 25,407,047 | ||||||
U.S. Treasury Notes, 1.875%, 2014 | 14,184,000 | 14,627,250 | ||||||
U.S. Treasury Notes, 2.125%, 2015 | 975,000 | 1,007,906 | ||||||
U.S. Treasury Notes, 5.125%, 2016 | 167,000 | 194,085 | ||||||
U.S. Treasury Notes, 3.5%, 2020 | 14,945,000 | 15,602,281 | ||||||
U.S. Treasury Notes, TIPS, 2%, 2014 | 764,395 | 823,517 | ||||||
U.S. Treasury Notes, TIPS, 1.625%, 2015 | 812,723 | 881,551 | ||||||
U.S. Treasury Notes, TIPS, 2%, 2016 | 1,393,787 | 1,549,063 | ||||||
$ | 165,590,136 | |||||||
Utilities – Electric Power – 1.2% | ||||||||
CenterPoint Energy, Inc., 5.95%, 2017 | $ | 540,000 | $ | 604,464 | ||||
EDP Finance B.V., 6%, 2018 (n) | 2,600,000 | 2,405,666 | ||||||
PPL WEM Holdings PLC, 5.375%, 2021 (n) | 2,909,000 | 3,013,567 | ||||||
TECO Energy, Inc., 5.15%, 2020 | 1,810,000 | 1,919,400 | ||||||
Waterford 3 Funding Corp., 8.09%, 2017 | 60,492 | 60,912 | ||||||
$ | 8,004,009 | |||||||
Total Bonds (Identified Cost, $651,686,500) | $ | 673,672,566 | ||||||
Issuer | Shares/Par | Value ($) | ||||||
FLOATING RATE LOANS (g)(r) – 0.0% | ||||||||
Automotive – 0.0% | ||||||||
Ford Motor Co., Term Loan B-1, 2.94%, 2013 (Identified Cost, $229,675) | $ | 242,665 | $ | 242,346 | ||||
MONEY MARKET FUNDS (v) – 1.5% | ||||||||
MFS Institutional Money Market Portfolio, 0.1%, at Cost and Net Asset Value | 10,146,942 | $ | 10,146,942 | |||||
Total Investments (Identified Cost, $662,063,117) | $ | 684,061,854 | ||||||
OTHER ASSETS, LESS LIABILITIES – 0.9% | 6,116,772 | |||||||
Net Assets – 100.0% | $ | 690,178,626 | ||||||
(g) | The rate shown represents a weighted average coupon rate on settled positions at period end, unless otherwise indicated. |
(i) | Interest only security for which the fund receives interest on notional principal (Par amount). Par amount shown is the notional principal and does not reflect the cost of the security. |
(m) | The debt is guaranteed under the Federal Deposit Insurance Corporation’s (FDIC) Temporary Liquidity Guarantee Program and is backed by the full faith and credit of the United States. The expiration date of the FDIC’s guarantee is the earlier of the maturity date of the debt or June 30, 2012. |
(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 $60,359,461 representing 8.7% of net assets. |
(q) | Interest received was less than stated coupon rate. |
(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 fund holds the following restricted securities: |
Restricted Securities | Acquisition Date | Cost | Value | |||||||
ARCap REIT, Inc., CDO, “F”, FRN, 6.054%, 2045 | 12/07/06 | $332,002 | $39,813 | |||||||
Anthracite Ltd., “A”, CDO, FRN, 0.545%, 2019 | 1/15/10-1/28/10 | 929,818 | 1,105,141 | |||||||
Anthracite Ltd., “B”, CDO, 5.488%, 2037 | 12/09/10 | 689,650 | 694,260 | |||||||
Anthracite Ltd., “BFL”, CDO, FRN, 1.185%, 2037 | 12/09/10 | 1,055,600 | 1,048,756 | |||||||
Anthracite Ltd., “CFL”, CDO, FRN, 1.435%, 2037 | 3/03/11 | 248,457 | 243,873 | |||||||
Anthracite Ltd., CDO, FRN, 1.035%, 2037 | 2/24/10-3/03/11 | 1,797,834 | 1,879,304 | |||||||
Banco do Brasil S.A., 5.875%, 2022 | 5/19/11 | 1,679,939 | 1,683,278 | |||||||
Bayview Commercial Asset Trust, FRN, 2.87%, 2035 | 10/06/05 | 43,458 | 17,381 | |||||||
Bayview Commercial Asset Trust, FRN, 2.93%, 2036 | 3/29/06 | 33,963 | 14,453 | |||||||
Bayview Commercial Asset Trust, FRN, 2.834%, 2036 | 2/28/06 | 45,005 | 20,955 | |||||||
Bayview Commercial Asset Trust, FRN, 3.086%, 2036 | 5/16/06 | 30,772 | 20,183 | |||||||
Bayview Commercial Asset Trust, FRN, 3.117%, 2036 | 9/11/06 | 140,104 | 70,614 |
9
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MFS Research Bond Series
Portfolio of Investments (unaudited) – continued
Restricted Securities - continued | Acquisition Date | Cost | Value | |||||||
Bayview Commercial Asset Trust, FRN, 3.037%, 2036 | 10/25/06 | $76,758 | $37,831 | |||||||
Bayview Commercial Asset Trust, FRN, 3.231%, 2037 | 1/26/07 | 110,291 | 88,865 | |||||||
Bayview Financial Revolving Mortgage Loan Trust, FRN, 1.785%, 2040 | 3/01/06 | 180,426 | 100,914 | |||||||
CNPC (HK) Overseas Capital Ltd., 4.5%, 2021 | 4/20/11-4/21/11 | 1,628,033 | 1,616,282 | |||||||
Capital Trust Realty Ltd., CDO, 5.16%, 2035 | 4/07/06-3/04/10 | 768,711 | 799,686 | |||||||
Capital Trust Realty Ltd., CDO, 5.267%, 2035 | 9/14/10-3/25/11 | 1,542,826 | 1,643,754 | |||||||
Carey Commercial Mortgage Trust, 2002-1, “A”, 5.97%, 2019 | 7/22/10 | 129,204 | 129,058 | |||||||
Crest Ltd., “A1” CDO, FRN, 0.726%, 2018 | 1/21/10-3/04/10 | 809,270 | 962,237 | �� | ||||||
Crest Ltd., “A2”, CDO, 4.669%, 2018 | 3/02/10 | 295,834 | 336,432 | |||||||
Crest Ltd., “B”, CDO, FRN, 1.622%, 2035 | 1/12/10 | 753,722 | 892,515 | |||||||
FIH Erhvervsbank A.S., 1.75%, 2012 | 12/02/09 | 765,019 | 778,570 | |||||||
FUEL Trust, 3.984%, 2016 | 6/14/11-6/29/11 | 1,767,842 | 1,758,594 | |||||||
Falcon Franchise Loan LLC, FRN, 3.948%, 2025 | 1/29/03 | 16,370 | 25,458 | |||||||
GMAC LLC, FRN, 6.02%, 2033 | 3/20/02 | 18,203 | 28,920 | |||||||
KKR Financial CLO Ltd., “A1”, FRN, 0.543%, 2017 | 4/11/11 | 955,000 | 972,470 | |||||||
Mach One Trust Commercial Mortgage, “B”, 5.43%, 2040 | 3/10/10 | 801,363 | 868,020 | |||||||
Morgan Stanley Capital I, Inc., FRN, 1.185%, 2030 | 4/04/02 | 9,581 | 6,798 | |||||||
NIBC Bank N.V., 2.8%, 2014 | 11/24/09 | 1,497,714 | 1,561,541 | |||||||
OJSC Russian Agricultural Bank, FRN, 6%, 2021 | 5/26/11-5/31/11 | 2,030,294 | 2,034,921 | |||||||
Petroleos Mexicanos, 6.5%, 2041 | 5/25/11 | 50,634 | 51,747 | |||||||
Preferred Term Securities XIX Ltd., CDO, FRN, 0.597%, 2035 | 9/08/05-3/28/11 | 329,874 | 310,365 | |||||||
Prudential Securities Secured Financing Corp., FRN, 7.325%, 2013 | 12/06/04 | 128,208 | 125,524 | |||||||
Smart Trust, “A2B”, FRN, 0.948%, 2013 | 3/10/11 | 713,000 | 713,001 | |||||||
Turkiye Garanti Bankasi A.S., 6.25%, 2021 | 4/14/11-4/20/11 | 1,618,211 | 1,583,040 | |||||||
Vedanta Resources PLC, 6.75%, 2016 | 5/26/11 | 1,068,000 | 1,063,942 | |||||||
Virgin Media Secured Finance PLC, 5.25%, 2021 | 2/24/11 | 477,578 | 511,158 | |||||||
Total Restricted Securities | $25,839,654 | |||||||||
% of Net Assets | 3.7% |
The following abbreviations are used in this report and are defined:
CDO | Collateralized Debt Obligation |
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 |
TIPS | Treasury Inflation Protected Security |
See Notes to Financial Statements
10
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MFS Research Bond Series
FINANCIAL STATEMENTS | STATEMENT OF ASSETS AND LIABILITIES (unaudited)
This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
At 6/30/11 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $651,916,175) | $673,914,912 | |||||||
Underlying affiliated funds, at cost and value | 10,146,942 | |||||||
Total investments, at value (identified cost, $662,063,117) | $684,061,854 | |||||||
Cash | 699,170 | |||||||
Receivables for | ||||||||
Fund shares sold | 1,688,683 | |||||||
Interest | 5,992,506 | |||||||
Other assets | 2,887 | |||||||
Total assets | $692,445,100 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Investments purchased | $1,635,051 | |||||||
Fund shares reacquired | 513,010 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 19,478 | |||||||
Shareholder servicing costs | 466 | |||||||
Distribution and/or service fees | 4,435 | |||||||
Payable for independent Trustees’ compensation | 890 | |||||||
Accrued expenses and other liabilities | 93,144 | |||||||
Total liabilities | $2,266,474 | |||||||
Net assets | $690,178,626 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $631,308,690 | |||||||
Unrealized appreciation (depreciation) on investments | 21,998,737 | |||||||
Accumulated net realized gain (loss) on investments | 7,302,697 | |||||||
Undistributed net investment income | 29,568,502 | |||||||
Net assets | $690,178,626 | |||||||
Shares of beneficial interest outstanding | 53,172,609 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $365,047,800 | 27,973,260 | $13.05 | |||||||||
Service Class | 325,130,826 | 25,199,349 | 12.90 |
See Notes to Financial Statements
11
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MFS Research Bond Series
FINANCIAL STATEMENTS | STATEMENT OF OPERATIONS (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
Six months ended 6/30/11 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Interest | $13,167,390 | |||||||
Dividends from underlying affiliated funds | 11,332 | |||||||
Total investment income | $13,178,722 | |||||||
Expenses | ||||||||
Management fee | $1,578,169 | |||||||
Distribution and/or service fees | 332,897 | |||||||
Shareholder servicing costs | 35,436 | |||||||
Administrative services fee | 50,560 | |||||||
Independent Trustees’ compensation | 7,920 | |||||||
Custodian fee | 38,725 | |||||||
Shareholder communications | 42,323 | |||||||
Auditing fees | 30,568 | |||||||
Legal fees | 4,681 | |||||||
Miscellaneous | 15,317 | |||||||
Total expenses | $2,136,596 | |||||||
Fees paid indirectly | (444 | ) | ||||||
Reduction of expenses by investment adviser | (1,759 | ) | ||||||
Net expenses | $2,134,393 | |||||||
Net investment income | $11,044,329 | |||||||
Realized and unrealized gain (loss) on investments | ||||||||
Realized gain (loss) on investment transactions (identified cost basis) | $956,346 | |||||||
Change in unrealized appreciation (depreciation) on investments | $6,705,180 | |||||||
Net realized and unrealized gain (loss) on investments | $7,661,526 | |||||||
Change in net assets from operations | $18,705,855 |
See Notes to Financial Statements
12
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MFS Research Bond Series
FINANCIAL STATEMENTS | STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
| Six months ended 6/30/11 (unaudited |
) |
| Year ended 12/31/10 |
| |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $11,044,329 | $16,535,232 | ||||||
Net realized gain (loss) on investments | 956,346 | 10,684,917 | ||||||
Net unrealized gain (loss) on investments | 6,705,180 | 4,393,825 | ||||||
Change in net assets from operations | $18,705,855 | $31,613,974 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(13,266,265 | ) | |||||
From net realized gain on investments | — | (1,375,381 | )�� | |||||
Total distributions declared to shareholders | $— | $(14,641,646 | ) | |||||
Change in net assets from fund share transactions | $88,530,765 | $203,342,287 | ||||||
Total change in net assets | $107,236,620 | $220,314,615 | ||||||
Net assets | ||||||||
At beginning of period | 582,942,006 | 362,627,391 | ||||||
At end of period (including undistributed net investment income of $29,568,502 and | $690,178,626 | $582,942,006 |
See Notes to Financial Statements
13
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MFS Research Bond Series
FINANCIAL STATEMENTS | FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund’s financial performance for the semiannual period and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
Initial Class | Six months ended 6/30/11 | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $12.66 | $12.20 | $11.00 | $11.60 | $11.51 | $11.61 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.23 | $0.44 | $0.51 | $0.52 | $0.55 | $0.53 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.16 | 0.45 | 1.20 | (0.78 | ) | (0.08 | ) | (0.08 | ) | |||||||||||||||
Total from investment operations | $0.39 | $0.89 | $1.71 | $(0.26 | ) | $0.47 | $0.45 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.39 | ) | $(0.51 | ) | $(0.34 | ) | $(0.38 | ) | $(0.49 | ) | |||||||||||||
From net realized gain on investments | — | (0.04 | ) | — | — | — | (0.06 | ) | ||||||||||||||||
Total distributions declared to shareholders | $— | $(0.43 | ) | $(0.51 | ) | $(0.34 | ) | $(0.38 | ) | $(0.55 | ) | |||||||||||||
Net asset value, end of period | $13.05 | $12.66 | $12.20 | $11.00 | $11.60 | $11.51 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 3.08 | (n) | 7.47 | 16.16 | (2.37 | ) | 4.21 | 4.05 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.57 | (a) | 0.59 | 0.62 | 0.74 | 0.77 | 0.94 | |||||||||||||||||
Expenses after expense reductions (f) | 0.57 | (a) | 0.59 | 0.62 | 0.64 | 0.67 | 0.70 | |||||||||||||||||
Net investment income | 3.61 | (a) | 3.51 | 4.38 | 4.63 | 4.80 | 4.69 | |||||||||||||||||
Portfolio turnover | 30 | 66 | 113 | 115 | 74 | 51 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $365,048 | $371,865 | $317,851 | $184,984 | $139,275 | $66,875 |
See Notes to Financial Statements
14
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MFS Research Bond Series
Financial Highlights – continued
Service Class | Six months ended 6/30/11 | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $12.53 | $12.10 | $10.91 | $11.51 | $11.43 | $11.54 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.21 | $0.40 | $0.47 | $0.49 | $0.52 | $0.50 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.16 | 0.45 | 1.20 | (0.78 | ) | (0.08 | ) | (0.08 | ) | |||||||||||||||
Total from investment operations | $0.37 | $0.85 | $1.67 | $(0.29 | ) | $0.44 | $0.42 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.38 | ) | $(0.48 | ) | $(0.31 | ) | $(0.36 | ) | $(0.47 | ) | |||||||||||||
From net realized gain on investments | — | (0.04 | ) | — | — | — | (0.06 | ) | ||||||||||||||||
Total distributions declared to shareholders | $— | $(0.42 | ) | $(0.48 | ) | $(0.31 | ) | $(0.36 | ) | $(0.53 | ) | |||||||||||||
Net asset value, end of period | $12.90 | $12.53 | $12.10 | $10.91 | $11.51 | $11.43 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 2.95 | (n) | 7.20 | 15.91 | (2.64 | ) | 3.92 | 3.79 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.82 | (a) | 0.84 | 0.87 | 0.99 | 1.03 | 1.20 | |||||||||||||||||
Expenses after expense reductions (f) | 0.82 | (a) | 0.84 | 0.87 | 0.89 | 0.93 | 0.95 | |||||||||||||||||
Net investment income | 3.35 | (a) | 3.20 | 4.07 | 4.37 | 4.55 | 4.44 | |||||||||||||||||
Portfolio turnover | 30 | 66 | 113 | 115 | 74 | 51 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $325,131 | $211,077 | $44,776 | $14,518 | $18,347 | $16,822 |
(a) | Annualized. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(k) | The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown. |
(n) | Not annualized. |
(r) | Certain expenses have been reduced without which performance would have been lower. |
(s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
See Notes to Financial Statements
15
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MFS Research Bond Series
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) | Business and Organization |
MFS Research Bond Series (the fund) is a series of MFS Variable Insurance Trust (the trust). The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The shareholders of each series of the trust are separate accounts of insurance companies, which offer variable annuity and/or life insurance products, and qualified retirement and pension plans.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued. The fund invests a significant portion of its assets in asset-backed and/or mortgage-backed securities. The value of these securities may depend, in part, on the issuer’s or borrower’s credit quality or ability to pay principal and interest when due and may fall if an issuer or borrower defaults on its obligation to pay principal or interest or if the instrument’s credit rating is downgraded by a credit rating agency. U.S. Government securities not supported as to the payment of principal or interest by the U.S. Treasury, such as those issued by Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, are subject to greater credit risk than are U.S. Government securities supported by the U.S. Treasury, such as those issued by Ginnie Mae. The fund invests in foreign securities. Investments in foreign securities are vulnerable to the effects of changes in the relative values of the local currency and the U.S. dollar and to the effects of changes in each country’s legal, political, and economic environment.
Investment Valuations – 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. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. Values obtained from third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair
16
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MFS Research Bond Series
Notes to Financial Statements (unaudited) – continued
value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. The following is a summary of the levels used as of June 30, 2011 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
U.S. Treasury Bonds & U.S. Government Agency & Equivalents | $ — | $197,243,848 | $— | $197,243,848 | ||||||||||||
Non-U.S. Sovereign Debt | — | 12,239,741 | — | 12,239,741 | ||||||||||||
Corporate Bonds | — | 200,534,075 | — | 200,534,075 | ||||||||||||
Residential Mortgage-Backed Securities | — | 145,014,651 | — | 145,014,651 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 42,229,474 | — | 42,229,474 | ||||||||||||
Asset-Backed Securities (including CDOs) | — | 16,855,122 | — | 16,855,122 | ||||||||||||
Foreign Bonds | — | 59,555,655 | — | 59,555,655 | ||||||||||||
Floating Rate Loans | — | 242,346 | — | 242,346 | ||||||||||||
Mutual Funds | 10,146,942 | — | — | 10,146,942 | ||||||||||||
Total Investments | $10,146,942 | $673,914,912 | $— | $684,061,854 |
For further information regarding security characteristics, see the Portfolio of Investments.
Inflation-Adjusted Debt Securities – The fund invests in inflation-adjusted debt securities issued by the U.S. Treasury. The fund may also invest in inflation-adjusted debt securities issued by U.S. Government agencies and instrumentalities other than the U.S. Treasury and by other entities such as U.S. and foreign corporations and foreign governments. The principal value of these debt securities is adjusted through income according to changes in the Consumer Price Index or another general price or wage index. These debt securities typically pay a fixed rate of interest, but this fixed rate is applied to the inflation-adjusted principal amount. The principal paid at maturity of the debt security is typically equal to the inflation-adjusted principal amount, or the security’s original par value, whichever is greater. Other types of inflation-adjusted securities may use other methods to adjust for other measures of inflation.
Loans and Other Direct Debt Instruments – The fund invests in loans and loan participations or other receivables. These investments may include standby financing commitments, including revolving credit facilities, which obligate the fund to supply additional cash to the borrower on demand. Loan participations involve a risk of insolvency of the lending bank or other financial intermediary.
Indemnifications – Under the fund’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund’s maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.
Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. All premium and discount is amortized or accreted for financial statement purposes in accordance with U.S. generally accepted accounting principles. The fund earns certain fees in connection with its floating rate loan purchasing activities. These fees are in addition to interest payments earned and may include amendment fees, commitment fees, facility fees, consent fees, and prepayment fees. Commitment fees are recorded on an accrual basis as income in the accompanying financial statements. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted upward or downward to the rate of inflation. Interest is accrued based on the principal value, which is adjusted for inflation. Any increase or decrease in the principal amount of an inflation-indexed bond is generally recorded as an increase or decrease in interest income, respectively, even though the adjusted principal is not received until maturity. Dividends received in cash are recorded on the ex-dividend date. Dividend and interest payments received in additional securities are recorded on the ex-dividend or ex-interest date in an amount equal to the value of the security on such date.
The fund may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
17
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MFS Research Bond Series
Notes to Financial Statements (unaudited) – continued
The fund entered into “TBA” (to be announced) purchase commitments to purchase securities for a fixed unit price at a future date. Although the unit price has been established, the principal value has not been finalized. However, the principal amount of the commitments will not fluctuate more than 0.01%. The fund holds, and maintains until settlement date, cash or high-grade debt obligations in an amount sufficient to meet the purchase price, or the fund may enter into offsetting contracts for the forward sale of other securities it owns. Income on the securities will not be earned until settlement date. TBA purchase commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to settlement date, which is in addition to the risk of decline in the value of the fund’s other assets. Unsettled TBA purchase commitments are valued at the current market value of the underlying securities.
Fees Paid Indirectly – The fund’s custody fee may be reduced according to an arrangement that measures the value of cash deposited with the custodian by the fund. This amount, for the six months ended June 30, 2011, is shown as a reduction of total expenses on the Statement of Operations.
Tax Matters and Distributions – The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to amortization and accretion of debt securities.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/10 | ||||
Ordinary income (including any short-term capital gains) | $14,641,646 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/11 | ||||
Cost of investments | $664,061,050 | |||
Gross appreciation | 22,378,504 | |||
Gross depreciation | (2,377,700 | ) | ||
Net unrealized appreciation (depreciation) | $20,000,804 | |||
As of 12/31/10 | ||||
Undistributed ordinary income | 24,584,956 | |||
Undistributed long-term capital gain | 2,046,568 | |||
Other temporary differences | (105,920 | ) | ||
Net unrealized appreciation (depreciation) | 13,638,477 |
The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.
18
Table of Contents
MFS Research Bond Series
Notes to Financial Statements (unaudited) – continued
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and/or service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported on the Statements of Changes in Net Assets are presented by class as follows:
From net investment income | From net realized gain on investments | |||||||||||||||
Six months ended 6/30/11 | Year ended 12/31/10 | Six months ended 6/30/11 | Year ended 12/31/10 | |||||||||||||
Initial Class | $— | $10,520,871 | $— | $1,086,136 | ||||||||||||
Service Class | — | 2,745,394 | — | 289,245 | ||||||||||||
Total | $— | $13,266,265 | $— | $1,375,381 |
(3) | Transactions with Affiliates |
Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at an annual rate of 0.50% of the fund’s average daily net assets.
The investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, exclusive of interest, taxes, extraordinary expenses, brokerage and transaction costs and investment-related expenses, such that total annual operating expenses do not exceed 0.70% of average daily net assets for the Initial Class shares and 0.95% of average daily net assets for the Service Class shares. This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until April 30, 2013. For the six months ended June 30, 2011, the fund’s actual operating expenses did not exceed the limit and therefore, the investment adviser did not pay any portion of the fund’s expenses related to this agreement.
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, is the distributor of shares of the fund. The Trustees have adopted a distribution plan for the Service Class shares pursuant to Rule 12b-1 under the Investment Company Act of 1940.
The fund’s distribution plan provides that the fund will pay MFD distribution and/or service fees equal to 0.25% per annum of its average daily net assets attributable to Service Class shares as partial consideration for services performed and expenses incurred by MFD and financial intermediaries (including participating insurance companies that invest in the fund to fund variable annuity and variable life insurance contracts, sponsors of qualified retirement and pension plans that invest in the fund, and affiliates of these participating insurance companies and plan sponsors) in connection with the sale and distribution of the Service Class shares. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries.
Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent. For the six months ended June 30, 2011, the fee was $35,233, which equated to 0.0112% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses paid by MFSC on behalf of the fund. For the six months ended June 30, 2011, these costs amounted to $203.
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund partially reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the six months ended June 30, 2011 was equivalent to an annual effective rate of 0.0160% of the fund’s average daily net assets.
Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – This fund and certain other funds managed by MFS (the funds) have entered into services agreements (the Agreements) which provide for payment of fees by the funds to Tarantino LLC and Griffin Compliance LLC in return for the provision of services of an Independent Chief Compliance Officer (ICCO) and Assistant ICCO, respectively, for the funds. The
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MFS Research Bond Series
Notes to Financial Statements (unaudited) – continued
ICCO and Assistant ICCO are officers of the funds and the sole members of Tarantino LLC and Griffin Compliance LLC, respectively. The funds can terminate the Agreements with Tarantino LLC and Griffin Compliance LLC at any time under the terms of the Agreements. For the six months ended June 30, 2011, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $2,171 and are included in miscellaneous expense on the Statement of Operations. MFS has agreed to reimburse the fund for a portion of the payments made by the fund in the amount of $1,759, which is shown as a reduction of total expenses in the Statement of Operations. Additionally, MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ICCO and Assistant ICCO.
The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks a high level of current income consistent with preservation of capital and liquidity. Income earned on this investment is included in dividends from underlying affiliated funds on the Statement of Operations. This money market fund does not pay a management fee to MFS.
(4) | Portfolio Securities |
Purchases and sales of investments, other than purchased option transactions, and short-term obligations, were as follows:
Purchases | Sales | |||||||
U.S. Government securities | $147,618,668 | $96,262,573 | ||||||
Investments (non-U.S. Government securities) | $134,383,297 | $88,532,107 |
(5) | Shares of Beneficial Interest |
The fund’s Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
Six months ended 6/30/11 | Year ended 12/31/10 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 2,404,292 | $30,800,014 | 7,336,270 | $91,347,137 | ||||||||||||
Service Class | 9,144,051 | 116,397,921 | 13,907,465 | 172,402,689 | ||||||||||||
11,548,343 | $147,197,935 | 21,243,735 | $263,749,826 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 955,309 | $11,607,007 | ||||||||||||
Service Class | — | — | 251,837 | 3,034,639 | ||||||||||||
— | $— | 1,207,146 | $14,641,646 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (3,798,992 | ) | $(48,673,400 | ) | (4,980,013 | ) | $(62,421,426 | ) | ||||||||
Service Class | (784,256 | ) | (9,993,770 | ) | (1,019,752 | ) | (12,627,759 | ) | ||||||||
(4,583,248 | ) | $(58,667,170 | ) | (5,999,765 | ) | $(75,049,185 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (1,394,700 | ) | $(17,873,386 | ) | 3,311,566 | $40,532,718 | ||||||||||
Service Class | 8,359,795 | 106,404,151 | 13,139,550 | 162,809,569 | ||||||||||||
6,965,095 | $88,530,765 | 16,451,116 | $203,342,287 |
(6) | Line of Credit |
The fund and certain other funds managed by MFS participate in a $1.1 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Federal Reserve funds rate or one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Federal Reserve funds rate plus an agreed upon spread. For the six months ended June 30, 2011, the fund’s commitment fee and interest expense were $2,769 and $0, respectively, and are included in miscellaneous expense on the Statement of Operations.
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MFS Research Bond Series
Notes to Financial Statements (unaudited) – continued
(7) | Transactions in Underlying Affiliated Funds – Affiliated Issuers |
An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the fund assumes the following to be affiliated issuers:
Underlying Affiliated Funds | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 8,107,357 | 167,990,205 | (165,950,620 | ) | 10,146,942 | |||||||||||
Underlying Affiliated Funds | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $11,332 | $10,146,942 |
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MFS Research Bond Series
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board’s most recent review and renewal of the fund’s Investment Advisory Agreement with MFS will be available on or about November 1, 2011 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds’ proxy voting policies and procedures is available without charge, upon request, by calling
1-800-225-2606, by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the Securities and Exchange Commission (the Commission) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. The fund’s Form N-Q is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and copies of this information may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
From time to time, MFS may post important information about the fund or the MFS funds on the MFS web site (mfs.com). This information is available by visiting the “News & Commentary” section of mfs.com or by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of mfs.com.
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rev. 3/11
FACTS | WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION? |
Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
What? | The types of personal information we collect and share depend on the product or service you have with us. This information can include:
• Social Security number and account balances • Account transactions and transaction history • Checking account information and wire transfer instructions
When you are no longer our customer, we continue to share your information as described in this notice. |
How? | All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons MFS chooses to share; and whether you can limit this sharing. |
Reasons we can share your personal information | Does MFS share? | Can you limit this sharing? | ||
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus | Yes | No | ||
For our marketing purposes – to offer our products and services to you | No | We don’t share | ||
For joint marketing with other financial companies | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your transactions and experiences | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your creditworthiness | No | We don’t share | ||
For nonaffiliates to market to you | No | We don’t share |
Questions? | Call 800-225-2606 or go to mfs.com. |
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Page 2 |
Who we are | ||
Who is providing this notice? | MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., MFS Fund Distributors, Inc., MFS Heritage Trust Company, and MFS Service Center, Inc. |
What we do | ||
How does MFS protect my personal information? | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you. | |
How does MFS collect my personal information? | We collect your personal information, for example, when you
• open an account or provide account information • direct us to buy securities or direct us to sell your securities • make a wire transfer
We also collect your personal information from others, such as credit bureaus, affiliates and other companies. | |
Why can’t I limit all sharing? | Federal law gives you the right to limit only
• sharing for affiliates’ everyday business purposes – information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you
State laws and individual companies may give you additional rights to limit sharing. |
Definitions | ||
Affiliates | Companies related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice. | |
Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share with nonaffiliates so they can market to you. | |
Joint Marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you.
• MFS doesn’t jointly market. |
Other important information | ||
If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours. |
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MFS® High Income Series
MFS® Variable Insurance Trust
SEMIANNUAL REPORT
June 30, 2011
VHI-SEM
Table of Contents
MFS® HIGH INCOME SERIES
The report is prepared for the general information of contract owners. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED Ÿ MAY LOSE VALUE Ÿ NO BANK OR CREDIT UNION GUARANTEE Ÿ NOT A DEPOSIT Ÿ NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
Table of Contents
MFS High Income Series
Dear Contract Owners:
After about a year of almost uninterrupted macroeconomic and financial market improvement following the global credit crisis, investors grew more cautious in the middle of 2010 as fears grew that some European countries would default on their debt and as economic data showed a weakening
trend in the global economy. As a result asset prices fell significantly.
Last September the U.S. Federal Reserve Board’s promises to make lending conditions easier helped assuage market fears and drive asset prices off their recent lows. A combination of solid earnings and improving economic data gave an additional boost to investor sentiment.
In the following months, the renewed positive market mood, coupled with indications of better global macroeconomic activity, pushed many asset valuations to post-crisis highs. At the same time, global sovereign
bond yields initially rose as investors became concerned about inflationary pressures, driven by higher prices for oil as well as other commodities. However, by the end of the second quarter of 2011, a weakening macroeconomic backdrop and renewed concerns over debt problems in some eurozone countries pushed equities lower.
For the remainder of 2011, we are cautiously optimistic that economic growth will continue to improve and that the global economies will recover from the shocks of the past few years. We expect the pace of recovery worldwide to be uneven and volatile and acknowledge the elevated uncertainty created by events in Japan, Europe, the Middle East, as well as that created by the U.S. debate over raising the debt ceiling and the downgrade by Standard & Poor’s of the U.S. long-term credit rating.
As always, we continue to be mindful of the many economic challenges faced at the local, national, and international levels. It is in times such as these that we want to remind investors of the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with their advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2011
The opinions expressed in this letter are subject to change, may not be relied upon for investment advice, and no forecasts can be guaranteed.
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MFS High Income Series
Portfolio structure (i)
Top five industries (i) | ||||
Energy Independent | 8.3% | |||
Broadcasting | 5.5% | |||
Medical & Health Technology & Services | 5.4% | |||
Utilities – Electric Power | 4.8% | |||
Telecommunications – Wireless | 4.7% |
Composition including fixed income credit quality (a)(i) | ||||
A | 1.1% | |||
BBB | 4.3% | |||
BB | 30.3% | |||
B | 42.2% | |||
CCC | 15.4% | |||
CC | 1.1% | |||
C | 0.3% | |||
D | 0.2% | |||
Not Rated | (0.4)% | |||
Non-Fixed Income | 2.2% | |||
Cash & Other | 3.3% | |||
Portfolio facts (i) | ||||
Average Duration (d) | 4.6 | |||
Average Effective Maturity (m) | 7.3 yrs. |
(a) | For all securities other than those specifically described below, ratings are assigned to underlying securities utilizing ratings from Moody’s, Fitch, and Standard & Poor’s rating agencies and applying the following hierarchy: If all three agencies provide a rating, the middle rating (after dropping the highest and lowest ratings) is assigned; if two of the three agencies rate a security, the lower of the two is assigned. Ratings are shown in the S&P and Fitch scale (e.g., AAA). All ratings are subject to change. Not Rated includes fixed income securities, including fixed income futures, which have not been rated by any rating agency. Non-Fixed Income includes equity securities (including convertible bonds and equity derivatives) and commodities. Cash & Other includes cash, other assets less liabilities, offsets to derivative positions, and short-term securities. The fund may not hold all of these instruments. The fund itself has not been rated. |
(d) | Duration is a measure of how much a bond’s price is likely to fluctuate with general changes in interest rates, e.g., if rates rise 1.00%, a bond with a 5-year duration is likely to lose about 5.00% of its value due to the interest rate move. |
(i) | For purposes of this presentation, the components include the market value of securities, and reflect the impact of the equivalent exposure of derivative positions, if applicable. These amounts may be negative from time to time. The bond component will include any accrued interest amounts. Equivalent exposure is a calculated amount that translates the derivative position into a reasonable approximation of the amount of the underlying asset that the portfolio would have to hold at a given point in time to have the same price sensitivity that results from the portfolio’s ownership of the derivative contract. When dealing with derivatives, equivalent exposure is a more representative measure of the potential impact of a position on portfolio performance than market value. Where the fund holds convertible bonds, these are treated as part of the equity portion of the portfolio. |
(m) | In determining an instrument’s effective maturity for purposes of calculating the fund’s dollar-weighted average effective maturity, MFS uses the instrument’s stated maturity or, if applicable, an earlier date on which MFS believes it is probable that a maturity-shortening device (such as a put, pre-refunding or prepayment) will cause the instrument to be repaid. Such an earlier date can be substantially shorter than the instrument’s stated maturity. |
Percentages are based on net assets as of 6/30/11.
The portfolio is actively managed and current holdings may be different.
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MFS High Income Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2011 through June 30, 2011
As a contract holder of the fund, you incur ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2011 through June 30, 2011.
Actual Expenses
The first line for each share class in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the following table provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight the fund’s ongoing costs only and do not take into account the fees and expenses imposed under the variable contracts through which your investment in the fund is made. Therefore, the second line for each share class in the table is useful in comparing ongoing costs associated with an investment in vehicles (such as the fund) which fund benefits under variable annuity and variable life insurance contracts and to qualified pension and retirement plans only, and will not help you determine the relative total costs of investing in the fund through variable annuity and variable life insurance contracts. If the fees and expenses imposed under the variable contracts were included, your costs would have been higher.
Share Class | Annualized Expense Ratio | Beginning Account Value 1/01/11 | Ending Account Value | Expenses Paid During Period (p) 1/01/11-6/30/11 | ||||||||||||||
Initial Class | Actual | 0.79% | $1,000.00 | $1,043.28 | $4.00 | |||||||||||||
Hypothetical (h) | 0.79% | $1,000.00 | $1,020.88 | $3.96 | ||||||||||||||
Service Class | Actual | 1.04% | $1,000.00 | $1,041.19 | $5.26 | |||||||||||||
Hypothetical (h) | 1.04% | $1,000.00 | $1,019.64 | $5.21 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid is equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
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MFS High Income Series
PORTFOLIO OF INVESTMENTS – 6/30/11 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
BONDS – 93.3% | ||||||||
Aerospace – 2.1% | ||||||||
BE Aerospace, Inc., 8.5%, 2018 | $ | 1,010,000 | $ | 1,102,163 | ||||
Bombardier, Inc., 7.5%, 2018 (n) | 1,370,000 | 1,534,400 | ||||||
Bombardier, Inc., 7.75%, 2020 (n) | 550,000 | 618,750 | ||||||
CPI International Acquisition, Inc., 8%, 2018 (n) | 1,040,000 | 982,800 | ||||||
Hawker Beechcraft Acquisition Co. LLC, 8.5%, 2015 | 1,220,000 | 954,650 | ||||||
Heckler & Koch GmbH, 9.5%, 2018 (z) | EUR | 655,000 | 902,356 | |||||
Huntington Ingalls Industries, Inc., 7.125%, 2021 (n) | $ | 915,000 | 947,025 | |||||
|
| |||||||
$ | 7,042,144 | |||||||
|
| |||||||
Airlines – 0.0% | ||||||||
Continental Airlines, Inc., 6.748%, 2018 | $ | 60,788 | $ | 60,253 | ||||
|
| |||||||
Apparel Manufacturers – 0.7% | ||||||||
Hanesbrands, Inc., 8%, 2016 | $ | 990,000 | $ | 1,056,825 | ||||
Phillips-Van Heusen Corp., 7.375%, 2020 | 1,350,000 | 1,444,500 | ||||||
|
| |||||||
$ | 2,501,325 | |||||||
|
| |||||||
Asset-Backed & Securitized – 1.2% | ||||||||
Airlie LCDO Ltd., CDO, FRN, 2.146%, 2011 (a)(p)(z) | $ | 738,379 | $ | 317,503 | ||||
Anthracite Ltd., CDO, 6%, 2037 (z) | 290,000 | 217,500 | ||||||
Arbor Realty Mortgage Securities, CDO, FRN, 2.573%, 2038 (z) | 568,229 | 73,870 | ||||||
ARCap REIT, Inc., CDO, “H”, FRN, 6.1%, 2045 (d)(z) | 670,155 | 25,130 | ||||||
Babson Ltd., CLO, “D”, FRN, 1.778%, 2018 (n) | 655,000 | 487,975 | ||||||
Citigroup Commercial Mortgage Trust, FRN, 5.886%, 2049 | 985,952 | 566,796 | ||||||
Crest Ltd., CDO, 7%, 2040 (a) | 907,061 | 45,353 | ||||||
CWCapital Cobalt Ltd., CDO, 6.23%, 2045 (a)(p)(z) | 1,060,218 | 21,895 | ||||||
CWCapital Cobalt Ltd., CDO, “F”, FRN, 1.573%, 2050 (z) | 512,458 | 10,249 | ||||||
First Union National Bank Commercial Mortgage Trust, 6.75%, 2032 | 750,000 | 511,932 | ||||||
G-Force LLC, CDO, “A2”, 4.83%, 2036 (z) | 670,601 | 663,895 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., “C”, FRN, 6.258%, 2051 | 750,000 | 517,413 | ||||||
Wachovia Bank Commercial Mortgage Trust, FRN, 5.943%, 2047 | 579,683 | 228,730 | ||||||
Wachovia Credit, CDO, FRN, 1.596%, 2026 (z) | 372,000 | 260,400 | ||||||
|
| |||||||
$ | 3,948,641 | |||||||
|
| |||||||
Automotive – 2.7% | ||||||||
Accuride Corp., 9.5%, 2018 | $ | 1,215,000 | $ | 1,300,050 | ||||
Allison Transmission, Inc., 7.125%, 2019 (n) | 705,000 | 685,613 | ||||||
Ford Motor Credit Co. LLC, 8%, 2014 | 710,000 | 778,901 | ||||||
Ford Motor Credit Co. LLC, 12%, 2015 | 3,008,000 | 3,730,275 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Automotive – continued | ||||||||
General Motors Financial Co., Inc., 6.75%, 2018 (z) | $ | 725,000 | $ | 726,813 | ||||
Goodyear Tire & Rubber Co., 10.5%, 2016 | 478,000 | 537,750 | ||||||
Jaguar Land Rover PLC, 7.75%, 2018 (z) | 200,000 | 201,000 | ||||||
Jaguar Land Rover PLC, 8.125%, 2021 (z) | 1,085,000 | 1,093,138 | ||||||
UCI International, Inc., 8.625%, 2019 | 140,000 | 144,200 | ||||||
|
| |||||||
$ | 9,197,740 | |||||||
|
| |||||||
Basic Industry – 0.3% | ||||||||
Trimas Corp., 9.75%, 2017 | $ | 1,050,000 | $ | 1,149,750 | ||||
|
| |||||||
Broadcasting – 4.8% | ||||||||
Allbritton Communications Co., 8%, 2018 | $ | 955,000 | $ | 971,713 | ||||
Citadel Broadcasting Corp., 7.75%, 2018 (n) | 190,000 | 201,875 | ||||||
Clear Channel Communications, Inc., 9%, 2021 (z) | 405,000 | 387,788 | ||||||
EH Holding Corp., 7.625%, 2021 (z) | 265,000 | 270,300 | ||||||
Gray Television, Inc., 10.5%, 2015 | 300,000 | 312,000 | ||||||
Inmarsat Finance PLC, 7.375%, 2017 (n) | 1,410,000 | 1,494,600 | ||||||
Intelsat Bermuda Ltd., 11.25%, 2017 | 935,000 | 1,003,956 | ||||||
Intelsat Jackson Holdings Ltd., 9.5%, 2016 | 2,725,000 | 2,857,844 | ||||||
Intelsat Jackson Holdings Ltd., 11.25%, 2016 | 405,000 | 429,300 | ||||||
Lamar Media Corp., 6.625%, 2015 | 460,000 | 466,900 | ||||||
LBI Media, Inc., 8.5%, 2017 (z) | 645,000 | 506,325 | ||||||
Liberty Media Corp., 8.5%, 2029 | 915,000 | 882,975 | ||||||
Local TV Finance LLC, 9.25%, 2015 (p)(z) | 1,542,946 | 1,544,875 | ||||||
Newport Television LLC, 13%, 2017 (n)(p) | 475,186 | 471,672 | ||||||
Salem Communications Corp., 9.625%, 2016 | 163,000 | 171,761 | ||||||
Sinclair Broadcast Group, Inc., 9.25%, 2017 (n) | 585,000 | 642,038 | ||||||
Sinclair Broadcast Group, Inc., 8.375%, 2018 | 195,000 | 204,750 | ||||||
SIRIUS XM Radio, Inc., 13%, 2013 (n) | 300,000 | 351,750 | ||||||
SIRIUS XM Radio, Inc., 8.75%, 2015 (n) | 1,095,000 | 1,207,238 | ||||||
SIRIUS XM Radio, Inc., 7.625%, 2018 (n) | 760,000 | 794,200 | ||||||
Univision Communications, Inc., 6.875%, 2019 (n) | 630,000 | 623,700 | ||||||
Univision Communications, Inc., 7.875%, 2020 (n) | 505,000 | 517,625 | ||||||
|
| |||||||
$ | 16,315,185 | |||||||
|
| |||||||
Brokerage & Asset Managers – 0.4% | ||||||||
E*TRADE Financial Corp., 12.5%, 2017 | $ | 1,095,000 | $ | 1,281,150 | ||||
|
| |||||||
Building – 2.2% | ||||||||
Associated Materials LLC, 9.125%, 2017 (z) | $ | 275,000 | $ | 274,313 | ||||
Building Materials Holding Corp., 6.875%, 2018 (n) | 815,000 | 831,300 | ||||||
Building Materials Holding Corp., 7%, 2020 (n) | 480,000 | 502,800 | ||||||
Building Materials Holding Corp., 6.75%, 2021 (n) | 445,000 | 447,225 | ||||||
CEMEX S.A., 9.25%, 2020 | 2,130,000 | 2,108,700 | ||||||
Masonite International Corp., 8.25%, 2021 (n) | 440,000 | 437,250 |
4
Table of Contents
MFS High Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Building – continued | ||||||||
Nortek, Inc., 10%, 2018 (n) | $ | 335,000 | $ | 335,000 | ||||
Nortek, Inc., 8.5%, 2021 (n) | 1,075,000 | 994,375 | ||||||
Owens Corning, 9%, 2019 | 1,275,000 | 1,522,854 | ||||||
$ | 7,453,817 | |||||||
Business Services – 1.4% | ||||||||
First Data Corp., 12.625%, 2021 (n) | $ | 465,000 | $ | 497,550 | ||||
Interactive Data Corp., 10.25%, 2018 (n) | 975,000 | 1,060,313 | ||||||
Iron Mountain, Inc., 6.625%, 2016 | 1,020,000 | 1,020,000 | ||||||
SunGard Data Systems, Inc., 10.25%, 2015 | 1,210,000 | 1,252,350 | ||||||
SunGard Data Systems, Inc., 7.375%, 2018 | 480,000 | 480,000 | ||||||
SunGard Data Systems, Inc., 7.625%, 2020 | 575,000 | 580,750 | ||||||
$ | 4,890,963 | |||||||
Cable TV – 4.0% | ||||||||
AMC Networks, Inc., 7.75%, 2021 (z) | $ | 208,000 | $ | 217,360 | ||||
Bresnan Broadband Holdings LLC, 8%, 2018 (n) | 290,000 | 299,063 | ||||||
Cablevision Systems Corp., 8.625%, 2017 | 750,000 | 812,813 | ||||||
CCH II LLC, 13.5%, 2016 | 1,120,000 | 1,318,800 | ||||||
CCO Holdings LLC, 7.875%, 2018 | 1,135,000 | 1,196,006 | ||||||
CCO Holdings LLC, 8.125%, 2020 | 580,000 | 626,400 | ||||||
Cequel Communications Holdings, 8.625%, 2017 (n) | 370,000 | 384,800 | ||||||
Charter Communications Operating LLC, 10.875%, 2014 (n) | 705,000 | 775,500 | ||||||
CSC Holdings LLC, 8.5%, 2014 | 1,575,000 | 1,744,313 | ||||||
CSC Holdings LLC, 8.5%, 2015 | 120,000 | 129,600 | ||||||
Insight Communications Co., Inc., 9.375%, 2018 (n) | 905,000 | 993,238 | ||||||
Mediacom LLC, 9.125%, 2019 | 845,000 | 891,475 | ||||||
Telenet Finance Luxembourg, 6.375%, 2020 (n) | EUR | 270,000 | 375,879 | |||||
UPCB Finance III Ltd., 6.625%, 2020 (n) | $ | 1,472,000 | 1,453,600 | |||||
Videotron LTEE, 6.875%, 2014 | 374,000 | 378,208 | ||||||
Virgin Media Finance PLC, 9.125%, 2016 | 1,270,000 | 1,336,675 | ||||||
Virgin Media Finance PLC, 9.5%, 2016 | 410,000 | 463,300 | ||||||
$ | 13,397,030 | |||||||
Chemicals – 3.8% | ||||||||
Ashland, Inc., 9.125%, 2017 | $ | 680,000 | $ | 765,000 | ||||
Celanese U.S. Holdings LLC, 6.625%, 2018 | 1,045,000 | 1,102,475 | ||||||
Hexion U.S. Finance Corp/Hexion Nova Scotia Finance, 8.875%, 2018 | 1,100,000 | 1,144,000 | ||||||
Hexion U.S. Finance Corp/Hexion Nova Scotia Finance, 9%, 2020 | 290,000 | 297,250 | ||||||
Huntsman International LLC, 8.625%, 2021 | 1,170,000 | 1,272,375 | ||||||
Lyondell Chemical Co., 8%, 2017 (n) | 472,000 | 525,100 | ||||||
Lyondell Chemical Co., 11%, 2018 | 2,754,755 | 3,085,326 | ||||||
Momentive Performance Materials, Inc., 12.5%, 2014 | 1,240,000 | 1,348,500 | ||||||
Momentive Performance Materials, Inc., 11.5%, 2016 | 1,300,000 | 1,384,500 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Chemicals – continued | ||||||||
Polypore International, Inc., 7.5%, 2017 | $ | 975,000 | $ | 1,031,063 | ||||
Solutia, Inc., 7.875%, 2020 | 805,000 | 861,350 | ||||||
$ | 12,816,939 | |||||||
Computer Software – 0.2% | ||||||||
Syniverse Holdings, Inc., 9.125%, 2019 (n) | $ | 750,000 | $ | 780,000 | ||||
Computer Software – Systems – 0.8% | ||||||||
Audatex North America, Inc., 6.75%, 2018 (z) | $ | 615,000 | $ | 618,075 | ||||
DuPont Fabros Technology, Inc., REIT, 8.5%, 2017 | 1,545,000 | 1,687,913 | ||||||
Eagle Parent, Inc., 8.625%, 2019 (z) | 550,000 | 530,063 | ||||||
$ | 2,836,051 | |||||||
Conglomerates – 1.2% | ||||||||
Amsted Industries, Inc., 8.125%, 2018 (n) | $ | 1,055,000 | $ | 1,107,750 | ||||
Griffon Corp., 7.125%, 2018 (n) | 1,055,000 | 1,058,956 | ||||||
Pinafore LLC, 9%, 2018 (n) | 1,770,000 | 1,907,175 | ||||||
$ | 4,073,881 | |||||||
Consumer Products – 1.4% | ||||||||
ACCO Brands Corp., 10.625%, 2015 | $ | 150,000 | $ | 167,438 | ||||
Easton – Bell Sports, Inc., 9.75%, 2016 | 890,000 | 981,225 | ||||||
Elizabeth Arden, Inc., 7.375%, 2021 | 670,000 | 697,638 | ||||||
Jarden Corp., 7.5%, 2020 | 1,095,000 | 1,138,800 | ||||||
Libbey Glass, Inc., 10%, 2015 | 805,000 | 873,425 | ||||||
Visant Corp., 10%, 2017 | 965,000 | 998,775 | ||||||
$ | 4,857,301 | |||||||
Consumer Services – 1.0% | ||||||||
Realogy Corp., 10.5%, 2014 | $ | 288,000 | $ | 285,120 | ||||
Realogy Corp., 11.5%, 2017 | 820,000 | 832,300 | ||||||
Service Corp. International, 6.75%, 2015 | 790,000 | 847,275 | ||||||
Service Corp. International, 7%, 2017 | 1,015,000 | 1,093,663 | ||||||
Service Corp. International, 7%, 2019 | 445,000 | 468,363 | ||||||
$ | 3,526,721 | |||||||
Containers – 2.2% | ||||||||
Exopack Holding Corp., 10%, 2018 (z) | $ | 545,000 | $ | 540,913 | ||||
Graham Packaging Co. LP/GPC Capital Corp., 9.875%, 2014 | 630,000 | 646,538 | ||||||
Graham Packaging Co. LP/GPC Capital Corp., 8.25%, 2018 | 400,000 | 445,000 | ||||||
Greif, Inc., 6.75%, 2017 | 1,070,000 | 1,112,800 | ||||||
Greif, Inc., 7.75%, 2019 | 310,000 | 334,800 | ||||||
Owens-Illinois, Inc., 7.375%, 2016 | 650,000 | 706,875 | ||||||
Packaging Dynamics Corp., 8.75%, 2016 (z) | 375,000 | 380,625 | ||||||
Reynolds Group, 8.5%, 2016 (n) | 470,000 | 489,975 | ||||||
Reynolds Group, 7.125%, 2019 (n) | 575,000 | 570,688 | ||||||
Reynolds Group, 9%, 2019 (n) | 1,135,000 | 1,120,813 | ||||||
Reynolds Group, 8.25%, 2021 (n) | 1,045,000 | 977,075 | ||||||
$ | 7,326,102 | |||||||
Defense Electronics – 0.6% | ||||||||
Ducommun, Inc., 9.75%, 2018 (z) | $ | 455,000 | $ | 467,513 | ||||
ManTech International Corp., 7.25%, 2018 | 1,275,000 | 1,332,375 |
5
Table of Contents
MFS High Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Defense Electronics – continued | ||||||||
MOOG, Inc., 7.25%, 2018 | $ | 300,000 | $ | 318,375 | ||||
$ | 2,118,263 | |||||||
Electronics – 0.7% | ||||||||
Freescale Semiconductor, Inc., 10.125%, 2018 (n) | $ | 473,000 | $ | 525,030 | ||||
Freescale Semiconductor, Inc., 9.25%, 2018 (n) | 720,000 | 775,800 | ||||||
Jabil Circuit, Inc., 7.75%, 2016 | 545,000 | 603,588 | ||||||
NXP B.V., 9.75%, 2018 (n) | 108,000 | 120,960 | ||||||
Sensata Technologies B.V., 6.5%, 2019 (z) | 445,000 | 443,888 | ||||||
$ | 2,469,266 | |||||||
Energy – Independent – 8.2% | ||||||||
ATP Oil & Gas Corp., 11.875%, 2015 | $ | 560,000 | $ | 568,400 | ||||
Bill Barrett Corp., 9.875%, 2016 | 915,000 | 1,024,800 | ||||||
Carrizo Oil & Gas, Inc., 8.625%, 2018 | 825,000 | 849,750 | ||||||
Chaparral Energy, Inc., 8.875%, 2017 | 1,255,000 | 1,298,925 | ||||||
Concho Resources, Inc., 8.625%, 2017 | 625,000 | 681,250 | ||||||
Concho Resources, Inc., 6.5%, 2022 | 1,270,000 | 1,273,175 | ||||||
Connacher Oil & Gas Ltd., 8.5%, 2019 (z) | 635,000 | 603,250 | ||||||
Continental Resources, Inc., 8.25%, 2019 | 925,000 | 1,010,563 | ||||||
Denbury Resources, Inc., 8.25%, 2020 | 1,040,000 | 1,133,600 | ||||||
Energy XXI Gulf Coast, Inc., 9.25%, 2017 (n) | 730,000 | 777,450 | ||||||
EXCO Resources, Inc., 7.5%, 2018 | 370,000 | 359,825 | ||||||
Harvest Operations Corp., 6.875%, 2017 (n) | 1,600,000 | 1,652,000 | ||||||
LINN Energy LLC, 6.5%, 2019 (z) | 445,000 | 440,550 | ||||||
LINN Energy LLC, 8.625%, 2020 | 355,000 | 385,175 | ||||||
LINN Energy LLC, 7.75%, 2021 (n) | 791,000 | 822,640 | ||||||
Newfield Exploration Co., 6.625%, 2014 | 445,000 | 451,675 | ||||||
Newfield Exploration Co., 6.625%, 2016 | 855,000 | 882,788 | ||||||
Newfield Exploration Co., 6.875%, 2020 | 375,000 | 398,438 | ||||||
OGX Petroleo e Gas Participacoes S.A., 8.5%, 2018 (z) | 1,074,000 | 1,104,609 | ||||||
OPTI Canada, Inc., 9.75%, 2013 (n) | 830,000 | 823,775 | ||||||
OPTI Canada, Inc., 8.25%, 2014 (d) | 1,890,000 | 784,350 | ||||||
Petrohawk Energy Corp., 7.25%, 2018 | 370,000 | 379,713 | ||||||
Pioneer Natural Resources Co., 6.875%, 2018 | 1,080,000 | 1,166,060 | ||||||
Pioneer Natural Resources Co., 7.5%, 2020 | 1,195,000 | 1,346,534 | ||||||
Plains Exploration & Production Co., 7%, 2017 | 1,425,000 | 1,467,750 | ||||||
QEP Resources, Inc., 6.875%, 2021 | 1,265,000 | 1,334,575 | ||||||
Quicksilver Resources, Inc., 9.125%, 2019 | 1,005,000 | 1,095,450 | ||||||
Range Resources Corp., 8%, 2019 | 685,000 | 743,225 | ||||||
SandRidge Energy, Inc., 8%, 2018 (n) | 1,675,000 | 1,708,500 | ||||||
W&T Offshore, Inc., 8.5%, 2019 (z) | 550,000 | 556,875 | ||||||
Whiting Petroleum Corp., 6.5%, 2018 | 560,000 | 582,400 | ||||||
$ | 27,708,070 | |||||||
Engineering – Construction – 0.2% | ||||||||
B – Corp. Merger Sub, Inc., 8.25%, 2019 (z) | $ | 800,000 | $ | 792,000 | ||||
Entertainment – 0.9% | ||||||||
AMC Entertainment, Inc., 8.75%, 2019 | $ | 1,010,000 | $ | 1,065,550 | ||||
AMC Entertainment, Inc., 9.75%, 2020 (n) | 585,000 | 598,163 | ||||||
Cinemark USA, Inc., 8.625%, 2019 | 790,000 | 865,050 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Entertainment – continued | ||||||||
NAI Entertainment Holdings LLC, 8.25%, 2017 (n) | $ | 450,000 | $ | 482,625 | ||||
$ | 3,011,388 | |||||||
Financial Institutions – 5.6% | ||||||||
CIT Group, Inc., 5.25%, 2014 (n) | $ | 1,415,000 | $ | 1,407,925 | ||||
CIT Group, Inc., 7%, 2016 | 2,420,000 | 2,410,925 | ||||||
CIT Group, Inc., 7%, 2017 | 4,215,000 | 4,204,463 | ||||||
CIT Group, Inc., 6.625%, 2018 (n) | 1,189,000 | 1,239,533 | ||||||
General Electric Capital Corp., 6.375% to 2017, FRN to 2067 | 1,180,000 | 1,209,500 | ||||||
International Lease Finance Corp., 8.75%, 2017 | 1,085,000 | 1,186,719 | ||||||
International Lease Finance Corp., 7.125%, 2018 (n) | 1,428,000 | 1,527,960 | ||||||
International Lease Finance Corp., 8.25%, 2020 | 290,000 | 313,200 | ||||||
Nationstar Mortgage LLC, 10.875%, 2015 (n) | 1,610,000 | 1,674,400 | ||||||
SLM Corp., 8.45%, 2018 | 465,000 | 510,390 | ||||||
SLM Corp., 8%, 2020 | 1,420,000 | 1,524,802 | ||||||
Springleaf Finance Corp., 6.9%, 2017 | 1,950,000 | 1,789,125 | ||||||
$ | 18,998,942 | |||||||
Food & Beverages – 1.3% | ||||||||
ARAMARK Corp., 8.5%, 2015 | $ | 355,000 | $ | 368,756 | ||||
B&G Foods, Inc., 7.625%, 2018 | 750,000 | 789,375 | ||||||
Constellation Brands, Inc., 7.25%, 2016 | 240,000 | 262,200 | ||||||
Pinnacle Foods Finance LLC, 9.25%, 2015 | 1,335,000 | 1,385,063 | ||||||
Pinnacle Foods Finance LLC, 10.625%, 2017 | 375,000 | 399,844 | ||||||
Pinnacle Foods Finance LLC, 8.25%, 2017 | 275,000 | 285,313 | ||||||
TreeHouse Foods, Inc., 7.75%, 2018 | 850,000 | 903,125 | ||||||
$ | 4,393,676 | |||||||
Forest & Paper Products – 1.7% | ||||||||
Boise, Inc., 8%, 2020 | $ | 1,065,000 | $ | 1,118,250 | ||||
Cascades, Inc., 7.75%, 2017 | 695,000 | 724,538 | ||||||
Georgia-Pacific Corp., 8%, 2024 | 870,000 | 1,033,162 | ||||||
Georgia-Pacific Corp., 7.25%, 2028 | 320,000 | 355,566 | ||||||
Graphic Packaging Holding Co., 7.875%, 2018 | 710,000 | 752,600 | ||||||
JSG Funding PLC, 7.75%, 2015 | 215,000 | 217,150 | ||||||
Smurfit Kappa Group PLC, 7.75%, 2019 (n) | EUR | 715,000 | 1,070,555 | |||||
Xerium Technologies, Inc., 8.875%, 2018 (z) | $ | 415,000 | 415,000 | |||||
$ | 5,686,821 | |||||||
Gaming & Lodging – 4.4% | ||||||||
American Casinos, Inc., 7.5%, 2021 (n) | $ | 870,000 | $ | 897,188 | ||||
Boyd Gaming Corp., 7.125%, 2016 | 720,000 | 664,200 | ||||||
Firekeepers Development Authority, 13.875%, 2015 (n) | 925,000 | 1,068,375 | ||||||
Fontainebleau Las Vegas Holdings LLC, 10.25%, 2015 (d)(n) | 1,190,000 | 595 |
6
Table of Contents
MFS High Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Gaming & Lodging – continued | ||||||||
GWR Operating Partnership LLP, 10.875%, 2017 | $ | 470,000 | $ | 508,775 | ||||
Harrah’s Operating Co., Inc., 11.25%, 2017 | 1,325,000 | 1,462,469 | ||||||
Harrah’s Operating Co., Inc., 10%, 2018 | 792,000 | 714,780 | ||||||
Harrah’s Operating Co., Inc., 10%, 2018 | 461,000 | 397,613 | ||||||
Host Hotels & Resorts, Inc., 6.75%, 2016 | 920,000 | 949,900 | ||||||
Host Hotels & Resorts, Inc., 9%, 2017 | 1,065,000 | 1,198,125 | ||||||
MGM Mirage, 10.375%, 2014 | 195,000 | 221,325 | ||||||
MGM Mirage, 11.125%, 2017 | 485,000 | 554,113 | ||||||
MGM Resorts International, 11.375%, 2018 | 625,000 | 701,563 | ||||||
MGM Resorts International, 9%, 2020 | 1,020,000 | 1,116,900 | ||||||
Penn National Gaming, Inc., 8.75%, 2019 | 1,195,000 | 1,299,563 | ||||||
Seven Seas Cruises S. de R.L., 9.125%, 2019 (z) | 400,000 | 412,000 | ||||||
Starwood Hotels & Resorts Worldwide, Inc., 6.75%, 2018 | 580,000 | 642,350 | ||||||
Station Casinos, Inc., 6.5%, 2014 (d) | 2,175,000 | 218 | ||||||
Station Casinos, Inc., 6.875%, 2016 (d) | 2,540,000 | 254 | ||||||
Station Casinos, Inc., 7.75%, 2016 (d) | 472,000 | 47 | ||||||
Wyndham Worldwide Corp., 6%, 2016 | 365,000 | 387,622 | ||||||
Wyndham Worldwide Corp., 7.375%, 2020 | 645,000 | 715,226 | ||||||
Wynn Las Vegas LLC, 7.75%, 2020 | 960,000 | 1,042,800 | ||||||
$ | 14,956,001 | |||||||
Industrial – 1.2% | ||||||||
Altra Holdings, Inc., 8.125%, 2016 | $ | 710,000 | $ | 766,800 | ||||
Dematic S.A., 8.75%, 2016 (z) | 895,000 | 888,288 | ||||||
Hillman Group, Inc., 10.875%, 2018 (z) | 565,000 | 609,494 | ||||||
Hyva Global B.V., 8.625%, 2016 (n) | 442,000 | 444,210 | ||||||
Mueller Water Products, Inc., 7.375%, 2017 | 289,000 | 271,660 | ||||||
Mueller Water Products, Inc., 8.75%, 2020 | 866,000 | 937,445 | ||||||
$ | 3,917,897 | |||||||
Insurance – 1.2% | ||||||||
ING Capital Funding Trust III, FRN, 3.845%, 2061 | $ | 970,000 | $ | 916,046 | ||||
ING Groep N.V., 5.775% to 2015, FRN to 2049 | 2,250,000 | 2,070,000 | ||||||
MetLife, Inc., 9.25% to 2038, FRN to 2068 (n) | 900,000 | 1,098,000 | ||||||
$ | 4,084,046 | |||||||
Insurance – Property & Casualty – 1.4% | ||||||||
Liberty Mutual Group, Inc., 10.75% to 2038, FRN to 2088 (n) | $ | 1,625,000 | $ | 2,157,188 | ||||
USI Holdings Corp., 9.75%, 2015 (z) | 780,000 | 781,950 | ||||||
XL Group PLC, 6.5% to 2017, FRN to 2049 | 1,780,000 | 1,633,150 | ||||||
$ | 4,572,288 | |||||||
International Market Sovereign – 0.3% | ||||||||
Republic of Ireland, 4.5%, 2020 | EUR | 500,000 | $ | 454,984 | ||||
Republic of Ireland, 5.4%, 2025 | 540,000 | 477,484 | ||||||
$ | 932,468 | |||||||
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Machinery & Tools – 1.2% | ||||||||
Case Corp., 7.25%, 2016 | $ | 545,000 | $ | 593,369 | ||||
Case New Holland, Inc., 7.875%, 2017 (n) | 2,140,000 | 2,354,000 | ||||||
Rental Service Corp., 9.5%, 2014 | 523,000 | 536,075 | ||||||
RSC Equipment Rental, Inc., 8.25%, 2021 | 470,000 | 467,650 | ||||||
$ | 3,951,094 | |||||||
Major Banks – 1.7% | ||||||||
Bank of America Corp., 8% to 2018, FRN to 2049 | $ | 2,205,000 | $ | 2,302,704 | ||||
JPMorgan Chase & Co., 7.9% to 2018, FRN to 2049 | 1,590,000 | 1,707,803 | ||||||
Royal Bank of Scotland Group PLC, 7.648% to 2031, FRN to 2049 | 1,580,000 | 1,422,000 | ||||||
Royal Bank of Scotland Group PLC, 6.99% to 2017, FRN to 2049 (d)(n) | 530,000 | 477,000 | ||||||
$ | 5,909,507 | |||||||
Medical & Health Technology & Services – 5.3% | ||||||||
Biomet, Inc., 10%, 2017 | $ | 835,000 | $ | 910,150 | ||||
Biomet, Inc., 10.375%, 2017 (p) | 500,000 | 551,250 | ||||||
Biomet, Inc., 11.625%, 2017 | 840,000 | 930,300 | ||||||
CDRT Merger Sub, Inc., 8.125%, 2019 (z) | 355,000 | 355,000 | ||||||
Davita, Inc., 6.375%, 2018 | 1,000,000 | 1,012,500 | ||||||
Davita, Inc., 6.625%, 2020 | 485,000 | 493,488 | ||||||
Fresenius Medical Care AG & Co. KGaA, 9%, 2015 (n) | 865,000 | 978,531 | ||||||
HCA, Inc., 9.25%, 2016 | 640,000 | 679,200 | ||||||
HCA, Inc., 8.5%, 2019 | 2,715,000 | 3,000,075 | ||||||
HealthSouth Corp., 8.125%, 2020 | 1,825,000 | 1,959,594 | ||||||
Teleflex, Inc., 6.875%, 2019 | 545,000 | 551,813 | ||||||
United Surgical Partners International, Inc., 8.875%, 2017 | 815,000 | 851,675 | ||||||
United Surgical Partners International, Inc., 9.25%, 2017 (p) | 495,000 | 517,275 | ||||||
Universal Health Services, Inc., 7%, 2018 | 455,000 | 468,650 | ||||||
Universal Hospital Services, Inc., 8.5%, 2015 (p) | 1,630,000 | 1,678,900 | ||||||
Universal Hospital Services, Inc., FRN, 3.777%, 2015 | 310,000 | 297,600 | ||||||
Vanguard Health Systems, Inc., 0%, 2016 | 21,000 | 13,834 | ||||||
Vanguard Health Systems, Inc., 8%, 2018 | 1,310,000 | 1,352,575 | ||||||
VWR Funding, Inc., 10.25%, 2015 (p) | 1,277,937 | 1,335,444 | ||||||
$ | 17,937,854 | |||||||
Metals & Mining – 1.8% | ||||||||
Arch Coal, Inc., 7%, 2019 (z) | $ | 925,000 | $ | 922,688 | ||||
Arch Coal, Inc., 7.25%, 2020 | 385,000 | 391,738 | ||||||
Arch Western Finance LLC, 6.75%, 2013 | 512,000 | 512,640 | ||||||
Cloud Peak Energy, Inc., 8.25%, 2017 | 390,000 | 417,300 | ||||||
Cloud Peak Energy, Inc., 8.5%, 2019 | 1,340,000 | 1,448,875 | ||||||
Consol Energy, Inc., 8%, 2017 | 765,000 | 833,850 | ||||||
Consol Energy, Inc., 8.25%, 2020 | 510,000 | 555,900 | ||||||
Novelis, Inc., 8.375%, 2017 | 585,000 | 624,488 | ||||||
Novelis, Inc., 8.75%, 2020 | 285,000 | 307,800 | ||||||
$ | 6,015,279 | |||||||
7
Table of Contents
MFS High Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Natural Gas – Distribution – 0.4% | ||||||||
AmeriGas Partners LP, 7.125%, 2016 | $ | 1,380,000 | $ | 1,421,400 | ||||
Natural Gas – Pipeline – 2.2% | ||||||||
Atlas Pipeline Partners LP, 8.75%, 2018 | $ | 825,000 | $ | 872,438 | ||||
Crosstex Energy, Inc., 8.875%, 2018 | 1,145,000 | 1,219,425 | ||||||
El Paso Corp., 7%, 2017 | 1,270,000 | 1,436,846 | ||||||
El Paso Corp., 7.75%, 2032 | 1,145,000 | 1,331,946 | ||||||
Energy Transfer Equity LP, 7.5%, 2020 | 1,240,000 | 1,314,400 | ||||||
Enterprise Products Partners LP, 8.375% to 2016, FRN to 2066 | 750,000 | 811,875 | ||||||
Enterprise Products Partners LP, 7.034% to 2018, FRN to 2068 | 391,000 | 411,039 | ||||||
$ | 7,397,969 | |||||||
Network & Telecom – 2.4% | ||||||||
CenturyLink, Inc., 7.6%, 2039 | $ | 360,000 | $ | 346,277 | ||||
Cincinnati Bell, Inc., 8.25%, 2017 | 315,000 | 316,575 | ||||||
Cincinnati Bell, Inc., 8.75%, 2018 | 1,160,000 | 1,102,000 | ||||||
Citizens Communications Co., 9%, 2031 | 440,000 | 451,000 | ||||||
Frontier Communications Corp., 8.25%, 2017 | 295,000 | 320,813 | ||||||
Frontier Communications Corp., 8.125%, 2018 | 1,205,000 | 1,308,931 | ||||||
Qwest Communications International, Inc., 8%, 2015 | 505,000 | 549,188 | ||||||
Qwest Communications International, Inc., 7.125%, 2018 (n) | 1,720,000 | 1,846,850 | ||||||
Windstream Corp., 8.125%, 2018 | 215,000 | 227,900 | ||||||
Windstream Corp., 7.75%, 2020 | 995,000 | 1,042,263 | ||||||
Windstream Corp., 7.75%, 2021 | 440,000 | 459,800 | ||||||
$ | 7,971,597 | |||||||
Oil Services – 1.2% | ||||||||
Edgen Murray Corp., 12.25%, 2015 | $ | 645,000 | $ | 649,838 | ||||
Expro Finance Luxembourg, 8.5%, 2016 (n) | 1,070,000 | 1,032,550 | ||||||
McJunkin Red Man Holding Corp., 9.5%, 2016 (n) | 760,000 | 773,300 | ||||||
Pioneer Drilling Co., 9.875%, 2018 | 1,375,000 | 1,471,250 | ||||||
Unit Corp., 6.625%, 2021 | 225,000 | 225,000 | ||||||
$ | 4,151,938 | |||||||
Oils – 0.2% | ||||||||
Petroplus Holdings AG, 9.375%, 2019 (n) | $ | 785,000 | $ | 788,925 | ||||
Other Banks & Diversified Financials – 1.6% | ||||||||
Capital One Financial Corp., 10.25%, 2039 | $ | 1,345,000 | $ | 1,425,700 | ||||
Groupe BPCE S.A., 12.5% to 2019, FRN to 2049 (n) | 710,000 | 812,496 | ||||||
LBG Capital No.1 PLC, 7.875%, 2020 (n) | 900,000 | 841,500 | ||||||
Santander UK PLC, 8.963% to 2030, FRN to 2049 | 2,155,000 | 2,381,275 | ||||||
$ | 5,460,971 | |||||||
Pollution Control – 0.1% | ||||||||
WCA Waste Corp., 7.5%, 2019 (z) | $ | 385,000 | $ | 384,519 | ||||
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Printing & Publishing – 0.5% | ||||||||
American Media, Inc., 13.5%, 2018 (z) | $ | 94,618 | $ | 101,951 | ||||
McClatchy Co., 11.5%, 2017 | 590,000 | 626,875 | ||||||
Nielsen Finance LLC, 11.5%, 2016 | 501,000 | 586,170 | ||||||
Nielsen Finance LLC, 7.75%, 2018 (n) | 480,000 | 504,000 | ||||||
$ | 1,818,996 | |||||||
Railroad & Shipping – 0.7% | ||||||||
Kansas City Southern Railway, 8%, 2015 | $ | 1,825,000 | $ | 1,957,313 | ||||
Kansas City Southern Railway, 6.125%, 2021 (z) | 455,000 | 455,000 | ||||||
$ | 2,412,313 | |||||||
Real Estate – 1.1% | ||||||||
CB Richard Ellis Group, Inc., 11.625%, 2017 | $ | 620,000 | $ | 718,425 | ||||
CNL Lifestyle Properties, Inc., REIT, 7.25%, 2019 (n) | 465,000 | 420,825 | ||||||
Entertainment Properties Trust, REIT, 7.75%, 2020 | 1,145,000 | 1,290,988 | ||||||
Kennedy Wilson, Inc., 8.75%, 2019 (n) | 765,000 | 769,781 | ||||||
MPT Operating Partnership, 6.875%, 2021 (n) | 635,000 | 623,888 | ||||||
$ | 3,823,907 | |||||||
Retailers – 2.3% | ||||||||
Burlington Coat Factory Warehouse Corp., 10%, 2019 (n) | $ | 680,000 | $ | 673,200 | ||||
J. Crew Group, Inc., 8.125%, 2019 (n) | 380,000 | 365,750 | ||||||
Limited Brands, Inc., 6.9%, 2017 | 760,000 | 814,150 | ||||||
Limited Brands, Inc., 6.95%, 2033 | 430,000 | 395,600 | ||||||
Neiman Marcus Group, Inc., 10.375%, 2015 | 1,365,000 | 1,433,250 | ||||||
QVC, Inc., 7.375%, 2020 (n) | 705,000 | 742,013 | ||||||
Sally Beauty Holdings, Inc., 10.5%, 2016 | 810,000 | 864,675 | ||||||
Toys “R” Us Property Co. II LLC, 8.5%, 2017 | 790,000 | 825,550 | ||||||
Toys “R” Us, Inc., 10.75%, 2017 | 1,260,000 | 1,401,750 | ||||||
Yankee Holdings Corp., 10.25%, 2016 (n)(p) | 280,000 | 280,700 | ||||||
$ | 7,796,638 | |||||||
Specialty Stores – 0.5% | ||||||||
Michaels Stores, Inc., 11.375%, 2016 | $ | 735,000 | $ | 782,775 | ||||
Michaels Stores, Inc., 7.75%, 2018 (n) | 785,000 | 786,963 | ||||||
$ | 1,569,738 | |||||||
Telecommunications – Wireless – 4.6% | ||||||||
Clearwire Corp., 12%, 2015 (n) | $ | 1,680,000 | $ | 1,799,700 | ||||
Cricket Communications, Inc., 7.75%, 2016 | 275,000 | 291,500 | ||||||
Cricket Communications, Inc., 7.75%, 2020 | 270,000 | 264,600 | ||||||
Crown Castle International Corp., 9%, 2015 | 1,120,000 | 1,215,200 | ||||||
Crown Castle International Corp., 7.125%, 2019 | 1,190,000 | 1,252,475 | ||||||
Digicel Group Ltd., 12%, 2014 (n) | 200,000 | 231,500 | ||||||
Digicel Group Ltd., 8.25%, 2017 (n) | 1,155,000 | 1,198,313 | ||||||
Digicel Group Ltd., 10.5%, 2018 (n) | 930,000 | 1,041,600 | ||||||
MetroPCS Wireless, Inc., 7.875%, 2018 | 880,000 | 931,700 | ||||||
Nextel Communications, Inc., 7.375%, 2015 | 1,025,000 | 1,025,000 | ||||||
NII Holdings, Inc., 10%, 2016 | 975,000 | 1,131,000 | ||||||
NII Holdings, Inc., 7.625%, 2021 | 720,000 | 752,400 |
8
Table of Contents
MFS High Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Telecommunications – Wireless – continued | ||||||||
SBA Communications Corp., 8%, 2016 | $ | 390,000 | $ | 414,863 | ||||
SBA Communications Corp., 8.25%, 2019 | 330,000 | 353,100 | ||||||
Sprint Capital Corp., 6.875%, 2028 | 545,000 | 516,388 | ||||||
Sprint Nextel Corp., 8.375%, 2017 | 825,000 | 906,469 | ||||||
Wind Acquisition Finance S.A., 11.75%, 2017 (n) | 1,095,000 | 1,240,088 | ||||||
Wind Acquisition Finance S.A., 7.25%, 2018 (n) | 960,000 | 998,400 | ||||||
$ | 15,564,296 | |||||||
Telephone Services – 0.1% | ||||||||
Cogent Communications Group, Inc., 8.375%, 2018 (n) | $ | 470,000 | $ | 482,925 | ||||
Transportation – 0.1% | ||||||||
Navios South American Logistics, Inc., 9.25%, 2019 (n) | $ | 459,000 | $ | 462,443 | ||||
Transportation – Services – 2.5% | ||||||||
ACL I Corp., 10.625%, 2016 (p)(z) | $ | 850,000 | $ | 756,881 | ||||
Aguila American Resources Ltd., 7.875%, 2018 (n) | 655,000 | 659,094 | ||||||
American Petroleum Tankers LLC, 10.25%, 2015 | 521,000 | 544,445 | ||||||
Atlas Airlines, Inc. Pass-Through Certificates, “A-1”, 7.2%, 2019 | 598,877 | 568,933 | ||||||
Commercial Barge Line Co., 12.5%, 2017 | 1,795,000 | 2,014,888 | ||||||
Hertz Corp., 8.875%, 2014 | 50,000 | 51,250 | ||||||
Hertz Corp., 7.5%, 2018 (n) | 740,000 | 762,200 | ||||||
Hertz Corp., 7.375%, 2021 (n) | 555,000 | 564,713 | ||||||
Navios Maritime Acquisition Corp., 8.625%, 2017 (z) | 470,000 | 462,950 | ||||||
Navios Maritime Acquisition Corp., 8.625%, 2017 | 485,000 | 477,725 | ||||||
Navios Maritime Holdings, Inc., 8.875%, 2017 | 545,000 | 561,350 | ||||||
Swift Services Holdings, Inc., 10%, 2018 | 975,000 | 1,031,063 | ||||||
$ | 8,455,492 | |||||||
Utilities – Electric Power – 4.7% | ||||||||
AES Corp., 8%, 2017 | $ | 1,215,000 | $ | 1,287,900 | ||||
Calpine Corp., 8%, 2016 (n) | 1,080,000 | 1,166,400 | ||||||
Calpine Corp., 7.875%, 2020 (n) | 1,415,000 | 1,478,675 | ||||||
Covanta Holding Corp., 7.25%, 2020 | 760,000 | 794,914 | ||||||
Dynegy Holdings, Inc., 7.5%, 2015 | 375,000 | 305,625 | ||||||
Dynegy Holdings, Inc., 7.75%, 2019 | 1,430,000 | 1,040,325 | ||||||
Edison Mission Energy, 7%, 2017 | 1,700,000 | 1,377,000 | ||||||
EDP Finance B.V., 6%, 2018 (n) | 760,000 | 703,195 | ||||||
Energy Future Holdings Corp., 10%, 2020 | 1,315,000 | 1,395,820 | ||||||
Energy Future Holdings Corp., 10%, 2020 | 2,045,000 | 2,180,911 | ||||||
GenOn Energy, Inc., 9.875%, 2020 | 1,605,000 | 1,677,225 | ||||||
NRG Energy, Inc., 7.375%, 2017 | 925,000 | 968,938 | ||||||
NRG Energy, Inc., 8.25%, 2020 | 985,000 | 1,004,700 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Utilities – Electric Power – continued | ||||||||
Texas Competitive Electric Holdings Co. LLC, 11.5%, 2020 (n) | $ | 590,000 | $ | 579,636 | ||||
$ | 15,961,264 | |||||||
Total Bonds (Identified Cost, $316,254,126) | $ | 316,835,184 | ||||||
FLOATING RATE LOANS (g)(r) – 0.7% | ||||||||
Aerospace – 0.2% | ||||||||
Hawker Beechcraft Acquisition Co. LLC, Term Loan, 10.5%, 2014 | $ | 564,811 | $ | 570,106 | ||||
Broadcasting – 0.2% | ||||||||
Gray Television, Inc., Term Loan B, 3.7%, 2014 | $ | 328,882 | $ | 322,469 | ||||
Local TV Finance LLC, Term Loan B, 2.19%, 2013 | 96,829 | 94,530 | ||||||
New Young Broadcasting Holding Co., Inc., Term Loan, 8%, 2015 | 363,559 | 365,149 | ||||||
$ | 782,148 | |||||||
Building – 0.0% | ||||||||
Goodman Global Holdings, Inc., 2nd Lien Term Loan, 9%, 2017 | $ | 56,680 | $ | 58,121 | ||||
Financial Institutions – 0.1% | ||||||||
Springleaf Finance Corp., Term Loan, 5.5%, 2017 | $ | 452,233 | $ | 442,717 | ||||
Gaming & Lodging – 0.2% | ||||||||
MGM Mirage, Term Loan, 7%, 2014 | $ | 684,052 | $ | 667,901 | ||||
Total Floating Rate Loans (Identified Cost, $2,307,822) | $ | 2,520,993 | ||||||
COMMON STOCKS – 0.4% | ||||||||
Automotive – 0.1% | ||||||||
Accuride Corp. (a) | 24,851 | $ | 313,868 | |||||
Oxford Automotive, Inc. (a) | 82 | 0 | ||||||
$ | 313,868 | |||||||
Broadcasting – 0.2% | ||||||||
New Young Broadcasting Holding Co., Inc. (a) | 163 | $ | 440,100 | |||||
Printing & Publishing – 0.1% | ||||||||
American Media Operations, Inc. (a) | 24,246 | $ | 382,359 | |||||
Golden Books Family Entertainment, Inc. (a) | 2,125 | 0 | ||||||
$ | 382,359 | |||||||
Special Products & Services – 0.0% | ||||||||
Mark IV Industries LLC, Common Units, “A” (a) | 676 | $ | 38,363 | |||||
Total Common Stocks (Identified Cost, $2,056,558) | $ | 1,174,690 | ||||||
CONVERTIBLE PREFERRED STOCKS – 0.7% | ||||||||
Automotive – 0.4% | ||||||||
General Motors Co., 4.75% | $ | 24,710 | $ | 1,204,365 | ||||
9
Table of Contents
MFS High Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
CONVERTIBLE PREFERRED STOCKS – continued | ||||||||
Insurance – 0.3% | ||||||||
MetLife, Inc., 5% | $ | 13,130 | $ | 1,082,306 | ||||
Total Convertible Preferred Stocks (Identified Cost, $2,321,813) | $ | 2,286,671 | ||||||
PREFERRED STOCKS – 0.9% | ||||||||
Other Banks & Diversified Financials – 0.9% | ||||||||
Ally Financial, Inc., 7% (n) | 550 | $ | 516,897 | |||||
Ally Financial, Inc., “A”, 8.5% | 69,992 | 1,751,900 | ||||||
GMAC Capital Trust I, 8.125% (a) | 32,300 | 826,880 | ||||||
Total Preferred Stocks (Identified Cost, $3,104,955) | $ | 3,095,677 | ||||||
Strike Price | First Exercise | |||||||||||||||
WARRANTS – 0.2% | ||||||||||||||||
Broadcasting – 0.2% | ||||||||||||||||
New Young Broadcasting Holding Co., Inc. (1 share for 1 warrant) (Identified Cost, $562,667) (a) | $ | 0.01 | 7/14/10 | 295 | $ | 796,500 |
Issuer | Shares/Par | Value ($) | ||||||
MONEY MARKET FUNDS (v) – 1.8% | ||||||||
MFS Institutional Money Market Portfolio, 0.1%, at Cost and Net Asset Value | 6,236,618 | $ | 6,236,618 | |||||
Total Investments (Identified Cost, $332,844,559) | $ | 332,946,333 | ||||||
OTHER ASSETS, LESS LIABILITIES – 2.0% | 6,762,069 | |||||||
Net Assets – 100.0% | $ | 339,708,402 | ||||||
(a) | Non-income producing security. |
(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 $79,317,609, representing 23.3% of net assets. |
(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 fund holds the following restricted securities: |
Restricted Securities | Acquisition Date | Cost | Value | |||||||
ACL I Corp., 10.625%, 2016 | 2/10/11 | $835,991 | $756,881 | |||||||
AMC Networks, Inc., 7.75%, 2021 | 6/22/11 | 208,000 | 217,360 | |||||||
Airlie LCDO Ltd., CDO, FRN, 2.146%, 2011 | 10/13/06 | 713,874 | 317,503 | |||||||
American Media, Inc., 13.5%, 2018 | 12/22/10 | 96,067 | 101,951 | |||||||
Anthracite Ltd., CDO, 6%, 2037 | 5/14/02-5/09/07 | 263,713 | 217,500 | |||||||
Arbor Realty Mortgage Securities, CDO, FRN, 2.573%, 2038 | 12/20/05 | 568,229 | 73,870 | |||||||
ARCap REIT, Inc., CDO, “H”, FRN, 6.1%, 2045 | 9/21/04 | 25,130 | 25,130 | |||||||
Arch Coal, Inc., 7%, 2019 | 6/08/11-6/14/11 | 929,121 | 922,688 | |||||||
Associated Materials LLC, 9.125%, 2017 | 6/09/11 | 268,846 | 274,313 | |||||||
Audatex North America, Inc., 6.75%, 2018 | 6/10/11 | 615,000 | 618,075 | |||||||
B-Corp. Merger Sub, Inc., 8.25%, 2019 | 5/17/11-6/06/11 | 802,785 | 792,000 | |||||||
CDRT Merger Sub, Inc., 8.125%, 2019 | 5/13/11 | 355,000 | 355,000 | |||||||
CWCapital Cobalt Ltd., CDO, 6.23%, 2045 | 5/20/06 | 1,072,867 | 21,895 |
10
Table of Contents
MFS High Income Series
Portfolio of Investments (unaudited) – continued
Restricted Securities - continued | Acquisition Date | Cost | Value | |||||||
CWCapital Cobalt Ltd., CDO, “F”, FRN, 1.573%, 2050 | 4/12/06 | $512,680 | $10,249 | |||||||
Clear Channel Communications, Inc., 9%, 2021 | 6/08/11-6/09/11 | 388,066 | 387,788 | |||||||
Connacher Oil & Gas Ltd., 8.5%, 2019 | 5/20/11 | 635,000 | 603,250 | |||||||
Dematic S.A., 8.75%, 2016 | 4/19/11-4/20/11 | 905,636 | 888,288 | |||||||
Ducommun, Inc., 9.75%, 2018 | 6/23/11 | 459,863 | 467,513 | |||||||
EH Holding Corp., 7.625%, 2021 | 5/17/11 | 265,000 | 270,300 | |||||||
Eagle Parent, Inc., 8.625%, 2019 | 5/11/11-5/24/11 | 555,361 | 530,063 | |||||||
Exopack Holding Corp., 10%, 2018 | 5/25/11 | 547,026 | 540,913 | |||||||
G-Force LLC, CDO, “A2”, 4.83%, 2036 | 2/14/11 | 652,361 | 663,895 | |||||||
General Motors Financial Co., Inc., 6.75%, 2018 | 5/26/11-6/06/11 | 728,724 | 726,813 | |||||||
Heckler & Koch GmbH, 9.5%, 2018 | 5/06/11-5/10/11 | 926,987 | 902,356 | |||||||
Hillman Group, Inc., 10.875%, 2018 | 3/11/11 | 615,704 | 609,494 | |||||||
Jaguar Land Rover PLC, 7.75%, 2018 | 5/12/11 | 200,000 | 201,000 | |||||||
Jaguar Land Rover PLC, 8.125%, 2021 | 5/12/11-5/24/11 | 1,112,551 | 1,093,138 | |||||||
Kansas City Southern Railway, 6.125%, 2021 | 5/06/11-5/09/11 | 458,867 | 455,000 | |||||||
LBI Media, Inc., 8.5%, 2017 | 7/18/07 | 637,500 | 506,325 | |||||||
LINN Energy LLC, 6.5%, 2019 | 5/10/11 | 441,626 | 440,550 | |||||||
Local TV Finance LLC, 9.25%, 2015 | 11/13/07-2/16/11 | 1,514,027 | 1,544,875 | |||||||
Navios Maritime Acquisition Corp., 8.625%, 2017 | 5/12/11 | 480,450 | 462,950 | |||||||
OGX Petroleo e Gas Participacoes S.A., 8.5%, 2018 | 5/26/11 | 1,074,000 | 1,104,609 | |||||||
Packaging Dynamics Corp., 8.75%, 2016 | 1/25/11-2/01/11 | 380,315 | 380,625 | |||||||
Sensata Technologies B.V., 6.5%, 2019 | 5/06/11-5/09/11 | 447,220 | 443,888 | |||||||
Seven Seas Cruises S. de R.L., 9.125%, 2019 | 5/13/11 | 400,000 | 412,000 | |||||||
USI Holdings Corp., 9.75%, 2015 | 5/07/07-6/08/07 | 786,820 | 781,950 | |||||||
W&T Offshore, Inc., 8.5%, 2019 | 6/03/11-6/09/11 | 550,000 | 556,875 | |||||||
WCA Waste Corp., 7.5%, 2019 | 5/26/11 | 385,000 | 384,519 | |||||||
Wachovia Credit, CDO, FRN, 1.596%, 2026 | 6/08/06 | 372,000 | 260,400 | |||||||
Xerium Technologies, Inc., 8.875%, 2018 | 5/20/11 | 415,000 | 415,000 | |||||||
Total Restricted Securities | $20,738,792 | |||||||||
% of Net Assets | 6.1% |
The following abbreviations are used in this report and are defined:
CDO | Collateralized Debt Obligation |
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 |
11
Table of Contents
MFS High Income Series
Portfolio of Investments (unaudited) – continued
Derivative Contracts at 6/30/11
Forward Foreign Currency Exchange Contracts at 6/30/11
Type | Currency | Counterparty | Contracts to Deliver/Receive | Settlement Date Range | In Exchange For | Contracts at Value | Net Unrealized Appreciation (Depreciation) | |||||||||||||||||
Asset Derivatives | ||||||||||||||||||||||||
BUY | EUR | Citibank N.A. | 19,750 | 7/12/11 | $ | 28,310 | $ | 28,635 | $ | 325 | ||||||||||||||
SELL | EUR | HSBC Bank | 402,645 | 7/12/11 | 587,143 | 583,782 | 3,361 | |||||||||||||||||
$ | 3,686 | |||||||||||||||||||||||
Liability Derivatives | ||||||||||||||||||||||||
SELL | EUR | Citibank N.A. | 363,160 | 7/12/11 | $ | 521,760 | $ | 526,534 | $ | (4,774 | ) | |||||||||||||
SELL | EUR | Deutsche Bank AG | 225,155 | 7/12/11 | 319,469 | 326,445 | (6,976 | ) | ||||||||||||||||
SELL | EUR | Goldman Sacs International | 301,188 | 7/12/11 | 432,969 | 436,682 | (3,713 | ) | ||||||||||||||||
SELL | EUR | UBS AG | 1,124,183 | 7/12/11 | 1,606,319 | 1,629,917 | (23,598 | ) | ||||||||||||||||
$ | (39,061 | ) | ||||||||||||||||||||||
Futures Contracts Outstanding at 6/30/11
Liability Derivatives
Description | Currency | Contracts | Value | Expiration Date | Unrealized Appreciation (Depreciation) | |||||||||||||
Interest Rate Futures | ||||||||||||||||||
U.S. Treasury Note 10 yr (Short) | USD | 25 | $3,058,203 | September - 2011 | $9,678 | |||||||||||||
U.S. Treasury Bond 30 yr (Short) | USD | 9 | 1,107,281 | September - 2011 | 12,695 | |||||||||||||
$22,373 | ||||||||||||||||||
At June 30, 2011, the fund had sufficient cash and/or other liquid securities to cover any commitments under these derivative contracts.
See Notes to Financial Statements
12
Table of Contents
MFS High Income Series
FINANCIAL STATEMENTS | STATEMENT OF ASSETS AND LIABILITIES (unaudited)
This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
At 6/30/11 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $326,607,941) | $326,709,715 | |||||||
Underlying affiliated funds, at cost and value | 6,236,618 | |||||||
Total investments, at value (identified cost, $332,844,559) | $332,946,333 | |||||||
Cash | 16,555 | |||||||
Restricted cash | 45,500 | |||||||
Receivables for | ||||||||
Forward foreign currency exchange contracts | 3,686 | |||||||
Daily variation margin on open futures contracts | 17,672 | |||||||
Investments sold | 2,812,145 | |||||||
Fund shares sold | 364,033 | |||||||
Interest | 5,942,900 | |||||||
Other assets | 1,887 | |||||||
Total assets | $342,150,711 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Forward foreign currency exchange contracts | $39,061 | |||||||
Investments purchased | 1,390,928 | |||||||
Fund shares reacquired | 919,053 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 13,310 | |||||||
Shareholder servicing costs | 273 | |||||||
Distribution and/or service fees | 105 | |||||||
Payable for independent Trustees’ compensation | 1,691 | |||||||
Accrued expenses and other liabilities | 77,888 | |||||||
Total liabilities | $2,442,309 | |||||||
Net assets | $339,708,402 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $322,091,258 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 89,280 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency transactions | (23,680,716 | ) | ||||||
Undistributed net investment income | 41,208,580 | |||||||
Net assets | $339,708,402 | |||||||
Shares of beneficial interest outstanding | 37,105,378 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $332,001,654 | 36,258,939 | $9.16 | |||||||||
Service Class | 7,706,748 | 846,439 | 9.10 |
See Notes to Financial Statements
13
Table of Contents
MFS High Income Series
FINANCIAL STATEMENTS | STATEMENT OF OPERATIONS (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
Six months ended 6/30/11 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Interest | $14,176,123 | |||||||
Dividends | 61,476 | |||||||
Dividends from underlying affiliated funds | 6,487 | |||||||
Foreign taxes withheld | (1,547 | ) | ||||||
Total investment income | $14,242,539 | |||||||
Expenses | ||||||||
Management fee | $1,275,604 | |||||||
Distribution and/or service fees | 9,479 | |||||||
Shareholder servicing costs | 20,544 | |||||||
Administrative services fee | 31,350 | |||||||
Independent Trustees’ compensation | 5,850 | |||||||
Custodian fee | 25,080 | |||||||
Shareholder communications | 30,629 | |||||||
Auditing fees | 32,556 | |||||||
Legal fees | 3,276 | |||||||
Miscellaneous | 12,131 | |||||||
Total expenses | $1,446,499 | |||||||
Fees paid indirectly | (292 | ) | ||||||
Reduction of expenses by investment adviser | (1,044 | ) | ||||||
Net expenses | $1,445,163 | |||||||
Net investment income | $12,797,376 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency transactions | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investment transactions | $9,238,437 | |||||||
Futures contracts | (191,969 | ) | ||||||
Foreign currency transactions | (141,418 | ) | ||||||
Net realized gain (loss) on investments and foreign currency transactions | $8,905,050 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $(5,853,875 | ) | ||||||
Futures contracts | (77,344 | ) | ||||||
Translation of assets and liabilities in foreign currencies | (13,380 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $(5,944,599 | ) | ||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $2,960,451 | |||||||
Change in net assets from operations | $15,757,827 |
See Notes to Financial Statements
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MFS High Income Series
FINANCIAL STATEMENTS | STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
| Six months ended 6/30/11 (unaudited |
) |
| Year ended 12/31/10 |
| |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $12,797,376 | $27,654,465 | ||||||
Net realized gain (loss) on investments and foreign currency transactions | 8,905,050 | 11,817,825 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | (5,944,599 | ) | 10,091,693 | |||||
Change in net assets from operations | $15,757,827 | $49,563,983 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(27,232,133 | ) | |||||
Change in net assets from fund share transactions | $(55,893,735 | ) | $6,115,633 | |||||
Total change in net assets | $(40,135,908 | ) | $28,447,483 | |||||
Net assets | ||||||||
At beginning of period | 379,844,310 | 351,396,827 | ||||||
At end of period (including undistributed net investment income of $41,208,580 and | $339,708,402 | $379,844,310 |
See Notes to Financial Statements
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MFS High Income Series
FINANCIAL STATEMENTS | FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund’s financial performance for the semiannual period and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
Initial Class | Six months ended 6/30/11 | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $8.78 | $8.25 | $6.25 | $9.52 | $10.04 | $9.87 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.32 | $0.63 | $0.63 | $0.71 | $0.71 | $0.68 | ||||||||||||||||||
Net realized and unrealized gain (loss) on | 0.06 | 0.53 | 1.98 | (3.18 | ) | (0.52 | ) | 0.29 | ||||||||||||||||
Total from investment operations | $0.38 | $1.16 | $2.61 | $(2.47 | ) | $0.19 | $0.97 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.63 | ) | $(0.61 | ) | $(0.80 | ) | $(0.71 | ) | $(0.80 | ) | |||||||||||||
Net asset value, end of period | $9.16 | $8.78 | $8.25 | $6.25 | $9.52 | $10.04 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 4.33 | (n) | 14.73 | 45.08 | (28.26 | ) | 1.77 | 10.37 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.79 | (a) | 0.80 | 0.81 | 0.87 | 0.88 | 0.91 | |||||||||||||||||
Expenses after expense reductions (f) | 0.79 | (a) | 0.80 | 0.81 | 0.82 | 0.83 | 0.88 | |||||||||||||||||
Net investment income | 7.02 | (a) | 7.55 | 8.89 | 8.66 | 7.21 | 7.06 | |||||||||||||||||
Portfolio turnover | 32 | 70 | 52 | 60 | 73 | 92 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $332,002 | $372,412 | $344,186 | $203,800 | $324,081 | $355,113 |
See Notes to Financial Statements
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Financial Highlights – continued
Service Class | Six months ended 6/30/11 | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $8.74 | $8.22 | $6.22 | $9.47 | $9.99 | $9.80 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.30 | $0.61 | $0.62 | $0.69 | $0.68 | $0.66 | ||||||||||||||||||
Net realized and unrealized gain (loss) on | 0.06 | 0.53 | 1.96 | (3.17 | ) | (0.52 | ) | 0.27 | ||||||||||||||||
Total from investment operations | $0.36 | $1.14 | $2.58 | $(2.48 | ) | $0.16 | $0.93 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.62 | ) | $(0.58 | ) | $(0.77 | ) | $(0.68 | ) | $(0.74 | ) | |||||||||||||
Net asset value, end of period | $9.10 | $8.74 | $8.22 | $6.22 | $9.47 | $9.99 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 4.12 | (n) | 14.40 | 44.75 | (28.43 | ) | 1.54 | 9.99 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.04 | (a) | 1.05 | 1.07 | 1.12 | 1.13 | 1.16 | |||||||||||||||||
Expenses after expense reductions (f) | 1.04 | (a) | 1.05 | 1.06 | 1.07 | 1.08 | 1.13 | |||||||||||||||||
Net investment income | 6.77 | (a) | 7.31 | 8.78 | 8.40 | 6.96 | 6.81 | |||||||||||||||||
Portfolio turnover | 32 | 70 | 52 | 60 | 73 | 92 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $7,707 | $7,432 | $7,210 | $6,442 | $11,086 | $11,896 |
(a) | Annualized. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(k) | The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown. |
(n) | Not annualized. |
(r) | Certain expenses have been reduced without which performance would have been lower. |
(s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
See Notes to Financial Statements
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MFS High Income Series
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) | Business and Organization |
MFS High Income Series (the fund) is a series of MFS Variable Insurance Trust (the trust). The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The shareholders of each series of the trust are separate accounts of insurance companies, which offer variable annuity and/or life insurance products, and qualified retirement and pension plans.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued. The fund invests in high-yield securities rated below investment grade. Investments in high-yield securities involve greater degrees of credit and market risk than investments in higher-rated securities and tend to be more sensitive to economic conditions. The fund invests in foreign securities. Investments in foreign securities are vulnerable to the effects of changes in the relative values of the local currency and the U.S. dollar and to the effects of changes in each country’s legal, political, and economic environment.
Investment Valuations – 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. 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. 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 exchange contracts are generally valued at the mean of bid and asked prices for the time period interpolated from rates provided by a third-party pricing service for proximate time periods. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. Values obtained from third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. 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;
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Notes to Financial Statements (unaudited) – continued
the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. Other financial instruments are derivative instruments not reflected in total investments, such as futures and forward foreign currency exchange contracts. The following is a summary of the levels used as of June 30, 2011 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $5,179,319 | $1,791,860 | $382,359 | $7,353,538 | ||||||||||||
Non-U.S. Sovereign Debt | — | 932,468 | — | 932,468 | ||||||||||||
Corporate Bonds | — | 265,361,288 | — | 265,361,288 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 1,824,871 | — | 1,824,871 | ||||||||||||
Asset-Backed Securities (including CDOs) | — | 1,806,266 | 317,503 | 2,123,769 | ||||||||||||
Foreign Bonds | — | 46,592,787 | — | 46,592,787 | ||||||||||||
Floating Rate Loans | — | 2,520,993 | — | 2,520,993 | ||||||||||||
Mutual Funds | 6,236,618 | — | — | 6,236,618 | ||||||||||||
Total Investments | $11,415,937 | $320,830,534 | $699,862 | $332,946,333 | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Futures | $22,373 | $— | $— | $22,373 | ||||||||||||
Forward Foreign Currency Exchange Contracts | — | (35,375 | ) | — | (35,375 | ) |
For further information regarding security characteristics, see the Portfolio of Investments.
The following is a reconciliation of level 3 assets for which significant unobservable inputs were used to determine fair value. The fund’s policy is to recognize transfers between the levels as of the end of the period. The table presents the activity of level 3 securities held at the beginning and the end of the period.
Equity Securities | Asset-Backed Securities | Corporate Bonds | Total | |||||||||||||
Balance as of 12/31/10 | $— | $321,294 | $96,132 | $417,426 | ||||||||||||
Realized gain (loss) | — | — | (333,216 | ) | (333,216 | ) | ||||||||||
Change in unrealized appreciation (depreciation) | — | (3,791 | ) | 339,035 | 335,244 | |||||||||||
Sales | — | — | 0 | 0 | ||||||||||||
Transfers into level 3 | 382,359 | — | — | 382,359 | ||||||||||||
Transfers out of level 3 | — | — | (101,951 | ) | (101,951 | ) | ||||||||||
Balance as of 6/30/11 | $382,359 | $317,503 | $— | $699,862 |
The net change in unrealized appreciation (depreciation) from investments still held as level 3 at June 30, 2011 is $(3,791).
Foreign Currency Translation – Purchases and sales of foreign investments, income, and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions or on the reporting date for foreign denominated receivables and payables. Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Gains and losses attributable to foreign exchange rate movements on receivables, payables, income and expenses are recorded for financial statement purposes as foreign currency transaction gains and losses. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.
Derivatives – The fund uses derivatives for different purposes, including to earn income and enhance returns, to increase or decrease exposure to a particular market, to manage or adjust the risk profile of the fund, or as alternatives to direct
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Notes to Financial Statements (unaudited) – continued
investments. Derivatives are used for hedging or non-hedging purposes. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. When the fund uses derivatives as an investment to increase market exposure, or for hedging purposes, gains and losses from derivative instruments may be substantially greater than the derivative’s original cost.
The derivative instruments used by the fund were purchased options, futures contracts, and forward foreign currency exchange contracts. The fund’s period end derivatives, as presented in the Portfolio of Investments and the associated Derivative Contract Tables, generally are indicative of the volume of its derivative activity during the period.
The following table presents, by major type of derivative contract, the fair value, on a gross basis, of the asset and liability components of derivatives held by the fund at June 30, 2011 as reported in the Statement of Assets and Liabilities:
Fair Value (a) | ||||||||||
Risk | Derivative Contracts | Asset Derivatives | Liability Derivatives | |||||||
Interest Rate | Interest Rate Futures | $22,373 | $— | |||||||
Foreign Exchange | Forward Foreign Currency Exchange | 3,686 | (39,061 | ) | ||||||
Total | $26,059 | $(39,061 | ) |
(a) | The value of futures contracts outstanding includes cumulative appreciation (depreciation) as reported in the fund’s Portfolio of Investments. Only the current day variation margin for futures contracts is separately reported within the fund’s Statement of Assets and Liabilities. |
The following table presents, by major type of derivative contract, the realized gain (loss) on derivatives held by the fund for the six months ended June 30, 2011 as reported in the Statement of Operations:
Risk | Futures Contracts | Foreign Currency Transactions | Investment Transactions (Purchased Options) | |||||||||
Interest Rate | $(191,969 | ) | $— | $— | ||||||||
Foreign Exchange | — | (143,555 | ) | — | ||||||||
Equity | — | — | 346,534 | |||||||||
Total | $(191,969 | ) | $(143,555 | ) | $346,534 |
The following table presents, by major type of derivative contract, the change in unrealized appreciation (depreciation) on derivatives held by the fund for the six months ended June 30, 2011 as reported in the Statement of Operations:
Risk | Futures Contracts | Translation of Liabilities in Foreign Currencies | Investments (Purchased Options) | |||||||||
Interest Rate | $(77,344 | ) | $— | $— | ||||||||
Foreign Exchange | — | (13,789 | ) | — | ||||||||
Equity | — | — | (206,773 | ) | ||||||||
Total | $(77,344 | ) | $(13,789 | ) | $(206,773 | ) |
Derivative counterparty credit risk is managed through formal evaluation of the creditworthiness of all potential counterparties. On certain over-the-counter derivatives, the fund attempts to reduce its exposure to counterparty credit risk whenever possible by entering into an International Swaps and Derivatives Association (ISDA) Master Agreement on a bilateral basis with each of the counterparties with whom it undertakes a significant volume of transactions. The ISDA Master Agreement gives each party to the agreement the right to terminate all transactions traded under such agreement if there is a certain deterioration in the credit quality of the other party. The ISDA Master Agreement gives the fund the right, upon an event of default by the applicable counterparty or a termination of the agreement, to close out all transactions traded under such agreement and to net amounts owed under each transaction to one net amount payable by one party to the other. This right to close out and net payments across all transactions traded under the ISDA Master Agreement could result in a reduction of the fund’s credit risk to such counterparty equal to any amounts payable by the fund under the applicable transactions, if any. However, absent an event of default by the counterparty or a termination of the agreement, the ISDA Master Agreement does not result in an offset of reported amounts of assets and liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty.
Collateral requirements differ by type of derivative. Collateral or margin requirements are set by the broker or exchange clearing house for exchange traded derivatives (i.e., futures and exchange-traded options) while collateral terms are contract specific for over-the-counter traded derivatives (i.e., forward foreign currency exchange contracts, swaps and over-the-counter options). For derivatives traded under an ISDA Master Agreement, the collateral requirements are netted across all transactions traded under such agreement and one amount is posted from one party to the other to collateralize such obligations. Cash
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MFS High Income Series
Notes to Financial Statements (unaudited) – continued
collateral that has been pledged to cover obligations of the fund under derivative contracts, if any, will be reported separately on the Statement of Assets and Liabilities as restricted cash. Securities collateral pledged for the same purpose, if any, is noted in the Portfolio of Investments.
Purchased Options – The fund purchased call options for a premium. Purchased call options entitle the holder to sell a specified number of shares or units of a particular security, currency or index at a specified price at a specified date or within a specified period of time. Purchasing call options may be used to hedge against an anticipated increase in the dollar cost of securities or currency to be acquired or to increase the fund’s exposure to an underlying instrument.
The premium paid is initially recorded as an investment in the Statement of Assets and Liabilities. That investment is subsequently marked-to-market daily with the difference between the premium paid and the market value of the purchased option being recorded as unrealized appreciation or depreciation. Premiums paid for purchased call options which have expired are treated as realized losses on investments in the Statement of Operations. Upon the exercise or closing of a purchased call option, the premium paid is added to the cost of the security or financial instrument.
The risk in purchasing an option is that the fund pays a premium whether or not the option is exercised. The fund’s maximum risk of loss due to counterparty credit risk is limited to the market value of the option. For over-the-counter options, this risk is mitigated in cases where there is an ISDA Master Agreement between the fund and the counterparty providing for netting as described above and for posting of collateral by the counterparty to the fund to cover the fund’s exposure to the counterparty under such ISDA Master Agreement.
Futures Contracts – The fund entered into futures contracts which may be used to hedge against or obtain broad market, interest rate or currency exposure. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date.
Upon entering into a futures contract, the fund is required to deposit with the broker, either in cash or securities, an initial margin in an amount equal to a certain percentage of the notional amount of the contract. Subsequent payments (variation margin) are made or received by the fund each day, depending on the daily fluctuations in the value of the contract, and are recorded for financial statement purposes as unrealized gain or loss by the fund until the contract is closed or expires at which point the gain or loss on futures is realized.
The fund bears the risk of interest rates, exchange rates or securities prices moving unexpectedly, in which case, the fund may not achieve the anticipated benefits of the futures contracts and may realize a loss. While futures may present less counterparty risk to the fund since the contracts are exchange traded and the exchange’s clearinghouse guarantees payments to the broker, there is still counterparty credit risk due to the insolvency of the broker. The fund’s maximum risk of loss due to counterparty credit risk is equal to the margin posted by the fund to the broker plus any gains or minus any losses on the outstanding futures contracts.
Forward Foreign Currency Exchange Contracts – The fund entered into forward foreign currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. These contracts may be used to hedge the fund’s currency risk or for non-hedging purposes. For hedging purposes, the fund may enter into contracts to deliver or receive foreign currency that the fund will receive from or use in its normal investment activities. The fund may also use contracts to hedge against declines in the value of foreign currency denominated securities due to unfavorable exchange rate movements. For non-hedging purposes, the fund may enter into contracts with the intent of changing the relative exposure of the fund’s portfolio of securities to different currencies to take advantage of anticipated exchange rate changes.
Forward foreign currency exchange contracts are adjusted by the daily exchange rate of the underlying currency and any unrealized gains or losses are recorded as a receivable or payable for forward foreign currency exchange contracts until the contract settlement date. On contract settlement date, any gain or loss on the contract is recorded as realized gains or losses on foreign currency transactions.
Risks may arise upon entering into these contracts from unanticipated movements in the value of the contract and from the potential inability of counterparties to meet the terms of their contracts. Generally, the fund’s maximum risk due to counterparty credit risk is the unrealized gain on the contract due to the use of Continuous Linked Settlement, an industry accepted settlement system. This risk is mitigated in cases where there is an ISDA Master Agreement between the fund and the counterparty providing for netting as described above and for posting of collateral by the counterparty to the fund to cover the fund’s exposure to the counterparty under such ISDA Master Agreement.
Hybrid Instruments – The fund invests in indexed or hybrid securities on which any combination of interest payments, the principal or stated amount payable at maturity is determined by reference to prices of other securities, currencies, indices, economic factors or other measures, including interest rates, currency exchange rates, or securities indices. The risks of
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Notes to Financial Statements (unaudited) – continued
investing in hybrid instruments reflect a combination of the risks of investing in securities, swaps, options, futures and currencies. Hybrid instruments are potentially more volatile and carry greater market risks than traditional debt instruments. Depending on the structure of the particular hybrid instrument, changes in a benchmark, underlying assets or economic indicator may be magnified by the terms of the hybrid instrument and have an even more dramatic and substantial effect upon the value of the hybrid instrument. Also, the prices of the hybrid instrument and the benchmark, underlying asset or economic indicator may not move in the same direction or at the same time.
Loans and Other Direct Debt Instruments – The fund invests in loans and loan participations or other receivables. These investments may include standby financing commitments, including revolving credit facilities, which obligate the fund to supply additional cash to the borrower on demand. Loan participations involve a risk of insolvency of the lending bank or other financial intermediary.
Indemnifications – Under the fund’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund’s maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.
Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. All premium and discount is amortized or accreted for financial statement purposes in accordance with U.S. generally accepted accounting principles. The fund earns certain fees in connection with its floating rate loan purchasing activities. These fees are in addition to interest payments earned and may include amendment fees, commitment fees, facility fees, consent fees, and prepayment fees. Commitment fees are recorded on an accrual basis as income in the accompanying financial statements. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend and interest payments received in additional securities are recorded on the ex-dividend or ex-interest date in an amount equal to the value of the security on such date. Debt obligations may be placed on non-accrual status or set to accrue at a rate of interest less than the contractual coupon when the collection of all or a portion of interest has become doubtful. Interest income for those debt obligations may be further reduced by the write-off of the related interest receivables when deemed uncollectible.
The fund may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
Fees Paid Indirectly – The fund’s custody fee may be reduced according to an arrangement that measures the value of cash deposited with the custodian by the fund. This amount, for the six months ended June 30, 2011, is shown as a reduction of total expenses on the Statement of Operations.
Tax Matters and Distributions – The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to amortization and accretion of debt securities, defaulted bonds, wash sale loss deferrals, and derivative transactions.
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MFS High Income Series
Notes to Financial Statements (unaudited) – continued
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/10 | ||||
Ordinary income (including any short-term capital gains) | $27,232,133 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/11 | ||||
Cost of investments | $333,970,335 | |||
Gross appreciation | 13,144,077 | |||
Gross depreciation | (14,168,079 | ) | ||
Net unrealized appreciation (depreciation) | $(1,024,002 | ) | ||
As of 12/31/10 | ||||
Undistributed ordinary income | 28,855,759 | |||
Capital loss carryforwards | (31,157,949 | ) | ||
Other temporary differences | (672,815 | ) | ||
Net unrealized appreciation (depreciation) | 4,834,322 |
The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.
As of December 31, 2010, the fund had capital loss carryforwards available to offset future realized gains. Such losses expire as follows:
12/31/14 | $(693,182 | ) | ||
12/31/16 | (22,939,919 | ) | ||
12/31/17 | (7,524,848 | ) | ||
Total | $(31,157,949 | ) |
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and/or service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported on the Statements of Changes in Net Assets are presented by class as follows:
From net investment income | ||||||||
Six months ended 6/30/11 | Year ended 12/31/10 | |||||||
Initial Class | $— | $26,701,187 | ||||||
Service Class | — | 530,946 | ||||||
Total | $— | $27,232,133 |
(3) | Transactions with Affiliates |
Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates:
First $1 billion of average daily net assets | 0.70% | |||
Average daily net assets in excess of $1 billion | 0.65% |
The management fee incurred for the six months ended June 30, 2011 was equivalent to an annual effective rate of 0.70% of the fund’s average daily net assets.
The investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, exclusive of interest, taxes, extraordinary expenses, brokerage and transaction costs and investment-related expenses, such that total annual operating expenses do not exceed 0.85% of average daily net assets for the Initial Class shares and 1.10% of average daily net assets for Service shares. This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until April 30, 2013. For the six months ended June 30, 2011, the fund’s actual operating expenses did not exceed the limit and therefore, the investment adviser did not pay any portion of the fund’s expenses related to this agreement.
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MFS High Income Series
Notes to Financial Statements (unaudited) – continued
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, is the distributor of shares of the fund. The Trustees have adopted a distribution plan for the Service Class shares pursuant to Rule 12b-1 under the Investment Company Act of 1940.
The fund’s distribution plan provides that the fund will pay MFD distribution and/or service fees equal to 0.25% per annum of its average daily net assets attributable to Service Class shares as partial consideration for services performed and expenses incurred by MFD and financial intermediaries (including participating insurance companies that invest in the fund to fund variable annuity and variable life insurance contracts, sponsors of qualified retirement and pension plans that invest in the fund, and affiliates of these participating insurance companies and plan sponsors) in connection with the sale and distribution of the Service Class shares. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries.
Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent. For the six months ended June 30, 2011, the fee was $20,336, which equated to 0.0112% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses paid by MFSC on behalf of the fund. For the six months ended June 30, 2011, these costs amounted to $208.
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund partially reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the six months ended June 30, 2011 was equivalent to an annual effective rate of 0.0172% of the fund’s average daily net assets.
Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – This fund and certain other funds managed by MFS (the funds) have entered into services agreements (the Agreements) which provide for payment of fees by the funds to Tarantino LLC and Griffin Compliance LLC in return for the provision of services of an Independent Chief Compliance Officer (ICCO) and Assistant ICCO, respectively, for the funds. The ICCO and Assistant ICCO are officers of the funds and the sole members of Tarantino LLC and Griffin Compliance LLC, respectively. The funds can terminate the Agreements with Tarantino LLC and Griffin Compliance LLC at any time under the terms of the Agreements. For the six months ended June 30, 2011, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $1,288 and are included in miscellaneous expense on the Statement of Operations. MFS has agreed to reimburse the fund for a portion of the payments made by the fund in the amount of $1,044, which is shown as a reduction of total expenses in the Statement of Operations. Additionally, MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ICCO and Assistant ICCO.
The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks a high level of current income consistent with preservation of capital and liquidity. Income earned on this investment is included in dividends from underlying affiliated funds on the Statement of Operations. This money market fund does not pay a management fee to MFS.
(4) | Portfolio Securities |
Purchases and sales of investments, other than purchased option transactions, and short-term obligations, were as follows:
Purchases | Sales | |||||||
U.S. Government securities | $1,039,776 | $— | ||||||
Investments (non-U.S. Government securities) | $111,341,161 | $155,031,066 |
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MFS High Income Series
Notes to Financial Statements (unaudited) – continued
(5) | Shares of Beneficial Interest |
The fund’s Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
Six months ended 6/30/11 | Year ended 12/31/10 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 2,548,819 | $23,140,623 | 10,058,256 | $84,434,070 | ||||||||||||
Service Class | 81,393 | 739,112 | 115,409 | 973,135 | ||||||||||||
2,630,212 | $23,879,735 | 10,173,665 | $85,407,205 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 3,284,279 | $26,701,187 | ||||||||||||
Service Class | — | — | 65,468 | 530,946 | ||||||||||||
— | $— | 3,349,747 | $27,232,133 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (8,723,989 | ) | $(78,998,039 | ) | (12,619,148 | ) | $(104,808,671 | ) | ||||||||
Service Class | (85,511 | ) | (775,431 | ) | (207,525 | ) | (1,715,034 | ) | ||||||||
(8,809,500 | ) | $(79,773,470 | ) | (12,826,673 | ) | $(106,523,705 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (6,175,170 | ) | $(55,857,416 | ) | 723,387 | $6,326,586 | ||||||||||
Service Class | (4,118 | ) | (36,319 | ) | (26,648 | ) | (210,953 | ) | ||||||||
(6,179,288 | ) | $(55,893,735 | ) | 696,739 | $6,115,633 |
(6) | Line of Credit |
The fund and certain other funds managed by MFS participate in a $1.1 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Federal Reserve funds rate or one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Federal Reserve funds rate plus an agreed upon spread. For the six months ended June 30, 2011, the fund’s commitment fee and interest expense were $1,837 and $0, respectively, and are included in miscellaneous expense on the Statement of Operations.
(7) | Transactions in Underlying Affiliated Funds – Affiliated Issuers |
An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the fund assumes the following to be affiliated issuers:
Underlying Affiliated Funds | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 5,221,763 | 69,917,473 | (68,902,618 | ) | 6,236,618 | |||||||||||
Underlying Affiliated Funds | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $6,487 | $6,236,618 |
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MFS High Income Series
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board’s most recent review and renewal of the fund’s Investment Advisory Agreement with MFS will be available on or about November 1, 2011 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds’ proxy voting policies and procedures is available without charge, upon request, by calling
1-800-225-2606, by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the Securities and Exchange Commission (the Commission) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. The fund’s Form N-Q is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and copies of this information may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
From time to time, MFS may post important information about the fund or the MFS funds on the MFS web site (mfs.com). This information is available by visiting the “News & Commentary” section of mfs.com or by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of mfs.com.
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rev. 3/11
FACTS | WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION? |
Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
What? | The types of personal information we collect and share depend on the product or service you have with us. This information can include:
• Social Security number and account balances • Account transactions and transaction history • Checking account information and wire transfer instructions
When you are no longer our customer, we continue to share your information as described in this notice. |
How? | All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons MFS chooses to share; and whether you can limit this sharing. |
Reasons we can share your personal information | Does MFS share? | Can you limit this sharing? | ||
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus | Yes | No | ||
For our marketing purposes – to offer our products and services to you | No | We don’t share | ||
For joint marketing with other financial companies | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your transactions and experiences | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your creditworthiness | No | We don’t share | ||
For nonaffiliates to market to you | No | We don’t share |
Questions? | Call 800-225-2606 or go to mfs.com. |
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Page 2 |
Who we are | ||
Who is providing this notice? | MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., MFS Fund Distributors, Inc., MFS Heritage Trust Company, and MFS Service Center, Inc. |
What we do | ||
How does MFS protect my personal information? | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you. | |
How does MFS collect my personal information? | We collect your personal information, for example, when you
• open an account or provide account information • direct us to buy securities or direct us to sell your securities • make a wire transfer
We also collect your personal information from others, such as credit bureaus, affiliates and other companies. | |
Why can’t I limit all sharing? | Federal law gives you the right to limit only
• sharing for affiliates’ everyday business purposes – information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you
State laws and individual companies may give you additional rights to limit sharing. |
Definitions | ||
Affiliates | Companies related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice. | |
Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share with nonaffiliates so they can market to you. | |
Joint Marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you.
• MFS doesn’t jointly market. |
Other important information | ||
If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours. |
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Table of Contents
MFS® Strategic Income Series
MFS® Variable Insurance Trust
SEMIANNUAL REPORT
June 30, 2011
VWG-SEM
Table of Contents
MFS® STRATEGIC INCOME SERIES
The report is prepared for the general information of contract owners.
It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED Ÿ MAY LOSE VALUE Ÿ NO BANK OR CREDIT UNION GUARANTEE Ÿ NOT A DEPOSIT Ÿ NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
Table of Contents
MFS Strategic Income Series
Dear Contract Owners:
After about a year of almost uninterrupted macroeconomic and financial market improvement following the global credit crisis, investors grew more cautious in the middle of 2010 as fears grew that some European countries would default on their debt and as economic data showed a weakening
trend in the global economy. As a result asset prices fell significantly.
Last September the U.S. Federal Reserve Board’s promises to make lending conditions easier helped assuage market fears and drive asset prices off their recent lows. A combination of solid earnings and improving economic data gave an additional boost to investor sentiment.
In the following months, the renewed positive market mood, coupled with indications of better global macroeconomic activity, pushed many asset valuations to post-crisis highs. At the same time, global sovereign
bond yields initially rose as investors became concerned about inflationary pressures, driven by higher prices for oil as well as other commodities. However, by the end of the second quarter of 2011, a weakening macroeconomic backdrop and renewed concerns over debt problems in some eurozone countries pushed equities lower.
For the remainder of 2011, we are cautiously optimistic that economic growth will continue to improve and that the global economies will recover from the shocks of the past few years. We expect the pace of recovery worldwide to be uneven and volatile and acknowledge the elevated uncertainty created by events in Japan, Europe, the Middle East, as well as that created by the U.S. debate over raising the debt ceiling and the downgrade by Standard & Poor’s of the U.S. long-term credit rating.
As always, we continue to be mindful of the many economic challenges faced at the local, national, and international levels. It is in times such as these that we want to remind investors of the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with their advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2011
The opinions expressed in this letter are subject to change, may not be relied upon for investment advice, and no forecasts can be guaranteed.
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MFS Strategic Income Series
Portfolio structure (i)
Fixed income sectors (i) | ||||
High Grade Corporates | 38.2% | |||
High Yield Corporates | 30.8% | |||
Non-U.S. Government Bonds | 15.6% | |||
Emerging Markets Bonds | 4.7% | |||
U.S. Government Agencies | 1.8% | |||
Commercial Mortgage-Backed Securities | 1.7% | |||
Mortgage-Backed Securities | 1.5% | |||
Collateralized Debt Obligations | 0.6% | |||
Asset-Backed Securities | 0.6% | |||
Floating Rate Loans | 0.2% |
Composition including fixed income credit quality (a)(i) | ||||
AAA | 7.9% | |||
AA | 12.9% | |||
A | 14.1% | |||
BBB | 25.1% | |||
BB | 13.2% | |||
B | 13.2% | |||
CCC | 5.2% | |||
CC | 0.3% | |||
C | 0.1% | |||
D | 0.1% | |||
Federal Agencies | 3.3% | |||
Not Rated | 0.3% | |||
Non-Fixed Income | 0.7% | |||
Cash & Other | 3.6% |
Portfolio facts (i) | ||||
Average Duration (d) | 4.8 | |||
Average Effective Maturity (m) | 7.3 yrs. |
Issuer country weightings (i)(x) | ||||
United States | 66.4% | |||
Japan | 4.5% | |||
United Kingdom | 3.3% | |||
France | 3.2% | |||
Canada | 3.0% | |||
Italy | 2.8% | |||
Netherlands | 2.3% | |||
Germany | 2.2% | |||
Brazil | 1.5% | |||
Other Countries | 10.8% |
(a) | For all securities other than those specifically described below, ratings are assigned to underlying securities utilizing ratings from Moody’s, Fitch, and Standard & Poor’s rating agencies and applying the following hierarchy: If all three agencies provide a rating, the middle rating (after dropping the highest and lowest ratings) is assigned; if two of the three agencies rate a security, the lower of the two is assigned. Ratings are shown in the S&P and Fitch scale (e.g., AAA). All ratings are subject to change. Federal Agencies includes rated and unrated U.S. Agency fixed-income securities, U.S. Agency mortgage-backed securities, and collateralized mortgage obligations of U.S. Agency mortgage-backed securities. Not Rated includes fixed income securities, including fixed income futures, which have not been rated by any rating agency. Non-Fixed Income includes equity securities (including convertible bonds and equity derivatives) and commodities. Cash & Other includes cash, other assets less liabilities, offsets to derivative positions, and short-term securities. The fund may not hold all of these instruments. The fund itself has not been rated. |
(d) | Duration is a measure of how much a bond’s price is likely to fluctuate with general changes in interest rates, e.g., if rates rise 1.00%, a bond with a 5-year duration is likely to lose about 5.00% of its value due to the interest rate move. |
(i) | For purposes of this presentation, the components include the market value of securities, and reflect the impact of the equivalent exposure of derivative positions, if applicable. These amounts may be negative from time to time. The bond component will include any accrued interest amounts. Equivalent exposure is a calculated amount that translates the derivative position into a reasonable approximation of the amount of the underlying asset that the portfolio would have to hold at a given point in time to have the same price sensitivity that results from the portfolio’s ownership of the derivative contract. When dealing with derivatives, equivalent exposure is a more representative measure of the potential impact of a position on portfolio performance than market value. Where the fund holds convertible bonds, these are treated as part of the equity portion of the portfolio. |
(m) | In determining an instrument’s effective maturity for purposes of calculating the fund’s dollar-weighted average effective maturity, MFS uses the instrument’s stated maturity or, if applicable, an earlier date on which MFS believes it is probable that a maturity-shortening device (such as a put, pre-refunding or prepayment) will cause the instrument to be repaid. Such an earlier date can be substantially shorter than the instrument’s stated maturity. |
(x) | Represents the portfolio’s exposure to issuer countries as a percentage of a portfolio’s total net assets. |
Percentages are based on net assets as of 6/30/11.
The portfolio is actively managed and current holdings may be different.
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MFS Strategic Income Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2011 through June 30, 2011
As a contract holder of the fund, you incur ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2011 through June 30, 2011.
Actual Expenses
The first line for each share class in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the following table provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight the fund’s ongoing costs only and do not take into account the fees and expenses imposed under the variable contracts through which your investment in the fund is made. Therefore, the second line for each share class in the table is useful in comparing ongoing costs associated with an investment in vehicles (such as the fund) which fund benefits under variable annuity and variable life insurance contracts and to qualified pension and retirement plans only, and will not help you determine the relative total costs of investing in the fund through variable annuity and variable life insurance contracts. If the fees and expenses imposed under the variable contracts were included, your costs would have been higher.
Share Class | Annualized Expense Ratio | Beginning Account Value 1/01/11 | Ending Account Value | Expenses Paid During Period (p) 1/01/11-6/30/11 | ||||||||||||||
Initial Class | Actual | 0.80% | $1,000.00 | $1,033.53 | $4.03 | |||||||||||||
Hypothetical (h) | 0.80% | $1,000.00 | $1,020.83 | $4.01 | ||||||||||||||
Service Class | Actual | 1.05% | $1,000.00 | $1,033.10 | $5.29 | |||||||||||||
Hypothetical (h) | 1.05% | $1,000.00 | $1,019.59 | $5.26 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid is equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
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MFS Strategic Income Series
PORTFOLIO OF INVESTMENTS – 6/30/11 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
BONDS – 93.5% | ||||||||
Aerospace – 0.7% | ||||||||
BE Aerospace, Inc., 8.5%, 2018 | $ | 30,000 | $ | 32,738 | ||||
Bombardier, Inc., 7.5%, 2018 (n) | 55,000 | 61,600 | ||||||
Bombardier, Inc., 7.75%, 2020 (n) | 20,000 | 22,500 | ||||||
CPI International Acquisition, Inc., 8%, 2018 (n) | 35,000 | 33,075 | ||||||
Hawker Beechcraft Acquisition Co. LLC, 8.5%, 2015 | 40,000 | 31,300 | ||||||
Huntington Ingalls Industries, Inc., 7.125%, 2021 (n) | 55,000 | 56,925 | ||||||
|
| |||||||
$ | 238,138 | |||||||
|
| |||||||
Airlines – 0.3% | ||||||||
Continental Airlines, Inc., FRN, 0.602%, 2013 | $ | 94,866 | $ | 89,648 | ||||
|
| |||||||
Apparel Manufacturers – 0.2% | ||||||||
Hanesbrands, Inc., 8%, 2016 | $ | 30,000 | $ | 32,025 | ||||
Phillips-Van Heusen Corp., 7.375%, 2020 | 35,000 | 37,450 | ||||||
|
| |||||||
$ | 69,475 | |||||||
|
| |||||||
Asset-Backed & Securitized – 2.9% | ||||||||
ARCap REIT, Inc., CDO, “H”, FRN, 6.1%, 2045 (d)(z) | $ | 73,928 | $ | 2,772 | ||||
Bayview Financial Revolving Mortgage Loan Trust, FRN, 1.785%, 2040 (z) | 180,426 | 100,914 | ||||||
Capital Trust Realty Ltd., CDO, 5.16%, 2035 (z) | 110,000 | 110,605 | ||||||
Crest Ltd., “A1” CDO, FRN, 0.726%, 2018 (z) | 92,016 | 84,654 | ||||||
Crest Ltd., CDO, 7%, 2040 (a) | 146,845 | 7,342 | ||||||
Deutsche Mortgage & Asset Receiving Corp., FRN, 7.5%, 2031 | 71,289 | 71,412 | ||||||
Falcon Franchise Loan LLC, FRN, 3.948%, 2025 (i)(z) | 305,298 | 41,460 | ||||||
First Union National Bank Commercial Mortgage Trust, FRN, 1.636%, 2043 (i)(z) | 87,672 | 3 | ||||||
First Union-Lehman Brothers Bank of America, FRN, 0.561%, 2035 (i) | 1,111,986 | 18,681 | ||||||
First Union-Lehman Brothers Commercial Mortgage Trust, 7%, 2029 (n) | 76,980 | 79,267 | ||||||
Hertz Global Holdings, Inc., 4.26%, 2014 (n) | 100,000 | 104,494 | ||||||
Lehman Brothers Commercial Conduit Mortgage Trust, FRN, 1.072%, 2030 (i) | 295,392 | 5,967 | ||||||
Morgan Stanley Capital I, Inc., FRN, 1.387%, 2039 (i)(z) | 748,778 | 20,591 | ||||||
Prudential Securities Secured Financing Corp., FRN, 7.325%, 2013 (z) | 171,000 | 171,717 | ||||||
Salomon Brothers Mortgage Securities, Inc., FRN, 7.285%, 2032 (z) | 134,179 | 143,112 | ||||||
|
| |||||||
$ | 962,991 | |||||||
|
| |||||||
Automotive – 1.4% | ||||||||
Accuride Corp., 9.5%, 2018 | $ | 50,000 | $ | 53,500 | ||||
Allison Transmission, Inc., 7.125%, 2019 (n) | 45,000 | 43,761 | ||||||
Ford Motor Credit Co. LLC, 12%, 2015 | 100,000 | 124,012 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Automotive – continued | ||||||||
General Motors Financial Co., Inc., 6.75%, 2018 (z) | $ | 25,000 | $ | 25,063 | ||||
Harley-Davidson Financial Services, 3.875%, 2016 (n) | 130,000 | 132,216 | ||||||
RCI Banque S.A., 4.6%, 2016 (n) | 90,000 | 91,937 | ||||||
|
| |||||||
$ | 470,489 | |||||||
|
| |||||||
Banks & Diversified Financials (Covered Bonds) – 0.5% | ||||||||
Bank of Nova Scotia, 1.45%, 2013 (n) | $ | 150,000 | $ | 151,722 | ||||
|
| |||||||
Basic Industry – 0.1% | ||||||||
Trimas Corp., 9.75%, 2017 | $ | 35,000 | $ | 38,325 | ||||
|
| |||||||
Broadcasting – 2.6% | ||||||||
Allbritton Communications Co., 8%, 2018 | $ | 30,000 | $ | 30,525 | ||||
CBS Corp., 5.75%, 2020 | 20,000 | 21,677 | ||||||
Citadel Broadcasting Corp., 7.75%, 2018 (n) | 5,000 | 5,313 | ||||||
Clear Channel Communications, Inc., 9%, 2021 (z) | 15,000 | 14,361 | ||||||
EH Holding Corp., 7.625%, 2021 (z) | 5,000 | 5,100 | ||||||
Gray Television, Inc., 10.5%, 2015 | 10,000 | 10,400 | ||||||
Intelsat Bermuda Ltd., 11.25%, 2017 | 40,000 | 42,950 | ||||||
Intelsat Jackson Holdings Ltd., 9.5%, 2016 | 115,000 | 120,606 | ||||||
Lamar Media Corp., 6.625%, 2015 | 40,000 | 40,600 | ||||||
LBI Media, Inc., 8.5%, 2017 (z) | 30,000 | 23,550 | ||||||
Liberty Media Corp., 8.5%, 2029 | 30,000 | 28,950 | ||||||
Local TV Finance LLC, 9.25%, 2015 (p)(z) | 51,074 | 51,138 | ||||||
NBC Universal, Inc., 5.95%, 2041 (n) | 113,000 | 114,909 | ||||||
Newport Television LLC, 13%, 2017 (n)(p) | 16,265 | 16,145 | ||||||
News America, Inc., 6.4%, 2035 | 100,000 | 104,577 | ||||||
News America, Inc., 6.9%, 2039 | 29,000 | 31,935 | ||||||
Salem Communications Corp., 9.625%, 2016 | 5,000 | 5,269 | ||||||
Sinclair Broadcast Group, Inc., 9.25%, 2017 (n) | 15,000 | 16,463 | ||||||
Sinclair Broadcast Group, Inc., 8.375%, 2018 | 5,000 | 5,250 | ||||||
SIRIUS XM Radio, Inc., 13%, 2013 (n) | 20,000 | 23,450 | ||||||
SIRIUS XM Radio, Inc., 8.75%, 2015 (n) | 20,000 | 22,050 | ||||||
SIRIUS XM Radio, Inc., 7.625%, 2018 (n) | 50,000 | 52,250 | ||||||
Univision Communications, Inc., 6.875%, 2019 (n) | 45,000 | 44,550 | ||||||
Univision Communications, Inc., 7.875%, 2020 (n) | 15,000 | 15,375 | ||||||
|
| |||||||
$ | 847,393 | |||||||
|
| |||||||
Brokerage & Asset Managers – 0.8% | ||||||||
E*TRADE Financial Corp., 7.875%, 2015 | $ | 30,000 | $ | 30,150 | ||||
E*TRADE Financial Corp., 12.5%, 2017 | 10,000 | 11,700 | ||||||
TD AMERITRADE Holding Corp., 5.6%, 2019 | 200,000 | 214,404 | ||||||
|
| |||||||
$ | 256,254 | |||||||
|
| |||||||
Building – 1.2% | ||||||||
Associated Materials LLC, 9.125%, 2017 (z) | $ | 10,000 | $ | 9,975 | ||||
Building Materials Holding Corp., 6.875%, 2018 (n) | 15,000 | 15,300 |
4
Table of Contents
MFS Strategic Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Building – continued | ||||||||
Building Materials Holding Corp., 7%, 2020 (n) | $ | 15,000 | $ | 15,713 | ||||
Building Materials Holding Corp., 6.75%, 2021 (n) | 10,000 | 10,050 | ||||||
CRH PLC, 8.125%, 2018 | 80,000 | 94,874 | ||||||
Lafarge S.A., 6.15%, 2011 | 160,000 | 160,216 | ||||||
Nortek, Inc., 10%, 2018 (n) | 5,000 | 5,000 | ||||||
Nortek, Inc., 8.5%, 2021 (n) | 55,000 | 50,875 | ||||||
Owens Corning, 9%, 2019 | 40,000 | 47,776 | ||||||
|
| |||||||
$ | 409,779 | |||||||
|
| |||||||
Business Services – 0.5% | ||||||||
First Data Corp., 12.625%, 2021 (n) | $ | 15,000 | $ | 16,050 | ||||
Interactive Data Corp., 10.25%, 2018 (n) | 35,000 | 38,063 | ||||||
Iron Mountain, Inc., 6.625%, 2016 | 40,000 | 40,000 | ||||||
SunGard Data Systems, Inc., 10.25%, 2015 | 61,000 | 63,135 | ||||||
SunGard Data Systems, Inc., 7.375%, 2018 | 10,000 | 10,000 | ||||||
SunGard Data Systems, Inc., 7.625%, 2020 | 5,000 | 5,050 | ||||||
|
| |||||||
$ | 172,298 | |||||||
|
| |||||||
Cable TV – 2.5% | ||||||||
AMC Networks, Inc., 7.75%, 2021 (z) | $ | 6,000 | $ | 6,270 | ||||
Bresnan Broadband Holdings LLC, 8%, 2018 (n) | 5,000 | 5,156 | ||||||
Cablevision Systems Corp., 8.625%, 2017 | 25,000 | 27,094 | ||||||
CCH II LLC, 13.5%, 2016 | 35,000 | 41,211 | ||||||
CCO Holdings LLC, 7.875%, 2018 | 55,000 | 57,956 | ||||||
CCO Holdings LLC, 8.125%, 2020 | 15,000 | 16,200 | ||||||
Cequel Communications Holdings, 8.625%, 2017 (n) | 10,000 | 10,400 | ||||||
Charter Communications Operating LLC, 10.875%, 2014 (n) | 25,000 | 27,500 | ||||||
CSC Holdings LLC, 8.5%, 2014 | 50,000 | 55,375 | ||||||
CSC Holdings LLC, 8.5%, 2015 | 15,000 | 16,200 | ||||||
DIRECTV Holdings LLC, 5.875%, 2019 | 40,000 | 44,363 | ||||||
Insight Communications Co., Inc., 9.375%, 2018 (n) | 30,000 | 32,925 | ||||||
Mediacom LLC, 9.125%, 2019 | 30,000 | 31,650 | ||||||
Myriad International Holdings B.V., 6.375%, 2017 (n) | 100,000 | 108,000 | ||||||
TCI Communications, Inc., 9.8%, 2012 | 81,000 | 85,180 | ||||||
Time Warner Cable, Inc., 8.25%, 2019 | 120,000 | 149,664 | ||||||
Videotron LTEE, 6.875%, 2014 | 15,000 | 15,169 | ||||||
Virgin Media Finance PLC, 9.125%, 2016 | 100,000 | 105,250 | ||||||
|
| |||||||
$ | 835,563 | |||||||
|
| |||||||
Chemicals – 2.0% | ||||||||
Celanese U.S. Holdings LLC, 6.625%, 2018 | $ | 55,000 | $ | 58,025 | ||||
Dow Chemical Co., 8.55%, 2019 | 170,000 | 219,205 | ||||||
Hexion U.S. Finance Corp/Hexion Nova Scotia Finance, 8.875%, 2018 | 55,000 | 57,200 | ||||||
Hexion U.S. Finance Corp/Hexion Nova Scotia Finance, 9%, 2020 | 5,000 | 5,125 | ||||||
Huntsman International LLC, 8.625%, 2021 | 50,000 | 54,375 | ||||||
Lyondell Chemical Co., 11%, 2018 | 124,207 | 139,112 | ||||||
Momentive Performance Materials, Inc., 12.5%, 2014 | 44,000 | 47,850 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Chemicals – continued | ||||||||
Momentive Performance Materials, Inc., 11.5%, 2016 | $ | 44,000 | $ | 46,860 | ||||
Polypore International, Inc., 7.5%, 2017 | 30,000 | 31,725 | ||||||
|
| |||||||
$ | 659,477 | |||||||
|
| |||||||
Computer Software – 0.3% | ||||||||
Oracle Corp., 5.375%, 2040 (n) | $ | 66,000 | $ | 66,738 | ||||
Syniverse Holdings, Inc., 9.125%, 2019 (n) | 20,000 | 20,800 | ||||||
|
| |||||||
$ | 87,538 | |||||||
|
| |||||||
Computer Software – Systems – 0.1% | ||||||||
DuPont Fabros Technology, Inc., REIT, 8.5%, 2017 | $ | 30,000 | $ | 32,775 | ||||
Eagle Parent, Inc., 8.625%, 2019 (z) | 15,000 | 14,456 | ||||||
|
| |||||||
$ | 47,231 | |||||||
|
| |||||||
Conglomerates – 0.4% | ||||||||
Amsted Industries, Inc., 8.125%, 2018 (n) | $ | 30,000 | $ | 31,500 | ||||
Griffon Corp., 7.125%, 2018 (n) | 30,000 | 30,113 | ||||||
Pinafore LLC, 9%, 2018 (n) | 60,000 | 64,650 | ||||||
|
| |||||||
$ | 126,263 | |||||||
|
| |||||||
Consumer Products – 0.7% | ||||||||
ACCO Brands Corp., 10.625%, 2015 | $ | 5,000 | $ | 5,581 | ||||
Easton-Bell Sports, Inc., 9.75%, 2016 | 30,000 | 33,075 | ||||||
Elizabeth Arden, Inc., 7.375%, 2021 | 25,000 | 26,031 | ||||||
Libbey Glass, Inc., 10%, 2015 | 27,000 | 29,295 | ||||||
Visant Corp., 10%, 2017 | 25,000 | 25,875 | ||||||
Whirlpool Corp., 8%, 2012 | 98,000 | 103,545 | ||||||
|
| |||||||
$ | 223,402 | |||||||
|
| |||||||
Consumer Services – 1.1% | ||||||||
Realogy Corp., 10.5%, 2014 | $ | 9,000 | $ | 8,910 | ||||
Realogy Corp., 11.5%, 2017 | 25,000 | 25,375 | ||||||
Service Corp. International, 7%, 2017 | 80,000 | 86,200 | ||||||
Service Corp. International, 7.625%, 2018 | 39,000 | 42,803 | ||||||
Western Union Co., 5.4%, 2011 | 210,000 | 213,786 | ||||||
|
| |||||||
$ | 377,074 | |||||||
|
| |||||||
Containers – 1.0% | ||||||||
Graham Packaging Co. LP/GPC Capital Corp., 9.875%, 2014 | $ | 20,000 | $ | 20,525 | ||||
Graham Packaging Co. LP/GPC Capital Corp., 8.25%, 2018 | 10,000 | 11,125 | ||||||
Greif, Inc., 6.75%, 2017 | 145,000 | 150,800 | ||||||
Owens-Illinois, Inc., 7.375%, 2016 | 20,000 | 21,750 | ||||||
Packaging Dynamics Corp., 8.75%, 2016 (z) | 15,000 | 15,225 | ||||||
Reynolds Group, 9%, 2019 (n) | 110,000 | 108,625 | ||||||
|
| |||||||
$ | 328,050 | |||||||
|
| |||||||
Defense Electronics – 0.8% | ||||||||
BAE Systems Holdings, Inc., 5.2%, 2015 (n) | $ | 169,000 | $ | 183,484 | ||||
BAE Systems Holdings, Inc., 6.375%, 2019 (n) | 40,000 | 45,458 | ||||||
ManTech International Corp., 7.25%, 2018 | 40,000 | 41,800 | ||||||
|
| |||||||
$ | 270,742 | |||||||
|
|
5
Table of Contents
MFS Strategic Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Electronics – 0.3% | ||||||||
Freescale Semiconductor, Inc., 10.125%, 2018 (n) | $ | 13,000 | $ | 14,430 | ||||
Freescale Semiconductor, Inc., 9.25%, 2018 (n) | 20,000 | 21,550 | ||||||
Jabil Circuit, Inc., 7.75%, 2016 | 25,000 | 27,688 | ||||||
Sensata Technologies B.V., 6.5%, 2019 (z) | 30,000 | 29,925 | ||||||
|
| |||||||
$ | 93,593 | |||||||
|
| |||||||
Emerging Market Quasi-Sovereign – 1.7% | ||||||||
Banco do Brasil S.A., 5.875%, 2022 (z) | $ | 200,000 | $ | 197,800 | ||||
IIRSA Norte Finance Ltd., 8.75%, 2024 | 107,692 | 121,315 | ||||||
Petrobras International Finance Co., 7.875%, 2019 | 66,000 | 79,920 | ||||||
Petrobras International Finance Co., 6.75%, 2041 | 48,000 | 51,221 | ||||||
Petroleos Mexicanos, 5.5%, 2021 | 100,000 | 104,850 | ||||||
|
| |||||||
$ | 555,106 | |||||||
|
| |||||||
Emerging Market Sovereign – 0.7% | ||||||||
Republic of Hungary, 6.375%, 2021 | $ | 114,000 | $ | 120,270 | ||||
Republic of Poland, 5.125%, 2021 | 6,000 | 6,203 | ||||||
Republic of South Africa, 5.5%, 2020 | 100,000 | 109,250 | ||||||
United Mexican States, 5.75%, 2110 | 4,000 | 3,730 | ||||||
|
| |||||||
$ | 239,453 | |||||||
|
| |||||||
Energy – Independent – 3.3% | ||||||||
Anadarko Petroleum Corp., 5.95%, 2016 | $ | 120,000 | $ | 135,070 | ||||
ATP Oil & Gas Corp., 11.875%, 2015 | 15,000 | 15,225 | ||||||
Bill Barrett Corp., 9.875%, 2016 | 30,000 | 33,600 | ||||||
Carrizo Oil & Gas, Inc., 8.625%, 2018 | 30,000 | 30,900 | ||||||
Chaparral Energy, Inc., 8.875%, 2017 | 45,000 | 46,575 | ||||||
Concho Resources, Inc., 8.625%, 2017 | 20,000 | 21,800 | ||||||
Concho Resources, Inc., 6.5%, 2022 | 40,000 | 40,100 | ||||||
Connacher Oil & Gas Ltd., 8.5%, 2019 (z) | 15,000 | 14,250 | ||||||
Continental Resources, Inc., 8.25%, 2019 | 30,000 | 32,775 | ||||||
Denbury Resources, Inc., 8.25%, 2020 | 35,000 | 38,150 | ||||||
Energy XXI Gulf Coast, Inc., 9.25%, 2017 (n) | 35,000 | 37,275 | ||||||
Harvest Operations Corp., 6.875%, 2017 (n) | 50,000 | 51,625 | ||||||
Hilcorp Energy I LP, 9%, 2016 (n) | 40,000 | 41,850 | ||||||
LINN Energy LLC, 6.5%, 2019 (z) | 10,000 | 9,900 | ||||||
LINN Energy LLC, 8.625%, 2020 | 15,000 | 16,275 | ||||||
LINN Energy LLC, 7.75%, 2021 (n) | 23,000 | 23,920 | ||||||
Newfield Exploration Co., 6.625%, 2014 | 40,000 | 40,600 | ||||||
Newfield Exploration Co., 6.625%, 2016 | 30,000 | 30,975 | ||||||
Newfield Exploration Co., 6.875%, 2020 | 10,000 | 10,625 | ||||||
OPTI Canada, Inc., 9.75%, 2013 (n) | 30,000 | 29,775 | ||||||
OPTI Canada, Inc., 8.25%, 2014 (d) | 65,000 | 26,975 | ||||||
Petrohawk Energy Corp., 7.25%, 2018 | 10,000 | 10,263 | ||||||
Pioneer Natural Resources Co., 6.875%, 2018 | 35,000 | 37,789 | ||||||
Pioneer Natural Resources Co., 7.5%, 2020 | 90,000 | 101,413 | ||||||
QEP Resources, Inc., 6.875%, 2021 | 60,000 | 63,300 | ||||||
Quicksilver Resources, Inc., 9.125%, 2019 | 30,000 | 32,700 | ||||||
Range Resources Corp., 8%, 2019 | 25,000 | 27,125 | ||||||
SandRidge Energy, Inc., 8%, 2018 (n) | 55,000 | 56,100 | ||||||
Talisman Energy, Inc., 7.75%, 2019 | 10,000 | 12,187 | ||||||
Whiting Petroleum Corp., 6.5%, 2018 | 15,000 | 15,600 | ||||||
|
| |||||||
$ | 1,084,717 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Energy – Integrated – 1.0% | ||||||||
BP Capital Markets PLC, 4.5%, 2020 | $ | 29,000 | $ | 29,574 | ||||
BP Capital Markets PLC, 4.742%, 2021 | 90,000 | 92,844 | ||||||
Cenovus Energy, Inc., 4.5%, 2014 | 30,000 | 32,559 | ||||||
Hess Corp., 8.125%, 2019 | 30,000 | 37,959 | ||||||
Petro-Canada Financial Partnership, 5%, 2014 | 110,000 | 120,702 | ||||||
|
| |||||||
$ | 313,638 | |||||||
|
| |||||||
Engineering – Construction – 0.1% | ||||||||
B-Corp. Merger Sub, Inc., 8.25%, 2019 (z) | $ | 25,000 | $ | 24,750 | ||||
|
| |||||||
Entertainment – 0.4% | ||||||||
AMC Entertainment, Inc., 8.75%, 2019 | $ | 60,000 | $ | 63,300 | ||||
AMC Entertainment, Inc., 9.75%, 2020 (n) | 15,000 | 15,338 | ||||||
Cinemark USA, Inc., 8.625%, 2019 | 45,000 | 49,275 | ||||||
|
| |||||||
$ | 127,913 | |||||||
|
| |||||||
Financial Institutions – 2.8% | ||||||||
CIT Group, Inc., 5.25%, 2014 (n) | $ | 45,000 | $ | 44,775 | ||||
CIT Group, Inc., 7%, 2016 | 60,000 | 59,775 | ||||||
CIT Group, Inc., 7%, 2017 | 150,000 | 149,625 | ||||||
CIT Group, Inc., 6.625%, 2018 (n) | 35,000 | 36,486 | ||||||
General Electric Capital Corp., 6%, 2019 | 30,000 | 33,218 | ||||||
General Electric Capital Corp., 5.5%, 2020 | 95,000 | 101,735 | ||||||
General Electric Capital Corp., 6.375% to 2017, FRN to 2067 | 50,000 | 51,250 | ||||||
International Lease Finance Corp., 8.75%, 2017 | 40,000 | 43,750 | ||||||
International Lease Finance Corp., 7.125%, 2018 (n) | 47,000 | 50,290 | ||||||
International Lease Finance Corp., 8.25%, 2020 | 5,000 | 5,400 | ||||||
Nationstar Mortgage LLC, 10.875%, 2015 (n) | 50,000 | 52,000 | ||||||
ORIX Corp., 5.48%, 2011 | 130,000 | 131,987 | ||||||
SLM Corp., 8.45%, 2018 | 15,000 | 16,464 | ||||||
SLM Corp., 8%, 2020 | 60,000 | 64,428 | ||||||
Springleaf Finance Corp., 6.9%, 2017 | 100,000 | 91,750 | ||||||
|
| |||||||
$ | 932,933 | |||||||
|
| |||||||
Food & Beverages – 2.1% | ||||||||
Anheuser-Busch InBev S.A., 7.75%, 2019 | $ | 140,000 | $ | 176,126 | ||||
ARAMARK Corp., 8.5%, 2015 | 30,000 | 31,161 | ||||||
B&G Foods, Inc., 7.625%, 2018 | 55,000 | 57,886 | ||||||
Conagra Foods, Inc., 5.875%, 2014 | 150,000 | 164,745 | ||||||
Kraft Foods, Inc., 6.125%, 2018 | 80,000 | 91,744 | ||||||
Pinnacle Foods Finance LLC, 9.25%, 2015 | 45,000 | 46,688 | ||||||
Pinnacle Foods Finance LLC, 10.625%, 2017 | 10,000 | 10,663 | ||||||
Pinnacle Foods Finance LLC, 8.25%, 2017 | 10,000 | 10,375 | ||||||
TreeHouse Foods, Inc., 7.75%, 2018 | 30,000 | 31,875 | ||||||
Tyson Foods, Inc., 6.85%, 2016 | 70,000 | 77,350 | ||||||
|
| |||||||
$ | 698,613 | |||||||
|
| |||||||
Food & Drug Stores – 0.3% | ||||||||
CVS Caremark Corp., 5.75%, 2041 | $ | 110,000 | $ | 108,156 | ||||
|
| |||||||
Forest & Paper Products – 1.0% | ||||||||
Boise, Inc., 8%, 2020 | $ | 30,000 | $ | 31,500 | ||||
Cascades, Inc., 7.75%, 2017 | 25,000 | 26,063 |
6
Table of Contents
MFS Strategic Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Forest & Paper Products – continued | ||||||||
Georgia-Pacific Corp., 8%, 2024 | $ | 30,000 | $ | 35,626 | ||||
Georgia-Pacific Corp., 7.25%, 2028 | 10,000 | 11,111 | ||||||
Graphic Packaging Holding Co., 7.875%, 2018 | 20,000 | 21,200 | ||||||
Inversiones CMPC S.A., 4.75%, 2018 (n) | 103,000 | 102,901 | ||||||
Votorantim Participacoes S.A., 6.75%, 2021 (n) | 100,000 | 106,000 | ||||||
|
| |||||||
$ | 334,401 | |||||||
|
| |||||||
Gaming & Lodging – 2.1% | ||||||||
American Casinos, Inc., 7.5%, 2021 (n) | $ | 25,000 | $ | 25,781 | ||||
Boyd Gaming Corp., 7.125%, 2016 | 25,000 | 23,063 | ||||||
Firekeepers Development Authority, 13.875%, 2015 (n) | 30,000 | 34,650 | ||||||
Fontainebleau Las Vegas Holdings LLC, 10.25%, 2015 (d)(n) | 65,000 | 33 | ||||||
GWR Operating Partnership LLP, 10.875%, 2017 | 20,000 | 21,650 | ||||||
Harrah’s Operating Co., Inc., 11.25%, 2017 | 75,000 | 82,781 | ||||||
Harrah’s Operating Co., Inc., 10%, 2018 | 2,000 | 1,725 | ||||||
Harrah’s Operating Co., Inc., 10%, 2018 | 29,000 | 26,173 | ||||||
Host Hotels & Resorts, Inc., 6.75%, 2016 | 30,000 | 30,975 | ||||||
Host Hotels & Resorts, Inc., 9%, 2017 | 30,000 | 33,750 | ||||||
Marriott International, Inc., 5.625%, 2013 | 80,000 | 85,323 | ||||||
MGM Mirage, 10.375%, 2014 | 5,000 | 5,675 | ||||||
MGM Mirage, 11.125%, 2017 | 10,000 | 11,425 | ||||||
MGM Resorts International, 11.375%, 2018 | 25,000 | 28,063 | ||||||
MGM Resorts International, 9%, 2020 | 30,000 | 32,850 | ||||||
Penn National Gaming, Inc., 8.75%, 2019 | 35,000 | 38,063 | ||||||
Seven Seas Cruises S. de R.L., 9.125%, 2019 (z) | 10,000 | 10,300 | ||||||
Station Casinos, Inc., 6.5%, 2014 (d) | 85,000 | 9 | ||||||
Station Casinos, Inc., 6.875%, 2016 (d) | 180,000 | 18 | ||||||
Wyndham Worldwide Corp., 6%, 2016 | 50,000 | 53,099 | ||||||
Wyndham Worldwide Corp., 5.75%, 2018 | 90,000 | 92,933 | ||||||
Wyndham Worldwide Corp., 7.375%, 2020 | 30,000 | 33,266 | ||||||
Wynn Las Vegas LLC, 7.75%, 2020 | 30,000 | 32,588 | ||||||
|
| |||||||
$ | 704,193 | |||||||
|
| |||||||
Industrial – 0.4% | ||||||||
Altra Holdings, Inc., 8.125%, 2016 | $ | 25,000 | $ | 27,000 | ||||
Mueller Water Products, Inc., 7.375%, 2017 | 11,000 | 10,340 | ||||||
Mueller Water Products, Inc., 8.75%, 2020 | 26,000 | 28,145 | ||||||
Steelcase, Inc., 6.5%, 2011 | 61,000 | 61,340 | ||||||
|
| |||||||
$ | 126,825 | |||||||
|
| |||||||
Insurance – 2.7% | ||||||||
Aflac, Inc., 6.45%, 2040 | $ | 60,000 | $ | 59,535 | ||||
Allianz AG, 5.5% to 2014, FRN to 2049 | EUR | 105,000 | 151,124 | |||||
ING Groep N.V., 5.775% to 2015, FRN to 2049 | $ | 210,000 | 193,200 | |||||
Metropolitan Life Global Funding, 2.875%, 2012 (n) | 140,000 | 143,074 | ||||||
Metropolitan Life Global Funding, 5.125%, 2014 (n) | 40,000 | 43,702 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Insurance – continued | ||||||||
Principal Financial Group, Inc., 8.875%, 2019 | $ | 80,000 | $ | 101,762 | ||||
Prudential Financial, Inc., 6.2%, 2015 | 80,000 | 89,563 | ||||||
Unum Group, 7.125%, 2016 | 90,000 | 103,305 | ||||||
|
| |||||||
$ | 885,265 | |||||||
|
| |||||||
Insurance – Property & Casualty – 2.7% | ||||||||
ACE INA Holdings, Inc., 2.6%, 2015 | $ | 150,000 | $ | 150,635 | ||||
Aon Corp., 3.5%, 2015 | 130,000 | 133,621 | ||||||
AXIS Capital Holdings Ltd., 5.75%, 2014 | 130,000 | 140,472 | ||||||
AXIS Capital Holdings Ltd., 5.875%, 2020 | 40,000 | 41,020 | ||||||
CNA Financial Corp., 5.875%, 2020 | 100,000 | 103,974 | ||||||
Liberty Mutual Group, Inc., 10.75% to 2038, FRN to 2088 (n) | 50,000 | 66,375 | ||||||
PartnerRe Ltd., 5.5%, 2020 | 66,000 | 66,653 | ||||||
Travelers Cos., Inc., 3.9%, 2020 | 150,000 | 145,000 | ||||||
USI Holdings Corp., 9.75%, 2015 (z) | 30,000 | 30,075 | ||||||
|
| |||||||
$ | 877,825 | |||||||
|
| |||||||
International Market Quasi-Sovereign – 2.5% | ||||||||
Canada Housing Trust, 4.6%, 2011 (n) | CAD | 63,000 | $ | 65,769 | ||||
EDF Energies Nouvelles S.A., 6.5%, 2019 (n) | $ | 120,000 | 140,262 | |||||
ING Bank N.V., 3.9%, 2014 (n) | 150,000 | 160,489 | ||||||
Irish Life & Permanent PLC, 3.6%, 2013 (e)(n) | 400,000 | 336,284 | ||||||
Westpac Banking Corp., 3.45%, 2014 (n) | 100,000 | 106,400 | ||||||
|
| |||||||
$ | 809,204 | |||||||
|
| |||||||
International Market Sovereign – 12.6% | ||||||||
Federal Republic of Germany, 3.75%, 2015 | EUR | 179,000 | $ | 275,099 | ||||
Federal Republic of Germany, 4.25%, 2018 | EUR | 73,000 | 116,443 | |||||
Federal Republic of Germany, 6.25%, 2030 | EUR | 89,000 | 173,668 | |||||
Government of Canada, 4.5%, 2015 | CAD | 60,000 | 67,796 | |||||
Government of Canada, 4.25%, 2018 | CAD | 31,000 | 35,269 | |||||
Government of Canada, 5.75%, 2033 | CAD | 11,000 | 15,231 | |||||
Government of Japan, 1.3%, 2014 | JPY | 28,850,000 | 370,459 | |||||
Government of Japan, 1.7%, 2017 | JPY | 41,100,000 | 544,134 | |||||
Government of Japan, 2.2%, 2027 | JPY | 13,200,000 | 175,255 | |||||
Government of Japan, 2.4%, 2037 | JPY | 13,900,000 | 186,297 | |||||
Kingdom of Belgium, 5.5%, 2017 | EUR | 79,000 | 125,934 | |||||
Kingdom of Spain, 4.6%, 2019 | EUR | 118,000 | 164,388 | |||||
Kingdom of the Netherlands, 3.75%, 2014 | EUR | 198,000 | 301,888 | |||||
Kingdom of the Netherlands, 5.5%, 2028 | EUR | 25,000 | 43,997 | |||||
Republic of Austria, 4.65%, 2018 | EUR | 96,000 | 152,245 | |||||
Republic of France, 6%, 2025 | EUR | 77,000 | 138,773 | |||||
Republic of France, 4.75%, 2035 | EUR | 103,000 | 162,480 | |||||
Republic of Ireland, 4.5%, 2020 | EUR | 35,000 | 31,849 | |||||
Republic of Italy, 4.75%, 2013 | EUR | 197,000 | 293,878 | |||||
Republic of Italy, 5.25%, 2017 | EUR | 262,000 | 400,494 | |||||
United Kingdom Treasury, 8%, 2015 | GBP | 94,000 | 190,024 | |||||
United Kingdom Treasury, 8%, 2021 | GBP | 36,000 | 80,576 | |||||
United Kingdom Treasury, 4.25%, 2036 | GBP | 50,000 | 79,917 | |||||
|
| |||||||
$ | 4,126,094 | |||||||
|
|
7
Table of Contents
MFS Strategic Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Local Authorities – 0.6% | ||||||||
Louisiana Gas & Fuels Tax Rev. (Build America Bonds), FRN, 3%, 2043 | $ | 100,000 | $ | 101,445 | ||||
Province of Ontario, 5.45%, 2016 | 95,000 | 108,857 | ||||||
|
| |||||||
$ | 210,302 | |||||||
|
| |||||||
Machinery & Tools – 0.8% | ||||||||
Atlas Copco AB, 5.6%, 2017 (n) | $ | 135,000 | $ | 150,188 | ||||
Case Corp., 7.25%, 2016 | 15,000 | 16,331 | ||||||
Case New Holland, Inc., 7.875%, 2017 (n) | 65,000 | 71,500 | ||||||
Rental Service Corp., 9.5%, 2014 | 20,000 | 20,500 | ||||||
RSC Equipment Rental, Inc., 8.25%, 2021 | 10,000 | 9,950 | ||||||
|
| |||||||
$ | 268,469 | |||||||
|
| |||||||
Major Banks – 4.9% | ||||||||
BAC Capital Trust XIV, 5.63% to 2012, FRN to 2049 | $ | 240,000 | $ | 178,500 | ||||
Bank of America Corp., 7.375%, 2014 | 50,000 | 56,210 | ||||||
Bank of America Corp., 8% to 2018, FRN to 2049 | 90,000 | 93,988 | ||||||
Barclays Bank PLC, 5.125%, 2020 | 100,000 | 101,494 | ||||||
BNP Paribas, 5.186% to 2015, FRN to 2049 (n) | 26,000 | 23,933 | ||||||
BNP Paribas, 7.195% to 2037, FRN to 2049 (n) | 100,000 | 96,500 | ||||||
Commonwealth Bank of Australia, 5%, 2019 (n) | 80,000 | 83,249 | ||||||
Goldman Sachs Group, Inc., 6%, 2014 | 50,000 | 54,848 | ||||||
Intesa Sanpaolo S.p.A., FRN, 2.657%, 2014 (n) | 100,000 | 99,755 | ||||||
JPMorgan Chase & Co., 4.625%, 2021 | 90,000 | 89,272 | ||||||
JPMorgan Chase Capital XXII, 6.45%, 2087 | 71,000 | 71,538 | ||||||
JPMorgan Chase Capital XXVII, 7%, 2039 | 20,000 | 19,975 | ||||||
Macquarie Group Ltd., 6%, 2020 (n) | 108,000 | 108,298 | ||||||
Merrill Lynch & Co., Inc., 6.4%, 2017 | 30,000 | 32,747 | ||||||
Morgan Stanley, 6%, 2014 | 100,000 | 108,912 | ||||||
Morgan Stanley, 5.625%, 2019 | 100,000 | 102,615 | ||||||
Royal Bank of Scotland Group PLC, 7.648% to 2031, FRN to 2049 | 55,000 | 49,500 | ||||||
Standard Chartered PLC, 3.85%, 2015 (n) | 100,000 | 103,519 | ||||||
UFJ Finance Aruba AEC, 6.75%, 2013 | 70,000 | 76,916 | ||||||
Wells Fargo & Co., 7.98% to 2018, FRN to 2049 | 49,000 | 52,920 | ||||||
|
| |||||||
$ | 1,604,689 | |||||||
|
| |||||||
Medical & Health Technology & Services – 2.8% | ||||||||
Biomet, Inc., 10%, 2017 | $ | 5,000 | $ | 5,450 | ||||
Biomet, Inc., 10.375%, 2017 (p) | 15,000 | 16,536 | ||||||
Biomet, Inc., 11.625%, 2017 | 55,000 | 60,911 | ||||||
Cardinal Health, Inc., 5.8%, 2016 | 94,000 | 106,419 | ||||||
CDRT Merger Sub, Inc., 8.125%, 2019 (z) | 10,000 | 10,000 | ||||||
Davita, Inc., 6.375%, 2018 | 45,000 | 45,563 | ||||||
Davita, Inc., 6.625%, 2020 | 10,000 | 10,175 | ||||||
Fresenius Medical Care AG & Co. KGaA, 9%, 2015 (n) | 20,000 | 22,625 | ||||||
HCA, Inc., 9.25%, 2016 | 55,000 | 58,369 | ||||||
HCA, Inc., 8.5%, 2019 | 85,000 | 93,925 | ||||||
HealthSouth Corp., 8.125%, 2020 | 75,000 | 80,531 | ||||||
Hospira, Inc., 6.05%, 2017 | 60,000 | 68,100 | ||||||
McKesson Corp., 5.7%, 2017 | 40,000 | 45,340 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Medical & Health Technology & Services – continued | ||||||||
Owens & Minor, Inc., 6.35%, 2016 | $ | 70,000 | $ | 73,485 | ||||
United Surgical Partners International, Inc., 8.875%, 2017 | 15,000 | 15,675 | ||||||
United Surgical Partners International, Inc., 9.25%, 2017 (p) | 15,000 | 15,675 | ||||||
Universal Health Services, Inc., 7%, 2018 | 15,000 | 15,450 | ||||||
Universal Hospital Services, Inc., 8.5%, 2015 (p) | 55,000 | 56,650 | ||||||
Universal Hospital Services, Inc., FRN, 3.777%, 2015 | 10,000 | 9,600 | ||||||
Vanguard Health Systems, Inc., 8%, 2018 | 55,000 | 56,788 | ||||||
VWR Funding, Inc., 10.25%, 2015 (p) | 47,531 | 49,670 | ||||||
|
| |||||||
$ | 916,937 | |||||||
|
| |||||||
Metals & Mining – 1.7% | ||||||||
ArcelorMittal, 5.5%, 2021 | $ | 210,000 | $ | 210,328 | ||||
Arch Coal, Inc., 7%, 2019 (z) | 35,000 | 34,913 | ||||||
Arch Western Finance LLC, 6.75%, 2013 | 17,000 | 17,021 | ||||||
Cloud Peak Energy, Inc., 8.25%, 2017 | 35,000 | 37,450 | ||||||
Cloud Peak Energy, Inc., 8.5%, 2019 | 50,000 | 54,061 | ||||||
Consol Energy, Inc., 8%, 2017 | 20,000 | 21,800 | ||||||
Consol Energy, Inc., 8.25%, 2020 | 15,000 | 16,350 | ||||||
Novelis, Inc., 8.375%, 2017 | 15,000 | 16,013 | ||||||
Novelis, Inc., 8.75%, 2020 | 5,000 | 5,400 | ||||||
Southern Copper Corp., 6.75%, 2040 | 100,000 | 97,281 | ||||||
Vale Overseas Ltd., 6.875%, 2039 | 33,000 | 35,864 | ||||||
|
| |||||||
$ | 546,481 | |||||||
|
| |||||||
Mortgage-Backed – 1.5% | ||||||||
Fannie Mae, 6%, 2017 | $ | 49,277 | $ | 53,940 | ||||
Fannie Mae, 5.5%, 2020 - 2034 | 319,226 | 347,393 | ||||||
Freddie Mac, 4.224%, 2020 | 94,792 | 98,619 | ||||||
|
| |||||||
$ | 499,952 | |||||||
|
| |||||||
Natural Gas – Distribution – 0.2% | ||||||||
AmeriGas Partners LP, 7.125%, 2016 | $ | 55,000 | $ | 56,650 | ||||
|
| |||||||
Natural Gas – Pipeline – 1.7% | ||||||||
Crosstex Energy, Inc., 8.875%, 2018 | $ | 45,000 | $ | 47,925 | ||||
El Paso Corp., 7%, 2017 | 45,000 | 50,912 | ||||||
El Paso Corp., 7.75%, 2032 | 35,000 | 40,715 | ||||||
Energy Transfer Equity LP, 7.5%, 2020 | 55,000 | 58,300 | ||||||
Enterprise Products Partners LP, 8.375% to 2016, FRN to 2066 | 20,000 | 21,650 | ||||||
Enterprise Products Partners LP, 7.034% to 2018, FRN to 2068 | 12,000 | 12,615 | ||||||
Kinder Morgan Energy Partners LP, 5.85%, 2012 | 97,000 | 102,210 | ||||||
Kinder Morgan Energy Partners LP, 6.375%, 2041 | 130,000 | 133,074 | ||||||
Spectra Energy Capital LLC, 8%, 2019 | 66,000 | 80,735 | ||||||
|
| |||||||
$ | 548,136 | |||||||
|
| |||||||
Network & Telecom – 2.0% | ||||||||
AT&T, Inc., 5.5%, 2018 | $ | 70,000 | $ | 78,073 | ||||
CenturyLink, Inc., 7.6%, 2039 | 10,000 | 9,619 | ||||||
Cincinnati Bell, Inc., 8.25%, 2017 | 10,000 | 10,050 |
8
Table of Contents
MFS Strategic Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Network & Telecom – continued | ||||||||
Cincinnati Bell, Inc., 8.75%, 2018 | $ | 30,000 | $ | 28,500 | ||||
Citizens Communications Co., 9%, 2031 | 15,000 | 15,375 | ||||||
France Telecom, 4.375%, 2014 | 80,000 | 86,636 | ||||||
Frontier Communications Corp., 8.125%, 2018 | 40,000 | 43,450 | ||||||
Qwest Communications International, Inc., 8%, 2015 | 10,000 | 10,875 | ||||||
Qwest Communications International, Inc., 7.125%, 2018 (n) | 35,000 | 37,581 | ||||||
Qwest Corp., 7.5%, 2014 | 65,000 | 72,881 | ||||||
Telefonica S.A., 5.877%, 2019 | 80,000 | 84,008 | ||||||
Verizon Communications, Inc., 8.75%, 2018 | 80,000 | 104,088 | ||||||
Windstream Corp., 8.125%, 2018 | 5,000 | 5,300 | ||||||
Windstream Corp., 7.75%, 2020 | 45,000 | 47,138 | ||||||
Windstream Corp., 7.75%, 2021 | 10,000 | 10,450 | ||||||
|
| |||||||
$ | 644,024 | |||||||
|
| |||||||
Oil Services – 0.3% | ||||||||
McJunkin Red Man Holding Corp., 9.5%, 2016 (n) | $ | 45,000 | $ | 45,788 | ||||
Pioneer Drilling Co., 9.875%, 2018 | 45,000 | 48,150 | ||||||
Unit Corp., 6.625%, 2021 | 5,000 | 5,000 | ||||||
|
| |||||||
$ | 98,938 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 3.0% | ||||||||
Banco Santander U.S. Debt S.A.U., 2.991%, 2013 (n) | $ | 200,000 | $ | 199,545 | ||||
Bosphorus Financial Services Ltd., FRN, 2.06%, 2012 (z) | 18,750 | 18,601 | ||||||
Citigroup, Inc., 6.375%, 2014 | 80,000 | 88,458 | ||||||
Citigroup, Inc., 6.01%, 2015 | 60,000 | 66,026 | ||||||
Citigroup, Inc., 8.5%, 2019 | 52,000 | 64,462 | ||||||
Groupe BPCE S.A., 12.5% to 2019, FRN to 2049 (n) | 102,000 | 116,725 | ||||||
Lloyds TSB Bank PLC, 5.8%, 2020 (n) | 110,000 | 110,159 | ||||||
Santander Holdings USA, Inc., 4.625%, 2016 | 10,000 | 10,050 | ||||||
Santander UK PLC, 8.963% to 2030, FRN to 2049 | 68,000 | 75,140 | ||||||
Svenska Handelsbanken AB, 4.875%, 2014 (n) | 110,000 | 118,818 | ||||||
UBS Preferred Funding Trust V, 6.243% to 2016, FRN to 2049 | 120,000 | 117,600 | ||||||
|
| |||||||
$ | 985,584 | |||||||
|
| |||||||
Pharmaceuticals – 1.6% | ||||||||
Celgene Corp., 3.95%, 2020 | $ | 130,000 | $ | 125,491 | ||||
Pfizer, Inc., 6.2%, 2019 | 160,000 | 187,160 | ||||||
Roche Holdings, Inc., 6%, 2019 (n) | 140,000 | 161,303 | ||||||
Teva Pharmaceutical Finance LLC, 5.55%, 2016 | 39,000 | 43,895 | ||||||
|
| |||||||
$ | 517,849 | |||||||
|
| |||||||
Pollution Control – 0.3% | ||||||||
Republic Services, Inc., 5.25%, 2021 | $ | 80,000 | $ | 84,526 | ||||
|
| |||||||
Printing & Publishing – 0.2% | ||||||||
American Media, Inc., 13.5%, 2018 (z) | $ | 3,347 | $ | 3,606 | ||||
McClatchy Co., 11.5%, 2017 | 20,000 | 21,250 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Printing & Publishing – continued | ||||||||
Nielsen Finance LLC, 11.5%, 2016 | $ | 13,000 | $ | 15,210 | ||||
Nielsen Finance LLC, 7.75%, 2018 (n) | 10,000 | 10,500 | ||||||
|
| |||||||
$ | 50,566 | |||||||
|
| |||||||
Railroad & Shipping – 0.5% | ||||||||
Kansas City Southern Railway, 8%, 2015 | $ | 45,000 | $ | 48,263 | ||||
Kansas City Southern Railway, 6.125%, 2021 (z) | 15,000 | 15,000 | ||||||
Panama Canal Railway Co., 7%, 2026 (n) | 92,600 | 85,118 | ||||||
|
| |||||||
$ | 148,381 | |||||||
|
| |||||||
Real Estate – 1.7% | ||||||||
CNL Lifestyle Properties, Inc., REIT, 7.25%, 2019 (n) | $ | 15,000 | $ | 13,575 | ||||
Entertainment Properties Trust, REIT, 7.75%, 2020 | 30,000 | 33,825 | ||||||
HCP, Inc., REIT, 5.375%, 2021 | 95,000 | 97,986 | ||||||
Kennedy Wilson, Inc., 8.75%, 2019 (n) | 20,000 | 20,125 | ||||||
Kimco Realty Corp., REIT, 6.875%, 2019 | 22,000 | 25,563 | ||||||
MPT Operating Partnership, 6.875%, 2021 (n) | 20,000 | 19,650 | ||||||
Simon Property Group, Inc., REIT, 6.1%, 2016 | 190,000 | 218,223 | ||||||
WEA Finance LLC, REIT, 5.4%, 2012 (n) | 50,000 | 52,540 | ||||||
WEA Finance LLC, REIT, 6.75%, 2019 (n) | 60,000 | 68,040 | ||||||
|
| |||||||
$ | 549,527 | |||||||
|
| |||||||
Retailers – 2.0% | ||||||||
AutoZone, Inc., 6.5%, 2014 | $ | 150,000 | $ | 168,046 | ||||
Burlington Coat Factory Warehouse Corp., 10%, 2019 (n) | 25,000 | 24,750 | ||||||
Limited Brands, Inc., 5.25%, 2014 | 25,000 | 26,125 | ||||||
Limited Brands, Inc., 6.9%, 2017 | 25,000 | 26,781 | ||||||
Limited Brands, Inc., 6.95%, 2033 | 15,000 | 13,800 | ||||||
Macy’s, Inc., 8.125%, 2015 | 120,000 | 142,350 | ||||||
Neiman Marcus Group, Inc., 10.375%, 2015 | 35,000 | 36,750 | ||||||
QVC, Inc., 7.375%, 2020 (n) | 25,000 | 26,313 | ||||||
Sally Beauty Holdings, Inc., 10.5%, 2016 | 45,000 | 48,038 | ||||||
Staples, Inc., 9.75%, 2014 | 80,000 | 95,239 | ||||||
Toys “R” Us Property Co. II LLC, 8.5%, 2017 | 15,000 | 15,675 | ||||||
Toys “R” Us, Inc., 10.75%, 2017 | 30,000 | 33,375 | ||||||
Yankee Holdings Corp., 10.25%, 2016 (n)(p) | 10,000 | 10,025 | ||||||
|
| |||||||
$ | 667,267 | |||||||
|
| |||||||
Specialty Stores – 0.1% | ||||||||
Michaels Stores, Inc., 11.375%, 2016 | $ | 25,000 | $ | 26,625 | ||||
Michaels Stores, Inc., 7.75%, 2018 (n) | 20,000 | 20,050 | ||||||
|
| |||||||
$ | 46,675 | |||||||
|
| |||||||
Supermarkets – 0.3% | ||||||||
Delhaize Group, 5.875%, 2014 | $ | 90,000 | $ | 98,729 | ||||
|
| |||||||
Supranational – 0.4% | ||||||||
Central American Bank, 4.875%, 2012 (n) | $ | 140,000 | $ | 142,115 | ||||
|
| |||||||
Telecommunications – Wireless – 2.2% | ||||||||
American Tower Corp., 4.625%, 2015 | $ | 40,000 | $ | 42,110 | ||||
Clearwire Corp., 12%, 2015 (n) | 60,000 | 64,275 | ||||||
Cricket Communications, Inc., 7.75%, 2020 | 15,000 | 14,700 |
9
Table of Contents
MFS Strategic Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Telecommunications – Wireless – continued | ||||||||
Crown Castle International Corp., 9%, 2015 | $ | 20,000 | $ | 21,700 | ||||
Crown Castle International Corp., 7.125%, 2019 | 85,000 | 89,461 | ||||||
Crown Castle Towers LLC, 6.113%, 2020 (n) | 104,000 | 113,476 | ||||||
MetroPCS Wireless, Inc., 7.875%, 2018 | 30,000 | 31,763 | ||||||
Nextel Communications, Inc., 7.375%, 2015 | 35,000 | 35,000 | ||||||
NII Holdings, Inc., 10%, 2016 | 30,000 | 34,800 | ||||||
NII Holdings, Inc., 8.875%, 2019 | 20,000 | 22,075 | ||||||
NII Holdings, Inc., 7.625%, 2021 | 10,000 | 10,450 | ||||||
Rogers Cable, Inc., 5.5%, 2014 | 79,000 | 86,995 | ||||||
Sprint Capital Corp., 6.875%, 2028 | 15,000 | 14,213 | ||||||
Sprint Nextel Corp., 8.375%, 2017 | 35,000 | 38,456 | ||||||
Wind Acquisition Finance S.A., 11.75%, 2017 (n) | 100,000 | 113,250 | ||||||
|
| |||||||
$ | 732,724 | |||||||
|
| |||||||
Telephone Services – 0.0% | ||||||||
Cogent Communications Group, Inc., 8.375%, 2018 (n) | $ | 10,000 | $ | 10,275 | ||||
|
| |||||||
Tobacco – 1.3% | ||||||||
Altria Group, Inc., 9.25%, 2019 | $ | 130,000 | $ | 169,513 | ||||
Lorillard Tobacco Co., 8.125%, 2019 | 37,000 | 43,096 | ||||||
Lorillard Tobacco Co., 6.875%, 2020 | 50,000 | 54,247 | ||||||
Reynolds American, Inc., 6.75%, 2017 | 135,000 | 155,868 | ||||||
|
| |||||||
$ | 422,724 | |||||||
|
| |||||||
Transportation – 0.1% | ||||||||
Navios South American Logistics, Inc., 9.25%, 2019 (n) | $ | 16,000 | $ | 16,120 | ||||
|
| |||||||
Transportation – Services – 1.0% | ||||||||
ACL I Corp., 10.625%, 2016 (p)(z) | $ | 30,000 | $ | 26,713 | ||||
American Petroleum Tankers LLC, 10.25%, 2015 | 14,000 | 14,630 | ||||||
Commercial Barge Line Co., 12.5%, 2017 | 40,000 | 44,900 | ||||||
Erac USA Finance Co., 6.375%, 2017 (n) | 110,000 | 126,505 | ||||||
Hertz Corp., 8.875%, 2014 | 5,000 | 5,125 | ||||||
Hertz Corp., 7.5%, 2018 (n) | 20,000 | 20,600 | ||||||
Hertz Corp., 7.375%, 2021 (n) | 25,000 | 25,438 | ||||||
Navios Maritime Acquisition Corp., 8.625%, 2017 | 15,000 | 14,775 | ||||||
Navios Maritime Acquisition Corp., 8.625%, 2017 (z) | 10,000 | 9,850 | ||||||
Navios Maritime Holdings, Inc., 8.875%, 2017 | 20,000 | 20,600 | ||||||
Swift Services Holdings, Inc., 10%, 2018 | 20,000 | 21,150 | ||||||
|
| |||||||
$ | 330,286 | |||||||
|
| |||||||
U.S. Government Agencies and Equivalents – 1.7% | ||||||||
National Credit Union Administration Guaranteed Note, 2.9%, 2020 | $ | 20,000 | $ | 19,963 | ||||
Small Business Administration, 6.35%, 2021 | 43,796 | 48,254 | ||||||
Small Business Administration, 4.34%, 2024 | 98,010 | 103,359 | ||||||
Small Business Administration, 4.99%, 2024 | 121,924 | 130,713 | ||||||
Small Business Administration, 4.86%, 2025 | 140,094 | 149,839 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
U.S. Government Agencies and Equivalents – continued | ||||||||
Small Business Administration, 4.625%, 2025 | $ | 55,005 | $ | 58,469 | ||||
Small Business Administration, 5.11%, 2025 | 50,327 | 54,210 | ||||||
|
| |||||||
$ | 564,807 | |||||||
|
| |||||||
Utilities – Electric Power – 3.8% | ||||||||
AES Corp., 8%, 2017 | $ | 55,000 | $ | 58,300 | ||||
Allegheny Energy, Inc., 5.75%, 2019 (n) | 90,000 | 94,160 | ||||||
Calpine Corp., 8%, 2016 (n) | 35,000 | 37,800 | ||||||
Calpine Corp., 7.875%, 2020 (n) | 45,000 | 47,025 | ||||||
CMS Energy Corp., 4.25%, 2015 | 90,000 | 92,570 | ||||||
Covanta Holding Corp., 7.25%, 2020 | 20,000 | 20,919 | ||||||
Duke Energy Corp., 3.35%, 2015 | 140,000 | 145,399 | ||||||
Dynegy Holdings, Inc., 7.5%, 2015 | 10,000 | 8,150 | ||||||
Dynegy Holdings, Inc., 7.75%, 2019 | 50,000 | 36,375 | ||||||
Edison Mission Energy, 7%, 2017 | 60,000 | 48,600 | ||||||
EDP Finance B.V., 6%, 2018 (n) | 130,000 | 120,283 | ||||||
Energy Future Holdings Corp., 10%, 2020 | 45,000 | 47,766 | ||||||
Energy Future Holdings Corp., 10%, 2020 | 90,000 | 95,981 | ||||||
Exelon Generation Co. LLC, 5.35%, 2014 | 40,000 | 43,294 | ||||||
Exelon Generation Co. LLC, 5.2%, 2019 | 65,000 | 67,834 | ||||||
FirstEnergy Corp., 6.45%, 2011 | 4,000 | 4,075 | ||||||
GenOn Energy, Inc., 9.875%, 2020 | 55,000 | 57,475 | ||||||
NRG Energy, Inc., 7.375%, 2017 | 30,000 | 31,425 | ||||||
NRG Energy, Inc., 8.25%, 2020 | 60,000 | 61,200 | ||||||
PPL WEM Holdings PLC, 3.9%, 2016 (n) | 110,000 | 112,880 | ||||||
Texas Competitive Electric Holdings Co. LLC, 11.5%, 2020 (n) | 20,000 | 19,650 | ||||||
|
| |||||||
$ | 1,251,161 | |||||||
|
| |||||||
Total Bonds (Identified Cost, $29,609,298) | $ | 30,718,425 | ||||||
|
| |||||||
PREFERRED STOCKS – 0.3% | ||||||||
Other Banks & Diversified Financials – 0.3% | ||||||||
Ally Financial, Inc., 7% (n) | 20 | $ | 18,796 | |||||
Ally Financial, Inc., “A”, 8.5% | 2,110 | 52,813 | ||||||
GMAC Capital Trust I, 8.125% (a) | 1,075 | 27,520 | ||||||
|
| |||||||
Total Preferred Stocks (Identified Cost, $101,194) | $ | 99,129 | ||||||
|
| |||||||
FLOATING RATE LOANS (g)(r) – 0.2% | ||||||||
Broadcasting – 0.1% | ||||||||
Gray Television, Inc., Term Loan B, 3.7%, 2014 | $ | 12,881 | $ | 12,630 | ||||
New Young Broadcasting Holding Co., Inc., Term Loan, 8%, 2015 | 12,688 | 12,743 | ||||||
|
| |||||||
$ | 25,373 | |||||||
|
| |||||||
Building – 0.0% | ||||||||
Goodman Global Holdings, Inc., 2nd Lien Term Loan, 9%, 2017 | $ | 1,683 | $ | 1,726 | ||||
|
| |||||||
Financial Institutions – 0.0% | ||||||||
Springleaf Finance Corp., Term Loan, 5.5%, 2017 | $ | 14,622 | $ | 14,314 | ||||
|
|
10
Table of Contents
MFS Strategic Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||||||
FLOATING RATE LOANS (g)(r) – continued | ||||||||||||
Gaming & Lodging – 0.1% | ||||||||||||
MGM Mirage, Term Loan, 7%, 2014 | $ | 23,116 | $ | 22,571 | ||||||||
|
| |||||||||||
Total Floating Rate Loans (Identified Cost, $57,538) | $ | 63,984 | ||||||||||
|
| |||||||||||
CONVERTIBLE PREFERRED STOCKS – 0.2% | ||||||||||||
Automotive – 0.1% | ||||||||||||
General Motors Co., 4.75% | 810 | $ | 39,479 | |||||||||
|
| |||||||||||
Insurance – 0.1% | ||||||||||||
MetLife, Inc., 5% | 430 | $ | 35,445 | |||||||||
|
| |||||||||||
Total Convertible Preferred Stocks (Identified Cost, $76,043) | $ | 74,924 | ||||||||||
|
| |||||||||||
COMMON STOCKS – 0.1% | ||||||||||||
Automotive – 0.0% | ||||||||||||
Accuride Corp. (a) | 791 | $ | 9,990 | |||||||||
|
| |||||||||||
Broadcasting – 0.1% | ||||||||||||
New Young Broadcasting Holding Co., Inc. (a) | 6 | $ | 16,200 | |||||||||
|
| |||||||||||
Printing & Publishing – 0.0% | ||||||||||||
American Media Operations, Inc. (a) | 858 | $ | 13,531 | |||||||||
|
| |||||||||||
Total Common Stocks (Identified Cost, $34,490) | $ | 39,721 | ||||||||||
|
|
Issuer | Strike Price | First Exercise | Shares/Par | Value ($) | ||||||||||||
WARRANTS – 0.1% | ||||||||||||||||
Broadcasting – 0.1% | ||||||||||||||||
New Young Broadcasting Holding Co., Inc. (1 share for 1 warrant) (Identified Cost, $18,500 )(a) | $ | 0.01 | 7/14/10 | 9 | $ | 24,300 | ||||||||||
|
| |||||||||||||||
MONEY MARKET FUNDS (v) – 2.3% | ||||||||||||||||
MFS Institutional Money Market Portfolio, 0.1%, at Cost and Net Asset Value | 749,443 | $ | 749,443 | |||||||||||||
|
| |||||||||||||||
Total Investments (Identified Cost, $30,646,506) | $ | 31,769,926 | ||||||||||||||
|
| |||||||||||||||
OTHER ASSETS, LESS LIABILITIES – 3.3% | 1,085,763 | |||||||||||||||
|
| |||||||||||||||
Net Assets – 100.0% | $ | 32,855,689 | ||||||||||||||
|
|
(a) | Non-income producing security. |
(d) | Non-income producing security – in default. |
(e) | Guaranteed by Minister for Finance of Ireland. |
(g) | The rate shown represents a weighted average coupon rate on settled positions at period end, unless otherwise indicated. |
(i) | Interest only security for which the fund receives interest on notional principal (Par amount). Par amount shown is the notional principal and does not reflect the cost of the security. |
(n) | Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be sold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. At period end, the aggregate value of these securities was $6,764,356 representing 20.6% of net assets. |
(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 fund holds the following restricted securities: |
Restricted Securities | Acquisition Date | Cost | Value | |||||||
ACL I Corp., 10.625%, 2016 | 2/10/11 | $29,508 | $26,713 | |||||||
AMC Networks, Inc., 7.75%, 2021 | 6/22/11 | 6,000 | 6,270 | |||||||
American Media, Inc., 13.5%, 2018 | 12/22/10 | 3,399 | 3,606 | |||||||
ARCap REIT, Inc., CDO, “H”, FRN, 6.1%, 2045 | 9/21/04 | 2,772 | 2,772 | |||||||
Arch Coal, Inc., 7%, 2019 | 6/08/11-6/10/11 | 35,149 | 34,913 | |||||||
Associated Materials LLC, 9.125%, 2017 | 6/09/11 | 9,776 | 9,975 | |||||||
B-Corp. Merger Sub, Inc., 8.25%, 2019 | 5/17/11-6/06/11 | 25,131 | 24,750 | |||||||
Banco do Brasil S.A., 5.875%, 2022 | 5/19/11 | 197,408 | 197,800 | |||||||
Bayview Financial Revolving Mortgage Loan Trust, FRN, 1.785%, 2040 | 3/01/06 | 180,427 | 100,914 | |||||||
Bosphorus Financial Services Ltd., FRN, 2.06%, 2012 | 3/08/05 | 18,750 | 18,601 |
11
Table of Contents
MFS Strategic Income Series
Portfolio of Investments (unaudited) – continued
Restricted Securities (continued) | Acquisition Date | Cost | Value | |||||||
CDRT Merger Sub, Inc., 8.125%, 2019 | 5/13/11 | $10,000 | $10,000 | |||||||
Capital Trust Realty Ltd., CDO, 5.16%, 2035 | 9/16/10 | 110,134 | 110,605 | |||||||
Clear Channel Communications, Inc., 9%, 2021 | 6/08/11 | 14,402 | 14,361 | |||||||
Connacher Oil & Gas Ltd., 8.5%, 2019 | 5/20/11 | 15,000 | 14,250 | |||||||
Crest Ltd., “A1” CDO, FRN, 0.726%, 2018 | 1/21/10 | 70,826 | 84,654 | |||||||
EH Holding Corp., 7.625%, 2021 | 5/17/11 | 5,000 | 5,100 | |||||||
Eagle Parent, Inc., 8.625%, 2019 | 5/11/11-5/24/11 | 15,186 | 14,456 | |||||||
Falcon Franchise Loan LLC, FRN, 3.948%, 2025 | 1/29/03 | 25,970 | 41,460 | |||||||
First Union National Bank Commercial Mortgage Trust, FRN, 1.636%, 2043 | 12/11/03 | 208 | 3 | |||||||
General Motors Financial Co., Inc., 6.75%, 2018 | 5/26/11-6/06/11 | 25,149 | 25,063 | |||||||
Kansas City Southern Railway, 6.125%, 2021 | 5/06/11-5/09/11 | 15,136 | 15,000 | |||||||
LBI Media, Inc., 8.5%, 2017 | 7/18/07 | 29,651 | 23,550 | |||||||
LINN Energy LLC, 6.5%, 2019 | 5/10/11 | 9,924 | 9,900 | |||||||
Local TV Finance LLC, 9.25%, 2015 | 11/13/07-2/16/11 | 50,184 | 51,138 | |||||||
Morgan Stanley Capital I, Inc., FRN, 1.387%, 2039 | 7/20/04 | 19,342 | 20,591 | |||||||
Navios Maritime Acquisition Corp., 8.625%, 2017 | 5/12/11 | 10,222 | 9,850 | |||||||
Packaging Dynamics Corp., 8.75%, 2016 | 1/25/11-2/01/11 | 15,221 | 15,225 | |||||||
Prudential Securities Secured Financing Corp., FRN, 7.325%, 2013 | 12/06/04 | 175,388 | 171,717 | |||||||
Salomon Brothers Mortgage Securities, Inc., FRN, 7.285%, 2032 | 1/07/05 | 137,702 | 143,112 | |||||||
Sensata Technologies B.V., 6.5%, 2019 | 5/06/11-5/18/11 | 30,297 | 29,925 | |||||||
Seven Seas Cruises S. de R.L., 9.125%, 2019 | 5/13/11 | 10,000 | 10,300 | |||||||
USI Holdings Corp., 9.75%, 2015 | 5/07/07 | 30,408 | 30,075 | |||||||
Total Restricted Securities | $1,276,649 | |||||||||
% of Net Assets | 3.9% |
The following abbreviations are used in this report and are defined:
CDO | Collateralized Debt 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:
CAD | Canadian Dollar |
CNY | Chinese Yuan Renminbi |
EUR | Euro |
GBP | British Pound |
IDR | Indonesian Rupiah |
JPY | Japanese Yen |
SEK | Swedish Krona |
12
Table of Contents
MFS Strategic Income Series
Portfolio of Investments (unaudited) – continued
Derivative Contracts at 6/30/11
Forward Foreign Currency Exchange Contracts at 6/30/11
Type | Currency | Counterparty | Contracts to Deliver/Receive | Settlement Date Range | In Exchange For | Contracts at Value | Net Unrealized Appreciation (Depreciation) | |||||||||||||||||
Asset Derivatives | ||||||||||||||||||||||||
BUY | CAD | Barclays Bank PLC | 8,857 | 7/12/11 | $ | 9,008 | $ | 9,182 | $ | 174 | ||||||||||||||
BUY | EUR | Citibank N.A. | 4,938 | 7/12/11 | 7,078 | 7,159 | 81 | |||||||||||||||||
BUY | EUR | Credit Suisse Group | 223,055 | 7/12/11 | 320,229 | 323,400 | 3,171 | |||||||||||||||||
BUY | EUR | JPMorgan Chase Bank N.A. | 90,527 | 7/12/11 | 129,178 | 131,253 | 2,075 | |||||||||||||||||
SELL | EUR | HSBC Bank | 3,476 | 7/12/11 | 5,048 | 5,040 | 8 | |||||||||||||||||
BUY | GBP | Credit Suisse Group | 21,032 | 7/12/11 | 33,679 | 33,753 | 74 | |||||||||||||||||
SELL | GBP | Barclays Bank PLC | 118,084 | 7/12/11 | 192,407 | 189,503 | 2,904 | |||||||||||||||||
SELL | GBP | Deutsche Bank AG | 118,084 | 7/12/11 | 192,479 | 189,503 | 2,976 | |||||||||||||||||
BUY | IDR | JPMorgan Chase Bank N.A. | 488,308,000 | 7/26/11 | 56,648 | 56,763 | 115 | |||||||||||||||||
BUY | JPY | Barclays Bank PLC | 27,120,034 | 7/12/11 | 335,326 | 336,885 | 1,559 | |||||||||||||||||
|
| |||||||||||||||||||||||
$ | 13,137 | |||||||||||||||||||||||
|
| |||||||||||||||||||||||
Liability Derivatives | ||||||||||||||||||||||||
SELL | CAD | Goldman Sachs International | 186,880 | 7/12/11 | $ | 193,232 | $ | 193,735 | $ | (503 | ) | |||||||||||||
BUY | CNY | Deutsche Bank AG | 1,149,000 | 11/16/11 | 178,874 | 178,390 | (484 | ) | ||||||||||||||||
SELL | EUR | Barclays Bank PLC | 31,000 | 7/12/11 | 44,602 | 44,946 | (344 | ) | ||||||||||||||||
SELL | EUR | Deutsche Bank AG | 21,443 | 7/12/11 | 30,426 | 31,090 | (664 | ) | ||||||||||||||||
SELL | EUR | Goldman Sachs International | 4,938 | 7/12/11 | 7,098 | 7,159 | (61 | ) | ||||||||||||||||
SELL | EUR | UBS AG | 984,241 | 9/15/11 | 1,418,074 | 1,424,407 | (6,333 | ) | ||||||||||||||||
SELL | GBP | Deutsche Bank AG | 5,000 | 7/12/11 | 8,009 | 8,024 | (15 | ) | ||||||||||||||||
SELL | JPY | Credit Suisse Group | 37,227,390 | 7/12/11 | 442,899 | 462,439 | (19,540 | ) | ||||||||||||||||
BUY | SEK | Credit Suisse Group | 36,840 | 7/12/11 | 5,885 | 5,822 | (63 | ) | ||||||||||||||||
|
| |||||||||||||||||||||||
$ | (28,007 | ) | ||||||||||||||||||||||
|
|
Swap Agreements at 6/30/11
Expiration | Notional Amount | Counterparty | Cash Flows to Receive | Cash Flows to Pay | Fair Value | |||||||||||||
Asset Derivatives | ||||||||||||||||||
Credit Default Swaps | ||||||||||||||||||
9/20/14 | USD | 160,000 | Goldman Sachs International (a) | 1.00% (fixed rate) | (1) | $3,517 | ||||||||||||
|
|
(1) | Fund, as protection seller, to pay notional amount upon a defined credit event by Cargill, Inc., 7.375%, 10/01/25, an A2 rated bond. The fund entered into the contract to gain issuer exposure. |
(a) | Net unamortized premiums received by the fund amounted to $237. |
The credit ratings presented here are an indicator of the current payment/performance risk of the related swap, the reference obligation for which may be either a single security or, in the case of a credit default index, a basket of securities issued by corporate or sovereign issuers. Ratings are assigned to each reference security, including each individual security within a reference basket of securities utilizing ratings from Moody’s, Fitch, and Standard & Poor’s rating agencies and applying the following hierarchy. If all three agencies provide a rating, the middle rating (after dropping the highest and lowest ratings) is assigned; if two of the three agencies rate a security, the lower of the two is assigned. Ratings are shown in the S&P and Fitch scale (e.g., AAA). The ratings for a credit default index are calculated by MFS as a weighted average of the external credit ratings of the individual securities that compose the index’s reference basket of securities.
At June 30, 2011, the fund had sufficient cash and/or other liquid securities to cover any commitments under these derivative contracts.
See Notes to Financial Statements
13
Table of Contents
MFS Strategic Income Series
FINANCIAL STATEMENTS | STATEMENT OF ASSETS AND LIABILITIES (unaudited)
This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
At 6/30/11 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $29,897,063) | $31,020,483 | |||||||
Underlying affiliated funds, at cost and value | 749,443 | |||||||
Total investments, at value (identified cost, $30,646,506) | $31,769,926 | |||||||
Cash | 16,510 | |||||||
Receivables for | ||||||||
Forward foreign currency exchange contracts | 13,137 | |||||||
Investments sold | 772,607 | |||||||
Fund shares sold | 13 | |||||||
Interest | 493,237 | |||||||
Swaps, at value (net unamortized premiums received, $237) | 3,517 | |||||||
Receivable from investment adviser | 10,376 | |||||||
Other assets | 314 | |||||||
Total assets | $33,079,637 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Forward foreign currency exchange contracts | $28,007 | |||||||
Investments purchased | 70,145 | |||||||
Fund shares reacquired | 66,889 | |||||||
Payable to affiliates | ||||||||
Shareholder servicing costs | 102 | |||||||
Distribution and/or service fees | 89 | |||||||
Payable for independent Trustees’ compensation | 215 | |||||||
Accrued expenses and other liabilities | 58,501 | |||||||
Total liabilities | $223,948 | |||||||
Net assets | $32,855,689 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $31,036,062 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 1,114,220 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency transactions | (1,611,731 | ) | ||||||
Undistributed net investment income | 2,317,138 | |||||||
Net assets | $32,855,689 | |||||||
Shares of beneficial interest outstanding | 3,145,696 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $26,375,586 | 2,516,472 | $10.48 | |||||||||
Service Class | 6,480,103 | 629,224 | 10.30 |
See Notes to Financial Statements
14
Table of Contents
MFS Strategic Income Series
FINANCIAL STATEMENTS | STATEMENT OF OPERATIONS (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
Six months ended 6/30/11 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Interest | $936,248 | |||||||
Dividends | 2,008 | |||||||
Dividends from underlying affiliated funds | 541 | |||||||
Total investment income | $938,797 | |||||||
Expenses | ||||||||
Management fee | $118,419 | |||||||
Distribution and/or service fees | 8,195 | |||||||
Shareholder servicing costs | 2,121 | |||||||
Administrative services fee | 8,679 | |||||||
Independent Trustees’ compensation | 744 | |||||||
Custodian fee | 14,648 | |||||||
Shareholder communications | 9,950 | |||||||
Auditing fees | 30,798 | |||||||
Legal fees | 313 | |||||||
Miscellaneous | 5,024 | |||||||
Total expenses | $198,891 | |||||||
Fees paid indirectly | (18 | ) | ||||||
Reduction of expenses by investment adviser | (55,097 | ) | ||||||
Net expenses | $143,776 | |||||||
Net investment income | $795,021 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency transactions | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investment transactions | $414,813 | |||||||
Futures contracts | 6,024 | |||||||
Swap transactions | 844 | |||||||
Foreign currency transactions | (120,850 | ) | ||||||
Net realized gain (loss) on investments and foreign currency transactions | $300,831 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $42,411 | |||||||
Futures contracts | (4,965 | ) | ||||||
Swap transactions | 235 | |||||||
Translation of assets and liabilities in foreign currencies | 4,087 | |||||||
Net unrealized gain (loss) on investments and foreign currency translation | $41,768 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $342,599 | |||||||
Change in net assets from operations | $1,137,620 |
See Notes to Financial Statements
15
Table of Contents
MFS Strategic Income Series
FINANCIAL STATEMENTS | STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
| Six months ended 6/30/11 (unaudited | ) | | Year ended 12/31/10 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $795,021 | $1,742,659 | ||||||
Net realized gain (loss) on investments and foreign currency transactions | 300,831 | 618,592 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 41,768 | 929,304 | ||||||
Change in net assets from operations | $1,137,620 | $3,290,555 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(1,656,044 | ) | |||||
Change in net assets from fund share transactions | $(3,142,963 | ) | $(1,174,505 | ) | ||||
Total change in net assets | $(2,005,343 | ) | $460,006 | |||||
Net assets | ||||||||
At beginning of period | 34,861,032 | 34,401,026 | ||||||
At end of period (including undistributed net investment income of $2,317,138 and | $32,855,689 | $34,861,032 |
See Notes to Financial Statements
16
Table of Contents
MFS Strategic Income Series
FINANCIAL STATEMENTS | FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund’s financial performance for the semiannual period and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
Initial Class | Six months 6/30/11 | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $10.14 | $9.68 | $8.72 | $10.55 | $10.67 | $10.64 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.24 | $0.50 | $0.51 | $0.56 | $0.59 | $0.57 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.10 | 0.45 | 1.41 | (1.76 | ) | (0.20 | ) | 0.11 | ||||||||||||||||
Total from investment operations | $0.34 | $0.95 | $1.92 | $(1.20 | ) | $0.39 | $0.68 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.49 | ) | $(0.96 | ) | $(0.63 | ) | $(0.51 | ) | $(0.57 | ) | |||||||||||||
From net realized gain on investments | — | — | — | — | — | (0.08 | ) | |||||||||||||||||
Total distributions declared to shareholders | $— | $(0.49 | ) | $(0.96 | ) | $(0.63 | ) | $(0.51 | ) | $(0.65 | ) | |||||||||||||
Net asset value, end of period | $10.48 | $10.14 | $9.68 | $8.72 | $10.55 | $10.67 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 3.35 | (n) | 10.11 | 24.25 | (12.12 | ) | 3.79 | 6.67 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.13 | (a) | 1.14 | 1.18 | 1.21 | 1.16 | 1.36 | |||||||||||||||||
Expenses after expense reductions (f) | 0.80 | (a) | 0.82 | 0.85 | 0.85 | 0.85 | 0.88 | |||||||||||||||||
Net investment income | 4.75 | (a) | 5.07 | 5.63 | 5.66 | 5.63 | 5.43 | |||||||||||||||||
Portfolio turnover | 19 | 46 | 52 | 41 | 49 | 66 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $26,376 | $28,120 | $27,652 | $20,331 | $32,507 | $30,008 |
See Notes to Financial Statements
17
Table of Contents
MFS Strategic Income Series
Financial Highlights – continued
Service Class | Six months 6/30/11 | Years ended 12/31 | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $9.97 | $9.53 | $8.60 | $10.40 | $10.54 | $10.52 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.23 | $0.47 | $0.48 | $0.53 | $0.56 | $0.53 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.10 | 0.44 | 1.39 | (1.73 | ) | (0.21 | ) | 0.11 | ||||||||||||||||
Total from investment operations | $0.33 | $0.91 | $1.87 | $(1.20 | ) | $0.35 | $0.64 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.47 | ) | $(0.94 | ) | $(0.60 | ) | $(0.49 | ) | $(0.54 | ) | |||||||||||||
From net realized gain on investments | — | — | — | — | — | (0.08 | ) | |||||||||||||||||
Total distributions declared to shareholders | $— | $(0.47 | ) | $(0.94 | ) | $(0.60 | ) | $(0.49 | ) | $(0.62 | ) | |||||||||||||
Net asset value, end of period | $10.30 | $9.97 | $9.53 | $8.60 | $10.40 | $10.54 | ||||||||||||||||||
Total return (%) (k)(r)(s) | 3.31 | (n) | 9.79 | 23.88 | (12.26 | ) | 3.42 | 6.39 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.38 | (a) | 1.39 | 1.43 | 1.47 | 1.41 | 1.62 | |||||||||||||||||
Expenses after expense reductions (f) | 1.05 | (a) | 1.07 | 1.10 | 1.10 | 1.10 | 1.13 | |||||||||||||||||
Net investment income | 4.49 | (a) | 4.83 | 5.40 | 5.46 | 5.39 | 5.18 | |||||||||||||||||
Portfolio turnover | 19 | 46 | 52 | 41 | 49 | 66 | ||||||||||||||||||
Net assets at end of period (000 omitted) | $6,480 | $6,741 | $6,749 | $5,834 | $8,192 | $6,684 |
(a) | Annualized. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(k) | The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown. |
(n) | Not annualized. |
(r) | Certain expenses have been reduced without which performance would have been lower. |
(s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
See Notes to Financial Statements
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NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) | Business and Organization |
MFS Strategic Income Series (the fund) is a series of MFS Variable Insurance Trust (the trust). The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The shareholders of each series of the trust are separate accounts of insurance companies, which offer variable annuity and/or life insurance products, and qualified retirement and pension plans.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued. The fund invests in high-yield securities rated below investment grade. Investments in high-yield securities involve greater degrees of credit and market risk than investments in higher-rated securities and tend to be more sensitive to economic conditions. The fund invests in foreign securities. Investments in foreign securities are vulnerable to the effects of changes in the relative values of the local currency and the U.S. dollar and to the effects of changes in each country’s legal, political, and economic environment.
Investment Valuations – 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. 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. 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 exchange contracts are generally valued at the mean of bid and asked prices for the time period interpolated from rates provided by a third-party pricing service for proximate time periods. Swaps are generally valued at valuations provided by a third-party pricing service. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. Values obtained from third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair
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value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. Other financial instruments are derivative instruments not reflected in total investments, such as forward foreign currency exchange contracts and swap contracts . The following is a summary of the levels used as of June 30, 2011 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities | $165,247 | $59,296 | $13,531 | $ 238,074 | ||||||||||||
U.S. Treasury Bonds & U.S. Government Agency & Equivalents | — | 564,807 | — | 564,807 | ||||||||||||
Non-U.S. Sovereign Debt | — | 5,871,972 | — | 5,871,972 | ||||||||||||
Corporate Bonds | — | 17,830,283 | — | 17,830,283 | ||||||||||||
Residential Mortgage-Backed Securities | — | 499,952 | — | 499,952 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 552,210 | — | 552,210 | ||||||||||||
Asset-Backed Securities (including CDOs) | — | 410,781 | — | 410,781 | ||||||||||||
Foreign Bonds | — | 4,988,420 | — | 4,988,420 | ||||||||||||
Floating Rate Loans | — | 63,984 | — | 63,984 | ||||||||||||
Mutual Funds | 749,443 | — | — | 749,443 | ||||||||||||
Total Investments | $914,690 | $30,841,705 | $13,531 | $31,769,926 | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Swaps | $— | $3,517 | $— | $3,517 | ||||||||||||
Forward Currency Contracts | — | (14,870 | ) | — | (14,870 | ) |
For further information regarding security characteristics, see the Portfolio of Investments.
The following is a reconciliation of level 3 assets for which significant unobservable inputs were used to determine fair value. The fund’s policy is to recognize transfers between the levels as of the end of the period. The table presents the activity of level 3 securities held at the beginning and the end of the period.
Equity Securities | Corporate Bond | Total | ||||||||||
Balance as of 12/31/10 | $— | $3,401 | $3,401 | |||||||||
Change in unrealized appreciation | — | 205 | 205 | |||||||||
Transfers into level 3 | 13,531 | — | 13,531 | |||||||||
Transfers out of level 3 | — | (3,606 | ) | (3,606 | ) | |||||||
Balance as of 6/30/11 | $13,531 | $— | $13,531 |
The net change in unrealized appreciation (depreciation) from investments still held as level 3 at June 30, 2011 is $0.
Foreign Currency Translation – Purchases and sales of foreign investments, income, and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions or on the reporting date for foreign denominated receivables and payables. Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Gains and losses attributable to foreign exchange rate movements on receivables, payables, income and expenses are recorded for financial statement purposes as foreign currency transaction gains and losses. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.
Derivatives – The fund uses derivatives for different purposes, including to earn income and enhance returns, to increase or decrease exposure to a particular market, to manage or adjust the risk profile of the fund, or as alternatives to direct investments. Derivatives are used for hedging or non-hedging purposes. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. When the fund uses derivatives as an investment to increase market exposure, or for hedging purposes, gains and losses from derivative instruments may be substantially greater than the derivative’s original cost.
The derivative instruments used by the fund were futures contracts, forward foreign currency exchange contracts, and swap agreements. The fund’s period end derivatives, as presented in the Portfolio of Investments and the associated Derivative Contract Tables, generally are indicative of the volume of its derivative activity during the period.
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Notes to Financial Statements (unaudited) – continued
The following table presents, by major type of derivative contract, the fair value, on a gross basis, of the asset and liability components of derivatives held by the fund at June 30, 2011 as reported in the Statement of Assets and Liabilities:
Fair Value | ||||||||||
Risk | Derivative Contracts | Asset Derivatives | Liability Derivatives | |||||||
Foreign Exchange | Forward Foreign Currency Exchange | $13,137 | $(28,007 | ) | ||||||
Credit | Credit Default Swaps | 3,517 | — | |||||||
Total | $16,654 | $(28,007 | ) |
The following table presents, by major type of derivative contract, the realized gain (loss) on derivatives held by the fund for the six months ended June 30, 2011 as reported in the Statement of Operations:
Risk | Futures Contracts | Swap Transactions | Foreign Currency Transactions | |||||||||
Interest Rate | $6,024 | $— | $— | |||||||||
Foreign Exchange | — | — | (134,957 | ) | ||||||||
Credit | — | 844 | — | |||||||||
Total | $6,024 | $844 | $(134,957 | ) |
The following table presents, by major type of derivative contract, the change in unrealized appreciation (depreciation) on derivatives held by the fund for the six months ended June 30, 2011 as reported in the Statement of Operations:
Risk | Futures Contracts | Swap Transactions | Translation of Assets and Liabilities in Foreign Currencies | |||||||||
Interest Rate | $(4,965 | ) | $— | $— | ||||||||
Foreign Exchange | — | — | 2,747 | |||||||||
Credit | — | 235 | — | |||||||||
Total | $(4,965 | ) | $235 | $2,747 |
Derivative counterparty credit risk is managed through formal evaluation of the creditworthiness of all potential counterparties. On certain over-the-counter derivatives, the fund attempts to reduce its exposure to counterparty credit risk whenever possible by entering into an International Swaps and Derivatives Association (ISDA) Master Agreement on a bilateral basis with each of the counterparties with whom it undertakes a significant volume of transactions. The ISDA Master Agreement gives each party to the agreement the right to terminate all transactions traded under such agreement if there is a certain deterioration in the credit quality of the other party. The ISDA Master Agreement gives the fund the right, upon an event of default by the applicable counterparty or a termination of the agreement, to close out all transactions traded under such agreement and to net amounts owed under each transaction to one net amount payable by one party to the other. This right to close out and net payments across all transactions traded under the ISDA Master Agreement could result in a reduction of the fund’s credit risk to such counterparty equal to any amounts payable by the fund under the applicable transactions, if any. However, absent an event of default by the counterparty or a termination of the agreement, the ISDA Master Agreement does not result in an offset of reported amounts of assets and liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty.
Collateral requirements differ by type of derivative. Collateral or margin requirements are set by the broker or exchange clearing house for exchange traded derivatives (i.e., futures and exchange-traded options) while collateral terms are contract specific for over-the-counter traded derivatives (i.e., forward foreign currency exchange contracts, swaps and over-the-counter options). For derivatives traded under an ISDA Master Agreement, the collateral requirements are netted across all transactions traded under such agreement and one amount is posted from one party to the other to collateralize such obligations. Cash collateral that has been pledged to cover obligations of the fund under derivative contracts, if any, will be reported separately on the Statement of Assets and Liabilities as restricted cash. Securities collateral pledged for the same purpose, if any, is noted in the Portfolio of Investments.
Futures Contracts – The fund entered into futures contracts which may be used to hedge against or obtain broad market, interest rate or currency exposure. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date.
Upon entering into a futures contract, the fund is required to deposit with the broker, either in cash or securities, an initial margin in an amount equal to a certain percentage of the notional amount of the contract. Subsequent payments (variation
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margin) are made or received by the fund each day, depending on the daily fluctuations in the value of the contract, and are recorded for financial statement purposes as unrealized gain or loss by the fund until the contract is closed or expires at which point the gain or loss on futures is realized.
The fund bears the risk of interest rates, exchange rates or securities prices moving unexpectedly, in which case, the fund may not achieve the anticipated benefits of the futures contracts and may realize a loss. While futures may present less counterparty risk to the fund since the contracts are exchange traded and the exchange’s clearinghouse guarantees payments to the broker, there is still counterparty credit risk due to the insolvency of the broker. The fund’s maximum risk of loss due to counterparty credit risk is equal to the margin posted by the fund to the broker plus any gains or minus any losses on the outstanding futures contracts.
Forward Foreign Currency Exchange Contracts – The fund entered into forward foreign currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. These contracts may be used to hedge the fund’s currency risk or for non-hedging purposes. For hedging purposes, the fund may enter into contracts to deliver or receive foreign currency that the fund will receive from or use in its normal investment activities. The fund may also use contracts to hedge against declines in the value of foreign currency denominated securities due to unfavorable exchange rate movements. For non-hedging purposes, the fund may enter into contracts with the intent of changing the relative exposure of the fund’s portfolio of securities to different currencies to take advantage of anticipated exchange rate changes.
Forward foreign currency exchange contracts are adjusted by the daily exchange rate of the underlying currency and any unrealized gains or losses are recorded as a receivable or payable for forward foreign currency exchange contracts until the contract settlement date. On contract settlement date, any gain or loss on the contract is recorded as realized gains or losses on foreign currency transactions.
Risks may arise upon entering into these contracts from unanticipated movements in the value of the contract and from the potential inability of counterparties to meet the terms of their contracts. Generally, the fund’s maximum risk due to counterparty credit risk is the unrealized gain on the contract due to the use of Continuous Linked Settlement, an industry accepted settlement system. This risk is mitigated in cases where there is an ISDA Master Agreement between the fund and the counterparty providing for netting as described above and for posting of collateral by the counterparty to the fund to cover the fund’s exposure to the counterparty under such ISDA Master Agreement.
Swap Agreements – The fund entered into swap agreements. A swap is generally an exchange of cash payments, at specified intervals or upon the occurrence of specified events, between the fund and a counterparty. The net cash payments exchanged are recorded as a realized gain or loss on swap transactions in the Statement of Operations. The value of the swap, which is adjusted daily and includes any related interest accruals to be paid or received by the fund, is recorded on the Statement of Assets and Liabilities. The daily change in value, including any related interest accruals to be paid or received, is recorded as unrealized appreciation or depreciation on swap transactions in the Statement of Operations. Amounts paid or received at the inception of the swap are reflected as premiums paid or received on the Statement of Assets and Liabilities and are amortized using the effective interest method over the term of the agreement. A liquidation payment received or made upon early termination is recorded as a realized gain or loss on swap transactions in the Statement of Operations.
Risks related to swap agreements include the possible lack of a liquid market, unfavorable market and interest rate movements of the underlying instrument and the failure of the counterparty to perform under the terms of the agreements. To address counterparty risk, swap transactions are limited to only highly-rated counterparties. The risk is further mitigated by having an ISDA Master Agreement between the fund and the counterparty providing for netting as described above and by the posting of collateral by the counterparty to the fund to cover the fund’s exposure to the counterparty under such ISDA Master Agreement.
The fund entered into credit default swaps in order to manage its exposure to the market or certain sectors of the market, to reduce its credit risk exposure to defaults of corporate and sovereign issuers or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. In a credit default swap, the protection buyer can make an upfront payment and will make a stream of payments based on a fixed percentage applied to the contract notional amount to the protection seller in exchange for the right to receive a specified return upon the occurrence of a defined credit event on the reference obligation (which may be either a single security or a basket of securities issued by corporate or sovereign issuers) and, with respect to the rare cases where physical settlement applies, the delivery by the buyer to the seller of a defined deliverable obligation. Although contract-specific, credit events generally consist of a combination of the following: bankruptcy, failure to pay, restructuring, obligation acceleration, obligation default, or repudiation/moratorium, each as defined in the 2003 ISDA Credit Derivatives Definitions as amended by the relevant contract. Restructuring is generally not applicable when the reference obligation is issued by a North American corporation and obligation acceleration, obligation default, or repudiation/moratorium are generally only applicable when the reference obligation is issued by a sovereign entity or an entity in an
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Notes to Financial Statements (unaudited) – continued
emerging country. Upon determination of the final price for the deliverable obligation (or upon delivery of the deliverable obligation in the case of physical settlement), the difference between the value of the deliverable obligation and the swap’s notional amount is recorded as realized gain or loss on swap transactions in the Statement of Operations.
Credit default swaps are considered to have credit-risk-related contingent features since they trigger payment by the protection seller to the protection buyer upon the occurrence of a defined credit event. As discussed earlier in this note, any collateral requirements for these swaps are based generally on the market value of the swap netted against collateral requirements for other types of over-the-counter derivatives traded under each counterparty’s ISDA Master Agreement. The maximum amount of future, undiscounted payments that the fund, as protection seller, could be required to make is equal to the swap’s notional amount. The protection seller’s payment obligation would be offset to the extent of the value of the contract’s deliverable obligation. At June 30, 2011, the fund did not hold any credit default swaps at an unrealized loss where it is the protection seller.
The fund’s maximum risk of loss from counterparty risk, either as the protection seller or as the protection buyer, is the fair value of the contract. This risk is mitigated by having an ISDA Master Agreement between the fund and the counterparty providing for netting as described above and by the posting of collateral by the counterparty to the fund to cover the fund’s exposure to the counterparty under such ISDA Master Agreement.
Loans and Other Direct Debt Instruments – The fund invests in loans and loan participations or other receivables. These investments may include standby financing commitments, including revolving credit facilities, which obligate the fund to supply additional cash to the borrower on demand. Loan participations involve a risk of insolvency of the lending bank or other financial intermediary.
Indemnifications – Under the fund’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund’s maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.
Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. All premium and discount is amortized or accreted for financial statement purposes in accordance with U.S. generally accepted accounting principles. The fund earns certain fees in connection with its floating rate loan purchasing activities. These fees are in addition to interest payments earned and may include amendment fees, commitment fees, facility fees, consent fees, and prepayment fees. Commitment fees are recorded on an accrual basis as income in the accompanying financial statements. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend and interest payments received in additional securities are recorded on the ex-dividend or ex-interest date in an amount equal to the value of the security on such date. Debt obligations may be placed on non-accrual status or set to accrue at a rate of interest less than the contractual coupon when the collection of all or a portion of interest has become doubtful. Interest income for those debt obligations may be further reduced by the write-off of the related interest receivables when deemed uncollectible.
The fund may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
Fees Paid Indirectly – The fund’s custody fee may be reduced according to an arrangement that measures the value of cash deposited with the custodian by the fund. This amount, for the six months ended June 30, 2011, is shown as a reduction of total expenses on the Statement of Operations.
Tax Matters and Distributions – The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from
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Notes to Financial Statements (unaudited) – continued
recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to amortization and accretion of debt securities, defaulted bonds, and straddle loss deferrals.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/10 | ||||
Ordinary income (including any short-term capital gains) | $1,656,044 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/11 | ||||
Cost of investments | $30,830,573 | |||
Gross appreciation | 1,836,994 | |||
Gross depreciation | (897,641 | ) | ||
Net unrealized appreciation (depreciation) | $939,353 | |||
As of 12/31/10 | ||||
Undistributed ordinary income | �� | 1,780,663 | ||
Capital loss carryforwards | (1,684,312 | ) | ||
Other temporary differences | (295,194 | ) | ||
Net unrealized appreciation (depreciation) | 880,850 |
As of December 31, 2010, the fund had capital loss carryforwards available to offset future realized gains. Such losses expire as follows:
12/31/16 | $(734,062 | ) | ||
12/31/17 | (950,250 | ) | ||
Total | $(1,684,312 | ) |
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and/or service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported on the Statements of Changes in Net Assets are presented by class as follows:
From net investment income | ||||||||
Six months ended 6/30/11 | Year ended 12/31/10 | |||||||
Initial Class | $— | $1,336,828 | ||||||
Service Class | — | 319,216 | ||||||
Total | $— | $1,656,044 |
(3) | Transactions with Affiliates |
Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates:
First $1 billion of average daily net assets | 0.70 | % | ||
Average daily net assets in excess of $1 billion | 0.65 | % |
The management fee incurred for the six months ended June 30, 2011 was equivalent to an annual effective rate of 0.70% of the fund’s average daily net assets.
The investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, exclusive of interest, taxes, extraordinary expenses, brokerage and transaction costs and investment-related expenses, such that total annual operating expenses do not exceed 0.80% of average daily net assets for the Initial Class shares and 1.05% of average daily net assets for the Service Class shares. This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until April 30, 2013. For the six months ended June 30, 2011, this reduction amounted to $55,001 and is reflected as a reduction of total expenses in the Statements of Operations.
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Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, is the distributor of shares of the fund. The Trustees have adopted a distribution plan for the Service Class shares pursuant to Rule 12b-1 under the Investment Company Act of 1940.
The fund’s distribution plan provides that the fund will pay MFD distribution and/or service fees equal to 0.25% per annum of its average daily net assets attributable to Service Class shares as partial consideration for services performed and expenses incurred by MFD and financial intermediaries (including participating insurance companies that invest in the fund to fund variable annuity and variable life insurance contracts, sponsors of qualified retirement and pension plans that invest in the fund, and affiliates of these participating insurance companies and plan sponsors) in connection with the sale and distribution of the Service Class shares. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries.
Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent. For the six months ended June 30, 2011, the fee was $1,886, which equated to 0.0111% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses paid by MFSC on behalf of the fund. For the six months ended June 30, 2011, these costs amounted to $235.
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund partially reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the six months ended June 30, 2011 was equivalent to an annual effective rate of 0.0513% of the fund’s average daily net assets.
Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – This fund and certain other funds managed by MFS (the funds) have entered into services agreements (the Agreements) which provide for payment of fees by the funds to Tarantino LLC and Griffin Compliance LLC in return for the provision of services of an Independent Chief Compliance Officer (ICCO) and Assistant ICCO, respectively, for the funds. The ICCO and Assistant ICCO are officers of the funds and the sole members of Tarantino LLC and Griffin Compliance LLC, respectively. The funds can terminate the Agreements with Tarantino LLC and Griffin Compliance LLC at any time under the terms of the Agreements. For the six months ended June 30, 2011, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $118 and are included in miscellaneous expense on the Statement of Operations. MFS has agreed to reimburse the fund for a portion of the payments made by the fund in the amount of $96, which is shown as a reduction of total expenses in the Statement of Operations. Additionally, MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ICCO and Assistant ICCO.
The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks a high level of current income consistent with preservation of capital and liquidity. Income earned on this investment is included in dividends from underlying affiliated funds on the Statement of Operations. This money market fund does not pay a management fee to MFS.
(4) | Portfolio Securities |
Purchases and sales of investments, other than purchased option transactions, and short-term obligations, were as follows:
Purchases | Sales | |||||||
U.S. Government securities | $423,606 | $639,277 | ||||||
Investments (non-U.S. Government securities) | $5,986,599 | $9,135,834 |
(5) | Shares of Beneficial Interest |
The fund’s Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
Six months ended 6/30/11 | Year ended 12/31/10 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 190,711 | $1,961,864 | 557,643 | $5,530,413 | ||||||||||||
Service Class | 67,897 | 689,538 | 267,644 | 2,579,652 | ||||||||||||
258,608 | $2,651,402 | 825,287 | $8,110,065 |
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Six months ended 6/30/11 | Year ended 12/31/10 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 139,689 | $1,336,828 | ||||||||||||
Service Class | — | — | 33,851 | 319,216 | ||||||||||||
— | $— | 173,540 | $1,656,044 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (447,896 | ) | $(4,632,777 | ) | (779,888 | ) | $(7,716,586 | ) | ||||||||
Service Class | (114,511 | ) | (1,161,588 | ) | (333,588 | ) | (3,224,028 | ) | ||||||||
(562,407 | ) | $(5,794,365 | ) | (1,113,476 | ) | $(10,940,614 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (257,185 | ) | $(2,670,913 | ) | (82,556 | ) | $(849,345 | ) | ||||||||
Service Class | (46,614 | ) | (472,050 | ) | (32,093 | ) | (325,160 | ) | ||||||||
(303,799 | ) | $(3,142,963 | ) | (114,649 | ) | $(1,174,505 | ) |
(6) | Line of Credit |
The fund and certain other funds managed by MFS participate in a $1.1 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Federal Reserve funds rate or one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Federal Reserve funds rate plus an agreed upon spread. For the six months ended June 30, 2011, the fund’s commitment fee and interest expense were $171 and $0, respectively, and are included in miscellaneous expense on the Statement of Operations.
(7) | Transactions in Underlying Affiliated Funds – Affiliated Issuers |
An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the fund assumes the following to be affiliated issuers:
Underlying Affiliated Funds | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 2,205,257 | 5,061,776 | (6,517,590 | ) | 749,443 | |||||||||||
Underlying Affiliated Funds | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $541 | $749,443 |
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MFS Strategic Income Series
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board’s most recent review and renewal of the fund’s Investment Advisory Agreement with MFS will be available on or about November 1, 2011 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds’ proxy voting policies and procedures is available without charge, upon request, by calling
1-800-225-2606, by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the Securities and Exchange Commission (the Commission) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. The fund’s Form N-Q is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and copies of this information may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
From time to time, MFS may post important information about the fund or the MFS funds on the MFS web site (mfs.com). This information is available by visiting the “News & Commentary” section of mfs.com or by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products and Performance” section of mfs.com.
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rev. 3/11
FACTS | WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION? |
Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
What? | The types of personal information we collect and share depend on the product or service you have with us. This information can include:
• Social Security number and account balances �� Account transactions and transaction history • Checking account information and wire transfer instructions
When you are no longer our customer, we continue to share your information as described in this notice. |
How? | All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons MFS chooses to share; and whether you can limit this sharing. |
Reasons we can share your personal information | Does MFS share? | Can you limit this sharing? | ||
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus | Yes | No | ||
For our marketing purposes – to offer our products and services to you | No | We don’t share | ||
For joint marketing with other financial companies | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your transactions and experiences | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your creditworthiness | No | We don’t share | ||
For nonaffiliates to market to you | No | We don’t share |
Questions? | Call 800-225-2606 or go to mfs.com. |
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Page 2 |
Who we are | ||
Who is providing this notice? | MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., MFS Fund Distributors, Inc., MFS Heritage Trust Company, and MFS Service Center, Inc. |
What we do | ||
How does MFS protect my personal information? | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you. | |
How does MFS collect my personal information? | We collect your personal information, for example, when you
• open an account or provide account information • direct us to buy securities or direct us to sell your securities • make a wire transfer
We also collect your personal information from others, such as credit bureaus, affiliates and other companies. | |
Why can’t I limit all sharing? | Federal law gives you the right to limit only
• sharing for affiliates’ everyday business purposes – information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you
State laws and individual companies may give you additional rights to limit sharing. |
Definitions | ||
Affiliates | Companies related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice. | |
Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies.
• MFS does not share with nonaffiliates so they can market to you. | |
Joint Marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you.
• MFS doesn’t jointly market. |
Other important information | ||
If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours. |
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ITEM 2. | CODE OF ETHICS. |
During the period covered by this report, the Registrant has not amended any provision in its Code of Ethics (the “Code”) that relates to an element of the Code’s definitions enumerated in paragraph (b) of Item 2 of this Form N-CSR. During the period covered by this report, the Registrant did not grant a waiver, including an implicit waiver, from any provision of the Code.
ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. |
Not applicable for semi-annual reports.
ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
Not applicable for semi-annual reports.
ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. |
Not applicable to the Registrant.
ITEM 6. | INVESTMENTS |
A schedule of investments for each series of the Registrant is included as part of the report to shareholders of such series under Item 1 of this Form N-CSR.
ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable to the Registrant.
ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable to the Registrant.
ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. |
Not applicable to the Registrant.
ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
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There were no material changes to the procedures by which shareholders may send recommendations to the Board for nominees to the Registrant’s Board since the Registrant last provided disclosure as to such procedures in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K or this Item.
ITEM 11. | CONTROLS AND PROCEDURES. |
(a) | Based upon their evaluation of the effectiveness of the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as conducted within 90 days of the filing date of this report on Form N-CSR, the registrant’s principal financial officer and principal executive officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. |
(b) | There were no changes in the registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by the report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
ITEM 12. | EXHIBITS. |
(a) | File the exhibits listed below as part of this form. Letter or number the exhibits in the sequence indicated. |
(1) | Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit. |
(2) | A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2): Attached hereto. |
(b) | If the report is filed under Section 13(a) or 15(d) of the Exchange Act, provide the certifications required by Rule 30a-2(b) under the Act (17 CFR 270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR 240.13a-14(b) or 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished pursuant to this paragraph will not be deemed “filed” for the purposes of Section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference: Attached hereto. |
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Notice
A copy of the Amended and Restated Declaration of Trust, as amended, of the Registrant is on file with the Secretary of State of The Commonwealth of Massachusetts and notice is hereby given that this instrument is executed on behalf of the Registrant by an officer of the Registrant as an officer and not individually and the obligations of or arising out of this instrument are not binding upon any of the Trustees or shareholders individually, but are binding only upon the assets and property of the respective constituent series of the Registrant.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) MFS VARIABLE INSURANCE TRUST
By (Signature and Title)* | MARIA F. DIORIODWYER | |
Maria F. DiOrioDwyer, President |
Date: August 16, 2011
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* | MARIA F. DIORIODWYER | |
Maria F. DiOrioDwyer, President (Principal Executive Officer) |
Date: August 16, 2011
By (Signature and Title)* | JOHN M. CORCORAN | |
John M. Corcoran, Treasurer (Principal Financial Officer and Accounting Officer) |
Date: August 16, 2011
* | Print name and title of each signing officer under his or her signature. |