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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, 2012
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ITEM 1. | REPORTS TO STOCKHOLDERS. |
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SEMIANNUAL REPORT
June 30, 2012
MFS® RESEARCH SERIES
MFS® Variable Insurance Trust
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
LETTER FROM THE CHAIRMAN AND CEO
Dear Contract Owners:
World financial markets remain a venue of uncertainty. The focus has shifted most recently to the eurozone, where policymakers are attempting to develop a plan that will help debt-laden countries and prevent their woes from spreading across the region. Volatility is likely to continue as investors test the resolve of European officials to make the tough decisions needed to solve the crisis. A slowing in the Chinese economy has added another layer of trepidation, as investors worry that the primary engine of global growth may be sputtering.
The U.S. economy is experiencing a period of growth. However, markets have been jittery in reaction to events in Europe and ahead of the U.S. presidential election. Voters in the United States are watching the economy closely and waiting to see if Congress agrees to cut the budget and extend the Bush administration tax cuts. Failure to do so could ultimately send the U.S. economy back into recession.
Amid this global uncertainty, managing risk becomes a top priority for investors and their advisors. At MFS® our global research platform is designed to ensure the smooth functioning of our investment process in all business climates. Real-time collaboration across the globe is vital in periods of heightened volatility and economic uncertainty. At MFS our investment staff shares ideas and evaluates opportunities across geographies, across both fundamental and quantitative disciplines, and across companies’ entire capital structure. We employ this uniquely collaborative approach to build better insights for our clients.
We, like our investors, are 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 emphasize the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with investment advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2012
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 (s)
Top ten holdings | ||||
Apple, Inc. | 5.4% | |||
Exxon Mobil Corp. | 4.6% | |||
Danaher Corp. | 2.3% | |||
Pfizer, Inc. | 2.1% | |||
JPMorgan Chase & Co. | 2.1% | |||
Target Corp. | 1.9% | |||
Google, Inc., “A” | 1.8% | |||
Philip Morris International, Inc. | 1.8% | |||
Merck & Co., Inc. | 1.6% | |||
Oracle Corp. | 1.6% |
Global equity sectors | ||||
Technology (s) | 18.9% | |||
Energy | 14.5% | |||
Financial Services | 14.3% | |||
Capital Goods | 14.0% | |||
Health Care | 12.0% | |||
Consumer Cyclicals | 11.9% | |||
Consumer Staples (s) | 8.7% | |||
Telecommunications/Cable Television | 4.6% |
(s) | Includes securities sold short. |
Percentages are based on net assets as of 6/30/12.
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, 2012 through June 30, 2012
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, 2012 through June 30, 2012.
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 1/01/12 | Ending Account Value 6/30/12 | Expenses Paid During Period (p) 1/01/12-6/30/12 | ||||||||||||||
Initial Class | Actual | 0.87% | $1,000.00 | $1,089.46 | $4.52 | |||||||||||||
Hypothetical (h) | 0.87% | $1,000.00 | $1,020.54 | $4.37 | ||||||||||||||
Service Class | Actual | 1.12% | $1,000.00 | $1,087.84 | $5.81 | |||||||||||||
Hypothetical (h) | 1.12% | $1,000.00 | $1,019.29 | $5.62 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
Expenses Impacting Table
Expense ratios include 0.01% of investment related expenses from short sale dividend and interest expenses.
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MFS Research Series
PORTFOLIO OF INVESTMENTS – 6/30/12 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 98.8% | ||||||||
Aerospace – 2.4% | ||||||||
Honeywell International, Inc. | 27,150 | $ | 1,516,053 | |||||
Precision Castparts Corp. | 9,780 | 1,608,712 | ||||||
United Technologies Corp. | 16,700 | 1,261,351 | ||||||
|
| |||||||
$ | 4,386,116 | |||||||
|
| |||||||
Apparel Manufacturers – 1.6% | ||||||||
Guess?, Inc. | 20,700 | $ | 628,659 | |||||
Li & Fung Ltd. | 234,000 | 454,065 | ||||||
NIKE, Inc., “B” | 10,230 | 897,989 | ||||||
VF Corp. | 7,240 | 966,178 | ||||||
|
| |||||||
$ | 2,946,891 | |||||||
|
| |||||||
Automotive – 1.3% | ||||||||
Delphi Automotive PLC (a) | 38,480 | $ | 981,240 | |||||
General Motors Co. (a) | 34,610 | 682,509 | ||||||
Johnson Controls, Inc. | 25,920 | 718,243 | ||||||
|
| |||||||
$ | 2,381,992 | |||||||
|
| |||||||
Biotechnology – 1.6% | ||||||||
Celgene Corp. (a) | 15,690 | $ | 1,006,670 | |||||
Gilead Sciences, Inc. (a) | 23,700 | 1,215,336 | ||||||
ViroPharma, Inc. (a) | 30,700 | 727,590 | ||||||
|
| |||||||
$ | 2,949,596 | |||||||
|
| |||||||
Broadcasting – 2.5% | ||||||||
News Corp., “A” | 110,690 | $ | 2,467,280 | |||||
Walt Disney Co. | 43,610 | 2,115,085 | ||||||
|
| |||||||
$ | 4,582,365 | |||||||
|
| |||||||
Brokerage & Asset Managers – 1.9% | ||||||||
BlackRock, Inc. | 7,734 | $ | 1,313,388 | |||||
CME Group, Inc. | 2,310 | 619,334 | ||||||
Franklin Resources, Inc. | 11,570 | 1,284,154 | ||||||
NASDAQ OMX Group, Inc. | 15,370 | 348,438 | ||||||
|
| |||||||
$ | 3,565,314 | |||||||
|
| |||||||
Business Services – 1.3% | ||||||||
Accenture PLC, “A” | 23,770 | $ | 1,428,339 | |||||
FleetCor Technologies, Inc. (a) | 29,570 | 1,036,133 | ||||||
|
| |||||||
$ | 2,464,472 | |||||||
|
| |||||||
Cable TV – 1.5% | ||||||||
Comcast Corp., “Special A” | 58,730 | $ | 1,844,122 | |||||
Time Warner Cable, Inc. | 10,700 | 878,470 | ||||||
|
| |||||||
$ | 2,722,592 | |||||||
|
| |||||||
Chemicals – 2.1% | ||||||||
3M Co. | 30,270 | $ | 2,712,192 | |||||
Celanese Corp. | 32,810 | 1,135,882 | ||||||
|
| |||||||
$ | 3,848,074 | |||||||
|
| |||||||
Computer Software – 4.7% | ||||||||
Autodesk, Inc. (a) | 27,950 | $ | 977,971 | |||||
Check Point Software Technologies Ltd. (a) | 17,900 | 887,661 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Computer Software – continued | ||||||||
Citrix Systems, Inc. (a) | 17,900 | $ | 1,502,526 | |||||
Microsoft Corp. | 21,700 | 663,803 | ||||||
Oracle Corp. | 100,040 | 2,971,188 | ||||||
Red Hat, Inc. (a) | 12,400 | 700,352 | ||||||
Salesforce.com, Inc. (a) | 6,590 | 911,133 | ||||||
|
| |||||||
$ | 8,614,634 | |||||||
|
| |||||||
Computer Software – Systems – 7.1% | ||||||||
Apple, Inc. (a)(s) | 16,840 | $ | 9,834,560 | |||||
EMC Corp. (a) | 80,430 | 2,061,421 | ||||||
Hewlett-Packard Co. | 57,000 | 1,146,270 | ||||||
|
| |||||||
$ | 13,042,251 | |||||||
|
| |||||||
Construction – 0.8% | ||||||||
Stanley Black & Decker, Inc. | 23,040 | $ | 1,482,854 | |||||
|
| |||||||
Consumer Products – 2.1% | ||||||||
Colgate-Palmolive Co. | 12,900 | $ | 1,342,890 | |||||
International Flavors & Fragrances, Inc. | 15,750 | 863,100 | ||||||
Newell Rubbermaid, Inc. | 49,880 | 904,823 | ||||||
Nu Skin Enterprises, Inc., “A” | 7,240 | 339,556 | ||||||
Procter & Gamble Co. | 7,430 | 455,088 | ||||||
|
| |||||||
$ | 3,905,457 | |||||||
|
| |||||||
Consumer Services – 0.3% | ||||||||
Priceline.com, Inc. (a) | 680 | $ | 451,874 | |||||
|
| |||||||
Containers – 0.4% | ||||||||
Silgan Holdings, Inc. | 16,520 | $ | 705,239 | |||||
|
| |||||||
Electrical Equipment – 2.3% | ||||||||
Danaher Corp. | 80,290 | $ | 4,181,503 | |||||
|
| |||||||
Electronics – 2.0% | ||||||||
Altera Corp. | 25,730 | $ | 870,703 | |||||
ASML Holding N.V. | 21,353 | 1,097,971 | ||||||
JDS Uniphase Corp. (a) | 39,160 | 430,760 | ||||||
Microchip Technology, Inc. | 38,230 | 1,264,648 | ||||||
|
| |||||||
$ | 3,664,082 | |||||||
|
| |||||||
Energy – Independent – 3.9% | ||||||||
Cabot Oil & Gas Corp. | 26,610 | $ | 1,048,434 | |||||
EOG Resources, Inc. | 6,410 | 577,605 | ||||||
EQT Corp. | 16,470 | 883,286 | ||||||
Noble Energy, Inc. | 5,100 | 432,582 | ||||||
Occidental Petroleum Corp. | 32,660 | 2,801,248 | ||||||
Pioneer Natural Resources Co. | 9,170 | 808,886 | ||||||
WPX Energy, Inc. (a) | 31,090 | 503,036 | ||||||
|
| |||||||
$ | 7,055,077 | |||||||
|
| |||||||
Energy – Integrated – 4.6% | ||||||||
Exxon Mobil Corp. (s) | 98,940 | $ | 8,466,296 | |||||
|
| |||||||
Engineering – Construction – 0.6% | ||||||||
Fluor Corp. | 23,750 | $ | 1,171,825 | |||||
|
|
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MFS Research Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Food & Beverages – 4.0% | ||||||||
Coca-Cola Enterprises, Inc. | 29,420 | $ | 824,937 | |||||
Dr Pepper Snapple Group, Inc. | 29,040 | 1,270,500 | ||||||
General Mills, Inc. | 29,130 | 1,122,670 | ||||||
Groupe Danone | 19,071 | 1,182,944 | ||||||
Ingredion, Inc. | 10,640 | 526,893 | ||||||
Kraft Foods, Inc., “A” | 51,340 | 1,982,751 | ||||||
Mead Johnson Nutrition Co., “A” | 5,890 | 474,204 | ||||||
|
| |||||||
$ | 7,384,899 | |||||||
|
| |||||||
Food & Drug Stores – 1.1% | ||||||||
CVS Caremark Corp. | 41,890 | $ | 1,957,520 | |||||
|
| |||||||
Gaming & Lodging – 0.1% | ||||||||
Sands China Ltd. | 79,600 | $ | 254,987 | |||||
|
| |||||||
General Merchandise – 2.7% | ||||||||
Dollar General Corp. (a) | 15,830 | $ | 860,994 | |||||
Kohl’s Corp. | 12,670 | 576,358 | ||||||
Target Corp. | 59,950 | 3,488,491 | ||||||
|
| |||||||
$ | 4,925,843 | |||||||
|
| |||||||
Health Maintenance Organizations – 1.0% | ||||||||
Aetna, Inc. | 15,720 | $ | 609,464 | |||||
UnitedHealth Group, Inc. | 19,660 | 1,150,110 | ||||||
|
| |||||||
$ | 1,759,574 | |||||||
|
| |||||||
Insurance – 3.4% | ||||||||
ACE Ltd. | 29,490 | $ | 2,186,094 | |||||
American International Group, Inc. (a) | 7,690 | 246,772 | ||||||
Aon PLC | 7,770 | 363,481 | ||||||
Chubb Corp. | 12,970 | 944,475 | ||||||
Everest Re Group Ltd. | 13,670 | 1,414,708 | ||||||
Prudential Financial, Inc. | 23,860 | 1,155,540 | ||||||
|
| |||||||
$ | 6,311,070 | |||||||
|
| |||||||
Internet – 2.7% | ||||||||
eBay, Inc. (a) | 37,560 | $ | 1,577,896 | |||||
Google, Inc., “A” (a) | 5,660 | 3,283,196 | ||||||
|
| |||||||
$ | 4,861,092 | |||||||
|
| |||||||
Machinery & Tools – 0.6% | ||||||||
Joy Global, Inc. | 18,210 | $ | 1,033,053 | |||||
|
| |||||||
Major Banks – 4.5% | ||||||||
Goldman Sachs Group, Inc. | 17,650 | $ | 1,691,929 | |||||
JPMorgan Chase & Co. (s) | 105,790 | 3,779,877 | ||||||
PNC Financial Services Group, Inc. | 25,960 | 1,586,416 | ||||||
State Street Corp. | 24,640 | 1,099,930 | ||||||
|
| |||||||
$ | 8,158,152 | |||||||
|
| |||||||
Medical & Health Technology & Services – 1.5% | ||||||||
AmerisourceBergen Corp. | 25,150 | $ | 989,653 | |||||
Express Scripts Holding Co. (a) | 19,950 | 1,113,809 | ||||||
Henry Schein, Inc. (a) | 7,670 | 602,018 | ||||||
|
| |||||||
$ | 2,705,480 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Medical Equipment – 2.6% | ||||||||
Covidien PLC | 32,110 | $ | 1,717,885 | |||||
Edwards Lifesciences Corp. (a) | 6,270 | 647,691 | ||||||
St. Jude Medical, Inc. | 28,780 | 1,148,610 | ||||||
Thermo Fisher Scientific, Inc. | 23,980 | 1,244,802 | ||||||
|
| |||||||
$ | 4,758,988 | |||||||
|
| |||||||
Natural Gas – Distribution – 0.5% | ||||||||
Spectra Energy Corp. | 29,950 | $ | 870,347 | |||||
|
| |||||||
Natural Gas – Pipeline – 0.2% | ||||||||
Kinder Morgan, Inc. | 10,058 | $ | 324,069 | |||||
|
| |||||||
Network & Telecom – 1.3% | ||||||||
F5 Networks, Inc. (a) | 6,920 | $ | 688,955 | |||||
Finisar Corp. (a) | 34,590 | 517,466 | ||||||
Fortinet, Inc. (a) | 27,440 | 637,157 | ||||||
Juniper Networks, Inc. (a) | 35,350 | 576,559 | ||||||
|
| |||||||
$ | 2,420,137 | |||||||
|
| |||||||
Oil Services – 2.0% | ||||||||
Cameron International Corp. (a) | 22,010 | $ | 940,047 | |||||
Dresser-Rand Group, Inc. (a) | 17,250 | 768,315 | ||||||
FMC Technologies, Inc. (a) | 8,770 | 344,047 | ||||||
Halliburton Co. | 8,260 | 234,501 | ||||||
Schlumberger Ltd. | 21,140 | 1,372,197 | ||||||
|
| |||||||
$ | 3,659,107 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 3.6% | ||||||||
Discover Financial Services | 31,710 | $ | 1,096,532 | |||||
Fifth Third Bancorp | 117,750 | 1,577,850 | ||||||
SunTrust Banks, Inc. | 14,860 | 360,058 | ||||||
Visa, Inc., “A” | 19,590 | 2,421,912 | ||||||
Western Union Co. | 70,330 | 1,184,357 | ||||||
|
| |||||||
$ | 6,640,709 | |||||||
|
| |||||||
Pharmaceuticals – 5.3% | ||||||||
Abbott Laboratories | 31,980 | $ | 2,061,751 | |||||
Johnson & Johnson | 12,830 | 866,795 | ||||||
Merck & Co., Inc. | 71,680 | 2,992,640 | ||||||
Pfizer, Inc. | 167,730 | 3,857,790 | ||||||
|
| |||||||
$ | 9,778,976 | |||||||
|
| |||||||
Pollution Control – 0.5% | ||||||||
Waste Connections, Inc. | 27,620 | $ | 826,390 | |||||
|
| |||||||
Precious Metals & Minerals – 0.2% | ||||||||
Goldcorp, Inc. | 10,010 | $ | 376,176 | |||||
|
| |||||||
Railroad & Shipping – 1.0% | ||||||||
Union Pacific Corp. | 16,030 | $ | 1,912,539 | |||||
|
| |||||||
Real Estate – 0.9% | ||||||||
BioMed Realty Trust, Inc., REIT | 42,900 | $ | 801,372 | |||||
Starwood Property Trust, Inc., REIT | 41,060 | 874,989 | ||||||
|
| |||||||
$ | 1,676,361 | |||||||
|
|
5
Table of Contents
MFS Research Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Restaurants – 1.6% | ||||||||
Starbucks Corp. | 14,300 | $ | 762,476 | |||||
YUM! Brands, Inc. | 33,980 | 2,188,992 | ||||||
|
| |||||||
$ | 2,951,468 | |||||||
|
| |||||||
Specialty Chemicals – 0.7% | ||||||||
Airgas, Inc. | 15,210 | $ | 1,277,792 | |||||
|
| |||||||
Specialty Stores – 2.0% | ||||||||
American Eagle Outfitters, Inc. | 22,110 | $ | 436,230 | |||||
Gap, Inc. | 16,010 | 438,034 | ||||||
PetSmart, Inc. | 17,490 | 1,192,468 | ||||||
Tiffany & Co. | 12,850 | 680,408 | ||||||
Urban Outfitters, Inc. (a) | 31,560 | 870,740 | ||||||
|
| |||||||
$ | 3,617,880 | |||||||
|
| |||||||
Telecommunications – Wireless – 0.9% | ||||||||
American Tower Corp., REIT | 10,980 | $ | 767,612 | |||||
SBA Communications Corp. (a) | 7,960 | 454,118 | ||||||
Vodafone Group PLC, ADR | 16,000 | 450,880 | ||||||
|
| |||||||
$ | 1,672,610 | |||||||
|
| |||||||
Telephone Services – 2.2% | ||||||||
AT&T, Inc. | 72,280 | $ | 2,577,505 | |||||
CenturyLink, Inc. | 10,900 | 430,441 | ||||||
Verizon Communications, Inc. | 20,440 | 908,354 | ||||||
Ziggo N.V. | 5,130 | 163,501 | ||||||
|
| |||||||
$ | 4,079,801 | |||||||
|
| |||||||
Tobacco – 2.9% | ||||||||
Lorillard, Inc. | 15,220 | $ | 2,008,279 | |||||
Philip Morris International, Inc. | 37,530 | 3,274,868 | ||||||
|
| |||||||
$ | 5,283,147 | |||||||
|
| |||||||
Trucking – 1.1% | ||||||||
Expeditors International of Washington, Inc. | 51,820 | $ | 2,008,025 | |||||
|
| |||||||
Utilities – Electric Power – 2.7% | ||||||||
AES Corp. (a) | 53,650 | $ | 688,330 | |||||
American Electric Power Co., Inc. | 22,010 | 878,199 | ||||||
CMS Energy Corp. | 70,410 | 1,654,635 | ||||||
Edison International | 37,950 | 1,753,290 | ||||||
|
| |||||||
$ | 4,974,454 | |||||||
|
| |||||||
Total Common Stocks (Identified Cost, $165,890,037) | $ | 181,049,150 | ||||||
|
| |||||||
CONVERTIBLE PREFERRED STOCKS – 0.6% | ||||||||
Utilities – Electric Power – 0.6% | ||||||||
PPL Corp., 9.5% (Identified Cost, $1,030,366) | 19,360 | $ | 1,024,144 | |||||
|
|
Issuer | Strike Price | First Exercise | Shares/Par | Value ($) | ||||||||||||
WARRANTS – 0.0% | ||||||||||||||||
Natural Gas – Pipeline – 0.0% | ||||||||||||||||
Kinder Morgan, Inc. (1 share for 1 warrant) (a) (Identified Cost, $29,358) | $ | 40 | 2/15/12 | 15,411 | $ | 33,288 | ||||||||||
|
|
MONEY MARKET FUNDS – 0.9% | ||||||||
MFS Institutional Money Market Portfolio, 0.14%, at Cost and Net Asset Value (v) | 1,685,118 | $ | 1,685,118 | |||||
|
| |||||||
Total Investments (Identified Cost, $168,634,879) | $ | 183,791,700 | ||||||
|
| |||||||
SECURITIES SOLD SHORT – (0.5)% | ||||||||
Business Services – (0.2)% | ||||||||
Computer Sciences Corp. | (19,070 | ) | $ | (473,317 | ) | |||
|
| |||||||
Food & Beverages – (0.3)% | ||||||||
Conagra Foods, Inc. | (18,830 | ) | $ | (488,262 | ) | |||
|
| |||||||
Total Securities Sold Short (Proceeds Received, $976,753) | $ | (961,579 | ) | |||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – 0.2% | 350,283 | |||||||
|
| |||||||
Net Assets – 100.0% | $ | 183,180,404 | ||||||
|
|
(a) | Non-income producing security. |
(s) | Security or a portion of the security was pledged to cover collateral requirements for securities sold short. |
(v) | Underlying affiliated fund that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end. |
At June 30, 2012, the fund had cash collateral of $484,976 and other liquid securities with an aggregate value of $1,130,248 to cover any commitments for securities sold short. Cash collateral includes “Deposits with brokers” on the Statement of Assets and Liabilities.
The following abbreviations are used in this report and are defined:
ADR | American Depositary Receipt |
PLC | Public Limited Company |
REIT | Real Estate Investment Trust |
See Notes to Financial Statements
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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 6/30/12 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $166,949,761) | $182,106,582 | |||||||
Underlying affiliated funds, at cost and value | 1,685,118 | |||||||
Total investments, at value (identified cost, $168,634,879) | $183,791,700 | |||||||
Deposits with brokers | 484,976 | |||||||
Receivables for | ||||||||
Investments sold | 2,279,050 | |||||||
Fund shares sold | 125,225 | |||||||
Dividends | 251,649 | |||||||
Other assets | 988 | |||||||
Total assets | $186,933,588 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Dividends on securities sold short | $2,680 | |||||||
Securities sold short, at value (proceeds received, $976,753) | 961,579 | |||||||
Investments purchased | 2,397,039 | |||||||
Fund shares reacquired | 315,772 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 11,298 | |||||||
Shareholder servicing costs | 323 | |||||||
Distribution and/or service fees | 442 | |||||||
Payable for independent Trustees’ compensation | 817 | |||||||
Accrued expenses and other liabilities | 63,234 | |||||||
Total liabilities | $3,753,184 | |||||||
Net assets | $183,180,404 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $190,952,487 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 15,171,981 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | (25,350,147 | ) | ||||||
Undistributed net investment income | 2,406,083 | |||||||
Net assets | $183,180,404 | |||||||
Shares of beneficial interest outstanding | 8,960,568 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $161,099,882 | 7,873,440 | $20.46 | |||||||||
Service Class | 22,080,522 | 1,087,128 | 20.31 |
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 6/30/12 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $1,787,293 | |||||||
Interest | 3,757 | |||||||
Dividends from underlying affiliated funds | 512 | |||||||
Foreign taxes withheld | (12,575 | ) | ||||||
Total investment income | $1,778,987 | |||||||
Expenses | ||||||||
Management fee | $702,810 | |||||||
Distribution and/or service fees | 27,335 | |||||||
Shareholder servicing costs | 10,189 | |||||||
Administrative services fee | 19,003 | |||||||
Independent Trustees’ compensation | 3,545 | |||||||
Custodian fee | 14,273 | |||||||
Shareholder communications | 21,554 | |||||||
Audit and tax fees | 25,952 | |||||||
Legal fees | 1,450 | |||||||
Dividend and interest expense on securities sold short | 10,159 | |||||||
Miscellaneous | 9,152 | |||||||
Total expenses | $845,422 | |||||||
Fees paid indirectly | (5 | ) | ||||||
Reduction of expenses by investment adviser | (482 | ) | ||||||
Net expenses | $844,935 | |||||||
Net investment income | $934,052 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $9,745,729 | |||||||
Written options | 8,538 | |||||||
Securities sold short | 70,627 | |||||||
Foreign currency | (139 | ) | ||||||
Net realized gain (loss) on investments and foreign currency | $9,824,755 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $5,073,436 | |||||||
Written options | 63,775 | |||||||
Securities sold short | 74,234 | |||||||
Translation of assets and liabilities in foreign currencies | (2 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $5,211,443 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $15,036,198 | |||||||
Change in net assets from operations | $15,970,250 |
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 6/30/12 (unaudited | ) | | Year ended 12/31/11 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $934,052 | $1,480,417 | ||||||
Net realized gain (loss) on investments and foreign currency | 9,824,755 | 10,557,510 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 5,211,443 | (12,321,464 | ) | |||||
Change in net assets from operations | $15,970,250 | $(283,537 | ) | |||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(1,601,688 | ) | |||||
Change in net assets from fund share transactions | $(13,696,506 | ) | $(19,927,763 | ) | ||||
Total change in net assets | $2,273,744 | $(21,812,988 | ) | |||||
Net assets | ||||||||
At beginning of period | 180,906,660 | 202,719,648 | ||||||
At end of period (including undistributed net investment income of $2,406,083 and | $183,180,404 | $180,906,660 |
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 ended 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $18.78 | $19.04 | $16.57 | $12.90 | $20.28 | $18.04 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.10 | $0.15 | $0.15 | $0.15 | $0.18 | $0.09 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.58 | (0.24 | ) | 2.47 | 3.72 | (7.47 | ) | 2.28 | ||||||||||||||||
Total from investment operations | $1.68 | $(0.09 | ) | $2.62 | $3.87 | $(7.29 | ) | $2.37 | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.17 | ) | $(0.15 | ) | $(0.20 | ) | $(0.09 | ) | $(0.13 | ) | |||||||||||||
Net asset value, end of period (x) | $20.46 | $18.78 | $19.04 | $16.57 | $12.90 | $20.28 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 8.95 | (n) | (0.45 | ) | 15.90 | 30.54 | (36.09 | ) | 13.20 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.87 | (a) | 0.88 | 0.89 | 0.90 | 0.88 | 0.88 | |||||||||||||||||
Expenses after expense reductions (f) | 0.87 | (a) | 0.88 | 0.89 | 0.90 | 0.88 | 0.88 | |||||||||||||||||
Net investment income | 1.02 | (a) | 0.79 | 0.86 | 1.05 | 1.04 | 0.46 | |||||||||||||||||
Portfolio turnover | 34 | (n) | 70 | 71 | 107 | 123 | 87 | |||||||||||||||||
Net assets at end of period (000 omitted) | $161,100 | $160,892 | $182,895 | $180,229 | $149,517 | $281,339 | ||||||||||||||||||
Supplemental Ratios (%): | ||||||||||||||||||||||||
Ratio of expenses to average net assets after expense | 0.86 | (a) | 0.86 | 0.89 | 0.90 | N/A | N/A |
See Notes to Financial Statements
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Financial Highlights – continued
Service Class | Six months ended 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $18.67 | $18.93 | $16.48 | $12.82 | $20.16 | $17.94 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.08 | $0.10 | $0.10 | $0.11 | $0.13 | $0.05 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.56 | (0.24 | ) | 2.47 | 3.71 | (7.42 | ) | 2.26 | ||||||||||||||||
Total from investment operations | $1.64 | $(0.14 | ) | $2.57 | $3.82 | $(7.29 | ) | $2.31 | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.12 | ) | $(0.12 | ) | $(0.16 | ) | $(0.05 | ) | $(0.09 | ) | |||||||||||||
Net asset value, end of period (x) | $20.31 | $18.67 | $18.93 | $16.48 | $12.82 | $20.16 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 8.78 | (n) | (0.69 | ) | 15.64 | 30.20 | (36.25 | ) | 12.93 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.12 | (a) | 1.13 | 1.14 | 1.15 | 1.14 | 1.13 | |||||||||||||||||
Expenses after expense reductions (f) | 1.12 | (a) | 1.13 | 1.14 | 1.15 | 1.13 | 1.13 | |||||||||||||||||
Net investment income | 0.78 | (a) | 0.55 | 0.61 | 0.80 | 0.78 | 0.23 | |||||||||||||||||
Portfolio turnover | 34 | (n) | 70 | 71 | 107 | 123 | 87 | |||||||||||||||||
Net assets at end of period (000 omitted) | $22,081 | $20,015 | $19,825 | $17,196 | $12,951 | $21,116 | ||||||||||||||||||
Supplemental Ratios (%): | ||||||||||||||||||||||||
Ratio of expenses to average net assets after expense | 1.11 | (a) | 1.11 | 1.14 | 1.15 | 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%. |
(x) | The net asset values per share and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
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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.
In this reporting period the fund adopted FASB Accounting Standards Update 2011-04, Fair Value Measurement (Topic 820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 seeks to improve the comparability of fair value measurements as presented and disclosed in financial statements prepared in accordance with U.S. GAAP and International Financial Reporting Standards (IFRS) by providing common requirements for fair value measurement and disclosure.
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11, Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. Although still evaluating the potential impacts of ASU 2011-11 to the fund, management expects that the impact of the fund’s adoption will be limited to additional financial statement disclosures.
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
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Notes to Financial Statements (unaudited) – continued
business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. The following is a summary of the levels used as of June 30, 2012 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $177,238,396 | $— | $— | $177,238,396 | ||||||||||||
Netherlands | 1,261,473 | — | — | 1,261,473 | ||||||||||||
France | 1,182,944 | — | — | 1,182,944 | ||||||||||||
Israel | 887,661 | — | — | 887,661 | ||||||||||||
Hong Kong | — | 709,052 | — | 709,052 | ||||||||||||
United Kingdom | 450,880 | — | — | 450,880 | ||||||||||||
Canada | 376,176 | — | — | 376,176 | ||||||||||||
Mutual Funds | 1,685,118 | — | — | 1,685,118 | ||||||||||||
Total Investments | $183,082,648 | $709,052 | $— | $183,791,700 | ||||||||||||
Short Sales | $(961,579 | ) | $— | $— | $(961,579 | ) |
For further information regarding security characteristics, see the Portfolio of Investments.
Of the level 2 investments presented above, equity investments amounting to $709,052 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.
Derivatives – The fund uses derivatives for different purposes, primarily to increase or decrease exposure to a particular market or segment of the market, or security, to increase or decrease interest rate or currency exposure, or as alternatives to direct investments. Derivatives are used for hedging or non-hedging purposes. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. When the fund uses derivatives as an investment to increase market exposure, or for hedging purposes, gains and losses from derivative instruments may be substantially greater than the derivative’s original cost.
The derivative instruments used by the fund were written options and purchased options. At June 30, 2012, the fund did not have any outstanding derivative instruments.
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, 2012 as reported in the Statement of Operations:
Risk | Investments (Purchased Options) | Written Options | ||||||
Equity | $(84,264 | ) | $8,538 |
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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, 2012 as reported in the Statement of Operations:
Risk | Written Options | |||
Equity | $63,775 |
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 contracts and exchange-traded options) while collateral terms are contract specific for over-the-counter traded derivatives (i.e., forward foreign currency exchange contracts, swap agreements 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 call options on securities that it anticipated the price would decline and also 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 call option is exercised, the premium received is offset against the proceeds to determine the 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 Options
Number of contracts | Premiums received | |||||||
Outstanding, beginning of period | 67 | $23,427 | ||||||
Options written | 114 | 10,211 | ||||||
Options closed | (48 | ) | (7,597 | ) | ||||
Options exercised | (102 | ) | (23,641 | ) | ||||
Options expired | (31 | ) | (2,400 | ) | ||||
Outstanding, end of period | — | $— |
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Notes to Financial Statements (unaudited) – continued
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, 2012, this expense amounted to $10,159. 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.
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, 2012, is shown as a reduction of total expenses on the Statement of Operations.
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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, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Foreign taxes 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:
12/31/11 | ||||
Ordinary income (including any short-term capital gains) | $1,601,688 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/12 | ||||
Cost of investments | $168,720,991 | |||
Gross appreciation | 23,986,551 | |||
Gross depreciation | (8,915,842 | ) | ||
Net unrealized appreciation (depreciation) | $15,070,709 | |||
As of 12/31/11 | ||||
Undistributed ordinary income | 1,472,031 | |||
Capital loss carryforwards | (35,088,790 | ) | ||
Other temporary differences | (122,847 | ) | ||
Net unrealized appreciation (depreciation) | 9,997,273 |
The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.
Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized after December 31, 2011 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.
As of December 31, 2011, the fund had capital loss carryforwards available to offset future realized gains. Such losses expire as follows:
Pre-enactment losses: | ||||
12/31/16 | $(9,633,475 | ) | ||
12/31/17 | (25,455,315 | ) | ||
Total | $(35,088,790 | ) |
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 6/30/12 | Year ended 12/31/11 | |||||||
Initial Class | $— | $1,473,743 | ||||||
Service Class | — | 127,945 | ||||||
Total | $— | $1,601,688 |
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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, 2012 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, 2012, the fee was $9,610, which equated to 0.0103% 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, 2012, these costs amounted to $579.
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, 2012 was equivalent to an annual effective rate of 0.0203% 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, 2012, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $970 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 $482, 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 $63,695,974 and $77,427,377, 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 6/30/12 | Year ended 12/31/11 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 297,178 | $6,055,241 | 1,101,108 | $20,631,224 | ||||||||||||
Service Class | 133,921 | 2,718,545 | 194,431 | 3,679,825 | ||||||||||||
431,099 | $8,773,786 | 1,295,539 | $24,311,049 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 82,194 | $1,473,743 | ||||||||||||
Service Class | — | — | 7,172 | 127,945 | ||||||||||||
— | $— | 89,366 | $1,601,688 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (989,456 | ) | $(20,076,548 | ) | (2,224,124 | ) | $(42,513,132 | ) | ||||||||
Service Class | (118,907 | ) | (2,393,744 | ) | (177,010 | ) | (3,327,368 | ) | ||||||||
(1,108,363 | ) | $(22,470,292 | ) | (2,401,134 | ) | $(45,840,500 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (692,278 | ) | $(14,021,307 | ) | (1,040,822 | ) | $(20,408,165 | ) | ||||||||
Service Class | 15,014 | 324,801 | 24,593 | 480,402 | ||||||||||||
(677,264 | ) | $(13,696,506 | ) | (1,016,229 | ) | $(19,927,763 | ) |
(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, 2012, the fund’s commitment fee and interest expense were $655 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 an affiliated issuer:
Underlying Affiliated Fund | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||
MFS Institutional Money Market Portfolio | 63 | 20,651,562 | (18,966,507 | ) | 1,685,118 | |||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $512 | $1,685,118 |
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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, 2012 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 is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. Copies of the fund’s Form N-Q also may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
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
SEMIANNUAL REPORT
June 30, 2012
MFS® RESEARCH INTERNATIONAL SERIES
MFS® Variable Insurance Trust
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
LETTER FROM THE CHAIRMAN AND CEO
Dear Contract Owners:
World financial markets remain a venue of uncertainty. The focus has shifted most recently to the eurozone, where policymakers are attempting to develop a plan that will help debt-laden countries and prevent their woes from spreading across the region. Volatility is likely to continue as investors test the resolve of European officials to make the tough decisions needed to solve the crisis. A slowing in the Chinese economy has added another layer of trepidation, as investors worry that the primary engine of global growth may be sputtering.
The U.S. economy is experiencing a period of growth. However, markets have been jittery in reaction to events in Europe and ahead of the U.S. presidential election. Voters in the United States are watching the economy closely and waiting to see if Congress agrees to cut the budget and extend the Bush administration tax cuts. Failure to do so could ultimately send the U.S. economy back into recession.
Amid this global uncertainty, managing risk becomes a top priority for investors and their advisors. At MFS® our global research platform is designed to ensure the smooth functioning of our investment process in all business climates. Real-time collaboration across the globe is vital in periods of heightened volatility and economic uncertainty. At MFS our investment staff shares ideas and evaluates opportunities across geographies, across both fundamental and quantitative disciplines, and across companies’ entire capital structure. We employ this uniquely collaborative approach to build better insights for our clients.
We, like our investors, are 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 emphasize the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with investment advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2012
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 | ||||
Royal Dutch Shell PLC, “A” | 3.1% | |||
Nestle S.A. | 2.9% | |||
Bayer AG | 2.5% | |||
Roche Holding AG | 2.4% | |||
Vodafone Group PLC | 2.3% | |||
Sumitomo Mitsui Financial Group, Inc. | 2.1% | |||
Novartis AG | 2.1% | |||
Rio Tinto Ltd. | 2.1% | |||
Groupe Danone | 1.9% | |||
BP PLC | 1.8% | |||
Global equity sectors | ||||
Capital Goods | 23.2% | |||
Financial Services | 21.9% | |||
Energy | 12.4% | |||
Health Care | 10.3% | |||
Consumer Staples | 9.4% | |||
Consumer Cyclicals | 7.7% | |||
Technology | 7.6% | |||
Telecommunications/Cable Television | 5.8% |
Issuer country weightings (x) | ||||
Japan | 23.2% | |||
United Kingdom | 19.8% | |||
Switzerland | 10.9% | |||
France | 7.9% | |||
Germany | 7.6% | |||
Hong Kong | 4.6% | |||
Netherlands | 4.6% | |||
Australia | 3.8% | |||
United States | 2.8% | |||
Other Countries | 14.8% | |||
Currency exposure weightings (y) | ||||
Japanese Yen | 23.2% | |||
Euro | 22.9% | |||
British Pound Sterling | 19.8% | |||
Swiss Franc | 10.9% | |||
Hong Kong Dollar | 6.4% | |||
Australian Dollar | 3.8% | |||
United States Dollar | 2.8% | |||
Brazilian Real | 2.7% | |||
Singapore Dollar | 1.4% | |||
Other Currencies | 6.1% |
(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. |
Percentages are based on net assets as of 6/30/12.
The portfolio is actively managed and current holdings may be different.
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MFS Research International Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2012 through June 30, 2012
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, 2012 through June 30, 2012.
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 1/01/12 | Ending Account Value 6/30/12 | Expenses Paid During Period (p) 1/01/12-6/30/12 | ||||||||||||||
Initial Class | Actual | 1.10% | $1,000.00 | $1,033.15 | $5.56 | |||||||||||||
Hypothetical (h) | 1.10% | $1,000.00 | $1,019.39 | $5.52 | ||||||||||||||
Service Class | Actual | 1.35% | $1,000.00 | $1,031.51 | $6.82 | |||||||||||||
Hypothetical (h) | 1.35% | $1,000.00 | $1,018.15 | $6.77 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
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MFS Research International Series
PORTFOLIO OF INVESTMENTS – 6/30/12 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 98.3% | ||||||||
Aerospace – 1.2% | ||||||||
Rolls-Royce Holdings PLC | 110,423 | $ | 1,489,707 | |||||
|
| |||||||
Alcoholic Beverages – 1.7% | ||||||||
Heineken N.V. | 40,750 | $ | 2,128,566 | |||||
|
| |||||||
Apparel Manufacturers – 1.7% | ||||||||
Li & Fung Ltd. | 522,000 | $ | 1,012,914 | |||||
LVMH Moet Hennessy Louis Vuitton S.A. | 7,794 | 1,187,948 | ||||||
|
| |||||||
$ | 2,200,862 | |||||||
|
| |||||||
Automotive – 3.9% | ||||||||
Bayerische Motoren Werke AG | 19,839 | $ | 1,437,492 | |||||
DENSO Corp. | 35,400 | 1,205,334 | ||||||
GKN PLC | 207,212 | 590,013 | ||||||
Honda Motor Co. Ltd. | 47,800 | 1,665,095 | ||||||
|
| |||||||
$ | 4,897,934 | |||||||
|
| |||||||
Broadcasting – 1.6% | ||||||||
Nippon Television Network Corp. | 6,360 | $ | 966,730 | |||||
Publicis Groupe S.A. (l) | 23,249 | 1,063,213 | ||||||
|
| |||||||
$ | 2,029,943 | |||||||
|
| |||||||
Business Services – 2.7% | ||||||||
Amadeus IT Holding S.A. | 27,866 | $ | 590,121 | |||||
Cognizant Technology Solutions Corp., “A” (a) | 10,100 | 606,000 | ||||||
Compass Group PLC | 53,450 | 560,649 | ||||||
Mitsubishi Corp. | 48,600 | 981,409 | ||||||
Nomura Research, Inc. | 30,000 | 661,210 | ||||||
|
| |||||||
$ | 3,399,389 | |||||||
|
| |||||||
Chemicals – 0.6% | ||||||||
Nufarm Ltd. | 139,208 | $ | 724,508 | |||||
|
| |||||||
Computer Software – 0.6% | ||||||||
Dassault Systems S.A. | 8,055 | $ | 756,702 | |||||
|
| |||||||
Computer Software – Systems – 1.2% | ||||||||
Canon, Inc. | 38,600 | $ | 1,545,651 | |||||
|
| |||||||
Conglomerates – 0.5% | ||||||||
Hutchison Whampoa Ltd. | 74,000 | $ | 640,018 | |||||
|
| |||||||
Consumer Products – 1.1% | ||||||||
Reckitt Benckiser Group PLC | 27,348 | $ | 1,441,267 | |||||
|
| |||||||
Electrical Equipment – 2.8% | ||||||||
Legrand S.A. (l) | 11,665 | $ | 396,728 | |||||
Schneider Electric S.A. | 23,926 | 1,333,126 | ||||||
Siemens AG | 21,598 | 1,815,478 | ||||||
|
| |||||||
$ | 3,545,332 | |||||||
|
| |||||||
Electronics – 1.6% | ||||||||
ASML Holding N.V. | 11,735 | $ | 597,984 | |||||
Samsung Electronics Co. Ltd. | 256 | 271,417 | ||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 403,174 | 1,103,541 | ||||||
|
| |||||||
$ | 1,972,942 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Energy – Independent – 2.4% | ||||||||
Cairn Energy PLC | 61,208 | $ | 253,936 | |||||
Cenovus Energy, Inc. | 13,470 | 428,272 | ||||||
CNOOC Ltd. | 255,000 | 514,409 | ||||||
INPEX Corp. | 207 | 1,160,509 | ||||||
Reliance Industries Ltd. | 47,351 | 629,750 | ||||||
|
| |||||||
$ | 2,986,876 | |||||||
|
| |||||||
Energy – Integrated – 5.8% | ||||||||
BG Group PLC | 51,968 | $ | 1,063,672 | |||||
BP PLC | 344,244 | 2,306,492 | ||||||
Royal Dutch Shell PLC, “A” | 116,518 | 3,925,057 | ||||||
|
| |||||||
$ | 7,295,221 | |||||||
|
| |||||||
Engineering – Construction – 2.0% | ||||||||
JGC Corp. | 60,000 | $ | 1,736,596 | |||||
Keppel Corp. Ltd. | 93,900 | 769,426 | ||||||
|
| |||||||
$ | 2,506,022 | |||||||
|
| |||||||
Food & Beverages – 5.0% | ||||||||
Groupe Danone | 39,324 | $ | 2,439,207 | |||||
M. Dias Branco S.A. Industria e Comercio de Alimentos | 8,400 | 246,751 | ||||||
Nestle S.A. | 60,611 | 3,615,532 | ||||||
|
| |||||||
$ | 6,301,490 | |||||||
|
| |||||||
Food & Drug Stores – 1.1% | ||||||||
Lawson, Inc. | 19,900 | $ | 1,392,256 | |||||
|
| |||||||
Gaming & Lodging – 0.8% | ||||||||
Sands China Ltd. | 326,800 | $ | 1,046,855 | |||||
|
| |||||||
Insurance – 4.4% | ||||||||
AIA Group Ltd. | 402,200 | $ | 1,386,764 | |||||
Hiscox Ltd. | 85,833 | 574,978 | ||||||
ING Groep N.V. (a) | 194,385 | 1,311,482 | ||||||
Sony Financial Holdings, Inc. | 37,500 | 613,409 | ||||||
Swiss Re Ltd. | 26,795 | 1,683,338 | ||||||
|
| |||||||
$ | 5,569,971 | |||||||
|
| |||||||
Internet – 0.5% | ||||||||
Yahoo Japan Corp. | 1,942 | $ | 628,484 | |||||
|
| |||||||
Machinery & Tools – 2.6% | ||||||||
Glory Ltd. | 45,600 | $ | 948,267 | |||||
Joy Global, Inc. | 13,450 | 763,019 | ||||||
Schindler Holding AG | 12,312 | 1,376,849 | ||||||
Sinotruk Hong Kong Ltd. | 424,500 | 254,886 | ||||||
|
| |||||||
$ | 3,343,021 | |||||||
|
| |||||||
Major Banks – 10.9% | ||||||||
Banco Santander S.A. | 116,211 | $ | 776,148 | |||||
Barclays PLC | 631,251 | 1,615,873 | ||||||
BNP Paribas | 35,370 | 1,365,416 | ||||||
BOC Hong Kong Holdings Ltd. | 287,000 | 881,392 | ||||||
HSBC Holdings PLC | 129,790 | 1,144,416 |
4
Table of Contents
MFS Research International Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Major Banks – continued | ||||||||
Mitsubishi UFJ Financial Group, Inc. | 186,700 | $ | 893,507 | |||||
Standard Chartered PLC | 103,242 | 2,250,763 | ||||||
Sumitomo Mitsui Financial Group, Inc. | 79,200 | 2,612,719 | ||||||
Westpac Banking Corp. | 104,700 | 2,277,699 | ||||||
|
| |||||||
$ | 13,817,933 | |||||||
|
| |||||||
Medical & Health Technology & Services – 1.4% | ||||||||
Diagnosticos da America S.A. | 89,100 | $ | 586,015 | |||||
Miraca Holdings, Inc. | 29,100 | 1,209,990 | ||||||
|
| |||||||
$ | 1,796,005 | |||||||
|
| |||||||
Medical Equipment – 0.5% | ||||||||
Sonova Holding AG | 7,008 | $ | 676,244 | |||||
|
| |||||||
Metals & Mining – 3.3% | ||||||||
Iluka Resources Ltd. | 109,738 | $ | 1,285,919 | |||||
Rio Tinto Ltd. | 54,540 | 2,604,793 | ||||||
Sumitomo Metal Industries Ltd. | 162,000 | 266,675 | ||||||
|
| |||||||
$ | 4,157,387 | |||||||
|
| |||||||
Natural Gas – Distribution – 1.7% | ||||||||
China Resources Gas Group Ltd. | 70,000 | $ | 120,881 | |||||
GDF SUEZ | 33,155 | 791,043 | ||||||
Tokyo Gas Co. Ltd. | 248,000 | 1,266,552 | ||||||
|
| |||||||
$ | 2,178,476 | |||||||
|
| |||||||
Network & Telecom – 1.0% | ||||||||
Ericsson, Inc., “B” (l) | 144,868 | $ | 1,320,418 | |||||
|
| |||||||
Oil Services – 0.6% | ||||||||
AMEC PLC | 29,060 | $ | 458,658 | |||||
Technip | 2,770 | 289,063 | ||||||
|
| |||||||
$ | 747,721 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 5.5% | ||||||||
Aeon Credit Service Co. Ltd. | 37,100 | $ | 687,959 | |||||
Bank Rakyat Indonesia | 551,500 | 377,435 | ||||||
China Construction Bank | 759,780 | 523,848 | ||||||
DBS Group Holdings Ltd. | 93,000 | 1,026,533 | ||||||
HDFC Bank Ltd., ADR | 15,620 | 509,212 | ||||||
ICICI Bank Ltd. | 24,987 | 406,387 | ||||||
Itau Unibanco Holding S.A., ADR | 68,270 | 950,318 | ||||||
Julius Baer Group Ltd. | 22,107 | 800,413 | ||||||
Komercni Banka A.S. | 4,395 | 762,796 | ||||||
PT Bank Mandiri Tbk. | 547,500 | 423,794 | ||||||
Siam Commercial Bank Co. Ltd. | 102,700 | 475,343 | ||||||
|
| |||||||
$ | 6,944,038 | |||||||
|
| |||||||
Pharmaceuticals – 8.4% | ||||||||
Bayer AG | 43,815 | $ | 3,159,439 | |||||
Novartis AG | 46,700 | 2,604,924 | ||||||
Roche Holding AG | 17,812 | 3,074,840 | ||||||
Santen Pharmaceutical Co. Ltd. | 43,200 | 1,769,938 | ||||||
|
| |||||||
$ | 10,609,141 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Precious Metals & Minerals – 0.4% | ||||||||
Newcrest Mining Ltd. | 24,072 | $ | 560,307 | |||||
|
| |||||||
Printing & Publishing – 0.8% | ||||||||
Pearson PLC | 47,720 | $ | 947,773 | |||||
|
| |||||||
Railroad & Shipping – 0.6% | ||||||||
East Japan Railway Co. | 12,800 | $ | 803,636 | |||||
|
| |||||||
Real Estate – 1.1% | ||||||||
GSW Immobilien AG (l) | 14,381 | $ | 491,013 | |||||
Hang Lung Properties Ltd. | 261,000 | 888,453 | ||||||
|
| |||||||
$ | 1,379,466 | |||||||
|
| |||||||
Restaurants – 0.7% | ||||||||
Whitbread PLC | 27,397 | $ | 874,267 | |||||
|
| |||||||
Specialty Chemicals – 4.0% | ||||||||
Akzo Nobel N.V. | 36,925 | $ | 1,736,949 | |||||
Chugoku Marine Paints Ltd. | 49,000 | 237,019 | ||||||
Linde AG | 13,792 | 2,148,214 | ||||||
Nippon Paint Co. Ltd. | 54,000 | 439,764 | ||||||
Symrise AG | 16,927 | 513,892 | ||||||
|
| |||||||
$ | 5,075,838 | |||||||
|
| |||||||
Specialty Stores – 1.0% | ||||||||
Industria de Diseno Textil S.A. | 11,754 | $ | 1,215,712 | |||||
|
| |||||||
Telecommunications – Wireless – 4.4% | ||||||||
KDDI Corp. | 311 | $ | 2,006,056 | |||||
TIM Participacoes S.A., ADR | 21,150 | 580,779 | ||||||
Vodafone Group PLC | 1,040,797 | 2,924,261 | ||||||
|
| |||||||
$ | 5,511,096 | |||||||
|
| |||||||
Telephone Services – 1.4% | ||||||||
China Unicom (Hong Kong) Ltd. | 600,000 | $ | 754,839 | |||||
Telecom Italia S.p.A. | 291,830 | 287,580 | ||||||
Telecom Italia S.p.A. | 818,116 | 658,092 | ||||||
|
| |||||||
$ | 1,700,511 | |||||||
|
| |||||||
Tobacco – 1.6% | ||||||||
Japan Tobacco, Inc. | 69,600 | $ | 2,062,495 | |||||
|
| |||||||
Trucking – 1.3% | ||||||||
Yamato Holdings Co. Ltd. | 100,100 | $ | 1,611,670 | |||||
|
| |||||||
Utilities – Electric Power – 1.9% | ||||||||
CEZ A.S. | 25,664 | $ | 886,903 | |||||
Energias do Brasil S.A. | 61,300 | 393,407 | ||||||
SUEZ Environnement | 36,620 | 394,196 | ||||||
Tractebel Energia S.A. | 35,920 | 664,388 | ||||||
|
| |||||||
$ | 2,338,894 | |||||||
|
| |||||||
Total Common Stocks (Identified Cost, $134,281,871) | $ | 124,172,045 | ||||||
|
| |||||||
MONEY MARKET FUNDS – 1.1% | ||||||||
MFS Institutional Money Market Portfolio, 0.14%, at Cost and Net Asset Value (v) | 1,387,566 | $ | 1,387,566 | |||||
|
|
5
Table of Contents
MFS Research International Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COLLATERAL FOR SECURITIES LOANED – 1.8% | ||||||||
Navigator Securities Lending Prime Portfolio, 0.28%, at Cost and Net Asset Value (j) | 2,332,947 | $ | 2,332,947 | |||||
|
| |||||||
Total Investments (Identified Cost, $138,002,384) | $ | 127,892,558 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – (1.2)% | (1,521,988 | ) | ||||||
|
| |||||||
Net Assets – 100.0% | $ | 126,370,570 | ||||||
|
|
(a) | Non-income producing security. |
(j) | The rate quoted is the annualized seven-day yield of the fund at period end. |
(l) | A portion of this security is on loan. |
(v) | Underlying affiliated fund that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end. |
The following abbreviations are used in this report and are defined:
ADR | American Depositary Receipt |
PLC | Public Limited Company |
See Notes to Financial Statements
6
Table of Contents
MFS Research International 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 6/30/12 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $136,614,818) | $126,504,992 | |||||||
Underlying affiliated funds, at cost and value | 1,387,566 | |||||||
Total investments, at value, including $2,320,365 of securities on loan (identified cost, $138,002,384) | $127,892,558 | |||||||
Foreign currency, at value (identified cost, $368,597) | 372,159 | |||||||
Receivables for | ||||||||
Investments sold | 507,860 | |||||||
Fund shares sold | 168,166 | |||||||
Interest and dividends | 527,985 | |||||||
Other assets | 706 | |||||||
Total assets | $129,469,434 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Investments purchased | $529,372 | |||||||
Fund shares reacquired | 115,367 | |||||||
Collateral for securities loaned, at value | 2,332,947 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 7,360 | |||||||
Shareholder servicing costs | 182 | |||||||
Distribution and/or service fees | 631 | |||||||
Payable for independent Trustees’ compensation | 34 | |||||||
Accrued expenses and other liabilities | 112,971 | |||||||
Total liabilities | $3,098,864 | |||||||
Net assets | $126,370,570 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $160,072,950 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | (10,128,035 | ) | ||||||
Accumulated net realized gain (loss) on investments and foreign currency | (28,883,417 | ) | ||||||
Undistributed net investment income | 5,309,072 | |||||||
Net assets | $126,370,570 | |||||||
Shares of beneficial interest outstanding | 11,284,813 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $94,515,544 | 8,423,749 | $11.22 | |||||||||
Service Class | 31,855,026 | 2,861,064 | 11.13 |
See Notes to Financial Statements
7
Table of Contents
MFS Research International 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 6/30/12 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $3,141,646 | |||||||
Interest | 56,790 | |||||||
Dividends from underlying affiliated funds | 588 | |||||||
Foreign taxes withheld | (246,787 | ) | ||||||
Total investment income | $2,952,237 | |||||||
Expenses | ||||||||
Management fee | $581,419 | |||||||
Distribution and/or service fees | 38,965 | |||||||
Shareholder servicing costs | 6,996 | |||||||
Administrative services fee | 14,659 | |||||||
Independent Trustees’ compensation | 2,644 | |||||||
Custodian fee | 48,578 | |||||||
Shareholder communications | 20,096 | |||||||
Audit and tax fees | 32,968 | |||||||
Legal fees | 1,223 | |||||||
Miscellaneous | 12,517 | |||||||
Total expenses | $760,065 | |||||||
Fees paid indirectly | (4 | ) | ||||||
Reduction of expenses by investment adviser | (10,921 | ) | ||||||
Net expenses | $749,140 | |||||||
Net investment income | $2,203,097 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments (net of $735 country tax) | $(2,430,002 | ) | ||||||
Foreign currency | (25,648 | ) | ||||||
Net realized gain (loss) on investments and foreign currency | $(2,455,650 | ) | ||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments (net of $12,828 increase in deferred country tax) | $4,652,166 | |||||||
Translation of assets and liabilities in foreign currencies | 3,421 | |||||||
Net unrealized gain (loss) on investments and foreign currency translation | $4,655,587 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $2,199,937 | |||||||
Change in net assets from operations | $4,403,034 |
See Notes to Financial Statements
8
Table of Contents
MFS Research International 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 6/30/12 (unaudited | ) | | Year ended 12/31/11 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $2,203,097 | $3,133,930 | ||||||
Net realized gain (loss) on investments and foreign currency | (2,455,650 | ) | 11,259,517 | |||||
Net unrealized gain (loss) on investments and foreign currency translation | 4,655,587 | (26,864,187 | ) | |||||
Change in net assets from operations | $4,403,034 | $(12,470,740 | ) | |||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(2,592,949 | ) | |||||
Change in net assets from fund share transactions | $(2,129,857 | ) | $(48,406,200 | ) | ||||
Total change in net assets | $2,273,177 | $(63,469,889 | ) | |||||
Net assets | ||||||||
At beginning of period | 124,097,393 | 187,567,282 | ||||||
At end of period (including undistributed net investment income of $5,309,072 and | $126,370,570 | $124,097,393 |
See Notes to Financial Statements
9
Table of Contents
MFS Research International 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 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $10.86 | $12.44 | $11.40 | $8.89 | $16.12 | $14.44 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.20 | $0.25 | $0.18 | $0.17 | $0.25 | $0.17 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.16 | (1.59 | ) | 1.03 | 2.51 | (6.82 | ) | 1.67 | ||||||||||||||||
Total from investment operations | $0.36 | $(1.34 | ) | $1.21 | $2.68 | $(6.57 | ) | $1.84 | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.24 | ) | $(0.17 | ) | $(0.17 | ) | $(0.10 | ) | $— | ||||||||||||||
From net realized gain on investments | — | — | — | — | (0.56 | ) | (0.16 | ) | ||||||||||||||||
Total distributions declared to shareholders | $— | $(0.24 | ) | $(0.17 | ) | $(0.17 | ) | $(0.66 | ) | $(0.16 | ) | |||||||||||||
Net asset value, end of period (x) | $11.22 | $10.86 | $12.44 | $11.40 | $8.89 | $16.12 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 3.31 | (n) | (10.88 | ) | 10.81 | 30.86 | (42.39 | ) | 12.82 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.12 | (a) | 1.14 | 1.15 | 1.23 | 1.35 | 1.56 | |||||||||||||||||
Expenses after expense reductions (f) | 1.10 | (a) | 1.10 | 1.10 | 1.10 | 1.10 | 1.10 | |||||||||||||||||
Net investment income | 3.46 | (a) | 2.04 | 1.60 | 1.78 | 2.06 | 1.14 | |||||||||||||||||
Portfolio turnover | 21 | (n) | 47 | 61 | 92 | 77 | 64 | |||||||||||||||||
Net assets at end of period (000 omitted) | $94,516 | $95,151 | $145,085 | $146,044 | $115,944 | $81,987 | ||||||||||||||||||
Service Class | Six months 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $10.79 | $12.35 | $11.33 | $8.83 | $16.02 | $14.39 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.18 | $0.21 | $0.14 | $0.15 | $0.25 | $0.16 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.16 | (1.56 | ) | 1.03 | 2.49 | (6.81 | ) | 1.63 | ||||||||||||||||
Total from investment operations | $0.34 | $(1.35 | ) | $1.17 | $2.64 | $(6.56 | ) | $1.79 | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.21 | ) | $(0.15 | ) | $(0.14 | ) | $(0.07 | ) | $— | ||||||||||||||
From net realized gain on investments | — | — | — | — | (0.56 | ) | (0.16 | ) | ||||||||||||||||
Total distributions declared to shareholders | $— | $(0.21 | ) | $(0.15 | ) | $(0.14 | ) | $(0.63 | ) | $(0.16 | ) | |||||||||||||
Net asset value, end of period (x) | $11.13 | $10.79 | $12.35 | $11.33 | $8.83 | $16.02 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 3.15 | (n) | (11.06 | ) | 10.48 | 30.57 | (42.52 | ) | 12.52 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.37 | (a) | 1.39 | 1.40 | 1.49 | 1.58 | 1.81 | |||||||||||||||||
Expenses after expense reductions (f) | 1.35 | (a) | 1.35 | 1.35 | 1.35 | 1.35 | 1.35 | |||||||||||||||||
Net investment income | 3.26 | (a) | 1.72 | 1.27 | 1.56 | 2.01 | 1.03 | |||||||||||||||||
Portfolio turnover | 21 | (n) | 47 | 61 | 92 | 77 | 64 | |||||||||||||||||
Net assets at end of period (000 omitted) | �� | $31,855 | $28,947 | $42,482 | $34,215 | $22,000 | $29,238 |
See Notes to Financial Statements
10
Table of Contents
MFS Research International Series
Financial Highlights – continued
(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. |
(x) | The net asset values per share and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
11
Table of Contents
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. 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.
In this reporting period the fund adopted FASB Accounting Standards Update 2011-04, Fair Value Measurement (Topic 820) – Amendments to Achieve Fair Common Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 seeks to improve the comparability of fair value measurements as presented and disclosed in financial statements prepared in accordance with U.S. GAAP and International Financial Reporting Standards (IFRS) by providing common requirements for fair value measurement and disclosure.
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11, Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. Although still evaluating the potential impacts of ASU 2011-11 to the fund, management expects that the impact of the fund’s adoption will be limited to additional financial statement disclosures.
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. 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
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Notes to Financial Statements (unaudited) – continued
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, 2012 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
Japan | $1,769,938 | $27,602,992 | $— | $29,372,930 | ||||||||||||
United Kingdom | 1,695,202 | 23,331,370 | — | 25,026,572 | ||||||||||||
Switzerland | — | 13,832,140 | — | 13,832,140 | ||||||||||||
France | 2,439,207 | 7,577,434 | — | 10,016,641 | ||||||||||||
Germany | 1,004,905 | 8,560,623 | — | 9,565,528 | ||||||||||||
Hong Kong | — | 5,856,395 | — | 5,856,395 | ||||||||||||
Netherlands | — | 5,774,982 | — | 5,774,982 | ||||||||||||
Australia | — | 4,848,434 | — | 4,848,434 | ||||||||||||
Brazil | 3,421,661 | — | — | 3,421,661 | ||||||||||||
Other Countries | 6,031,458 | 10,425,304 | — | 16,456,762 | ||||||||||||
Mutual Funds | 3,720,513 | — | — | 3,720,513 | ||||||||||||
Total Investments | $20,082,884 | $107,809,674 | $— | $127,892,558 |
For further information regarding security characteristics, see the Portfolio of Investments.
Of the level 2 investments presented above, equity investments amounting to $57,138,485 would have been considered level 1 investments at the beginning of the period. Of the level 1 investments presented above, equity investments amounting to $3,252,698 would have been considered level 2 investments at the beginning of the period. The primary reason for changes in the classifications between levels 1 and 2 occurs when foreign equity securities are fair valued using other observable market-based inputs in place of the closing exchange price due to events occurring after the close of the exchange or market on which the investment is principally traded. The fund’s foreign equity securities may often be valued 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
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Notes to Financial Statements (unaudited) – continued
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, 2012, 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, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Foreign taxes 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:
12/31/11 | ||||
Ordinary income (including any short-term capital gains) | $2,592,949 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/12 | ||||
Cost of investments | $138,879,964 | |||
Gross appreciation | 7,107,681 | |||
Gross depreciation | (18,095,087 | ) | ||
Net unrealized appreciation (depreciation) | $(10,987,406 | ) | ||
As of 12/31/11 | ||||
Undistributed ordinary income | 3,111,875 | |||
Capital loss carryforwards | (25,550,187 | ) | ||
Other temporary differences | (14,702 | ) | ||
Net unrealized appreciation (depreciation) | (15,652,400 | ) |
The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.
Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized after December 31, 2011 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.
As of December 31, 2011, the fund had capital loss carryforwards available to offset future realized gains. Such losses expire as follows:
Pre-enactment losses: | ||||
12/31/16 | $(20,360,853 | ) | ||
12/31/17 | (3,004,405 | ) | ||
12/31/18 | (2,184,929 | ) | ||
Total | $(25,550,187 | ) |
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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 | ||||||||
Six months ended 6/30/12 | Year ended 12/31/11 | |||||||
Initial Class | $— | $2,068,928 | ||||||
Service Class | — | 524,021 | ||||||
Total | $— | $2,592,949 |
(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, 2014. For the six months ended June 30, 2012, this reduction amounted to $10,588 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, 2012, the fee was $6,630, which equated to 0.0103% 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, 2012, these costs amounted to $366.
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, 2012 was equivalent to an annual effective rate of 0.0227% 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, 2012, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $662 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 $333, 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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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 $27,428,215 and $28,479,893, 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 6/30/12 | Year ended 12/31/11 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 607,769 | $6,726,686 | 1,306,904 | $15,524,751 | ||||||||||||
Service Class | 473,626 | 5,401,968 | 919,669 | 10,732,113 | ||||||||||||
1,081,395 | $12,128,654 | 2,226,573 | $26,256,864 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 176,983 | $2,068,928 | ||||||||||||
Service Class | — | — | 45,096 | 524,021 | ||||||||||||
— | $— | 222,079 | $2,592,949 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (943,610 | ) | $(10,886,317 | ) | (4,390,766 | ) | $(56,183,520 | ) | ||||||||
Service Class | (294,670 | ) | (3,372,194 | ) | (1,721,998 | ) | (21,072,493 | ) | ||||||||
(1,238,280 | ) | $(14,258,511 | ) | (6,112,764 | ) | $(77,256,013 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (335,841 | ) | $(4,159,631 | ) | (2,906,879 | ) | $(38,589,841 | ) | ||||||||
Service Class | 178,956 | 2,029,774 | (757,233 | ) | (9,816,359 | ) | ||||||||||
(156,885 | ) | $(2,129,857 | ) | (3,664,112 | ) | $(48,406,200 | ) |
(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, 2012, the fund’s commitment fee and interest expense were $471 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 an affiliated issuer:
Underlying Affiliated Fund | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 214,504 | 17,560,078 | (16,387,016 | ) | 1,387,566 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $588 | $1,387,566 |
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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, 2012 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 is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. Copies of the fund’s Form N-Q also may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
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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SEMIANNUAL REPORT
June 30, 2012
MFS® GROWTH SERIES
MFS® Variable Insurance Trust
VEG-SEM
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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
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MFS Growth Series
LETTER FROM THE CHAIRMAN AND CEO
Dear Contract Owners:
World financial markets remain a venue of uncertainty. The focus has shifted most recently to the eurozone, where policymakers are attempting to develop a plan that will help debt-laden countries and prevent their woes from spreading across the region. Volatility is likely to continue as investors test the resolve of European officials to make the tough decisions needed to solve the crisis. A slowing in the Chinese economy has added another layer of trepidation, as investors worry that the primary engine of global growth may be sputtering.
The U.S. economy is experiencing a period of growth. However, markets have been jittery in reaction to events in Europe and ahead of the U.S. presidential election. Voters in the United States are watching the economy closely and waiting to see if Congress agrees to cut the budget and extend the Bush administration tax cuts. Failure to do so could ultimately send the U.S. economy back into recession.
Amid this global uncertainty, managing risk becomes a top priority for investors and their advisors. At MFS® our global research platform is designed to ensure the smooth functioning of our investment process in all business climates. Real-time collaboration across the globe is vital in periods of heightened volatility and economic uncertainty. At MFS our investment staff shares ideas and evaluates opportunities across geographies, across both fundamental and quantitative disciplines, and across companies’ entire capital structure. We employ this uniquely collaborative approach to build better insights for our clients.
We, like our investors, are 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 emphasize the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with investment advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2012
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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Portfolio structure
Top ten holdings | ||||
Apple, Inc. | 8.0% | |||
Google, Inc., “A” | 3.8% | |||
Danaher Corp. | 3.2% | |||
American Tower Corp., REIT | 2.6% | |||
EMC Corp. | 2.3% | |||
Qualcomm, Inc. | 2.0% | |||
Precision Castparts Corp. | 2.0% | |||
Visa, Inc., “A” | 1.9% | |||
MasterCard, Inc., “A” | 1.8% | |||
Target Corp. | 1.8% |
Equity sectors | ||||
Technology | 26.0% | |||
Health Care | 12.8% | |||
Leisure | 10.2% | |||
Retailing | 10.0% | |||
Industrial Goods & Services | 7.8% | |||
Consumer Staples | 6.9% | |||
Energy | 5.9% | |||
Financial Services | 4.8% | |||
Special Products & Services | 3.5% | |||
Utilities & Communications | 3.0% | |||
Transportation | 2.1% | |||
Basic Materials | 2.0% | |||
Autos & Housing | 2.0% |
Percentages are based on net assets as of 6/30/12.
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, 2012 through June 30, 2012
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, 2012 through June 30, 2012.
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 1/01/12 | Ending Account Value 6/30/12 | Expenses Paid During Period (p) 1/01/12-6/30/12 | ||||||||||||||
Initial Class | Actual | 0.83% | $1,000.00 | $1,091.21 | $4.32 | |||||||||||||
Hypothetical (h) | 0.83% | $1,000.00 | $1,020.74 | $4.17 | ||||||||||||||
Service Class | Actual | 1.08% | $1,000.00 | $1,089.52 | $5.61 | |||||||||||||
Hypothetical (h) | 1.08% | $1,000.00 | $1,019.49 | $5.42 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
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PORTFOLIO OF INVESTMENTS – 6/30/12 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 97.0% | ||||||||
Aerospace – 3.0% | ||||||||
Honeywell International, Inc. | 101,120 | $ | 5,646,540 | |||||
Precision Castparts Corp. | 70,622 | 11,616,612 | ||||||
|
| |||||||
$ | 17,263,152 | |||||||
|
| |||||||
Alcoholic Beverages – 1.4% | ||||||||
Diageo PLC | 323,673 | $ | 8,323,640 | |||||
|
| |||||||
Apparel Manufacturers – 1.7% | ||||||||
LVMH Moet Hennessy Louis Vuitton S.A. | 19,312 | $ | 2,943,502 | |||||
NIKE, Inc., “B” | 36,406 | 3,195,719 | ||||||
VF Corp. | 27,930 | 3,727,259 | ||||||
|
| |||||||
$ | 9,866,480 | |||||||
|
| |||||||
Automotive – 1.2% | ||||||||
Johnson Controls, Inc. | 211,320 | $ | 5,855,677 | |||||
LKQ Corp. (a) | 41,590 | 1,389,106 | ||||||
|
| |||||||
$ | 7,244,783 | |||||||
|
| |||||||
Biotechnology – 4.8% | ||||||||
Alexion Pharmaceuticals, Inc. (a) | 78,410 | $ | 7,786,113 | |||||
Biogen Idec, Inc. (a) | 53,678 | 7,750,030 | ||||||
Celgene Corp. (a) | 110,701 | 7,102,576 | ||||||
Gilead Sciences, Inc. (a) | 101,960 | 5,228,509 | ||||||
|
| |||||||
$ | 27,867,228 | |||||||
|
| |||||||
Broadcasting – 4.9% | ||||||||
Discovery Communications, Inc., “A” (a) | 83,080 | $ | 4,486,320 | |||||
News Corp., “A” | 381,120 | 8,495,165 | ||||||
Viacom, Inc., “B” | 199,370 | 9,374,377 | ||||||
Walt Disney Co. | 122,920 | 5,961,620 | ||||||
|
| |||||||
$ | 28,317,482 | |||||||
|
| |||||||
Brokerage & Asset Managers – 1.1% | ||||||||
Affiliated Managers Group, Inc. (a) | 29,790 | $ | 3,260,516 | |||||
BlackRock, Inc. | 17,013 | 2,889,148 | ||||||
|
| |||||||
$ | 6,149,664 | |||||||
|
| |||||||
Business Services – 2.8% | ||||||||
Cognizant Technology Solutions Corp., “A” (a) | 123,839 | $ | 7,430,340 | |||||
FleetCor Technologies, Inc. (a) | 65,600 | 2,298,624 | ||||||
Verisk Analytics, Inc., “A” (a) | 137,910 | 6,793,447 | ||||||
|
| |||||||
$ | 16,522,411 | |||||||
|
| |||||||
Cable TV – 1.5% | ||||||||
Comcast Corp., “Special A” | 272,496 | $ | 8,556,374 | |||||
|
| |||||||
Chemicals – 0.4% | ||||||||
Monsanto Co. | 29,140 | $ | 2,412,209 | |||||
|
| |||||||
Computer Software – 5.2% | ||||||||
Autodesk, Inc. (a) | 81,070 | $ | 2,836,639 | |||||
Check Point Software Technologies Ltd. (a) | 153,500 | 7,612,065 | ||||||
Citrix Systems, Inc. (a) | 64,080 | 5,378,875 | ||||||
Oracle Corp. | 148,560 | 4,412,232 | ||||||
Parametric Technology Corp. (a) | 98,720 | 2,069,171 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Computer Software – continued | ||||||||
Red Hat, Inc. (a) | 52,670 | $ | 2,974,802 | |||||
Salesforce.com, Inc. (a) | 20,028 | 2,769,071 | ||||||
VeriSign, Inc. (a) | 54,733 | 2,384,717 | ||||||
|
| |||||||
$ | 30,437,572 | |||||||
|
| |||||||
Computer Software – Systems – 11.0% | ||||||||
Apple, Inc. (a) | 79,402 | $ | 46,370,768 | |||||
EMC Corp. (a) | 519,470 | 13,314,016 | ||||||
NetApp, Inc. (a) | 98,140 | 3,122,815 | ||||||
Verifone Systems, Inc. (a) | 43,320 | 1,433,459 | ||||||
|
| |||||||
$ | 64,241,058 | |||||||
|
| |||||||
Construction – 0.8% | ||||||||
Stanley Black & Decker, Inc. | 70,670 | $ | 4,548,321 | |||||
|
| |||||||
Consumer Products – 0.7% | ||||||||
Estee Lauder Cos., Inc., “A” | 77,580 | $ | 4,198,630 | |||||
|
| |||||||
Consumer Services – 0.7% | ||||||||
Priceline.com, Inc. (a) | 5,716 | $ | 3,798,396 | |||||
|
| |||||||
Electrical Equipment – 3.2% | ||||||||
Danaher Corp. | 363,040 | $ | 18,907,123 | |||||
|
| |||||||
Electronics – 2.3% | ||||||||
Altera Corp. | 133,150 | $ | 4,505,796 | |||||
ASML Holding N.V. | 53,497 | 2,750,816 | ||||||
Broadcom Corp., “A” | 132,331 | 4,472,788 | ||||||
Linear Technology Corp. | 57,840 | 1,812,127 | ||||||
|
| |||||||
$ | 13,541,527 | |||||||
|
| |||||||
Energy – Independent – 3.6% | ||||||||
Cabot Oil & Gas Corp. | 141,990 | $ | 5,594,406 | |||||
EOG Resources, Inc. | 30,990 | 2,792,509 | ||||||
EQT Corp. | 46,600 | 2,499,158 | ||||||
Noble Energy, Inc. | 68,500 | 5,810,170 | ||||||
Pioneer Natural Resources Co. | 20,253 | 1,786,517 | ||||||
Range Resources Corp. | 43,920 | 2,717,330 | ||||||
|
| |||||||
$ | 21,200,090 | |||||||
|
| |||||||
Engineering – Construction – 0.3% | ||||||||
Fluor Corp. | 30,570 | $ | 1,508,324 | |||||
|
| |||||||
Food & Beverages – 2.9% | ||||||||
General Mills, Inc. | 48,090 | $ | 1,853,389 | |||||
Groupe Danone | 73,388 | 4,552,143 | ||||||
Kraft Foods, Inc., “A” | 76,300 | 2,946,706 | ||||||
Mead Johnson Nutrition Co., “A” | 91,830 | 7,393,233 | ||||||
|
| |||||||
$ | 16,745,471 | |||||||
|
| |||||||
Gaming & Lodging – 1.5% | ||||||||
Las Vegas Sands Corp. | 116,360 | $ | 5,060,496 | |||||
Royal Caribbean Cruises Ltd. | 62,230 | 1,619,847 | ||||||
Wynn Resorts Ltd. | 17,263 | 1,790,518 | ||||||
|
| |||||||
$ | 8,470,861 | |||||||
|
|
4
Table of Contents
MFS Growth Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
General Merchandise – 4.1% | ||||||||
Costco Wholesale Corp. | 86,047 | $ | 8,174,465 | |||||
Dollar General Corp. (a) | 96,750 | 5,262,233 | ||||||
Target Corp. | 177,789 | 10,345,542 | ||||||
|
| |||||||
$ | 23,782,240 | |||||||
|
| |||||||
Internet – 4.8% | ||||||||
Baidu, Inc., ADR (a) | 9,750 | $ | 1,121,055 | |||||
eBay, Inc. (a) | 74,710 | 3,138,567 | ||||||
Facebook, Inc., “A“ (a) | 51,640 | 1,607,037 | ||||||
Google, Inc., “A” (a) | 38,291 | 22,211,460 | ||||||
|
| |||||||
$ | 28,078,119 | |||||||
|
| |||||||
Leisure & Toys – 0.5% | ||||||||
Polaris Industries, Inc. | 43,356 | $ | 3,099,087 | |||||
|
| |||||||
Machinery & Tools – 0.9% | ||||||||
Joy Global, Inc. | 51,980 | $ | 2,948,825 | |||||
Polypore International, Inc. (a)(l) | 40,470 | 1,634,583 | ||||||
United Rentals, Inc. (a) | 16,390 | 557,916 | ||||||
|
| |||||||
$ | 5,141,324 | |||||||
|
| |||||||
Medical & Health Technology & Services – 2.2% | ||||||||
Catamaran Corp. (a) | 40,364 | $ | 4,004,512 | |||||
Cerner Corp. (a) | 59,504 | 4,918,601 | ||||||
Express Scripts Holding Co. (a) | 37,620 | 2,100,325 | ||||||
IDEXX Laboratories, Inc. (a) | 19,300 | 1,855,309 | ||||||
|
| |||||||
$ | 12,878,747 | |||||||
|
| |||||||
Medical Equipment – 3.3% | ||||||||
Cooper Cos., Inc. | 18,670 | $ | 1,489,119 | |||||
Covidien PLC | 154,061 | 8,242,264 | ||||||
Thermo Fisher Scientific, Inc. | 185,395 | 9,623,854 | ||||||
|
| |||||||
$ | 19,355,237 | |||||||
|
| |||||||
Natural Gas – Pipeline – 0.4% | ||||||||
Kinder Morgan, Inc. | 64,750 | $ | 2,086,245 | |||||
|
| |||||||
Network & Telecom – 2.7% | ||||||||
F5 Networks, Inc. (a) | 41,972 | $ | 4,178,732 | |||||
Qualcomm, Inc. | 209,717 | 11,677,043 | ||||||
|
| |||||||
$ | 15,855,775 | |||||||
|
| |||||||
Oil Services – 2.3% | ||||||||
Cameron International Corp. (a) | 95,750 | $ | 4,089,483 | |||||
Dresser-Rand Group, Inc. (a) | 90,960 | 4,051,358 | ||||||
FMC Technologies, Inc. (a) | 59,650 | 2,340,070 | ||||||
Schlumberger Ltd. | 44,869 | 2,912,447 | ||||||
|
| |||||||
$ | 13,393,358 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 3.7% | ||||||||
MasterCard, Inc., “A” | 24,427 | $ | 10,506,297 | |||||
Visa, Inc., “A” | 89,843 | 11,107,290 | ||||||
|
| |||||||
$ | 21,613,587 | |||||||
|
| |||||||
Pharmaceuticals – 2.5% | ||||||||
Abbott Laboratories | 92,350 | $ | 5,953,805 | |||||
Allergan, Inc. | 90,891 | 8,413,780 | ||||||
|
| |||||||
$ | 14,367,585 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Pollution Control – 0.4% | ||||||||
Stericycle, Inc. (a) | 25,420 | $ | 2,330,251 | |||||
|
| |||||||
Railroad & Shipping – 1.3% | ||||||||
Kansas City Southern Co. | 45,650 | $ | 3,175,414 | |||||
Union Pacific Corp. | 36,431 | 4,346,583 | ||||||
|
| |||||||
$ | 7,521,997 | |||||||
|
| |||||||
Restaurants – 1.8% | ||||||||
Starbucks Corp. | 125,670 | $ | 6,700,724 | |||||
YUM! Brands, Inc. | 54,070 | 3,483,189 | ||||||
|
| |||||||
$ | 10,183,913 | |||||||
|
| |||||||
Specialty Chemicals – 1.6% | ||||||||
Airgas, Inc. | 54,490 | $ | 4,577,705 | |||||
Praxair, Inc. | 45,959 | 4,997,122 | ||||||
|
| |||||||
$ | 9,574,827 | |||||||
|
| |||||||
Specialty Stores – 4.2% | ||||||||
PetSmart, Inc. | 75,940 | $ | 5,177,589 | |||||
Ross Stores, Inc. | 158,118 | 9,877,631 | ||||||
Tiffany & Co. | 57,210 | 3,029,270 | ||||||
Tractor Supply Co. | 26,370 | 2,190,292 | ||||||
Urban Outfitters, Inc. (a) | 147,842 | 4,078,961 | ||||||
|
| |||||||
$ | 24,353,743 | |||||||
|
| |||||||
Telecommunications – Wireless – 2.6% | ||||||||
American Tower Corp., REIT | 219,263 | $ | 15,328,676 | |||||
|
| |||||||
Tobacco – 1.9% | ||||||||
Lorillard, Inc. | 26,430 | $ | 3,487,439 | |||||
Philip Morris International, Inc. | 89,490 | 7,808,897 | ||||||
|
| |||||||
$ | 11,296,336 | |||||||
|
| |||||||
Trucking – 0.8% | ||||||||
Expeditors International of Washington, Inc. | 120,646 | $ | 4,675,033 | |||||
|
| |||||||
Total Common Stocks (Identified Cost, $477,407,667) | $ | 565,036,876 | ||||||
|
| |||||||
MONEY MARKET FUNDS – 3.3% | ||||||||
MFS Institutional Money Market Portfolio, 0.14%, at Cost and Net Asset Value (v) | 19,169,267 | $ | 19,169,267 | |||||
|
| |||||||
COLLATERAL FOR SECURITIES LOANED – 0.2% | ||||||||
Navigator Securities Lending Prime Portfolio, 0.28%, at Cost and Net Asset Value (j) | 1,118,798 | $ | 1,118,798 | |||||
|
| |||||||
Total Investments (Identified Cost, $497,695,732) | $ | 585,324,941 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – (0.5)% | (3,156,670 | ) | ||||||
|
| |||||||
Net Assets – 100.0% | $ | 582,168,271 | ||||||
|
|
5
Table of Contents
MFS Growth Series
Portfolio of Investments (unaudited) – continued
(a) | Non-income producing security. |
(j) | The rate quoted is the annualized seven-day yield of the fund at period end. |
(l) | A portion of this security is on loan. |
(v) | Underlying affiliated fund that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end. |
The following abbreviations are used in this report and are defined:
ADR | American Depositary Receipt |
PLC | Public Limited Company |
REIT | Real Estate Investment Trust |
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 6/30/12 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $478,526,465) | $566,155,674 | |||||||
Underlying affiliated funds, at cost and value | 19,169,267 | |||||||
Total investments, at value, including $1,144,006 of securities on loan (identified cost, $497,695,732) | $585,324,941 | |||||||
Receivables for | ||||||||
Investments sold | 4,209,569 | |||||||
Fund shares sold | 708,668 | |||||||
Interest and dividends | 424,042 | |||||||
Other assets | 2,486 | |||||||
Total assets | $590,669,706 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Investments purchased | $7,012,755 | |||||||
Fund shares reacquired | 205,035 | |||||||
Collateral for securities loaned, at value | 1,118,798 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 35,657 | |||||||
Shareholder servicing costs | 757 | |||||||
Distribution and/or service fees | 1,486 | |||||||
Payable for independent Trustees’ compensation | 59 | |||||||
Accrued expenses and other liabilities | 126,888 | |||||||
Total liabilities | $8,501,435 | |||||||
Net assets | $582,168,271 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $518,284,397 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 87,629,207 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | (23,920,796 | ) | ||||||
Undistributed net investment income | 175,463 | |||||||
Net assets | $582,168,271 | |||||||
Shares of beneficial interest outstanding | 21,776,640 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $507,775,549 | 18,947,201 | $26.80 | |||||||||
Service Class | 74,392,722 | 2,829,439 | 26.29 |
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 6/30/12 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $2,595,536 | |||||||
Interest | 16,611 | |||||||
Dividends from underlying affiliated funds | 7,426 | |||||||
Foreign taxes withheld | (31,136 | ) | ||||||
Total investment income | $2,588,437 | |||||||
Expenses | ||||||||
Management fee | $2,115,460 | |||||||
Distribution and/or service fees | 85,387 | |||||||
Shareholder servicing costs | 29,929 | |||||||
Administrative services fee | 47,138 | |||||||
Independent Trustees’ compensation | 9,133 | |||||||
Custodian fee | 29,573 | |||||||
Shareholder communications | 51,854 | |||||||
Audit and tax fees | 25,951 | |||||||
Legal fees | 3,884 | |||||||
Miscellaneous | 16,109 | |||||||
Total expenses | $2,414,418 | |||||||
Fees paid indirectly | (5 | ) | ||||||
Reduction of expenses by investment adviser | (1,439 | ) | ||||||
Net expenses | $2,412,974 | |||||||
Net investment income | $175,463 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $21,419,412 | |||||||
Foreign currency | (3,866 | ) | ||||||
Net realized gain (loss) on investments and foreign currency | $21,415,546 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $25,952,246 | |||||||
Translation of assets and liabilities in foreign currencies | (4 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $25,952,242 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $47,367,788 | |||||||
Change in net assets from operations | $47,543,251 |
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 6/30/12 (unaudited | ) | | Year ended 12/31/11 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income (loss) | $175,463 | $(133,687 | ) | |||||
Net realized gain (loss) on investments and foreign currency | 21,415,546 | 36,539,304 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 25,952,242 | (38,178,192 | ) | |||||
Change in net assets from operations | $47,543,251 | $(1,772,575 | ) | |||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(934,874 | ) | |||||
Change in net assets from fund share transactions | $16,432,775 | $(25,758,827 | ) | |||||
Total change in net assets | $63,976,026 | $(28,466,276 | ) | |||||
Net assets | ||||||||
At beginning of period | 518,192,245 | 546,658,521 | ||||||
At end of period (including undistributed net investment income of $175,463 and | $582,168,271 | $518,192,245 |
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 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $24.56 | $24.69 | $21.43 | $15.62 | $25.01 | $20.64 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.01 | $(0.00 | )(w) | $0.05 | $0.03 | $0.05 | $0.05 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 2.23 | (0.08 | ) | 3.24 | 5.83 | (9.39 | ) | 4.32 | ||||||||||||||||
Total from investment operations | $2.24 | $(0.08 | ) | $3.29 | $5.86 | $(9.34 | ) | $4.37 | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.05 | ) | $(0.03 | ) | $(0.05 | ) | $(0.05 | ) | $— | ||||||||||||||
Net asset value, end of period (x) | $26.80 | $24.56 | $24.69 | $21.43 | $15.62 | $25.01 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 9.12 | (n) | (0.32 | ) | 15.34 | 37.67 | (37.42 | ) | 21.17 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.83 | (a) | 0.84 | 0.85 | 0.86 | 0.84 | 0.87 | |||||||||||||||||
Expenses after expense reductions (f) | 0.83 | (a) | 0.84 | 0.85 | 0.86 | 0.84 | 0.87 | |||||||||||||||||
Net investment income | 0.09 | (a) | (0.00 | )(w) | 0.24 | 0.14 | 0.25 | 0.20 | ||||||||||||||||
Portfolio turnover | 32 | (n) | 75 | 100 | 100 | 129 | 84 | |||||||||||||||||
Net assets at end of period (000 omitted) | $507,776 | $461,382 | $503,497 | $498,288 | $389,813 | $711,418 | ||||||||||||||||||
Service Class | Six months ended 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $24.13 | $24.27 | $21.10 | $15.37 | $24.61 | $20.36 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (loss) (d) | $(0.02 | ) | $(0.06 | ) | $0.00 | (w) | $(0.02 | ) | $0.00 | (w) | $(0.01 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | 2.18 | (0.08 | ) | 3.17 | 5.76 | (9.24 | ) | 4.26 | ||||||||||||||||
Total from investment operations | $2.16 | $(0.14 | ) | $3.17 | $5.74 | $(9.24 | ) | $4.25 | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.00 | )(w) | $— | $(0.01 | ) | $— | $— | ||||||||||||||||
Net asset value, end of period (x) | $26.29 | $24.13 | $24.27 | $21.10 | $15.37 | $24.61 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 8.95 | (n) | (0.56 | ) | 15.02 | 37.33 | (37.55 | ) | 20.87 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.08 | (a) | 1.09 | 1.10 | 1.10 | 1.09 | 1.12 | |||||||||||||||||
Expenses after expense reductions (f) | 1.08 | (a) | 1.09 | 1.10 | 1.10 | 1.08 | 1.12 | |||||||||||||||||
Net investment income (loss) | (0.15 | )(a) | (0.25 | ) | 0.02 | (0.11 | ) | 0.01 | (0.05 | ) | ||||||||||||||
Portfolio turnover | 32 | (n) | 75 | 100 | 100 | 129 | 84 | |||||||||||||||||
Net assets at end of period (000 omitted) | $74,393 | $56,810 | $43,161 | $31,861 | $18,684 | $30,698 |
See Notes to Financial Statements
10
Table of Contents
MFS Growth Series
Financial Highlights – continued
(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. |
(x) | The net asset values per share and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
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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.
In this reporting period the fund adopted FASB Accounting Standards Update 2011-04, Fair Value Measurement (Topic 820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 seeks to improve the comparability of fair value measurements as presented and disclosed in financial statements prepared in accordance with U.S. GAAP and International Financial Reporting Standards (IFRS) by providing common requirements for fair value measurement and disclosure.
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11, Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. Although still evaluating the potential impacts of ASU 2011-11 to the fund, management expects that the impact of the fund’s adoption will be limited to additional financial statement disclosures.
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. 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, 2012 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $533,729,143 | $— | $— | $533,729,143 | ||||||||||||
United Kingdom | 8,323,640 | — | — | 8,323,640 | ||||||||||||
Israel | 7,612,065 | — | — | 7,612,065 | ||||||||||||
France | 4,552,143 | 2,943,502 | — | 7,495,645 | ||||||||||||
Canada | 4,004,512 | — | — | 4,004,512 | ||||||||||||
Netherlands | 2,750,816 | — | — | 2,750,816 | ||||||||||||
China | 1,121,055 | — | — | 1,121,055 | ||||||||||||
Mutual Funds | 20,288,065 | — | — | 20,288,065 | ||||||||||||
Total Investments | $582,381,439 | $2,943,502 | $— | $585,324,941 |
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 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, 2012, 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, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Foreign taxes 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 net operating losses, wash sale loss deferrals, and straddle loss deferrals.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/11 | ||||
Ordinary income (including any short-term capital gains) | $934,874 | (a) |
(a) | Included in the fund’s distributions from ordinary income is $1,176 in excess of investment company taxable income, which in accordance with applicable U.S. tax law, is taxable to shareholders as ordinary income distribution. |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/12 | ||||
Cost of investments | $498,171,302 | |||
Gross appreciation | 103,577,492 | |||
Gross depreciation | (16,423,853 | ) | ||
Net unrealized appreciation (depreciation) | $87,153,639 | |||
As of 12/31/11 | ||||
Capital loss carryforwards | (44,674,146 | ) | ||
Other temporary differences | (186,624 | ) | ||
Net unrealized appreciation (depreciation) | 61,201,393 |
The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.
Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized after December 31, 2011 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.
As of December 31, 2011, the fund had capital loss carryforwards available to offset future realized gains. Such losses expire as follows:
Pre-enactment losses: | ||||
12/31/16 | $(16,766,873 | ) | ||
12/31/17 | (27,907,273 | ) | ||
Total | $(44,674,146 | ) |
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
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MFS Growth Series
Notes to Financial Statements (unaudited) – continued
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 6/30/12 | Year ended 12/31/11 | |||||||
Initial Class | $— | $925,433 | ||||||
Service Class | — | 9,441 | ||||||
Total | $— | $934,874 |
(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, 2012 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, 2012, the fee was $28,901, which equated to 0.0102% 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, 2012, these costs amounted to $1,028.
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, 2012 was equivalent to an annual effective rate of 0.0167% 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, 2012, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $2,837 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 $1,439, 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.
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MFS Growth Series
Notes to Financial Statements (unaudited) – continued
(4) | Portfolio Securities |
Purchases and sales of investments, other than U.S. Government securities, purchased option transactions, and short-term obligations, aggregated $183,470,794 and $175,185,773, respectively.
(5) | Shares of Beneficial Interest |
The fund’s Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
Six months ended 6/30/12 | Year ended 12/31/11 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 2,144,510 | $57,029,269 | 2,705,438 | $67,872,176 | ||||||||||||
Service Class | 1,085,218 | 28,725,110 | 1,506,623 | 36,837,421 | ||||||||||||
3,229,728 | $85,754,379 | 4,212,061 | $104,709,597 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 38,916 | $925,433 | ||||||||||||
Service Class | — | — | 404 | 9,441 | ||||||||||||
— | $— | 39,320 | $934,874 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (1,980,169 | ) | $(53,272,907 | ) | (4,355,037 | ) | $(108,841,435 | ) | ||||||||
Service Class | (610,172 | ) | (16,048,697 | ) | (931,109 | ) | (22,561,863 | ) | ||||||||
(2,590,341 | ) | $(69,321,604 | ) | (5,286,146 | ) | $(131,403,298 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | 164,341 | $3,756,362 | (1,610,683 | ) | $(40,043,826 | ) | ||||||||||
Service Class | 475,046 | 12,676,413 | 575,918 | 14,284,999 | ||||||||||||
639,387 | $16,432,775 | (1,034,765 | ) | $(25,758,827 | ) |
(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, 2012, the fund’s commitment fee and interest expense were $1,899 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 an affiliated issuer:
Underlying Affiliated Fund | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 13,485,319 | 98,644,827 | (92,960,879 | ) | 19,169,267 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $7,426 | $19,169,267 |
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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, 2012 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 is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. Copies of the fund’s Form N-Q also may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
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
SEMIANNUAL REPORT
June 30, 2012
MFS® INVESTORS TRUST SERIES
MFS® Variable Insurance Trust
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
LETTER FROM THE CHAIRMAN AND CEO
Dear Contract Owners:
World financial markets remain a venue of uncertainty. The focus has shifted most recently to the eurozone, where policymakers are attempting to develop a plan that will help debt-laden countries and prevent their woes from spreading across the region. Volatility is likely to continue as investors test the resolve of European officials to make the tough decisions needed to solve the crisis. A slowing in the Chinese economy has added another layer of trepidation, as investors worry that the primary engine of global growth may be sputtering.
The U.S. economy is experiencing a period of growth. However, markets have been jittery in reaction to events in Europe and ahead of the U.S. presidential election. Voters in the United States are watching the economy closely and waiting to see if Congress agrees to cut the budget and extend the Bush administration tax cuts. Failure to do so could ultimately send the U.S. economy back into recession.
Amid this global uncertainty, managing risk becomes a top priority for investors and their advisors. At MFS® our global research platform is designed to ensure the smooth functioning of our investment process in all business climates. Real-time collaboration across the globe is vital in periods of heightened volatility and economic uncertainty. At MFS our investment staff shares ideas and evaluates opportunities across geographies, across both fundamental and quantitative disciplines, and across companies’ entire capital structure. We employ this uniquely collaborative approach to build better insights for our clients.
We, like our investors, are 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 emphasize the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with investment advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2012
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 Investors Trust Series
Portfolio structure
Top ten holdings | ||||
Apple, Inc. | 4.7% | |||
Exxon Mobil Corp. | 2.6% | |||
Danaher Corp. | 2.6% | |||
Walt Disney Co. | 2.5% | |||
Philip Morris International, Inc. | 2.3% | |||
Pfizer, Inc. | 2.3% | |||
JPMorgan Chase & Co. | 2.3% | |||
Google, Inc., “A” | 2.1% | |||
Oracle Corp. | 2.1% | |||
Procter & Gamble Co. | 2.0% |
Equity sectors | ||||
Technology | 16.5% | |||
Financial Services | 16.1% | |||
Health Care | 12.3% | |||
Consumer Staples | 10.9% | |||
Energy | 10.1% | |||
Industrial Goods & Services | 7.2% | |||
Retailing | 6.0% | |||
Utilities & Communications | 5.7% | |||
Leisure | 4.7% | |||
Basic Materials | 4.1% | |||
Transportation | 2.4% | |||
Autos & Housing | 2.3% | |||
Special Products & Services | 0.7% |
Percentages are based on net assets as of 6/30/12.
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, 2012 through June 30, 2012
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, 2012 through June 30, 2012.
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 1/01/12 | Ending Account Value | Expenses Paid During Period (p) 1/01/12-6/30/12 | ||||||||||||||
Initial Class | Actual | 0.82% | $1,000.00 | $1,088.61 | $4.26 | |||||||||||||
Hypothetical (h) | 0.82% | $1,000.00 | $1,020.79 | $4.12 | ||||||||||||||
Service Class | Actual | 1.07% | $1,000.00 | $1,087.00 | $5.55 | |||||||||||||
Hypothetical (h) | 1.07% | $1,000.00 | $1,019.54 | $5.37 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
3
Table of Contents
MFS Investors Trust Series
PORTFOLIO OF INVESTMENTS – 6/30/12 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 99.0% | ||||||||
Aerospace – 3.8% | ||||||||
Honeywell International, Inc. | 134,600 | $ | 7,516,064 | |||||
Precision Castparts Corp. | 25,120 | 4,131,989 | ||||||
United Technologies Corp. | 125,380 | 9,469,951 | ||||||
|
| |||||||
$ | 21,118,004 | |||||||
|
| |||||||
Alcoholic Beverages – 2.3% | ||||||||
Diageo PLC | 194,267 | $ | 4,995,809 | |||||
Heineken N.V. | 144,307 | 7,537,840 | ||||||
|
| |||||||
$ | 12,533,649 | |||||||
|
| |||||||
Apparel Manufacturers – 2.4% | ||||||||
LVMH Moet Hennessy Louis Vuitton S.A. | 34,147 | $ | 5,204,627 | |||||
NIKE, Inc., “B” | 43,560 | 3,823,697 | ||||||
VF Corp. | 31,500 | 4,203,675 | ||||||
|
| |||||||
$ | 13,231,999 | |||||||
|
| |||||||
Automotive – 0.8% | ||||||||
Bayerische Motoren Werke AG | 41,860 | $ | 3,033,088 | |||||
Delphi Automotive PLC (a) | 49,150 | 1,253,325 | ||||||
|
| |||||||
$ | 4,286,413 | |||||||
|
| |||||||
Biotechnology – 1.4% | ||||||||
Celgene Corp. (a) | 37,010 | $ | 2,374,562 | |||||
Gilead Sciences, Inc. (a) | 110,610 | 5,672,081 | ||||||
|
| |||||||
$ | 8,046,643 | |||||||
|
| |||||||
Broadcasting – 3.4% | ||||||||
Viacom, Inc., “B” | 112,690 | $ | 5,298,684 | |||||
Walt Disney Co. | 284,260 | 13,786,610 | ||||||
|
| |||||||
$ | 19,085,294 | |||||||
|
| |||||||
Brokerage & Asset Managers – 2.6% | ||||||||
BlackRock, Inc. | 49,013 | $ | 8,323,388 | |||||
Franklin Resources, Inc. | 56,180 | 6,235,418 | ||||||
|
| |||||||
$ | 14,558,806 | |||||||
|
| |||||||
Business Services – 0.7% | ||||||||
Accenture PLC, “A” | 66,330 | $ | 3,985,770 | |||||
|
| |||||||
Cable TV – 1.3% | ||||||||
Comcast Corp., “A” | 226,730 | $ | 7,248,558 | |||||
|
| |||||||
Chemicals – 2.2% | ||||||||
3M Co. | 97,490 | $ | 8,735,104 | |||||
Celanese Corp. | 97,030 | 3,359,179 | ||||||
|
| |||||||
$ | 12,094,283 | |||||||
|
| |||||||
Computer Software – 3.7% | ||||||||
Check Point Software Technologies Ltd. (a) | 106,190 | $ | 5,265,962 | |||||
Citrix Systems, Inc. (a) | 21,560 | 1,809,746 | ||||||
Oracle Corp. | 390,830 | 11,607,651 | ||||||
VeriSign, Inc. (a) | 46,170 | 2,011,627 | ||||||
|
| |||||||
$ | 20,694,986 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Computer Software – Systems – 6.6% | ||||||||
Apple, Inc. (a) | 44,280 | $ | 25,859,520 | |||||
EMC Corp. (a) | 413,860 | 10,607,232 | ||||||
|
| |||||||
$ | 36,466,752 | |||||||
|
| |||||||
Construction – 1.5% | ||||||||
Sherwin-Williams Co. | 26,590 | $ | 3,519,187 | |||||
Stanley Black & Decker, Inc. | 74,630 | 4,803,187 | ||||||
|
| |||||||
$ | 8,322,374 | |||||||
|
| |||||||
Consumer Products – 3.9% | ||||||||
Colgate-Palmolive Co. | 50,020 | $ | 5,207,082 | |||||
Procter & Gamble Co. | 180,680 | 11,066,650 | ||||||
Reckitt Benckiser Group PLC | 98,720 | 5,202,641 | ||||||
|
| |||||||
$ | 21,476,373 | |||||||
|
| |||||||
Electrical Equipment – 2.6% | ||||||||
Danaher Corp. | 272,390 | $ | 14,186,071 | |||||
|
| |||||||
Electronics – 2.8% | ||||||||
Altera Corp. | 144,810 | $ | 4,900,370 | |||||
ASML Holding N.V. | 55,283 | 2,842,652 | ||||||
Microchip Technology, Inc. | 241,700 | 7,995,436 | ||||||
|
| |||||||
$ | 15,738,458 | |||||||
|
| |||||||
Energy – Independent – 2.7% | ||||||||
EOG Resources, Inc. | 72,470 | $ | 6,530,272 | |||||
Occidental Petroleum Corp. | 99,290 | 8,516,103 | ||||||
|
| |||||||
$ | 15,046,375 | |||||||
|
| |||||||
Energy – Integrated – 4.4% | ||||||||
Chevron Corp. | 97,010 | $ | 10,234,555 | |||||
Exxon Mobil Corp. | 167,400 | 14,324,418 | ||||||
|
| |||||||
$ | 24,558,973 | |||||||
|
| |||||||
Engineering – Construction – 0.8% | ||||||||
Fluor Corp. | 86,900 | $ | 4,287,646 | |||||
|
| |||||||
Food & Beverages – 2.4% | ||||||||
General Mills, Inc. | 135,150 | $ | 5,208,681 | |||||
Groupe Danone | 131,103 | 8,132,115 | ||||||
|
| |||||||
$ | 13,340,796 | |||||||
|
| |||||||
General Merchandise – 2.9% | ||||||||
Kohl’s Corp. | 118,480 | $ | 5,389,655 | |||||
Target Corp. | 182,240 | 10,604,546 | ||||||
|
| |||||||
$ | 15,994,201 | |||||||
|
| |||||||
Insurance – 1.8% | ||||||||
ACE Ltd. | 128,520 | $ | 9,527,188 | |||||
Aon PLC | 7,140 | 334,009 | ||||||
|
| |||||||
$ | 9,861,197 | |||||||
|
|
4
Table of Contents
MFS Investors Trust Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Internet – 2.3% | ||||||||
Facebook, Inc., “A “ (a) | 40,490 | $ | 1,260,049 | |||||
Google, Inc., “A” (a) | 20,110 | 11,665,208 | ||||||
|
| |||||||
$ | 12,925,257 | |||||||
|
| |||||||
Major Banks – 7.3% | ||||||||
Bank of America Corp. | 510,990 | $ | 4,179,898 | |||||
Bank of New York Mellon Corp. | 121,943 | 2,676,649 | ||||||
Goldman Sachs Group, Inc. | 77,740 | 7,452,156 | ||||||
JPMorgan Chase & Co. | 357,870 | 12,786,695 | ||||||
State Street Corp. | 74,180 | 3,311,395 | ||||||
Wells Fargo & Co. | 307,200 | 10,272,768 | ||||||
|
| |||||||
$ | 40,679,561 | |||||||
|
| |||||||
Medical Equipment – 6.1% | ||||||||
Baxter International, Inc. | 67,830 | $ | 3,605,164 | |||||
Covidien PLC | 172,060 | 9,205,210 | ||||||
Medtronic, Inc. | 133,620 | 5,175,103 | ||||||
St. Jude Medical, Inc. | 218,980 | 8,739,492 | ||||||
Thermo Fisher Scientific, Inc. | 137,840 | 7,155,274 | ||||||
|
| |||||||
$ | 33,880,243 | |||||||
|
| |||||||
Network & Telecom – 1.1% | ||||||||
Cisco Systems, Inc. | 368,992 | $ | 6,335,593 | |||||
|
| |||||||
Oil Services – 3.0% | ||||||||
Cameron International Corp. (a) | 98,540 | $ | 4,208,643 | |||||
Dresser-Rand Group, Inc. (a) | 85,100 | 3,790,354 | ||||||
National Oilwell Varco, Inc. | 67,150 | 4,327,146 | ||||||
Schlumberger Ltd. | 65,030 | 4,221,097 | ||||||
|
| |||||||
$ | 16,547,240 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 4.4% | ||||||||
American Express Co. | 162,960 | $ | 9,485,902 | |||||
MasterCard, Inc., “A” | 15,650 | 6,731,221 | ||||||
Visa, Inc., “A” | 68,430 | 8,460,001 | ||||||
|
| |||||||
$ | 24,677,124 | |||||||
|
| |||||||
Pharmaceuticals – 4.8% | ||||||||
Johnson & Johnson | 153,776 | $ | 10,389,107 | |||||
Pfizer, Inc. | 556,430 | 12,797,890 | ||||||
Teva Pharmaceutical Industries Ltd., ADR | 95,010 | 3,747,194 | ||||||
|
| |||||||
$ | 26,934,191 | |||||||
|
| |||||||
Railroad & Shipping – 1.2% | ||||||||
Canadian National Railway Co. | 80,350 | $ | 6,779,933 | |||||
|
| |||||||
Specialty Chemicals – 1.9% | ||||||||
Linde AG | 33,993 | $ | 5,294,681 | |||||
Praxair, Inc. | 49,330 | 5,363,651 | ||||||
|
| |||||||
$ | 10,658,332 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Specialty Stores – 0.7% | ||||||||
Hennes & Mauritz AB, “B” | 104,710 | $ | 3,764,623 | |||||
|
| |||||||
Telecommunications – Wireless – 1.4% | ||||||||
American Tower Corp., REIT | 111,010 | $ | 7,760,709 | |||||
|
| |||||||
Telephone Services – 1.2% | ||||||||
AT&T, Inc. | 181,670 | $ | 6,478,352 | |||||
|
| |||||||
Tobacco – 2.3% | ||||||||
Philip Morris International, Inc. | 147,890 | $ | 12,904,881 | |||||
|
| |||||||
Trucking – 1.2% | ||||||||
United Parcel Service, Inc., “B” | 81,070 | $ | 6,385,073 | |||||
|
| |||||||
Utilities – Electric Power – 3.1% | ||||||||
Alliant Energy Corp. | 94,260 | $ | 4,295,428 | |||||
American Electric Power Co., Inc. | 139,460 | 5,564,454 | ||||||
CMS Energy Corp. | 119,110 | 2,799,085 | ||||||
Wisconsin Energy Corp. | 116,980 | 4,628,899 | ||||||
|
| |||||||
$ | 17,287,866 | |||||||
|
| |||||||
Total Common Stocks (Identified Cost, $481,527,309) | $ | 550,162,599 | ||||||
|
| |||||||
MONEY MARKET FUNDS – 0.9% | ||||||||
MFS Institutional Money Market Portfolio, 0.14%, at Cost and Net Asset Value (v) | 4,836,278 | $ | 4,836,278 | |||||
|
| |||||||
Total Investments (Identified Cost, $486,363,587) | $ | 554,998,877 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – 0.1% | 627,969 | |||||||
|
| |||||||
Net Assets – 100.0% | $ | 555,626,846 | ||||||
|
|
(a) | Non-income producing security. |
(v) | Underlying affiliated fund that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end. |
The following abbreviations are used in this report and are defined:
ADR | American Depositary Receipt |
PLC | Public Limited Company |
REIT | Real Estate Investment Trust |
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 6/30/12 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $481,527,309) | $550,162,599 | |||||||
Underlying affiliated funds, at cost and value | 4,836,278 | |||||||
Total investments, at value (identified cost, $486,363,587) | $554,998,877 | |||||||
Cash | 25,023 | |||||||
Receivables for | ||||||||
Investments sold | 5,080,218 | |||||||
Fund shares sold | 535,927 | |||||||
Interest and dividends | 484,050 | |||||||
Other assets | 2,719 | |||||||
Total assets | $561,126,814 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Investments purchased | $4,345,837 | |||||||
Fund shares reacquired | 1,001,474 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 34,016 | |||||||
Shareholder servicing costs | 566 | |||||||
Distribution and/or service fees | 1,961 | |||||||
Payable for independent Trustees’ compensation | 186 | |||||||
Accrued expenses and other liabilities | 115,928 | |||||||
Total liabilities | $5,499,968 | |||||||
Net assets | $555,626,846 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $499,795,359 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 68,633,221 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | (20,768,288 | ) | ||||||
Undistributed net investment income | 7,966,554 | |||||||
Net assets | $555,626,846 | |||||||
Shares of beneficial interest outstanding | 26,326,574 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $457,120,503 | 21,632,857 | $21.13 | |||||||||
Service Class | 98,506,343 | 4,693,717 | 20.99 |
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 6/30/12 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $5,515,427 | |||||||
Interest | 67,732 | |||||||
Dividends from underlying affiliated funds | 2,531 | |||||||
Foreign taxes withheld | (150,062 | ) | ||||||
Total investment income | $5,435,628 | |||||||
Expenses | ||||||||
Management fee | $2,160,842 | |||||||
Distribution and/or service fees | 112,801 | |||||||
Shareholder servicing costs | 30,015 | |||||||
Administrative services fee | 48,109 | |||||||
Independent Trustees’ compensation | 9,263 | |||||||
Custodian fee | 32,931 | |||||||
Shareholder communications | 45,094 | |||||||
Audit and tax fees | 24,871 | |||||||
Legal fees | 4,443 | |||||||
Miscellaneous | 16,231 | |||||||
Total expenses | $2,484,600 | |||||||
Reduction of expenses by investment adviser | (1,487 | ) | ||||||
Net expenses | $2,483,113 | |||||||
Net investment income | $2,952,515 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $25,165,144 | |||||||
Foreign currency | (4,876 | ) | ||||||
Net realized gain (loss) on investments and foreign currency | $25,160,268 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $21,593,274 | |||||||
Translation of assets and liabilities in foreign currencies | (634 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $21,592,640 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $46,752,908 | |||||||
Change in net assets from operations | $49,705,423 |
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 6/30/12 (unaudited | ) | | Year ended 12/31/11 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $2,952,515 | $5,031,290 | ||||||
Net realized gain (loss) on investments and foreign currency | 25,160,268 | 23,627,753 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 21,592,640 | (39,378,834 | ) | |||||
Change in net assets from operations | $49,705,423 | $(10,719,791 | ) | |||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(5,466,481 | ) | |||||
Change in net assets from fund share transactions | $(58,971,042 | ) | $(84,509,302 | ) | ||||
Total change in net assets | $(9,265,619 | ) | $(100,695,574 | ) | ||||
Net assets | ||||||||
At beginning of period | 564,892,465 | 665,588,039 | ||||||
At end of period (including undistributed net investment income of $7,966,554 and | $555,626,846 | $564,892,465 |
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 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $19.41 | $20.04 | $18.24 | $14.64 | $23.52 | $21.69 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.11 | $0.17 | $0.16 | $0.19 | $0.24 | $0.17 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 1.61 | (0.61 | ) | 1.86 | 3.67 | (7.54 | ) | 2.04 | ||||||||||||||||
Total from investment operations | $1.72 | $(0.44 | ) | $2.02 | $3.86 | $(7.30 | ) | $2.21 | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.19 | ) | $(0.22 | ) | $(0.26 | ) | $(0.17 | ) | $(0.19 | ) | |||||||||||||
From net realized gain on investments | — | — | — | — | (1.41 | ) | (0.19 | ) | ||||||||||||||||
Total distributions declared to shareholders | $— | $(0.19 | ) | $(0.22 | ) | $(0.26 | ) | $(1.58 | ) | $(0.38 | ) | |||||||||||||
Net asset value, end of period (x) | $21.13 | $19.41 | $20.04 | $18.24 | $14.64 | $23.52 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 8.86 | (n) | (2.18 | ) | 11.10 | 26.90 | (33.08 | ) | 10.31 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.82 | (a) | 0.82 | 0.83 | 0.86 | 0.84 | 0.85 | |||||||||||||||||
Expenses after expense reductions (f) | 0.82 | (a) | 0.82 | 0.83 | 0.86 | 0.84 | 0.85 | |||||||||||||||||
Net investment income | 1.07 | (a) | 0.84 | 0.87 | 1.25 | 1.25 | 0.74 | |||||||||||||||||
Portfolio turnover | 17 | (n) | 22 | 22 | 34 | 29 | 37 | |||||||||||||||||
Net assets at end of period (000 omitted) | $457,121 | $486,500 | $603,279 | $636,809 | $560,356 | $917,158 |
Service Class | Six months ended 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $19.31 | $19.95 | $18.16 | $14.56 | $23.39 | $21.57 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.08 | $0.12 | $0.11 | $0.15 | $0.19 | $0.11 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 1.60 | (0.61 | ) | 1.86 | 3.65 | (7.51 | ) | 2.03 | ||||||||||||||||
Total from investment operations | $1.68 | $(0.49 | ) | $1.97 | $3.80 | $(7.32 | ) | $2.14 | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.15 | ) | $(0.18 | ) | $(0.20 | ) | $(0.10 | ) | $(0.13 | ) | |||||||||||||
From net realized gain on investments | — | — | — | — | (1.41 | ) | (0.19 | ) | ||||||||||||||||
Total distributions declared to shareholders | $— | $(0.15 | ) | $(0.18 | ) | $(0.20 | ) | $(1.51 | ) | $(0.32 | ) | |||||||||||||
Net asset value, end of period (x) | $20.99 | $19.31 | $19.95 | $18.16 | $14.56 | $23.39 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 8.70 | (n) | (2.42 | ) | 10.88 | 26.56 | (33.25 | ) | 10.03 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.07 | (a) | 1.07 | 1.08 | 1.11 | 1.09 | 1.11 | |||||||||||||||||
Expenses after expense reductions (f) | 1.07 | (a) | 1.07 | 1.08 | 1.11 | 1.09 | 1.11 | |||||||||||||||||
Net investment income | 0.80 | (a) | 0.60 | 0.63 | 0.99 | 1.00 | 0.49 | |||||||||||||||||
Portfolio turnover | 17 | (n) | 22 | 22 | 34 | 29 | 37 | |||||||||||||||||
Net assets at end of period (000 omitted) | $98,506 | $78,392 | $62,309 | $46,267 | $38,259 | $65,180 |
See Notes to Financial Statements
9
Table of Contents
MFS Investors Trust Series
Financial Highlights – continued
(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. |
(x) | The net asset values per share and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
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.
In this reporting period the fund adopted FASB Accounting Standards Update 2011-04, Fair Value Measurement (Topic 820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 seeks to improve the comparability of fair value measurements as presented and disclosed in financial statements prepared in accordance with U.S. GAAP and International Financial Reporting Standards (IFRS) by providing common requirements for fair value measurement and disclosure.
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11, Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. Although still evaluating the potential impacts of ASU 2011-11 to the fund, management expects that the impact of the fund’s adoption will be limited to additional financial statement disclosures.
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. 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
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Notes to Financial Statements (unaudited) – continued
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, 2012 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $488,361,433 | $— | $— | $488,361,433 | ||||||||||||
France | 8,132,115 | 5,204,627 | — | 13,336,742 | ||||||||||||
Netherlands | 2,842,652 | 7,537,841 | — | 10,380,493 | ||||||||||||
United Kingdom | 10,198,450 | — | — | 10,198,450 | ||||||||||||
Israel | 9,013,157 | — | — | 9,013,157 | ||||||||||||
Germany | — | 8,327,768 | — | 8,327,768 | ||||||||||||
Canada | 6,779,933 | — | — | 6,779,933 | ||||||||||||
Sweden | — | 3,764,623 | — | 3,764,623 | ||||||||||||
Mutual Funds | 4,836,278 | — | — | 4,836,278 | ||||||||||||
Total Investments | $530,164,018 | $24,834,859 | $— | $554,998,877 |
For further information regarding security characteristics, see the Portfolio of Investments.
Of the level 2 investments presented above, equity investments amounting to $5,294,681 would have been considered level 1 investments at the beginning of the period. Of the level 1 investments presented above, equity investments amounting to $5,502,641 would have been considered level 2 investments at the beginning of the period. The primary reason for changes in the classifications between levels 1 and 2 occurs when foreign equity securities are fair valued using other observable market-based inputs in place of the closing exchange price due to events occurring after the close of the exchange or market on which the investment is principally traded. The fund’s foreign equity securities may often be valued 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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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. For the six months ended June 30, 2012, 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, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Foreign taxes 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:
12/31/11 | ||||
Ordinary income (including any short-term capital gains) | $5,466,481 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/12 | ||||
Cost of investments | $487,547,111 | |||
Gross appreciation | 96,259,957 | |||
Gross depreciation | (28,808,191 | ) | ||
Net unrealized appreciation (depreciation) | $67,451,766 | |||
As of 12/31/11 | ||||
Undistributed ordinary income | 5,014,039 | |||
Capital loss carryforwards | (44,745,032 | ) | ||
Other temporary differences | (1,435 | ) | ||
Net unrealized appreciation (depreciation) | 45,858,492 |
The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.
Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized after December 31, 2011 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.
As of December 31, 2011 the fund had capital loss carryforwards available to offset future realized gains. Such losses expire as follows:
Pre-enactment losses: | ||||
12/31/17 | $(44,745,032 | ) |
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
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Notes to Financial Statements (unaudited) – continued
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 6/30/12 | Year ended 12/31/11 | |||||||
Initial Class | $— | $4,901,513 | ||||||
Service Class | — | 564,968 | ||||||
Total | $— | $5,466,481 |
(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 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, 2014. For the six months ended June 30, 2012, 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, 2012 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, 2012, the fee was $29,559, which equated to 0.0103% 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, 2012, these costs amounted to $456.
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, 2012 was equivalent to an annual effective rate of 0.0167% 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, 2012, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $3,007 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 $1,487, 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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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 $98,615,584 and $155,768,276, 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 6/30/12 | Year ended 12/31/11 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 317,036 | $6,779,313 | 956,445 | $17,827,008 | ||||||||||||
Service Class | 1,083,079 | 22,735,510 | 1,634,433 | 32,550,264 | ||||||||||||
1,400,115 | $29,514,823 | 2,590,878 | $50,377,272 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 258,655 | $4,901,513 | ||||||||||||
Service Class | — | — | 29,956 | 564,968 | ||||||||||||
— | $— | 288,611 | $5,466,481 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (3,742,523 | ) | $(79,021,464 | ) | (6,254,861 | ) | $(125,918,742 | ) | ||||||||
Service Class | (449,846 | ) | (9,464,401 | ) | (727,691 | ) | (14,434,313 | ) | ||||||||
(4,192,369 | ) | $(88,485,865 | ) | (6,982,552 | ) | $(140,353,055 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (3,425,487 | ) | $(72,242,151 | ) | (5,039,761 | ) | $(103,190,221 | ) | ||||||||
Service Class | 633,233 | 13,271,109 | 936,698 | 18,680,919 | ||||||||||||
(2,792,254 | ) | $(58,971,042 | ) | (4,103,063 | ) | $(84,509,302 | ) |
(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, 2012, the fund’s commitment fee and interest expense were $2,067 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 an affiliated issuer:
Underlying Affiliated Fund | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 3,692,509 | 63,271,060 | (62,127,291 | ) | 4,836,278 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $2,531 | $4,836,278 |
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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, 2012 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 is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. Copies of the fund’s Form N-Q also may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
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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SEMIANNUAL REPORT
June 30, 2012
MFS® VALUE SERIES
MFS® Variable Insurance Trust
VLU-SEM
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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
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MFS Value Series
LETTER FROM THE CHAIRMAN AND CEO
Dear Contract Owners:
World financial markets remain a venue of uncertainty. The focus has shifted most recently to the eurozone, where policymakers are attempting to develop a plan that will help debt-laden countries and prevent their woes from spreading across the region. Volatility is likely to continue as investors test the resolve of European officials to make the tough decisions needed to solve the crisis. A slowing in the Chinese economy has added another layer of trepidation, as investors worry that the primary engine of global growth may be sputtering.
The U.S. economy is experiencing a period of growth. However, markets have been jittery in reaction to events in Europe and ahead of the U.S. presidential election. Voters in the United States are watching the economy closely and waiting to see if Congress agrees to cut the budget and extend the Bush administration tax cuts. Failure to do so could ultimately send the U.S. economy back into recession.
Amid this global uncertainty, managing risk becomes a top priority for investors and their advisors. At MFS® our global research platform is designed to ensure the smooth functioning of our investment process in all business climates. Real-time collaboration across the globe is vital in periods of heightened volatility and economic uncertainty. At MFS our investment staff shares ideas and evaluates opportunities across geographies, across both fundamental and quantitative disciplines, and across companies’ entire capital structure. We employ this uniquely collaborative approach to build better insights for our clients.
We, like our investors, are 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 emphasize the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with investment advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2012
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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Portfolio structure
Top ten holdings | ||||
Philip Morris International, Inc. | 3.9% | |||
Lockheed Martin Corp. | 3.4% | |||
Pfizer, Inc. | 3.1% | |||
JPMorgan Chase & Co. | 3.0% | |||
Johnson & Johnson | 2.7% | |||
AT&T, Inc. | 2.2% | |||
Chevron Corp. | 2.1% | |||
United Technologies Corp. | 2.1% | |||
Accenture PLC, “A” | 2.1% | |||
Wells Fargo & Co. | 2.1% |
Equity sectors | ||||
Financial Services | 20.7% | |||
Health Care | 13.2% | |||
Consumer Staples | 13.0% | |||
Industrial Goods & Services | 11.7% | |||
Energy | 7.1% | |||
Leisure | 6.2% | |||
Technology | 6.0% | |||
Utilities & Communications | 5.2% | |||
Retailing | 4.1% | |||
Basic Materials | 3.9% | |||
Special Products & Services | 3.0% | |||
Autos & Housing | 2.7% | |||
Transportation | 1.7% |
Percentages are based on net assets as of 6/30/12.
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, 2012 through June 30, 2012
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, 2012 through June 30, 2012.
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 1/01/12 | Ending Account Value | Expenses Paid During Period (p) 1/01/12-6/30/12 | ||||||||||||||
Initial Class | Actual | 0.79% | $1,000.00 | $1,079.65 | $4.08 | |||||||||||||
Hypothetical (h) | 0.79% | $1,000.00 | $1,020.93 | $3.97 | ||||||||||||||
Service Class | Actual | 1.04% | $1,000.00 | $1,078.15 | $5.37 | |||||||||||||
Hypothetical (h) | 1.04% | $1,000.00 | $1,019.69 | $5.22 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
3
Table of Contents
MFS Value Series
PORTFOLIO OF INVESTMENTS – 6/30/12 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 98.3% | ||||||||
Aerospace – 8.4% | ||||||||
Honeywell International, Inc. | 373,330 | $ | 20,846,742 | |||||
Huntington Ingalls Industries, Inc. (a) | 38,373 | 1,544,130 | ||||||
Lockheed Martin Corp. | 489,090 | 42,589,957 | ||||||
Northrop Grumman Corp. | 216,940 | 13,838,603 | ||||||
United Technologies Corp. | 342,840 | 25,894,705 | ||||||
|
| |||||||
$ | 104,714,137 | |||||||
|
| |||||||
Alcoholic Beverages – 1.8% | ||||||||
Diageo PLC | 868,763 | $ | 22,341,284 | |||||
|
| |||||||
Automotive – 1.6% | ||||||||
Delphi Automotive PLC (a) | 200,020 | $ | 5,100,510 | |||||
General Motors Co. (a) | 103,100 | 2,033,132 | ||||||
Johnson Controls, Inc. | 463,720 | 12,849,681 | ||||||
|
| |||||||
$ | 19,983,323 | |||||||
|
| |||||||
Broadcasting – 4.1% | ||||||||
Omnicom Group, Inc. | 304,070 | $ | 14,777,802 | |||||
Viacom, Inc., “B” | 293,770 | 13,813,065 | ||||||
Walt Disney Co. | 471,960 | 22,890,060 | ||||||
|
| |||||||
$ | 51,480,927 | |||||||
|
| |||||||
Brokerage & Asset Managers – 1.8% | ||||||||
BlackRock, Inc. | 89,182 | $ | 15,144,887 | |||||
Franklin Resources, Inc. | 70,170 | 7,788,168 | ||||||
|
| |||||||
$ | 22,933,055 | |||||||
|
| |||||||
Business Services – 3.0% | ||||||||
Accenture PLC, “A” | 429,880 | $ | 25,831,489 | |||||
Dun & Bradstreet Corp. | 85,880 | 6,112,080 | ||||||
Fiserv, Inc. (a) | 76,380 | 5,516,164 | ||||||
|
| |||||||
$ | 37,459,733 | |||||||
|
| |||||||
Cable TV – 0.9% | ||||||||
Comcast Corp., “Special A” | 368,760 | $ | 11,579,064 | |||||
|
| |||||||
Chemicals – 3.0% | ||||||||
3M Co. | 237,820 | $ | 21,308,672 | |||||
PPG Industries, Inc. | 159,186 | 16,892,818 | ||||||
|
| |||||||
$ | 38,201,490 | |||||||
|
| |||||||
Computer Software – 1.9% | ||||||||
Oracle Corp. | 820,320 | $ | 24,363,504 | |||||
|
| |||||||
Computer Software – Systems – 2.3% | ||||||||
Hewlett-Packard Co. | 135,330 | $ | 2,721,486 | |||||
International Business Machines Corp. | 131,610 | 25,740,284 | ||||||
|
| |||||||
$ | 28,461,770 | |||||||
|
| |||||||
Construction – 1.1% | ||||||||
Stanley Black & Decker, Inc. | 208,133 | $ | 13,395,440 | |||||
|
| |||||||
Consumer Products – 0.6% | ||||||||
Procter & Gamble Co. | 115,594 | $ | 7,080,133 | |||||
|
| |||||||
Electrical Equipment – 2.5% | ||||||||
Danaher Corp. | 280,150 | $ | 14,590,212 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Electrical Equipment – continued | ||||||||
Tyco International Ltd. | 317,530 | $ | 16,781,461 | |||||
|
| |||||||
$ | 31,371,673 | |||||||
|
| |||||||
Electronics – 1.2% | ||||||||
ASML Holding N.V. | 52,670 | $ | 2,708,291 | |||||
Intel Corp. | 452,760 | 12,066,054 | ||||||
|
| |||||||
$ | 14,774,345 | |||||||
|
| |||||||
Energy – Independent – 2.9% | ||||||||
Apache Corp. | 102,230 | $ | 8,984,995 | |||||
EOG Resources, Inc. | 77,020 | 6,940,272 | ||||||
Occidental Petroleum Corp. | 235,790 | 20,223,708 | ||||||
|
| |||||||
$ | 36,148,975 | |||||||
|
| |||||||
Energy – Integrated – 3.9% | ||||||||
Chevron Corp. | 249,470 | $ | 26,319,085 | |||||
Exxon Mobil Corp. | 248,968 | 21,304,192 | ||||||
Hess Corp. | 19,190 | 833,806 | ||||||
|
| |||||||
$ | 48,457,083 | |||||||
|
| |||||||
Engineering – Construction – 0.1% | ||||||||
Fluor Corp. | 35,930 | $ | 1,772,786 | |||||
|
| |||||||
Food & Beverages – 5.3% | ||||||||
General Mills, Inc. | 496,200 | $ | 19,123,548 | |||||
Groupe Danone | 204,786 | 12,702,557 | ||||||
J.M. Smucker Co. | 58,540 | 4,420,941 | ||||||
Kellogg Co. | 113,440 | 5,595,995 | ||||||
Nestle S.A. | 250,429 | 14,938,445 | ||||||
PepsiCo, Inc. | 145,238 | 10,262,517 | ||||||
|
| |||||||
$ | 67,044,003 | |||||||
|
| |||||||
Food & Drug Stores – 1.6% | ||||||||
CVS Caremark Corp. | 251,771 | $ | 11,765,259 | |||||
Walgreen Co. | 259,810 | 7,685,180 | ||||||
|
| |||||||
$ | 19,450,439 | |||||||
|
| |||||||
General Merchandise – 1.8% | ||||||||
Kohl’s Corp. | 83,380 | $ | 3,792,956 | |||||
Target Corp. | 328,310 | 19,104,359 | ||||||
|
| |||||||
$ | 22,897,315 | |||||||
|
| |||||||
Insurance – 6.7% | ||||||||
ACE Ltd. | 141,570 | $ | 10,494,584 | |||||
Aon PLC | 256,410 | 11,994,860 | ||||||
Chubb Corp. | 136,640 | 9,950,125 | ||||||
MetLife, Inc. | 675,583 | 20,841,736 | ||||||
Prudential Financial, Inc. | 296,835 | 14,375,719 | ||||||
Travelers Cos., Inc. | 253,150 | 16,161,096 | ||||||
|
| |||||||
$ | 83,818,120 | |||||||
|
| |||||||
Leisure & Toys – 0.8% | ||||||||
Hasbro, Inc. | 306,960 | $ | 10,396,735 | |||||
|
|
4
Table of Contents
MFS Value Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Machinery & Tools – 0.6% | ||||||||
Eaton Corp. | 197,810 | $ | 7,839,210 | |||||
|
| |||||||
Major Banks – 10.6% | ||||||||
Bank of America Corp. | 397,540 | $ | 3,251,877 | |||||
Bank of New York Mellon Corp. | 883,190 | 19,386,021 | ||||||
Goldman Sachs Group, Inc. | 268,492 | 25,737,643 | ||||||
JPMorgan Chase & Co. | 1,049,390 | 37,494,705 | ||||||
PNC Financial Services Group, Inc. | 159,810 | 9,765,989 | ||||||
State Street Corp. | 243,900 | 10,887,696 | ||||||
Wells Fargo & Co. | 770,700 | 25,772,208 | ||||||
|
| |||||||
$ | 132,296,139 | |||||||
|
| |||||||
Medical & Health Technology & Services – 0.6% | ||||||||
Quest Diagnostics, Inc. | 118,330 | $ | 7,087,967 | |||||
|
| |||||||
Medical Equipment – 3.4% | ||||||||
Becton, Dickinson & Co. | 100,390 | $ | 7,504,153 | |||||
Medtronic, Inc. | 357,250 | 13,836,293 | ||||||
St. Jude Medical, Inc. | 283,790 | 11,326,059 | ||||||
Thermo Fisher Scientific, Inc. | 201,140 | 10,441,177 | ||||||
|
| |||||||
$ | 43,107,682 | |||||||
|
| |||||||
Network & Telecom – 0.6% | ||||||||
Cisco Systems, Inc. | 425,910 | $ | 7,312,875 | |||||
|
| |||||||
Oil Services – 0.3% | ||||||||
Transocean, Inc. | 70,920 | $ | 3,172,252 | |||||
|
| |||||||
Other Banks & Diversified Financials – 1.6% | ||||||||
MasterCard, Inc., “A” | 15,178 | $ | 6,528,210 | |||||
SunTrust Banks, Inc. | 81,030 | 1,963,357 | ||||||
Western Union Co. | 680,570 | 11,460,799 | ||||||
|
| |||||||
$ | 19,952,366 | |||||||
|
| |||||||
Pharmaceuticals – 9.2% | ||||||||
Abbott Laboratories | 342,980 | $ | 22,111,921 | |||||
Johnson & Johnson | 506,360 | 34,209,682 | ||||||
Merck & Co., Inc. | 298,100 | 12,445,675 | ||||||
Pfizer, Inc. | 1,716,486 | 39,479,178 | ||||||
Roche Holding AG | 37,811 | 6,527,216 | ||||||
|
| |||||||
$ | 114,773,672 | |||||||
|
| |||||||
Printing & Publishing – 0.4% | ||||||||
Moody’s Corp. | 150,470 | $ | 5,499,679 | |||||
|
| |||||||
Railroad & Shipping – 0.6% | ||||||||
Canadian National Railway Co. | 95,480 | $ | 8,056,602 | |||||
|
| |||||||
Specialty Chemicals – 0.9% | ||||||||
Air Products & Chemicals, Inc. | 141,076 | $ | 11,389,065 | |||||
|
| |||||||
Specialty Stores – 0.7% | ||||||||
Advance Auto Parts, Inc. | 57,640 | $ | 3,932,201 | |||||
Staples, Inc. | 400,250 | 5,223,263 | ||||||
|
| |||||||
$ | 9,155,464 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Telecommunications – Wireless – 1.7% | ||||||||
Vodafone Group PLC | 7,455,611 | $ | 20,947,552 | |||||
|
| |||||||
Telephone Services – 2.2% | ||||||||
AT&T, Inc. | 789,600 | $ | 28,157,136 | |||||
|
| |||||||
Tobacco – 5.3% | ||||||||
Altria Group, Inc. | 222,081 | $ | 7,672,899 | |||||
Lorillard, Inc. | 73,660 | 9,719,437 | ||||||
Philip Morris International, Inc. | 565,791 | 49,370,923 | ||||||
|
| |||||||
$ | 66,763,259 | |||||||
|
| |||||||
Trucking – 1.1% | ||||||||
United Parcel Service, Inc., “B” | 174,690 | $ | 13,758,584 | |||||
|
| |||||||
Utilities – Electric Power – 1.2% | ||||||||
PG&E Corp. | 213,180 | $ | 9,650,659 | |||||
PPL Corp. | 87,540 | 2,434,487 | ||||||
Public Service Enterprise Group, Inc. | 86,750 | 2,819,375 | ||||||
|
| |||||||
$ | 14,904,521 | |||||||
|
| |||||||
Total Common Stocks (Identified Cost, $1,071,769,911) | $ | 1,232,299,359 | ||||||
|
| |||||||
CONVERTIBLE PREFERRED STOCKS – 0.2% | ||||||||
Aerospace – 0.1% | ||||||||
United Technologies Corp., 7.5% (a) | 25,730 | $ | 1,355,714 | |||||
|
| |||||||
Utilities – Electric Power – 0.1% | ||||||||
PPL Corp., 9.5% | 33,770 | $ | 1,786,433 | |||||
|
| |||||||
Total Convertible Preferred Stocks (Identified Cost, $2,982,243) | $ | 3,142,147 | ||||||
|
| |||||||
MONEY MARKET FUNDS – 1.3% | ||||||||
MFS Institutional Money Market Portfolio, 0.14%, at Cost and Net Asset Value (v) | 16,051,746 | $ | 16,051,746 | |||||
|
| |||||||
Total Investments (Identified Cost, $1,090,803,900) | $ | 1,251,493,252 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – 0.2% | 2,061,310 | |||||||
|
| |||||||
Net Assets – 100.0% | $ | 1,253,554,562 | ||||||
|
|
(a) | Non-income producing security. |
(v) | Underlying affiliated fund that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end. |
The following abbreviations are used in this report and are defined:
PLC | Public Limited Company |
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 6/30/12 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $1,074,752,154) | $1,235,441,506 | |||||||
Underlying affiliated funds, at cost and value | 16,051,746 | |||||||
Total investments, at value (identified cost, $1,090,803,900) | $1,251,493,252 | |||||||
Cash | 29,735 | |||||||
Receivables for | ||||||||
Fund shares sold | 1,551,433 | |||||||
Interest and dividends | 2,774,979 | |||||||
Other assets | 5,322 | |||||||
Total assets | $1,255,854,721 | |||||||
Liabilities | ||||||||
Payable for fund shares reacquired | $2,061,017 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 74,866 | |||||||
Shareholder servicing costs | 1,077 | |||||||
Distribution and/or service fees | 18,023 | |||||||
Payable for independent Trustees’ compensation | 132 | |||||||
Accrued expenses and other liabilities | 145,044 | |||||||
Total liabilities | $2,300,159 | |||||||
Net assets | $1,253,554,562 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $1,060,598,490 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 160,686,337 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | 2,191,124 | |||||||
Undistributed net investment income | 30,078,611 | |||||||
Net assets | $1,253,554,562 | |||||||
Shares of beneficial interest outstanding | 92,405,382 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $353,305,278 | 25,804,130 | $13.69 | |||||||||
Service Class | 900,249,284 | 66,601,252 | 13.52 |
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 6/30/12 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $17,108,329 | |||||||
Interest | 22,282 | |||||||
Dividends from underlying affiliated funds | 7,947 | |||||||
Foreign taxes withheld | (183,165 | ) | ||||||
Total investment income | $16,955,393 | |||||||
Expenses | ||||||||
Management fee | $4,549,143 | |||||||
Distribution and/or service fees | 1,100,524 | |||||||
Shareholder servicing costs | 64,298 | |||||||
Administrative services fee | 98,201 | |||||||
Independent Trustees’ compensation | 14,768 | |||||||
Custodian fee | 58,128 | |||||||
Shareholder communications | 66,539 | |||||||
Audit and tax fees | 25,245 | |||||||
Legal fees | 8,223 | |||||||
Miscellaneous | 25,170 | |||||||
Total expenses | $6,010,239 | |||||||
Fees paid indirectly | (12 | ) | ||||||
Reduction of expenses by investment adviser | (3,194 | ) | ||||||
Net expenses | $6,007,033 | |||||||
Net investment income | $10,948,360 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $927,582 | |||||||
Foreign currency | (21,059 | ) | ||||||
Net realized gain (loss) on investments and foreign currency | $906,523 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $81,546,565 | |||||||
Translation of assets and liabilities in foreign currencies | 13,221 | |||||||
Net unrealized gain (loss) on investments and foreign currency translation | $81,559,786 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $82,466,309 | |||||||
Change in net assets from operations | $93,414,669 |
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 6/30/12 (unaudited | ) | | Year ended 12/31/11 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $10,948,360 | $19,122,135 | ||||||
Net realized gain (loss) on investments and foreign currency | 906,523 | 7,048,777 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 81,559,786 | (27,106,084 | ) | |||||
Change in net assets from operations | $93,414,669 | $(935,172 | ) | |||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(15,423,161 | ) | |||||
From net realized gain on investments | — | (4,647,117 | ) | |||||
Total distributions declared to shareholders | $— | $(20,070,278 | ) | |||||
Change in net assets from fund share transactions | $(24,092,782 | ) | $66,137,253 | |||||
Total change in net assets | $69,321,887 | $45,131,803 | ||||||
Net assets | ||||||||
At beginning of period | 1,184,232,675 | 1,139,100,872 | ||||||
At end of period (including undistributed net investment income of $30,078,611 and | $1,253,554,562 | $1,184,232,675 |
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 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $12.68 | $12.98 | $11.80 | $9.76 | $15.25 | $14.52 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.13 | $0.24 | $0.19 | $0.20 | $0.22 | $0.21 | ||||||||||||||||||
Net realized and unrealized gain (loss) on | 0.88 | (0.30 | ) | 1.16 | 1.98 | (4.98 | ) | 0.92 | ||||||||||||||||
Total from investment operations | $1.01 | $(0.06 | ) | $1.35 | $2.18 | $(4.76 | ) | $1.13 | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.19 | ) | $(0.17 | ) | $(0.14 | ) | $(0.17 | ) | $(0.15 | ) | |||||||||||||
From net realized gain on investments | — | (0.05 | ) | — | — | (0.56 | ) | (0.25 | ) | |||||||||||||||
Total distributions declared to shareholders | $— | $(0.24 | ) | $(0.17 | ) | $(0.14 | ) | $(0.73 | ) | $(0.40 | ) | |||||||||||||
Net asset value, end of period (x) | $13.69 | $12.68 | $12.98 | $11.80 | $9.76 | $15.25 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 7.97 | (n) | (0.30 | ) | 11.53 | 22.71 | (32.58 | ) | 7.91 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.79 | (a) | 0.79 | 0.83 | 0.84 | 0.84 | 0.86 | |||||||||||||||||
Expenses after expense reductions (f) | 0.79 | (a) | 0.79 | 0.83 | 0.84 | 0.84 | 0.86 | |||||||||||||||||
Net investment income | 1.93 | (a) | 1.81 | 1.60 | 1.99 | 1.77 | 1.41 | |||||||||||||||||
Portfolio turnover | 9 | (n) | 18 | 28 | 26 | 36 | 23 | |||||||||||||||||
Net assets at end of period (000 omitted) | $353,305 | $352,752 | $389,052 | $367,676 | $295,721 | $390,346 |
See Notes to Financial Statements
9
Table of Contents
MFS Value Series
Financial Highlights – continued
Service Class | Six months ended 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $12.54 | $12.83 | $11.68 | $9.67 | $15.12 | $14.42 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.11 | $0.20 | $0.16 | $0.18 | $0.19 | $0.17 | ||||||||||||||||||
Net realized and unrealized gain (loss) on | 0.87 | (0.27 | ) | 1.15 | 1.95 | (4.94 | ) | 0.91 | ||||||||||||||||
Total from investment operations | $0.98 | $(0.07 | ) | $1.31 | $2.13 | $(4.75 | ) | $1.08 | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.17 | ) | $(0.16 | ) | $(0.12 | ) | $(0.14 | ) | $(0.13 | ) | |||||||||||||
From net realized gain on investments | — | (0.05 | ) | — | — | (0.56 | ) | (0.25 | ) | |||||||||||||||
Total distributions declared to shareholders | $— | $(0.22 | ) | $(0.16 | ) | $(0.12 | ) | $(0.70 | ) | $(0.38 | ) | |||||||||||||
Net asset value, end of period (x) | $13.52 | $12.54 | $12.83 | $11.68 | $9.67 | $15.12 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 7.81 | (n) | (0.47 | ) | 11.22 | 22.45 | (32.74 | ) | 7.59 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.04 | (a) | 1.04 | 1.08 | 1.09 | 1.09 | 1.11 | |||||||||||||||||
Expenses after expense reductions (f) | 1.04 | (a) | 1.04 | 1.08 | 1.09 | 1.09 | 1.11 | |||||||||||||||||
Net investment income | 1.69 | (a) | 1.58 | 1.35 | 1.75 | 1.57 | 1.16 | |||||||||||||||||
Portfolio turnover | 9 | (n) | 18 | 28 | 26 | 36 | 23 | |||||||||||||||||
Net assets at end of period (000 omitted) | $900,249 | $831,481 | $750,049 | $617,739 | $218,528 | $197,844 |
(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. |
(x) | The net asset values per share and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
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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.
In this reporting period the fund adopted FASB Accounting Standards Update 2011-04, Fair Value Measurement (Topic 820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 seeks to improve the comparability of fair value measurements as presented and disclosed in financial statements prepared in accordance with U.S. GAAP and International Financial Reporting Standards (IFRS) by providing common requirements for fair value measurement and disclosure.
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11, Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. Although still evaluating the potential impacts of ASU 2011-11 to the fund, management expects that the impact of the fund’s adoption will be limited to additional financial statement disclosures.
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. 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 Value 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, 2012 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $1,147,219,558 | $— | $— | $1,147,219,558 | ||||||||||||
United Kingdom | 22,341,284 | 20,947,552 | — | 43,288,836 | ||||||||||||
Switzerland | — | 21,465,661 | — | 21,465,661 | ||||||||||||
France | 12,702,557 | — | — | 12,702,557 | ||||||||||||
Canada | 8,056,603 | — | — | 8,056,603 | ||||||||||||
Netherlands | 2,708,291 | — | — | 2,708,291 | ||||||||||||
Mutual Funds | 16,051,746 | — | — | 16,051,746 | ||||||||||||
Total Investments | $1,209,080,039 | $42,413,213 | $— | $1,251,493,252 |
For further information regarding security characteristics, see the Portfolio of Investments.
Of the level 2 investments presented above, equity investments amounting to $20,947,552 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.
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.
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MFS Value Series
Notes to Financial Statements (unaudited) – continued
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, 2012, 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, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Foreign taxes 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:
12/31/11 | ||||
Ordinary income (including any short-term capital gains) | $15,423,161 | |||
Long-term capital gains | 4,647,117 | |||
Total distributions | $20,070,278 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/12 | ||||
Cost of investments | $1,099,298,674 | |||
Gross appreciation | 203,164,340 | |||
Gross depreciation | (50,969,762 | ) | ||
Net unrealized appreciation (depreciation) | $152,194,578 | |||
As of 12/31/11 | ||||
Undistributed ordinary income | 28,552,821 | |||
Undistributed long-term capital gain | 356,805 | |||
Other temporary differences | (16,236 | ) | ||
Net unrealized appreciation (depreciation) | 70,648,013 |
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 | From net realized gain on investments | |||||||||||||||
Six months ended 6/30/12 | Year ended 12/31/11 | Six months ended 6/30/12 | Year ended 12/31/11 | |||||||||||||
Initial Class | $— | $5,362,125 | $— | $1,450,316 | ||||||||||||
Service Class | — | 10,061,036 | — | 3,196,801 | ||||||||||||
Total | $— | $15,423,161 | $— | $4,647,117 |
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MFS Value 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 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, 2014. For the six months ended June 30, 2012, 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, 2012 was equivalent to an annual effective rate of 0.73% 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, 2014. For the six months ended June 30, 2012, 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, 2012, the fee was $63,905, which equated to 0.0103% 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, 2012, these costs amounted to $393.
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, 2012 was equivalent to an annual effective rate of 0.0158% 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, 2012, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $6,376 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 $3,194, 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.
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MFS Value 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 $115,640,485 and $122,301,837, 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 6/30/12 | Year ended 12/31/11 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 1,774,264 | $23,591,838 | 2,298,352 | $29,236,939 | ||||||||||||
Service Class | 6,301,556 | 84,249,178 | 14,860,781 | 187,192,540 | ||||||||||||
8,075,820 | $107,841,016 | 17,159,133 | $216,429,479 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 565,817 | $6,812,441 | ||||||||||||
Service Class | — | — | 1,113,169 | 13,257,837 | ||||||||||||
— | $— | 1,678,986 | $20,070,278 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (3,779,736 | ) | $(51,341,574 | ) | (5,029,795 | ) | $(65,732,351 | ) | ||||||||
Service Class | (6,016,191 | ) | (80,592,224 | ) | (8,102,420 | ) | (104,630,153 | ) | ||||||||
(9,795,927 | ) | $(131,933,798 | ) | (13,132,215 | ) | $(170,362,504 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (2,005,472 | ) | $(27,749,736 | ) | (2,165,626 | ) | $(29,682,971 | ) | ||||||||
Service Class | 285,365 | 3,656,954 | 7,871,530 | 95,820,224 | ||||||||||||
(1,720,107 | ) | $(24,092,782 | ) | 5,705,904 | $66,137,253 |
(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, 2012, the fund’s commitment fee and interest expense were $4,197 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 an affiliated issuer:
Underlying Affiliated Fund | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 20,734,900 | 83,671,809 | (88,354,963 | ) | 16,051,746 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $7,947 | $16,051,746 |
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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, 2012 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 is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. Copies of the fund’s Form N-Q also may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
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
SEMIANNUAL REPORT
June 30, 2012
MFS® MID CAP GROWTH SERIES
MFS® Variable Insurance Trust
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
LETTER FROM THE CHAIRMAN AND CEO
Dear Contract Owners:
World financial markets remain a venue of uncertainty. The focus has shifted most recently to the eurozone, where policymakers are attempting to develop a plan that will help debt-laden countries and prevent their woes from spreading across the region. Volatility is likely to continue as investors test the resolve of European officials to make the tough decisions needed to solve the crisis. A slowing in the Chinese economy has added another layer of trepidation, as investors worry that the primary engine of global growth may be sputtering.
The U.S. economy is experiencing a period of growth. However, markets have been jittery in reaction to events in Europe and ahead of the U.S. presidential election. Voters in the United States are watching the economy closely and waiting to see if Congress agrees to cut the budget and extend the Bush administration tax cuts. Failure to do so could ultimately send the U.S. economy back into recession.
Amid this global uncertainty, managing risk becomes a top priority for investors and their advisors. At MFS® our global research platform is designed to ensure the smooth functioning of our investment process in all business climates. Real-time collaboration across the globe is vital in periods of heightened volatility and economic uncertainty. At MFS our investment staff shares ideas and evaluates opportunities across geographies, across both fundamental and quantitative disciplines, and across companies’ entire capital structure. We employ this uniquely collaborative approach to build better insights for our clients.
We, like our investors, are 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 emphasize the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with investment advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2012
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 | ||||
Ross Stores, Inc. | 2.1% | |||
American Tower Corp., REIT | 2.1% | |||
AMETEK, Inc. | 1.9% | |||
MasterCard, Inc., “A” | 1.9% | |||
Alexion Pharmaceuticals, Inc. | 1.8% | |||
Verisk Analytics, Inc., “A” | 1.8% | |||
Cabot Oil & Gas Corp. | 1.7% | |||
Cognizant Technology Solutions Corp., “A” | 1.5% | |||
PetSmart, Inc. | 1.5% | |||
Dollar General Corp. | 1.4% |
Equity sectors | ||||
Technology | 15.9% | |||
Health Care | 14.7% | |||
Retailing | 12.3% | |||
Industrial Goods & Services | 11.2% | |||
Special Products & Services | 8.4% | |||
Energy | 8.2% | |||
Leisure | 5.7% | |||
Basic Materials | 5.1% | |||
Autos & Housing | 4.8% | |||
Financial Services | 4.2% | |||
Consumer Staples | 3.5% | |||
Utilities & Communications | 2.7% | |||
Transportation | 1.7% |
Percentages are based on net assets as of 6/30/12.
The portfolio is actively managed and current holdings may be different.
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MFS Mid Cap Growth Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2012 through June 30, 2012
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, 2012 through June 30, 2012.
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 1/01/12 | Ending Account Value | Expenses Paid During Period (p) 1/01/12-6/30/12 | ||||||||||||||
Initial Class | Actual | 0.89% | $1,000.00 | $1,079.93 | $4.60 | |||||||||||||
Hypothetical (h) | 0.89% | $1,000.00 | $1,020.44 | $4.47 | ||||||||||||||
Service Class | Actual | 1.14% | $1,000.00 | $1,078.47 | $5.89 | |||||||||||||
Hypothetical (h) | 1.14% | $1,000.00 | $1,019.19 | $5.72 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
3
Table of Contents
MFS Mid Cap Growth Series
PORTFOLIO OF INVESTMENTS – 6/30/12 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 98.4% | ||||||||
Aerospace – 2.0% | ||||||||
BE Aerospace, Inc. (a) | 25,610 | $ | 1,118,127 | |||||
TransDigm Group, Inc. (a) | 7,870 | 1,056,941 | ||||||
|
| |||||||
$ | 2,175,068 | |||||||
|
| |||||||
Alcoholic Beverages – 0.9% | ||||||||
Beam, Inc. | 15,280 | $ | 954,847 | |||||
|
| |||||||
Apparel Manufacturers – 1.7% | ||||||||
Guess?, Inc. | 8,080 | $ | 245,390 | |||||
Li & Fung Ltd. | 352,000 | 683,038 | ||||||
VF Corp. | 6,990 | 932,816 | ||||||
|
| |||||||
$ | 1,861,244 | |||||||
|
| |||||||
Automotive – 2.5% | ||||||||
BorgWarner Transmission Systems, Inc. (a) | 17,650 | $ | 1,157,664 | |||||
Delphi Automotive PLC (a) | 34,150 | 870,825 | ||||||
LKQ Corp. (a) | 21,280 | 710,752 | ||||||
|
| |||||||
$ | 2,739,241 | |||||||
|
| |||||||
Biotechnology – 2.7% | ||||||||
Alexion Pharmaceuticals, Inc. (a) | 20,580 | $ | 2,043,594 | |||||
Dendreon Corp. (a) | 23,490 | 173,826 | ||||||
Regeneron Pharmaceuticals, Inc. (a) | 2,960 | 338,091 | ||||||
ViroPharma, Inc. (a) | 19,220 | 455,514 | ||||||
|
| |||||||
$ | 3,011,025 | |||||||
|
| |||||||
Broadcasting – 1.8% | ||||||||
CBS Corp., “B” | 15,270 | $ | 500,551 | |||||
Discovery Communications, Inc., “A” (a) | 28,038 | 1,514,052 | ||||||
|
| |||||||
$ | 2,014,603 | |||||||
|
| |||||||
Brokerage & Asset Managers – 2.3% | ||||||||
Affiliated Managers Group, Inc. (a) | 13,800 | $ | 1,510,410 | |||||
Evercore Partners, Inc. | 11,520 | 269,453 | ||||||
IntercontinentalExchange, Inc. (a) | 6,150 | 836,277 | ||||||
|
| |||||||
$ | 2,616,140 | |||||||
|
| |||||||
Business Services – 6.8% | ||||||||
Cognizant Technology Solutions Corp., “A” (a) | 27,775 | $ | 1,666,500 | |||||
Concur Technologies, Inc. (a) | 12,850 | 875,085 | ||||||
FleetCor Technologies, Inc. (a) | 25,670 | 899,477 | ||||||
Gartner, Inc. (a) | 17,970 | 773,609 | ||||||
IHS, Inc. “A” (a) | 3,090 | 332,886 | ||||||
Jones Lang LaSalle, Inc. | 14,030 | 987,291 | ||||||
Verisk Analytics, Inc., “A” (a) | 41,450 | 2,041,827 | ||||||
|
| |||||||
$ | 7,576,675 | |||||||
|
| |||||||
Cable TV – 0.9% | ||||||||
Charter Communications, Inc., “A” (a) | 13,670 | $ | 968,793 | |||||
|
| |||||||
Chemicals – 0.6% | ||||||||
Celanese Corp. | 20,450 | $ | 707,979 | |||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Computer Software – 6.6% | ||||||||
Autodesk, Inc. (a) | 20,210 | $ | 707,148 | |||||
Check Point Software Technologies Ltd. (a) | 26,190 | 1,298,762 | ||||||
Citrix Systems, Inc. (a) | 9,140 | 767,212 | ||||||
NetSuite, Inc. (a) | 8,260 | 452,400 | ||||||
Parametric Technology Corp. (a) | 55,960 | 1,172,922 | ||||||
Red Hat, Inc. (a) | 19,420 | 1,096,842 | ||||||
SolarWinds, Inc. (a) | 18,490 | 805,424 | ||||||
TIBCO Software, Inc. (a) | 35,200 | 1,053,184 | ||||||
|
| |||||||
$ | 7,353,894 | |||||||
|
| |||||||
Computer Software – Systems – 2.9% | ||||||||
MICROS Systems, Inc. (a) | 25,210 | $ | 1,290,752 | |||||
NetApp, Inc. (a) | 18,200 | 579,124 | ||||||
Qlik Technologies, Inc. (a) | 32,810 | 725,757 | ||||||
Verifone Systems, Inc. (a) | 19,280 | 637,975 | ||||||
|
| |||||||
$ | 3,233,608 | |||||||
|
| |||||||
Construction – 2.3% | ||||||||
NVR, Inc. (a) | 1,110 | $ | 943,500 | |||||
Sherwin-Williams Co. | 2,480 | 328,228 | ||||||
Stanley Black & Decker, Inc. | 20,848 | 1,341,777 | ||||||
|
| |||||||
$ | 2,613,505 | |||||||
|
| |||||||
Consumer Products – 0.8% | ||||||||
Chr. Hansen Holding A/S | 22,199 | $ | 570,424 | |||||
Nu Skin Enterprises, Inc., “A” | 7,260 | 340,494 | ||||||
|
| |||||||
$ | 910,918 | |||||||
|
| |||||||
Consumer Services – 1.6% | ||||||||
Anhanguera Educacional Participacoes S.A. | 17,000 | $ | 216,679 | |||||
HomeAway, Inc. (a) | 5,110 | 111,091 | ||||||
Priceline.com, Inc. (a) | 1,511 | 1,004,090 | ||||||
Sotheby’s | 14,830 | 494,729 | ||||||
|
| |||||||
$ | 1,826,589 | |||||||
|
| |||||||
Containers – 2.2% | ||||||||
Ball Corp. | 33,980 | $ | 1,394,879 | |||||
Silgan Holdings, Inc. | 25,780 | 1,100,548 | ||||||
|
| |||||||
$ | 2,495,427 | |||||||
|
| |||||||
Electrical Equipment – 5.0% | ||||||||
AMETEK, Inc. | 42,695 | $ | 2,130,907 | |||||
Mettler-Toledo International, Inc. (a) | 7,070 | 1,101,860 | ||||||
MSC Industrial Direct Co., Inc., “A” | 6,690 | 438,530 | ||||||
Sensata Technologies Holding B.V. (a) | 26,140 | 700,029 | ||||||
TriMas Corp. (a) | 14,250 | 286,425 | ||||||
W.W. Grainger, Inc. | 5,040 | 963,850 | ||||||
|
| |||||||
$ | 5,621,601 | |||||||
|
| |||||||
Electronics – 3.2% | ||||||||
Altera Corp. | 28,770 | $ | 973,577 | |||||
ARM Holdings PLC | 51,909 | 413,372 | ||||||
Hittite Microwave Corp. (a) | 7,840 | 400,781 | ||||||
Linear Technology Corp. | 19,770 | 619,394 |
4
Table of Contents
MFS Mid Cap Growth Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Electronics – continued | ||||||||
Microchip Technology, Inc. | 35,490 | $ | 1,174,009 | |||||
|
| |||||||
$ | 3,581,133 | |||||||
|
| |||||||
Energy – Independent – 5.1% | ||||||||
Cabot Oil & Gas Corp. | 48,690 | $ | 1,918,386 | |||||
Celtic Exploration Ltd. (a) | 44,740 | 605,117 | ||||||
Concho Resources, Inc. (a) | 10,680 | 909,082 | ||||||
EQT Corp. | 12,960 | 695,045 | ||||||
Pioneer Natural Resources Co. | 4,880 | 430,465 | ||||||
Range Resources Corp. | 7,920 | 490,010 | ||||||
SM Energy Co. | 14,070 | 690,978 | ||||||
|
| |||||||
$ | 5,739,083 | |||||||
|
| |||||||
Engineering – Construction – 0.3% | ||||||||
Fluor Corp. | 6,951 | $ | 342,962 | |||||
|
| |||||||
Entertainment – 0.3% | ||||||||
Six Flags Entertainment Corp. | 6,250 | $ | 338,625 | |||||
|
| |||||||
Food & Beverages – 1.8% | ||||||||
Mead Johnson Nutrition Co., “A” | 17,480 | $ | 1,407,315 | |||||
Want Want China Holdings Ltd. | 451,000 | 557,938 | ||||||
|
| |||||||
$ | 1,965,253 | |||||||
|
| |||||||
Gaming & Lodging – 0.8% | ||||||||
Royal Caribbean Cruises Ltd. | 21,040 | $ | 547,671 | |||||
Sands China Ltd. | 93,600 | 299,834 | ||||||
|
| |||||||
$ | 847,505 | |||||||
|
| |||||||
General Merchandise – 1.4% | ||||||||
Dollar General Corp. (a) | 28,330 | $ | 1,540,869 | |||||
|
| |||||||
Internet – 1.1% | ||||||||
LinkedIn Corp., “A” (a) | 6,610 | $ | 702,445 | |||||
Rackspace Hosting, Inc. (a) | 13,130 | 576,932 | ||||||
|
| |||||||
$ | 1,279,377 | |||||||
|
| |||||||
Leisure & Toys – 1.3% | ||||||||
Brunswick Corp. | 28,710 | $ | 637,936 | |||||
Polaris Industries, Inc. | 10,690 | 764,121 | ||||||
|
| |||||||
$ | 1,402,057 | |||||||
|
| |||||||
Machinery & Tools – 3.0% | ||||||||
Flowserve Corp. | 3,440 | $ | 394,740 | |||||
Joy Global, Inc. | 15,020 | 852,085 | ||||||
Polypore International, Inc. (a) | 15,780 | 637,354 | ||||||
United Rentals, Inc. (a) | 13,710 | 466,688 | ||||||
WABCO Holdings, Inc. (a) | 18,350 | 971,266 | ||||||
|
| |||||||
$ | 3,322,133 | |||||||
|
| |||||||
Medical & Health Technology & Services – 4.0% | ||||||||
Catamaran Corp. (a) | 14,990 | $ | 1,487,158 | |||||
Cerner Corp. (a) | 17,810 | 1,472,175 | ||||||
IDEXX Laboratories, Inc. (a) | 5,810 | 558,515 | ||||||
Patterson Cos., Inc. | 28,260 | 974,122 | ||||||
|
| |||||||
$ | 4,491,970 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Medical Equipment – 6.4% | ||||||||
Cooper Cos., Inc. | 12,480 | $ | 995,405 | |||||
Covidien PLC | 24,270 | 1,298,445 | ||||||
Edwards Lifesciences Corp. (a) | 13,000 | 1,342,900 | ||||||
Endologix, Inc. (a) | 36,690 | 566,494 | ||||||
Gen-Probe, Inc. (a) | 9,670 | 794,874 | ||||||
Intuitive Surgical, Inc. (a) | 2,043 | 1,131,393 | ||||||
Sirona Dental Systems, Inc. (a) | 7,190 | 323,622 | ||||||
Thermo Fisher Scientific, Inc. | 13,060 | 677,945 | ||||||
|
| |||||||
$ | 7,131,078 | |||||||
|
| |||||||
Network & Telecom – 2.1% | ||||||||
F5 Networks, Inc. (a) | 9,120 | $ | 907,987 | |||||
Fortinet, Inc. (a) | 61,450 | 1,426,869 | ||||||
|
| |||||||
$ | 2,334,856 | |||||||
|
| |||||||
Oil Services – 3.1% | ||||||||
Cameron International Corp. (a) | 8,480 | $ | 362,181 | |||||
Core Laboratories N.V. | 4,430 | 513,437 | ||||||
Dresser-Rand Group, Inc. (a) | 29,120 | 1,297,005 | ||||||
FMC Technologies, Inc. (a) | 23,170 | 908,959 | ||||||
Lufkin Industries, Inc. | 6,390 | 347,105 | ||||||
|
| |||||||
$ | 3,428,687 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 1.9% | ||||||||
MasterCard, Inc., “A” | 4,910 | $ | 2,111,840 | |||||
|
| |||||||
Pharmaceuticals – 1.6% | ||||||||
Auxilium Pharmaceuticals, Inc. (a) | 14,460 | $ | 388,829 | |||||
Perrigo Co. | 11,360 | 1,339,685 | ||||||
|
| |||||||
$ | 1,728,514 | |||||||
|
| |||||||
Pollution Control – 0.9% | ||||||||
Stericycle, Inc. (a) | 4,600 | $ | 421,682 | |||||
Waste Connections, Inc. | 20,850 | 623,832 | ||||||
|
| |||||||
$ | 1,045,514 | |||||||
|
| |||||||
Railroad & Shipping – 0.8% | ||||||||
Kansas City Southern Co. | 13,610 | $ | 946,712 | |||||
|
| |||||||
Restaurants – 0.6% | ||||||||
Starbucks Corp. | 13,110 | $ | 699,025 | |||||
|
| |||||||
Specialty Chemicals – 2.3% | ||||||||
Airgas, Inc. | 11,930 | $ | 1,002,239 | |||||
Albemarle Corp. | 10,270 | 612,503 | ||||||
Rockwood Holdings, Inc. | 20,160 | 894,096 | ||||||
|
| |||||||
$ | 2,508,838 | |||||||
|
| |||||||
Specialty Stores – 9.2% | ||||||||
American Eagle Outfitters, Inc. | 40,260 | $ | 794,330 | |||||
AutoZone, Inc. (a) | 2,890 | 1,061,121 | ||||||
Children’s Place Retail Store, Inc. (a) | 13,730 | 684,166 | ||||||
O’Reilly Automotive, Inc. (a) | 8,840 | 740,527 | ||||||
PetSmart, Inc. | 24,140 | 1,645,865 | ||||||
Ross Stores, Inc. | 37,470 | 2,340,751 | ||||||
rue21, Inc. (a) | 11,470 | 289,503 | ||||||
Tiffany & Co. | 17,380 | 920,271 |
5
Table of Contents
MFS Mid Cap Growth Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Specialty Stores – continued | ||||||||
Tractor Supply Co. | 6,280 | $ | 521,617 | |||||
Urban Outfitters, Inc. (a) | 46,790 | 1,290,936 | ||||||
|
| |||||||
$ | 10,289,087 | |||||||
|
| |||||||
Telecommunications – Wireless – 2.1% | ||||||||
American Tower Corp., REIT | 33,350 | $ | 2,331,499 | |||||
|
| |||||||
Trucking – 0.9% | ||||||||
Expeditors International of Washington, Inc. | 24,620 | $ | 954,025 | |||||
|
| |||||||
Utilities – Electric Power – 0.6% | ||||||||
CMS Energy Corp. | 30,100 | $ | 707,350 | |||||
|
| |||||||
Total Common Stocks (Identified Cost, $96,617,653) | $ | 109,749,149 | ||||||
|
| |||||||
MONEY MARKET FUNDS – 2.0% | ||||||||
MFS Institutional Money Market Portfolio, 0.14%, at Cost and Net Asset Value (v) | 2,187,211 | $ | 2,187,211 | |||||
|
| |||||||
Total Investments (Identified Cost, $98,804,864) | $ | 111,936,360 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – (0.4)% | (452,909 | ) | ||||||
|
| |||||||
Net Assets – 100.0% | $ | 111,483,451 | ||||||
|
|
(a) | Non-income producing security. |
(v) | Underlying affiliated fund that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end. |
The following abbreviations are used in this report and are defined:
PLC | Public Limited Company |
REIT | Real Estate Investment Trust |
See Notes to Financial Statements
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 6/30/12 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $96,617,653) | $109,749,149 | |||||||
Underlying affiliated funds, at cost and value | 2,187,211 | |||||||
Total investments, at value (identified cost, $98,804,864) | $111,936,360 | |||||||
Receivables for | ||||||||
Investments sold | 1,288,860 | |||||||
Fund shares sold | 70,390 | |||||||
Dividends | 42,494 | |||||||
Other assets | 685 | |||||||
Total assets | $113,338,789 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Investments purchased | $1,717,660 | |||||||
Fund shares reacquired | 78,827 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 6,876 | |||||||
Shareholder servicing costs | 153 | |||||||
Distribution and/or service fees | 612 | |||||||
Payable for independent Trustees’ compensation | 43 | |||||||
Accrued expenses and other liabilities | 51,167 | |||||||
Total liabilities | $1,855,338 | |||||||
Net assets | $111,483,451 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $108,888,550 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 13,131,513 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | (10,317,996 | ) | ||||||
Accumulated net investment loss | (218,616 | ) | ||||||
Net assets | $111,483,451 | |||||||
Shares of beneficial interest outstanding | 18,478,958 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $80,798,561 | 13,287,606 | $6.08 | |||||||||
Service Class | 30,684,890 | 5,191,352 | 5.91 |
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 6/30/12 | ||||||||
Net investment loss | ||||||||
Income | ||||||||
Dividends | $344,968 | |||||||
Interest | 2,115 | |||||||
Dividends from underlying affiliated funds | 1,157 | |||||||
Foreign taxes withheld | (378 | ) | ||||||
Total investment income | $347,862 | |||||||
Expenses | ||||||||
Management fee | $445,512 | |||||||
Distribution and/or service fees | 39,738 | |||||||
Shareholder servicing costs | 6,333 | |||||||
Administrative services fee | 13,877 | |||||||
Independent Trustees’ compensation | 2,634 | |||||||
Custodian fee | 12,767 | |||||||
Shareholder communications | 12,597 | |||||||
Audit and tax fees | 25,578 | |||||||
Legal fees | 1,093 | |||||||
Miscellaneous | 6,657 | |||||||
Total expenses | $566,786 | |||||||
Fees paid indirectly | (2 | ) | ||||||
Reduction of expenses by investment adviser | (306 | ) | ||||||
Net expenses | $566,478 | |||||||
Net investment loss | $(218,616 | ) | ||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $4,972,029 | |||||||
Foreign currency | (3,089 | ) | ||||||
Net realized gain (loss) on investments and foreign currency | $4,968,940 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $4,521,330 | |||||||
Translation of assets and liabilities in foreign currencies | 14 | |||||||
Net unrealized gain (loss) on investments and foreign currency translation | $4,521,344 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $9,490,284 | |||||||
Change in net assets from operations | $9,271,668 |
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 6/30/12 (unaudited | ) |
| Year ended 12/31/11 |
| |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment loss | $(218,616 | ) | $(712,690 | ) | ||||
Net realized gain (loss) on investments and foreign currency | 4,968,940 | 25,044,307 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 4,521,344 | (31,574,277 | ) | |||||
Change in net assets from operations | $9,271,668 | $(7,242,660 | ) | |||||
Change in net assets from fund share transactions | $(12,317,182 | ) | $(51,517,703 | ) | ||||
Total change in net assets | $(3,045,514 | ) | $(58,760,363 | ) | ||||
Net assets | ||||||||
At beginning of period | 114,528,965 | 173,289,328 | ||||||
At end of period (including accumulated net investment loss of $218,616 and | $111,483,451 | $114,528,965 |
See Notes to Financial Statements
9
Table of Contents
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 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $5.63 | $5.99 | $4.62 | $3.27 | $7.66 | $7.25 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (loss) (d) | $(0.01 | ) | $(0.03 | ) | $(0.00 | )(w) | $(0.00 | )(w) | $0.01 | $(0.01 | ) | |||||||||||||
Net realized and unrealized gain (loss) on investments | 0.46 | (0.33 | ) | 1.37 | 1.36 | (3.55 | ) | 0.71 | ||||||||||||||||
Total from investment operations | $0.45 | $(0.36 | ) | $1.37 | $1.36 | $(3.54 | ) | $0.70 | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $— | $— | $(0.01 | ) | $— | $(0.01 | ) | ||||||||||||||||
From net realized gain on investments | — | — | — | — | (0.85 | ) | (0.28 | ) | ||||||||||||||||
From tax return of capital | — | — | — | (0.00 | )(w) | — | — | |||||||||||||||||
Total distributions declared to shareholders | $— | $— | $— | $(0.01 | ) | $(0.85 | ) | $(0.29 | ) | |||||||||||||||
Net asset value, end of period (x) | $6.08 | $5.63 | $5.99 | $4.62 | $3.27 | $7.66 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 7.99 | (n) | (6.01 | ) | 29.65 | 41.78 | (51.56 | ) | 9.82 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.89 | (a) | 0.88 | 0.88 | 0.90 | 0.87 | 0.91 | |||||||||||||||||
Expenses after expense reductions (f) | 0.89 | (a) | 0.88 | 0.88 | 0.90 | 0.87 | 0.91 | |||||||||||||||||
Net investment income (loss) | (0.30 | )(a) | (0.44 | ) | 0.09 | (0.09 | ) | 0.21 | (0.10 | ) | ||||||||||||||
Portfolio turnover | 32 | (n) | 71 | 91 | 114 | 104 | 91 | |||||||||||||||||
Net assets at end of period (000 omitted) | $80,799 | $84,387 | $137,567 | $107,989 | $73,066 | $173,048 | ||||||||||||||||||
Service Class | Six months 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $5.48 | $5.84 | $4.52 | $3.20 | $7.52 | $7.13 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment loss (d) | $(0.02 | ) | $(0.04 | ) | $(0.01 | ) | $(0.01 | ) | $(0.00 | )(w) | $(0.03 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 0.45 | (0.32 | ) | 1.33 | 1.33 | (3.47 | ) | 0.70 | ||||||||||||||||
Total from investment operations | $0.43 | $(0.36 | ) | $1.32 | $1.32 | $(3.47 | ) | $0.67 | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net realized gain on investments | $— | $— | $— | $— | $(0.85 | ) | $(0.28 | ) | ||||||||||||||||
Net asset value, end of period (x) | $5.91 | $5.48 | $5.84 | $4.52 | $3.20 | $7.52 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 7.85 | (n) | (6.16 | ) | 29.20 | 41.25 | (51.59 | ) | 9.51 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.14 | (a) | 1.13 | 1.13 | 1.16 | 1.12 | 1.16 | |||||||||||||||||
Expenses after expense reductions (f) | 1.14 | (a) | 1.13 | 1.13 | 1.15 | 1.12 | 1.16 | |||||||||||||||||
Net investment loss | (0.55 | )(a) | (0.70 | ) | (0.16 | ) | (0.33 | ) | (0.05 | ) | (0.35 | ) | ||||||||||||
Portfolio turnover | 32 | (n) | 71 | 91 | 114 | 104 | 91 | |||||||||||||||||
Net assets at end of period (000 omitted) | $30,685 | $30,142 | $35,722 | $29,524 | $22,511 | $48,209 |
See Notes to Financial Statements
10
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MFS Mid Cap Growth Series
Financial Highlights – continued
(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. |
(x) | The net asset values per share and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
11
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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.
In this reporting period the fund adopted FASB Accounting Standards Update 2011-04, Fair Value Measurement (Topic 820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 seeks to improve the comparability of fair value measurements as presented and disclosed in financial statements prepared in accordance with U.S. GAAP and International Financial Reporting Standards (IFRS) by providing common requirements for fair value measurement and disclosure.
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11, Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. Although still evaluating the potential impacts of ASU 2011-11 to the fund, management expects that the impact of the fund’s adoption will be limited to additional financial statement disclosures.
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. 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 Mid Cap 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, 2012 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $103,616,827 | $— | $— | $103,616,827 | ||||||||||||
Canada | 2,092,275 | — | — | 2,092,275 | ||||||||||||
Israel | 1,298,762 | — | — | 1,298,762 | ||||||||||||
Hong Kong | — | 982,872 | — | 982,872 | ||||||||||||
Denmark | — | 570,424 | — | 570,424 | ||||||||||||
China | — | 557,938 | — | 557,938 | ||||||||||||
United Kingdom | — | 413,372 | — | 413,372 | ||||||||||||
Brazil | 216,679 | — | — | 216,679 | ||||||||||||
Mutual Funds | 2,187,211 | — | — | 2,187,211 | ||||||||||||
Total Investments | $109,411,754 | $2,524,606 | $— | $111,936,360 |
For further information regarding security characteristics, see the Portfolio of Investments.
Of the level 2 investments presented above, equity investments amounting to $1,240,976 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.
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.
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MFS Mid Cap Growth Series
Notes to Financial Statements (unaudited) – continued
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, 2012, 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, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Foreign taxes 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 net operating losses and wash sale loss deferrals.
The fund declared no distributions for the current period or for the year ended December 31, 2011.
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/12 | ||||
Cost of investments | $98,970,730 | |||
Gross appreciation | 18,457,955 | |||
Gross depreciation | (5,492,325 | ) | ||
Net unrealized appreciation (depreciation) | $12,965,630 | |||
As of 12/31/11 | ||||
Capital loss carryforwards | (15,121,266 | ) | ||
Other temporary differences | 199 | |||
Net unrealized appreciation (depreciation) | 8,444,300 |
The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.
Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized after December 31, 2011 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.
As of December 31, 2011, the fund had capital loss carryforwards available to offset future realized gains. Such losses expire as follows:
Pre-enactment losses: | ||||
12/31/16 | $(5,680,106 | ) | ||
12/31/17 | (9,441,160 | ) | ||
Total | $(15,121,266 | ) |
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.
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MFS Mid Cap Growth 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 | 0.70% |
The management fee incurred for the six months ended June 30, 2012 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, 2012, the fee was $6,095, which equated to 0.0103% 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, 2012, these costs amounted to $238.
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, 2012 was equivalent to an annual effective rate of 0.0234% 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, 2012, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $614 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 $306, 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 $37,859,716 and $50,259,255, respectively.
15
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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 6/30/12 | Year ended 12/31/11 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 557,076 | $3,428,463 | 924,633 | $5,574,028 | ||||||||||||
Service Class | 458,356 | 2,745,259 | 1,307,673 | 7,551,227 | ||||||||||||
Total | 1,015,432 | $6,173,722 | 2,232,306 | $13,125,255 | ||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (2,264,536 | ) | $(13,871,646 | ) | (8,892,985 | ) | $(53,492,403 | ) | ||||||||
Service Class | (770,261 | ) | (4,619,258 | ) | (1,916,202 | ) | (11,150,555 | ) | ||||||||
Total | (3,034,797 | ) | $(18,490,904 | ) | (10,809,187 | ) | $(64,642,958 | ) | ||||||||
Net change | ||||||||||||||||
Initial Class | (1,707,460 | ) | $(10,443,183 | ) | (7,968,352 | ) | $(47,918,375 | ) | ||||||||
Service Class | (311,905 | ) | (1,873,999 | ) | (608,529 | ) | (3,599,328 | ) | ||||||||
Total | (2,019,365 | ) | $(12,317,182 | ) | (8,576,881 | ) | $(51,517,703 | ) |
(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, 2012, the fund’s commitment fee and interest expense were $437 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 an affiliated issuer:
Underlying Affiliated Fund | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 2,546,249 | 18,316,029 | (18,675,067 | ) | 2,187,211 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $1,157 | $2,187,211 |
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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, 2012 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 is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. Copies of the fund’s Form N-Q also may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
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
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Table of Contents
SEMIANNUAL REPORT
June 30, 2012
MFS® NEW DISCOVERY SERIES
MFS® Variable Insurance Trust
VND-SEM
Table of Contents
CONTENTS
The report is prepared for the general information of contract owners. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED 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
LETTER FROM THE CHAIRMAN AND CEO
Dear Contract Owners:
World financial markets remain a venue of uncertainty. The focus has shifted most recently to the eurozone, where policymakers are attempting to develop a plan that will help debt-laden countries and prevent their woes from spreading across the region. Volatility is likely to continue as investors test the resolve of European officials to make the tough decisions needed to solve the crisis. A slowing in the Chinese economy has added another layer of trepidation, as investors worry that the primary engine of global growth may be sputtering.
The U.S. economy is experiencing a period of growth. However, markets have been jittery in reaction to events in Europe and ahead of the U.S. presidential election. Voters in the United States are watching the economy closely and waiting to see if Congress agrees to cut the budget and extend the Bush administration tax cuts. Failure to do so could ultimately send the U.S. economy back into recession.
Amid this global uncertainty, managing risk becomes a top priority for investors and their advisors. At MFS® our global research platform is designed to ensure the smooth functioning of our investment process in all business climates. Real-time collaboration across the globe is vital in periods of heightened volatility and economic uncertainty. At MFS our investment staff shares ideas and evaluates opportunities across geographies, across both fundamental and quantitative disciplines, and across companies’ entire capital structure. We employ this uniquely collaborative approach to build better insights for our clients.
We, like our investors, are 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 emphasize the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with investment advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2012
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 | ||||
Cabot Oil & Gas Corp. | 3.4% | |||
Range Resources Corp. | 2.4% | |||
Conceptus, Inc. | 2.3% | |||
HomeAway, Inc. | 1.7% | |||
Brookdale Senior Living, Inc. | 1.7% | |||
Pulte Homes, Inc. | 1.5% | |||
Eagle Materials, Inc. | 1.5% | |||
Veeco Instruments, Inc. | 1.4% | |||
SciQuest, Inc. | 1.4% | |||
Six Flags Entertainment Corp. | 1.4% |
Equity sectors | ||||
Technology | 23.3% | |||
Health Care | 22.4% | |||
Energy | 12.9% | |||
Industrial Goods & Services | 10.4% | |||
Retailing | 6.7% | |||
Transportation | 5.7% | |||
Autos & Housing | 5.5% | |||
Special Products & Services | 5.4% | |||
Leisure | 3.5% | |||
Financial Services | 1.6% | |||
Basic Materials | 1.5% | |||
Consumer Staples | 1.3% |
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 6/30/12.
The portfolio is actively managed and current holdings may be different.
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Table of Contents
MFS New Discovery Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2012 through June 30, 2012
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, 2012 through June 30, 2012.
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 1/01/12 | Ending Account Value 6/30/12 | Expenses Paid During Period (p) 1/01/12-6/30/12 | ||||||||||||||
Initial Class | Actual | 0.98% | $1,000.00 | $1,118.96 | $5.16 | |||||||||||||
Hypothetical (h) | 0.98% | $1,000.00 | $1,019.99 | $4.92 | ||||||||||||||
Service Class | Actual | 1.23% | $1,000.00 | $1,117.90 | $6.48 | |||||||||||||
Hypothetical (h) | 1.23% | $1,000.00 | $1,018.75 | $6.17 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
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Table of Contents
MFS New Discovery Series
PORTFOLIO OF INVESTMENTS – 6/30/12 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 100.2% | ||||||||
Aerospace – 0.5% | ||||||||
Kaman Corp. | 114,128 | $ | 3,531,120 | |||||
|
| |||||||
Airlines – 2.6% | ||||||||
Allegiant Travel Co. (a) | 71,754 | $ | 4,999,819 | |||||
Spirit Airlines, Inc. (a) | 176,131 | 3,427,509 | ||||||
U.S. Airways Group, Inc. (a) | 256,130 | 3,414,213 | ||||||
United Continental Holdings, Inc. (a) | 241,824 | 5,883,578 | ||||||
|
| |||||||
$ | 17,725,119 | |||||||
|
| |||||||
Apparel Manufacturers – 0.8% | ||||||||
Guess?, Inc. | 186,870 | $ | 5,675,242 | |||||
|
| |||||||
Automotive – 0.4% | ||||||||
Delphi Automotive PLC (a) | 117,310 | $ | 2,991,405 | |||||
|
| |||||||
Biotechnology – 1.5% | ||||||||
Anacor Pharmaceuticals, Inc. (a) | 395,502 | $ | 2,566,808 | |||||
SEQUENOM, Inc. (a) | 812,720 | 3,299,643 | ||||||
ViroPharma, Inc. (a) | 202,990 | 4,810,863 | ||||||
|
| |||||||
$ | 10,677,314 | |||||||
|
| |||||||
Business Services – 3.1% | ||||||||
Constant Contact, Inc. (a) | 490,498 | $ | 8,770,104 | |||||
FleetCor Technologies, Inc. (a) | 221,286 | 7,753,861 | ||||||
Jones Lang LaSalle, Inc. | 72,031 | 5,068,821 | ||||||
|
| |||||||
$ | 21,592,786 | |||||||
|
| |||||||
Computer Software – 5.6% | ||||||||
ANSYS, Inc. (a) | 79,980 | $ | 5,047,538 | |||||
Check Point Software Technologies Ltd. (a) | 145,648 | 7,222,684 | ||||||
NetSuite, Inc. (a) | 77,467 | 4,242,868 | ||||||
Nuance Communications, Inc. (a) | 381,243 | 9,081,208 | ||||||
Red Hat, Inc. (a) | 86,101 | 4,862,984 | ||||||
SolarWinds, Inc. (a) | 200,782 | 8,746,064 | ||||||
|
| |||||||
$ | 39,203,346 | |||||||
|
| |||||||
Computer Software – Systems – 8.9% | ||||||||
Aruba Networks, Inc. (a) | 401,788 | $ | 6,046,909 | |||||
Ellie Mae, Inc. (a) | 81,910 | 1,474,380 | ||||||
Exa Corp. (a) | 303,800 | 3,223,318 | ||||||
ExactTarget, Inc. (a) | 85,120 | 1,860,723 | ||||||
Fusion-io, Inc. (a)(l) | 170,145 | 3,554,329 | ||||||
Guidewire Software, Inc. (a) | 211,310 | 5,942,037 | ||||||
National Instruments Corp. | 268,280 | 7,206,001 | ||||||
PROS Holdings, Inc. (a) | 237,982 | 4,002,857 | ||||||
Qlik Technologies, Inc. (a) | 261,314 | 5,780,266 | ||||||
SciQuest, Inc. (a) | 543,432 | 9,760,039 | ||||||
ServiceSource International, Inc. (a) | 442,173 | 6,124,096 | ||||||
Tangoe, Inc. (a) | 147,997 | 3,153,816 | ||||||
Vantiv, Inc. (a) | 147,950 | 3,445,756 | ||||||
|
| |||||||
$ | 61,574,527 | |||||||
|
| |||||||
Construction – 5.1% | ||||||||
Beacon Roofing Supply, Inc. (a) | 228,156 | $ | 5,754,094 | |||||
Eagle Materials, Inc. | 269,901 | 10,078,103 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Construction – continued | ||||||||
NVR, Inc. (a) | 10,172 | $ | 8,646,200 | |||||
Pulte Homes, Inc. (a) | 1,002,297 | 10,724,578 | ||||||
|
| |||||||
$ | 35,202,975 | |||||||
|
| |||||||
Consumer Products – 0.5% | ||||||||
L’Occitane International S.A. | 1,344,000 | $ | 3,722,488 | |||||
|
| |||||||
Consumer Services – 2.3% | ||||||||
HomeAway, Inc. (a) | 545,331 | $ | 11,855,496 | |||||
MakeMyTrip Ltd. (a) | 244,007 | 4,009,035 | ||||||
|
| |||||||
$ | 15,864,531 | |||||||
|
| |||||||
Electrical Equipment – 2.0% | ||||||||
MSC Industrial Direct Co., Inc., “A” | 129,480 | $ | 8,487,414 | |||||
Sensata Technologies Holding B.V. (a) | 194,716 | 5,214,494 | ||||||
|
| |||||||
$ | 13,701,908 | |||||||
|
| |||||||
Electronics – 6.1% | ||||||||
CEVA, Inc. (a) | 418,171 | $ | 7,363,991 | |||||
Entegris, Inc. (a) | 456,051 | 3,894,676 | ||||||
Monolithic Power Systems, Inc. (a) | 416,364 | 8,273,153 | ||||||
Stratasys, Inc. (a) | 88,368 | 4,378,634 | ||||||
Ultratech, Inc. (a) | 216,686 | 6,825,609 | ||||||
Universal Display Corp. (a) | 44,930 | 1,614,784 | ||||||
Veeco Instruments, Inc. (a) | 284,997 | 9,792,497 | ||||||
|
| |||||||
$ | 42,143,344 | |||||||
|
| |||||||
Energy – Independent – 9.1% | ||||||||
Approach Resources, Inc. (a) | 211,120 | $ | 5,392,005 | |||||
Cabot Oil & Gas Corp. | 590,849 | 23,279,451 | ||||||
Celtic Exploration Ltd. (a) | 298,611 | 4,038,772 | ||||||
Cloud Peak Energy, Inc. (a) | 219,240 | 3,707,348 | ||||||
Midstates Petroleum Co., Inc. (a) | 517,510 | 5,025,022 | ||||||
Pinecrest Energy, Inc. (a) | 2,693,054 | 4,681,962 | ||||||
Range Resources Corp. | 271,949 | 16,825,485 | ||||||
|
| |||||||
$ | 62,950,045 | |||||||
|
| |||||||
Entertainment – 1.4% | ||||||||
Six Flags Entertainment Corp. | 178,553 | $ | 9,674,002 | |||||
|
| |||||||
Food & Beverages – 0.8% | ||||||||
Green Mountain Coffee Roasters, Inc. (a) | 270,395 | $ | 5,889,203 | |||||
|
| |||||||
Internet – 0.6% | ||||||||
Millennial Media, Inc. (a) | 291,720 | $ | 3,847,787 | |||||
|
| |||||||
Machinery & Tools – 7.9% | ||||||||
Allison Transmission Holdings, Inc. | 446,490 | $ | 7,840,364 | |||||
Douglas Dynamics, Inc. | 125,707 | 1,791,325 | ||||||
IPG Photonics Corp. (a) | 173,156 | 7,547,870 | ||||||
Joy Global, Inc. | 150,032 | 8,511,315 | ||||||
Kennametal, Inc. | 193,026 | 6,398,812 | ||||||
Polypore International, Inc. (a)(l) | 186,240 | 7,522,234 | ||||||
United Rentals, Inc. (a) | 283,747 | 9,658,748 | ||||||
WABCO Holdings, Inc. (a) | 107,911 | 5,711,729 | ||||||
|
| |||||||
$ | 54,982,397 | |||||||
|
|
4
Table of Contents
MFS New Discovery Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Medical & Health Technology & Services – 6.9% | ||||||||
Advisory Board Co. (a) | 115,852 | $ | 5,745,101 | |||||
Air Methods Corp. (a) | 47,926 | 4,708,730 | ||||||
Brookdale Senior Living, Inc. (a) | 645,885 | 11,458,000 | ||||||
Cerner Corp. (a) | 75,091 | 6,207,022 | ||||||
Healthcare Services Group, Inc. | 474,618 | 9,198,097 | ||||||
HMS Holdings Corp. (a) | 206,090 | 6,864,858 | ||||||
IDEXX Laboratories, Inc. (a) | 39,020 | 3,750,993 | ||||||
|
| |||||||
$ | 47,932,801 | |||||||
|
| |||||||
Medical Equipment – 13.4% | ||||||||
Align Technology, Inc. (a) | 187,707 | $ | 6,280,676 | |||||
Cepheid, Inc. (a) | 101,298 | 4,533,086 | ||||||
Conceptus, Inc. (a) | 787,900 | 15,616,178 | ||||||
DexCom, Inc. (a) | 340,378 | 4,411,299 | ||||||
Edwards Lifesciences Corp. (a) | 33,270 | 3,436,791 | ||||||
Endologix, Inc. (a) | 438,485 | 6,770,208 | ||||||
Essilor International S.A. | 37,921 | 3,522,634 | ||||||
Heartware International, Inc. (a) | 38,187 | 3,391,006 | ||||||
Masimo Corp. (a) | 322,718 | 7,222,429 | ||||||
Novadaq Technologies, Inc. (a) | 112,330 | 749,241 | ||||||
NxStage Medical, Inc. (a) | 472,731 | 7,922,972 | ||||||
Sirona Dental Systems, Inc. (a) | 95,121 | 4,281,396 | ||||||
Sonova Holding AG | 42,998 | 4,149,135 | ||||||
Thoratec Corp. (a) | 75,198 | 2,525,149 | ||||||
Uroplasty, Inc. (a) | 756,925 | 3,474,286 | ||||||
Vocera Communications, Inc. (a) | 260,250 | 6,972,098 | ||||||
Volcano Corp. (a) | 262,885 | 7,531,655 | ||||||
|
| |||||||
$ | 92,790,239 | |||||||
|
| |||||||
Metals & Mining – 1.2% | ||||||||
Globe Specialty Metals, Inc. | 516,289 | $ | 6,933,761 | |||||
Iluka Resources Ltd. | 131,537 | 1,541,362 | ||||||
|
| |||||||
$ | 8,475,123 | |||||||
|
| |||||||
Network & Telecom – 2.1% | ||||||||
Calix, Inc. (a) | 731,493 | $ | 6,012,872 | |||||
Fortinet, Inc. (a) | 359,733 | 8,353,000 | ||||||
|
| |||||||
$ | 14,365,872 | |||||||
|
| |||||||
Oil Services – 3.8% | ||||||||
Atwood Oceanics, Inc. (a) | 236,488 | $ | 8,948,706 | |||||
Dresser-Rand Group, Inc. (a) | 170,047 | 7,573,893 | ||||||
Helmerich & Payne, Inc. | 102,490 | 4,456,265 | ||||||
Lufkin Industries, Inc. | 95,220 | 5,172,350 | ||||||
|
| |||||||
$ | 26,151,214 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 1.6% | ||||||||
Air Lease Corp. (a) | 236,325 | $ | 4,582,342 | |||||
First Republic Bank (a) | 187,486 | 6,299,530 | ||||||
|
| |||||||
$ | 10,881,872 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Pharmaceuticals – 0.6% | ||||||||
Perrigo Co. | 33,197 | $ | 3,914,922 | |||||
|
| |||||||
Precious Metals & Minerals – 0.2% | ||||||||
Colossus Minerals, Inc. (a) | 463,009 | $ | 1,609,912 | |||||
|
| |||||||
Railroad & Shipping – 0.9% | ||||||||
Diana Shipping, Inc. (a) | 810,552 | $ | 6,306,095 | |||||
|
| |||||||
Restaurants – 2.1% | ||||||||
Arcos Dorados Holdings, Inc. | 641,638 | $ | 9,483,410 | |||||
BJ’s Restaurants, Inc. (a) | 45,440 | 1,726,720 | ||||||
Dunkin Brands Group, Inc. | 93,437 | 3,208,627 | ||||||
|
| |||||||
$ | 14,418,757 | |||||||
|
| |||||||
Specialty Chemicals – 0.1% | ||||||||
Ecosynthetix, Inc. (a)(z) | 208,740 | $ | 799,613 | |||||
|
| |||||||
Specialty Stores – 5.9% | ||||||||
Citi Trends, Inc. (a) | 585,410 | $ | 9,038,730 | |||||
Ethan Allen Interiors, Inc. | 359,701 | 7,168,841 | ||||||
Francesca’s Holdings Corp. (a) | 155,380 | 4,196,814 | ||||||
Monro Muffler Brake, Inc. | 252,088 | 8,379,405 | ||||||
Tiffany & Co. | 102,410 | 5,422,610 | ||||||
Urban Outfitters, Inc. (a) | 233,772 | 6,449,769 | ||||||
|
| |||||||
$ | 40,656,169 | |||||||
|
| |||||||
Trucking – 2.2% | ||||||||
Atlas Air Worldwide Holdings, Inc. (a) | 146,017 | $ | 6,353,200 | |||||
Swift Transportation Co. (a) | 977,141 | 9,233,982 | ||||||
|
| |||||||
$ | 15,587,182 | |||||||
|
| |||||||
Total Common Stocks (Identified Cost, $653,773,796) | $ | 694,839,310 | ||||||
|
| |||||||
MONEY MARKET FUNDS – 0.6% | ||||||||
MFS Institutional Money Market Portfolio, 0.14%, at Cost and Net Asset Value (v) | 3,913,458 | $ | 3,913,458 | |||||
|
| |||||||
COLLATERAL FOR SECURITIES LOANED – 1.0% | ||||||||
Navigator Securities Lending Prime Portfolio, 0.28%, at Cost and Net Asset Value (j) | 7,364,935 | $ | 7,364,935 | |||||
|
| |||||||
Total Investments (Identified Cost, $665,052,189) | $ | 706,117,703 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – (1.8)% | (12,750,329 | ) | ||||||
|
| |||||||
Net Assets – 100.0% | $ | 693,367,374 | ||||||
|
|
5
Table of Contents
MFS New Discovery Series
Portfolio of Investments (unaudited) – continued
(a) | Non-income producing security. |
(j) | The rate quoted is the annualized seven-day yield of the fund at period end. |
(l) | A portion of this security is on loan. |
(v) | Underlying affiliated fund that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end. |
(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 | |||||||
Ecosynthetix, Inc. | 7/28/11 | $1,974,316 | $799,613 | |||||||
% of Net Assets | 0.1% |
The following abbreviations are used in this report and are defined:
PLC | Public Limited Company |
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 6/30/12 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $661,138,731) | $702,204,245 | |||||||
Underlying affiliated funds, at cost and value | 3,913,458 | |||||||
Total investments, at value, including $7,458,447 of securities on loan (identified cost, $665,052,189) | $706,117,703 | |||||||
Cash | 4,634 | |||||||
Receivables for | ||||||||
Investments sold | 11,385,197 | |||||||
Fund shares sold | 304,065 | |||||||
Interest and dividends | 78,041 | |||||||
Other assets | 3,341 | |||||||
Total assets | $717,892,981 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Investments purchased | $15,579,967 | |||||||
Fund shares reacquired | 1,368,726 | |||||||
Collateral for securities loaned, at value | 7,364,935 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 50,486 | |||||||
Shareholder servicing costs | 774 | |||||||
Distribution and/or service fees | 6,773 | |||||||
Payable for independent Trustees’ compensation | 210 | |||||||
Accrued expenses and other liabilities | 153,736 | |||||||
Total liabilities | $24,525,607 | |||||||
Net assets | $693,367,374 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $612,184,279 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 41,066,072 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | 42,449,730 | |||||||
Accumulated net investment loss | (2,332,707 | ) | ||||||
Net assets | $693,367,374 | |||||||
Shares of beneficial interest outstanding | 44,242,378 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $352,565,223 | 22,050,573 | $15.99 | |||||||||
Service Class | 340,802,151 | 22,191,805 | 15.36 |
See Notes to Financial Statements
7
Table of Contents
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 6/30/12 | ||||||||
Net investment loss | ||||||||
Income | ||||||||
Dividends | $1,463,709 | |||||||
Income on securities loaned | 185,169 | |||||||
Dividends from underlying affiliated funds | 1,199 | |||||||
Foreign taxes withheld | (17,818 | ) | ||||||
Total investment income | $1,632,259 | |||||||
Expenses | ||||||||
Management fee | $3,241,583 | |||||||
Distribution and/or service fees | 430,651 | |||||||
Shareholder servicing costs | 37,898 | |||||||
Administrative services fee | 58,852 | |||||||
Independent Trustees’ compensation | 9,571 | |||||||
Custodian fee | 64,745 | |||||||
Shareholder communications | 68,625 | |||||||
Audit and tax fees | 26,499 | |||||||
Legal fees | 5,773 | |||||||
Miscellaneous | 22,655 | |||||||
Total expenses | $3,966,852 | |||||||
Fees paid indirectly | (36 | ) | ||||||
Reduction of expenses by investment adviser | (1,850 | ) | ||||||
Net expenses | $3,964,966 | |||||||
Net investment loss | $(2,332,707 | ) | ||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $(5,668,007 | ) | ||||||
Foreign currency | (114,023 | ) | ||||||
Net realized gain (loss) on investments and foreign currency | $(5,782,030 | ) | ||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $85,820,022 | |||||||
Translation of assets and liabilities in foreign currencies | 4,981 | |||||||
Net unrealized gain (loss) on investments and foreign currency translation | $85,825,003 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $80,042,973 | |||||||
Change in net assets from operations | $77,710,266 |
See Notes to Financial Statements
8
Table of Contents
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 6/30/12 (unaudited | ) | | Year ended 12/31/11 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment loss | $(2,332,707 | ) | $(5,355,422 | ) | ||||
Net realized gain (loss) on investments and foreign currency | (5,782,030 | ) | 54,611,110 | |||||
Net unrealized gain (loss) on investments and foreign currency translation | 85,825,003 | (125,805,522 | ) | |||||
Change in net assets from operations | $77,710,266 | $(76,549,834 | ) | |||||
Distributions declared to shareholders | ||||||||
From net realized gain on investments | $— | $(94,303,410 | ) | |||||
Change in net assets from fund share transactions | $(60,343,028 | ) | $23,275,762 | |||||
Total change in net assets | $17,367,238 | $(147,577,482 | ) | |||||
Net assets | ||||||||
At beginning of period | 676,000,136 | 823,577,618 | ||||||
At end of period (including accumulated net investment loss of $2,332,707 and | $693,367,374 | $676,000,136 |
See Notes to Financial Statements
9
Table of Contents
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 ended 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $14.29 | $18.31 | $13.43 | $8.23 | $16.63 | $17.42 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment loss (d) | $(0.04 | ) | $(0.10 | ) | $(0.08 | ) | $(0.06 | ) | $(0.04 | ) | $(0.09 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | 1.74 | (1.70 | ) | 4.96 | 5.26 | (5.54 | ) | 0.58 | ||||||||||||||||
Total from investment operations | $1.70 | $(1.80 | ) | $4.88 | $5.20 | $(5.58 | ) | $0.49 | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net realized gain on investments | $— | $(2.22 | ) | $— | $— | $(2.82 | ) | $(1.28 | ) | |||||||||||||||
Net asset value, end of period (x) | $15.99 | $14.29 | $18.31 | $13.43 | $8.23 | $16.63 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 11.90 | (n) | (10.27 | ) | 36.34 | 63.18 | (39.33 | ) | 2.52 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.98 | (a) | 0.98 | 1.01 | 1.03 | 1.01 | 1.01 | |||||||||||||||||
Expenses after expense reductions (f) | 0.98 | (a) | 0.98 | 1.01 | 1.03 | 1.01 | 1.01 | |||||||||||||||||
Net investment loss | (0.53 | )(a) | (0.56 | ) | (0.54 | ) | (0.57 | ) | (0.36 | ) | (0.50 | ) | ||||||||||||
Portfolio turnover | 64 | (n) | 177 | 195 | 158 | 121 | 95 | |||||||||||||||||
Net assets at end of period (000 omitted) | $352,565 | $363,412 | $499,020 | $423,042 | $289,596 | $520,726 | ||||||||||||||||||
Service Class | Six months ended 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $13.74 | $17.74 | $13.05 | $8.01 | $16.31 | $17.15 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment loss (d) | $(0.06 | ) | $(0.14 | ) | $(0.11 | ) | $(0.08 | ) | $(0.07 | ) | $(0.13 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | 1.68 | (1.64 | ) | 4.80 | 5.12 | (5.41 | ) | 0.57 | ||||||||||||||||
Total from investment operations | $1.62 | $(1.78 | ) | $4.69 | $5.04 | $(5.48 | ) | $0.44 | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net realized gain on investments | $— | $(2.22 | ) | $— | $— | $(2.82 | ) | $(1.28 | ) | |||||||||||||||
Net asset value, end of period (x) | $15.36 | $13.74 | $17.74 | $13.05 | $8.01 | $16.31 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 11.79 | (n) | (10.49 | ) | 35.94 | 62.92 | (39.52 | ) | 2.25 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.23 | (a) | 1.23 | 1.26 | 1.28 | 1.26 | 1.26 | |||||||||||||||||
Expenses after expense reductions (f) | 1.23 | (a) | 1.23 | 1.26 | 1.28 | 1.26 | 1.26 | |||||||||||||||||
Net investment loss | (0.78 | )(a) | (0.80 | ) | (0.79 | ) | (0.82 | ) | (0.60 | ) | (0.75 | ) | ||||||||||||
Portfolio turnover | 64 | (n) | 177 | 195 | 158 | 121 | 95 | |||||||||||||||||
Net assets at end of period (000 omitted) | $340,802 | $312,589 | $324,557 | $219,982 | $125,421 | $242,510 |
See Notes to Financial Statements
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MFS New Discovery Series
Financial Highlights – continued
(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. |
(x) | The net asset values per share and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
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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.
In this reporting period the fund adopted FASB Accounting Standards Update 2011-04, Fair Value Measurement (Topic 820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 seeks to improve the comparability of fair value measurements as presented and disclosed in financial statements prepared in accordance with U.S. GAAP and International Financial Reporting Standards (IFRS) by providing common requirements for fair value measurement and disclosure.
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11, Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. Although still evaluating the potential impacts of ASU 2011-11 to the fund, management expects that the impact of the fund’s adoption will be limited to additional financial statement disclosures.
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. 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 New Discovery 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, 2012 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $643,002,967 | $— | $— | $643,002,967 | ||||||||||||
Canada | 11,079,887 | 799,613 | — | 11,879,500 | ||||||||||||
British Virgin Islands | 9,483,410 | — | — | 9,483,410 | ||||||||||||
Israel | 7,222,684 | — | — | 7,222,684 | ||||||||||||
Greece | 6,306,095 | — | — | 6,306,095 | ||||||||||||
Switzerland | — | 4,149,135 | — | 4,149,135 | ||||||||||||
India | 4,009,035 | — | — | 4,009,035 | ||||||||||||
Luxembourg | — | 3,722,488 | — | 3,722,488 | ||||||||||||
France | — | 3,522,634 | — | 3,522,634 | ||||||||||||
Other Countries | — | 1,541,362 | — | 1,541,362 | ||||||||||||
Mutual Funds | 11,278,393 | — | — | 11,278,393 | ||||||||||||
Total Investments | $692,382,471 | $13,735,232 | $— | $706,117,703 |
For further information regarding security characteristics, see the Portfolio of Investments.
Of the level 2 investments presented above, equity investments amounting to $7,871,623 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 separately reported 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
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MFS New Discovery Series
Notes to Financial Statements (unaudited) – continued
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, 2012, 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, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Foreign taxes 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 net operating losses and wash sale loss deferrals.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/11 | ||||
Ordinary income (including any short-term capital gains) | $29,763,811 | |||
Long-term capital gains | 64,539,599 | |||
Total distributions | $94,303,410 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/12 | ||||
Cost of investments | $682,836,483 | |||
Gross appreciation | 70,178,778 | |||
Gross depreciation | (46,897,558 | ) | ||
Net unrealized appreciation (depreciation) | $23,281,220 | |||
As of 12/31/11 | ||||
Undistributed ordinary income | 63,087,379 | |||
Undistributed long-term capital gain | 2,928,676 | |||
Other temporary differences | (4,423 | ) | ||
Net unrealized appreciation (depreciation) | (62,538,803 | ) |
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 Statement of Changes in Net Assets are presented by class as follows:
From net realized gain on investments | ||||||||
Six months ended 6/30/12 | Year ended 12/31/11 | |||||||
Initial Class | $— | $50,955,129 | ||||||
Service Class | — | 43,348,281 | ||||||
Total | $— | $94,303,410 |
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MFS New Discovery 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 | 0.90% | |||
Average daily net assets in excess of $1 billion | 0.80% |
The management fee incurred for the six months ended June 30, 2012 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, 2012, the fee was $36,922, which equated to 0.0103% 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, 2012, these costs amounted to $976.
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, 2012 was equivalent to an annual effective rate of 0.0163% 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, 2012, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $3,654 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 $1,850 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 $462,221,146 and $514,890,637, respectively.
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MFS New Discovery 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 6/30/12 | Year ended 12/31/11 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 1,253,666 | $20,497,835 | 6,070,255 | $105,677,682 | ||||||||||||
Service Class | 2,840,660 | 43,407,773 | 7,612,042 | 131,491,764 | ||||||||||||
4,094,326 | $63,905,608 | 13,682,297 | $237,169,446 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 3,433,634 | $50,955,129 | ||||||||||||
Service Class | — | — | 3,035,594 | 43,348,281 | ||||||||||||
— | $— | 6,469,228 | $94,303,410 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (4,640,324 | ) | $(72,563,288 | ) | (11,317,023 | ) | $(204,277,916 | ) | ||||||||
Service Class | (3,401,212 | ) | (51,685,348 | ) | (6,185,971 | ) | (103,919,178 | ) | ||||||||
(8,041,536 | ) | $(124,248,636 | ) | (17,502,994 | ) | $(308,197,094 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (3,386,658 | ) | $(52,065,453 | ) | (1,813,134 | ) | $(47,645,105 | ) | ||||||||
Service Class | (560,552 | ) | (8,277,575 | ) | 4,461,665 | 70,920,867 | ||||||||||
(3,947,210 | ) | $(60,343,028 | ) | 2,648,531 | $23,275,762 |
(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, 2012, the fund’s commitment fee and interest expense were $2,566 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 an affiliated issuer:
Underlying Affiliated Fund | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 2,841,923 | 87,075,888 | (86,004,353 | ) | 3,913,458 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $1,199 | $3,913,458 |
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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, 2012 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 is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. Copies of the fund’s Form N-Q also may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
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
SEMIANNUAL REPORT
June 30, 2012
MFS® CORE EQUITY SERIES
MFS® Variable Insurance Trust
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
LETTER FROM THE CHAIRMAN AND CEO
Dear Contract Owners:
World financial markets remain a venue of uncertainty. The focus has shifted most recently to the eurozone, where policymakers are attempting to develop a plan that will help debt-laden countries and prevent their woes from spreading across the region. Volatility is likely to continue as investors test the resolve of European officials to make the tough decisions needed to solve the crisis. A slowing in the Chinese economy has added another layer of trepidation, as investors worry that the primary engine of global growth may be sputtering.
The U.S. economy is experiencing a period of growth. However, markets have been jittery in reaction to events in Europe and ahead of the U.S. presidential election. Voters in the United States are watching the economy closely and waiting to see if Congress agrees to cut the budget and extend the Bush administration tax cuts. Failure to do so could ultimately send the U.S. economy back into recession.
Amid this global uncertainty, managing risk becomes a top priority for investors and their advisors. At MFS® our global research platform is designed to ensure the smooth functioning of our investment process in all business climates. Real-time collaboration across the globe is vital in periods of heightened volatility and economic uncertainty. At MFS our investment staff shares ideas and evaluates opportunities across geographies, across both fundamental and quantitative disciplines, and across companies’ entire capital structure. We employ this uniquely collaborative approach to build better insights for our clients.
We, like our investors, are 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 emphasize the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with investment advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2012
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 Core Equity Series
Portfolio structure
Top ten holdings | ||||
Apple, Inc. | 5.2% | |||
Exxon Mobil Corp. | 4.7% | |||
JPMorgan Chase & Co. | 2.1% | |||
Danaher Corp. | 2.0% | |||
Philip Morris International, Inc. | 1.7% | |||
Target Corp. | 1.7% | |||
Pfizer, Inc. | 1.7% | |||
ACE Ltd. | 1.5% | |||
Google, Inc., “A” | 1.3% | |||
AT&T, Inc. | 1.3% |
Equity sectors | ||||
Technology | 17.2% | |||
Financial Services | 16.3% | |||
Health Care | 10.8% | |||
Energy | 10.1% | |||
Industrial Goods & Services | 7.9% | |||
Consumer Staples | 7.7% | |||
Retailing | 7.1% | |||
Utilities & Communications | 7.0% | |||
Leisure | 5.5% | |||
Basic Materials | 3.2% | |||
Special Products & Services | 2.6% | |||
Transportation | 2.0% | |||
Autos & Housing | 1.4% |
Percentages are based on net assets as of 6/30/12.
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, 2012 through June 30, 2012
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, 2012 through June 30, 2012.
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 1/01/12 | Ending Account Value 6/30/12 | Expenses Paid During Period (p) 1/01/12-6/30/12 | ||||||||||||||
Initial Class | Actual | 0.90% | $1,000.00 | $1,079.58 | $4.65 | |||||||||||||
Hypothetical (h) | 0.90% | $1,000.00 | $1,020.39 | $4.52 | ||||||||||||||
Service Class | Actual | 1.15% | $1,000.00 | $1,077.88 | $5.94 | |||||||||||||
Hypothetical (h) | 1.15% | $1,000.00 | $1,019.14 | $5.77 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
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MFS Core Equity Series
PORTFOLIO OF INVESTMENTS – 6/30/12 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 98.1% | ||||||||
Aerospace – 2.5% | ||||||||
Embraer S.A., ADR | 3,590 | $ | 95,234 | |||||
Honeywell International, Inc. | 7,630 | 426,059 | ||||||
Lockheed Martin Corp. | 2,030 | 176,772 | ||||||
Precision Castparts Corp. | 1,910 | 314,176 | ||||||
Textron, Inc. | 3,350 | 83,315 | ||||||
United Technologies Corp. | 5,260 | 397,288 | ||||||
|
| |||||||
$ | 1,492,844 | |||||||
|
| |||||||
Apparel Manufacturers – 1.2% | ||||||||
Guess?, Inc. | 8,710 | $ | 264,523 | |||||
NIKE, Inc., “B” | 2,950 | 258,951 | ||||||
VF Corp. | 1,240 | 165,478 | ||||||
|
| |||||||
$ | 688,952 | |||||||
|
| |||||||
Automotive – 1.0% | ||||||||
Delphi Automotive PLC (a) | 15,410 | $ | 392,955 | |||||
General Motors Co. (a) | 8,980 | 177,086 | ||||||
|
| |||||||
$ | 570,041 | |||||||
|
| |||||||
Biotechnology – 1.7% | ||||||||
Amgen, Inc. | 1,510 | $ | 110,290 | |||||
Celgene Corp. (a) | 4,010 | 257,282 | ||||||
Gilead Sciences, Inc. (a) | 6,930 | 355,370 | ||||||
ViroPharma, Inc. (a) | 10,590 | 250,983 | ||||||
|
| |||||||
$ | 973,925 | |||||||
|
| |||||||
Broadcasting – 2.2% | ||||||||
News Corp., “A” | 27,610 | $ | 615,427 | |||||
Walt Disney Co. | 14,320 | 694,520 | ||||||
|
| |||||||
$ | 1,309,947 | |||||||
|
| |||||||
Brokerage & Asset Managers – 1.2% | ||||||||
BlackRock, Inc. | 1,373 | $ | 233,163 | |||||
CME Group, Inc. | 450 | 120,650 | ||||||
Franklin Resources, Inc. | 880 | 97,671 | ||||||
FXCM, Inc. “A” | 7,450 | 87,612 | ||||||
GFI Group, Inc. | 26,440 | 94,126 | ||||||
NASDAQ OMX Group, Inc. | 3,511 | 79,594 | ||||||
|
| |||||||
$ | 712,816 | |||||||
|
| |||||||
Business Services – 1.7% | ||||||||
Accenture PLC, “A” | 3,900 | $ | 234,351 | |||||
Automatic Data Processing, Inc. | 5,140 | 286,092 | ||||||
FleetCor Technologies, Inc. (a) | 9,340 | 327,274 | ||||||
Global Payments, Inc. | 3,390 | 146,550 | ||||||
|
| |||||||
$ | 994,267 | |||||||
|
| |||||||
Cable TV – 1.3% | ||||||||
Comcast Corp., “Special A” | 13,950 | $ | 438,030 | |||||
Time Warner Cable, Inc. | 4,210 | 345,641 | ||||||
|
| |||||||
$ | 783,671 | |||||||
|
| |||||||
Chemicals – 0.5% | ||||||||
Celanese Corp. | 7,970 | $ | 275,921 | |||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Computer Software – 4.5% | ||||||||
Autodesk, Inc. (a) | 7,700 | $ | 269,423 | |||||
Check Point Software Technologies Ltd. (a) | 6,380 | 316,384 | ||||||
Citrix Systems, Inc. (a) | 6,070 | 509,516 | ||||||
Microsoft Corp. | 5,720 | 174,975 | ||||||
Oracle Corp. | 21,920 | 651,024 | ||||||
Red Hat, Inc. (a) | 3,070 | 173,394 | ||||||
Salesforce.com, Inc. (a) | 1,710 | 236,425 | ||||||
SolarWinds, Inc. (a) | 6,580 | 286,625 | ||||||
|
| |||||||
$ | 2,617,766 | |||||||
|
| |||||||
Computer Software – Systems – 7.7% | ||||||||
Apple, Inc. (a)(s) | 5,200 | $ | 3,036,800 | |||||
EMC Corp. (a) | 22,550 | 577,957 | ||||||
Hewlett-Packard Co. | 19,580 | 393,754 | ||||||
International Business Machines Corp. | 1,170 | 228,829 | ||||||
NICE Systems Ltd., ADR (a) | 5,020 | 183,732 | ||||||
ServiceSource International, Inc. (a) | 8,290 | 114,817 | ||||||
|
| |||||||
$ | 4,535,889 | |||||||
|
| |||||||
Construction – 0.4% | ||||||||
Mohawk Industries, Inc. (a) | 950 | $ | 66,339 | |||||
Stanley Black & Decker, Inc. | 2,750 | 176,990 | ||||||
|
| |||||||
$ | 243,329 | |||||||
|
| |||||||
Consumer Products – 1.9% | ||||||||
Colgate-Palmolive Co. | 5,880 | $ | 612,108 | |||||
International Flavors & Fragrances, Inc. | 4,250 | 232,900 | ||||||
Newell Rubbermaid, Inc. | 13,480 | 244,527 | ||||||
Nu Skin Enterprises, Inc., “A” | 940 | 44,086 | ||||||
|
| |||||||
$ | 1,133,621 | |||||||
|
| |||||||
Consumer Services – 0.9% | ||||||||
DeVry, Inc. | 7,110 | $ | 220,197 | |||||
Priceline.com, Inc. (a) | 440 | 292,389 | ||||||
|
| |||||||
$ | 512,586 | |||||||
|
| |||||||
Containers – 0.8% | ||||||||
Silgan Holdings, Inc. | 11,200 | $ | 478,128 | |||||
|
| |||||||
Electrical Equipment – 2.6% | ||||||||
AMETEK, Inc. | 3,530 | $ | 176,182 | |||||
Danaher Corp. | 23,060 | 1,200,965 | ||||||
Sensata Technologies Holding B.V. (a) | 6,330 | 169,517 | ||||||
|
| |||||||
$ | 1,546,664 | |||||||
|
| |||||||
Electronics – 2.3% | ||||||||
Altera Corp. | 11,450 | $ | 387,468 | |||||
ASML Holding N.V. | 5,390 | 277,154 | ||||||
KLA-Tencor Corp. | 1,940 | 95,545 | ||||||
Linear Technology Corp. | 5,890 | 184,534 | ||||||
Microchip Technology, Inc. | 12,830 | 424,416 | ||||||
|
| |||||||
$ | 1,369,117 | |||||||
|
|
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Table of Contents
MFS Core Equity Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Energy – Independent – 3.2% | ||||||||
Cabot Oil & Gas Corp. | 6,400 | $ | 252,160 | |||||
Concho Resources, Inc. (a) | 1,270 | 108,102 | ||||||
CONSOL Energy, Inc. | 1,670 | 50,501 | ||||||
EOG Resources, Inc. | 1,460 | 131,561 | ||||||
EQT Corp. | 4,620 | 247,771 | ||||||
Noble Energy, Inc. | 3,870 | 328,253 | ||||||
Occidental Petroleum Corp. | 3,370 | 289,045 | ||||||
Peabody Energy Corp. | 1,830 | 44,872 | ||||||
Pioneer Natural Resources Co. | 3,070 | 270,805 | ||||||
SM Energy Co. | 1,814 | 89,086 | ||||||
WPX Energy, Inc. (a) | 2,570 | 41,583 | ||||||
|
| |||||||
$ | 1,853,739 | |||||||
|
| |||||||
Energy – Integrated – 5.3% | ||||||||
Chevron Corp. | 3,460 | $ | 365,030 | |||||
Exxon Mobil Corp. (s) | 32,230 | 2,757,921 | ||||||
|
| |||||||
$ | 3,122,951 | |||||||
|
| |||||||
Engineering – Construction – 0.4% | ||||||||
Fluor Corp. | 4,580 | $ | 225,977 | |||||
|
| |||||||
Food & Beverages – 3.3% | ||||||||
Coca-Cola Enterprises, Inc. | 5,680 | $ | 159,267 | |||||
General Mills, Inc. | 15,270 | 588,506 | ||||||
J.M. Smucker Co. | 2,930 | 221,274 | ||||||
Kraft Foods, Inc., “A” | 17,230 | 665,423 | ||||||
Mead Johnson Nutrition Co., “A” | 3,800 | 305,938 | ||||||
|
| |||||||
$ | 1,940,408 | |||||||
|
| |||||||
Food & Drug Stores – 1.0% | ||||||||
CVS Caremark Corp. | 10,070 | $ | 470,571 | |||||
Kroger Co. | 4,690 | 108,761 | ||||||
|
| |||||||
$ | 579,332 | |||||||
|
| |||||||
Gaming & Lodging – 0.6% | ||||||||
Las Vegas Sands Corp. | 3,530 | $ | 153,520 | |||||
Royal Caribbean Cruises Ltd. | 6,960 | 181,169 | ||||||
|
| |||||||
$ | 334,689 | |||||||
|
| |||||||
General Merchandise – 1.7% | ||||||||
Target Corp. | 17,500 | $ | 1,018,325 | |||||
|
| |||||||
Health Maintenance Organizations – 0.7% | ||||||||
Aetna, Inc. | 9,760 | $ | 378,395 | |||||
UnitedHealth Group, Inc. | 540 | 31,590 | ||||||
|
| |||||||
$ | 409,985 | |||||||
|
| |||||||
Insurance – 3.5% | ||||||||
ACE Ltd. | 11,930 | $ | 884,371 | |||||
Aflac, Inc. | 1,120 | 47,701 | ||||||
American International Group, Inc. (a) | 1,040 | 33,374 | ||||||
Aon PLC | 4,130 | 193,201 | ||||||
Chubb Corp. | 2,710 | 197,342 | ||||||
Everest Re Group Ltd. | 3,620 | 374,634 | ||||||
MetLife, Inc. | 4,950 | 152,708 | ||||||
Prudential Financial, Inc. | 3,280 | 158,850 | ||||||
|
| |||||||
$ | 2,042,181 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Internet – 1.8% | ||||||||
eBay, Inc. (a) | 6,510 | $ | 273,485 | |||||
Google, Inc., “A” (a) | 1,330 | 771,493 | ||||||
|
| |||||||
$ | 1,044,978 | |||||||
|
| |||||||
Leisure & Toys – 0.2% | ||||||||
Activision Blizzard, Inc. | 5,550 | $ | 66,545 | |||||
Brunswick Corp. | 2,780 | 61,772 | ||||||
|
| |||||||
$ | 128,317 | |||||||
|
| |||||||
Machinery & Tools – 2.2% | ||||||||
Allison Transmission Holdings, Inc. | 3,750 | $ | 65,850 | |||||
Eaton Corp. | 5,790 | 229,458 | ||||||
Gardner Denver, Inc. | 2,160 | 114,286 | ||||||
Joy Global, Inc. | 4,600 | 260,958 | ||||||
Kennametal, Inc. | 7,650 | 253,598 | ||||||
Polypore International, Inc. (a) | 3,180 | 128,440 | ||||||
Roper Industries, Inc. | 2,490 | 245,464 | ||||||
|
| |||||||
$ | 1,298,054 | |||||||
|
| |||||||
Major Banks – 4.6% | ||||||||
Goldman Sachs Group, Inc. | 4,470 | $ | 428,494 | |||||
JPMorgan Chase & Co. (s) | 35,160 | 1,256,267 | ||||||
PNC Financial Services Group, Inc. | 10,100 | 617,211 | ||||||
State Street Corp. | 9,460 | 422,294 | ||||||
|
| |||||||
$ | 2,724,266 | |||||||
|
| |||||||
Medical & Health Technology & Services – 1.2% | ||||||||
AmerisourceBergen Corp. | 4,750 | $ | 186,913 | |||||
Cerner Corp. (a) | 980 | 81,007 | ||||||
Express Scripts Holding Co. (a) | 5,520 | 308,182 | ||||||
Henry Schein, Inc. (a) | 1,240 | 97,328 | ||||||
Quest Diagnostics, Inc. | 980 | 58,702 | ||||||
|
| |||||||
$ | 732,132 | |||||||
|
| |||||||
Medical Equipment – 2.3% | ||||||||
Cooper Cos., Inc. | 3,620 | $ | 288,731 | |||||
Covidien PLC | 8,320 | 445,120 | ||||||
Sirona Dental Systems, Inc. (a) | 1,570 | 70,666 | ||||||
St. Jude Medical, Inc. | 8,620 | 344,024 | ||||||
Thermo Fisher Scientific, Inc. | 3,520 | 182,723 | ||||||
|
| |||||||
$ | 1,331,264 | |||||||
|
| |||||||
Metals & Mining – 0.5% | ||||||||
Cliffs Natural Resources, Inc. | 2,910 | $ | 143,434 | |||||
Teck Resources Ltd., “B” | 4,701 | 145,587 | ||||||
|
| |||||||
$ | 289,021 | |||||||
|
| |||||||
Natural Gas – Distribution – 0.5% | ||||||||
Spectra Energy Corp. | 9,980 | $ | 290,019 | |||||
|
| |||||||
Natural Gas – Pipeline – 0.1% | ||||||||
Kinder Morgan, Inc. | 2,156 | $ | 69,466 | |||||
|
| |||||||
Network & Telecom – 0.9% | ||||||||
Acme Packet, Inc. (a) | 1,000 | $ | 18,650 | |||||
F5 Networks, Inc. (a) | 1,360 | 135,402 | ||||||
Finisar Corp. (a) | 9,300 | 139,128 |
5
Table of Contents
MFS Core Equity Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Network & Telecom – continued | ||||||||
Fortinet, Inc. (a) | 8,070 | $ | 187,385 | |||||
Juniper Networks, Inc. (a) | 4,220 | 68,828 | ||||||
|
| |||||||
$ | 549,393 | |||||||
|
| |||||||
Oil Services – 1.6% | ||||||||
Cameron International Corp. (a) | 6,140 | $ | 262,239 | |||||
Dresser-Rand Group, Inc. (a) | 4,020 | 179,051 | ||||||
FMC Technologies, Inc. (a) | 2,810 | 110,236 | ||||||
Lufkin Industries, Inc. | 790 | 42,913 | ||||||
Schlumberger Ltd. | 4,340 | 281,709 | ||||||
Transocean, Inc. | 1,830 | 81,856 | ||||||
|
| |||||||
$ | 958,004 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 3.7% | ||||||||
American Express Co. | 2,210 | $ | 128,644 | |||||
CapitalSource, Inc. | 23,400 | 157,248 | ||||||
CIT Group, Inc. (a) | 11,930 | 425,185 | ||||||
EuroDekania Ltd. (a)(z) | 50,820 | 107,283 | ||||||
Fifth Third Bancorp | 26,430 | 354,162 | ||||||
First Republic Bank (a) | 4,210 | 141,456 | ||||||
Visa, Inc., “A” | 5,050 | 624,332 | ||||||
Western Union Co. | 12,970 | 218,415 | ||||||
|
| |||||||
$ | 2,156,725 | |||||||
|
| |||||||
Pharmaceuticals – 4.9% | ||||||||
Abbott Laboratories | 9,990 | $ | 644,055 | |||||
Auxilium Pharmaceuticals, Inc. (a) | 730 | 19,630 | ||||||
Johnson & Johnson | 7,280 | 491,837 | ||||||
Merck & Co., Inc. | 15,550 | 649,213 | ||||||
Pfizer, Inc. | 42,249 | 971,727 | ||||||
Teva Pharmaceutical Industries Ltd., ADR | 3,260 | 128,574 | ||||||
|
| |||||||
$ | 2,905,036 | |||||||
|
| |||||||
Pollution Control – 0.2% | ||||||||
Waste Connections, Inc. | 3,360 | $ | 100,531 | |||||
|
| |||||||
Precious Metals & Minerals – 0.3% | ||||||||
Goldcorp, Inc. | 4,730 | $ | 177,753 | |||||
|
| |||||||
Printing & Publishing – 0.4% | ||||||||
Moody’s Corp. | 5,960 | $ | 217,838 | |||||
|
| |||||||
Railroad & Shipping – 0.8% | ||||||||
Union Pacific Corp. | 4,160 | $ | 496,330 | |||||
|
| |||||||
Real Estate – 3.3% | ||||||||
Atrium European Real Estate Ltd. | 24,270 | $ | 114,009 | |||||
BioMed Realty Trust, Inc., REIT | 20,750 | 387,610 | ||||||
Mid-America Apartment Communities, Inc., REIT | 7,160 | 488,598 | ||||||
Public Storage, Inc., REIT | 3,330 | 480,885 | ||||||
Tanger Factory Outlet Centers, Inc., REIT | 15,240 | 488,442 | ||||||
|
| |||||||
$ | 1,959,544 | |||||||
|
| |||||||
Restaurants – 0.8% | ||||||||
YUM! Brands, Inc. | 7,730 | $ | 497,967 | |||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Specialty Chemicals – 1.1% | ||||||||
Airgas, Inc. | 3,300 | $ | 277,233 | |||||
Albemarle Corp. | 2,960 | 176,534 | ||||||
Chemtura Corp. (a) | 8,820 | 127,890 | ||||||
Ferro Corp. (a) | 11,960 | 57,408 | ||||||
|
| |||||||
$ | 639,065 | |||||||
|
| |||||||
Specialty Stores – 3.2% | ||||||||
American Eagle Outfitters, Inc. | 12,810 | $ | 252,741 | |||||
Children’s Place Retail Store, Inc. (a) | 4,500 | 224,235 | ||||||
Gap, Inc. | 7,130 | 195,077 | ||||||
PetSmart, Inc. | 7,270 | 495,669 | ||||||
rue21, Inc. (a) | 7,410 | 187,028 | ||||||
Tiffany & Co. | 3,840 | 203,328 | ||||||
Urban Outfitters, Inc. (a) | 10,690 | 294,937 | ||||||
|
| |||||||
$ | 1,853,015 | |||||||
|
| |||||||
Telecommunications – Wireless – 0.7% | ||||||||
American Tower Corp., REIT | 3,680 | $ | 257,269 | |||||
SBA Communications Corp. (a) | 2,650 | 151,183 | ||||||
|
| |||||||
$ | 408,452 | |||||||
|
| |||||||
Telephone Services – 2.4% | ||||||||
AT&T, Inc. | 20,780 | $ | 741,015 | |||||
CenturyLink, Inc. | 3,522 | 139,084 | ||||||
Verizon Communications, Inc. | 12,050 | 535,502 | ||||||
|
| |||||||
$ | 1,415,601 | |||||||
|
| |||||||
Tobacco – 2.5% | ||||||||
Lorillard, Inc. | 3,410 | $ | 449,950 | |||||
Philip Morris International, Inc. | 11,720 | 1,022,687 | ||||||
|
| |||||||
$ | 1,472,637 | |||||||
|
| |||||||
Trucking – 1.2% | ||||||||
Expeditors International of Washington, Inc. | 9,520 | $ | 368,900 | |||||
Swift Transportation Co. (a) | 35,550 | 335,948 | ||||||
|
| |||||||
$ | 704,848 | |||||||
|
| |||||||
Utilities – Electric Power – 2.6% | ||||||||
AES Corp. (a) | 14,290 | $ | 183,341 | |||||
American Electric Power Co., Inc. | 5,310 | 211,869 | ||||||
Calpine Corp. (a) | 12,240 | 202,082 | ||||||
CMS Energy Corp. | 11,550 | 271,425 | ||||||
Edison International | 4,240 | 195,888 | ||||||
Great Plains Energy, Inc. | 11,090 | 237,437 | ||||||
PG&E Corp. | 4,460 | 201,904 | ||||||
|
| |||||||
$ | 1,503,946 | |||||||
|
| |||||||
Total Common Stocks (Identified Cost, $53,699,917) | $ | 57,691,273 | ||||||
|
| |||||||
CONVERTIBLE PREFERRED STOCKS – 0.7% | ||||||||
Utilities – Electric Power – 0.7% | ||||||||
PPL Corp., 9.5% | 3,660 | $ | 193,614 | |||||
PPL Corp., 8.75% | 3,270 | 174,847 | ||||||
|
| |||||||
Total Convertible Preferred Stocks (Identified Cost, $352,234) | $ | 368,461 | ||||||
|
|
6
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MFS Core Equity Series
Portfolio of Investments (unaudited) – continued
Issuer | Strike Price | First Exercise | Shares/Par | Value ($) | ||||||||||||
WARRANTS – 0.0% | ||||||||||||||||
Natural Gas – Pipeline – 0.0% | ||||||||||||||||
Kinder Morgan, Inc. (1 share for 1 warrant) (Identified Cost, $6,241)(a) | $ | 40 | 2/15/17 | 3,276 | $ | 7,076 | ||||||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
MONEY MARKET FUNDS - 0.5% | ||||||||
MFS Institutional Money Market Portfolio, 0.14%, at Cost and Net Asset Value (v) | 295,172 | $ | 295,172 | |||||
|
| |||||||
Total Investments (Identified Cost, $54,353,564) | $ | 58,361,982 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – 0.7% | 435,860 | |||||||
|
| |||||||
Net Assets – 100.0% | $ | 58,797,842 | ||||||
|
|
(a) | Non-income producing security. |
(s) | Security or a portion of the security was pledged to cover collateral requirements for securities sold short and/or certain derivative transactions. At June 30, 2012, the fund had no short sales outstanding. |
(v) | Underlying affiliated fund that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end. |
(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 | $107,283 | |||||||
% of Net assets | 0.2% |
At June 30, 2012, the fund had liquid securities with an aggregate value of $593,809 to cover any commitments for securities sold short and/or certain derivatives contracts.
The following abbreviations are used in this report and are defined:
ADR | American Depositary Receipt |
PLC | Public Limited Company |
REIT | Real Estate Investment Trust |
See Notes to Financial Statements
7
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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 6/30/12 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $54,058,392) | $58,066,810 | |||||||
Underlying affiliated funds, at cost and value | 295,172 | |||||||
Total investments, at value (identified cost, $54,353,564) | $58,361,982 | |||||||
Foreign currency, at value (identified cost, $4,622) | 4,535 | |||||||
Receivables for | ||||||||
Investments sold | 724,548 | |||||||
Fund shares sold | 2,029 | |||||||
Interest and dividends | 66,228 | |||||||
Receivable from investment adviser | 1,493 | |||||||
Other assets | 405 | |||||||
Total assets | $59,161,220 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Investments purchased | $225,759 | |||||||
Fund shares reacquired | 87,643 | |||||||
Payable to affiliates | ||||||||
Shareholder servicing costs | 149 | |||||||
Distribution and/or service fees | 68 | |||||||
Payable for independent Trustees’ compensation | 16 | |||||||
Accrued expenses and other liabilities | 49,743 | |||||||
Total liabilities | $363,378 | |||||||
Net assets | $58,797,842 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $73,296,420 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 4,008,332 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | (19,194,581 | ) | ||||||
Undistributed net investment income | 687,671 | |||||||
Net assets | $58,797,842 | |||||||
Shares of beneficial interest outstanding | 3,554,508 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $55,379,506 | 3,346,976 | $16.55 | |||||||||
Service Class | 3,418,336 | 207,532 | 16.47 |
See Notes to Financial Statements
8
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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 6/30/12 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $519,720 | |||||||
Interest | 610 | |||||||
Dividends from underlying affiliated funds | 319 | |||||||
Foreign taxes withheld | (1,677 | ) | ||||||
Total investment income | $518,972 | |||||||
Expenses | ||||||||
Management fee | $226,704 | |||||||
Distribution and/or service fees | 4,431 | |||||||
Shareholder servicing costs | 3,364 | |||||||
Administrative services fee | 9,507 | |||||||
Independent Trustees’ compensation | 1,555 | |||||||
Custodian fee | 8,566 | |||||||
Shareholder communications | 15,590 | |||||||
Audit and tax fees | 25,951 | |||||||
Legal fees | 541 | |||||||
Interest expense on securities sold short | 22 | |||||||
Miscellaneous | 6,098 | |||||||
Total expenses | $302,329 | |||||||
Reduction of expenses by investment adviser | (25,645 | ) | ||||||
Net expenses | $276,684 | |||||||
Net investment income | $242,288 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $2,178,990 | |||||||
Written options | 5,827 | |||||||
Securities sold short | (6,437 | ) | ||||||
Foreign currency | 58 | |||||||
Net realized gain (loss) on investments and foreign currency | $2,178,438 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $2,177,958 | |||||||
Written options | (1,151 | ) | ||||||
Translation of assets and liabilities in foreign currencies | (106 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $2,176,701 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $4,355,139 | |||||||
Change in net assets from operations | $4,597,427 |
See Notes to Financial Statements
9
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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 6/30/12 (unaudited | ) | | Year ended 12/31/11 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $242,288 | $447,180 | ||||||
Net realized gain (loss) on investments and foreign currency | 2,178,438 | 3,839,546 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 2,176,701 | (4,723,782 | ) | |||||
Change in net assets from operations | $4,597,427 | $(437,056 | ) | |||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(586,002 | ) | |||||
Change in net assets from fund share transactions | $(3,807,658 | ) | $(8,193,687 | ) | ||||
Total change in net assets | $789,769 | $(9,216,745 | ) | |||||
Net assets | ||||||||
At beginning of period | 58,008,073 | 67,224,818 | ||||||
At end of period (including undistributed net investment income of $687,671 and | $58,797,842 | $58,008,073 |
See Notes to Financial Statements
10
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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 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $15.33 | $15.65 | $13.49 | $10.38 | $17.18 | $15.51 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.07 | $0.11 | $0.13 | $0.14 | $0.16 | $0.09 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.15 | (0.28 | ) | 2.18 | 3.16 | (6.85 | ) | 1.64 | ||||||||||||||||
Total from investment operations | $1.22 | $(0.17 | ) | $2.31 | $3.30 | $(6.69 | ) | $1.73 | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.15 | ) | $(0.15 | ) | $(0.19 | ) | $(0.11 | ) | $(0.06 | ) | |||||||||||||
Net asset value, end of period (x) | $16.55 | $15.33 | $15.65 | $13.49 | $10.38 | $17.18 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 7.96 | (n) | (1.02 | ) | 17.21 | 32.43 | (39.15 | ) | 11.15 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.99 | (a) | 1.00 | 1.01 | 1.01 | 0.95 | 1.03 | |||||||||||||||||
Expenses after expense reductions (f) | 0.90 | (a) | 0.91 | 0.91 | 0.90 | 0.90 | 0.90 | |||||||||||||||||
Net investment income | 0.82 | (a) | 0.72 | 0.93 | 1.20 | 1.13 | 0.53 | |||||||||||||||||
Portfolio turnover | 37 | (n) | 68 | 69 | 90 | 109 | 151 | |||||||||||||||||
Net assets at end of period (000 omitted) | $55,380 | $54,471 | $62,602 | $61,856 | $54,049 | $115,251 | ||||||||||||||||||
Supplemental Ratios (%): | ||||||||||||||||||||||||
Ratio of expenses to average net assets after expense | 0.90 | (a) | 0.90 | 0.90 | 0.90 | N/A | N/A |
See Notes to Financial Statements
11
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MFS Core Equity Series
Financial Highlights – continued
Service Class | Six months ended 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $15.28 | $15.59 | $13.45 | $10.32 | $17.07 | $15.41 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.05 | $0.07 | $0.09 | $0.11 | $0.12 | $0.04 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.14 | (0.27 | ) | 2.17 | 3.17 | (6.81 | ) | 1.63 | ||||||||||||||||
Total from investment operations | $1.19 | $(0.20 | ) | $2.26 | $3.28 | $(6.69 | ) | $1.67 | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.11 | ) | $(0.12 | ) | $(0.15 | ) | $(0.06 | ) | $(0.01 | ) | |||||||||||||
Net asset value, end of period (x) | $16.47 | $15.28 | $15.59 | $13.45 | $10.32 | $17.07 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 7.79 | (n) | (1.28 | ) | 16.86 | 32.24 | (39.32 | ) | 10.87 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.24 | (a) | 1.25 | 1.26 | 1.26 | 1.20 | 1.27 | |||||||||||||||||
Expenses after expense reductions (f) | 1.15 | (a) | 1.16 | 1.16 | 1.15 | 1.15 | 1.15 | |||||||||||||||||
Net investment income | 0.57 | (a) | 0.47 | 0.67 | 0.95 | 0.87 | 0.25 | |||||||||||||||||
Portfolio turnover | 37 | (n) | 68 | 69 | 90 | 109 | 151 | |||||||||||||||||
Net assets at end of period (000 omitted) | $3,418 | $3,537 | $4,623 | $4,783 | $4,571 | $9,288 | ||||||||||||||||||
Supplemental Ratios (%): | ||||||||||||||||||||||||
Ratio of expenses to average net assets after expense | 1.15 | (a) | 1.15 | 1.15 | 1.15 | 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 end December 31, 2008 would have each been lower by approximately 0.87%. |
(x) | The net asset values per share and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
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.
In this reporting period the fund adopted FASB Accounting Standards Update 2011-04, Fair Value Measurement (Topic 820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 seeks to improve the comparability of fair value measurements as presented and disclosed in financial statements prepared in accordance with U.S. GAAP and International Financial Reporting Standards (IFRS) by providing common requirements for fair value measurement and disclosure.
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11, Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. Although still evaluating the potential impacts of ASU 2011-11 to the fund, management expects that the impact of the fund’s adoption will be limited to additional financial statement disclosures.
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
13
Table of Contents
MFS Core Equity Series
Notes to Financial Statements (unaudited) – continued
business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. The following is a summary of the levels used as of June 30, 2012 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $56,521,089 | $— | $— | $56,521,089 | ||||||||||||
Israel | 628,691 | — | — | 628,691 | ||||||||||||
Canada | 323,341 | — | — | 323,341 | ||||||||||||
Netherlands | 277,154 | — | — | 277,154 | ||||||||||||
Austria | — | 114,009 | — | 114,009 | ||||||||||||
United Kingdom | — | — | 107,283 | 107,283 | ||||||||||||
Brazil | 95,243 | — | — | 95,243 | ||||||||||||
Mutual Funds | 295,172 | — | — | 295,172 | ||||||||||||
Total Investments | $58,140,690 | $114,009 | $107,283 | $58,361,982 |
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 12/31/11 | $127,787 | |||
Change in unrealized appreciation (depreciation) | (20,504 | ) | ||
Balance as of 6/30/12 | $107,283 |
The net change in unrealized appreciation (depreciation) from investments still held as level 3 at June 30, 2012 is $(20,504).
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, primarily to increase or decrease exposure to a particular market or segment of the market, or security, to increase or decrease interest rate or currency exposure, or as alternatives to direct investments. Derivatives are used for hedging or non-hedging purposes. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. When the fund uses derivatives as an investment to increase market exposure, or for hedging purposes, gains and losses from derivative instruments may be substantially greater than the derivative’s original cost.
The derivative instruments used by the fund were written options and purchased options. At June 30, 2012, the fund did not have any outstanding derivative instruments.
14
Table of Contents
MFS Core Equity 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, 2012 as reported in the Statement of Operations:
Risk | Investments (Purchased Options) | Written Options | ||||||
Equity | $(3,917 | ) | $5,827 |
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, 2012 as reported in the Statement of Operations:
Risk | Written Options | |||
Equity | $(1,151 | ) |
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 contracts and exchange-traded options) while collateral terms are contract specific for over-the-counter traded derivatives (i.e., forward foreign currency exchange contracts, swap agreements 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 call options on securities that it anticipated the price would decline and also 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 call option is exercised, the premium received is offset against the proceeds to determine the 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.
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Notes to Financial Statements (unaudited) – continued
Written Options
Number of contracts | Premiums received | |||||||
Outstanding, beginning of period | 16 | $1,711 | ||||||
Options written | 31 | 4,784 | ||||||
Options closed | (4 | ) | (3,100 | ) | ||||
Options expired | (43 | ) | (3,395 | ) | ||||
Outstanding, end of period | — | $— |
Purchased Options – The fund purchased put options for a premium. Purchased put 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 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 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 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, 2012, this expense amounted to $22. 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, 2012, 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.
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MFS Core Equity 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. For the six months ended June 30, 2012, 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, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Foreign taxes 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:
12/31/11 | ||||
Ordinary income (including any short-term capital gains) | $586,002 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/12 | ||||
Cost of investments | $54,387,791 | |||
Gross appreciation | 7,832,824 | |||
Gross depreciation | (3,858,633 | ) | ||
Net unrealized appreciation (depreciation) | $3,974,191 | |||
As of 12/31/11 | ||||
Undistributed ordinary income | 445,383 | |||
Capital loss carryforwards | (21,325,098 | ) | ||
Other temporary differences | (12,525 | ) | ||
Net unrealized appreciation (depreciation) | 1,796,235 |
The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.
Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized after December 31, 2011 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.
As of December 31, 2011, the fund had capital loss carryforwards available to offset future realized gains. Such losses expire as follows:
Pre-enactment losses: | ||||
12/31/16 | $(12,320,793 | ) | ||
12/31/17 | (9,004,305 | ) | ||
Total | $(21,325,098 | ) |
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 6/30/12 | Year ended 12/31/11 | |||||||
Initial Class | $— | $560,229 | ||||||
Service Class | — | 25,773 | ||||||
Total | $— | $586,002 |
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MFS Core 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 | 0.75% | |||
Average daily net assets in excess of $1 billion | 0.65% |
The management fee incurred for the six months ended June 30, 2012 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, 2014. For the six months ended June 30, 2012, this reduction amounted to $25,490 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, 2012, the fee was $3,100, which equated to 0.0103% 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, 2012, these costs amounted to $264.
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, 2012 was equivalent to an annual effective rate of 0.0314% 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, 2012, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $312 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 $155 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 $22,117,237 and $25,899,486, respectively.
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MFS Core Equity 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 6/30/12 | Year ended 12/31/11 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 197,202 | $3,258,310 | 432,255 | $6,792,348 | ||||||||||||
Service Class | 6,378 | 105,362 | 22,622 | 357,190 | ||||||||||||
203,580 | $3,363,672 | 454,877 | $7,149,538 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 38,215 | $560,229 | ||||||||||||
Service Class | — | — | 1,762 | 25,773 | ||||||||||||
— | $— | 39,977 | $586,002 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (403,399 | ) | $(6,670,823 | ) | (917,874 | ) | $(14,513,082 | ) | ||||||||
Service Class | (30,326 | ) | (500,507 | ) | (89,506 | ) | (1,416,145 | ) | ||||||||
(433,725 | ) | $(7,171,330 | ) | (1,007,380 | ) | $(15,929,227 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (206,197 | ) | $(3,412,513 | ) | (447,404 | ) | $(7,160,505 | ) | ||||||||
Service Class | (23,948 | ) | (395,145 | ) | (65,122 | ) | (1,033,182 | ) | ||||||||
(230,145 | ) | $(3,807,658 | ) | (512,526 | ) | $(8,193,687 | ) |
(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, 2012, the fund’s commitment fee and interest expense were $212 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 an affiliated issuer:
Underlying Affiliated Fund | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 284,156 | 7,559,403 | (7,548,387 | ) | 295,172 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $319 | $295,172 |
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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, 2012 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 is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. Copies of the fund’s Form N-Q also may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
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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SEMIANNUAL REPORT
June 30, 2012
MFS® UTILITIES SERIES
MFS® Variable Insurance Trust
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
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MFS Utilities Series
LETTER FROM THE CHAIRMAN AND CEO
Dear Contract Owners:
World financial markets remain a venue of uncertainty. The focus has shifted most recently to the eurozone, where policymakers are attempting to develop a plan that will help debt-laden countries and prevent their woes from spreading across the region. Volatility is likely to continue as investors test the resolve of European officials to make the tough decisions needed to solve the crisis. A slowing in the Chinese economy has added another layer of trepidation, as investors worry that the primary engine of global growth may be sputtering.
The U.S. economy is experiencing a period of growth. However, markets have been jittery in reaction to events in Europe and ahead of the U.S. presidential election. Voters in the United States are watching the economy closely and waiting to see if Congress agrees to cut the budget and extend the Bush administration tax cuts. Failure to do so could ultimately send the U.S. economy back into recession.
Amid this global uncertainty, managing risk becomes a top priority for investors and their advisors. At MFS® our global research platform is designed to ensure the smooth functioning of our investment process in all business climates. Real-time collaboration across the globe is vital in periods of heightened volatility and economic uncertainty. At MFS our investment staff shares ideas and evaluates opportunities across geographies, across both fundamental and quantitative disciplines, and across companies’ entire capital structure. We employ this uniquely collaborative approach to build better insights for our clients.
We, like our investors, are 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 emphasize the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with investment advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2012
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 Utilities Series
Portfolio structure (i)
Top ten holdings (i) | ||||
Comcast Corp., “Special A” | 4.0% | |||
Virgin Media, Inc. | 3.6% | |||
CMS Energy Corp. | 3.0% | |||
Williams Cos., Inc. | 3.0% | |||
Edison International | 2.7% | |||
Kinder Morgan, Inc. | 2.6% | |||
Energias de Portugal S.A. | 2.4% | |||
Public Service Enterprise Group, Inc. | 2.3% | |||
AES Corp. | 2.2% | |||
Calpine Corp. | 2.1% |
Top five industries (i) | ||||
Utilities – Electric Power | 46.2% | |||
Cable TV | 12.1% | |||
Telephone Services | 10.2% | |||
Natural Gas – Pipeline | 9.2% | |||
Telecommunications – Wireless | 7.1% | |||
Issuer country weightings (i)(x) | ||||
United States | 67.4% | |||
Brazil | 7.4% | |||
United Kingdom | 4.1% | |||
Spain | 4.1% | |||
Portugal | 3.5% | |||
Germany | 2.9% | |||
Czech Republic | 1.5% | |||
Chile | 1.4% | |||
Italy | 1.3% | |||
Other Countries | 6.4% |
(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 any. 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 net assets. |
Percentages are based on net assets as of 6/30/12.
The portfolio is actively managed and current holdings may be different.
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MFS Utilities Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2012 through June 30, 2012
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, 2012 through June 30, 2012.
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 1/01/12 | Ending Account Value | Expenses Paid During Period (p) 1/01/12-6/30/12 | ||||||||||||||
Initial Class | Actual | 0.82% | $1,000.00 | $1,049.08 | $4.18 | |||||||||||||
Hypothetical (h) | 0.82% | $1,000.00 | $1,020.79 | $4.12 | ||||||||||||||
Service Class | Actual | 1.07% | $1,000.00 | $1,047.80 | $5.45 | |||||||||||||
Hypothetical (h) | 1.07% | $1,000.00 | $1,019.54 | $5.37 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
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PORTFOLIO OF INVESTMENTS – 6/30/12 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 90.4% | ||||||||
Broadcasting – 0.7% | ||||||||
Viacom, Inc., “B” | 190,401 | $ | 8,952,655 | |||||
|
| |||||||
Cable TV – 11.4% | ||||||||
Charter Communications, Inc., “A” (a) | 28,830 | $ | 2,043,182 | |||||
Comcast Corp., “Special A” | 1,598,205 | 50,183,637 | ||||||
Liberty Global, Inc., “A” (a) | 238,524 | 11,837,946 | ||||||
Telenet Group Holding N.V. | 208,815 | 9,116,805 | ||||||
Time Warner Cable, Inc. | 313,953 | 25,775,541 | ||||||
Virgin Media, Inc. | 1,882,031 | 45,902,736 | ||||||
|
| |||||||
$ | 144,859,847 | |||||||
|
| |||||||
Energy – Independent – 5.1% | ||||||||
Cabot Oil & Gas Corp. | 149,781 | $ | 5,901,371 | |||||
Energen Corp. | 159,076 | 7,179,100 | ||||||
EQT Corp. | 354,589 | 19,016,608 | ||||||
Occidental Petroleum Corp. | 80,977 | 6,945,397 | ||||||
QEP Resources, Inc. | 514,300 | 15,413,571 | ||||||
WPX Energy, Inc. (a) | 590,473 | 9,553,853 | ||||||
|
| |||||||
$ | 64,009,900 | |||||||
|
| |||||||
Natural Gas – Distribution – 5.7% | ||||||||
AGL Resources, Inc. | 146,451 | $ | 5,674,976 | |||||
Atmos Energy Corp. | 39,024 | 1,368,572 | ||||||
GDF SUEZ | 632,063 | 15,080,344 | ||||||
NiSource, Inc. | 183,066 | 4,530,883 | ||||||
ONEOK, Inc. | 73,586 | 3,113,424 | ||||||
Sempra Energy | 371,302 | 25,575,282 | ||||||
Spectra Energy Corp. | 596,917 | 17,346,408 | ||||||
|
| |||||||
$ | 72,689,889 | |||||||
|
| |||||||
Natural Gas – Pipeline – 8.7% | ||||||||
El Paso Pipeline Partners LP | 54,435 | $ | 1,839,903 | |||||
Enagas S.A. | 1,000,542 | 18,257,998 | ||||||
Kinder Morgan, Inc. | 1,036,214 | 33,386,815 | ||||||
Williams Cos., Inc. | 1,312,362 | 37,822,273 | ||||||
Williams Partners LP | 366,919 | 19,167,849 | ||||||
|
| |||||||
$ | 110,474,838 | |||||||
|
| |||||||
Oil Services – 0.1% | ||||||||
Cheniere Energy, Inc. (a) | 98,147 | $ | 1,446,687 | |||||
|
| |||||||
Telecommunications – Wireless – 6.4% | ||||||||
American Tower Corp., REIT | 191,238 | $ | 13,369,449 | |||||
Cellcom Israel Ltd. | 500,887 | 3,055,411 | ||||||
KDDI Corp. | 97 | 625,683 | ||||||
Mobile TeleSystems OJSC, ADR | 565,181 | 9,721,113 | ||||||
NII Holdings, Inc. (a) | 158,844 | 1,624,974 | ||||||
SBA Communications Corp. (a) | 192,278 | 10,969,460 | ||||||
TIM Participacoes S.A., ADR | 745,712 | 20,477,251 | ||||||
Vodafone Group PLC | 7,360,513 | 20,680,362 | ||||||
|
| |||||||
$ | 80,523,703 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Telephone Services – 10.2% | ||||||||
Bezeq – The Israel Telecommunication Corp. Ltd. | 7,689,931 | $ | 8,137,012 | |||||
CenturyLink, Inc. | 370,732 | 14,640,207 | ||||||
China Unicom (Hong Kong) Ltd. | 1,090,000 | 1,371,290 | ||||||
Crown Castle International Corp. (a) | 114,420 | 6,711,877 | ||||||
Deutsche Telekom AG | 1,162,596 | 12,753,967 | ||||||
Empresa Nacional de Telecomunicaciones S.A. | 482,930 | 9,161,927 | ||||||
Frontier Communications Corp. (l) | 1,080,243 | 4,137,331 | ||||||
Kabel Deutschland Holding AG (a) | 146,226 | 9,100,044 | ||||||
PT XL Axiata Tbk | 11,241,000 | 7,360,357 | ||||||
TDC A.S. | 2,018,136 | 14,027,827 | ||||||
Telecom Italia S.p.A. | 21,039,517 | 16,924,174 | ||||||
Telefonica Brasil S.A., ADR | 712,717 | 17,632,619 | ||||||
Ziggo N.V. | 233,356 | 7,437,428 | ||||||
|
| |||||||
$ | 129,396,060 | |||||||
|
| |||||||
Utilities – Electric Power – 42.1% | ||||||||
AES Corp. (a) | 2,187,614 | $ | 28,067,088 | |||||
Aguas Andinas S.A. | 7,960,966 | 4,928,406 | ||||||
American Electric Power Co., Inc. | 381,937 | 15,239,286 | ||||||
Calpine Corp. (a) | 1,601,722 | 26,444,430 | ||||||
CenterPoint Energy, Inc. | 763,506 | 15,781,669 | ||||||
CEZ A.S. | 533,077 | 18,422,210 | ||||||
China Hydroelectric Corp., ADR (a) | 298,729 | 210,634 | ||||||
China Longyuan Power Group | 709,000 | 466,951 | ||||||
CMS Energy Corp. | 1,631,339 | 38,336,466 | ||||||
Companhia de Saneamento Basico do Estado de Sao Paulo | 61,400 | 2,353,896 | ||||||
Companhia de Saneamento de Minas Gerais – Copasa MG | 371,700 | 8,050,261 | ||||||
Companhia Energetica de Minas Gerais, IPS | 334,725 | 6,254,533 | ||||||
Companhia Paranaense de Energia, ADR | 260,327 | 5,643,889 | ||||||
Companhia Paranaense de Energia, IPS | 345,700 | 7,607,638 | ||||||
E-CL S.A. | 1,700,550 | 4,054,492 | ||||||
E.ON AG | 334,689 | 7,209,349 | ||||||
E.On Russia JSC | 20,766,243 | 1,506,840 | ||||||
Edison International | 729,008 | 33,680,170 | ||||||
EDP Renovaveis S.A. (a) | 3,805,332 | 13,039,716 | ||||||
Enel OGK-5 OAO (a) | 20,601,901 | 1,059,226 | ||||||
Energias de Portugal S.A. | 13,105,778 | 30,961,070 | ||||||
Energias do Brasil S.A. | 1,397,400 | 8,968,128 | ||||||
FirstEnergy Corp. | 240,400 | 11,825,276 | ||||||
GenOn Energy, Inc. (a) | 4,727,894 | 8,084,699 | ||||||
Great Plains Energy, Inc. | 383,346 | 8,207,438 | ||||||
Iberdrola S.A. | 3,395,315 | 16,076,454 | ||||||
ITC Holdings Corp. | 161,389 | 11,121,316 | ||||||
Light S.A. | 767,830 | 9,480,799 | ||||||
National Grid PLC | 1,330,267 | 14,073,361 | ||||||
NextEra Energy, Inc. | 348,842 | 24,003,818 | ||||||
Northeast Utilities | 350,113 | 13,587,885 | ||||||
NRG Energy, Inc. (a) | 1,116,150 | 19,376,364 |
4
Table of Contents
MFS Utilities Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Utilities – Electric Power – continued | ||||||||
NV Energy, Inc. | 401,094 | $ | 7,051,232 | |||||
OGE Energy Corp. | 310,345 | 16,072,767 | ||||||
PPL Corp. | 583,806 | 16,235,645 | ||||||
Public Service Enterprise Group, Inc. | 905,341 | 29,423,582 | ||||||
Red Electrica de Espana | 399,532 | 17,423,457 | ||||||
RWE AG | 182,812 | 7,473,157 | ||||||
SSE PLC | 600,970 | 13,092,229 | ||||||
SUEZ Environnement | 117,320 | 1,262,891 | ||||||
TGK International GmbH | 4,125,771,888 | 874,664 | ||||||
Tractebel Energia S.A. | 369,600 | 6,836,266 | ||||||
United Utilities Group PLC | 243,065 | 2,571,766 | ||||||
|
| |||||||
$ | 532,441,414 | |||||||
|
| |||||||
Total Common Stocks (Identified Cost, $1,191,856,617) | $ | 1,144,794,993 | ||||||
|
| |||||||
CONVERTIBLE PREFERRED STOCKS – 3.1% | ||||||||
Utilities – Electric Power – 3.1% | ||||||||
NextEra Energy, Inc., 7% | 227,382 | $ | 12,453,712 | |||||
PPL Corp., 9.5% | 245,213 | 12,971,768 | ||||||
PPL Corp., 8.75% | 248,819 | 13,304,352 | ||||||
|
| |||||||
Total Convertible Preferred Stocks (Identified Cost, $38,812,673) | $ | 38,729,832 | ||||||
|
| |||||||
BONDS – 1.6% | ||||||||
Asset-Backed & Securitized – 0.0% | ||||||||
Falcon Franchise Loan LLC, FRN, 5.541%, 2023 (i)(z) | $ | 77,884 | $ | 7,414 | ||||
|
| |||||||
Energy – Independent – 0.6% | ||||||||
Everest Acquisition LLC/Everest Acquisition Finance, Inc., 9.375%, 2020 (n) | $ | 7,070,000 | $ | 7,326,287 | ||||
|
| |||||||
Utilities – Electric Power – 1.0% | ||||||||
GenOn Energy, Inc., 9.875%, 2020 | $ | 8,316,000 | $ | 8,108,100 | ||||
NRG Energy, Inc., 7.875%, 2021 | 3,260,000 | 3,292,600 | ||||||
Viridian Group FundCo II, 11.125%, 2017 (z) | 2,195,000 | 2,019,400 | ||||||
|
| |||||||
$ | 13,420,100 | |||||||
|
| |||||||
Total Bonds (Identified Cost, $20,696,168) | $ | 20,753,801 | ||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
CONVERTIBLE BONDS – 1.4% | ||||||||
Cable TV – 0.7% | ||||||||
Virgin Media, Inc., 6.5%, 2016 | $ | 5,838,559 | $ | 8,728,646 | ||||
|
| |||||||
Telecommunications – Wireless – 0.7% | ||||||||
SBA Communications Corp., 4%, 2014 | $ | 4,298,807 | $ | 8,291,324 | ||||
|
| |||||||
Total Convertible Bonds (Identified Cost, $12,672,080) | $ | 17,019,970 | ||||||
|
|
Strike Price | First Exercise | |||||||||||||||
WARRANTS – 0.1% | ||||||||||||||||
Natural Gas – Pipeline – 0.1% | ||||||||||||||||
Kinder Morgan, Inc. (1 share for 1 warrant) (Identified Cost, $958,817) (a) | $ | 40 | 2/15/17 | 503,316 | $ | 1,087,163 | ||||||||||
|
| |||||||||||||||
Total Warrants (Identified Cost, $958,817) | $ | 1,087,163 | ||||||||||||||
|
|
MONEY MARKET FUNDS – 2.7% | ||||||||
MFS Institutional Money Market Portfolio, 0.14%, at Cost and Net Asset Value (v) | 34,709,807 | $ | 34,709,807 | |||||
|
| |||||||
COLLATERAL FOR SECURITIES LOANED – 0.2% | ||||||||
Navigator Securities Lending Prime Portfolio, 0.28%, at Cost and Net Asset Value (j) | 2,814,448 | $ | 2,814,448 | |||||
|
| |||||||
Total Investments (Identified Cost, $1,302,520,610) | $ | 1,259,910,014 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – 0.5% | 6,040,443 | |||||||
|
| |||||||
Net Assets – 100.0% | $ | 1,265,950,457 | ||||||
|
|
(a) | Non-income producing security. |
(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. |
(j) | The rate quoted is the annualized seven-day yield of the fund at period end. |
(l) | A portion of this security is on loan. |
(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 $7,326,287, representing 0.6% of net assets. |
(v) | Underlying affiliated fund that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end. |
5
Table of Contents
MFS Utilities Series
Portfolio of Investments (unaudited) – continued
(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, 5.541%, 2023 | 1/18/02 | $3,929 | $7,414 | |||||||
Viridian Group FundCo II, 11.125%, 2017 | 3/01/12 | 2,126,515 | 2,019,400 | |||||||
Total Restricted Securities | $2,026,814 | |||||||||
% of Net assets | 0.2% |
The following abbreviations are used in this report and are defined:
ADR | American Depositary Receipt |
FRN | Floating Rate Note. Interest rate resets periodically and may not be the rate reported at period end. |
IPS | International Preference Stock |
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 |
EUR | Euro |
GBP | British Pound |
Derivative Contracts at 6/30/12
Forward Foreign Currency Exchange Contracts at 6/30/12
Type | Currency | Counterparty | Contracts to Deliver/Receive | Settlement Date Range | In Exchange For | Contracts at Value | Net Unrealized Appreciation (Depreciation) | |||||||||||||||||
Asset Derivatives | ||||||||||||||||||||||||
SELL | BRL | UBS AG | 32,841,839 | 8/02/12 | $ | 16,258,336 | $ | 16,246,531 | $ | 11,805 | ||||||||||||||
BUY | EUR | Barclays Bank PLC | 370 | 7/13/12 | 464 | 469 | 5 | |||||||||||||||||
BUY | EUR | Credit Suisse Group | 139,640 | 7/13/12 | 173,771 | 176,728 | 2,957 | |||||||||||||||||
BUY | EUR | Deutsche Bank AG | 254,913 | 7/13/12 | 315,239 | 322,617 | 7,378 | |||||||||||||||||
BUY | EUR | Merrill Lynch International Bank | 213,212 | 7/13/12 | 267,307 | 269,841 | 2,534 | |||||||||||||||||
BUY | EUR | UBS AG | 608,455 | 7/13/12 | 764,878 | 770,060 | 5,182 | |||||||||||||||||
SELL | EUR | Barclays Bank PLC | 5,090,599 | 7/13/12 | 6,593,220 | 6,442,658 | 150,562 | |||||||||||||||||
SELL | EUR | Citibank N.A. | 5,045,075 | 7/13/12 | 6,612,335 | 6,385,043 | 227,292 | |||||||||||||||||
SELL | EUR | Credit Suisse Group | 11,581,946 | 7/13/12 | 15,165,780 | 14,658,101 | 507,679 | |||||||||||||||||
SELL | EUR | Deutsche Bank AG | 4,470,558 | 7/13/12 | 5,808,751 | 5,657,934 | 150,817 | |||||||||||||||||
SELL | EUR | Goldman Sachs International | 182,242 | 7/13/12 | 239,015 | 230,645 | 8,370 | |||||||||||||||||
SELL | EUR | JPMorgan Chase Bank N.A. | 2,813,934 | 7/13/12 | 3,679,162 | 3,561,312 | 117,850 | |||||||||||||||||
SELL | EUR | Merrill Lynch International Bank | 5,963,884 | 7/13/12 | 7,809,515 | 7,547,886 | 261,629 | |||||||||||||||||
SELL | EUR | UBS AG | 5,294,079 | 7/13/12 | 6,940,259 | 6,700,182 | 240,077 | |||||||||||||||||
SELL | GBP | Barclays Bank PLC | 16,732,958 | 7/13/12 | 26,547,343 | 26,205,693 | 341,650 | |||||||||||||||||
SELL | GBP | Citibank N.A. | 296,995 | 7/13/12 | 483,079 | 465,128 | 17,951 | |||||||||||||||||
SELL | GBP | Deutsche Bank AG | 17,822,578 | 7/13/12 | 28,242,638 | 27,912,160 | 330,478 | |||||||||||||||||
SELL | GBP | JPMorgan Chase Bank N.A. | 158,421 | 7/13/12 | 248,154 | 248,106 | 48 | |||||||||||||||||
SELL | GBP | UBS AG | 512,703 | 7/13/12 | 819,738 | 802,950 | 16,788 | |||||||||||||||||
|
| |||||||||||||||||||||||
$ | 2,401,052 | |||||||||||||||||||||||
|
|
6
Table of Contents
MFS Utilities Series
Portfolio of Investments (unaudited) – continued
Forward Foreign Currency Exchange Contracts at 6/30/12 - continued
Type | Currency | Counterparty | Contracts to Deliver/Receive | Settlement Date Range | In Exchange For | Contracts at Value | Net Unrealized Appreciation (Depreciation) | |||||||||||||||||
Liability Derivatives | ||||||||||||||||||||||||
BUY | BRL | UBS AG | 5,250,000 | 8/02/12 | $ | 2,599,010 | $ | 2,597,123 | $ | (1,887 | ) | |||||||||||||
BUY | EUR | Barclays Bank PLC | 129,658 | 7/13/12 | 167,778 | 164,095 | (3,683 | ) | ||||||||||||||||
BUY | EUR | Credit Suisse Group | 57,079 | 7/13/12 | 73,980 | 72,239 | (1,741 | ) | ||||||||||||||||
BUY | EUR | Deutsche Bank AG | 1,661,593 | 7/13/12 | 2,199,848 | 2,102,911 | (96,937 | ) | ||||||||||||||||
BUY | EUR | Goldman Sachs International | 129,467 | 7/13/12 | 164,670 | 163,854 | (816 | ) | ||||||||||||||||
BUY | EUR | JPMorgan Chase Bank N.A. | 40,036,533 | 7/13/12 | 52,346,967 | 50,670,204 | (1,676,763 | ) | ||||||||||||||||
BUY | EUR | UBS AG | 4,683,390 | 7/13/12 | 6,153,932 | 5,927,295 | (226,637 | ) | ||||||||||||||||
SELL | EUR | Barclays Bank PLC | 980,566 | 7/13/12 | 1,228,777 | 1,241,004 | (12,227 | ) | ||||||||||||||||
SELL | EUR | Citibank N.A. | 1,604 | 7/13/12 | 2,016 | 2,030 | (14 | ) | ||||||||||||||||
SELL | EUR | Credit Suisse Group | 1,645,742 | 7/13/12 | 2,057,972 | 2,082,850 | (24,878 | ) | ||||||||||||||||
SELL | EUR | Deutsche Bank AG | 77,105 | 7/13/12 | 96,320 | 97,585 | (1,265 | ) | ||||||||||||||||
SELL | EUR | JPMorgan Chase Bank N.A. | 965,847 | 7/13/12 | 1,213,860 | 1,222,375 | (8,515 | ) | ||||||||||||||||
SELL | EUR | Merrill Lynch International Bank | 1,028,456 | 7/13/12 | 1,292,925 | 1,301,614 | (8,689 | ) | ||||||||||||||||
SELL | EUR | UBS AG | 87,147,516 | 7/13/12-9/17/12 | 108,834,262 | 110,361,830 | (1,527,568 | ) | ||||||||||||||||
BUY | GBP | Citibank N.A. | 350,338 | 7/13/12 | 565,934 | 548,668 | (17,266 | ) | ||||||||||||||||
BUY | GBP | UBS AG | 1,247,000 | 7/13/12 | 2,022,075 | 1,952,942 | (69,133 | ) | ||||||||||||||||
SELL | GBP | Barclays Bank PLC | 119,537 | 7/13/12 | 187,198 | 187,208 | (10 | ) | ||||||||||||||||
SELL | GBP | JPMorgan Chase Bank N.A. | 63,036 | 7/12/12 | 98,179 | 98,722 | (543 | ) | ||||||||||||||||
|
| |||||||||||||||||||||||
$ | (3,678,572 | ) | ||||||||||||||||||||||
|
|
At June 30, 2012, the fund had cash collateral of $2,150,000 to cover any commitments for certain derivative contracts. Cash collateral includes “Restricted cash” on the Statement of Assets and Liabilities.
See Notes to Financial Statements
7
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 6/30/12 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $1,267,810,803) | $1,225,200,207 | |||||||
Underlying affiliated funds, at cost and value | 34,709,807 | |||||||
Total investments, at value, including $2,694,834 of securities on loan (identified cost, $1,302,520,610) | $1,259,910,014 | |||||||
Cash | 51,568 | |||||||
Restricted cash | 2,150,000 | |||||||
Foreign currency, at value (identified cost, $304,976) | 310,519 | |||||||
Receivables for | ||||||||
Forward foreign currency exchange contracts | 2,401,052 | |||||||
Investments sold | 8,967,204 | |||||||
Fund shares sold | 529,669 | |||||||
Interest and dividends | 5,382,724 | |||||||
Other assets | 8,703 | |||||||
Total assets | $1,279,711,453 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Forward foreign currency exchange contracts | $3,678,572 | |||||||
Investments purchased | 4,674,762 | |||||||
Fund shares reacquired | 2,212,884 | |||||||
Collateral for securities loaned, at value | 2,814,448 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 76,884 | |||||||
Shareholder servicing costs | 1,239 | |||||||
Distribution and/or service fees | 15,934 | |||||||
Payable for independent Trustees’ compensation | 1,590 | |||||||
Accrued expenses and other liabilities | 284,683 | |||||||
Total liabilities | $13,760,996 | |||||||
Net assets | $1,265,950,457 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $1,163,033,220 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | (43,870,258 | ) | ||||||
Accumulated net realized gain (loss) on investments and foreign currency | 48,505,892 | |||||||
Undistributed net investment income | 98,281,603 | |||||||
Net assets | $1,265,950,457 | |||||||
Shares of beneficial interest outstanding | 46,699,322 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $473,158,998 | 17,294,019 | $27.36 | |||||||||
Service Class | 792,791,459 | 29,405,303 | 26.96 |
See Notes to Financial Statements
8
Table of Contents
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 6/30/12 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $29,239,039 | |||||||
Interest | 1,142,129 | |||||||
Dividends from underlying affiliated funds | 20,523 | |||||||
Foreign taxes withheld | (2,037,748 | ) | ||||||
Total investment income | $28,363,943 | |||||||
Expenses | ||||||||
Management fee | $5,424,670 | |||||||
Distribution and/or service fees | 1,217,827 | |||||||
Shareholder servicing costs | 77,263 | |||||||
Administrative services fee | 116,387 | |||||||
Independent Trustees’ compensation | 20,873 | |||||||
Custodian fee | 242,719 | |||||||
Shareholder communications | 93,635 | |||||||
Audit and tax fees | 26,471 | |||||||
Legal fees | 13,885 | |||||||
Miscellaneous | 54,678 | |||||||
Total expenses | $7,288,408 | |||||||
Fees paid indirectly | (325 | ) | ||||||
Reduction of expenses by investment adviser | (3,944 | ) | ||||||
Net expenses | $7,284,139 | |||||||
Net investment income | $21,079,804 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $152,494,651 | |||||||
Foreign currency | 7,809,484 | |||||||
Net realized gain (loss) on investments and foreign currency | $160,304,135 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $(81,697,451 | ) | ||||||
Translation of assets and liabilities in foreign currencies | (8,179,921 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $(89,877,372 | ) | ||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $70,426,763 | |||||||
Change in net assets from operations | $91,506,567 |
See Notes to Financial Statements
9
Table of Contents
MFS Utilities 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 6/30/12 (unaudited | ) | | Year ended 12/31/11 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $21,079,804 | $68,837,745 | ||||||
Net realized gain (loss) on investments and foreign currency | 160,304,135 | 131,137,099 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | (89,877,372 | ) | (78,973,517 | ) | ||||
Change in net assets from operations | $91,506,567 | $121,001,327 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(60,160,403 | ) | |||||
Change in net assets from fund share transactions | $(816,260,019 | ) | $52,904,945 | |||||
Total change in net assets | $(724,753,452 | ) | $113,745,869 | |||||
Net assets | ||||||||
At beginning of period | 1,990,703,909 | 1,876,958,040 | ||||||
At end of period (including undistributed net investment income of $98,281,603 and | $1,265,950,457 | $1,990,703,909 |
See Notes to Financial Statements
10
Table of Contents
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 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $26.08 | $25.27 | $22.92 | $18.21 | $34.48 | $29.27 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.44 | $0.97 | $0.79 | $0.80 | $0.73 | $0.71 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 0.84 | 0.70 | 2.29 | 4.90 | (11.97 | ) | 7.10 | |||||||||||||||||
Total from investment operations | $1.28 | $1.67 | $3.08 | $5.70 | $(11.24 | ) | $7.81 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.86 | ) | $(0.73 | ) | $(0.99 | ) | $(0.44 | ) | $(0.32 | ) | |||||||||||||
From net realized gain on investments | — | — | — | — | (4.59 | ) | (2.28 | ) | ||||||||||||||||
Total distributions declared to shareholders | $— | $(0.86 | ) | $(0.73 | ) | $(0.99 | ) | $(5.03 | ) | $(2.60 | ) | |||||||||||||
Net asset value, end of period (x) | $27.36 | $26.08 | $25.27 | $22.92 | $18.21 | $34.48 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 4.91 | (n) | 6.78 | 13.81 | 33.44 | (37.77 | ) | 27.90 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | �� | |||||||||||||||||||||||
Expenses before expense reductions (f) | 0.82 | (a) | 0.80 | 0.81 | 0.83 | 0.84 | 0.85 | |||||||||||||||||
Expenses after expense reductions (f) | 0.82 | (a) | 0.80 | 0.81 | 0.83 | 0.81 | 0.82 | |||||||||||||||||
Net investment income | 3.27 | (a) | 3.71 | 3.47 | 4.11 | 2.76 | 2.22 | |||||||||||||||||
Portfolio turnover | 27 | (n) | 53 | 56 | 70 | 68 | 84 | |||||||||||||||||
Net assets at end of period (000 omitted) | $473,159 | $532,447 | $541,653 | $564,822 | $495,297 | $969,404 | ||||||||||||||||||
Service Class | Six months ended 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $25.73 | $24.95 | $22.65 | $17.98 | $34.11 | $29.01 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.34 | $0.89 | $0.73 | $0.73 | $0.66 | $0.62 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 0.89 | 0.70 | 2.25 | 4.86 | (11.82 | ) | 7.03 | |||||||||||||||||
Total from investment operations | $1.23 | $1.59 | $2.98 | $5.59 | $(11.16 | ) | $7.65 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.81 | ) | $(0.68 | ) | $(0.92 | ) | $(0.38 | ) | $(0.27 | ) | |||||||||||||
From net realized gain on investments | — | — | — | — | (4.59 | ) | (2.28 | ) | ||||||||||||||||
Total distributions declared to shareholders | $— | $(0.81 | ) | $(0.68 | ) | $(0.92 | ) | $(4.97 | ) | $(2.55 | ) | |||||||||||||
Net asset value, end of period (x) | $26.96 | $25.73 | $24.95 | $22.65 | $17.98 | $34.11 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 4.78 | (n) | 6.51 | 13.51 | 33.09 | (37.91 | ) | 27.56 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.07 | (a) | 1.05 | 1.06 | 1.08 | 1.09 | 1.10 | |||||||||||||||||
Expenses after expense reductions (f) | 1.07 | (a) | 1.05 | 1.06 | 1.07 | 1.06 | 1.07 | |||||||||||||||||
Net investment income | 2.63 | (a) | 3.45 | 3.23 | 3.83 | 2.54 | 1.96 | |||||||||||||||||
Portfolio turnover | 27 | (n) | 53 | 56 | 70 | 68 | 84 | |||||||||||||||||
Net assets at end of period (000 omitted) | $792,791 | $1,458,257 | $1,335,305 | $1,209,765 | $992,502 | $1,715,446 |
See Notes to Financial Statements
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(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. |
(x) | The net asset values per share and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
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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.
In this reporting period the fund adopted FASB Accounting Standards Update 2011-04, Fair Value Measurement (Topic 820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 seeks to improve the comparability of fair value measurements as presented and disclosed in financial statements prepared in accordance with U.S. GAAP and International Financial Reporting Standards (IFRS) by providing common requirements for fair value measurement and disclosure.
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11, Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. Although still evaluating the potential impacts of ASU 2011-11 to the fund, management expects that the impact of the fund’s adoption will be limited to additional financial statement disclosures.
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. 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
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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 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, 2012 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $773,788,094 | $— | $— | $773,788,094 | ||||||||||||
Brazil | 93,305,280 | — | — | 93,305,280 | ||||||||||||
Spain | — | 51,757,908 | — | 51,757,908 | ||||||||||||
United Kingdom | 27,165,590 | 23,252,128 | — | 50,417,718 | ||||||||||||
Portugal | — | 44,000,786 | — | 44,000,786 | ||||||||||||
Germany | — | 36,536,518 | — | 36,536,518 | ||||||||||||
Czech Republic | 18,422,210 | — | — | 18,422,210 | ||||||||||||
Chile | 18,144,825 | — | — | 18,144,825 | ||||||||||||
Italy | — | 16,924,174 | — | 16,924,174 | ||||||||||||
Other Countries | 38,273,038 | 43,041,437 | — | 81,314,475 | ||||||||||||
Corporate Bonds | — | 35,746,957 | — | 35,746,957 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 7,414 | — | 7,414 | ||||||||||||
Foreign Bonds | — | 2,019,400 | — | 2,019,400 | ||||||||||||
Mutual Funds | 37,524,255 | — | — | 37,524,255 | ||||||||||||
Total Investments | $1,006,623,292 | $253,286,722 | $— | $1,259,910,014 | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Forward Foreign Currency Exchange Contracts | $— | $(1,277,520 | ) | $— | $(1,277,520 | ) |
For further information regarding security characteristics, see the Portfolio of Investments.
Of the level 2 investments presented above, equity investments amounting to $75,098,476 would have been considered level 1 investments at the beginning of the period. Of the level 1 investments presented above, equity investments amounting to $9,116,805 would have been considered level 2 investments at the beginning of the period. The primary reason for changes in the classifications between levels 1 and 2 occurs when foreign equity securities are fair valued using other observable market-based inputs in place of the closing exchange price due to events occurring after the close of the exchange or market on which the investment is principally traded. The fund’s foreign equity securities may often be valued 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.
Derivatives – The fund uses derivatives for different purposes, primarily to increase or decrease exposure to a particular market or segment of the market, or security, to increase or decrease interest rate or currency exposure, or as alternatives to direct investments.
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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, 2012 as reported in the Statement of Assets and Liabilities:
Risk | Derivative Contracts | Asset Derivatives | Liability Derivatives | |||||||
Foreign Exchange | Forward Foreign Currency Exchange | $2,401,052 | $(3,678,572 | ) |
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, 2012 as reported in the Statement of Operations:
Risk | Foreign Currency | |||
Foreign Exchange | $8,105,822 |
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, 2012 as reported in the Statement of Operations:
Risk | Translation of Assets and Liabilities in Foreign Currencies | |||
Foreign Exchange | $(8,254,300 | ) |
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 contracts and exchange-traded options) while collateral terms are contract specific for over-the-counter traded derivatives (i.e., forward foreign currency exchange contracts, swap agreements 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.
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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 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, 2012, 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, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Foreign taxes 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, wash sale loss deferrals, and derivative transactions.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/11 | ||||
Ordinary income (including any short-term capital gains) | $60,160,403 |
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The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/12 | ||||
Cost of investments | $1,312,896,783 | |||
Gross appreciation | 106,694,613 | |||
Gross depreciation | (159,681,382 | ) | ||
Net unrealized appreciation (depreciation) | $(52,986,769 | ) | ||
As of 12/31/11 | ||||
Undistributed ordinary income | 84,208,490 | |||
Capital loss carryforwards | (101,608,243 | ) | ||
Other temporary differences | (86,432 | ) | ||
Net unrealized appreciation (depreciation) | 28,896,855 |
The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.
Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized after December 31, 2011 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.
As of December 31, 2011 the fund had capital loss carryforwards available to offset future realized gains. Such losses expire as follows:
Pre-enactment losses: | ||||
12/31/17 | $(101,608,243 | ) |
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 6/30/12 | Year ended 12/31/11 | |||||||
Initial Class | $— | $17,376,268 | ||||||
Service Class | — | 42,784,135 | ||||||
Total | $— | $60,160,403 |
(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, 2012 was equivalent to an annual effective rate of 0.73% 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, 2012, the fee was $76,301, which equated to
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0.0103% 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, 2012, these costs amounted to $962.
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, 2012 was equivalent to an annual effective rate of 0.0157% 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, 2012, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $8,964 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 $3,944, 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 $396,442,690 and $430,643,954, 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 6/30/12 | Year ended 12/31/11 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 714,403 | $19,027,654 | 1,930,246 | $51,018,561 | ||||||||||||
Service Class | 3,300,010 | 86,753,626 | 7,808,390 | 201,808,348 | ||||||||||||
4,014,413 | $105,781,280 | 9,738,636 | $252,826,909 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 697,562 | $17,376,268 | ||||||||||||
Service Class | — | — | 1,739,192 | 42,784,135 | ||||||||||||
— | $— | 2,436,754 | $60,160,403 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (3,838,879 | ) | $(104,235,212 | ) | (3,642,984 | ) | $(95,642,985 | ) | ||||||||
Service Class | (30,571,148 | ) | (817,806,087 | ) | (6,387,884 | ) | (164,439,382 | ) | ||||||||
(34,410,027 | ) | $(922,041,299 | ) | (10,030,868 | ) | $(260,082,367 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (3,124,476 | ) | $(85,207,558 | ) | (1,015,176 | ) | $(27,248,156 | ) | ||||||||
Service Class | (27,271,138 | ) | (731,052,461 | ) | 3,159,698 | 80,153,101 | ||||||||||
(30,395,614 | ) | $(816,260,019 | ) | 2,144,522 | $52,904,945 |
(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
18
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MFS Utilities Series
Notes to Financial Statements (unaudited) – continued
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, 2012, the fund’s commitment fee and interest expense were $6,641 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 an affiliated issuer:
Underlying Affiliated Fund | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 60,086,370 | 185,891,565 | (211,268,128 | ) | 34,709,807 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $20,523 | $34,709,807 |
19
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, 2012 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 is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. Copies of the fund’s Form N-Q also may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
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.
20
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Table of Contents
SEMIANNUAL REPORT
June 30, 2012
MFS® INVESTORS GROWTH STOCK SERIES
MFS® Variable Insurance Trust
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
LETTER FROM THE CHAIRMAN AND CEO
Dear Contract Owners:
World financial markets remain a venue of uncertainty. The focus has shifted most recently to the eurozone, where policymakers are attempting to develop a plan that will help debt-laden countries and prevent their woes from spreading across the region. Volatility is likely to continue as investors test the resolve of European officials to make the tough decisions needed to solve the crisis. A slowing in the Chinese economy has added another layer of trepidation, as investors worry that the primary engine of global growth may be sputtering.
The U.S. economy is experiencing a period of growth. However, markets have been jittery in reaction to events in Europe and ahead of the U.S. presidential election. Voters in the United States are watching the economy closely and waiting to see if Congress agrees to cut the budget and extend the Bush administration tax cuts. Failure to do so could ultimately send the U.S. economy back into recession.
Amid this global uncertainty, managing risk becomes a top priority for investors and their advisors. At MFS® our global research platform is designed to ensure the smooth functioning of our investment process in all business climates. Real-time collaboration across the globe is vital in periods of heightened volatility and economic uncertainty. At MFS our investment staff shares ideas and evaluates opportunities across geographies, across both fundamental and quantitative disciplines, and across companies’ entire capital structure. We employ this uniquely collaborative approach to build better insights for our clients.
We, like our investors, are 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 emphasize the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with investment advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2012
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 | ||||
Apple, Inc. | 4.2% | |||
Google, Inc., “A” | 4.0% | |||
Danaher Corp. | 3.9% | |||
Colgate-Palmolive Co. | 3.9% | |||
Oracle Corp. | 3.4% | |||
United Technologies Corp. | 3.3% | |||
Visa, Inc., “A” | 2.9% | |||
Schlumberger Ltd. | 2.8% | |||
Accenture PLC, “A” | 2.8% | |||
Thermo Fisher Scientific, Inc. | 2.6% |
Equity sectors | ||||
Technology | 22.7% | |||
Industrial Goods & Services | 13.9% | |||
Consumer Staples | 12.5% | |||
Health Care | 10.7% | |||
Financial Services | 8.6% | |||
Special Products & Services | 6.6% | |||
Retailing | 6.2% | |||
Energy | 6.0% | |||
Leisure | 5.0% | |||
Basic Materials | 2.4% | |||
Transportation | 2.2% | |||
Autos & Housing | 1.9% |
Percentages are based on net assets as of 6/30/12.
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, 2012 through June 30, 2012
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, 2012 through June 30, 2012.
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 1/01/12 | Ending Account Value 6/30/12 | Expenses Paid During Period (p) 1/01/12-6/30/12 | ||||||||||||||
Initial Class | Actual | 0.83% | $1,000.00 | $1,080.84 | $4.29 | |||||||||||||
Hypothetical (h) | 0.83% | $1,000.00 | $1,020.74 | $4.17 | ||||||||||||||
Service Class | Actual | 1.08% | $1,000.00 | $1,078.92 | $5.58 | |||||||||||||
Hypothetical (h) | 1.08% | $1,000.00 | $1,019.49 | $5.42 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
3
Table of Contents
MFS Investors Growth Stock Series
PORTFOLIO OF INVESTMENTS – 6/30/12 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 98.7% | ||||||||
Aerospace – 4.0% | ||||||||
Precision Castparts Corp. | 13,540 | $ | 2,227,190 | |||||
United Technologies Corp. | 145,930 | 11,022,093 | ||||||
|
| |||||||
$ | 13,249,283 | |||||||
|
| |||||||
Alcoholic Beverages – 0.9% | ||||||||
Diageo PLC | 112,013 | $ | 2,880,549 | |||||
|
| |||||||
Apparel Manufacturers – 2.4% | ||||||||
LVMH Moet Hennessy Louis Vuitton S.A. | 30,000 | $ | 4,572,548 | |||||
NIKE, Inc., “B” | 38,100 | 3,344,418 | ||||||
|
| |||||||
$ | 7,916,966 | |||||||
|
| |||||||
Automotive – 1.9% | ||||||||
Johnson Controls, Inc. | 233,560 | $ | 6,471,948 | |||||
|
| |||||||
Broadcasting – 3.9% | ||||||||
Omnicom Group, Inc. | 74,640 | $ | 3,627,504 | |||||
Viacom, Inc., “B” | 139,730 | 6,570,105 | ||||||
Walt Disney Co. | 55,920 | 2,712,120 | ||||||
|
| |||||||
$ | 12,909,729 | |||||||
|
| |||||||
Brokerage & Asset Managers – 4.5% | ||||||||
Charles Schwab Corp. | 259,600 | $ | 3,356,628 | |||||
CME Group, Inc. | 14,480 | 3,882,233 | ||||||
Franklin Resources, Inc. | 71,310 | 7,914,697 | ||||||
|
| |||||||
$ | 15,153,558 | |||||||
|
| |||||||
Business Services – 6.6% | ||||||||
Accenture PLC, “A” | 153,270 | $ | 9,209,994 | |||||
Dun & Bradstreet Corp. | 56,340 | 4,009,718 | ||||||
MSCI, Inc., “A” (a) | 170,290 | 5,793,266 | ||||||
Verisk Analytics, Inc., “A” (a) | 64,260 | 3,165,448 | ||||||
|
| |||||||
$ | 22,178,426 | |||||||
|
| |||||||
Cable TV – 1.1% | ||||||||
DIRECTV, “A” (a) | 76,660 | $ | 3,742,541 | |||||
|
| |||||||
Chemicals – 0.6% | ||||||||
Monsanto Co. | 22,920 | $ | 1,897,318 | |||||
|
| |||||||
Computer Software – 5.8% | ||||||||
Autodesk, Inc. (a) | 98,960 | $ | 3,462,610 | |||||
Check Point Software Technologies Ltd. (a) | 95,310 | 4,726,423 | ||||||
Oracle Corp. | 380,250 | 11,293,425 | ||||||
|
| |||||||
$ | 19,482,458 | |||||||
|
| |||||||
Computer Software – Systems – 6.6% | ||||||||
Apple, Inc. (a) | 24,050 | $ | 14,045,200 | |||||
EMC Corp. (a) | 105,900 | 2,714,217 | ||||||
International Business Machines Corp. | 27,890 | 5,454,726 | ||||||
|
| |||||||
$ | 22,214,143 | |||||||
|
| |||||||
Consumer Products – 7.2% | ||||||||
Church & Dwight Co., Inc. | 44,150 | $ | 2,449,001 | |||||
Colgate-Palmolive Co. | 125,990 | 13,115,559 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Consumer Products – continued | ||||||||
Procter & Gamble Co. | 141,133 | $ | 8,644,396 | |||||
|
| |||||||
$ | 24,208,956 | |||||||
|
| |||||||
Electrical Equipment – 9.9% | ||||||||
Amphenol Corp., “A” | 89,530 | $ | 4,916,988 | |||||
Danaher Corp. | 252,080 | 13,128,326 | ||||||
Mettler-Toledo International, Inc. (a) | 27,070 | 4,218,860 | ||||||
Sensata Technologies Holding B.V. (a) | 248,370 | 6,651,349 | ||||||
W.W. Grainger, Inc. | 21,340 | 4,081,062 | ||||||
|
| |||||||
$ | 32,996,585 | |||||||
|
| |||||||
Electronics – 4.5% | ||||||||
ASML Holding N.V. | 43,170 | $ | 2,219,801 | |||||
Microchip Technology, Inc. | 230,810 | 7,635,195 | ||||||
Taiwan Semiconductor Manufacturing Co. Ltd., ADR | 361,196 | 5,042,296 | ||||||
|
| |||||||
$ | 14,897,292 | |||||||
|
| |||||||
Energy – Independent – 1.5% | ||||||||
Occidental Petroleum Corp. | 58,110 | $ | 4,984,095 | |||||
|
| |||||||
Energy – Integrated – 1.2% | ||||||||
Exxon Mobil Corp. | 47,130 | $ | 4,032,914 | |||||
|
| |||||||
Food & Beverages – 4.4% | ||||||||
Groupe Danone | 93,901 | $ | 5,824,533 | |||||
Mead Johnson Nutrition Co., “A” | 27,480 | 2,212,415 | ||||||
PepsiCo, Inc. | 91,970 | 6,498,600 | ||||||
|
| |||||||
$ | 14,535,548 | |||||||
|
| |||||||
Food & Drug Stores – 0.7% | ||||||||
CVS Caremark Corp. | 50,473 | $ | 2,358,603 | |||||
|
| |||||||
General Merchandise – 2.3% | ||||||||
Kohl’s Corp. | 58,680 | $ | 2,669,353 | |||||
Target Corp. | 88,880 | 5,171,927 | ||||||
|
| |||||||
$ | 7,841,280 | |||||||
|
| |||||||
Internet – 4.8% | ||||||||
eBay, Inc. (a) | 64,080 | $ | 2,692,001 | |||||
Google, Inc., “A” (a) | 23,210 | 13,463,425 | ||||||
|
| |||||||
$ | 16,155,426 | |||||||
|
| |||||||
Medical & Health Technology & Services – 1.2% | ||||||||
Express Scripts Holding Co. (a) | 29,776 | $ | 1,662,394 | |||||
Patterson Cos., Inc. | 66,750 | 2,300,873 | ||||||
|
| |||||||
$ | 3,963,267 | |||||||
|
| |||||||
Medical Equipment – 7.6% | ||||||||
Becton, Dickinson & Co. | 52,290 | $ | 3,908,678 | |||||
DENTSPLY International, Inc. | 134,430 | 5,082,798 | ||||||
St. Jude Medical, Inc. | 106,880 | 4,265,581 | ||||||
Thermo Fisher Scientific, Inc. | 166,800 | 8,658,588 | ||||||
Waters Corp. (a) | 43,490 | 3,456,150 | ||||||
|
| |||||||
$ | 25,371,795 | |||||||
|
|
4
Table of Contents
MFS Investors Growth Stock Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Metals & Mining – 0.5% | ||||||||
Rio Tinto Ltd. | 38,190 | $ | 1,823,928 | |||||
|
| |||||||
Network & Telecom – 1.0% | ||||||||
Cisco Systems, Inc. | 201,000 | $ | 3,451,170 | |||||
|
| |||||||
Oil Services – 3.3% | ||||||||
National Oilwell Varco, Inc. | 22,140 | $ | 1,426,702 | |||||
Schlumberger Ltd. | 145,630 | 9,452,843 | ||||||
|
| |||||||
$ | 10,879,545 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 4.1% | ||||||||
MasterCard, Inc., “A” | 9,430 | $ | 4,055,937 | |||||
Visa, Inc., “A” | 78,070 | 9,651,794 | ||||||
|
| |||||||
$ | 13,707,731 | |||||||
|
| |||||||
Pharmaceuticals – 1.9% | ||||||||
Allergan, Inc. | 20,710 | $ | 1,917,125 | |||||
Johnson & Johnson | 67,700 | 4,573,812 | ||||||
|
| |||||||
$ | 6,490,937 | |||||||
|
| |||||||
Railroad & Shipping – 0.5% | ||||||||
Kuehne & Nagel, Inc. AG | 14,160 | $ | 1,498,766 | |||||
|
| |||||||
Specialty Chemicals – 1.3% | ||||||||
Praxair, Inc. | 41,420 | $ | 4,503,597 | |||||
|
| |||||||
Specialty Stores – 0.8% | ||||||||
Industria de Diseno Textil S.A. | 24,761 | $ | 2,561,022 | |||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Trucking – 1.7% | ||||||||
Expeditors International of Washington, Inc. | 146,750 | $ | 5,686,563 | |||||
|
| |||||||
Total Common Stocks (Identified Cost, $291,051,266) | $ | 330,045,939 | ||||||
|
| |||||||
MONEY MARKET FUNDS – 1.1% | ||||||||
MFS Institutional Money Market Portfolio, 0.14%, at Cost and Net Asset Value (v) | 3,741,929 | $ | 3,741,929 | |||||
|
| |||||||
Total Investments (Identified Cost, $294,793,195) | $ | 333,787,868 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – 0.2% | 598,762 | |||||||
|
| |||||||
Net Assets – 100.0% | $ | 334,386,630 | ||||||
|
|
(a) | Non-income producing security. |
(v) | Underlying affiliated fund that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end. |
The following abbreviations are used in this report and are defined:
ADR | American Depositary 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 6/30/12 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $291,051,266) | $330,045,939 | |||||||
Underlying affiliated funds, at cost and value | 3,741,929 | |||||||
Total investments, at value (identified cost, $294,793,195) | $333,787,868 | |||||||
Receivables for | ||||||||
Investments sold | 1,253,672 | |||||||
Fund shares sold | 158,646 | |||||||
Dividends | 302,609 | |||||||
Other assets | 1,733 | |||||||
Total assets | $335,504,528 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Investments purchased | $704,855 | |||||||
Fund shares reacquired | 322,446 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 20,454 | |||||||
Shareholder servicing costs | 345 | |||||||
Distribution and/or service fees | 5,228 | |||||||
Payable for independent Trustees’ compensation | 68 | |||||||
Accrued expenses and other liabilities | 64,502 | |||||||
Total liabilities | $1,117,898 | |||||||
Net assets | $334,386,630 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $265,912,740 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 38,993,670 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | 27,634,058 | |||||||
Undistributed net investment income | 1,846,162 | |||||||
Net assets | $334,386,630 | |||||||
Shares of beneficial interest outstanding | 28,625,500 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $71,997,861 | 6,052,638 | $11.90 | |||||||||
Service Class | 262,388,769 | 22,572,862 | 11.62 |
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 6/30/12 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $2,716,299 | |||||||
Interest | 15,507 | |||||||
Dividends from underlying affiliated funds | 1,954 | |||||||
Foreign taxes withheld | (53,526 | ) | ||||||
Total investment income | $2,680,234 | |||||||
Expenses | ||||||||
Management fee | $1,301,371 | |||||||
Distribution and/or service fees | 334,229 | |||||||
Shareholder servicing costs | 18,189 | |||||||
Administrative services fee | 30,948 | |||||||
Independent Trustees’ compensation | 5,477 | |||||||
Custodian fee | 21,136 | |||||||
Shareholder communications | 24,463 | |||||||
Audit and tax fees | 25,577 | |||||||
Legal fees | 2,523 | |||||||
Miscellaneous | 11,871 | |||||||
Total expenses | $1,775,784 | |||||||
Reduction of expenses by investment adviser | (892 | ) | ||||||
Net expenses | $1,774,892 | |||||||
Net investment income | $905,342 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $11,359,029 | |||||||
Foreign currency | (2,665 | ) | ||||||
Net realized gain (loss) on investments and foreign currency | $11,356,364 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $14,296,604 | |||||||
Translation of assets and liabilities in foreign currencies | (457 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $14,296,147 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $25,652,511 | |||||||
Change in net assets from operations | $26,557,853 |
See Notes to Financial Statements
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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 6/30/12 (unaudited |
) |
| Year ended 12/31/11 |
| |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $905,342 | $934,593 | ||||||
Net realized gain (loss) on investments and foreign currency | 11,356,364 | 20,185,477 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 14,296,147 | (19,025,996 | ) | |||||
Change in net assets from operations | $26,557,853 | $2,094,074 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(1,103,339 | ) | |||||
Change in net assets from fund share transactions | $(21,365,070 | ) | $(31,928,730 | ) | ||||
Total change in net assets | $5,192,783 | $(30,937,995 | ) | |||||
Net assets | ||||||||
At beginning of period | 329,193,847 | 360,131,842 | ||||||
At end of period (including undistributed net investment income of $1,846,162 and | $334,386,630 | $329,193,847 |
See Notes to Financial Statements
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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 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $11.01 | $11.01 | $9.83 | $7.10 | $11.82 | $10.65 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.04 | $0.05 | $0.05 | $0.05 | $0.06 | $0.05 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.85 | 0.01 | 1.17 | 2.74 | (4.24 | ) | 1.16 | |||||||||||||||||
Total from investment operations | $0.89 | $0.06 | $1.22 | $2.79 | $(4.18 | ) | $1.21 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.06 | ) | $(0.04 | ) | $(0.06 | ) | $(0.06 | ) | $(0.04 | ) | |||||||||||||
From net realized gain on investments | — | — | — | — | (0.48 | ) | — | |||||||||||||||||
Total distributions declared to shareholders | $— | $(0.06 | ) | $(0.04 | ) | $(0.06 | ) | $(0.54 | ) | $(0.04 | ) | |||||||||||||
Net asset value, end of period (x) | $11.90 | $11.01 | $11.01 | $9.83 | $7.10 | $11.82 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 8.08 | (n) | 0.58 | 12.47 | 39.55 | (36.87 | ) | 11.36 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.83 | (a) | 0.82 | 0.88 | 0.86 | 0.85 | 0.86 | |||||||||||||||||
Expenses after expense reductions (f) | 0.83 | (a) | 0.82 | 0.88 | 0.86 | 0.85 | 0.86 | |||||||||||||||||
Net investment income | 0.70 | (a) | 0.46 | 0.49 | 0.63 | 0.60 | 0.47 | |||||||||||||||||
Portfolio turnover | 18 | (n) | 28 | 44 | 50 | 50 | 63 | |||||||||||||||||
Net assets at end of period (000 omitted) | $71,998 | $77,136 | $83,355 | $93,011 | $75,444 | $148,096 | ||||||||||||||||||
Service Class | Six months ended 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $10.77 | $10.76 | $9.62 | $6.95 | $11.57 | $10.43 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.03 | $0.02 | $0.02 | $0.03 | $0.03 | $0.02 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.82 | 0.02 | 1.15 | 2.68 | (4.14 | ) | 1.13 | |||||||||||||||||
Total from investment operations | $0.85 | $0.04 | $1.17 | $2.71 | $(4.11 | ) | $1.15 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.03 | ) | $(0.03 | ) | $(0.04 | ) | $(0.03 | ) | $(0.01 | ) | |||||||||||||
From net realized gain on investments | — | — | — | — | (0.48 | ) | — | |||||||||||||||||
Total distributions declared to shareholders | $— | $(0.03 | ) | $(0.03 | ) | $(0.04 | ) | $(0.51 | ) | $(0.01 | ) | |||||||||||||
Net asset value, end of period (x) | $11.62 | $10.77 | $10.76 | $9.62 | $6.95 | $11.57 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 7.89 | (n) | 0.37 | 12.15 | 39.10 | (36.98 | ) | 11.02 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.08 | (a) | 1.07 | 1.12 | 1.11 | 1.10 | 1.11 | |||||||||||||||||
Expenses after expense reductions (f) | 1.08 | (a) | 1.07 | 1.12 | 1.11 | 1.10 | 1.11 | |||||||||||||||||
Net investment income | 0.47 | (a) | 0.21 | 0.23 | 0.38 | 0.35 | 0.22 | |||||||||||||||||
Portfolio turnover | 18 | (n) | 28 | 44 | 50 | 50 | 63 | |||||||||||||||||
Net assets at end of period (000 omitted) | $262,389 | $252,058 | $276,777 | $406,039 | $178,256 | $297,186 |
See Notes to Financial Statements
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MFS Investors Growth Stock Series
Financial Highlights – continued
(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. |
(x) | The net asset values per share and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
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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.
In this reporting period the fund adopted FASB Accounting Standards Update 2011-04, Fair Value Measurement (Topic 820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 seeks to improve the comparability of fair value measurements as presented and disclosed in financial statements prepared in accordance with U.S. GAAP and International Financial Reporting Standards (IFRS) by providing common requirements for fair value measurement and disclosure.
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11, Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. Although still evaluating the potential impacts of ASU 2011-11 to the fund, management expects that the impact of the fund’s adoption will be limited to additional financial statement disclosures.
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. 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 Investors Growth Stock 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, 2012 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $298,896,073 | $— | $— | $298,896,073 | ||||||||||||
France | 5,824,533 | 4,572,548 | — | 10,397,081 | ||||||||||||
Taiwan | 5,042,296 | — | — | 5,042,296 | ||||||||||||
Israel | 4,726,423 | — | — | 4,726,423 | ||||||||||||
United Kingdom | 2,880,549 | 1,823,928 | — | 4,704,477 | ||||||||||||
Spain | — | 2,561,022 | — | 2,561,022 | ||||||||||||
Netherlands | 2,219,801 | — | — | 2,219,801 | ||||||||||||
Switzerland | — | 1,498,766 | — | 1,498,766 | ||||||||||||
Mutual Funds | 3,741,929 | — | — | 3,741,929 | ||||||||||||
Total Investments | $323,331,604 | $10,456,264 | $— | $333,787,868 |
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 Investors Growth Stock 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. For the six months ended June 30, 2012, 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, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Foreign taxes 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:
12/31/11 | ||||
Ordinary income (including any short-term capital gains) | $1,103,339 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/12 | ||||
Cost of investments | $295,284,324 | |||
Gross appreciation | 48,881,176 | |||
Gross depreciation | (10,377,632 | ) | ||
Net unrealized appreciation (depreciation) | $38,503,544 | |||
As of 12/31/11 | ||||
Undistributed ordinary income | 3,579,474 | |||
Undistributed long-term capital gain | 14,130,169 | |||
Other temporary differences | (546 | ) | ||
Net unrealized appreciation (depreciation) | $24,206,940 |
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 6/30/12 | Year ended 12/31/11 | |||||||
Initial Class | $— | $414,685 | ||||||
Service Class | — | 688,654 | ||||||
Total | $— | $1,103,339 |
(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, 2012 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.
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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, 2012, the fee was $17,798, which equated to 0.0103% 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, 2012, these costs amounted to $391.
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, 2012 was equivalent to an annual effective rate of 0.0178% 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, 2012, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $1,780 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 $892, 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 $61,964,979 and $82,493,378, 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 6/30/12 | Year ended 12/31/11 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 528,755 | $6,355,832 | 1,666,762 | $18,718,772 | ||||||||||||
Service Class | 1,010,118 | 11,720,115 | 2,190,395 | 23,821,491 | ||||||||||||
1,538,873 | $18,075,947 | 3,857,157 | $42,540,263 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 38,719 | $414,685 | ||||||||||||
Service Class | — | — | 65,649 | 688,654 | ||||||||||||
— | $— | 104,368 | $1,103,339 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (1,481,663 | ) | $(17,957,876 | ) | (2,273,982 | ) | $(25,426,763 | ) | ||||||||
Service Class | (1,833,761 | ) | (21,483,141 | ) | (4,575,756 | ) | (50,145,569 | ) | ||||||||
(3,315,424 | ) | $(39,441,017 | ) | (6,849,738 | ) | $(75,572,332 | ) |
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MFS Investors Growth Stock Series
Notes to Financial Statements (unaudited) – continued
Six months ended 6/30/12 | Year ended 12/31/11 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Net change | ||||||||||||||||
Initial Class | (952,908 | ) | $(11,602,044 | ) | (568,501 | ) | $(6,293,306 | ) | ||||||||
Service Class | (823,643 | ) | (9,763,026 | ) | (2,319,712 | ) | (25,635,424 | ) | ||||||||
(1,776,551 | ) | $(21,365,070 | ) | (2,888,213 | ) | $(31,928,730 | ) |
(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, 2012, the fund’s commitment fee and interest expense were $1,205 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 an affiliated issuer:
Underlying Affiliated Fund | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 3,594,998 | 34,420,498 | (34,273,567 | ) | 3,741,929 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $1,954 | $3,741,929 |
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, 2012 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 is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. Copies of the fund’s Form N-Q also may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
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
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Table of Contents
SEMIANNUAL REPORT
June 30, 2012
MFS® GLOBAL EQUITY SERIES
MFS® Variable Insurance Trust
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
LETTER FROM THE CHAIRMAN AND CEO
Dear Contract Owners:
World financial markets remain a venue of uncertainty. The focus has shifted most recently to the eurozone, where policymakers are attempting to develop a plan that will help debt-laden countries and prevent their woes from spreading across the region. Volatility is likely to continue as investors test the resolve of European officials to make the tough decisions needed to solve the crisis.
The U.S. economy is experiencing a period of growth. However, markets have been jittery in reaction to events in Europe and ahead of the U.S. presidential election. Voters in the United States are watching the economy closely and waiting to see if Congress agrees to cut the budget and extend the Bush administration tax cuts. Failure to do so could ultimately send the U.S. economy back into recession. A slowing in the Chinese economy has added another layer of trepidation, as investors worry that the primary engine of global growth may be sputtering.
Amid this global uncertainty, managing risk becomes a top priority for investors and their advisors. At MFS® our global research platform is designed to ensure the smooth functioning of our investment process in all business climates. Real-time collaboration across the globe is vital in periods of heightened volatility and economic uncertainty. At MFS our investment staff shares ideas and evaluates opportunities across geographies, across both fundamental and quantitative disciplines, and across companies’ entire capital structure. We employ this uniquely collaborative approach to build better insights for our clients.
We, like our investors, are 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 emphasize the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with investment advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2012
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 | 3.1% | |||
Nestle S.A. | 3.1% | |||
Walt Disney Co. | 2.9% | |||
Diageo PLC | 2.6% | |||
Heineken N.V. | 2.5% | |||
Reckitt Benckiser Group PLC | 2.4% | |||
Oracle Corp. | 2.1% | |||
Honeywell International, Inc. | 2.0% | |||
Accenture PLC, “A” | 1.9% | |||
Visa, Inc., “A” | 1.9% | |||
Equity sectors | ||||
Consumer Staples | 20.3% | |||
Financial Services | 14.4% | |||
Health Care | 11.8% | |||
Basic Materials | 9.1% | |||
Technology | 8.5% | |||
Retailing | 8.5% | |||
Industrial Goods & Services | 7.2% | |||
Leisure | 6.6% | |||
Special Products & Services | 4.4% | |||
Transportation | 3.9% | |||
Energy | 2.6% | |||
Autos & Housing | 1.3% | |||
Utilities & Communications | 0.3% |
Issuer country weightings (x) | ||||
United States | 48.0% | |||
United Kingdom | 10.4% | |||
France | 9.5% | |||
Switzerland | 8.7% | |||
Germany | 7.5% | |||
Japan | 4.4% | |||
Netherlands | 3.8% | |||
Canada | 1.8% | |||
Sweden | 1.5% | |||
Other Countries | 4.4% | |||
Currency exposure weightings (y) | ||||
United States Dollar | 50.8% | |||
Euro | 21.5% | |||
British Pound Sterling | 10.4% | |||
Swiss Franc | 8.7% | |||
Japanese Yen | 4.4% | |||
Swedish Krona | 1.5% | |||
South Korean Won | 0.9% | |||
Danish Krone | 0.8% | |||
Indian Rupee | 0.5% | |||
Other Currencies | 0.5% |
(x) | Represents the portfolio’s exposure to issuer countries as a percentage of a portfolio’s net assets. |
(y) | Represents the portfolio’s exposure to a particular currency as a percentage of a portfolio’s net assets. |
Percentages are based on net assets as of 6/30/12.
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, 2012 through June 30, 2012
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, 2012 through June 30, 2012.
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 1/01/12 | Ending Account Value 6/30/12 | Expenses Paid During Period (p) 1/01/12-6/30/12 | ||||||||||||||
Initial Class | Actual | 1.15% | $1,000.00 | $1,084.19 | $5.96 | |||||||||||||
Hypothetical (h) | 1.15% | $1,000.00 | $1,019.14 | $5.77 | ||||||||||||||
Service Class | Actual | 1.40% | $1,000.00 | $1,082.81 | $7.25 | |||||||||||||
Hypothetical (h) | 1.40% | $1,000.00 | $1,017.90 | $7.02 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
3
Table of Contents
MFS Global Equity Series
PORTFOLIO OF INVESTMENTS – 6/30/12 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 98.9% | ||||||||
Aerospace – 3.5% | ||||||||
Honeywell International, Inc. | 14,450 | $ | 806,888 | |||||
United Technologies Corp. | 8,650 | 653,335 | ||||||
|
| |||||||
$ | 1,460,223 | |||||||
|
| |||||||
Alcoholic Beverages – 7.2% | ||||||||
Carlsberg A.S., “B” | 3,998 | $ | 315,032 | |||||
Diageo PLC | 41,038 | 1,055,341 | ||||||
Heineken N.V. | 20,036 | 1,046,576 | ||||||
Pernod Ricard S.A. | 5,083 | 543,761 | ||||||
|
| |||||||
$ | 2,960,710 | |||||||
|
| |||||||
Apparel Manufacturers – 3.7% | ||||||||
Burberry Group PLC | 7,350 | $ | 153,315 | |||||
Compagnie Financiere Richemont S.A. | 7,904 | 433,776 | ||||||
LVMH Moet Hennessy Louis Vuitton S.A. | 4,950 | 754,470 | ||||||
NIKE, Inc., “B” | 1,950 | 171,171 | ||||||
|
| |||||||
$ | 1,512,732 | |||||||
|
| |||||||
Automotive – 0.7% | ||||||||
Delphi Automotive PLC (a) | 7,720 | $ | 196,860 | |||||
Harley-Davidson, Inc. | 1,940 | 88,716 | ||||||
|
| |||||||
$ | 285,576 | |||||||
|
| |||||||
Broadcasting – 6.0% | ||||||||
Omnicom Group, Inc. | 11,830 | $ | 574,938 | |||||
Viacom, Inc., “B” | 3,800 | 178,676 | ||||||
Walt Disney Co. | 24,760 | 1,200,860 | ||||||
WPP Group PLC | 44,185 | 537,038 | ||||||
|
| |||||||
$ | 2,491,512 | |||||||
|
| |||||||
Brokerage & Asset Managers – 0.6% | ||||||||
Deutsche Boerse AG | 4,650 | $ | 250,971 | |||||
|
| |||||||
Business Services – 4.2% | ||||||||
Accenture PLC, “A” | 13,250 | $ | 796,193 | |||||
Adecco S.A. | 5,540 | 246,539 | ||||||
Brenntag AG | 1,606 | 177,669 | ||||||
Compass Group PLC | 47,790 | 501,280 | ||||||
|
| |||||||
$ | 1,721,681 | |||||||
|
| |||||||
Chemicals – 1.8% | ||||||||
3M Co. | 8,450 | $ | 757,120 | |||||
|
| |||||||
Computer Software – 3.8% | ||||||||
Autodesk, Inc. (a) | 9,210 | $ | 322,258 | |||||
Check Point Software Technologies Ltd. (a) | 2,430 | 120,504 | ||||||
Dassault Systems S.A. | 2,638 | 247,819 | ||||||
Oracle Corp. | 28,790 | 855,063 | ||||||
|
| |||||||
$ | 1,545,644 | |||||||
|
| |||||||
Computer Software – Systems – 1.0% | ||||||||
Canon, Inc. | 10,500 | $ | 420,449 | |||||
|
| |||||||
Conglomerates – 0.2% | ||||||||
Smiths Group PLC | 6,259 | $ | 99,624 | |||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Construction – 0.6% | ||||||||
Sherwin-Williams Co. | 1,770 | $ | 234,260 | |||||
|
| |||||||
Consumer Products – 6.8% | ||||||||
Beiersdorf AG | 2,576 | $ | 167,139 | |||||
Colgate-Palmolive Co. | 6,000 | 624,600 | ||||||
International Flavors & Fragrances, Inc. | 6,250 | 342,500 | ||||||
Procter & Gamble Co. | 3,903 | 239,059 | ||||||
Reckitt Benckiser Group PLC | 18,668 | 983,822 | ||||||
Svenska Cellulosa Aktiebolaget | 29,033 | 436,028 | ||||||
|
| |||||||
$ | 2,793,148 | |||||||
|
| |||||||
Electrical Equipment – 3.7% | ||||||||
Amphenol Corp., “A” | 6,810 | $ | 374,005 | |||||
Legrand S.A. (l) | 15,293 | 520,116 | ||||||
Rockwell Automation, Inc. | 1,360 | 89,842 | ||||||
Schneider Electric S.A. | 9,579 | 533,729 | ||||||
|
| |||||||
$ | 1,517,692 | |||||||
|
| |||||||
Electronics – 2.8% | ||||||||
Altera Corp. | 5,060 | $ | 171,230 | |||||
Hoya Corp. | 16,200 | 356,948 | ||||||
Microchip Technology, Inc. | 7,730 | 255,708 | ||||||
Samsung Electronics Co. Ltd. | 368 | 390,162 | ||||||
|
| |||||||
$ | 1,174,048 | |||||||
|
| |||||||
Energy – Independent – 0.7% | ||||||||
INPEX Corp. | 52 | $ | 291,529 | |||||
|
| |||||||
Food & Beverages – 6.3% | ||||||||
Dr Pepper Snapple Group, Inc. | 7,410 | $ | 324,188 | |||||
Groupe Danone | 11,796 | 731,688 | ||||||
J.M. Smucker Co. | 3,665 | 276,781 | ||||||
Nestle S.A. | 21,340 | 1,272,961 | ||||||
|
| |||||||
$ | 2,605,618 | |||||||
|
| |||||||
Food & Drug Stores – 2.1% | ||||||||
Lawson, Inc. | 2,400 | $ | 167,910 | |||||
Tesco PLC | 43,192 | 209,950 | ||||||
Walgreen Co. | 16,380 | 484,520 | ||||||
|
| |||||||
$ | 862,380 | |||||||
|
| |||||||
Gaming & Lodging – 0.6% | ||||||||
William Hill PLC | 53,240 | $ | 236,016 | |||||
|
| |||||||
General Merchandise – 1.1% | ||||||||
Target Corp. | 8,020 | $ | 466,684 | |||||
|
| |||||||
Insurance – 1.3% | ||||||||
AXA | 15,127 | $ | 202,463 | |||||
Swiss Re Ltd. | 5,141 | 322,972 | ||||||
|
| |||||||
$ | 525,435 | |||||||
|
| |||||||
Major Banks – 5.4% | ||||||||
Bank of New York Mellon Corp. | 27,440 | $ | 602,308 | |||||
Goldman Sachs Group, Inc. | 3,780 | 362,351 | ||||||
Standard Chartered PLC | 24,538 | 534,949 |
4
Table of Contents
MFS Global Equity Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Major Banks – continued | ||||||||
State Street Corp. | 16,700 | $ | 745,488 | |||||
|
| |||||||
$ | 2,245,096 | |||||||
|
| |||||||
Medical Equipment – 7.3% | ||||||||
DENTSPLY International, Inc. | 9,170 | $ | 346,718 | |||||
Medtronic, Inc. | 13,030 | 504,652 | ||||||
Sonova Holding AG | 2,563 | 247,319 | ||||||
St. Jude Medical, Inc. | 18,670 | 745,120 | ||||||
Thermo Fisher Scientific, Inc. | 14,120 | 732,969 | ||||||
Waters Corp. (a) | 5,580 | 443,443 | ||||||
|
| |||||||
$ | 3,020,221 | |||||||
|
| |||||||
Network & Telecom – 0.9% | ||||||||
Cisco Systems, Inc. | 22,510 | $ | 386,497 | |||||
|
| |||||||
Oil Services – 1.9% | ||||||||
National Oilwell Varco, Inc. | 5,440 | $ | 350,554 | |||||
Schlumberger Ltd. | 6,540 | 424,511 | ||||||
|
| |||||||
$ | 775,065 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 7.1% | ||||||||
Aeon Credit Service Co. Ltd. | 8,700 | $ | 161,327 | |||||
American Express Co. | 7,880 | 458,695 | ||||||
Banco Santander Brasil S.A., ADR | 21,690 | 168,098 | ||||||
Credicorp Ltd. | 950 | 119,596 | ||||||
Erste Group Bank AG (a) | 8,473 | 161,083 | ||||||
ICICI Bank Ltd. | 13,587 | 220,978 | ||||||
Julius Baer Group Ltd. | 9,163 | 331,758 | ||||||
Komercni Banka A.S. | 1,169 | 202,892 | ||||||
UBS AG | 27,559 | 322,286 | ||||||
Visa, Inc., “A” | 6,430 | 794,941 | ||||||
|
| |||||||
$ | 2,941,654 | |||||||
|
| |||||||
Pharmaceuticals – 4.5% | ||||||||
Bayer AG | 10,388 | $ | 749,064 | |||||
Johnson & Johnson | 4,550 | 307,398 | ||||||
Merck KGaA | 4,740 | 473,013 | ||||||
Roche Holding AG | 1,794 | 309,694 | ||||||
|
| |||||||
$ | 1,839,169 | |||||||
|
| |||||||
Railroad & Shipping – 2.1% | ||||||||
Canadian National Railway Co. | 8,904 | $ | 751,320 | |||||
Kuehne & Nagel, Inc. AG | 910 | 96,319 | ||||||
|
| |||||||
$ | 847,639 | |||||||
|
| |||||||
Specialty Chemicals – 7.3% | ||||||||
Akzo Nobel N.V. | 11,213 | $ | 527,459 | |||||
L’Air Liquide S.A. | 3,342 | 382,360 | ||||||
Linde AG | 8,296 | 1,292,168 | ||||||
Praxair, Inc. | 3,470 | 377,293 | ||||||
Shin-Etsu Chemical Co. Ltd. | 7,500 | 412,624 | ||||||
|
| |||||||
$ | 2,991,904 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Specialty Stores – 1.6% | ||||||||
Hennes & Mauritz AB, “B” | 4,810 | $ | 172,932 | |||||
Sally Beauty Holdings, Inc. (a) | 9,680 | 249,163 | ||||||
Urban Outfitters, Inc. (a) | 8,880 | 244,999 | ||||||
|
| |||||||
$ | 667,094 | |||||||
|
| |||||||
Trucking – 1.8% | ||||||||
United Parcel Service, Inc., “B” | 9,350 | $ | 736,406 | |||||
|
| |||||||
Utilities – Electric Power – 0.3% | ||||||||
Red Electrica de Espana | 2,923 | $ | 127,471 | |||||
|
| |||||||
Total Common Stocks (Identified Cost, $36,772,120) | $ | 40,791,268 | ||||||
|
| |||||||
MONEY MARKET FUNDS – 0.1% | ||||||||
MFS Institutional Money Market Portfolio, 0.14%, at Cost and Net Asset Value (v) | 52,040 | $ | 52,040 | |||||
|
| |||||||
COLLATERAL FOR SECURITIES LOANED – 0.9% | ||||||||
Navigator Securities Lending Prime Portfolio, 0.28%, at Cost and Net Asset Value (j) | 370,645 | $ | 370,645 | |||||
|
| |||||||
Total Investments (Identified Cost, $37,194,805) | $ | 41,213,953 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – 0.1% | 48,976 | |||||||
|
| |||||||
Net Assets – 100.0% | $ | 41,262,929 | ||||||
|
|
(a) | Non-income producing security. |
(j) | The rate quoted is the annualized seven-day yield of the fund at period end. |
(l) | A portion of this security is on loan. |
(v) | Underlying affiliated fund that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end. |
The following abbreviations are used in this report and are defined:
ADR | American Depositary 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 6/30/12 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $37,142,765) | $41,161,913 | |||||||
Underlying affiliated funds, at cost and value | 52,040 | |||||||
Total investments, at value, including $378,115 of securities on loan (identified cost, $37,194,805) | $41,213,953 | |||||||
Cash | 2,876 | |||||||
Foreign currency, at value (identified cost, $9,286) | 9,371 | |||||||
Receivables for | ||||||||
Investments sold | 359,031 | |||||||
Fund shares sold | 34,321 | |||||||
Interest and dividends | 92,328 | |||||||
Receivable from investment adviser | 1,897 | |||||||
Other assets | 308 | |||||||
Total assets | $41,714,085 | |||||||
Liabilities | ||||||||
Payable for fund shares reacquired | $17,559 | |||||||
Collateral for securities loaned, at value | 370,645 | |||||||
Payable to affiliates | ||||||||
Shareholder servicing costs | 57 | |||||||
Distribution and/or service fees | 64 | |||||||
Payable for independent Trustees’ compensation | 8 | |||||||
Accrued expenses and other liabilities | 62,823 | |||||||
Total liabilities | $451,156 | |||||||
Net assets | $41,262,929 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $35,759,873 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 4,017,162 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | 644,303 | |||||||
Undistributed net investment income | 841,591 | |||||||
Net assets | $41,262,929 | |||||||
Shares of beneficial interest outstanding | 2,995,416 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $37,995,082 | 2,757,339 | $13.78 | |||||||||
Service Class | 3,267,847 | 238,077 | 13.73 |
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 6/30/12 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $688,339 | |||||||
Interest | 12,458 | |||||||
Dividends from underlying affiliated funds | 203 | |||||||
Foreign taxes withheld | (53,600 | ) | ||||||
Total investment income | $647,400 | |||||||
Expenses | ||||||||
Management fee | $213,619 | |||||||
Distribution and/or service fees | 3,916 | |||||||
Shareholder servicing costs | 2,305 | |||||||
Administrative services fee | 8,701 | |||||||
Independent Trustees’ compensation | 718 | |||||||
Custodian fee | 18,683 | |||||||
Shareholder communications | 11,833 | |||||||
Audit and tax fees | 26,579 | |||||||
Legal fees | 390 | |||||||
Miscellaneous | 6,428 | |||||||
Total expenses | $293,172 | |||||||
Fees paid indirectly | (1 | ) | ||||||
Reduction of expenses by investment adviser | (43,456 | ) | ||||||
Net expenses | $249,715 | |||||||
Net investment income | $397,685 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $(136,368 | ) | ||||||
Foreign currency | (6,490 | ) | ||||||
Net realized gain (loss) on investments and foreign currency | $(142,858 | ) | ||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments (net of $1,467 increase in deferred country tax) | $3,045,837 | |||||||
Translation of assets and liabilities in foreign currencies | (412 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $3,045,425 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $2,902,567 | |||||||
Change in net assets from operations | $3,300,252 |
See Notes to Financial Statements
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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 6/30/12 (unaudited | ) | | Year ended 12/31/11 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $397,685 | $444,222 | ||||||
Net realized gain (loss) on investments and foreign currency | (142,858 | ) | 1,469,693 | |||||
Net unrealized gain (loss) on investments and foreign currency translation | 3,045,425 | (3,784,970 | ) | |||||
Change in net assets from operations | $3,300,252 | $(1,871,055 | ) | |||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(340,420 | ) | |||||
Change in net assets from fund share transactions | $(103,722 | ) | $(2,161,876 | ) | ||||
Total change in net assets | $3,196,530 | $(4,373,351 | ) | |||||
Net assets | ||||||||
At beginning of period | 38,066,399 | 42,439,750 | ||||||
At end of period (including undistributed net investment income of $841,591 | $41,262,929 | $38,066,399 |
See Notes to Financial Statements
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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 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $12.71 | $13.40 | $12.04 | $9.36 | $15.47 | $15.45 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.13 | $0.14 | $0.11 | $0.12 | $0.20 | $0.13 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.94 | (0.72 | ) | 1.37 | 2.78 | (5.01 | ) | 1.22 | ||||||||||||||||
Total from investment operations | $1.07 | $(0.58 | ) | $1.48 | $2.90 | $(4.81 | ) | $1.35 | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.11 | ) | $(0.12 | ) | $(0.22 | ) | $(0.14 | ) | $(0.32 | ) | |||||||||||||
From net realized gain on investments | — | — | — | — | (1.16 | ) | (1.01 | ) | ||||||||||||||||
Total distributions declared to shareholders | $— | $(0.11 | ) | $(0.12 | ) | $(0.22 | ) | $(1.30 | ) | $(1.33 | ) | |||||||||||||
Net asset value, end of period (x) | $13.78 | $12.71 | $13.40 | $12.04 | $9.36 | $15.47 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 8.42 | (n) | (4.32 | ) | 12.36 | 31.98 | (33.77 | ) | 9.19 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.35 | (a) | 1.40 | 1.38 | 1.52 | 1.36 | 1.41 | |||||||||||||||||
Expenses after expense reductions (f) | 1.15 | (a) | 1.15 | 1.15 | 1.15 | 1.15 | 1.15 | |||||||||||||||||
Net investment income | 1.88 | (a) | 1.08 | 0.88 | 1.18 | 1.61 | 0.88 | |||||||||||||||||
Portfolio turnover | 11 | (n) | 15 | 18 | 23 | 28 | 38 | |||||||||||||||||
Net assets at end of period (000 omitted) | $37,995 | $35,426 | $39,966 | $39,418 | $33,523 | $56,246 | ||||||||||||||||||
Service Class | Six months ended 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $12.68 | $13.37 | $12.03 | $9.35 | $15.47 | $15.47 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.11 | $0.11 | $0.08 | $0.08 | $0.16 | $0.09 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.94 | (0.71 | ) | 1.36 | 2.81 | (5.01 | ) | 1.23 | ||||||||||||||||
Total from investment operations | $1.05 | $(0.60 | ) | $1.44 | $2.89 | $(4.85 | ) | $1.32 | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.09 | ) | $(0.10 | ) | $(0.21 | ) | $(0.11 | ) | $(0.31 | ) | |||||||||||||
From net realized gain on investments | — | — | — | — | (1.16 | ) | (1.01 | ) | ||||||||||||||||
Total distributions declared to shareholders | $— | $(0.09 | ) | $(0.10 | ) | $(0.21 | ) | $(1.27 | ) | $(1.32 | ) | |||||||||||||
Net asset value, end of period (x) | $13.73 | $12.68 | $13.37 | $12.03 | $9.35 | $15.47 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 8.28 | (n) | (4.53 | ) | 12.05 | 31.80 | (33.97 | ) | 8.97 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.60 | (a) | 1.65 | 1.63 | 1.75 | 1.60 | 1.65 | |||||||||||||||||
Expenses after expense reductions (f) | 1.40 | (a) | 1.40 | 1.40 | 1.40 | 1.40 | 1.40 | |||||||||||||||||
Net investment income | 1.66 | (a) | 0.83 | 0.64 | 0.82 | 1.32 | 0.60 | |||||||||||||||||
Portfolio turnover | 11 | (n) | 15 | 18 | 23 | 28 | 38 | |||||||||||||||||
Net assets at end of period (000 omitted) | $3,268 | $2,640 | $2,474 | $2,248 | $695 | $628 |
See Notes to Financial Statements
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MFS Global Equity Series
Financial Highlights – continued
(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. |
(x) | The net asset values per share and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
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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.
In this reporting period the fund adopted FASB Accounting Standards Update 2011-04, Fair Value Measurement (Topic 820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 seeks to improve the comparability of fair value measurements as presented and disclosed in financial statements prepared in accordance with U.S. GAAP and International Financial Reporting Standards (IFRS) by providing common requirements for fair value measurement and disclosure.
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11, Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. Although still evaluating the potential impacts of ASU 2011-11 to the fund, management expects that the impact of the fund’s adoption will be limited to additional financial statement disclosures.
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. 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
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MFS Global Equity Series
Notes to Financial Statements (unaudited) – continued
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, 2012 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $19,298,958 | $— | $— | $19,298,958 | ||||||||||||
United Kingdom | 2,039,163 | 2,272,173 | — | 4,311,336 | ||||||||||||
France | 731,688 | 3,184,719 | — | 3,916,407 | ||||||||||||
Switzerland | — | 3,583,625 | — | 3,583,625 | ||||||||||||
Germany | — | 3,110,024 | — | 3,110,024 | ||||||||||||
Japan | — | 1,810,788 | — | 1,810,788 | ||||||||||||
Netherlands | — | 1,574,034 | — | 1,574,034 | ||||||||||||
Canada | 751,320 | — | — | 751,320 | ||||||||||||
Sweden | — | 608,962 | — | 608,962 | ||||||||||||
Other Countries | 611,088 | 1,214,726 | — | 1,825,814 | ||||||||||||
Mutual Funds | 422,685 | — | — | 422,685 | ||||||||||||
Total Investments | $23,854,902 | $17,359,051 | $— | $41,213,953 |
For further information regarding security characteristics, see the Portfolio of Investments.
Of the level 2 investments presented above, equity investments amounting to $7,587,079 would have been considered level 1 investments at the beginning of the period. Of the level 1 investments presented above, equity investments amounting to $983,822 would have been considered level 2 investments at the beginning of the period. The primary reason for changes in the classifications between levels 1 and 2 occurs when foreign equity securities are fair valued using other observable market-based inputs in place of the closing exchange price due to events occurring after the close of the exchange or market on which the investment is principally traded. The fund’s foreign equity securities may often be valued 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.
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MFS Global Equity 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. 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, 2012, 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, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Foreign taxes 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:
12/31/11 | ||||
Ordinary income (including any short-term capital gains) | $340,420 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/12 | ||||
Cost of investments | $37,306,172 | |||
Gross appreciation | 7,185,231 | |||
Gross depreciation | (3,277,450 | ) | ||
Net unrealized appreciation (depreciation) | $3,907,781 | |||
As of 12/31/11 | ||||
Undistributed ordinary income | 444,459 | |||
Undistributed long-term capital gain | 898,528 | |||
Other temporary differences | (660 | ) | ||
Net unrealized appreciation (depreciation) | 860,477 |
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
13
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MFS Global Equity Series
Notes to Financial Statements (unaudited) – continued
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 6/30/12 | Year ended 12/31/11 | |||||||
Initial Class | $— | $321,125 | ||||||
Service Class | — | 19,295 | ||||||
Total | $— | $340,420 |
(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% |
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, 2014. This management fee reduction amounted to $21,420, 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, 2012 was equivalent to an annual effective 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 1.15% 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, 2014. For the six months ended June 30, 2012, this reduction amounted to $21,927 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, 2012, the fee was $2,190, which equated to 0.0103% 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, 2012, these costs amounted to $115.
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, 2012 was equivalent to an annual effective rate of 0.0407% 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
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MFS Global Equity Series
Notes to Financial Statements (unaudited) – continued
ended June 30, 2012, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $211 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 $109, 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 $4,864,182 and $4,592,350, 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 6/30/12 | Year ended 12/31/11 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 388,017 | $5,195,445 | 494,836 | $6,720,060 | ||||||||||||
Service Class | 87,021 | 1,203,313 | 121,174 | 1,633,337 | ||||||||||||
475,038 | $6,398,758 | 616,010 | $8,353,397 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 24,951 | $321,125 | ||||||||||||
Service Class | — | — | 1,503 | 19,295 | ||||||||||||
— | $— | 26,454 | $340,420 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (417,975 | ) | $(5,699,088 | ) | (715,295 | ) | $(9,536,607 | ) | ||||||||
Service Class | (57,209 | ) | (803,392 | ) | (99,504 | ) | (1,319,086 | ) | ||||||||
(475,184 | ) | $(6,502,480 | ) | (814,799 | ) | $(10,855,693 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (29,958 | ) | $(503,643 | ) | (195,508 | ) | $(2,495,422 | ) | ||||||||
Service Class | 29,812 | 399,921 | 23,173 | 333,546 | ||||||||||||
(146 | ) | $(103,722 | ) | (172,335 | ) | $(2,161,876 | ) |
(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, 2012, the fund’s commitment fee and interest expense were $145 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 an affiliated issuer:
Underlying Affiliated Fund | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 22 | 6,279,469 | (6,227,451 | ) | 52,040 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $203 | $52,040 |
15
Table of Contents
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, 2012 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 is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. Copies of the fund’s Form N-Q also may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
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
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Table of Contents
SEMIANNUAL REPORT
June 30, 2012
MFS® TOTAL RETURN SERIES
MFS® Variable Insurance Trust
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
LETTER FROM THE CHAIRMAN AND CEO
Dear Contract Owners:
World financial markets remain a venue of uncertainty. The focus has shifted most recently to the eurozone, where policymakers are attempting to develop a plan that will help debt-laden countries and prevent their woes from spreading across the region. Volatility is likely to continue as investors test the resolve of European officials to make the tough decisions needed to solve the crisis. A slowing in the Chinese economy has added another layer of trepidation, as investors worry that the primary engine of global growth may be sputtering.
The U.S. economy is experiencing a period of growth. However, markets have been jittery in reaction to events in Europe and ahead of the U.S. presidential election. Voters in the United States are watching the economy closely and waiting to see if Congress agrees to cut the budget and extend the Bush administration tax cuts. Failure to do so could ultimately send the U.S. economy back into recession.
Amid this global uncertainty, managing risk becomes a top priority for investors and their advisors. At MFS® our global research platform is designed to ensure the smooth functioning of our investment process in all business climates. Real-time collaboration across the globe is vital in periods of heightened volatility and economic uncertainty. At MFS our investment staff shares ideas and evaluates opportunities across geographies, across both fundamental and quantitative disciplines, and across companies’ entire capital structure. We employ this uniquely collaborative approach to build better insights for our clients.
We, like our investors, are 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 emphasize the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with investment advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2012
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 Total Return Series
Portfolio structure (i)
Top ten holdings (i) | ||||
U.S. Treasury Notes, 3.75%, 2018 | 2.6% | |||
U.S. Treasury Bonds, 4.5%, 2039 | 2.2% | |||
Fannie Mae, 5.5%, 30 Years | 2.2% | |||
Philip Morris International, Inc. | 2.2% | |||
JP Morgan Chase & Co. | 2.0% | |||
U.S. Treasury Notes, 2.125%, 2015 | 1.8% | |||
Exxon Mobil Corp. | 1.7% | |||
Pfizer, Inc. | 1.5% | |||
Lockhead Martin Corp. | 1.5% | |||
Johnson & Johnson | 1.4% | |||
Composition including fixed income credit quality (a)(i) | ||||
AAA | 1.1% | |||
AA | 1.7% | |||
A | 3.7% | |||
BBB | 5.2% | |||
BB | 0.5% | |||
CC (o) | 0.0% | |||
C | 0.1% | |||
D (o) | 0.0% | |||
U.S. Government | 13.5% | |||
Federal Agencies | 13.6% | |||
Not Rated | 0.1% | |||
Non-Fixed Income | 59.4% | |||
Cash & Other | 1.1% |
Equity sectors | ||||
Financial Services | 12.8% | |||
Consumer Staples | 7.2% | |||
Health Care | 7.1% | |||
Industrial Goods & Services | 6.6% | |||
Energy | 5.9% | |||
Utilities & Communications | 3.8% | |||
Leisure | 3.6% | |||
Technology | 3.4% | |||
Basic Materials | 3.0% | |||
Retailing | 2.7% | |||
Autos & Housing | 1.5% | |||
Transportation | 0.9% | |||
Special Products & Services | 0.9% | |||
Fixed income sectors (i) | ||||
U.S. Treasury Securities | 13.5% | |||
Mortgage-Backed Securities | 12.7% | |||
High Grade Corporates | 8.5% | |||
Commercial Mortgage-Backed Securities | 1.7% | |||
U.S. Government Agencies | 0.9% | |||
Emerging Markets Bonds | 0.9% | |||
Non-U.S. Government Bonds | 0.7% | |||
High Yield Corporates | 0.3% | |||
Asset-Backed Securities | 0.2% | |||
Collateralized Debt Obligations | 0.1% |
(a) | For all securities other than those specifically described below, ratings are assigned to underlying securities utilizing ratings from Moody’s, Fitch, and Standard & Poor’s rating agencies and applying the following hierarchy: If all three agencies provide a rating, the middle rating (after dropping the highest and lowest ratings) is assigned; if two of the three agencies rate a security, the lower of the two is assigned. Ratings are shown in the S&P and Fitch scale (e.g., AAA). Securities rated BBB or higher are considered investment grade. All ratings are subject to change. U.S. Government includes securities issued by the U.S. Department of the Treasury. Federal Agencies includes rated and unrated U.S. Agency fixed-income securities, U.S. Agency mortgage-backed securities, and collateralized mortgage obligations of U.S. Agency mortgage-backed securities. Not Rated includes fixed income securities, including fixed income futures contracts, which have not been rated by any rating agency. 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 is not rated by these agencies. |
(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 any. 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 6/30/12.
The portfolio is actively managed and current holdings may be different.
2
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MFS Total Return Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2012 through June 30, 2012
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, 2012 through June 30, 2012.
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 1/01/12 | Ending Account Value | Expenses Paid During Period (p) 1/01/12-6/30/12 | ||||||||||||||
Initial Class | Actual | 0.77% | $1,000.00 | $1,052.89 | $3.93 | |||||||||||||
Hypothetical (h) | 0.77% | $1,000.00 | $1,021.03 | $3.87 | ||||||||||||||
Service Class | Actual | 1.02% | $1,000.00 | $1,051.34 | $5.20 | |||||||||||||
Hypothetical (h) | 1.02% | $1,000.00 | $1,019.79 | $5.12 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
3
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MFS Total Return Series
PORTFOLIO OF INVESTMENTS – 6/30/12 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 59.2% | ||||||||
Aerospace – 4.3% | ||||||||
Honeywell International, Inc. | 410,390 | $ | 22,916,178 | |||||
Huntington Ingalls Industries, Inc. (a) | 22,389 | 900,933 | ||||||
Lockheed Martin Corp. | 408,723 | 35,591,599 | ||||||
Northrop Grumman Corp. | 132,427 | 8,447,518 | ||||||
Precision Castparts Corp. | 34,600 | 5,691,354 | ||||||
United Technologies Corp. | 376,730 | 28,454,417 | ||||||
|
| |||||||
$ | 102,001,999 | |||||||
|
| |||||||
Alcoholic Beverages – 0.9% | ||||||||
Diageo PLC | 814,240 | $ | 20,939,159 | |||||
|
| |||||||
Automotive – 0.9% | ||||||||
Delphi Automotive PLC (a) | 252,550 | $ | 6,440,025 | |||||
General Motors Co. (a) | 120,460 | 2,375,471 | ||||||
Johnson Controls, Inc. | 417,840 | 11,578,346 | ||||||
|
| |||||||
$ | 20,393,842 | |||||||
|
| |||||||
Broadcasting – 2.4% | ||||||||
Omnicom Group, Inc. | 296,120 | $ | 14,391,432 | |||||
Viacom, Inc., “B” | 382,300 | 17,975,746 | ||||||
Walt Disney Co. | 494,760 | 23,995,860 | ||||||
|
| |||||||
$ | 56,363,038 | |||||||
|
| |||||||
Brokerage & Asset Managers – 1.0% | ||||||||
BlackRock, Inc. | 75,358 | $ | 12,797,296 | |||||
Franklin Resources, Inc. | 90,675 | 10,064,018 | ||||||
|
| |||||||
$ | 22,861,314 | |||||||
|
| |||||||
Business Services – 0.9% | ||||||||
Accenture PLC, “A” | 246,090 | $ | 14,787,548 | |||||
Dun & Bradstreet Corp. | 49,530 | 3,525,050 | ||||||
Fiserv, Inc. (a) | 43,850 | 3,166,847 | ||||||
|
| |||||||
$ | 21,479,445 | |||||||
|
| |||||||
Cable TV – 0.7% | ||||||||
Comcast Corp., “Special A” | 560,840 | $ | 17,610,376 | |||||
|
| |||||||
Chemicals – 2.3% | ||||||||
3M Co. | 261,020 | $ | 23,387,392 | |||||
Celanese Corp. | 107,520 | 3,722,342 | ||||||
E.I. du Pont de Nemours & Co. | 120,560 | 6,096,719 | ||||||
PPG Industries, Inc. | 185,490 | 19,684,199 | ||||||
|
| |||||||
$ | 52,890,652 | |||||||
|
| |||||||
Computer Software – 1.3% | ||||||||
Check Point Software Technologies Ltd. (a) | 62,830 | $ | 3,115,740 | |||||
Microsoft Corp. | 136,820 | 4,185,324 | ||||||
Oracle Corp. | 786,322 | 23,353,763 | ||||||
|
| |||||||
$ | 30,654,827 | |||||||
|
| |||||||
Computer Software – Systems – 1.1% | ||||||||
Hewlett-Packard Co. | 324,451 | $ | 6,524,700 | |||||
International Business Machines Corp. | 98,240 | 19,213,779 | ||||||
|
| |||||||
$ | 25,738,479 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Construction – 0.5% | ||||||||
Stanley Black & Decker, Inc. | 164,649 | $ | 10,596,810 | |||||
|
| |||||||
Consumer Products – 0.7% | ||||||||
Procter & Gamble Co. | 224,611 | $ | 13,757,424 | |||||
Reckitt Benckiser Group PLC | 69,744 | 3,675,577 | ||||||
|
| |||||||
$ | 17,433,001 | |||||||
|
| |||||||
Electrical Equipment – 1.7% | ||||||||
Danaher Corp. | 485,640 | $ | 25,292,131 | |||||
Tyco International Ltd. | 256,690 | 13,566,067 | ||||||
|
| |||||||
$ | 38,858,198 | |||||||
|
| |||||||
Electronics – 0.6% | ||||||||
ASML Holding N.V. | 72,971 | $ | 3,752,169 | |||||
Intel Corp. | 261,978 | 6,981,714 | ||||||
Microchip Technology, Inc. | 107,030 | 3,540,552 | ||||||
|
| |||||||
$ | 14,274,435 | |||||||
|
| |||||||
Energy – Independent – 2.6% | ||||||||
Anadarko Petroleum Corp. | 112,100 | $ | 7,421,020 | |||||
Apache Corp. | 183,520 | 16,129,573 | ||||||
EOG Resources, Inc. | 43,950 | 3,960,335 | ||||||
EQT Corp. | 82,450 | 4,421,794 | ||||||
Noble Energy, Inc. | 113,160 | 9,598,231 | ||||||
Occidental Petroleum Corp. | 226,380 | 19,416,613 | ||||||
|
| |||||||
$ | 60,947,566 | |||||||
|
| |||||||
Energy – Integrated – 2.9% | ||||||||
Chevron Corp. | 260,352 | $ | 27,467,136 | |||||
Exxon Mobil Corp. | 471,172 | 40,318,188 | ||||||
Hess Corp. | 11,221 | 487,552 | ||||||
|
| |||||||
$ | 68,272,876 | |||||||
|
| |||||||
Engineering – Construction – 0.2% | ||||||||
Fluor Corp. | 80,760 | $ | 3,984,698 | |||||
|
| |||||||
Food & Beverages – 2.8% | ||||||||
General Mills, Inc. | 417,930 | $ | 16,107,022 | |||||
Groupe Danone | 199,961 | 12,403,270 | ||||||
J.M. Smucker Co. | 33,590 | 2,536,717 | ||||||
Kellogg Co. | 65,837 | 3,247,739 | ||||||
Nestle S.A. | 322,897 | 19,261,264 | ||||||
PepsiCo, Inc. | 173,650 | 12,270,109 | ||||||
|
| |||||||
$ | 65,826,121 | |||||||
|
| |||||||
Food & Drug Stores – 1.2% | ||||||||
CVS Caremark Corp. | 335,970 | $ | 15,699,878 | |||||
Kroger Co. | 162,600 | 3,770,694 | ||||||
Walgreen Co. | 271,450 | 8,029,491 | ||||||
|
| |||||||
$ | 27,500,063 | |||||||
|
| |||||||
General Merchandise – 1.2% | ||||||||
Kohl’s Corp. | 189,060 | $ | 8,600,339 | |||||
Target Corp. | 356,280 | 20,731,933 | ||||||
|
| |||||||
$ | 29,332,272 | |||||||
|
|
4
Table of Contents
MFS Total Return Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Health Maintenance Organizations – 0.1% | ||||||||
Aetna, Inc. | 81,640 | $ | 3,165,183 | |||||
|
| |||||||
Insurance – 3.9% | ||||||||
ACE Ltd. | 252,890 | $ | 18,746,736 | |||||
Aon PLC | 271,020 | 12,678,316 | ||||||
Chubb Corp. | 76,330 | 5,558,351 | ||||||
MetLife, Inc. | 652,910 | 20,142,274 | ||||||
Prudential Financial, Inc. | 354,290 | 17,158,265 | ||||||
Travelers Cos., Inc. | 267,390 | 17,070,178 | ||||||
|
| |||||||
$ | 91,354,120 | |||||||
|
| |||||||
Leisure & Toys – 0.4% | ||||||||
Hasbro, Inc. | 254,390 | $ | 8,616,189 | |||||
|
| |||||||
Machinery & Tools – 0.4% | ||||||||
Eaton Corp. | 223,990 | $ | 8,876,724 | |||||
|
| |||||||
Major Banks – 6.5% | ||||||||
Bank of America Corp. | 1,041,940 | $ | 8,523,069 | |||||
Bank of New York Mellon Corp. | 1,014,902 | 22,277,099 | ||||||
Goldman Sachs Group, Inc. | 239,920 | 22,998,731 | ||||||
JPMorgan Chase & Co. | 1,309,474 | 46,787,506 | ||||||
PNC Financial Services Group, Inc. | 155,410 | 9,497,105 | ||||||
State Street Corp. | 315,410 | 14,079,902 | ||||||
Wells Fargo & Co. | 814,860 | 27,248,918 | ||||||
|
| |||||||
$ | 151,412,330 | |||||||
|
| |||||||
Medical & Health Technology & Services – 0.4% | ||||||||
AmerisourceBergen Corp. | 106,120 | $ | 4,175,822 | |||||
Quest Diagnostics, Inc. | 67,640 | 4,051,636 | ||||||
|
| |||||||
$ | 8,227,458 | |||||||
|
| |||||||
Medical Equipment – 2.1% | ||||||||
Becton, Dickinson & Co. | 105,090 | $ | 7,855,478 | |||||
Covidien PLC | 155,710 | 8,330,485 | ||||||
Medtronic, Inc. | 203,860 | 7,895,498 | ||||||
St. Jude Medical, Inc. | 277,840 | 11,088,594 | ||||||
Thermo Fisher Scientific, Inc. | 259,860 | 13,489,333 | ||||||
|
| |||||||
$ | 48,659,388 | |||||||
|
| |||||||
Metals & Mining – 0.1% | ||||||||
Cliffs Natural Resources, Inc. | 37,220 | $ | 1,834,574 | |||||
|
| |||||||
Natural Gas – Pipeline – 0.3% | ||||||||
Williams Cos., Inc. | 243,988 | $ | 7,031,734 | |||||
|
| |||||||
Network & Telecom – 0.4% | ||||||||
Cisco Systems, Inc. | 535,980 | $ | 9,202,777 | |||||
|
| |||||||
Oil Services – 0.4% | ||||||||
Schlumberger Ltd. | 45,470 | $ | 2,951,458 | |||||
Transocean, Inc. | 150,280 | 6,722,024 | ||||||
|
| |||||||
$ | 9,673,482 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 1.4% | ||||||||
American Express Co. | 66,830 | $ | 3,890,174 | |||||
MasterCard, Inc., “A” | 8,662 | 3,725,613 | ||||||
SunTrust Banks, Inc. | 162,420 | 3,935,437 | ||||||
Visa, Inc., “A” | 64,740 | 8,003,806 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Other Banks & Diversified Financials – continued | ||||||||
Western Union Co. | 640,960 | $ | 10,793,766 | |||||
Zions Bancorporation | 169,360 | 3,288,971 | ||||||
|
| |||||||
$ | 33,637,767 | |||||||
|
| |||||||
Pharmaceuticals – 4.5% | ||||||||
Abbott Laboratories | 376,640 | $ | 24,281,981 | |||||
Bayer AG | 48,383 | 3,488,831 | ||||||
Johnson & Johnson | 471,210 | 31,834,948 | ||||||
Merck & Co., Inc. | 170,040 | 7,099,170 | ||||||
Pfizer, Inc. | 1,549,276 | 35,633,348 | ||||||
Roche Holding AG | 21,239 | 3,666,434 | ||||||
|
| |||||||
$ | 106,004,712 | |||||||
|
| |||||||
Printing & Publishing – 0.1% | ||||||||
Moody’s Corp. | 85,590 | $ | 3,128,315 | |||||
|
| |||||||
Railroad & Shipping – 0.3% | ||||||||
Canadian National Railway Co. | 54,780 | $ | 4,622,336 | |||||
Union Pacific Corp. | 26,990 | 3,220,177 | ||||||
|
| |||||||
$ | 7,842,513 | |||||||
|
| |||||||
Specialty Chemicals – 0.6% | ||||||||
Air Products & Chemicals, Inc. | 165,660 | $ | 13,373,732 | |||||
|
| |||||||
Specialty Stores – 0.3% | ||||||||
Advance Auto Parts, Inc. | 33,270 | $ | 2,269,679 | |||||
Staples, Inc. | 445,980 | 5,820,039 | ||||||
|
| |||||||
$ | 8,089,718 | |||||||
|
| |||||||
Telecommunications – Wireless – 0.9% | ||||||||
Vodafone Group PLC | 7,312,382 | $ | 20,545,131 | |||||
|
| |||||||
Telephone Services – 1.4% | ||||||||
AT&T, Inc. | 801,334 | $ | 28,575,570 | |||||
CenturyLink, Inc. | 105,541 | 4,167,814 | ||||||
|
| |||||||
$ | 32,743,384 | |||||||
|
| |||||||
Tobacco – 2.8% | ||||||||
Altria Group, Inc. | 127,263 | $ | 4,396,937 | |||||
Lorillard, Inc. | 85,290 | 11,254,016 | ||||||
Philip Morris International, Inc. | 583,050 | 50,876,943 | ||||||
|
| |||||||
$ | 66,527,896 | |||||||
|
| |||||||
Trucking – 0.6% | ||||||||
United Parcel Service, Inc., “B” | 176,030 | $ | 13,864,123 | |||||
|
| |||||||
Utilities – Electric Power – 1.1% | ||||||||
NRG Energy, Inc. (a) | 149,690 | $ | 2,598,618 | |||||
PG&E Corp. | 171,540 | 7,765,616 | ||||||
PPL Corp. | 279,940 | 7,785,131 | ||||||
Public Service Enterprise Group, Inc. | 271,030 | 8,808,475 | ||||||
|
| |||||||
$ | 26,957,840 | |||||||
|
| |||||||
Total Common Stocks (Identified Cost, $1,326,638,318) | $ | 1,388,728,261 | ||||||
|
| |||||||
BONDS – 39.3% | ||||||||
Agency – Other – 0.0% | ||||||||
Financing Corp., 9.65%, 2018 | $ | 740,000 | $ | 1,098,163 | ||||
|
|
5
Table of Contents
MFS Total Return Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Asset-Backed & Securitized – 2.0% | ||||||||
Anthracite Ltd., “A”, CDO, FRN, 0.695%, 2017 (n) | $ | 1,404,799 | $ | 1,362,655 | ||||
Bayview Financial Revolving Mortgage Loan Trust, FRN, 1.845%, 2040 (z) | 2,025,940 | 1,318,289 | ||||||
Capital Trust Realty Ltd., CDO, 5.16%, 2035 (n) | 1,511,343 | 1,522,678 | ||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust, 5.322%, 2049 | 4,124,280 | 4,580,912 | ||||||
Credit Suisse Mortgage Capital Certificate, FRN, 5.695%, 2040 | 3,818,128 | 4,094,958 | ||||||
GMAC Mortgage Corp. Loan Trust, FRN, 5.805%, 2036 | 1,247,312 | 894,068 | ||||||
Greenwich Capital Commercial Funding Corp., 5.475%, 2039 | 5,978,000 | 5,932,209 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., 4.78%, 2042 | 2,485,000 | 2,640,653 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., “A3”, FRN, 6.179%, 2051 | 5,259,422 | 5,586,921 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 4.948%, 2037 | 2,548,000 | 2,726,284 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 5.386%, 2041 | 2,550,000 | 2,700,901 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 5.475%, 2043 | 3,155,262 | 3,526,671 | ||||||
Merrill Lynch Mortgage Trust, FRN, “A3”, 6.041%, 2050 | 808,563 | 834,410 | ||||||
Merrill Lynch/Countrywide Commercial Mortgage Trust, FRN, 5.81%, 2050 | 4,602,142 | 4,954,105 | ||||||
Morgan Stanley Capital I, Inc., FRN, 1.184%, 2030 (i)(n) | 2,536,644 | 61,970 | ||||||
Residential Asset Mortgage Products, Inc., FRN, 4.97%, 2034 | 325,769 | 327,465 | ||||||
Residential Funding Mortgage Securities, Inc., FRN, 5.32%, 2035 | 2,164,000 | 1,308,776 | ||||||
Spirit Master Funding LLC, 5.05%, 2023 (z) | 1,764,617 | 1,652,228 | ||||||
|
| |||||||
$ | 46,026,153 | |||||||
|
| |||||||
Automotive – 0.2% | ||||||||
Toyota Motor Credit Corp., 3.2%, 2015 | $ | 1,430,000 | $ | 1,518,900 | ||||
Toyota Motor Credit Corp., 3.4%, 2021 | 2,050,000 | 2,155,844 | ||||||
Volkswagen International Finance N.V., 2.375%, 2017 (n) | 1,948,000 | 1,978,829 | ||||||
|
| |||||||
$ | 5,653,573 | |||||||
|
| |||||||
Broadcasting – 0.1% | ||||||||
Hearst-Argyle Television, Inc., 7.5%, 2027 | $ | 1,871,000 | $ | 1,396,647 | ||||
News America, Inc., 8.5%, 2025 | 1,586,000 | 1,993,397 | ||||||
|
| |||||||
$ | 3,390,044 | |||||||
|
| |||||||
Cable TV – 0.5% | ||||||||
Cox Communications, Inc., 4.625%, 2013 | $ | 2,949,000 | $ | 3,052,492 | ||||
DIRECTV Holdings LLC, 4.6%, 2021 | 2,930,000 | 3,116,166 | ||||||
Time Warner Entertainment Co. LP, 8.375%, 2033 | 3,421,000 | 4,634,063 | ||||||
|
| |||||||
$ | 10,802,721 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Conglomerates – 0.1% | ||||||||
ABB Finance (USA), Inc., 2.875%, 2022 | $ | 703,000 | $ | 711,124 | ||||
United Technologies Corp., 3.1%, 2022 | 970,000 | 1,016,426 | ||||||
|
| |||||||
$ | 1,727,550 | |||||||
|
| |||||||
Defense Electronics – 0.0% | ||||||||
BAE Systems Holdings, Inc., 5.2%, 2015 (n) | $ | 1,074,000 | $ | 1,168,523 | ||||
|
| |||||||
Emerging Market Quasi-Sovereign – 0.4% | ||||||||
CNOOC Finance (2012) Ltd., 3.875%, 2022 (n) | $ | 2,350,000 | $ | 2,430,558 | ||||
Corporacion Nacional del Cobre de Chile, 3.75%, 2020 (n) | 746,000 | 777,992 | ||||||
Petrobras International Finance Co., 5.375%, 2021 | 882,000 | 950,594 | ||||||
Petrobras International Finance Co., 6.75%, 2041 | 637,000 | 747,191 | ||||||
Petroleos Mexicanos, 8%, 2019 | 1,753,000 | 2,226,310 | ||||||
Ras Laffan Liquefied Natural Gas Co. Ltd., 5.832%, 2016 (n) | 1,930,637 | 2,068,194 | ||||||
|
| |||||||
$ | 9,200,839 | |||||||
|
| |||||||
Emerging Market Sovereign – 0.4% | ||||||||
Republic of Peru, 7.35%, 2025 | $ | 184,000 | $ | 258,520 | ||||
Russian Federation, 3.625%, 2015 (z) | 5,000,000 | 5,172,350 | ||||||
United Mexican States, 4.75%, 2044 | 3,200,000 | 3,448,000 | ||||||
|
| |||||||
$ | 8,878,870 | |||||||
|
| |||||||
Energy – Independent – 0.1% | ||||||||
Apache Corp., 3.25%, 2022 | $ | 959,000 | $ | 1,001,399 | ||||
Apache Corp., 4.75%, 2043 | 734,000 | 815,307 | ||||||
Hess Corp., 8.125%, 2019 | 700,000 | 901,029 | ||||||
|
| |||||||
$ | 2,717,735 | |||||||
|
| |||||||
Energy – Integrated – 0.6% | ||||||||
BP Capital Markets PLC, 4.5%, 2020 | $ | 683,000 | $ | 768,946 | ||||
BP Capital Markets PLC, 4.742%, 2021 | 1,966,000 | 2,250,270 | ||||||
Husky Energy, Inc., 5.9%, 2014 | 1,758,000 | 1,911,127 | ||||||
Husky Energy, Inc., 7.25%, 2019 | 1,793,000 | 2,213,043 | ||||||
Petro-Canada, 6.05%, 2018 | 3,647,000 | 4,315,688 | ||||||
Total Capital International S.A., 1.55%, 2017 | 2,841,000 | 2,847,654 | ||||||
|
| |||||||
$ | 14,306,728 | |||||||
|
| |||||||
Financial Institutions – 0.1% | ||||||||
General Electric Capital Corp., 5.45%, 2013 | $ | 1,963,000 | $ | 2,013,732 | ||||
|
| |||||||
Food & Beverages – 0.2% | ||||||||
Anheuser-Busch InBev Worldwide, Inc., 8%, 2039 | $ | 2,330,000 | $ | 3,663,394 | ||||
Kraft Foods, Inc., 3.5%, 2022 (n) | 938,000 | 962,540 | ||||||
Molson Coors Brewing Co., 5%, 2042 | 801,000 | 865,378 | ||||||
|
| |||||||
$ | 5,491,312 | |||||||
|
| |||||||
Food & Drug Stores – 0.1% | ||||||||
CVS Caremark Corp., 6.125%, 2016 | $ | 2,078,000 | $ | 2,430,666 | ||||
|
|
6
Table of Contents
MFS Total Return Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Gaming & Lodging – 0.0% | ||||||||
Wyndham Worldwide Corp., 6%, 2016 | $ | 15,000 | $ | 16,686 | ||||
|
| |||||||
Insurance – 0.1% | ||||||||
Metropolitan Life Global Funding I, 5.125%, 2013 (n) | $ | 1,200,000 | $ | 1,239,684 | ||||
Metropolitan Life Global Funding I, 5.125%, 2014 (n) | 1,060,000 | 1,136,706 | ||||||
Prudential Financial, Inc., 6.625%, 2040 | 980,000 | 1,116,949 | ||||||
|
| |||||||
$ | 3,493,339 | |||||||
|
| |||||||
Insurance – Property & Casualty – 0.2% | ||||||||
Chubb Corp., 6.375% to 2017, FRN to 2067 | $ | 3,516,000 | $ | 3,630,270 | ||||
ZFS Finance USA Trust V, 6.5% to 2017, FRN to 2067 (n) | 990,000 | 970,200 | ||||||
|
| |||||||
$ | 4,600,470 | |||||||
|
| |||||||
International Market Quasi-Sovereign – 0.6% | ||||||||
Achmea Hypotheekbank N.V., 3.2%, 2014 (n) | $ | 1,228,000 | $ | 1,280,964 | ||||
ING Bank N.V., 3.9%, 2014 (n) | 2,900,000 | 3,043,585 | ||||||
Irish Life & Permanent PLC, 3.6%, 2013 (e)(n) | 3,600,000 | 3,488,738 | ||||||
KFW International Finance, Inc., 4.875%, 2019 | 2,980,000 | 3,584,413 | ||||||
Societe Financement de l’ Economie Francaise, 3.375%, 2014 (n) | 1,664,000 | 1,728,826 | ||||||
|
| |||||||
$ | 13,126,526 | |||||||
|
| |||||||
Local Authorities – 0.1% | ||||||||
New Jersey Turnpike Authority Rev. (Build America Bonds), “F”, 7.414%, 2040 | $ | 2,405,000 | $ | 3,505,648 | ||||
|
| |||||||
Machinery & Tools – 0.2% | ||||||||
Atlas Copco AB, 5.6%, 2017 (n) | $ | 3,117,000 | $ | 3,524,445 | ||||
|
| |||||||
Major Banks – 1.6% | ||||||||
ABN AMRO Bank N.V., FRN, 2.235%, 2014 (n) | $ | 2,400,000 | $ | 2,400,898 | ||||
Bank of America Corp., 7.375%, 2014 | 1,160,000 | 1,247,503 | ||||||
Bank of America Corp., 5.49%, 2019 | 2,160,000 | 2,199,740 | ||||||
Bank of America Corp., 7.625%, 2019 | 1,640,000 | 1,928,445 | ||||||
BNP Paribas, 7.195% to 2037, FRN to 2049 (n) | 1,042,000 | 890,910 | ||||||
Commonwealth Bank of Australia, 5%, 2019 (n) | 1,620,000 | 1,779,779 | ||||||
Credit Suisse New York, 5.5%, 2014 | 3,360,000 | 3,562,087 | ||||||
Goldman Sachs Group, Inc., 5.625%, 2017 | 2,680,000 | 2,811,057 | ||||||
HSBC Holdings PLC, 5.1%, 2021 | 1,568,000 | 1,750,594 | ||||||
ING Bank N.V., 3.75%, 2017 (n) | 1,918,000 | 1,909,003 | ||||||
JPMorgan Chase & Co., 6.3%, 2019 | 2,760,000 | 3,225,700 | ||||||
JPMorgan Chase Capital XXII, 6.45%, 2087 | 1,295,000 | 1,295,000 | ||||||
JPMorgan Chase Capital XXVII, 7%, 2039 | 339,000 | 339,000 | ||||||
Merrill Lynch & Co., Inc., 6.15%, 2013 | 2,480,000 | 2,566,812 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Major Banks – continued | ||||||||
Morgan Stanley, 6.625%, 2018 | $ | 1,980,000 | $ | 2,070,225 | ||||
PNC Funding Corp., 5.625%, 2017 | 2,078,000 | 2,312,110 | ||||||
Wachovia Corp., 5.25%, 2014 | 2,143,000 | 2,286,090 | ||||||
Wells Fargo & Co., 2.1%, 2017 | 2,290,000 | 2,295,118 | ||||||
|
| |||||||
$ | 36,870,071 | |||||||
|
| |||||||
Medical & Health Technology & Services – 0.4% | ||||||||
Aristotle Holding, Inc., 2.65%, 2017 (n) | $ | 2,980,000 | $ | 3,031,760 | ||||
CareFusion Corp., 6.375%, 2019 | 2,550,000 | 3,007,452 | ||||||
Hospira, Inc., 6.05%, 2017 | 1,927,000 | 2,173,602 | ||||||
|
| |||||||
$ | 8,212,814 | |||||||
|
| |||||||
Metals & Mining – 0.1% | ||||||||
Vale Overseas Ltd., 4.625%, 2020 | $ | 669,000 | $ | 699,838 | ||||
Vale Overseas Ltd., 6.875%, 2039 | 525,000 | 613,398 | ||||||
|
| |||||||
$ | 1,313,236 | |||||||
|
| |||||||
Mortgage-Backed – 12.7% | ||||||||
Fannie Mae, 4.722%, 2012 | $ | 1,149,815 | $ | 1,149,411 | ||||
Fannie Mae, 4.01%, 2013 | 222,533 | 227,175 | ||||||
Fannie Mae, 4.02%, 2013 | 990,135 | 1,013,537 | ||||||
Fannie Mae, 4.766%, 2013 | 119,430 | 120,161 | ||||||
Fannie Mae, 4.845%, 2013 | 394,823 | 402,263 | ||||||
Fannie Mae, 5.357%, 2013 | 721,941 | 721,681 | ||||||
Fannie Mae, 4.561%, 2014 | 884,004 | 928,354 | ||||||
Fannie Mae, 4.842%, 2014 | 1,669,986 | 1,768,893 | ||||||
Fannie Mae, 4.858%, 2014 | 802,027 | 825,310 | ||||||
Fannie Mae, 4.94%, 2015 | 379,000 | 412,725 | ||||||
Fannie Mae, 5.19%, 2015 | 405,709 | 445,086 | ||||||
Fannie Mae, 5.27%, 2016 | 1,103,891 | 1,223,215 | ||||||
Fannie Mae, 5.662%, 2016 | 309,944 | 349,810 | ||||||
Fannie Mae, 5.724%, 2016 | 695,103 | 792,018 | ||||||
Fannie Mae, 5.45%, 2017 | 775,145 | 872,342 | ||||||
Fannie Mae, 5.5%, 2017 - 2038 | 51,708,778 | 56,709,450 | ||||||
Fannie Mae, 6%, 2017 - 2037 | 24,441,480 | 27,274,289 | ||||||
Fannie Mae, 2.578%, 2018 | 1,545,000 | 1,610,876 | ||||||
Fannie Mae, 3.8%, 2018 | 329,996 | 361,288 | ||||||
Fannie Mae, 3.849%, 2018 | 391,078 | 430,967 | ||||||
Fannie Mae, 3.91%, 2018 | 481,917 | 529,157 | ||||||
Fannie Mae, 4.5%, 2018 - 2041 | 10,133,834 | 10,976,991 | ||||||
Fannie Mae, 5%, 2018 - 2041 | 26,146,375 | 28,386,941 | ||||||
Fannie Mae, 5.37%, 2018 | 1,740,000 | 1,987,063 | ||||||
Fannie Mae, 4.6%, 2019 | 316,000 | 362,247 | ||||||
Fannie Mae, 4.88%, 2020 | 884,528 | 991,216 | ||||||
Fannie Mae, 3%, 2027 | 4,011,666 | 4,210,131 | ||||||
Fannie Mae, 7.5%, 2030 - 2032 | 213,582 | 261,903 | ||||||
Fannie Mae, 6.5%, 2031 - 2037 | 6,699,274 | 7,624,369 | ||||||
Fannie Mae, 4%, 2040 | 977,880 | 1,042,407 | ||||||
Fannie Mae, 3.5%, 2041 - 2042 | 5,908,705 | 6,242,796 | ||||||
Freddie Mac, 6%, 2016 - 2037 | 12,202,140 | 13,531,052 | ||||||
Freddie Mac, 3.882%, 2017 | 839,798 | 931,231 | ||||||
Freddie Mac, 5%, 2017 - 2039 | 16,267,258 | 17,661,104 | ||||||
Freddie Mac, 2.303%, 2018 | 401,707 | 414,545 | ||||||
Freddie Mac, 2.412%, 2018 (n) | 1,226,000 | 1,272,664 | ||||||
Freddie Mac, 3.154%, 2018 | 274,000 | 294,908 | ||||||
Freddie Mac, 4.5%, 2018-2035 | 6,979,385 | 7,440,658 |
7
Table of Contents
MFS Total Return Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Mortgage-Backed – continued | ||||||||
Freddie Mac, 5.085%, 2019 | $ | 2,793,000 | $ | 3,275,223 | ||||
Freddie Mac, 5.5%, 2019 - 2037 | 8,055,289 | 8,838,717 | ||||||
Freddie Mac, 3.808%, 2020 | 2,402,000 | 2,665,973 | ||||||
Freddie Mac, 6.5%, 2034 - 2038 | 4,106,843 | 4,653,719 | ||||||
Freddie Mac, 4%, 2040 - 2041 | 13,190,657 | 14,015,713 | ||||||
Freddie Mac, 3.5%, 2042 | 4,991,334 | 5,255,957 | ||||||
Ginnie Mae, 6%, 2032 - 2038 | 5,079,491 | 5,743,415 | ||||||
Ginnie Mae, 4.5%, 2033 - 2041 | 14,651,588 | 16,121,179 | ||||||
Ginnie Mae, 5.5%, 2033 - 2035 | 5,602,157 | 6,254,015 | ||||||
Ginnie Mae, 5%, 2034 - 2041 | 11,054,348 | 12,218,372 | ||||||
Ginnie Mae, 3.5%, 2041 - 2042 | 4,324,601 | 4,630,757 | ||||||
Ginnie Mae, 4%, 2041 | 7,053,035 | 7,717,487 | ||||||
Ginnie Mae, TBA, 3.5%, 2040 | 3,660,000 | 3,900,759 | ||||||
|
| |||||||
$ | 297,091,520 | |||||||
|
| |||||||
Natural Gas – Pipeline – 0.3% | ||||||||
Enterprise Products Operating LLC, 6.5%, 2019 | $ | 1,953,000 | $ | 2,353,900 | ||||
Kinder Morgan Energy Partners LP, 7.4%, 2031 | 219,000 | 266,697 | ||||||
Kinder Morgan Energy Partners LP, 7.75%, 2032 | 1,000,000 | 1,245,155 | ||||||
Spectra Energy Capital LLC, 8%, 2019 | 1,694,000 | 2,170,111 | ||||||
|
| |||||||
$ | 6,035,863 | |||||||
|
| |||||||
Network & Telecom – 0.3% | ||||||||
AT&T, Inc., 5.55%, 2041 | $ | 992,000 | $ | 1,182,421 | ||||
BellSouth Corp., 6.55%, 2034 | 2,642,000 | 3,102,762 | ||||||
Telecom Italia Capital, 5.25%, 2013 | 2,176,000 | 2,181,440 | ||||||
|
| |||||||
$ | 6,466,623 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 0.9% | ||||||||
American Express Co., 5.5%, 2016 | $ | 2,287,000 | $ | 2,610,686 | ||||
Banco Bradesco S.A., 6.75%, 2019 (n) | 1,391,000 | 1,544,010 | ||||||
Banco Santander U.S. Debt S.A.U., 3.781%, 2015 (n) | 1,100,000 | 1,027,036 | ||||||
Capital One Financial Corp., 6.15%, 2016 | 2,872,000 | 3,210,818 | ||||||
Citigroup, Inc., 5%, 2014 | 2,679,000 | 2,746,154 | ||||||
Groupe BPCE S.A., 12.5% to 2019, FRN to 2049 (n) | 3,021,000 | 3,040,878 | ||||||
Nordea Bank AB, 4.875%, 2021 (z) | 1,880,000 | 2,045,966 | ||||||
Svenska Handelsbanken AB, 4.875%, 2014 (n) | 2,240,000 | 2,364,412 | ||||||
UBS Preferred Funding Trust V, 6.243% to 2016, FRN to 2049 | 2,558,000 | 2,404,520 | ||||||
|
| |||||||
$ | 20,994,480 | |||||||
|
| |||||||
Pharmaceuticals – 0.3% | ||||||||
Roche Holdings, Inc., 6%, 2019 (n) | $ | 3,007,000 | $ | 3,740,239 | ||||
Teva Pharmaceutical Finance IV LLC, 3.65%, 2021 | 2,950,000 | 3,102,745 | ||||||
|
| |||||||
$ | 6,842,984 | |||||||
|
| |||||||
Real Estate – 0.8% | ||||||||
Boston Properties, Inc., REIT, 5%, 2015 | $ | 1,871,000 | $ | 2,032,842 | ||||
ERP Operating LP, REIT, 5.375%, 2016 | 590,000 | 660,838 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Real Estate – continued | ||||||||
ERP Operating LP, REIT, 4.625%, 2021 | $ | 2,097,000 | $ | 2,277,705 | ||||
HCP, Inc., REIT, 5.375%, 2021 | 1,703,000 | 1,883,183 | ||||||
HRPT Properties Trust, REIT, 6.25%, 2016 | 3,320,000 | 3,503,433 | ||||||
HRPT Properties Trust, REIT, 6.65%, 2018 | 1,620,000 | 1,754,096 | ||||||
Kimco Realty Corp., REIT, 6%, 2012 | 936,000 | 951,122 | ||||||
Simon Property Group, Inc., REIT, 5.875%, 2017 | 1,880,000 | 2,164,201 | ||||||
WEA Finance LLC, REIT, 6.75%, 2019 (n) | 837,000 | 987,554 | ||||||
WEA Finance LLC, REIT, 4.625%, 2021 (n) | 2,300,000 | 2,430,707 | ||||||
|
| |||||||
$ | 18,645,681 | |||||||
|
| |||||||
Retailers – 0.4% | ||||||||
Home Depot, Inc., 5.95%, 2041 | $ | 643,000 | $ | 836,574 | ||||
Limited Brands, Inc., 5.25%, 2014 | 779,000 | 817,950 | ||||||
Target Corp., 4%, 2042 | 2,356,000 | 2,320,719 | ||||||
Wal-Mart Stores, Inc., 5.25%, 2035 | 5,106,000 | 6,179,593 | ||||||
|
| |||||||
$ | 10,154,836 | |||||||
|
| |||||||
Specialty Chemicals – 0.0% | ||||||||
Ecolab, Inc., 5.5%, 2041 | $ | 410,000 | $ | 491,916 | ||||
|
| |||||||
Supermarkets – 0.0% | ||||||||
Kroger Co., 5%, 2013 | $ | 1,045,000 | $ | 1,076,741 | ||||
|
| |||||||
Supranational – 0.2% | ||||||||
Asian Development Bank, 2.75%, 2014 | $ | 2,220,000 | $ | 2,318,950 | ||||
Asian Development Bank, 1.125%, 2017 | 1,340,000 | 1,360,644 | ||||||
|
| |||||||
$ | 3,679,594 | |||||||
|
| |||||||
Telecommunications – Wireless – 0.3% | ||||||||
Crown Castle Towers LLC, 6.113%, 2020 (n) | $ | 1,605,000 | $ | 1,857,974 | ||||
Crown Castle Towers LLC, 4.883%, 2020 (n) | 830,000 | 901,144 | ||||||
Rogers Communications, Inc., 6.8%, 2018 | 3,340,000 | 4,119,075 | ||||||
|
| |||||||
$ | 6,878,193 | |||||||
|
| |||||||
Tobacco – 0.1% | ||||||||
B.A.T. International Finance PLC, 3.25%, 2022 (n) | $ | 2,334,000 | $ | 2,306,620 | ||||
|
| |||||||
Transportation – Services – 0.1% | ||||||||
Erac USA Finance Co., 7%, 2037 (n) | $ | 2,572,000 | $ | 3,100,389 | ||||
|
| |||||||
U.S. Government Agencies and Equivalents – 0.9% | ||||||||
Freddie Mac, 4.625%, 2012 | $ | 13,500,000 | $ | 13,690,782 | ||||
Small Business Administration, 4.77%, 2024 | 514,438 | 570,339 | ||||||
Small Business Administration, 5.18%, 2024 | 851,277 | 943,421 | ||||||
Small Business Administration, 4.99%, 2024 | 868,996 | 968,822 | ||||||
Small Business Administration, 5.11%, 2025 | 3,589,454 | 4,026,897 | ||||||
|
| |||||||
$ | 20,200,261 | |||||||
|
|
8
Table of Contents
MFS Total Return Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
U.S. Treasury Obligations – 13.4% | ||||||||
U.S. Treasury Bonds, 8.5%, 2020 | $ | 3,204,000 | $ | 4,911,130 | ||||
U.S. Treasury Bonds, 8%, 2021 | 366,000 | 574,563 | ||||||
U.S. Treasury Bonds, 6%, 2026 | 278,000 | 407,531 | ||||||
U.S. Treasury Bonds, 6.75%, 2026 | 2,129,000 | 3,339,205 | ||||||
U.S. Treasury Bonds, 5.25%, 2029 | 2,618,000 | 3,693,016 | ||||||
U.S. Treasury Bonds, 5.375%, 2031 | 495,000 | 721,308 | ||||||
U.S. Treasury Bonds, 4.5%, 2036 | 1,109,000 | 1,489,526 | ||||||
U.S. Treasury Bonds, 5%, 2037 | 2,204,000 | 3,180,648 | ||||||
U.S. Treasury Bonds, 4.5%, 2039 | 38,268,400 | 51,925,435 | ||||||
U.S. Treasury Notes, 1.375%, 2012 | 1,478,000 | 1,483,197 | ||||||
U.S. Treasury Notes, 1.375%, 2013 | 15,539,000 | 15,637,937 | ||||||
U.S. Treasury Notes, 3.5%, 2013 | 8,400,000 | 8,648,716 | ||||||
U.S. Treasury Notes, 3.125%, 2013 | 16,178,000 | 16,749,278 | ||||||
U.S. Treasury Notes, 2%, 2013 | 4,762,000 | 4,876,398 | ||||||
U.S. Treasury Notes, 1.5%, 2013 | 6,564,000 | 6,680,406 | ||||||
U.S. Treasury Notes, 1.875%, 2014 | 26,428,000 | 27,106,248 | ||||||
U.S. Treasury Notes, 1.875%, 2014 | 1,365,000 | 1,403,391 | ||||||
U.S. Treasury Notes, 4.125%, 2015 | 6,910,000 | 7,636,089 | ||||||
U.S. Treasury Notes, 2.125%, 2015 | 40,303,000 | 42,280,346 | ||||||
U.S. Treasury Notes, 9.875%, 2015 | 2,793,000 | 3,667,776 | ||||||
U.S. Treasury Notes, 2.625%, 2016 | 1,737,000 | 1,869,311 | ||||||
U.S. Treasury Notes, 4.875%, 2016 | 6,300,000 | 7,390,688 | ||||||
U.S. Treasury Notes, 3.75%, 2018 | 52,256,000 | 61,208,916 | ||||||
U.S. Treasury Notes, 2.75%, 2019 | 6,001,500 | 6,660,261 | ||||||
U.S. Treasury Notes, 3.125%, 2019 | 514,000 | 584,193 | ||||||
U.S. Treasury Notes, 3.5%, 2020 | 18,971,000 | 22,166,437 | ||||||
U.S. Treasury Notes, TIPS, 0.5%, 2014 | 8,728,000 | 8,757,317 | ||||||
|
| |||||||
$ | 315,049,267 | |||||||
|
| |||||||
Utilities – Electric Power – 0.5% | ||||||||
Bruce Mansfield Unit, 6.85%, 2034 | $ | 3,509,442 | $ | 3,654,733 | ||||
MidAmerican Funding LLC, 6.927%, 2029 | 387,000 | 509,353 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Utilities – Electric Power – continued | ||||||||
Oncor Electric Delivery Co., 7%, 2022 | $ | 3,162,000 | $ | 3,840,837 | ||||
Progress Energy, Inc., 3.15%, 2022 | 2,519,000 | 2,542,094 | ||||||
PSEG Power LLC, 5.32%, 2016 | 1,603,000 | 1,807,711 | ||||||
System Energy Resources, Inc., 5.129%, 2014 (z) | 379,130 | 387,046 | ||||||
Waterford 3 Funding Corp., 8.09%, 2017 | 124,471 | 124,746 | ||||||
|
| |||||||
$ | 12,866,520 | |||||||
|
| |||||||
Total Bonds (Identified Cost, $857,902,895) | $ | 921,451,332 | ||||||
|
| |||||||
CONVERTIBLE PREFERRED STOCKS – 0.2% | ||||||||
Aerospace – 0.0% | ||||||||
United Technologies Corp., 7.5% (a) | 17,600 | $ | 927,344 | |||||
|
| |||||||
Automotive – 0.1% | ||||||||
General Motors Co., 4.75% | 83,720 | $ | 2,779,504 | |||||
|
| |||||||
Utilities – Electric Power – 0.1% | ||||||||
PPL Corp., 9.5% | 24,560 | $ | 1,299,224 | |||||
|
| |||||||
Total Convertible Preferred Stocks (Identified Cost, $6,298,147) | $ | 5,006,072 | ||||||
MONEY MARKET FUNDS – 1.1% |
|
|
| |||||
MFS Institutional Money Market Portfolio, 0.14%, at Cost and Net Asset Value (v) | 26,860,012 | $ | 26,860,012 | |||||
|
| |||||||
Total Investments (Identified Cost, $2,217,699,372) | $ | 2,342,045,677 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – 0.2% | 4,542,538 | |||||||
|
| |||||||
Net Assets – 100.0% | $ | 2,346,588,215 | ||||||
|
|
(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 $63,333,064, representing 2.7% of net assets. |
(v) | Underlying affiliated fund that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end. |
(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 | |||||||
Bayview Financial Revolving Mortgage Loan Trust, FRN, 1.845%, 2040 | 3/01/06 | $2,025,940 | $1,318,289 | |||||||
Nordea Bank AB, 4.875%, 2021 | 1/11/11 | 1,872,089 | 2,045,966 | |||||||
Russian Federation, 3.625%, 2015 | 4/22/10 | 4,984,564 | 5,172,350 | |||||||
Spirit Master Funding LLC, 5.05%, 2023 | 10/04/05 | 1,749,503 | 1,652,228 | |||||||
System Energy Resources, Inc., 5.129%, 2014 | 4/16/04-11/22/04 | 379,498 | 387,046 | |||||||
Total Restricted Securities | $10,575,879 | |||||||||
% of Net assets | 0.5% |
9
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MFS Total Return Series
Portfolio of Investments (unaudited) – continued
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
10
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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 6/30/12 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $2,190,839,360) | $2,315,185,665 | |||||||
Underlying affiliated funds, at cost and value | 26,860,012 | |||||||
Total investments, at value (identified cost, $2,217,699,372) | $2,342,045,677 | |||||||
Foreign currency, at value (identified cost, $206,637) | 194,716 | |||||||
Receivables for | ||||||||
Investments sold | 2,341,552 | |||||||
Fund shares sold | 385,338 | |||||||
Interest and dividends | 9,270,265 | |||||||
Other assets | 10,606 | |||||||
Total assets | $2,354,248,154 | |||||||
Liabilities | ||||||||
Payable to custodian | $2,655 | |||||||
Payables for | ||||||||
TBA purchase commitments | 3,884,073 | |||||||
Fund shares reacquired | 3,290,352 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 139,704 | |||||||
Shareholder servicing costs | 2,153 | |||||||
Distribution and/or service fees | 17,121 | |||||||
Payable for independent Trustees’ compensation | 950 | |||||||
Accrued expenses and other liabilities | 322,931 | |||||||
Total liabilities | $7,659,939 | |||||||
Net assets | $2,346,588,215 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $2,386,798,025 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 124,337,524 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | (254,487,887 | ) | ||||||
Undistributed net investment income | 89,940,553 | |||||||
Net assets | $2,346,588,215 | |||||||
Shares of beneficial interest outstanding | 120,872,469 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $1,499,847,509 | 76,880,952 | $19.51 | |||||||||
Service Class | 846,740,706 | 43,991,517 | 19.25 |
See Notes to Financial Statements
11
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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 6/30/12 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $19,542,235 | |||||||
Interest | 18,129,599 | |||||||
Dividends from underlying affiliated funds | 13,692 | |||||||
Foreign taxes withheld | (210,067 | ) | ||||||
Total investment income | $37,475,459 | |||||||
Expenses | ||||||||
Management fee | $9,109,551 | |||||||
Distribution and/or service fees | 1,081,146 | |||||||
Shareholder servicing costs | 125,711 | |||||||
Administrative services fee | 186,758 | |||||||
Independent Trustees’ compensation | 26,131 | |||||||
Custodian fee | 85,525 | |||||||
Shareholder communications | 143,813 | |||||||
Audit and tax fees | 31,986 | |||||||
Legal fees | 18,515 | |||||||
Miscellaneous | 51,067 | |||||||
Total expenses | $10,860,203 | |||||||
Fees paid indirectly | (98 | ) | ||||||
Reduction of expenses by investment adviser | (366,518 | ) | ||||||
Net expenses | $10,493,587 | |||||||
Net investment income | $26,981,872 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $56,636,877 | |||||||
Foreign currency | (9,361 | ) | ||||||
Net realized gain (loss) on investments and foreign currency | $56,627,516 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $42,203,147 | |||||||
Translation of assets and liabilities in foreign currencies | 15,268 | |||||||
Net unrealized gain (loss) on investments and foreign currency translation | $42,218,415 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $98,845,931 | |||||||
Change in net assets from operations | $125,827,803 |
See Notes to Financial Statements
12
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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 6/30/12 (unaudited | ) | | Year ended 12/31/11 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $26,981,872 | $59,820,148 | ||||||
Net realized gain (loss) on investments and foreign currency | 56,627,516 | 87,425,419 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 42,218,415 | (100,406,972 | ) | |||||
Change in net assets from operations | $125,827,803 | $46,838,595 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(65,256,874 | ) | |||||
Change in net assets from fund share transactions | $(212,985,316 | ) | $(333,095,963 | ) | ||||
Total change in net assets | $(87,157,513 | ) | $(351,514,242 | ) | ||||
Net assets | ||||||||
At beginning of period | 2,433,745,728 | 2,785,259,970 | ||||||
At end of period (including undistributed net investment income of $89,940,553 and | $2,346,588,215 | $2,433,745,728 |
See Notes to Financial Statements
13
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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 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $18.53 | $18.71 | $17.48 | $15.42 | $21.68 | $21.90 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.22 | $0.44 | $0.41 | $0.44 | $0.52 | $0.56 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.76 | (0.12 | ) | 1.31 | 2.20 | (4.97 | ) | 0.34 | ||||||||||||||||
Total from investment operations | $0.98 | $0.32 | $1.72 | $2.64 | $(4.45 | ) | $0.90 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.50 | ) | $(0.49 | ) | $(0.58 | ) | $(0.61 | ) | $(0.57 | ) | |||||||||||||
From net realized gain on investments | — | — | — | — | (1.20 | ) | (0.55 | ) | ||||||||||||||||
Total distributions declared to shareholders | $— | $(0.50 | ) | $(0.49 | ) | $(0.58 | ) | $(1.81 | ) | $(1.12 | ) | |||||||||||||
Net asset value, end of period (x) | $19.51 | $18.53 | $18.71 | $17.48 | $15.42 | $21.68 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 5.29 | (n) | 1.77 | 9.93 | 18.03 | (22.13 | ) | 4.17 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.80 | (a) | 0.81 | 0.81 | 0.82 | 0.82 | 0.83 | |||||||||||||||||
Expenses after expense reductions (f) | 0.77 | (a) | 0.78 | 0.81 | 0.82 | 0.80 | 0.80 | |||||||||||||||||
Net investment income | 2.31 | (a) | 2.36 | 2.30 | 2.80 | 2.80 | 2.55 | |||||||||||||||||
Portfolio turnover | 12 | (n) | 19 | 30 | 43 | 55 | 60 | |||||||||||||||||
Net assets at end of period (000 omitted) | $1,499,848 | $1,574,503 | $1,860,233 | $1,967,226 | $1,901,307 | $2,887,256 | ||||||||||||||||||
Service Class | Six months ended 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $18.31 | $18.48 | $17.28 | $15.24 | $21.44 | $21.67 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.20 | $0.39 | $0.36 | $0.39 | $0.46 | $0.50 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.74 | (0.11 | ) | 1.29 | 2.18 | (4.91 | ) | 0.34 | ||||||||||||||||
Total from investment operations | $0.94 | $0.28 | $1.65 | $2.57 | $(4.45 | ) | $0.84 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.45 | ) | $(0.45 | ) | $(0.53 | ) | $(0.55 | ) | $(0.52 | ) | |||||||||||||
From net realized gain on investments | — | — | — | — | (1.20 | ) | (0.55 | ) | ||||||||||||||||
Total distributions declared to shareholders | $— | $(0.45 | ) | $(0.45 | ) | $(0.53 | ) | $(1.75 | ) | $(1.07 | ) | |||||||||||||
Net asset value, end of period (x) | $19.25 | $18.31 | $18.48 | $17.28 | $15.24 | $21.44 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 5.13 | (n) | 1.58 | 9.63 | 17.72 | (22.32 | ) | 3.94 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.05 | (a) | 1.06 | 1.06 | 1.07 | 1.07 | 1.08 | |||||||||||||||||
Expenses after expense reductions (f) | 1.02 | (a) | 1.03 | 1.06 | 1.07 | 1.05 | 1.05 | |||||||||||||||||
Net investment income | 2.06 | (a) | 2.11 | 2.05 | 2.54 | 2.55 | 2.30 | |||||||||||||||||
Portfolio turnover | 12 | (n) | 19 | 30 | 43 | 55 | 60 | |||||||||||||||||
Net assets at end of period (000 omitted) | $846,741 | $859,243 | $925,027 | $872,466 | $804,493 | $1,113,209 |
See Notes to Financial Statements
14
Table of Contents
MFS Total Return Series
Financial Highlights – continued
(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. |
(x) | The net asset values per share and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
15
Table of Contents
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.
In this reporting period the fund adopted FASB Accounting Standards Update 2011-04, Fair Value Measurement (Topic 820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 seeks to improve the comparability of fair value measurements as presented and disclosed in financial statements prepared in accordance with U.S. GAAP and International Financial Reporting Standards (IFRS) by providing common requirements for fair value measurement and disclosure.
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11, Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. Although still evaluating the potential impacts of ASU 2011-11 to the fund, management expects that the impact of the fund’s adoption will be limited to additional financial statement disclosures.
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. 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
16
Table of Contents
MFS Total Return Series
Notes to Financial Statements (unaudited) – continued
business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. The following is a summary of the levels used as of June 30, 2012 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $1,298,264,422 | $— | $— | $1,298,264,422 | ||||||||||||
United Kingdom | 24,614,736 | 20,545,131 | — | 45,159,867 | ||||||||||||
Switzerland | — | 22,927,698 | — | 22,927,698 | ||||||||||||
France | 12,403,270 | — | — | 12,403,270 | ||||||||||||
Canada | 4,622,336 | — | — | 4,622,336 | ||||||||||||
Netherlands | 3,752,169 | — | — | 3,752,169 | ||||||||||||
Germany | — | 3,488,831 | — | 3,488,831 | ||||||||||||
Israel | 3,115,740 | — | — | 3,115,740 | ||||||||||||
U.S. Treasury Bonds & U.S. Government Agency & Equivalents | — | 336,347,691 | — | 336,347,691 | ||||||||||||
Non-U.S. Sovereign Debt | — | 34,885,829 | — | 34,885,829 | ||||||||||||
Corporate Bonds | — | 143,177,119 | — | 143,177,119 | ||||||||||||
Residential Mortgage-Backed Securities | — | 299,621,829 | — | 299,621,829 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 39,292,222 | — | 39,292,222 | ||||||||||||
Asset-Backed Securities (including CDOs) | — | 4,203,622 | — | 4,203,622 | ||||||||||||
Foreign Bonds | — | 63,923,020 | — | 63,923,020 | ||||||||||||
Mutual Funds | 26,860,012 | — | — | 26,860,012 | ||||||||||||
Total Investments | $1,373,632,685 | $968,412,992 | $— | $2,342,045,677 |
For further information regarding security characteristics, see the Portfolio of Investments.
Of the level 2 investments presented above, equity investments amounting to $24,033,962 would have been considered level 1 investments at the beginning of the period. Of the level 1 investments presented above, equity investments amounting to $3,675,577 would have been considered level 2 investments at the beginning of the period. The primary reason for changes in the classifications between levels 1 and 2 occurs when foreign equity securities are fair valued using other observable market-based inputs in place of the closing exchange price due to events occurring after the close of the exchange or market on which the investment is principally traded. The fund’s foreign equity securities may often be valued at fair value. The fund’s policy is to recognize transfers between the levels as of the end of the period.
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
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Notes to Financial Statements (unaudited) – continued
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. 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.
The fund purchased or sold debt securities on a when-issued or delayed delivery basis, or in a “To Be Announced” (TBA) or “forward commitment” transaction with delivery or payment to occur at a later date beyond the normal settlement period. TBA securities resulting from these transactions are included in the Portfolio of Investments. At the time a fund enters into a commitment to purchase or sell a security, the transaction is recorded and the value of the security acquired is reflected in the fund’s net asset value. The price of such security and the date that the security will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the security may vary with market fluctuations. No interest accrues to the fund until payment takes place. At the time that a fund enters into this type of transaction, the fund is required to have sufficient cash and/or liquid securities to cover its commitments. Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract’s terms, or if the issuer does not issue the securities due to political, economic or other factors. Additionally, losses may arise due to declines in the value of the securities prior to settlement date.
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, 2012, 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, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Foreign taxes 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
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Notes to Financial Statements (unaudited) – continued
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:
12/31/11 | ||||
Ordinary income (including any short-term capital gains) | $65,256,874 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/12 | ||||
Cost of investments | $2,240,849,782 | |||
Gross appreciation | 220,613,332 | |||
Gross depreciation | (119,417,437 | ) | ||
Net unrealized appreciation (depreciation) | $101,195,895 | |||
As of 12/31/11 | ||||
Undistributed ordinary income | 62,958,681 | |||
Capital loss carryforwards | (288,695,988 | ) | ||
Other temporary differences | (24,049 | ) | ||
Net unrealized appreciation (depreciation) | 59,723,743 |
The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.
Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized after December 31, 2011 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.
As of December 31, 2011, the fund had capital loss carryforwards available to offset future realized gains. Such losses expire as follows:
Pre-enactment losses: | ||||
12/31/16 | $(228,036,600 | ) | ||
12/31/17 | (60,659,388 | ) | ||
Total | $(288,695,988 | ) |
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 6/30/12 | Year ended 12/31/11 | |||||||
Initial Class | $— | $44,014,211 | ||||||
Service Class | — | 21,242,663 | ||||||
Total | $— | $65,256,874 |
(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% |
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Notes to Financial Statements (unaudited) – continued
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, 2014. This management fee reduction amounted to $360,250, 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, 2012 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, 2012, the fee was $124,603, which equated to 0.0103% 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, 2012, these costs amounted to $1,108.
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, 2012 was equivalent to an annual effective rate of 0.0154% 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, 2012, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $12,835 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 $6,268, 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 | $127,631,291 | $135,233,308 | ||||||
Investments (non-U.S. Government securities) | $150,699,482 | $325,656,300 |
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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 6/30/12 | Year ended 12/31/11 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 695,955 | $13,522,995 | 2,116,823 | $40,124,261 | ||||||||||||
Service Class | 2,102,699 | 40,204,346 | 6,166,846 | 114,533,054 | ||||||||||||
2,798,654 | $53,727,341 | 8,283,669 | $154,657,315 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 2,445,234 | $44,014,211 | ||||||||||||
Service Class | — | — | 1,193,408 | 21,242,663 | ||||||||||||
— | $— | 3,638,642 | $65,256,874 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (8,769,775 | ) | $(170,234,080 | ) | (19,049,237 | ) | $(358,577,630 | ) | ||||||||
Service Class | (5,042,977 | ) | (96,478,577 | ) | (10,473,551 | ) | (194,432,522 | ) | ||||||||
(13,812,752 | ) | $(266,712,657 | ) | (29,522,788 | ) | $(553,010,152 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (8,073,820 | ) | $(156,711,085 | ) | (14,487,180 | ) | $(274,439,158 | ) | ||||||||
Service Class | (2,940,278 | ) | (56,274,231 | ) | (3,113,297 | ) | (58,656,805 | ) | ||||||||
(11,014,098 | ) | $(212,985,316 | ) | (17,600,477 | ) | $(333,095,963 | ) |
(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, 2012, the fund’s commitment fee and interest expense were $8,806 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 an affiliated issuer:
Underlying Affiliated Fund | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 25,468,371 | 213,010,684 | (211,619,043 | ) | 26,860,012 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $13,692 | $26,860,012 |
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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, 2012 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 is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. Copies of the fund’s Form N-Q also may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
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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SEMIANNUAL REPORT
June 30, 2012
MFS® RESEARCH BOND SERIES
MFS® Variable Insurance Trust
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
LETTER FROM THE CHAIRMAN AND CEO
Dear Contract Owners:
World financial markets remain a venue of uncertainty. The focus has shifted most recently to the eurozone, where policymakers are attempting to develop a plan that will help debt-laden countries and prevent their woes from spreading across the region. Volatility is likely to continue as investors test the resolve of European officials to make the tough decisions needed to solve the crisis. A slowing in the Chinese economy has added another layer of trepidation, as investors worry that the primary engine of global growth may be sputtering.
The U.S. economy is experiencing a period of growth. However, markets have been jittery in reaction to events in Europe and ahead of the U.S. presidential election. Voters in the United States are watching the economy closely and waiting to see if Congress agrees to cut the budget and extend the Bush administration tax cuts. Failure to do so could ultimately send the U.S. economy back into recession.
Amid this global uncertainty, managing risk becomes a top priority for investors and their advisors. At MFS® our global research platform is designed to ensure the smooth functioning of our investment process in all business climates. Real-time collaboration across the globe is vital in periods of heightened volatility and economic uncertainty. At MFS our investment staff shares ideas and evaluates opportunities across geographies, across both fundamental and quantitative disciplines, and across companies’ entire capital structure. We employ this uniquely collaborative approach to build better insights for our clients.
We, like our investors, are 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 emphasize the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with investment advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2012
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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Portfolio structure (i)
Fixed income sectors (i) | ||||
High Grade Corporates | 33.1% | |||
Mortgage-Backed Securities | 26.1% | |||
U.S. Treasury Securities | 22.9% | |||
Commercial Mortgage-Backed Securities | 5.1% | |||
High Yield Corporates | 3.5% | |||
Emerging Markets Bonds | 1.7% | |||
Asset-Backed Securities | 1.4% | |||
U.S. Government Agencies | 1.3% | |||
Collateralized Debt Obligations | 1.1% | |||
Municipal Bonds | 0.8% | |||
Non-U.S. Government Bonds | 0.6% |
Composition including fixed income credit quality (a)(i) | ||||
AAA | 4.0% | |||
AA | 2.2% | |||
A | 12.0% | |||
BBB | 25.2% | |||
BB | 3.0% | |||
B | 0.9% | |||
CCC (o) | 0.0% | |||
CC (o) | 0.0% | |||
C (o) | 0.0% | |||
D (o) | 0.0% | |||
U.S. Government | 22.9% | |||
Federal Agencies | 27.4% | |||
Not Rated (o) | 0.0% | |||
Cash & Other | 2.4% | |||
Portfolio facts (i) | ||||
Average Duration (d) | 4.6 | |||
Average Effective Maturity (m) | 6.7 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). Securities rated BBB or higher are considered investment grade. All ratings are subject to change. U.S. Government includes securities issued by the U.S. Department of the Treasury. Federal Agencies includes rated and unrated U.S. Agency fixed-income securities, U.S. Agency mortgage-backed securities, and collateralized mortgage obligations of U.S. Agency mortgage-backed securities. Not Rated includes fixed income securities, including fixed income futures contracts, which have not been rated by any rating agency. 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 is not rated by these agencies. |
(d) | Duration is a measure of how much a bond’s price is likely to fluctuate with general changes in interest rates, e.g., if rates rise 1.00%, a bond with a 5-year duration is likely to lose about 5.00% of its value due to the interest rate move. |
(i) | For purposes of this presentation, the components include the market value of securities, and reflect the impact of the equivalent exposure of derivative positions, if any. These amounts may be negative from time to time. 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 6/30/12.
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, 2012 through June 30, 2012
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, 2012 through June 30, 2012.
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 1/01/12 | Ending Account Value 6/30/12 | Expenses Paid During Period (p) 1/01/12-6/30/12 | ||||||||||||||
Initial Class | Actual | 0.56% | $1,000.00 | $1,034.59 | $2.83 | |||||||||||||
Hypothetical (h) | 0.56% | $1,000.00 | $1,022.08 | $2.82 | ||||||||||||||
Service Class | Actual | 0.81% | $1,000.00 | $1,033.46 | $4.10 | |||||||||||||
Hypothetical (h) | 0.81% | $1,000.00 | $1,020.84 | $4.07 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
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PORTFOLIO OF INVESTMENTS – 6/30/12 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
BONDS – 96.9% | ||||||||
Aerospace – 0.1% | ||||||||
Bombardier, Inc., 7.75%, 2020 (n) | $ | 1,020,000 | $ | 1,134,750 | ||||
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Airlines – 0.3% | ||||||||
Continental Airlines, Inc., FRN, 0.816%, 2013 | $ | 2,440,896 | $ | 2,367,669 | ||||
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Apparel Manufacturers – 0.2% | ||||||||
Phillips-Van Heusen Corp., 7.375%, 2020 | $ | 1,455,000 | $ | 1,611,413 | ||||
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Asset-Backed & Securitized – 7.6% | ||||||||
Anthracite Ltd., “A”, CDO, FRN, 0.605%, 2019 (z) | $ | 1,359,181 | $ | 1,162,100 | ||||
Anthracite Ltd., “B”, CDO, 5.488%, 2037 (z) | 700,000 | 714,000 | ||||||
Anthracite Ltd., “BFL”, CDO, FRN, 1.245%, 2037 (z) | 1,160,000 | 1,154,200 | ||||||
Anthracite Ltd., “CFL”, CDO, FRN, 1.495%, 2037 (z) | 263,618 | 230,007 | ||||||
Anthracite Ltd., CDO, FRN, 1.095%, 2037 (z) | 1,977,382 | 1,848,852 | ||||||
ARCap REIT, Inc., CDO, “F”, FRN, 6.036%, 2045 (a)(d)(z) | 252,518 | 126 | ||||||
ARI Fleet Lease Trust, “A”, FRN, 0.791%, 2020 (n) | 1,942,477 | 1,942,481 | ||||||
Bayview Commercial Asset Trust, FRN, 2.93%, 2036 (i)(z) | 304,783 | 6,127 | ||||||
Bayview Commercial Asset Trust, FRN, 3.838%, 2036 (i)(z) | 449,610 | 19,646 | ||||||
Bayview Commercial Asset Trust, FRN, 4.084%, 2037 (i)(z) | 980,762 | 53,385 | ||||||
Bayview Commercial Asset Trust, FRN, 2.87%, 2035 (i)(z) | 485,011 | 3,055 | ||||||
Bayview Commercial Asset Trust, FRN, 3.927%, 2036 (i)(z) | 898,032 | 33,617 | ||||||
Bayview Commercial Asset Trust, FRN, 3.174%, 2036 (i)(z) | 345,084 | 8,530 | ||||||
Bayview Commercial Asset Trust, FRN, 2.816%, 2036 (i)(z) | 447,835 | 7,782 | ||||||
Bayview Financial Acquisition Trust, FRN, 5.483%, 2041 | 31,162 | 31,265 | ||||||
Bayview Financial Revolving Mortgage Loan Trust, FRN, 1.845%, 2040 (z) | 168,323 | 109,529 | ||||||
Capital Trust Realty Ltd., CDO, 5.16%, 2035 (n) | 524,382 | 528,315 | ||||||
Capital Trust Realty Ltd., CDO, 5.267%, 2035 (z) | 1,677,300 | 1,668,914 | ||||||
Chesapeake Funding LLC, “A”, FRN, 0.989%, 2023 (z) | 2,121,000 | 2,120,975 | ||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust, 5.322%, 2049 | 4,500,342 | 4,998,611 | ||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust, FRN, 5.393%, 2044 | 500,000 | 539,934 | ||||||
Commercial Mortgage Acceptance Corp., FRN, 2.064%, 2030 (i) | 138,902 | 5,617 | ||||||
Commercial Mortgage Asset Trust, FRN, 0.964%, 2032 (i)(z) | 2,914,139 | 23,674 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Asset-Backed & Securitized – continued | ||||||||
Commercial Mortgage Pass-Through Certificates, “A4”, 5.306%, 2046 | $ | 1,361,478 | $ | 1,529,536 | ||||
Credit Acceptance Auto Loan Trust, “A”, 2.2%, 2019 (z) | 939,000 | 941,798 | ||||||
Credit Suisse Mortgage Capital Certificate, 5.311%, 2039 | 2,250,000 | 2,496,445 | ||||||
Credit Suisse Mortgage Capital Certificate, FRN, 5.694%, 2040 | 375,725 | 394,661 | ||||||
Credit-Based Asset Servicing & Securitization LLC, 5.303%, 2035 | 33,283 | 30,029 | ||||||
Crest Ltd., “A1”, CDO, FRN, 0.94%, 2018 (z) | 894,424 | 804,981 | ||||||
Crest Ltd., “A2”, CDO, 4.669%, 2018 (z) | 193,434 | 179,893 | ||||||
Crest Ltd., “B”, CDO, FRN, 1.815%, 2035 (z) | 189,829 | 188,880 | ||||||
CWCapital LLC, 5.223%, 2048 | 600,000 | 662,752 | ||||||
Falcon Franchise Loan LLC, FRN, 5.43%, 2025 (i)(z) | 78,443 | 12,316 | ||||||
First Union National Bank Commercial Mortgage Trust, FRN, 1.819%, 2043 (i)(z) | 256,168 | 408 | ||||||
GE Equipment Transportation LLC, “A2”, 0.77%, 2013 | 679,694 | 680,080 | ||||||
GE Equipment Transportation LLC, “A2”, 0.77%, 2014 | 1,710,628 | 1,711,517 | ||||||
GMAC LLC, FRN, 7.997%, 2034 (d)(n)(q) | 110,000 | 83,838 | ||||||
GMAC LLC, FRN, 6.02%, 2033 (z) | 23,677 | 24,347 | ||||||
Hertz Vehicle Financing LLC, 2010-1A, “A1”, 2.6%, 2015 (n) | 1,205,000 | 1,229,013 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., 5.552%, 2045 | 725,000 | 818,264 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., “A3”, FRN, 6.179%, 2051 | 4,621,335 | 4,909,101 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., “A3”, FRN, 6.009%, 2049 | 3,564,937 | 3,799,079 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., “A4”, FRN, 6.009%, 2049 | 7,019,635 | 7,706,183 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 5.613%, 2042 (n) | 130,000 | 27,845 | ||||||
KKR Financial CLO Ltd., “A1”, FRN, 0.735%, 2017 (z) | 563,851 | 552,526 | ||||||
Lehman Brothers Commercial Conduit Mortgage Trust, FRN, 1.111%, 2030 (i) | 159,365 | 2,034 | ||||||
Mach One Trust Commercial Mortgage, CDO, “B”, 5.43%, 2040 (z) | 851,000 | 836,108 | ||||||
Merrill Lynch Mortgage Trust, FRN, “A3”, 6.041%, 2050 | 3,575,513 | 3,689,811 | ||||||
Merrill Lynch/Countrywide Commercial Mortgage Trust, FRN, 5.81%, 2050 | 4,590,646 | 4,941,729 | ||||||
Morgan Stanley Capital I, Inc., FRN, 1.184%, 2030 (i)(n) | 202,621 | 4,950 | ||||||
Preferred Term Securities XIX Ltd., CDO, FRN, 0.817%, 2035 (z) | 453,071 | 253,720 | ||||||
Prudential Securities Secured Financing Corp., FRN, 7.266%, 2013 (z) | 1,596,000 | 1,590,288 |
4
Table of Contents
MFS Research Bond Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Asset-Backed & Securitized – continued | ||||||||
Residential Funding Mortgage Securities, Inc., FRN, 5.32%, 2035 | $ | 174,000 | $ | 105,234 | ||||
Santander Drive Auto Receivable Trust, “A2”, 0.91%, 2015 | 1,604,000 | 1,606,900 | ||||||
Smart Trust, “A2B”, FRN, 0.79%, 2014 (z) | 2,681,000 | 2,681,257 | ||||||
Wachovia Bank Commercial Mortgage Trust, “A3”, FRN, 6.096%, 2051 | 3,431,440 | 3,609,600 | ||||||
Wachovia Bank Commercial Mortgage Trust, “A4”, FRN, 6.096%, 2051 | 4,231,834 | 4,742,307 | ||||||
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$ | 70,058,172 | |||||||
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Automotive – 1.3% | ||||||||
Ford Motor Credit Co. LLC, 8%, 2014 | $ | 1,350,000 | $ | 1,497,548 | ||||
Ford Motor Credit Co. LLC, 5%, 2018 | 850,000 | 902,600 | ||||||
Ford Motor Credit Co. LLC, 8%, 2016 | 910,000 | 1,076,308 | ||||||
Ford Motor Credit Co. LLC, 3.984%, 2016 (z) | 891,000 | 917,649 | ||||||
Harley-Davidson Financial Services, 3.875%, 2016 (n) | 3,270,000 | 3,453,591 | ||||||
Lear Corp., 8.125%, 2020 | 1,495,000 | 1,674,400 | ||||||
Volkswagen International Finance N.V., 2.375%, 2017 (n) | 2,763,000 | 2,806,727 | ||||||
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$ | 12,328,823 | |||||||
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Banks & Diversified Financials (Covered Bonds) – 0.1% | ||||||||
Compagnie de Financement Foncier, 2.125%, 2013 (n) | $ | 900,000 | $ | 905,180 | ||||
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Biotechnology – 0.2% | ||||||||
Life Technologies Corp., 5%, 2021 | $ | 1,582,000 | $ | 1,758,103 | ||||
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Broadcasting – 0.9% | ||||||||
Discovery Communications, Inc., 4.95%, 2042 | $ | 1,423,000 | $ | 1,485,101 | ||||
NBCUniversal Media LLC, 5.95%, 2041 | 2,838,000 | 3,350,194 | ||||||
News America, Inc., 8.5%, 2025 | 152,000 | 191,044 | ||||||
SIRIUS XM Radio, Inc., 13%, 2013 (n) | 1,215,000 | 1,354,725 | ||||||
Vivendi S.A., 4.75%, 2022 (n) | 1,607,000 | 1,585,895 | ||||||
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$ | 7,966,959 | |||||||
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Brokerage & Asset Managers – 0.4% | ||||||||
BlackRock, Inc., 3.375%, 2022 | $ | 977,000 | $ | 991,389 | ||||
E*TRADE Financial Corp., 12.5%, 2017 | 1,874,000 | 2,148,073 | ||||||
TD AMERITRADE Holding Corp., 5.6%, 2019 | 859,000 | 976,355 | ||||||
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$ | 4,115,817 | |||||||
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Building – 0.3% | ||||||||
Owens Corning, Inc., 6.5%, 2016 | $ | 2,292,000 | $ | 2,548,523 | ||||
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Business Services – 0.1% | ||||||||
Corning, Inc., 4.75%, 2042 | $ | 570,000 | $ | 597,300 | ||||
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Cable TV – 1.8% | ||||||||
CCO Holdings LLC, 7.875%, 2018 | $ | 1,630,000 | $ | 1,772,625 | ||||
CSC Holdings LLC, 8.5%, 2014 | 1,600,000 | 1,760,000 | ||||||
DIRECTV Holdings LLC, 3.8%, 2022 | 2,821,000 | 2,852,858 | ||||||
DIRECTV Holdings LLC, 5.2%, 2020 | 2,110,000 | 2,335,021 | ||||||
Myriad International Holdings B.V., 6.375%, 2017 (n) | 782,000 | 861,730 | ||||||
Time Warner Cable, Inc., 4.125%, 2021 | 1,143,000 | 1,213,150 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Cable TV – continued | ||||||||
Time Warner Cable, Inc., 4%, 2021 | $ | 660,000 | $ | 693,562 | ||||
Time Warner Cable, Inc., 5%, 2020 | 2,000,000 | 2,246,062 | ||||||
Time Warner Entertainment Co. LP, 8.375%, 2033 | 290,000 | 392,832 | ||||||
Videotron Ltee, 5%, 2022 (n) | 1,310,000 | 1,329,650 | ||||||
Virgin Media Finance PLC, 5.25%, 2022 | 705,000 | 720,862 | ||||||
Virgin Media Finance PLC, 9.5%, 2016 | 559,000 | 623,285 | ||||||
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$ | 16,801,637 | |||||||
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Chemicals – 0.9% | ||||||||
Ashland, Inc., 9.125%, 2017 | $ | 2,120,000 | $ | 2,332,000 | ||||
Dow Chemical Co., 8.55%, 2019 | 3,139,000 | 4,175,102 | ||||||
LyondellBasell Industries N.V., 5.75%, 2024 (z) | 1,790,000 | 1,915,300 | ||||||
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$ | 8,422,402 | |||||||
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Conglomerates – 0.3% | ||||||||
United Technologies Corp., 4.5%, 2042 | $ | 2,294,000 | $ | 2,519,741 | ||||
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Consumer Products – 0.3% | ||||||||
Mattel, Inc., 5.45%, 2041 | $ | 988,000 | $ | 1,079,928 | ||||
Newell Rubbermaid, Inc., 5.5%, 2013 | 1,971,000 | 2,037,693 | ||||||
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$ | 3,117,621 | |||||||
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Consumer Services – 0.2% | ||||||||
Experian Finance PLC, 2.375%, 2017 (z) | $ | 1,621,000 | $ | 1,622,816 | ||||
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Containers – 0.2% | ||||||||
Greif, Inc., 7.75%, 2019 | $ | 1,575,000 | $ | 1,795,500 | ||||
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Defense Electronics – 0.1% | ||||||||
BAE Systems Holdings, Inc., 6.375%, 2019 (n) | $ | 500,000 | $ | 584,779 | ||||
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Electrical Equipment – 0.2% | ||||||||
Ericsson, Inc., 4.125%, 2022 | $ | 1,639,000 | $ | 1,643,532 | ||||
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Electronics – 0.1% | ||||||||
Tyco Electronics Group S.A., 3.5%, 2022 | $ | 349,000 | $ | 347,867 | ||||
Tyco Electronics Group S.A., 6.55%, 2017 | 708,000 | 845,220 | ||||||
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$ | 1,193,087 | |||||||
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Emerging Market Quasi-Sovereign – 0.8% | ||||||||
CEZ A.S., 4.25%, 2022 (n) | $ | 1,304,000 | $ | 1,336,039 | ||||
CNPC (HK) Overseas Capital Ltd., 4.5%, 2021 (n) | 1,659,000 | 1,774,106 | ||||||
Petrobras International Finance Co., 5.375%, 2021 | 1,471,000 | 1,585,401 | ||||||
Petroleos Mexicanos, 4.875%, 2022 (n) | 770,000 | 831,600 | ||||||
Petroleos Mexicanos, 6.5%, 2041 (n) | 1,358,000 | 1,585,465 | ||||||
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$ | 7,112,611 | |||||||
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Energy – Independent – 1.9% | ||||||||
Anadarko Petroleum Corp., 6.95%, 2019 | $ | 1,460,000 | $ | 1,789,299 | ||||
Anadarko Petroleum Corp., 6.375%, 2017 | 653,000 | 758,547 | ||||||
Apache Corp., 4.75%, 2043 | 1,270,000 | 1,410,682 | ||||||
ConocoPhillips, 6%, 2020 | 740,000 | 930,588 | ||||||
Encana Corp., 5.15%, 2041 | 1,810,000 | 1,729,004 | ||||||
EQT Corp., 4.875%, 2021 | 575,000 | 587,325 | ||||||
Nexen, Inc., 7.5%, 2039 | 1,124,000 | 1,310,010 |
5
Table of Contents
MFS Research Bond Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Energy – Independent – continued | ||||||||
Noble Energy, Inc., 4.15%, 2021 | $ | 2,580,000 | $ | 2,712,986 | ||||
Pioneer Natural Resources Co., 6.65%, 2017 | 1,760,000 | 2,044,185 | ||||||
Southwestern Energy Co., 4.1%, 2022 (n) | 1,180,000 | 1,195,976 | ||||||
Southwestern Energy Co., 7.5%, 2018 | 2,144,000 | 2,572,148 | ||||||
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$ | 17,040,750 | |||||||
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Energy – Integrated – 0.5% | ||||||||
BG Energy Capital PLC, 2.875%, 2016 (n) | $ | 1,855,000 | $ | 1,954,671 | ||||
Total Capital International S.A., 1.55%, 2017 | 2,336,000 | 2,341,471 | ||||||
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$ | 4,296,142 | |||||||
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Financial Institutions – 1.0% | ||||||||
CIT Group, Inc., 5.5%, 2019 (n) | $ | 1,969,000 | $ | 2,023,148 | ||||
CIT Group, Inc., 5.25%, 2018 | 75,000 | 77,437 | ||||||
General Electric Capital Corp., 4.65%, 2021 | 1,733,000 | 1,924,542 | ||||||
International Lease Finance Corp., 7.125%, 2018 (n) | 1,190,000 | 1,311,975 | ||||||
International Lease Finance Corp., 5.75%, 2016 | 1,205,000 | 1,222,571 | ||||||
Nationstar Mortgage LLC/Capital Corp., 9.625%, 2019 (n) | 465,000 | 491,737 | ||||||
SLM Corp., 6.25%, 2016 | 1,081,000 | 1,135,050 | ||||||
SLM Corp., 6%, 2017 | 540,000 | 557,834 | ||||||
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$ | 8,744,294 | |||||||
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Food & Beverages – 2.0% | ||||||||
Anheuser-Busch InBev S.A., 7.75%, 2019 | $ | 2,667,000 | $ | 3,522,451 | ||||
Kraft Foods Group, Inc., 5%, 2042 (z) | 1,703,000 | 1,802,414 | ||||||
Kraft Foods, Inc., 6.125%, 2018 | 719,000 | 861,589 | ||||||
Kraft Foods, Inc., 5.375%, 2020 | 859,000 | 1,016,502 | ||||||
Kraft Foods, Inc., 6.5%, 2040 | 1,500,000 | 1,926,885 | ||||||
Molson Coors Brewing Co., 5%, 2042 | 1,462,000 | 1,579,504 | ||||||
Pernod-Ricard S.A., 4.25%, 2022 (n) | 3,500,000 | 3,589,128 | ||||||
Tyson Foods, Inc., 4.5%, 2022 | 1,271,000 | 1,309,130 | ||||||
Tyson Foods, Inc., 6.85%, 2016 | 2,065,000 | 2,361,844 | ||||||
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$ | 17,969,447 | |||||||
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Forest & Paper Products – 0.3% | ||||||||
Georgia-Pacific Corp., 5.4%, 2020 (n) | $ | 2,281,000 | $ | 2,646,802 | ||||
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Gaming & Lodging – 0.3% | ||||||||
Wyndham Worldwide Corp., 4.25%, 2022 | $ | 2,177,000 | $ | 2,192,111 | ||||
Wyndham Worldwide Corp., 6%, 2016 | 22,000 | 24,473 | ||||||
Wyndham Worldwide Corp., 7.375%, 2020 | 600,000 | 713,188 | ||||||
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$ | 2,929,772 | |||||||
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Insurance – 1.0% | ||||||||
American International Group, Inc., 6.4%, 2020 | $ | 2,142,000 | $ | 2,423,624 | ||||
American International Group, Inc., 4.875%, 2016 | 1,168,000 | 1,238,937 | ||||||
American International Group, Inc., 3.8%, 2017 | 1,870,000 | 1,906,259 | ||||||
Metropolitan Life Global Funding I, 5.125%, 2014 (n) | 290,000 | 310,986 | ||||||
Metropolitan Life Global Funding I, 5.125%, 2013 (n) | 420,000 | 433,889 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Insurance – continued | ||||||||
Unum Group, 7.125%, 2016 | $ | 290,000 | $ | 334,477 | ||||
UnumProvident Corp., 6.85%, 2015 (n) | 2,243,000 | 2,505,303 | ||||||
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$ | 9,153,475 | |||||||
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Insurance – Health – 0.7% | ||||||||
CIGNA Corp., 4%, 2022 | $ | 2,665,000 | $ | 2,779,246 | ||||
Humana, Inc., 7.2%, 2018 | 3,339,000 | 4,012,443 | ||||||
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$ | 6,791,689 | |||||||
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Insurance – Property & Casualty – 1.4% | ||||||||
Allied World Assurance, 5.5%, 2020 | $ | 740,000 | $ | 777,363 | ||||
AXIS Capital Holdings Ltd., 5.75%, 2014 | 555,000 | 588,080 | ||||||
CNA Financial Corp., 5.875%, 2020 | 1,580,000 | 1,737,453 | ||||||
Liberty Mutual Group, Inc., 6.5%, 2042 (z) | 1,629,000 | 1,648,867 | ||||||
Marsh & McLennan Cos., Inc., 4.8%, 2021 | 2,400,000 | 2,613,293 | ||||||
PartnerRe Ltd., 5.5%, 2020 | 1,083,000 | 1,142,534 | ||||||
QBE Capital Funding III Ltd., FRN, 7.25%, 2041 (n) | 1,670,000 | 1,507,046 | ||||||
XL Group PLC, 6.5% to 2017, FRN to 2049 | 1,504,000 | 1,222,000 | ||||||
ZFS Finance USA Trust II, 6.45% to 2016, FRN to 2065 (n) | 542,000 | 542,000 | ||||||
ZFS Finance USA Trust V, 6.5% to 2017, FRN to 2067 (n) | 1,452,000 | 1,422,960 | ||||||
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$ | 13,201,596 | |||||||
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International Market Quasi-Sovereign – 0.6% | ||||||||
Achmea Hypotheekbank N.V., 3.2%, 2014 (n) | $ | 699,000 | $ | 729,148 | ||||
FIH Erhvervsbank A.S., 1.75%, 2012 (z) | 766,000 | 769,930 | ||||||
ING Bank N.V., 3.9%, 2014 (n) | 1,500,000 | 1,574,268 | ||||||
NIBC Bank N.V., 2.8%, 2014 (z) | 1,500,000 | 1,556,252 | ||||||
Societe Financement de l’ Economie Francaise, 3.375%, 2014 (n) | 842,000 | 874,803 | ||||||
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$ | 5,504,401 | |||||||
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Local Authorities – 0.5% | ||||||||
State of California (Build America Bonds), 7.6%, 2040 | $ | 1,740,000 | $ | 2,262,557 | ||||
State of California (Build America Bonds), 7.625%, 2040 | 360,000 | 465,422 | ||||||
State of Illinois (Build America Bonds), 6.63%, 2035 | 1,825,000 | 1,982,972 | ||||||
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$ | 4,710,951 | |||||||
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Machinery & Tools – 0.3% | ||||||||
Case New Holland, Inc., 7.875%, 2017 | $ | 2,210,000 | $ | 2,552,550 | ||||
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Major Banks – 4.8% | ||||||||
ABN AMRO Bank N.V., 4.25%, 2017 (n) | $ | 2,064,000 | $ | 2,101,462 | ||||
Bank of America Corp., 5.625%, 2020 | 555,000 | 594,202 | ||||||
Bank of America Corp., 5.875%, 2021 | 1,670,000 | 1,823,318 | ||||||
Bank of America Corp., 5%, 2021 | 1,280,000 | 1,320,585 | ||||||
Bank of America Corp., 5.875%, 2042 | 1,383,000 | 1,514,911 | ||||||
Bank of America Corp., 5.65%, 2018 | 5,215,000 | 5,576,363 | ||||||
Bank of America Corp., 6.5%, 2016 | 85,000 | 93,341 | ||||||
DBS Bank Ltd., 3.625% to 2017, FRN to 2022 (n) | 1,508,000 | 1,510,924 | ||||||
Goldman Sachs Group, Inc., 7.5%, 2019 | 1,438,000 | 1,639,898 |
6
Table of Contents
MFS Research Bond Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Major Banks – continued | ||||||||
Goldman Sachs Group, Inc., 5.625%, 2017 | $ | 336,000 | $ | 352,431 | ||||
HSBC Holdings PLC, 4%, 2022 | 2,066,000 | 2,145,330 | ||||||
HSBC USA, Inc., 4.875%, 2020 | 1,090,000 | 1,121,275 | ||||||
JPMorgan Chase & Co., 4.25%, 2020 | 2,800,000 | 2,941,439 | ||||||
JPMorgan Chase & Co., 4.5%, 2022 | 1,800,000 | 1,938,992 | ||||||
JPMorgan Chase Bank N.A., 5.875%, 2016 | 250,000 | 274,161 | ||||||
JPMorgan Chase Capital XXII, 6.45%, 2087 | 845,000 | 845,000 | ||||||
JPMorgan Chase Capital XXVII, 7%, 2039 | 221,000 | 221,000 | ||||||
Macquarie Bank Ltd., 5%, 2017 (n) | 2,002,000 | 2,039,043 | ||||||
Macquarie Group Ltd., 6%, 2020 (n) | 448,000 | 445,683 | ||||||
Merrill Lynch & Co., Inc., 6.15%, 2013 | 1,170,000 | 1,210,956 | ||||||
Merrill Lynch & Co., Inc., 6.05%, 2016 | 1,569,000 | 1,622,172 | ||||||
Morgan Stanley, 5.5%, 2020 | 1,600,000 | 1,565,386 | ||||||
Morgan Stanley, 5.5%, 2021 | 3,541,000 | 3,488,795 | ||||||
Morgan Stanley, 5.75%, 2016 | 944,000 | 969,064 | ||||||
PNC Funding Corp., 5.625%, 2017 | 1,673,000 | 1,861,482 | ||||||
Wachovia Corp., 6.605%, 2025 | 164,000 | 194,341 | ||||||
Wells Fargo & Co., 3.5%, 2022 | 5,030,000 | 5,175,684 | ||||||
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$ | 44,587,238 | |||||||
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| |||||||
Medical & Health Technology & Services – 0.7% | ||||||||
Aristotle Holding, Inc., 3.9%, 2022 (n) | $ | 2,649,000 | $ | 2,745,726 | ||||
Aristotle Holding, Inc., 2.65%, 2017 (n) | 1,811,000 | 1,842,455 | ||||||
HCA, Inc., 7.875%, 2020 | 1,505,000 | 1,670,550 | ||||||
McKesson Corp., 5.7%, 2017 | 510,000 | 597,161 | ||||||
|
| |||||||
$ | 6,855,892 | |||||||
|
| |||||||
Metals & Mining – 0.9% | ||||||||
Freeport-McMoRan Copper & Gold, Inc., 3.55%, 2022 | $ | 2,624,000 | $ | 2,581,696 | ||||
Gold Fields Orogen Holding Ltd., 4.875%, 2020 (n) | 2,022,000 | 1,926,657 | ||||||
Southern Copper Corp., 6.75%, 2040 | 1,229,000 | 1,301,461 | ||||||
Teck Resources Ltd., 10.75%, 2019 | 584,000 | 702,260 | ||||||
Vale Overseas Ltd., 4.375%, 2022 | 2,152,000 | 2,191,431 | ||||||
|
| |||||||
$ | 8,703,505 | |||||||
|
| |||||||
Mortgage-Backed – 26.0% | ||||||||
Fannie Mae, 4.86%, 2012 - 2015 | $ | 189,796 | $ | 195,949 | ||||
Fannie Mae, 4.501%, 2013 | 232,026 | 234,197 | ||||||
Fannie Mae, 4.845%, 2013 | 46,499 | 47,376 | ||||||
Fannie Mae, 5.156%, 2013 | 1,267,662 | 1,310,651 | ||||||
Fannie Mae, 4.561%, 2014 | 92,074 | 96,693 | ||||||
Fannie Mae, 4.6%, 2014 - 2019 | 850,557 | 966,871 | ||||||
Fannie Mae, 4.606%, 2014 | 61,786 | 64,544 | ||||||
Fannie Mae, 4.77%, 2014 - 2019 | 478,865 | 541,991 | ||||||
Fannie Mae, 4.88%, 2014 - 2020 | 197,585 | 212,474 | ||||||
Fannie Mae, 4.53%, 2015 | 97,899 | 105,748 | ||||||
Fannie Mae, 4.56%, 2015 | 51,031 | 54,627 | ||||||
Fannie Mae, 4.665%, 2015 | 34,970 | 37,592 | ||||||
Fannie Mae, 4.69%, 2015 | 151,902 | 163,029 | ||||||
Fannie Mae, 4.7%, 2015 | 320,912 | 347,715 | ||||||
Fannie Mae, 4.74%, 2015 | 45,820 | 49,477 | ||||||
Fannie Mae, 4.78%, 2015 | 97,837 | 106,185 | ||||||
Fannie Mae, 4.815%, 2015 | 51,496 | 55,701 | ||||||
Fannie Mae, 4.85%, 2015 | 162,563 | 174,887 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Mortgage-Backed – continued | ||||||||
Fannie Mae, 4.87%, 2015 | $ | 31,682 | $ | 34,302 | ||||
Fannie Mae, 4.89%, 2015 | 89,818 | 97,655 | ||||||
Fannie Mae, 4.894%, 2015 | 66,703 | 72,890 | ||||||
Fannie Mae, 4.94%, 2015 | 120,000 | 130,678 | ||||||
Fannie Mae, 5.1%, 2015 | 275,000 | 291,243 | ||||||
Fannie Mae, 5.466%, 2015 | 772,404 | 855,451 | ||||||
Fannie Mae, 5.08%, 2016 | 345,656 | 380,139 | ||||||
Fannie Mae, 5.09%, 2016 | 113,574 | 125,013 | ||||||
Fannie Mae, 5.152%, 2016 | 3,140,230 | 3,503,947 | ||||||
Fannie Mae, 5.35%, 2016 | 676,537 | 757,256 | ||||||
Fannie Mae, 5.395%, 2016 | 127,205 | 142,379 | ||||||
Fannie Mae, 5.423%, 2016 | 1,112,854 | 1,257,697 | ||||||
Fannie Mae, 5.724%, 2016 | 1,589,719 | 1,811,366 | ||||||
Fannie Mae, 2.71%, 2017 | 386,927 | 407,650 | ||||||
Fannie Mae, 3.308%, 2017 | 1,375,342 | 1,482,372 | ||||||
Fannie Mae, 4.989%, 2017 | 147,149 | 158,419 | ||||||
Fannie Mae, 5.05%, 2017 | 251,609 | 280,625 | ||||||
Fannie Mae, 5.28%, 2017 | 136,088 | 152,839 | ||||||
Fannie Mae, 5.482%, 2017 | 855,444 | 982,490 | ||||||
Fannie Mae, 5.5%, 2017 - 2040 | 32,795,512 | 35,856,443 | ||||||
Fannie Mae, 5.54%, 2017 | 103,834 | 116,943 | ||||||
Fannie Mae, 5.65%, 2017 | 155,508 | 174,223 | ||||||
Fannie Mae, 2.578%, 2018 | 4,500,000 | 4,691,871 | ||||||
Fannie Mae, 3.84%, 2018 | 688,418 | 755,284 | ||||||
Fannie Mae, 3.99%, 2018 | 600,000 | 663,544 | ||||||
Fannie Mae, 5.341%, 2018 | 496,563 | 573,027 | ||||||
Fannie Mae, 4.45%, 2019 | 531,373 | 600,360 | ||||||
Fannie Mae, 5.18%, 2019 | 128,846 | 147,905 | ||||||
Fannie Mae, 5.51%, 2019 | 192,815 | 222,278 | ||||||
Fannie Mae, 5%, 2020 - 2040 | 16,915,276 | 18,360,636 | ||||||
Fannie Mae, 5.19%, 2020 | 186,871 | 214,519 | ||||||
Fannie Mae, 6%, 2022 - 2038 | 11,441,871 | 12,653,242 | ||||||
Fannie Mae, 4.5%, 2024 - 2040 | 7,353,345 | 7,922,061 | ||||||
Fannie Mae, 4%, 2025 | 144,920 | 157,429 | ||||||
Fannie Mae, 4.5%, 2025 | 545,278 | 584,846 | ||||||
Fannie Mae, 3%, 2027 | 1,834,378 | 1,925,129 | ||||||
Fannie Mae, 6.5%, 2032 - 2033 | 23,327 | 26,701 | ||||||
Fannie Mae, 3.5%, 2041 - 2042 | 5,508,804 | 5,820,681 | ||||||
Fannie Mae, TBA, 3%, 2018 | 2,549,000 | 2,665,696 | ||||||
Fannie Mae, TBA, 3.5%, 2033 | 16,840,000 | 17,653,057 | ||||||
Freddie Mac, 1.655%, 2016 | 1,696,158 | 1,728,319 | ||||||
Freddie Mac, 3.882%, 2017 | 1,936,000 | 2,146,782 | ||||||
Freddie Mac, 2.323%, 2018 | 1,194,000 | 1,232,932 | ||||||
Freddie Mac, 2.412%, 2018 (n) | 2,300,000 | 2,387,543 | ||||||
Freddie Mac, 3.154%, 2018 | 935,000 | 1,006,348 | ||||||
Freddie Mac, 5%, 2018 - 2040 | 3,832,045 | 4,151,960 | ||||||
Freddie Mac, 2.13%, 2019 | 4,704,000 | 4,797,972 | ||||||
Freddie Mac, 5.5%, 2019 - 2038 | 3,133,972 | 3,439,006 | ||||||
Freddie Mac, 2.757%, 2020 | 1,375,168 | 1,459,913 | ||||||
Freddie Mac, 3.32%, 2020 | 2,838,777 | 3,070,294 | ||||||
Freddie Mac, 4.251%, 2020 | 807,000 | 916,372 | ||||||
Freddie Mac, 4%, 2025 - 2040 | 10,367,428 | 11,004,741 | ||||||
Freddie Mac, 4.5%, 2025 - 2041 | 1,511,373 | 1,616,283 | ||||||
Freddie Mac, 3.5%, 2026 - 2042 | 5,663,749 | 5,968,026 | ||||||
Freddie Mac, 6%, 2034 - 2038 | 781,506 | 866,308 |
7
Table of Contents
MFS Research Bond Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Mortgage-Backed – continued | ||||||||
Freddie Mac, TBA, 3%, 2018 | $ | 21,340,000 | $ | 22,258,121 | ||||
Ginnie Mae, 6%, 2036 - 2039 | 1,670,561 | 1,880,173 | ||||||
Ginnie Mae, 5.5%, 2038 - 2042 | 4,558,558 | 5,062,364 | ||||||
Ginnie Mae, 4.5%, 2039 - 2041 | 20,745,328 | 22,891,635 | ||||||
Ginnie Mae, 3.5%, 2040 - 2042 | 6,966,724 | 7,466,637 | ||||||
Ginnie Mae, 4%, 2040 | 3,933,757 | 4,304,348 | ||||||
|
| |||||||
$ | 239,132,070 | |||||||
|
| |||||||
Municipals – 0.8% | ||||||||
Kaiser Foundation Hospital, 3.5%, 2022 | $ | 1,870,000 | $ | 1,940,392 | ||||
New York Dormitory Authority, State Personal Income Tax Rev., “A”, 4%, 2022 | 4,625,000 | 5,332,717 | ||||||
|
| |||||||
$ | 7,273,109 | |||||||
|
| |||||||
Natural Gas – Pipeline – 1.1% | ||||||||
Energy Transfer Partners LP, 5.2%, 2022 | $ | 433,000 | $ | 463,705 | ||||
Energy Transfer Partners LP, 4.65%, 2021 | 2,898,000 | 2,993,956 | ||||||
Enterprise Products Operating LP, 4.85%, 2042 | 2,000,000 | 1,991,422 | ||||||
Enterprise Products Operating LP, 5.65%, 2013 | 227,000 | 234,188 | ||||||
Kinder Morgan Energy Partners LP, 7.4%, 2031 | 103,000 | 125,433 | ||||||
Kinder Morgan Energy Partners LP, 6.375%, 2041 | 2,240,000 | 2,553,880 | ||||||
Kinder Morgan Energy Partners LP, 6.95%, 2038 | 681,000 | 805,381 | ||||||
Spectra Energy Capital LLC, 8%, 2019 | 613,000 | 785,288 | ||||||
|
| |||||||
$ | 9,953,253 | |||||||
|
| |||||||
Network & Telecom – 0.9% | ||||||||
AT&T, Inc., 5.35%, 2040 | $ | 1,770,000 | $ | 2,031,364 | ||||
AT&T, Inc., 5.55%, 2041 | 920,000 | 1,096,600 | ||||||
Centurylink, Inc., 7.65%, 2042 | 1,321,000 | 1,282,111 | ||||||
Centurylink, Inc., 6.45%, 2021 | 3,162,000 | 3,290,301 | ||||||
Telefonica Emisiones S.A.U., 5.134%, 2020 | 1,045,000 | 900,146 | ||||||
|
| |||||||
$ | 8,600,522 | |||||||
|
| |||||||
Oil Services – 0.3% | ||||||||
Transocean, Inc., 6%, 2018 | $ | 610,000 | $ | 681,373 | ||||
Transocean, Inc., 6.5%, 2020 | 1,726,000 | 1,957,783 | ||||||
|
| |||||||
$ | 2,639,156 | |||||||
|
| |||||||
Oils – 0.2% | ||||||||
Phillips 66, 4.3%, 2022 (n) | $ | 1,668,000 | $ | 1,754,681 | ||||
|
| |||||||
Other Banks & Diversified Financials – 2.6% | ||||||||
Banco Santander U.S. Debt S.A.U., 3.781%, 2015 (n) | $ | 1,500,000 | $ | 1,400,503 | ||||
Capital One Financial Corp., 8.8%, 2019 | 893,000 | 1,124,601 | ||||||
Capital One Financial Corp., 6.15%, 2016 | 1,970,000 | 2,202,407 | ||||||
Citigroup, Inc., 4.45%, 2017 | 1,711,000 | 1,793,544 | ||||||
Citigroup, Inc., 6.125%, 2018 | 1,810,000 | 2,020,999 | ||||||
Citigroup, Inc., 8.5%, 2019 | 4,160,000 | 5,137,729 | ||||||
Discover Bank, 7%, 2020 | 3,709,000 | 4,316,798 | ||||||
Fifth Third Bancorp, 3.5%, 2022 | 1,080,000 | 1,091,418 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Other Banks & Diversified Financials – continued | ||||||||
Groupe BPCE S.A., 12.5% to 2019, FRN to 2049 (n) | $ | 472,000 | $ | 475,106 | ||||
Santander Holdings USA, Inc., 4.625%, 2016 | 1,021,000 | 986,647 | ||||||
Santander UK PLC, 8.963% to 2030, FRN to 2049 | 1,800,000 | 1,728,000 | ||||||
SunTrust Banks, Inc., 3.5%, 2017 | 932,000 | 964,832 | ||||||
Svenska Handelsbanken AB, 2.875%, 2017 | 904,000 | 916,413 | ||||||
UBS Preferred Funding Trust V, 6.243% to 2016, FRN to 2049 | 122,000 | 114,680 | ||||||
|
| |||||||
$ | 24,273,677 | |||||||
|
| |||||||
Pharmaceuticals – 0.5% | ||||||||
Celgene Corp., 2.45%, 2015 | $ | 1,649,000 | $ | 1,689,095 | ||||
Teva Pharmaceutical Finance IV LLC, 3.65%, 2021 | 2,720,000 | 2,860,836 | ||||||
|
| |||||||
$ | 4,549,931 | |||||||
|
| |||||||
Precious Metals & Minerals – 0.0% | ||||||||
Teck Resources Ltd., 3%, 2019 | $ | 217,000 | $ | 215,569 | ||||
|
| |||||||
Printing & Publishing – 0.2% | ||||||||
Pearson Funding Four PLC, 3.75%, 2022 (n) | $ | 1,784,000 | $ | 1,819,309 | ||||
|
| |||||||
Railroad & Shipping – 0.0% | ||||||||
Canadian Pacific Railway Co., 4.45%, 2023 | $ | 362,000 | $ | 384,467 | ||||
|
| |||||||
Real Estate – 1.6% | ||||||||
Alexandria Real Estate Equities, Inc., REIT, 4.6%, 2022 | $ | 1,261,000 | $ | 1,291,133 | ||||
Boston Properties LP, REIT, 3.85%, 2023 | 470,000 | 474,415 | ||||||
Boston Properties LP, REIT, 3.7%, 2018 | 1,395,000 | 1,457,631 | ||||||
DDR Corp., REIT, 4.625%, 2022 | 275,000 | 271,404 | ||||||
HCP, Inc., REIT, 5.375%, 2021 | 1,134,000 | 1,253,981 | ||||||
HCP, Inc., REIT, 3.75%, 2019 | 1,264,000 | 1,261,782 | ||||||
HRPT Properties Trust, REIT, 6.25%, 2016 | 1,689,000 | 1,782,319 | ||||||
Kimco Realty Corp., REIT, 5.783%, 2016 | 1,794,000 | 1,971,854 | ||||||
Liberty Property LP, REIT, 5.5%, 2016 | 1,013,000 | 1,123,362 | ||||||
Simon Property Group, Inc., REIT, 10.35%, 2019 | 1,313,000 | 1,841,884 | ||||||
WEA Finance LLC, REIT, 6.75%, 2019 (n) | 1,510,000 | 1,781,608 | ||||||
|
| |||||||
$ | 14,511,373 | |||||||
|
| |||||||
Retailers – 1.0% | ||||||||
Gap, Inc., 5.95%, 2021 | $ | 1,992,000 | $ | 2,064,724 | ||||
Home Depot, Inc., 5.95%, 2041 | 1,118,000 | 1,454,572 | ||||||
Lowe’s Cos., Inc., 4.65%, 2042 | 1,843,000 | 1,957,082 | ||||||
Target Corp., 4%, 2042 | 2,500,000 | 2,462,562 | ||||||
Wesfarmers Ltd., 6.998%, 2013 (n) | 1,000,000 | 1,038,916 | ||||||
|
| |||||||
$ | 8,977,856 | |||||||
|
| |||||||
Specialty Stores – 0.2% | ||||||||
Advance Auto Parts, Inc., 5.75%, 2020 | $ | 1,512,000 | $ | 1,708,717 | ||||
|
| |||||||
Telecommunications – Wireless – 0.7% | ||||||||
American Tower Corp., 4.5%, 2018 | $ | 3,373,000 | $ | 3,565,308 | ||||
Crown Castle Towers LLC, 4.883%, 2020 (n) | 900,000 | 977,144 | ||||||
Crown Castle Towers LLC, 6.113%, 2020 (n) | 1,096,000 | 1,268,747 | ||||||
Rogers Cable, Inc., 5.5%, 2014 | 734,000 | 787,851 | ||||||
|
| |||||||
$ | 6,599,050 | |||||||
|
|
8
Table of Contents
MFS Research Bond Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Telephone Services – 0.2% | ||||||||
Oi S.A., 5.75%, 2022 (n) | $ | 1,728,000 | $ | 1,760,832 | ||||
|
| |||||||
Tobacco – 0.7% | ||||||||
Lorillard Tobacco Co., 7%, 2041 | $ | 321,000 | $ | 348,183 | ||||
Lorillard Tobacco Co., 8.125%, 2019 | 2,222,000 | 2,757,662 | ||||||
Reynolds American, Inc., 6.75%, 2017 | 2,900,000 | 3,481,653 | ||||||
|
| |||||||
$ | 6,587,498 | |||||||
|
| |||||||
Transportation – Services – 0.4% | ||||||||
ERAC USA Finance Co., 2.75%, 2017 (n) | $ | 812,000 | $ | 823,410 | ||||
Erac USA Finance Co., 7%, 2037 (n) | 2,589,000 | 3,120,882 | ||||||
|
| |||||||
$ | 3,944,292 | |||||||
|
| |||||||
U.S. Government Agencies and Equivalents – 1.3% | ||||||||
FDIC Structured Sale Guarantee Note, 0%, 2012 (n) | $ | 396,000 | $ | 395,727 | ||||
JPMorgan Chase & Co., FRN, 0.711%, 2012 (m) | 5,650,000 | 5,665,724 | ||||||
National Credit Union Administration Guaranteed Note, 2.9%, 2020 | 980,000 | 1,044,925 | ||||||
Small Business Administration, 4.86%, 2025 | 170,297 | 189,579 | ||||||
Small Business Administration, 4.625%, 2025 | 167,896 | 185,311 | ||||||
Small Business Administration, 5.11%, 2025 | 131,271 | 146,701 | ||||||
Small Business Administration, 3.25%, 2030 | 870,946 | 925,770 | ||||||
Small Business Administration, 2.85%, 2031 | 1,788,036 | 1,852,138 | ||||||
Small Business Administration, 4.99%, 2024 | 78,246 | 87,235 | ||||||
Small Business Administration, 4.43%, 2029 | 973,247 | 1,093,952 | ||||||
Small Business Administration, 4.34%, 2024 | 97,472 | 106,971 | ||||||
Small Business Administration, 4.93%, 2024 | 70,911 | 78,648 | ||||||
|
| |||||||
$ | 11,772,681 | |||||||
|
| |||||||
U.S. Treasury Obligations – 22.8% | ||||||||
U.S. Treasury Bonds, 6.75%, 2026 | $ | 19,000 | $ | 29,800 | ||||
U.S. Treasury Bonds, 4.5%, 2036 | 116,000 | 155,803 | ||||||
U.S. Treasury Bonds, 4.5%, 2039 | 22,598,600 | 30,663,475 | ||||||
U.S. Treasury Notes, 1.375%, 2013 | 41,455,000 | 41,796,672 | ||||||
U.S. Treasury Notes, 3.125%, 2013 | 201,000 | 208,098 | ||||||
U.S. Treasury Notes, 1.875%, 2014 | 41,959,000 | 43,035,836 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
U.S. Treasury Obligations – continued | ||||||||
U.S. Treasury Notes, 1.875%, 2014 | $ | 31,684,000 | $ | 32,575,113 | ||||
U.S. Treasury Notes, 2.125%, 2015 | 52,244,000 | 54,807,195 | ||||||
U.S. Treasury Notes, 0.875%, 2016 | 2,974,000 | 3,000,718 | ||||||
U.S. Treasury Notes, TIPS, 2%, 2014 | 781,973 | 811,908 | ||||||
U.S. Treasury Notes, TIPS, 1.625%, 2015 | 831,402 | 883,494 | ||||||
U.S. Treasury Notes, TIPS, 2%, 2016 | 1,425,828 | 1,577,545 | ||||||
|
| |||||||
$ | 209,545,657 | |||||||
|
| |||||||
Utilities – Electric Power – 2.1% | ||||||||
CenterPoint Energy, Inc., 5.95%, 2017 | $ | 540,000 | $ | 615,723 | ||||
Constellation Energy Group, Inc., 5.15%, 2020 | 887,000 | 981,857 | ||||||
Duke Energy Corp., 5.05%, 2019 | 1,736,000 | 2,024,527 | ||||||
EDP Finance B.V., 6%, 2018 (n) | 1,600,000 | 1,391,870 | ||||||
Enel Finance International S.A., 6%, 2039 (n) | 2,000,000 | 1,570,116 | ||||||
Exelon Corp., 4.9%, 2015 | 2,042,000 | 2,219,411 | ||||||
FirstEnergy Solutions Corp., 6.8%, 2039 | 1,644,000 | 1,726,445 | ||||||
Oncor Electric Delivery Co., 4.1%, 2022 (n) | 1,850,000 | 1,886,166 | ||||||
Pacific Gas & Electric Co., 4.45%, 2042 | 650,000 | 682,323 | ||||||
PPL WEM Holdings PLC, 5.375%, 2021 (n) | 2,909,000 | 3,134,183 | ||||||
Progress Energy, Inc., 3.15%, 2022 | 979,000 | 987,975 | ||||||
TECO Energy, Inc., 5.15%, 2020 | 1,810,000 | 2,068,850 | ||||||
Waterford 3 Funding Corp., 8.09%, 2017 | 52,768 | 52,885 | ||||||
|
| |||||||
$ | 19,342,331 | |||||||
|
| |||||||
Total Bonds (Identified Cost, $854,501,366) | $ | 891,240,970 | ||||||
|
| |||||||
MONEY MARKET FUNDS – 6.9% | ||||||||
MFS Institutional Money Market Portfolio, 0.14%, at Cost and Net Asset Value (v) | 63,771,791 | $ | 63,771,791 | |||||
|
| |||||||
Total Investments (Identified Cost, $918,273,157) | $ | 955,012,761 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – (3.8)% | (35,007,557 | ) | ||||||
|
| |||||||
Net Assets – 100.0% | $ | 920,005,204 | ||||||
|
|
(a) | Non-income producing security. |
(d) | In default. Interest and/or scheduled principal payment(s) have been missed. |
(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 $86,073,212 representing 9.4% of net assets. |
(q) | Interest received was less than stated coupon rate. |
(v) | Underlying affiliated fund that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end. |
9
Table of Contents
MFS Research Bond Series
Portfolio of Investments (unaudited) – continued
(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, 6.036%, 2045 | 12/07/06 | $257,934 | $126 | |||||||
Anthracite Ltd., “A”, CDO, FRN, 0.605%, 2019 | 1/15/10-8/11/11 | 1,049,203 | 1,162,100 | |||||||
Anthracite Ltd., “B”, CDO, 5.488%, 2037 | 12/09/10 | 689,929 | 714,000 | |||||||
Anthracite Ltd., “BFL”, CDO, FRN, 1.245%, 2037 | 12/09/10 | 1,060,825 | 1,154,200 | |||||||
Anthracite Ltd., “CFL”, CDO, FRN, 1.495%, 2037 | 3/03/11 | 248,975 | 230,007 | |||||||
Anthracite Ltd., CDO, FRN, 1.095%, 2037 | 2/24/10-3/03/11 | 1,803,699 | 1,848,852 | |||||||
Bayview Commercial Asset Trust, FRN, 2.87%, 2035 | 10/06/05 | 37,548 | 3,055 | |||||||
Bayview Commercial Asset Trust, FRN, 2.93%, 2036 | 3/29/06 | 27,306 | 6,127 | |||||||
Bayview Commercial Asset Trust, FRN, 2.816%, 2036 | 2/28/06 | 38,191 | 7,782 | |||||||
Bayview Commercial Asset Trust, FRN, 3.174%, 2036 | 5/16/06 | 25,974 | 8,530 | |||||||
Bayview Commercial Asset Trust, FRN, 3.927%, 2036 | 9/11/06 | 105,943 | 33,617 | |||||||
Bayview Commercial Asset Trust, FRN, 3.838%, 2036 | 10/25/06 | 59,956 | 19,646 | |||||||
Bayview Commercial Asset Trust, FRN, 4.084%, 2037 | 1/26/07 | 63,950 | 53,385 | |||||||
Bayview Financial Revolving Mortgage Loan Trust, FRN, 1.845%, 2040 | 3/01/06 | 168,323 | 109,529 | |||||||
Capital Trust Realty Ltd., CDO, 5.267%, 2035 | 9/14/10-3/25/11 | 1,546,811 | 1,668,914 | |||||||
Chesapeake Funding LLC, “A”, FRN, 0.989%, 2023 | 5/10/12 | 2,121,000 | 2,120,975 | |||||||
Commercial Mortgage Asset Trust, FRN, 0.964%, 2032 | 4/09/12 | 27,750 | 23,674 | |||||||
Credit Acceptance Auto Loan Trust, “A”, 2.2%, 2019 | 3/22/12 | 938,896 | 941,798 | |||||||
Crest Ltd., “A1” CDO, FRN, 0.94%, 2018 | 1/21/10-8/11/11 | 730,708 | 804,981 | |||||||
Crest Ltd., “A2”, CDO, 4.669%, 2018 | 3/02/10 | 163,229 | 179,893 | |||||||
Crest Ltd., “B”, CDO, FRN, 1.815%, 2035 | 1/12/10 | 160,532 | 188,880 | |||||||
Experian Finance PLC, 2.375%, 2017 | 6/26/12 | 1,617,958 | 1,622,816 | |||||||
FIH Erhvervsbank A.S., 1.75%, 2012 | 12/02/09 | 765,702 | 769,930 | |||||||
Falcon Franchise Loan LLC, FRN, 5.43%, 2025 | 1/29/03 | 6,100 | 12,316 | |||||||
First Union National Bank Commercial Mortgage Trust, FRN, 1.819%, 2043 | 4/09/12 | 8 | 408 | |||||||
Ford Motor Credit Co. LLC, 3.984%, 2016 | 5/14/12-5/15/12 | 886,152 | 917,649 | |||||||
GMAC LLC, FRN, 6.02%, 2033 | 3/20/02 | 14,038 | 24,347 | |||||||
KKR Financial CLO Ltd., “A1”, FRN, 0.735%, 2017 | 4/11/11 | 543,394 | 552,526 | |||||||
Kraft Foods Group, Inc., 5%, 2042 | 5/30/12 | 1,696,534 | 1,802,414 | |||||||
Liberty Mutual Group, Inc., 6.5%, 2042 | 5/01/12 | 1,625,179 | 1,648,867 | |||||||
LyondellBasell Industries N.V., 5.75%, 2024 | 3/26/12 | 1,790,000 | 1,915,300 | |||||||
Mach One Trust Commercial Mortgage, CDO, “B”, 5.43%, 2040 | 3/10/10 | 802,502 | 836,108 | |||||||
NIBC Bank N.V., 2.8%, 2014 | 11/24/09 | 1,498,359 | 1,556,252 | |||||||
Preferred Term Securities XIX Ltd., CDO, FRN, 0.817%, 2035 | 9/08/05-3/28/11 | 321,906 | 253,720 | |||||||
Prudential Securities Secured Financing Corp., FRN, 7.266%, 2013 | 12/06/04-8/11/11 | 1,590,385 | 1,590,288 | |||||||
Smart Trust, “A2B”, FRN, 0.79%, 2014 | 3/07/12 | 2,681,000 | 2,681,257 | |||||||
Total Restricted Securities | $27,464,269 | |||||||||
% of Net assets | 3.0% |
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MFS Research Bond Series
Portfolio of Investments (unaudited) – continued
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 |
TBA | To Be Announced |
TIPS | Treasury Inflation Protected Security |
See Notes to Financial Statements
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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 6/30/12 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $854,501,366) | $891,240,970 | |||||||
Underlying affiliated funds, at cost and value | 63,771,791 | |||||||
Total investments, at value (identified cost, $918,273,157) | $955,012,761 | |||||||
Cash | 626,869 | |||||||
Receivables for | ||||||||
Investments sold | 533,809 | |||||||
Fund shares sold | 1,909,461 | |||||||
Interest | 6,530,095 | |||||||
Other assets | 3,464 | |||||||
Total assets | $964,616,459 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Investments purchased | $1,617,959 | |||||||
TBA purchase commitments | 42,414,598 | |||||||
Fund shares reacquired | 426,496 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 38,857 | |||||||
Shareholder servicing costs | 762 | |||||||
Distribution and/or service fees | 11,119 | |||||||
Payable for independent Trustees’ compensation | 6 | |||||||
Accrued expenses and other liabilities | 101,458 | |||||||
Total liabilities | $44,611,255 | |||||||
Net assets | $920,005,204 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $834,900,218 | |||||||
Unrealized appreciation (depreciation) on investments | 36,739,604 | |||||||
Accumulated net realized gain (loss) on investments | 11,005,882 | |||||||
Undistributed net investment income | 37,359,500 | |||||||
Net assets | $920,005,204 | |||||||
Shares of beneficial interest outstanding | 68,866,641 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $377,412,074 | 28,027,883 | $13.47 | |||||||||
Service Class | 542,593,130 | 40,838,758 | 13.29 |
See Notes to Financial Statements
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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 6/30/12 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Interest | $14,937,986 | |||||||
Dividends from underlying affiliated funds | 17,597 | |||||||
Total investment income | $14,955,583 | |||||||
Expenses | ||||||||
Management fee | $2,103,216 | |||||||
Distribution and/or service fees | 593,376 | |||||||
Shareholder servicing costs | 43,257 | |||||||
Administrative services fee | 67,735 | |||||||
Independent Trustees’ compensation | 9,671 | |||||||
Custodian fee | 43,167 | |||||||
Shareholder communications | 35,855 | |||||||
Audit and tax fees | 32,180 | |||||||
Legal fees | 4,802 | |||||||
Miscellaneous | 24,008 | |||||||
Total expenses | $2,957,267 | |||||||
Fees paid indirectly | (124 | ) | ||||||
Reduction of expenses by investment adviser | (2,129 | ) | ||||||
Net expenses | $2,955,014 | |||||||
Net investment income | $12,000,569 | |||||||
Realized and unrealized gain (loss) on investments | ||||||||
Realized gain (loss) on investments (identified cost basis) | $8,079,113 | |||||||
Change in unrealized appreciation (depreciation) on investments | $8,132,139 | |||||||
Net realized and unrealized gain (loss) on investments | $16,211,252 | |||||||
Change in net assets from operations | $28,211,821 |
See Notes to Financial Statements
13
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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 6/30/12 (unaudited | ) | | Year ended 12/31/11 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $12,000,569 | $22,449,683 | ||||||
Net realized gain (loss) on investments | 8,079,113 | 7,598,826 | ||||||
Net unrealized gain (loss) on investments | 8,132,139 | 13,313,908 | ||||||
Change in net assets from operations | $28,211,821 | $43,362,417 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(18,525,349 | ) | |||||
From net realized gain on investments | — | (8,107,984 | ) | |||||
Total distributions declared to shareholders | $— | $(26,633,333 | ) | |||||
Change in net assets from fund share transactions | $118,122,552 | $173,999,741 | ||||||
Total change in net assets | $146,334,373 | $190,728,825 | ||||||
Net assets | ||||||||
At beginning of period | 773,670,831 | 582,942,006 | ||||||
At end of period (including undistributed net investment income of $37,359,500 and | $920,005,204 | $773,670,831 |
See Notes to Financial Statements
14
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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 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $13.01 | $12.66 | $12.20 | $11.00 | $11.60 | $11.51 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.20 | $0.44 | $0.44 | $0.51 | $0.52 | $0.55 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.26 | 0.41 | 0.45 | 1.20 | (0.78 | ) | (0.08 | ) | ||||||||||||||||
Total from investment operations | $0.46 | $0.85 | $0.89 | $1.71 | $(0.26 | ) | $0.47 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.35 | ) | $(0.39 | ) | $(0.51 | ) | $(0.34 | ) | $(0.38 | ) | |||||||||||||
From net realized gain on investments | — | (0.15 | ) | (0.04 | ) | — | — | — | ||||||||||||||||
Total distributions declared to shareholders | $— | $(0.50 | ) | $(0.43 | ) | $(0.51 | ) | $(0.34 | ) | $(0.38 | ) | |||||||||||||
Net asset value, end of period (x) | $13.47 | $13.01 | $12.66 | $12.20 | $11.00 | $11.60 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 3.54 | (n) | 6.75 | 7.47 | 16.16 | (2.37 | ) | 4.21 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.56 | (a) | 0.57 | 0.59 | 0.62 | 0.74 | 0.77 | |||||||||||||||||
Expenses after expense reductions (f) | 0.56 | (a) | 0.57 | 0.59 | 0.62 | 0.64 | 0.67 | |||||||||||||||||
Net investment income | 2.99 | (a) | 3.41 | 3.51 | 4.38 | 4.63 | 4.80 | |||||||||||||||||
Portfolio turnover | 54 | (n) | 60 | 66 | 113 | 115 | 74 | |||||||||||||||||
Net assets at end of period (000 omitted) | $377,412 | $367,398 | $371,865 | $317,851 | $184,984 | $139,275 | ||||||||||||||||||
Service Class | Six months ended 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $12.85 | $12.53 | $12.10 | $10.91 | $11.51 | $11.43 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.18 | $0.40 | $0.40 | $0.47 | $0.49 | $0.52 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.26 | 0.41 | 0.45 | 1.20 | (0.78 | ) | (0.08 | ) | ||||||||||||||||
Total from investment operations | $0.44 | $0.81 | $0.85 | $1.67 | $(0.29 | ) | $0.44 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.34 | ) | $(0.38 | ) | $(0.48 | ) | $(0.31 | ) | $(0.36 | ) | |||||||||||||
From net realized gain on investments | — | (0.15 | ) | (0.04 | ) | — | — | — | ||||||||||||||||
Total distributions declared to shareholders | $— | $(0.49 | ) | $(0.42 | ) | $(0.48 | ) | $(0.31 | ) | $(0.36 | ) | |||||||||||||
Net asset value, end of period (x) | $13.29 | $12.85 | $12.53 | $12.10 | $10.91 | $11.51 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 3.42 | (n) | 6.48 | 7.20 | 15.91 | (2.64 | ) | 3.92 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.81 | (a) | 0.82 | 0.84 | 0.87 | 0.99 | 1.03 | |||||||||||||||||
Expenses after expense reductions (f) | 0.81 | (a) | 0.82 | 0.84 | 0.87 | 0.89 | 0.93 | |||||||||||||||||
Net investment income | 2.74 | (a) | 3.13 | 3.20 | 4.07 | 4.37 | 4.55 | |||||||||||||||||
Portfolio turnover | 54(n | ) | 60 | 66 | 113 | 115 | 74 | |||||||||||||||||
Net assets at end of period (000 omitted) | $542,593 | $406,273 | $211,077 | $44,776 | $14,518 | $18,347 |
See Notes to Financial Statements
15
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MFS Research Bond Series
Financial Highlights – continued
(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. |
(x) | The net asset values per share and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
16
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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.
In this reporting period the fund adopted FASB Accounting Standards Update 2011-04, Fair Value Measurement (Topic 820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 seeks to improve the comparability of fair value measurements as presented and disclosed in financial statements prepared in accordance with U.S. GAAP and International Financial Reporting Standards (IFRS) by providing common requirements for fair value measurement and disclosure.
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11, Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. Although still evaluating the potential impacts of ASU 2011-11 to the fund, management expects that the impact of the fund’s adoption will be limited to additional financial statement disclosures.
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.
17
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MFS Research Bond 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, 2012 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 | $— | $221,318,338 | $— | $221,318,338 | ||||||||||||
Non-U.S. Sovereign Debt | — | 12,617,012 | — | 12,617,012 | ||||||||||||
Municipal Bonds | — | 7,273,109 | — | 7,273,109 | ||||||||||||
Corporate Bonds | — | 278,051,749 | — | 278,051,749 | ||||||||||||
Residential Mortgage-Backed Securities | — | 239,298,598 | — | 239,298,598 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 46,745,472 | — | 46,745,472 | ||||||||||||
Asset-Backed Securities (including CDOs) | — | 23,146,172 | — | 23,146,172 | ||||||||||||
Foreign Bonds | — | 62,790,520 | — | 62,790,520 | ||||||||||||
Mutual Funds | 63,771,791 | — | — | 63,771,791 | ||||||||||||
Total Investments | $63,771,791 | $891,240,970 | $— | $955,012,761 |
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.
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. 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.
The fund purchased or sold debt securities on a when-issued or delayed delivery basis, or in a “To Be Announced” (TBA) or “forward commitment” transaction with delivery or payment to occur at a later date beyond the normal settlement period. TBA securities resulting from these transactions are included in the Portfolio of Investments. At the time a fund enters into a commitment to purchase or sell a security, the transaction is recorded and the value of the security acquired is reflected in the fund’s net asset value. The price of such security and the date that the security will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the security may vary with market fluctuations. No interest accrues to the fund until payment takes place. At the time that a fund enters into this type of transaction, the fund is required to have sufficient cash and/or liquid securities to
18
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MFS Research Bond Series
Notes to Financial Statements (unaudited) – continued
cover its commitments. Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract’s terms, or if the issuer does not issue the securities due to political, economic or other factors. Additionally, losses may arise due to declines in the value of the securities prior to settlement date.
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, 2012, 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, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Foreign taxes 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:
12/31/11 | ||||
Ordinary income (including any short-term capital gains) | $24,586,584 | |||
Long-term capital gains | 2,046,749 | |||
Total distributions | $26,633,333 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/12 | ||||
Cost of investments | $921,507,948 | |||
Gross appreciation | 36,808,861 | |||
Gross depreciation | (3,304,048 | ) | ||
Net unrealized appreciation (depreciation) | $33,504,813 | |||
As of 12/31/11 | ||||
Undistributed ordinary income | 27,594,420 | |||
Undistributed long-term capital gain | 4,038,287 | |||
Other temporary differences | (120,559 | ) | ||
Net unrealized appreciation (depreciation) | 25,381,017 |
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 | From net realized gain on investments | |||||||||||||||
Six months ended 6/30/12 | Year ended 12/31/11 | Six months ended 6/30/12 | Year ended 12/31/11 | |||||||||||||
Initial Class | $— | $9,511,956 | $— | $4,094,590 | ||||||||||||
Service Class | — | 9,013,393 | — | 4,013,394 | ||||||||||||
Total | $— | $18,525,349 | $— | $8,107,984 |
(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.
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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 0.70% 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 until April 30, 2013. For the six months ended June 30, 2012, 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, 2012, the fee was $43,039, which equated to 0.0102% 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, 2012, these costs amounted to $218.
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, 2012 was equivalent to an annual effective rate of 0.0161% 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, 2012, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $4,218 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 $2,129, 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 | $404,462,586 | $270,228,096 | ||||||
Investments (non-U.S. Government securities) | $201,808,846 | $161,583,296 |
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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 6/30/12 | Year ended 12/31/11 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 2,511,716 | $33,380,103 | 5,485,570 | $70,722,201 | ||||||||||||
Service Class | 11,081,116 | 145,010,494 | 17,888,039 | 228,414,619 | ||||||||||||
13,592,832 | $178,390,597 | 23,373,609 | $299,136,820 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 1,058,875 | $13,606,546 | ||||||||||||
Service Class | — | — | 1,024,924 | 13,026,787 | ||||||||||||
— | $— | 2,083,799 | $26,633,333 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (2,720,874 | ) | $(36,003,325 | ) | (7,675,364 | ) | $(98,873,980 | ) | ||||||||
Service Class | (1,849,456 | ) | (24,264,720 | ) | (4,145,419 | ) | (52,896,432 | ) | ||||||||
(4,570,330 | ) | $(60,268,045 | ) | (11,820,783 | ) | $(151,770,412 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (209,158 | ) | $(2,623,222 | ) | (1,130,919 | ) | $(14,545,233 | ) | ||||||||
Service Class | 9,231,660 | 120,745,774 | 14,767,544 | 188,544,974 | ||||||||||||
9,022,502 | $118,122,552 | 13,636,625 | $173,999,741 |
(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, 2012, the fund’s commitment fee and interest expense were $2,685 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 an affiliated issuer:
Underlying Affiliated Fund | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 27,904,931 | 344,430,534 | (308,563,674 | ) | 63,771,791 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $17,597 | $63,771,791 |
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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, 2012 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 is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. Copies of the fund’s Form N-Q also may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
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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SEMIANNUAL REPORT
June 30, 2012
MFS® HIGH INCOME SERIES
MFS® Variable Insurance Trust
VHI-SEM
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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
LETTER FROM THE CHAIRMAN AND CEO
Dear Contract Owners:
World financial markets remain a venue of uncertainty. The focus has shifted most recently to the eurozone, where policymakers are attempting to develop a plan that will help debt-laden countries and prevent their woes from spreading across the region. Volatility is likely to continue as investors test the resolve of European officials to make the tough decisions needed to solve the crisis. A slowing in the Chinese economy has added another layer of trepidation, as investors worry that the primary engine of global growth may be sputtering.
The U.S. economy is experiencing a period of growth. However, markets have been jittery in reaction to events in Europe and ahead of the U.S. presidential election. Voters in the United States are watching the economy closely and waiting to see if Congress agrees to cut the budget and extend the Bush administration tax cuts. Failure to do so could ultimately send the U.S. economy back into recession.
Amid this global uncertainty, managing risk becomes a top priority for investors and their advisors. At MFS® our global research platform is designed to ensure the smooth functioning of our investment process in all business climates. Real-time collaboration across the globe is vital in periods of heightened volatility and economic uncertainty. At MFS our investment staff shares ideas and evaluates opportunities across geographies, across both fundamental and quantitative disciplines, and across companies’ entire capital structure. We employ this uniquely collaborative approach to build better insights for our clients.
We, like our investors, are 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 emphasize the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with investment advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2012
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 | 8.5% | |||
Medical & Health Technology & Services | 6.0% | |||
Broadcasting | 5.8% | |||
Utilities – Electric Power | 5.2% | |||
Gaming & Lodging | 4.3% |
Composition including fixed income credit quality (a)(i) | ||||
A | 0.3% | |||
BBB | 5.8% | |||
BB | 32.4% | |||
B | 43.5% | |||
CCC | 14.2% | |||
CC | 0.1% | |||
C | 0.1% | |||
D | 0.1% | |||
Not Rated | 0.3% | |||
Non-Fixed Income | 1.3% | |||
Cash & Other | 1.9% | |||
Portfolio facts (i) | ||||
Average Duration (d) | 4.1 | |||
Average Effective Maturity (m) | 7.1 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). Securities rated BBB or higher are considered investment grade. All ratings are subject to change. Not Rated includes fixed income securities, including fixed income futures contracts, 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 is not rated by these agencies. |
(d) | Duration is a measure of how much a bond’s price is likely to fluctuate with general changes in interest rates, e.g., if rates rise 1.00%, a bond with a 5-year duration is likely to lose about 5.00% of its value due to the interest rate move. |
(i) | For purposes of this presentation, the components include the market value of securities, and reflect the impact of the equivalent exposure of derivative positions, if any. These amounts may be negative from time to time. 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 6/30/12.
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, 2012 through June 30, 2012
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, 2012 through June 30, 2012.
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 1/01/12 | Ending Account Value 6/30/12 | Expenses Paid During Period (p) 1/01/12-6/30/12 | ||||||||||||||
Initial Class | Actual | 0.80% | $1,000.00 | $1,067.55 | $4.11 | |||||||||||||
Hypothetical (h) | 0.80% | $1,000.00 | $1,020.89 | $4.02 | ||||||||||||||
Service Class | Actual | 1.05% | $1,000.00 | $1,066.67 | $5.40 | |||||||||||||
Hypothetical (h) | 1.05% | $1,000.00 | $1,019.64 | $5.27 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
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MFS High Income Series
PORTFOLIO OF INVESTMENTS – 6/30/12 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
BONDS – 94.7% | ||||||||
Aerospace – 2.0% | ||||||||
BE Aerospace, Inc., 8.5%, 2018 | $ | 410,000 | $ | 448,400 | ||||
Bombardier, Inc., 7.5%, 2018 (n) | 1,370,000 | 1,501,863 | ||||||
Bombardier, Inc., 7.75%, 2020 (n) | 550,000 | 611,875 | ||||||
CPI International, Inc., 8%, 2018 | 1,040,000 | 937,300 | ||||||
Heckler & Koch GmbH, 9.5%, 2018 (z) | EUR | 386,000 | 356,592 | |||||
Huntington Ingalls Industries, Inc., 7.125%, 2021 | $ | 1,090,000 | 1,139,050 | |||||
Kratos Defense & Security Solutions, Inc., 10%, 2017 | 1,040,000 | 1,120,600 | ||||||
|
| |||||||
$ | 6,115,680 | |||||||
|
| |||||||
Apparel Manufacturers – 0.9% | ||||||||
Hanesbrands, Inc., 8%, 2016 | $ | 230,000 | $ | 253,288 | ||||
Hanesbrands, Inc., 6.375%, 2020 | 535,000 | 563,088 | ||||||
Jones Group, Inc., 6.875%, 2019 | 610,000 | 585,600 | ||||||
Levi Strauss & Co., 6.875%, 2022 (n) | 165,000 | 169,331 | ||||||
Phillips-Van Heusen Corp., 7.375%, 2020 | 1,065,000 | 1,179,488 | ||||||
|
| |||||||
$ | 2,750,795 | |||||||
|
| |||||||
Asset-Backed & Securitized – 0.5% | ||||||||
Arbor Realty Mortgage Securities, CDO, FRN, 2.765%, 2038 (z) | $ | 568,229 | $ | 142,057 | ||||
Citigroup Commercial Mortgage Trust, FRN, 5.888%, 2049 | 985,952 | 254,434 | ||||||
Crest Ltd., CDO, 7%, 2040 (a)(p) | 972,241 | 48,612 | ||||||
CWCapital Cobalt Ltd., CDO, 6.23%, 2045 (a)(p)(z) | 1,164,584 | 11,646 | ||||||
CWCapital Cobalt Ltd., CDO, “F”, FRN, 1.765%, 2050 (z) | 521,248 | 10,425 | ||||||
First Union National Bank Commercial Mortgage Trust, 6.75%, 2032 | 726,303 | 392,360 | ||||||
G-Force LLC, CDO, “A2”, 4.83%, 2036 (z) | 572,913 | 547,132 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., “C”, FRN, 6.251%, 2051 | 750,000 | 171,789 | ||||||
|
| |||||||
$ | 1,578,455 | |||||||
|
| |||||||
Automotive – 3.4% | ||||||||
Accuride Corp., 9.5%, 2018 | $ | 1,515,000 | $ | 1,560,450 | ||||
Allison Transmission, Inc., 7.125%, 2019 (n) | 900,000 | 938,250 | ||||||
Chrysler Group LLC/CG Co-Issuer, Inc., 8.25%, 2021 | 345,000 | 354,488 | ||||||
Ford Motor Co., 7.45%, 2031 | 320,000 | 400,800 | ||||||
Ford Motor Credit Co. LLC, 12%, 2015 | 1,926,000 | 2,393,055 | ||||||
Ford Motor Credit Co. LLC, 8.125%, 2020 | 395,000 | 482,460 | ||||||
General Motors Financial Co., Inc., 6.75%, 2018 | 905,000 | 989,278 | ||||||
Goodyear Tire & Rubber Co., 7%, 2022 | 425,000 | 424,469 | ||||||
IDQ Holdings, Inc., 11.5%, 2017 (z) | 360,000 | 374,400 | ||||||
Jaguar Land Rover PLC, 7.75%, 2018 (n) | 200,000 | 206,000 | ||||||
Jaguar Land Rover PLC, 8.125%, 2021 (n) | 1,640,000 | 1,693,300 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Automotive – continued | ||||||||
Lear Corp., 8.125%, 2020 | $ | 625,000 | $ | 700,000 | ||||
|
| |||||||
$ | 10,516,950 | |||||||
|
| |||||||
Basic Industry – 0.3% | ||||||||
Trimas Corp., 9.75%, 2017 | $ | 840,000 | $ | 924,000 | ||||
|
| |||||||
Broadcasting – 5.4% | ||||||||
Allbritton Communications Co., 8%, 2018 | $ | 490,000 | $ | 512,050 | ||||
AMC Networks, Inc., 7.75%, 2021 (n) | 631,000 | 695,678 | ||||||
Clear Channel Communications, Inc., 9%, 2021 | 763,000 | 663,810 | ||||||
Clear Channel Worldwide Holdings, Inc., 7.625%, 2020 (n) | 535,000 | 522,963 | ||||||
Clear Channel Worldwide Holdings, Inc., “A”, 7.625%, 2020 (n) | 50,000 | 47,875 | ||||||
Hughes Network Systems LLC, 7.625%, 2021 | 645,000 | 701,438 | ||||||
Inmarsat Finance PLC, 7.375%, 2017 (n) | 860,000 | 918,050 | ||||||
Intelsat Bermuda Ltd., 11.25%, 2017 | 1,735,000 | 1,787,050 | ||||||
Intelsat Bermuda Ltd., 11.5%, 2017 (p) | 1,360,000 | 1,404,200 | ||||||
Intelsat Jackson Holdings Ltd., 11.25%, 2016 | 481,000 | 503,848 | ||||||
LBI Media, Inc., 8.5%, 2017 (z) | 645,000 | 133,838 | ||||||
Liberty Media Corp., 8.5%, 2029 | 1,215,000 | 1,251,450 | ||||||
Liberty Media Corp., 8.25%, 2030 | 160,000 | 164,400 | ||||||
Local TV Finance LLC, 9.25%, 2015 (p)(z) | 772,946 | 779,709 | ||||||
Newport Television LLC, 13%, 2017 (n)(p) | 542,770 | 561,767 | ||||||
Nexstar Broadcasting Group, Inc., 8.875%, 2017 | 430,000 | 454,188 | ||||||
Sinclair Broadcast Group, Inc., 9.25%, 2017 (n) | 585,000 | 646,425 | ||||||
Sinclair Broadcast Group, Inc., 8.375%, 2018 | 175,000 | 190,750 | ||||||
SIRIUS XM Radio, Inc., 13%, 2013 (n) | 300,000 | 334,500 | ||||||
SIRIUS XM Radio, Inc., 8.75%, 2015 (n) | 595,000 | 669,375 | ||||||
SIRIUS XM Radio, Inc., 7.625%, 2018 (n) | 835,000 | 897,625 | ||||||
Townsquare Radio LLC, 9%, 2019 (z) | 410,000 | 428,450 | ||||||
Univision Communications, Inc., 6.875%, 2019 (n) | 595,000 | 612,850 | ||||||
Univision Communications, Inc., 7.875%, 2020 (n) | 820,000 | 877,400 | ||||||
Univision Communications, Inc., 8.5%, 2021 (n) | 675,000 | 680,063 | ||||||
|
| |||||||
$ | 16,439,752 | |||||||
|
| |||||||
Brokerage & Asset Managers – 0.5% | ||||||||
E*TRADE Financial Corp., 12.5%, 2017 | $ | 1,400,000 | $ | 1,604,750 | ||||
|
| |||||||
Building – 2.0% | ||||||||
Building Materials Holding Corp., 6.875%, 2018 (n) | $ | 815,000 | $ | 865,938 | ||||
Building Materials Holding Corp., 7%, 2020 (n) | 480,000 | 517,200 |
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Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Building – continued | ||||||||
Building Materials Holding Corp., 6.75%, 2021 (n) | $ | 445,000 | $ | 476,150 | ||||
CEMEX S.A., 9.25%, 2020 | 1,110,000 | 933,788 | ||||||
HD Supply, Inc., 8.125%, 2019 (n) | 325,000 | 351,000 | ||||||
Masonite International Corp., 8.25%, 2021 (n) | 960,000 | 988,800 | ||||||
Nortek, Inc., 8.5%, 2021 | 1,300,000 | 1,270,750 | ||||||
Roofing Supply Group LLC/Roofing Supply Finance, Inc., 10%, 2020 (z) | 320,000 | 334,400 | ||||||
USG Corp., 7.875%, 2020 (n) | 490,000 | 507,150 | ||||||
|
| |||||||
$ | 6,245,176 | |||||||
|
| |||||||
Business Services – 1.5% | ||||||||
Ceridian Corp., 12.25%, 2015 (p) | $ | 620,000 | $ | 601,400 | ||||
Ceridian Corp., 8.875%, 2019 (z) | 200,000 | 206,500 | ||||||
Fidelity National Information Services, Inc., 7.625%, 2017 | 425,000 | 468,563 | ||||||
Fidelity National Information Services, Inc., 5%, 2022 (n) | 415,000 | 422,263 | ||||||
iGate Corp., 9%, 2016 | 1,072,000 | 1,147,040 | ||||||
Iron Mountain, Inc., 8.375%, 2021 | 1,170,000 | 1,269,450 | ||||||
SunGard Data Systems, Inc., 10.25%, 2015 | 139,000 | 142,823 | ||||||
SunGard Data Systems, Inc., 7.375%, 2018 | 315,000 | 337,838 | ||||||
|
| |||||||
$ | 4,595,877 | |||||||
|
| |||||||
Cable TV – 3.8% | ||||||||
Bresnan Broadband Holdings LLC, 8%, 2018 (n) | $ | 270,000 | $ | 282,150 | ||||
CCH II LLC, 13.5%, 2016 | 620,000 | 691,300 | ||||||
CCO Holdings LLC, 7.875%, 2018 | 1,135,000 | 1,234,313 | ||||||
CCO Holdings LLC, 8.125%, 2020 | 1,640,000 | 1,828,600 | ||||||
Cequel Communications Holdings, 8.625%, 2017 (n) | 585,000 | 630,338 | ||||||
DISH DBS Corp., 6.75%, 2021 | 530,000 | 572,400 | ||||||
EchoStar Corp., 7.125%, 2016 | 825,000 | 905,438 | ||||||
Telenet Finance Luxembourg, 6.375%, 2020 (n) | EUR | 270,000 | 339,122 | |||||
UPC Holding B.V., 9.875%, 2018 (n) | $ | 685,000 | 750,075 | |||||
UPCB Finance III Ltd., 6.625%, 2020 (n) | 1,472,000 | 1,494,080 | ||||||
Videotron Ltee, 5%, 2022 (n) | 530,000 | 537,950 | ||||||
Virgin Media Finance PLC, 9.5%, 2016 | 170,000 | 189,550 | ||||||
Virgin Media Finance PLC, 8.375%, 2019 | 120,000 | 134,850 | ||||||
Virgin Media Finance PLC, 5.25%, 2022 | 1,020,000 | 1,042,950 | ||||||
Ziggo Bond Co. B.V., 8%, 2018 (n) | EUR | 700,000 | 961,147 | |||||
|
| |||||||
$ | 11,594,263 | |||||||
|
| |||||||
Chemicals – 3.0% | ||||||||
Celanese U.S. Holdings LLC, 6.625%, 2018 | $ | 835,000 | $ | 908,063 | ||||
Hexion U.S. Finance Corp./Hexion Nova Scotia Finance, 8.875%, 2018 | 1,025,000 | 1,045,500 | ||||||
Hexion U.S. Finance Corp./Hexion Nova Scotia Finance, 9%, 2020 | 270,000 | 232,875 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Chemicals – continued | ||||||||
Huntsman International LLC, 8.625%, 2021 | $ | 730,000 | $ | 823,075 | ||||
INEOS Finance PLC, 8.375%, 2019 (n) | 660,000 | 683,100 | ||||||
INEOS Group Holdings PLC, 8.5%, 2016 (n) | 880,000 | 807,400 | ||||||
LyondellBasell Industries N.V., 5%, 2019 (n) | 455,000 | 477,181 | ||||||
LyondellBasell Industries N.V., 6%, 2021 (n) | 805,000 | 883,488 | ||||||
Momentive Performance Materials, Inc., 12.5%, 2014 | 1,505,000 | 1,568,963 | ||||||
Momentive Performance Materials, Inc., 11.5%, 2016 | 907,000 | 675,715 | ||||||
Polypore International, Inc., 7.5%, 2017 | 975,000 | 1,034,719 | ||||||
|
| |||||||
$ | 9,140,079 | |||||||
|
| |||||||
Computer Software – 1.1% | ||||||||
Lawson Software, Inc., 11.5%, 2018 (n) | $ | 1,100,000 | $ | 1,243,000 | ||||
Lawson Software, Inc., 9.375%, 2019 (n) | 280,000 | 298,900 | ||||||
Syniverse Holdings, Inc., 9.125%, 2019 | 1,075,000 | 1,166,375 | ||||||
TransUnion Holding Co., Inc., 9.625%, 2018 (n)(p) | 410,000 | 442,800 | ||||||
TransUnion LLC/TransUnion Financing Corp., 11.375%, 2018 | 195,000 | 229,369 | ||||||
|
| |||||||
$ | 3,380,444 | |||||||
|
| |||||||
Computer Software – Systems – 1.0% | ||||||||
Audatex North America, Inc., 6.75%, 2018 (n) | $ | 645,000 | $ | 678,863 | ||||
CDW LLC/CDW Finance Corp., 12.535%, 2017 | 465,000 | 504,525 | ||||||
CDW LLC/CDW Finance Corp., 8.5%, 2019 | 1,295,000 | 1,379,175 | ||||||
DuPont Fabros Technology, Inc., REIT, 8.5%, 2017 | 560,000 | 616,000 | ||||||
|
| |||||||
$ | 3,178,563 | |||||||
|
| |||||||
Conglomerates – 1.5% | ||||||||
Amsted Industries, Inc., 8.125%, 2018 (n) | $ | 1,710,000 | $ | 1,808,325 | ||||
Dynacast International LLC, 9.25%, 2019 (z) | 745,000 | 772,938 | ||||||
Griffon Corp., 7.125%, 2018 | 1,280,000 | 1,299,200 | ||||||
Tomkins LLC/Tomkins, Inc., 9%, 2018 | 577,000 | 641,913 | ||||||
|
| |||||||
$ | 4,522,376 | |||||||
|
| |||||||
Consumer Products – 1.1% | ||||||||
ACCO Brands Corp., 6.75%, 2020 | $ | 165,000 | $ | 174,075 | ||||
Easton-Bell Sports, Inc., 9.75%, 2016 | 890,000 | 975,663 | ||||||
Elizabeth Arden, Inc., 7.375%, 2021 | 910,000 | 998,725 | ||||||
FGI Operating Co./FGI Finance, Inc., 7.875%, 2020 (z) | 85,000 | 88,613 | ||||||
Jarden Corp., 7.5%, 2020 | 770,000 | 841,225 | ||||||
Libbey Glass, Inc., 6.875%, 2020 (z) | 320,000 | 328,800 | ||||||
Prestige Brands, Inc., 8.125%, 2020 (z) | 95,000 | 104,263 | ||||||
|
| |||||||
$ | 3,511,364 | |||||||
|
| |||||||
Consumer Services – 0.6% | ||||||||
Service Corp. International, 6.75%, 2015 | $ | 565,000 | $ | 613,025 | ||||
Service Corp. International, 7%, 2017 | 1,015,000 | 1,129,188 | ||||||
|
| |||||||
$ | 1,742,213 | |||||||
|
|
5
Table of Contents
MFS High Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Containers – 1.9% | ||||||||
Ardagh Packaging Finance PLC, 9.125%, 2020 (n) | $ | 690,000 | $ | 724,500 | ||||
Ball Corp., 5%, 2022 | 521,000 | 541,840 | ||||||
Consolidated Container Co. LLC/Consolidated Container Finance, Inc., 10.125%, 2020 (z) | 225,000 | 231,750 | ||||||
Exopack Holding Corp., 10%, 2018 | 545,000 | 546,363 | ||||||
Greif, Inc., 6.75%, 2017 | 1,070,000 | 1,160,950 | ||||||
Reynolds Group, 7.75%, 2016 (n) | 470,000 | 494,675 | ||||||
Reynolds Group, 7.125%, 2019 (n) | 695,000 | 728,013 | ||||||
Reynolds Group, 9.875%, 2019 (n) | 330,000 | 342,375 | ||||||
Reynolds Group, 8.5%, 2021 (n) | 615,000 | 584,250 | ||||||
Sealed Air Corp., 8.125%, 2019 (n) | 165,000 | 183,975 | ||||||
Sealed Air Corp., 8.375%, 2021 (n) | 165,000 | 186,450 | ||||||
|
| |||||||
$ | 5,725,141 | |||||||
|
| |||||||
Defense Electronics – 0.7% | ||||||||
Ducommun, Inc., 9.75%, 2018 | $ | 845,000 | $ | 889,363 | ||||
ManTech International Corp., 7.25%, 2018 | 720,000 | 756,000 | ||||||
MOOG, Inc., 7.25%, 2018 | 540,000 | 572,400 | ||||||
|
| |||||||
$ | 2,217,763 | |||||||
|
| |||||||
Electrical Equipment – 0.2% | ||||||||
Avaya, Inc., 9.75%, 2015 | $ | 615,000 | $ | 508,913 | ||||
Avaya, Inc., 7%, 2019 (z) | 250,000 | 231,875 | ||||||
|
| |||||||
$ | 740,788 | |||||||
|
| |||||||
Electronics – 0.9% | ||||||||
Freescale Semiconductor, Inc., 9.25%, 2018 (n) | $ | 1,170,000 | $ | 1,251,900 | ||||
Nokia Corp., 5.375%, 2019 | 335,000 | 263,813 | ||||||
NXP B.V., 9.75%, 2018 (n) | 108,000 | 123,120 | ||||||
Sensata Technologies B.V., 6.5%, 2019 (n) | 960,000 | 991,200 | ||||||
|
| |||||||
$ | 2,630,033 | |||||||
|
| |||||||
Energy – Independent – 8.4% | ||||||||
ATP Oil & Gas Corp., 11.875%, 2015 | $ | 400,000 | $ | 186,000 | ||||
BreitBurn Energy Partners LP, 8.625%, 2020 | 445,000 | 470,588 | ||||||
BreitBurn Energy Partners LP, 7.875%, 2022 (n) | 515,000 | 515,000 | ||||||
Carrizo Oil & Gas, Inc., 8.625%, 2018 | 385,000 | 402,325 | ||||||
Chaparral Energy, Inc., 7.625%, 2022 (n) | 505,000 | 515,100 | ||||||
Chesapeake Energy Corp., 6.875%, 2020 | 525,000 | 517,125 | ||||||
Concho Resources, Inc., 8.625%, 2017 | 625,000 | 689,063 | ||||||
Concho Resources, Inc., 6.5%, 2022 | 770,000 | 800,800 | ||||||
Continental Resources, Inc., 8.25%, 2019 | 925,000 | 1,033,688 | ||||||
Denbury Resources, Inc., 8.25%, 2020 | 1,270,000 | 1,390,650 | ||||||
Energy XXI Gulf Coast, Inc., 9.25%, 2017 | 1,425,000 | 1,524,750 | ||||||
Everest Acquisition LLC/Everest Acquisition Finance, Inc., 9.375%, 2020 (n) | 1,990,000 | 2,062,138 | ||||||
EXCO Resources, Inc., 7.5%, 2018 | 1,305,000 | 1,128,825 | ||||||
Harvest Operations Corp., 6.875%, 2017 (n) | 1,245,000 | 1,322,813 | ||||||
Hilcorp Energy I/Hilcorp Finance Co., 8%, 2020 (n) | 350,000 | 377,125 | ||||||
Laredo Petroleum, Inc., 9.5%, 2019 | 615,000 | 685,725 | ||||||
LINN Energy LLC, 6.5%, 2019 (n) | 445,000 | 440,550 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Energy – Independent – continued | ||||||||
LINN Energy LLC, 8.625%, 2020 | $ | 535,000 | $ | 576,463 | ||||
LINN Energy LLC, 7.75%, 2021 | 546,000 | 570,570 | ||||||
Newfield Exploration Co., 6.625%, 2016 | 855,000 | 876,375 | ||||||
Newfield Exploration Co., 6.875%, 2020 | 1,150,000 | 1,224,750 | ||||||
OGX Petroleo e Gas Participacoes S.A., 8.5%, 2018 (n) | 1,659,000 | 1,476,510 | ||||||
Pioneer Natural Resources Co., 7.5%, 2020 | 605,000 | 748,562 | ||||||
Plains Exploration & Production Co., 8.625%, 2019 | 675,000 | 745,031 | ||||||
QEP Resources, Inc., 6.875%, 2021 | 1,265,000 | 1,404,150 | ||||||
Range Resources Corp., 8%, 2019 | 1,045,000 | 1,141,663 | ||||||
SandRidge Energy, Inc., 8%, 2018 (n) | 1,595,000 | 1,614,938 | ||||||
SM Energy Co., 6.5%, 2021 | 890,000 | 905,575 | ||||||
Whiting Petroleum Corp., 6.5%, 2018 | 245,000 | 260,925 | ||||||
|
| |||||||
$ | 25,607,777 | |||||||
|
| |||||||
Energy – Integrated – 0.1% | ||||||||
Pacific Rubiales Energy Corp., 7.25%, 2021 (n) | $ | 405,000 | $ | 439,425 | ||||
|
| |||||||
Engineering – Construction – 0.3% | ||||||||
B-Corp. Merger Sub, Inc., 8.25%, 2019 (n) | $ | 800,000 | $ | 794,000 | ||||
|
| |||||||
Entertainment – 1.1% | ||||||||
AMC Entertainment, Inc., 8.75%, 2019 | $ | 440,000 | $ | 471,900 | ||||
AMC Entertainment, Inc., 9.75%, 2020 | 725,000 | 783,000 | ||||||
Cedar Fair LP, 9.125%, 2018 | 595,000 | 660,450 | ||||||
Cinemark USA, Inc., 8.625%, 2019 | 760,000 | 841,700 | ||||||
NAI Entertainment Holdings LLC, 8.25%, 2017 (n) | 450,000 | 497,250 | ||||||
|
| |||||||
$ | 3,254,300 | |||||||
|
| |||||||
Financial Institutions – 4.6% | ||||||||
Ally Financial, Inc., 5.5%, 2017 | $ | 1,295,000 | $ | 1,315,385 | ||||
CIT Group, Inc., 5.25%, 2014 (n) | 795,000 | 822,825 | ||||||
CIT Group, Inc., 7%, 2017 (z) | 380,072 | 380,784 | ||||||
CIT Group, Inc., 5.25%, 2018 | 680,000 | 702,100 | ||||||
CIT Group, Inc., 6.625%, 2018 (n) | 1,189,000 | 1,281,148 | ||||||
CIT Group, Inc., 5.5%, 2019 (n) | 1,086,000 | 1,115,865 | ||||||
Credit Acceptance Corp., 9.125%, 2017 | 815,000 | 884,275 | ||||||
GMAC, Inc., 8%, 2031 | 175,000 | 205,188 | ||||||
Icahn Enterprises LP, 8%, 2018 | 926,000 | 983,875 | ||||||
International Lease Finance Corp., 4.875%, 2015 | 415,000 | 417,054 | ||||||
International Lease Finance Corp., 8.625%, 2015 | 420,000 | 464,100 | ||||||
International Lease Finance Corp., 7.125%, 2018 (n) | 928,000 | 1,023,120 | ||||||
Nationstar Mortgage LLC/Capital Corp., 10.875%, 2015 | 1,325,000 | 1,431,000 | ||||||
Nationstar Mortgage LLC/Capital Corp., 9.625%, 2019 (n) | 350,000 | 370,125 | ||||||
PHH Corp., 9.25%, 2016 | 865,000 | 919,063 | ||||||
SLM Corp., 8.45%, 2018 | 295,000 | 330,400 | ||||||
SLM Corp., 8%, 2020 | 1,220,000 | 1,335,900 |
6
Table of Contents
MFS High Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Financial Institutions – continued | ||||||||
SLM Corp., 7.25%, 2022 | $ | 210,000 | $ | 222,075 | ||||
|
| |||||||
$ | 14,204,282 | |||||||
|
| |||||||
Food & Beverages – 1.6% | ||||||||
ARAMARK Corp., 8.5%, 2015 | $ | 355,000 | $ | 363,435 | ||||
B&G Foods, Inc., 7.625%, 2018 | 1,365,000 | 1,467,375 | ||||||
Constellation Brands, Inc., 7.25%, 2016 | 240,000 | 271,800 | ||||||
JBS USA LLC/JBS USA Finance, 8.25%, 2020 (n) | 520,000 | 505,700 | ||||||
Pinnacle Foods Finance LLC, 9.25%, 2015 | 1,195,000 | 1,227,863 | ||||||
Pinnacle Foods Finance LLC, 8.25%, 2017 | 275,000 | 290,813 | ||||||
TreeHouse Foods, Inc., 7.75%, 2018 | 850,000 | 921,188 | ||||||
|
| |||||||
$ | 5,048,174 | |||||||
|
| |||||||
Forest & Paper Products – 1.6% | ||||||||
Boise, Inc., 8%, 2020 | $ | 665,000 | $ | 734,825 | ||||
Cascades, Inc., 7.75%, 2017 | 695,000 | 700,213 | ||||||
Georgia-Pacific Corp., 8%, 2024 | 590,000 | 788,062 | ||||||
Graphic Packaging Holding Co., 7.875%, 2018 | 415,000 | 456,500 | ||||||
Millar Western Forest Products Ltd., 8.5%, 2021 | 200,000 | 153,000 | ||||||
Smurfit Kappa Group PLC, 7.75%, 2019 (n) | EUR | 715,000 | 970,432 | |||||
Tembec Industries, Inc., 11.25%, 2018 | $ | 480,000 | 478,800 | |||||
Xerium Technologies, Inc., 8.875%, 2018 | 735,000 | 578,813 | ||||||
|
| |||||||
$ | 4,860,645 | |||||||
|
| |||||||
Gaming & Lodging – 4.2% | ||||||||
Boyd Gaming Corp., 7.125%, 2016 | $ | 620,000 | $ | 598,300 | ||||
Caesars Operating Escrow LLC, 8.5%, 2020 (n) | 250,000 | 251,875 | ||||||
Choice Hotels International, Inc., 5.75%, 2022 | 150,000 | 156,837 | ||||||
Fontainebleau Las Vegas Holdings LLC, 10.25%, 2015 (a)(d)(n) | 1,190,000 | 744 | ||||||
GWR Operating Partnership LLP, 10.875%, 2017 | 470,000 | 526,400 | ||||||
Harrah’s Operating Co., Inc., 11.25%, 2017 | 1,945,000 | 2,122,481 | ||||||
Harrah’s Operating Co., Inc., 10%, 2018 | 461,000 | 305,413 | ||||||
Host Hotels & Resorts, Inc., 5.25%, 2022 (z) | 495,000 | 507,375 | ||||||
MGM Mirage, 10.375%, 2014 | 670,000 | 755,425 | ||||||
MGM Mirage, 6.625%, 2015 | 360,000 | 370,800 | ||||||
MGM Mirage, 7.5%, 2016 | 180,000 | 186,300 | ||||||
MGM Resorts International, 11.375%, 2018 | 1,100,000 | 1,295,250 | ||||||
MGM Resorts International, 9%, 2020 | 520,000 | 577,200 | ||||||
Penn National Gaming, Inc., 8.75%, 2019 | 1,450,000 | 1,605,875 | ||||||
Pinnacle Entertainment, Inc., 8.75%, 2020 | 700,000 | 766,500 | ||||||
Rivers Pittsburgh Borrower LP/Rivers Pittsburgh Finance Corp., 9.5%, 2019 (z) | 160,000 | 166,200 | ||||||
Seven Seas Cruises S. de R.L., 9.125%, 2019 | 1,180,000 | 1,218,350 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Gaming & Lodging – continued | ||||||||
Wyndham Worldwide Corp., 7.375%, 2020 | $ | 535,000 | $ | 635,926 | ||||
Wynn Las Vegas LLC, 7.75%, 2020 | 820,000 | 908,150 | ||||||
|
| |||||||
$ | 12,955,401 | |||||||
|
| |||||||
Industrial – 1.6% | ||||||||
Altra Holdings, Inc., 8.125%, 2016 | $ | 710,000 | $ | 762,363 | ||||
Dematic S.A., 8.75%, 2016 (z) | 1,450,000 | 1,518,875 | ||||||
Hillman Group, Inc., 10.875%, 2018 | 565,000 | 597,488 | ||||||
Hyva Global B.V., 8.625%, 2016 (n) | 695,000 | 590,750 | ||||||
Mueller Water Products, Inc., 8.75%, 2020 | 779,000 | 864,690 | ||||||
Rexel S.A., 6.125%, 2019 (n) | 545,000 | 549,088 | ||||||
|
| |||||||
$ | 4,883,254 | |||||||
|
| |||||||
Insurance – 1.4% | ||||||||
American International Group, Inc., 8.25%, 2018 | $ | 890,000 | $ | 1,074,396 | ||||
American International Group, Inc., 8.175% to 2038, FRN to 2068 | 2,420,000 | 2,625,700 | ||||||
MetLife, Inc., 9.25% to 2038, FRN to 2068 (n) | 500,000 | 612,500 | ||||||
|
| |||||||
$ | 4,312,596 | |||||||
|
| |||||||
Insurance – Health – 0.2% | ||||||||
AMERIGROUP Corp., 7.5%, 2019 | $ | 555,000 | $ | 596,625 | ||||
|
| |||||||
Insurance – Property & Casualty – 0.9% | ||||||||
Liberty Mutual Group, Inc., 10.75% to 2038, FRN to 2088 (n) | $ | 1,075,000 | $ | 1,462,000 | ||||
XL Group PLC, 6.5% to 2017, FRN to 2049 | 1,415,000 | 1,149,688 | ||||||
|
| |||||||
$ | 2,611,688 | |||||||
|
| |||||||
Machinery & Tools – 1.7% | ||||||||
Ashtead Capital, Inc., 6.5%, 2022 (z) | $ | 235,000 | $ | 235,000 | ||||
Case Corp., 7.25%, 2016 | 545,000 | 599,500 | ||||||
Case New Holland, Inc., 7.875%, 2017 | 1,390,000 | 1,605,450 | ||||||
CNH Capital LLC, 6.25%, 2016 (n) | 255,000 | 272,850 | ||||||
NESCO LLC/NESCO Holdings Corp., 11.75%, 2017 (z) | 625,000 | 640,625 | ||||||
RSC Equipment Rental, Inc., 8.25%, 2021 | 930,000 | 990,450 | ||||||
UR Financing Escrow Corp., 5.75%, 2018 (n) | 455,000 | 473,200 | ||||||
UR Financing Escrow Corp., 7.625%, 2022 (n) | 454,000 | 475,565 | ||||||
|
| |||||||
$ | 5,292,640 | |||||||
|
| |||||||
Major Banks – 0.9% | ||||||||
Bank of America Corp., 5.65%, 2018 | $ | 930,000 | $ | 994,442 | ||||
Royal Bank of Scotland Group PLC, 6.99% to 2017, FRN to 2049 (a)(d)(n) | 530,000 | 408,100 | ||||||
Royal Bank of Scotland Group PLC, 7.648% to 2031, FRN to 2049 | 1,580,000 | 1,264,000 | ||||||
|
| |||||||
$ | 2,666,542 | |||||||
|
| |||||||
Medical & Health Technology & Services – 5.9% | ||||||||
Biomet, Inc., 10%, 2017 | $ | 835,000 | $ | 891,884 | ||||
Biomet, Inc., 10.375%, 2017 (p) | 375,000 | 400,781 | ||||||
Biomet, Inc., 11.625%, 2017 | 605,000 | 652,644 | ||||||
Davita, Inc., 6.375%, 2018 | 1,550,000 | 1,600,375 |
7
Table of Contents
MFS High Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Medical & Health Technology & Services – continued | ||||||||
Davita, Inc., 6.625%, 2020 | $ | 950,000 | $ | 990,375 | ||||
Fresenius Medical Care AG & Co. KGaA, 9%, 2015 (n) | 865,000 | 993,669 | ||||||
Fresenius Medical Care Capital Trust III, 5.625%, 2019 (n) | 735,000 | 766,238 | ||||||
HCA, Inc., 8.5%, 2019 | 2,765,000 | 3,096,800 | ||||||
HCA, Inc., 7.5%, 2022 | 620,000 | 675,800 | ||||||
HCA, Inc., 5.875%, 2022 | 435,000 | 454,575 | ||||||
HealthSouth Corp., 8.125%, 2020 | 1,385,000 | 1,513,113 | ||||||
IASIS Healthcare LLC/IASIS Capital Corp., 8.375%, 2019 | 670,000 | 663,300 | ||||||
Physio-Control International, Inc., 9.875%, 2019 (z) | 595,000 | 633,675 | ||||||
Select Medical Corp., 7.625%, 2015 | 320,000 | 320,400 | ||||||
Teleflex, Inc., 6.875%, 2019 | 545,000 | 579,063 | ||||||
Tenet Healthcare Corp., 9.25%, 2015 | 575,000 | 639,688 | ||||||
Truven Health Analytics, Inc., 10.625%, 2020 (z) | 410,000 | 426,400 | ||||||
Universal Health Services, Inc., 7%, 2018 | 715,000 | 768,625 | ||||||
Universal Hospital Services, Inc., 8.5%, 2015 (p) | 980,000 | 998,988 | ||||||
Universal Hospital Services, Inc., FRN, 4.111%, 2015 | 310,000 | 294,500 | ||||||
Vanguard Health Systems, Inc., 0%, 2016 | 4,000 | 2,660 | ||||||
Vanguard Health Systems, Inc., 8%, 2018 | 535,000 | 547,038 | ||||||
|
| |||||||
$ | 17,910,591 | |||||||
|
| |||||||
Metals & Mining – 1.7% | ||||||||
Arch Coal, Inc., 7.25%, 2020 | $ | 570,000 | $ | 481,650 | ||||
Cloud Peak Energy, Inc., 8.25%, 2017 | 1,505,000 | 1,557,675 | ||||||
Cloud Peak Energy, Inc., 8.5%, 2019 | 755,000 | 783,313 | ||||||
Consol Energy, Inc., 8%, 2017 | 595,000 | 617,313 | ||||||
Consol Energy, Inc., 8.25%, 2020 | 130,000 | 136,500 | ||||||
Fortescue Metals Group Ltd., 8.25%, 2019 (n) | 835,000 | 885,100 | ||||||
Peabody Energy Corp., 6%, 2018 (n) | 420,000 | 417,900 | ||||||
Peabody Energy Corp., 6.25%, 2021 (n) | 420,000 | 415,800 | ||||||
|
| |||||||
$ | 5,295,251 | |||||||
|
| |||||||
Natural Gas – Distribution – 0.4% | ||||||||
AmeriGas Finance LLC, 6.75%, 2020 | $ | 715,000 | $ | 729,300 | ||||
Ferrellgas LP/Ferrellgas Finance Corp., 6.5%, 2021 | 540,000 | 492,750 | ||||||
|
| |||||||
$ | 1,222,050 | |||||||
|
| |||||||
Natural Gas – Pipeline – 2.7% | ||||||||
Atlas Pipeline Partners LP, 8.75%, 2018 | $ | 1,165,000 | $ | 1,243,638 | ||||
Crosstex Energy, Inc., 8.875%, 2018 | 1,435,000 | 1,515,719 | ||||||
El Paso Corp., 7%, 2017 | 985,000 | 1,117,341 | ||||||
El Paso Corp., 7.75%, 2032 | 1,415,000 | 1,590,955 | ||||||
Energy Transfer Equity LP, 7.5%, 2020 | 1,150,000 | 1,262,125 | ||||||
Enterprise Products Partners LP, 8.375% to 2016, FRN to 2066 | 750,000 | 812,813 | ||||||
Enterprise Products Partners LP, 7.034% to 2018, FRN to 2068 | 391,000 | 418,370 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Natural Gas – Pipeline – continued | ||||||||
Rockies Express Pipeline LLC, 5.625%, 2020 (n) | $ | 461,000 | $ | 419,510 | ||||
|
| |||||||
$ | 8,380,471 | |||||||
|
| |||||||
Network & Telecom – 1.6% | ||||||||
Cincinnati Bell, Inc., 8.25%, 2017 | $ | 315,000 | $ | 327,600 | ||||
Citizens Communications Co., 9%, 2031 | 650,000 | 620,750 | ||||||
Eileme 2 AB, 11.625%, 2020 (n) | 686,000 | 704,865 | ||||||
Frontier Communications Corp., 8.125%, 2018 | 190,000 | 201,875 | ||||||
Qwest Communications International, Inc., 7.125%, 2018 (n) | 695,000 | 733,225 | ||||||
Telefonica S.A., 5.877%, 2019 | 230,000 | 205,720 | ||||||
Windstream Corp., 8.125%, 2018 | 215,000 | 231,125 | ||||||
Windstream Corp., 7.75%, 2020 | 1,420,000 | 1,505,200 | ||||||
Windstream Corp., 7.75%, 2021 | 440,000 | 466,400 | ||||||
|
| |||||||
$ | 4,996,760 | |||||||
|
| |||||||
Oil Services – 1.2% | ||||||||
Chesapeake Energy Corp., 6.625%, 2019 (n) | $ | 325,000 | $ | 292,500 | ||||
Dresser-Rand Group, Inc., 6.5%, 2021 | 415,000 | 430,563 | ||||||
Edgen Murray Corp., 12.25%, 2015 | 645,000 | 641,775 | ||||||
Pioneer Energy Services Corp., 9.875%, 2018 | 1,375,000 | 1,443,750 | ||||||
Pioneer Energy Services Corp., 9.875%, 2018 (n) | 80,000 | 84,000 | ||||||
Unit Corp., 6.625%, 2021 | 640,000 | 636,800 | ||||||
|
| |||||||
$ | 3,529,388 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 1.7% | ||||||||
Capital One Financial Corp., 10.25%, 2039 | $ | 1,605,000 | $ | 1,637,100 | ||||
Groupe BPCE S.A., 12.5% to 2019, FRN to 2049 (n) | 710,000 | 714,672 | ||||||
LBG Capital No. 1 PLC, 7.875%, 2020 (n) | 900,000 | 814,500 | ||||||
Santander UK PLC, 8.963% to 2030, FRN to 2049 | 1,965,000 | 1,886,400 | ||||||
|
| |||||||
$ | 5,052,672 | |||||||
|
| |||||||
Pharmaceuticals – 0.7% | ||||||||
Capsugel FinanceCo. SCA, 9.875%, 2019 (n) | EUR | 385,000 | $ | 521,322 | ||||
Endo Health Solutions, Inc., 7%, 2019 | 610,000 | 663,375 | ||||||
Valeant Pharmaceuticals International, Inc., 6.5%, 2016 (n) | 345,000 | 360,525 | ||||||
Valeant Pharmaceuticals International, Inc., 7%, 2020 (n) | 670,000 | 676,700 | ||||||
|
| |||||||
$ | 2,221,922 | |||||||
|
| |||||||
Pollution Control – 0.2% | ||||||||
Heckmann Corp., 9.875%, 2018 (z) | $ | 580,000 | $ | 551,000 | ||||
|
| |||||||
Printing & Publishing – 0.5% | ||||||||
American Media, Inc., 13.5%, 2018 (z) | $ | 94,618 | $ | 88,941 | ||||
Nielsen Finance LLC, 11.5%, 2016 | 501,000 | 569,888 | ||||||
Nielsen Finance LLC, 7.75%, 2018 | 885,000 | 980,138 | ||||||
|
| |||||||
$ | 1,638,967 | |||||||
|
|
8
Table of Contents
MFS High Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Railroad & Shipping – 0.2% | ||||||||
Kansas City Southern de Mexico S.A. de C.V., 6.125%, 2021 | $ | 455,000 | $ | 500,500 | ||||
|
| |||||||
Real Estate – 1.1% | ||||||||
CB Richard Ellis Group, Inc., 11.625%, 2017 | $ | 335,000 | $ | 380,225 | ||||
CNL Lifestyle Properties, Inc., REIT, 7.25%, 2019 | 465,000 | 427,800 | ||||||
Entertainment Properties Trust, REIT, 7.75%, 2020 | 1,015,000 | 1,115,981 | ||||||
Kennedy Wilson, Inc., 8.75%, 2019 | 390,000 | 401,700 | ||||||
MPT Operating Partnership LP, REIT, 6.875%, 2021 | 780,000 | 813,150 | ||||||
MPT Operating Partnership LP, REIT, 6.375%, 2022 | 275,000 | 275,688 | ||||||
|
| |||||||
$ | 3,414,544 | |||||||
|
| |||||||
Retailers – 2.5% | ||||||||
Academy Ltd., 9.25%, 2019 (n) | $ | 665,000 | $ | 721,525 | ||||
Burlington Coat Factory Warehouse Corp., 10%, 2019 | 915,000 | 969,900 | ||||||
J. Crew Group, Inc., 8.125%, 2019 | 750,000 | 774,375 | ||||||
Limited Brands, Inc., 6.9%, 2017 | 760,000 | 843,600 | ||||||
Limited Brands, Inc., 7%, 2020 | 300,000 | 333,000 | ||||||
Limited Brands, Inc., 6.95%, 2033 | 415,000 | 402,550 | ||||||
QVC, Inc., 7.375%, 2020 (n) | 705,000 | 780,788 | ||||||
Rite Aid Corp., 9.25%, 2020 (z) | 430,000 | 430,000 | ||||||
Sally Beauty Holdings, Inc., 6.875%, 2019 | 420,000 | 456,750 | ||||||
Toys “R” Us Property Co. II LLC, 8.5%, 2017 | 355,000 | 369,644 | ||||||
Toys “R” Us, Inc., 10.75%, 2017 | 1,060,000 | 1,158,050 | ||||||
Yankee Acquisition Corp., 8.5%, 2015 | 6,000 | 6,120 | ||||||
YCC Holdings LLC/Yankee Finance, Inc., 10.25%, 2016 (p) | 445,000 | 452,788 | ||||||
|
| |||||||
$ | 7,699,090 | |||||||
|
| |||||||
Specialty Chemicals – 0.1% | ||||||||
Koppers, Inc., 7.875%, 2019 | $ | 355,000 | $ | 382,513 | ||||
|
| |||||||
Specialty Stores – 0.4% | ||||||||
Gymboree Corp., 9.125%, 2018 | $ | 155,000 | $ | 143,763 | ||||
Michaels Stores, Inc., 11.375%, 2016 | 440,000 | 467,504 | ||||||
Michaels Stores, Inc., 7.75%, 2018 | 510,000 | 538,050 | ||||||
|
| |||||||
$ | 1,149,317 | |||||||
|
| |||||||
Telecommunications – Wireless – 3.8% | ||||||||
Clearwire Corp., 12%, 2015 (n) | $ | 605,000 | $ | 550,550 | ||||
Cricket Communications, Inc., 7.75%, 2016 | 275,000 | 291,844 | ||||||
Cricket Communications, Inc., 7.75%, 2020 | 1,165,000 | 1,112,575 | ||||||
Crown Castle International Corp., 9%, 2015 | 915,000 | 998,494 | ||||||
Crown Castle International Corp., 7.125%, 2019 | 1,315,000 | 1,410,338 | ||||||
Digicel Group Ltd., 12%, 2014 (n) | 200,000 | 222,000 | ||||||
Digicel Group Ltd., 8.25%, 2017 (n) | 655,000 | 666,463 | ||||||
Digicel Group Ltd., 10.5%, 2018 (n) | 930,000 | 971,850 | ||||||
MetroPCS Wireless, Inc., 7.875%, 2018 | 465,000 | 482,438 | ||||||
Sprint Capital Corp., 6.875%, 2028 | 735,000 | 591,675 | ||||||
Sprint Nextel Corp., 6%, 2016 | 1,050,000 | 1,005,375 | ||||||
Sprint Nextel Corp., 8.375%, 2017 | 825,000 | 845,625 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Telecommunications – Wireless – continued | ||||||||
Sprint Nextel Corp., 9%, 2018 (n) | $ | 440,000 | $ | 491,700 | ||||
Wind Acquisition Finance S.A., 11.75%, 2017 (n) | 1,570,000 | 1,267,775 | ||||||
Wind Acquisition Finance S.A., 7.25%, 2018 (n) | 650,000 | 568,750 | ||||||
|
| |||||||
$ | 11,477,452 | |||||||
|
| |||||||
Telephone Services – 0.7% | ||||||||
Cogent Communications Group, Inc., 8.375%, 2018 (n) | $ | 470,000 | $ | 501,725 | ||||
Level 3 Financing, Inc., 9.375%, 2019 | 815,000 | 880,200 | ||||||
Level 3 Financing, Inc., 8.625%, 2020 | 415,000 | 435,750 | ||||||
Sable International Finance Ltd., 8.75%, 2020 (n) | 200,000 | 214,000 | ||||||
|
| |||||||
$ | 2,031,675 | |||||||
|
| |||||||
Transportation – 0.2% | ||||||||
Navios South American Logistics, Inc., 9.25%, 2019 | $ | 779,000 | $ | 716,680 | ||||
|
| |||||||
Transportation – Services – 3.2% | ||||||||
ACL I Corp., 10.625%, 2016 (p) | $ | 1,033,986 | $ | 988,246 | ||||
Aguila American Resources Ltd., 7.875%, 2018 (n) | 890,000 | 916,700 | ||||||
Avis Budget Car Rental LLC, 8.25%, 2019 (n) | 205,000 | 219,863 | ||||||
Avis Budget Car Rental LLC, 8.25%, 2019 | 420,000 | 450,450 | ||||||
Avis Budget Car Rental LLC, 9.75%, 2020 | 365,000 | 405,606 | ||||||
CEVA Group PLC, 8.375%, 2017 (n) | 1,185,000 | 1,149,450 | ||||||
Commercial Barge Line Co., 12.5%, 2017 | 1,890,000 | 2,135,700 | ||||||
Navios Maritime Acquisition Corp., 8.625%, 2017 | 1,065,000 | 990,450 | ||||||
Navios Maritime Holdings, Inc., 8.875%, 2017 (z) | 270,000 | 270,653 | ||||||
Navios Maritime Holdings, Inc., 8.875%, 2017 | 650,000 | 654,875 | ||||||
Swift Services Holdings, Inc., 10%, 2018 | 1,370,000 | 1,486,450 | ||||||
|
| |||||||
$ | 9,668,443 | |||||||
|
| |||||||
Utilities – Electric Power – 5.0% | ||||||||
AES Corp., 8%, 2017 | $ | 890,000 | $ | 1,012,375 | ||||
Atlantic Power Corp., 9%, 2018 (z) | 565,000 | 577,713 | ||||||
Calpine Corp., 8%, 2016 (n) | 805,000 | 869,400 | ||||||
Calpine Corp., 7.875%, 2020 (n) | 1,210,000 | 1,334,025 | ||||||
Covanta Holding Corp., 7.25%, 2020 | 1,165,000 | 1,262,176 | ||||||
Covanta Holding Corp., 6.375%, 2022 | 275,000 | 290,673 | ||||||
Dolphin Subsidiary ll, Inc., 7.25%, 2021 (n) | 670,000 | 743,700 | ||||||
Edison Mission Energy, 7%, 2017 | 795,000 | 445,200 | ||||||
EDP Finance B.V., 6%, 2018 (n) | 1,660,000 | 1,444,066 | ||||||
Energy Future Holdings Corp., 10%, 2020 | 1,140,000 | 1,216,950 | ||||||
Energy Future Holdings Corp., 10%, 2020 | 1,810,000 | 1,968,375 | ||||||
Energy Future Holdings Corp., 11.75%, 2022 (n) | 600,000 | 613,500 | ||||||
GenOn Energy, Inc., 9.5%, 2018 | 65,000 | 64,269 | ||||||
GenOn Energy, Inc., 9.875%, 2020 | 1,445,000 | 1,408,875 | ||||||
NRG Energy, Inc., 7.375%, 2017 | 590,000 | 613,600 |
9
Table of Contents
MFS High Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Utilities – Electric Power – continued | ||||||||
NRG Energy, Inc., 8.25%, 2020 | $ | 960,000 | $ | 993,600 | ||||
Texas Competitive Electric Holdings Co. LLC, 11.5%, 2020 (n) | 470,000 | 320,775 | ||||||
|
| |||||||
$ | 15,179,272 | |||||||
|
| |||||||
Total Bonds (Identified Cost, $288,481,335) | $ | 289,700,369 | ||||||
|
| |||||||
FLOATING RATE LOANS (g)(r) – 0.2% | ||||||||
Financial Institutions – 0.1% | ||||||||
Springleaf Finance Corp., Term Loan, 5.5%, 2017 | $ | 452,233 | $ | 425,018 | ||||
|
| |||||||
Utilities – Electric Power – 0.1% | ||||||||
Dynegy Midwest Generation LLC, Term Loan, 9.25%, 2016 | $ | 120,675 | $ | 123,088 | ||||
Dynegy Power LLC, Term Loan, 9.25%, 2016 | 181,012 | 185,940 | ||||||
|
| |||||||
$ | 309,028 | |||||||
|
| |||||||
Total Floating Rate Loans (Identified Cost, $746,563) | $ | 734,046 | ||||||
|
| |||||||
COMMON STOCKS – 0.2% | ||||||||
Automotive – 0.1% | ||||||||
Accuride Corp. (a) | 24,851 | $ | 149,106 | |||||
|
| |||||||
Broadcasting – 0.1% | ||||||||
New Young Broadcasting Holding Co., Inc. (a) | 115 | $ | 333,500 | |||||
|
| |||||||
Printing & Publishing – 0.0% | ||||||||
American Media Operations, Inc. (a) | 24,246 | $ | 134,565 | |||||
|
| |||||||
Total Common Stocks (Identified Cost, $957,811) | $ | 617,171 | ||||||
|
| |||||||
CONVERTIBLE PREFERRED STOCKS – 0.2% | ||||||||
Automotive – 0.2% | ||||||||
General Motors Co., 4.75% (Identified Cost, $791,000) | 15,820 | $ | 525,224 | |||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
PREFERRED STOCKS – 0.4% | ||||||||
Other Banks & Diversified Financials – 0.4% | ||||||||
Ally Financial, Inc., 7% (z) | 511 | $ | 455,253 | |||||
GMAC Capital Trust I, 8.125% | 28,350 | 681,818 | ||||||
|
| |||||||
Total Preferred Stocks (Identified Cost, $1,193,270) | $ | 1,137,071 | ||||||
|
|
Strike Price | First Exercise | |||||||||||||||
WARRANTS – 0.2% | ||||||||||||||||
Broadcasting – 0.2% | ||||||||||||||||
New Young Broadcasting Holding Co., Inc. (1 share for 1 warrant) (Identified Cost, $399,986) (a) | $ | 0.01 | 7/14/10 | 209 | $ | 606,100 | ||||||||||
|
|
CONVERTIBLE BONDS – 0.3% | ||||||||
Network & Telecom – 0.3% | ||||||||
Nortel Networks Corp., 2.125%, 2014 (Identified Cost, $947,481) (a)(d) | $ | 960,000 | $ | 950,400 | ||||
|
| |||||||
MONEY MARKET FUNDS – 1.9% | ||||||||
MFS Institutional Money Market Portfolio, 0.14%, at Cost and Net Asset Value (v) | 5,674,903 | $ | 5,674,903 | |||||
|
| |||||||
Total Investments (Identified Cost, $299,192,349) | $ | 299,945,284 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – 1.9% | 5,787,825 | |||||||
|
| |||||||
Net Assets – 100.0% | $ | 305,733,109 | ||||||
|
|
(a) | Non-income producing security. |
(d) | In default. Interest and/or scheduled principal payment(s) have been missed. |
(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 $79,251,935, representing 25.9% 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 for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end. |
10
Table of Contents
MFS High Income Series
Portfolio of Investments (unaudited) – continued
(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 | |||||||
Ally Financial, Inc., 7% (Preferred Stock), | 4/13/11-4/14/11 | $479,063 | $455,253 | |||||||
American Media, Inc., 13.5%, 2018 | 12/22/10 | 95,929 | 88,941 | |||||||
Arbor Realty Mortgage Securities, CDO, FRN, 2.765%, 2038 | 12/20/05 | 568,229 | 142,057 | |||||||
Ashtead Capital, Inc., 6.5%, 2022 | 6/29/12 | 235,000 | 235,000 | |||||||
Atlantic Power Corp., 9%, 2018 | 10/26/11-3/02/12 | 561,866 | 577,713 | |||||||
Avaya, Inc., 7%, 2019 | 5/24/12 | 228,955 | 231,875 | |||||||
CIT Group, Inc., 7%, 2017 | 6/26/12 | 381,496 | 380,784 | |||||||
CWCapital Cobalt Ltd., CDO, 6.23%, 2045 | 3/20/06 | 1,107,321 | 11,646 | |||||||
CWCapital Cobalt Ltd., CDO, “F”, FRN, 1.765%, 2050 | 4/12/06 | 521,470 | 10,425 | |||||||
Ceridian Corp., 8.875%, 2019 | 6/28/12 | 200,000 | 206,500 | |||||||
Consolidated Container Co. LLC/Consolidated Container Finance, Inc., 10.125%, 2020 | 6/28/12 | 225,000 | 231,750 | |||||||
Dematic S.A., 8.75%, 2016 | 4/19/11-1/24/12 | 1,461,044 | 1,518,875 | |||||||
Dynacast International LLC, 9.25%, 2019 | 7/12/11-7/15/11 | 752,721 | 772,938 | |||||||
FGI Operating Co./FGI Finance, Inc., 7.875%, 2020 | 4/12/12 | 85,000 | 88,613 | |||||||
G-Force LLC, CDO, “A2”, 4.83%, 2036 | 2/14/11 | 557,798 | 547,132 | |||||||
Heckler & Koch GmbH, 9.5%, 2018 | 5/06/11-5/10/11 | 547,583 | 356,592 | |||||||
Heckmann Corp., 9.875%, 2018 | 4/4/12 | 576,855 | 551,000 | |||||||
Host Hotels & Resorts, Inc., 5.25%, 2022 | 6/26/12-6/27/12 | 510,753 | 507,375 | |||||||
IDQ Holdings, Inc., 11.5%, 2017 | 3/20/12 | 353,086 | 374,400 | |||||||
LBI Media, Inc., 8.5%, 2017 | 7/18/07 | 638,481 | 133,838 | |||||||
Libbey Glass, Inc., 6.875%, 2020 | 5/11/12 | 320,000 | 328,800 | |||||||
Local TV Finance LLC, 9.25%, 2015 | 12/10/07-2/16/11 | 765,781 | 779,709 | |||||||
NESCO LLC/NESCO Holdings Corp., 11.75%, 2017 | 4/05/12-6/15/12 | 620,501 | 640,625 | |||||||
Navios Maritime Holdings, Inc., 8.875%, 2017 | 6/27/12 | 270,000 | 270,653 | |||||||
Physio-Control International, Inc., 9.875%, 2019 | 1/13/12-1/30/12 | 604,342 | 633,675 | |||||||
Prestige Brands, Inc., 8.125%, 2020 | 1/24/12 | 95,000 | 104,263 | |||||||
Rite Aid Corp., 9.25%, 2020 | 5/03/12-5/21/12 | 426,140 | 430,000 | |||||||
Rivers Pittsburgh Borrower LP/Rivers Pittsburgh Finance Corp., 9.5%, 2019 | 5/30/12 | 160,000 | 166,200 | |||||||
Roofing Supply Group LLC/Roofing Supply Finance, Inc., 10%, 2020 | 5/24/12 | 320,000 | 334,400 | |||||||
Townsquare Radio LLC, 9%, 2019 | 3/30/12 | 406,004 | 428,450 | |||||||
Truven Health Analytics, Inc., 10.625%, 2020 | 5/24/12-6/15/12 | 416,074 | 426,400 | |||||||
Total Restricted Securities | $11,965,882 | |||||||||
% 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:
EUR | Euro |
11
Table of Contents
MFS High Income Series
Portfolio of Investments (unaudited) – continued
Derivative Contracts at 6/30/12
Forward Foreign Currency Exchange Contracts at 6/30/12
Type | Currency | Counterparty | Contracts to Deliver/Receive | Settlement Date Range | In Exchange For | Contracts at Value | Net Unrealized Appreciation (Depreciation) | |||||||||||||||||
Asset Derivatives | ||||||||||||||||||||||||
SELL | EUR | JPMORGAN CHASE BANK N.A | 2,608,980 | 7/13/12 | $ | 3,411,189 | $ | 3,301,923 | $ | 109,266 | ||||||||||||||
|
|
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 6/30/12 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $293,517,446) | $294,270,381 | |||||||
Underlying affiliated funds, at cost and value | 5,674,903 | |||||||
Total investments, at value (identified cost, $299,192,349) | $299,945,284 | |||||||
Receivables for | ||||||||
Forward foreign currency exchange contracts | 109,266 | |||||||
Investments sold | 2,175,158 | |||||||
Fund shares sold | 312,252 | |||||||
Interest | 5,811,137 | |||||||
Other assets | 1,583 | |||||||
Total assets | $308,354,680 | |||||||
Liabilities | ||||||||
Payable to custodian | $2,281 | |||||||
Payables for | ||||||||
Investments purchased | 2,230,520 | |||||||
Fund shares reacquired | 282,193 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 17,902 | |||||||
Shareholder servicing costs | 297 | |||||||
Distribution and/or service fees | 135 | |||||||
Payable for independent Trustees’ compensation | 42 | |||||||
Accrued expenses and other liabilities | 88,201 | |||||||
Total liabilities | $2,621,571 | |||||||
Net assets | $305,733,109 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $297,572,235 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 861,839 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | (28,682,927 | ) | ||||||
Undistributed net investment income | 35,981,962 | |||||||
Net assets | $305,733,109 | |||||||
Shares of beneficial interest outstanding | 34,546,752 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $299,133,883 | 33,796,616 | $8.85 | |||||||||
Service Class | 6,599,226 | 750,136 | 8.80 |
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 6/30/12 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Interest | $12,397,346 | |||||||
Dividends | 139,902 | |||||||
Dividends from underlying affiliated funds | 4,796 | |||||||
Total investment income | $12,542,044 | |||||||
Expenses | ||||||||
Management fee | $1,136,248 | |||||||
Distribution and/or service fees | 8,386 | |||||||
Shareholder servicing costs | 16,851 | |||||||
Administrative services fee | 29,267 | |||||||
Independent Trustees’ compensation | 5,418 | |||||||
Custodian fee | 21,552 | |||||||
Shareholder communications | 28,168 | |||||||
Audit and tax fees | 34,310 | |||||||
Legal fees | 2,990 | |||||||
Miscellaneous | 18,736 | |||||||
Total expenses | $1,301,926 | |||||||
Fees paid indirectly | (141 | ) | ||||||
Reduction of expenses by investment adviser | (840 | ) | ||||||
Net expenses | $1,300,945 | |||||||
Net investment income | $11,241,099 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $400,866 | |||||||
Foreign currency | 104,048 | |||||||
Net realized gain (loss) on investments and foreign currency | $504,914 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $9,299,471 | |||||||
Translation of assets and liabilities in foreign currencies | (24,386 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $9,275,085 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $9,779,999 | |||||||
Change in net assets from operations | $21,021,098 |
See Notes to Financial Statements
14
Table of Contents
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 6/30/12 (unaudited | ) | | Year ended 12/31/11 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $11,241,099 | $23,913,403 | ||||||
Net realized gain (loss) on investments and foreign currency | 504,914 | 4,671,000 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 9,275,085 | (14,447,125 | ) | |||||
Change in net assets from operations | $21,021,098 | $14,137,278 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(28,856,819 | ) | |||||
Change in net assets from fund share transactions | $(35,697,069 | ) | $(44,715,689 | ) | ||||
Total change in net assets | $(14,675,971 | ) | $(59,435,230 | ) | ||||
Net assets | ||||||||
At beginning of period | 320,409,080 | 379,844,310 | ||||||
At end of period (including undistributed net investment income of $35,981,962 and | $305,733,109 | $320,409,080 |
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 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $8.29 | $8.78 | $8.25 | $6.25 | $9.52 | $10.04 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.30 | $0.61 | $0.63 | $0.63 | $0.71 | $0.71 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 0.26 | (0.28 | ) | 0.53 | 1.98 | (3.18 | ) | (0.52 | ) | |||||||||||||||
Total from investment operations | $0.56 | $0.33 | $1.16 | $2.61 | $(2.47 | ) | $0.19 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.82 | ) | $(0.63 | ) | $(0.61 | ) | $(0.80 | ) | $(0.71 | ) | |||||||||||||
Net asset value, end of period (x) | $8.85 | $8.29 | $8.78 | $8.25 | $6.25 | $9.52 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 6.76 | (n) | 4.10 | 14.73 | 45.08 | (28.26 | ) | 1.77 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.80 | (a) | 0.79 | 0.80 | 0.81 | 0.87 | 0.88 | |||||||||||||||||
Expenses after expense reductions (f) | 0.80 | (a) | 0.79 | 0.80 | 0.81 | 0.82 | 0.83 | |||||||||||||||||
Net investment income | 6.93 | (a) | 7.01 | 7.55 | 8.89 | 8.66 | 7.21 | |||||||||||||||||
Portfolio turnover | 22 | (n) | 59 | 70 | 52 | 60 | 73 | |||||||||||||||||
Net assets at end of period (000 omitted) | $299,134 | $313,703 | $372,412 | $344,186 | $203,800 | $324,081 | ||||||||||||||||||
Service Class | Six months ended 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $8.25 | $8.74 | $8.22 | $6.22 | $9.47 | $9.99 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.29 | $0.59 | $0.61 | $0.62 | $0.69 | $0.68 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 0.26 | (0.28 | ) | 0.53 | 1.96 | (3.17 | ) | (0.52 | ) | |||||||||||||||
Total from investment operations | $0.55 | $0.31 | $1.14 | $2.58 | $(2.48 | ) | $0.16 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.80 | ) | $(0.62 | ) | $(0.58 | ) | $(0.77 | ) | $(0.68 | ) | |||||||||||||
Net asset value, end of period (x) | $8.80 | $8.25 | $8.74 | $8.22 | $6.22 | $9.47 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 6.67 | (n) | 3.85 | 14.40 | 44.75 | (28.43 | ) | 1.54 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.05 | (a) | 1.04 | 1.05 | 1.07 | 1.12 | 1.13 | |||||||||||||||||
Expenses after expense reductions (f) | 1.05 | (a) | 1.04 | 1.05 | 1.06 | 1.07 | 1.08 | |||||||||||||||||
Net investment income | 6.68 | (a) | 6.77 | 7.31 | 8.78 | 8.40 | 6.96 | |||||||||||||||||
Portfolio turnover | 22 | (n) | 59 | 70 | 52 | 60 | 73 | |||||||||||||||||
Net assets at end of period (000 omitted) | $6,599 | $6,706 | $7,432 | $7,210 | $6,442 | $11,086 |
See Notes to Financial Statements
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MFS High Income Series
Financial Highlights – continued
(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. |
(x) | The net asset values per share and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
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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.
In this reporting period the fund adopted FASB Accounting Standards Update 2011-04, Fair Value Measurement (Topic 820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 seeks to improve the comparability of fair value measurements as presented and disclosed in financial statements prepared in accordance with U.S. GAAP and International Financial Reporting Standards (IFRS) by providing common requirements for fair value measurement and disclosure.
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11, Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. Although still evaluating the potential impacts of ASU 2011-11 to the fund, management expects that the impact of the fund’s adoption will be limited to additional financial statement disclosures.
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. 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. 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
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MFS High Income Series
Notes to Financial Statements (unaudited) – continued
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 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, 2012 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities | $1,356,148 | $1,394,853 | $134,565 | $2,885,566 | ||||||||||||
Corporate Bonds | — | 241,024,142 | — | 241,024,142 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 818,583 | — | 818,583 | ||||||||||||
Asset-Backed Securities (including CDOs) | — | 759,872 | — | 759,872 | ||||||||||||
Foreign Bonds | — | 48,048,172 | — | 48,048,172 | ||||||||||||
Floating Rate Loans | — | 734,046 | — | 734,046 | ||||||||||||
Mutual Funds | 5,674,903 | — | — | 5,674,903 | ||||||||||||
Total Investments | $7,031,051 | $292,779,668 | $134,565 | $299,945,284 | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Forward Foreign Currency Exchange Contracts | $— | $109,266 | $— | $109,266 |
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 12/31/11 | $288,285 | |||
Change in unrealized appreciation (depreciation) | (153,720 | ) | ||
Balance as of 6/30/12 | $134,565 |
The net change in unrealized appreciation (depreciation) from investments still held as level 3 at June 30, 2012 is $(153,720).
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, primarily to increase or decrease exposure to a particular market or segment of the market, or security, to increase or decrease interest rate or currency exposure, or as alternatives to direct investments. Derivatives are used for hedging or non-hedging purposes. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. When the fund uses derivatives as an investment to increase market exposure, or for hedging purposes, gains and losses from derivative instruments may be substantially greater than the derivative’s original cost.
The derivative instruments used by the fund were purchased options 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.
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MFS High Income 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, 2012 as reported in the Statement of Assets and Liabilities:
Fair Value | ||||||
Risk | Derivative Contracts | Asset Derivatives | ||||
Foreign Exchange | Forward Foreign Currency Exchange | $109,266 |
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, 2012 as reported in the Statement of Operations:
Risk | Foreign Currency Transactions | Investment Transactions (Purchased Options) | ||||||
Foreign Exchange | $109,703 | $— | ||||||
Equity | — | (161,611 | ) | |||||
Total | $109,703 | $(161,611 | ) |
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, 2012 as reported in the Statement of Operations:
Risk | Translation of Assets and Liabilities in Foreign Currencies | Investments (Purchased Options) | ||||||
Foreign Exchange | $(25,847 | ) | $— | |||||
Equity | — | 131,872 | ||||||
Total | $(25,847 | ) | $131,872 |
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 contracts and exchange-traded options) while collateral terms are contract specific for over-the-counter traded derivatives (i.e., forward foreign currency exchange contracts, swap agreements 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.
Purchased Options – The fund purchased put options for a premium. Purchased put 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 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 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
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MFS High Income Series
Notes to Financial Statements (unaudited) – continued
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.
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.
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.
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, 2012, 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, when filed, will remain subject to examination by the Internal Revenue Service for a three year period.
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,
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MFS High Income Series
Notes to Financial Statements (unaudited) – continued
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:
12/31/11 | ||||
Ordinary income (including any short-term capital gains) | $28,856,819 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/12 | ||||
Cost of investments | $300,841,720 | |||
Gross appreciation | 10,828,529 | |||
Gross depreciation | (11,724,965 | ) | ||
Net unrealized appreciation (depreciation) | $(896,436 | ) | ||
As of 12/31/11 | ||||
Undistributed ordinary income | 25,018,410 | |||
Capital loss carryforwards | (27,951,482 | ) | ||
Other temporary differences | (12,385 | ) | ||
Net unrealized appreciation (depreciation) | (9,914,767 | ) |
The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.
Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized after December 31, 2011 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.
As of December 31, 2011, the fund had capital loss carryforwards available to offset future realized gains. Such losses expire as follows:
Pre-enactment losses: | ||||
12/31/16 | $(20,426,634 | ) | ||
12/31/17 | (7,524,848 | ) | ||
Total | $(27,951,482 | ) |
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 6/30/12 | Year ended 12/31/11 | |||||||
Initial Class | $— | $28,197,014 | ||||||
Service Class | — | 659,805 | ||||||
Total | $— | $28,856,819 |
(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, 2012 was equivalent to an annual effective rate of 0.70% of the fund’s average daily net assets.
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MFS High Income 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 0.85% of average daily net assets for the Initial Class shares and 1.10% 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, 2014. For the six months ended June 30, 2012, 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, 2012, the fee was $16,647, which equated to 0.0103% 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, 2012, these costs amounted to $204.
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, 2012 was equivalent to an annual effective rate of 0.0180% 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, 2012, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $1,699 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 $840, 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 $68,734,204 and $85,516,448, respectively.
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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 6/30/12 | Year ended 12/31/11 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 2,763,067 | $24,030,863 | 7,341,306 | $62,780,029 | ||||||||||||
Service Class | 18,975 | 164,590 | 108,386 | 967,172 | ||||||||||||
2,782,042 | $24,195,453 | 7,449,692 | $63,747,201 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 3,507,091 | $28,197,014 | ||||||||||||
Service Class | — | — | 82,373 | 659,805 | ||||||||||||
— | $— | 3,589,464 | $28,856,819 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (6,826,352 | ) | $(59,183,968 | ) | (15,422,605 | ) | $(135,365,132 | ) | ||||||||
Service Class | (82,086 | ) | (708,554 | ) | (228,069 | ) | (1,954,577 | ) | ||||||||
(6,908,438 | ) | $(59,892,522 | ) | (15,650,674 | ) | $(137,319,709 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (4,063,285 | ) | $(35,153,105 | ) | (4,574,208 | ) | $(44,388,089 | ) | ||||||||
Service Class | (63,111 | ) | (543,964 | ) | (37,310 | ) | (327,600 | ) | ||||||||
(4,126,396 | ) | $(35,697,069 | ) | (4,611,518 | ) | $(44,715,689 | ) |
(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, 2012, the fund’s commitment fee and interest expense were $1,140 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 an affiliated issuer:
Underlying Affiliated Fund | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 10,895,508 | 58,326,062 | (63,546,667 | ) | 5,674,903 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $4,796 | $5,674,903 |
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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, 2012 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 is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. Copies of the fund’s Form N-Q also may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
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.
25
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SEMIANNUAL REPORT
June 30, 2012
MFS® STRATEGIC INCOME SERIES
MFS® Variable Insurance Trust
VWG-SEM
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MFS® STRATEGIC INCOME SERIES
Note to Contract Owners: At a meeting held June 19, 2012, the Board of Trustees of the MFS Strategic Income Series (the fund) approved investing some or all of the fund’s assets currently invested in high income debt instruments in the MFS High Yield Pooled Portfolio, a mutual fund advised by MFS that normally invests at least 80% of its assets in high income debt instruments (the “High Yield Pooled Portfolio”). The High Yield Pooled Portfolio will not charge a management fee, distribution and/or services fees, or sales charges. The investment in the MFS High Yield Pooled Portfolio is anticipated to occur in late 2012 or early 2013.
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
LETTER FROM THE CHAIRMAN AND CEO
Dear Contract Owners:
World financial markets remain a venue of uncertainty. The focus has shifted most recently to the eurozone, where policymakers are attempting to develop a plan that will help debt-laden countries and prevent their woes from spreading across the region. Volatility is likely to continue as investors test the resolve of European officials to make the tough decisions needed to solve the crisis. A slowing in the Chinese economy has added another layer of trepidation, as investors worry that the primary engine of global growth may be sputtering.
The U.S. economy is experiencing a period of growth. However, markets have been jittery in reaction to events in Europe and ahead of the U.S. presidential election. Voters in the United States are watching the economy closely and waiting to see if Congress agrees to cut the budget and extend the Bush administration tax cuts. Failure to do so could ultimately send the U.S. economy back into recession.
Amid this global uncertainty, managing risk becomes a top priority for investors and their advisors. At MFS® our global research platform is designed to ensure the smooth functioning of our investment process in all business climates. Real-time collaboration across the globe is vital in periods of heightened volatility and economic uncertainty. At MFS our investment staff shares ideas and evaluates opportunities across geographies, across both fundamental and quantitative disciplines, and across companies’ entire capital structure. We employ this uniquely collaborative approach to build better insights for our clients.
We, like our investors, are 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 emphasize the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with investment advisors to research and identify appropriate investment opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2012
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 | 47.1% | |||
High Yield Corporates | 30.2% | |||
Non-U.S. Government Bonds | 13.2% | |||
Emerging Markets Bonds | 3.4% | |||
U.S. Government Agencies | 1.7% | |||
Mortgage-Backed Securities | 1.3% | |||
Commercial Mortgage-Backed Securities | 1.2% | |||
Asset-Backed Securities | 0.7% | |||
Collateralized Debt Obligations | 0.4% | |||
Floating Rate Loans (o) | 0.0% | |||
U.S. Treasury Securities | (3.0)% |
Composition including fixed income credit quality (a)(i) | ||||
AAA | 6.3% | |||
AA | 3.9% | |||
A | 19.6% | |||
BBB | 33.3% | |||
BB | 14.1% | |||
B | 14.1% | |||
CCC | 4.4% | |||
CC (o) | 0.0% | |||
C | 0.4% | |||
Federal Agencies | 3.0% | |||
Not Rated | (2.9)% | |||
Non-Fixed Income | 0.5% | |||
Cash & Other | 3.3% | |||
Portfolio facts (i) | ||||
Average Duration (d) | 4.8 | |||
Average Effective Maturity (m) | 7.4 yrs. | |||
Issuer country weightings (i)(x) | ||||
United States | 67.5% | |||
United Kingdom | 5.2% | |||
Japan | 3.3% | |||
Netherlands | 3.1% | |||
France | 2.9% | |||
Canada | 2.5% | |||
Germany | 2.0% | |||
Italy | 1.9% | |||
Australia | 1.3% | |||
Other Countries | 10.3% |
(a) | For all securities other than those specifically described below, ratings are assigned to underlying securities utilizing ratings from Moody’s, Fitch, and Standard & Poor’s rating agencies and applying the following hierarchy: If all three agencies provide a rating, the middle rating (after dropping the highest and lowest ratings) is assigned; if two of the three agencies rate a security, the lower of the two is assigned. Ratings are shown in the S&P and Fitch scale (e.g., AAA). Securities rated BBB or higher are considered investment grade. All ratings are subject to change. Federal Agencies includes rated and unrated U.S. Agency fixed-income securities, U.S. Agency mortgage-backed securities, and collateralized mortgage obligations of U.S. Agency mortgage-backed securities. Not Rated includes fixed income securities, including fixed income futures contracts, which have not been rated by any rating agency. 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 is not rated by these agencies. |
(d) | Duration is a measure of how much a bond’s price is likely to fluctuate with general changes in interest rates, e.g., if rates rise 1.00%, a bond with a 5-year duration is likely to lose about 5.00% of its value due to the interest rate move. |
(i) | For purposes of this presentation, the components include the market value of securities, and reflect the impact of the equivalent exposure of derivative positions, if any. These amounts may be negative from time to time. 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%. |
(x) | Represents the portfolio’s exposure to issuer countries as a percentage of a portfolio’s net assets. |
Percentages are based on net assets as of 6/30/12.
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, 2012 through June 30, 2012
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, 2012 through June 30, 2012.
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 1/01/12 | Ending Account Value 6/30/12 | Expenses Paid During Period (p) 1/01/12-6/30/12 | ||||||||||||||
Initial Class | Actual | 0.80% | $1,000.00 | $1,049.80 | $4.08 | |||||||||||||
Hypothetical (h) | 0.80% | $1,000.00 | $1,020.89 | $4.02 | ||||||||||||||
Service Class | Actual | 1.05% | $1,000.00 | $1,048.63 | $5.35 | |||||||||||||
Hypothetical (h) | 1.05% | $1,000.00 | $1,019.64 | $5.27 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’ annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
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MFS Strategic Income Series
PORTFOLIO OF INVESTMENTS – 6/30/12 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
BONDS – 97.8% | ||||||||
Aerospace – 0.8% | ||||||||
BE Aerospace, Inc., 8.5%, 2018 | $ | 30,000 | $ | 32,813 | ||||
Bombardier, Inc., 7.5%, 2018 (n) | 55,000 | 60,294 | ||||||
Bombardier, Inc., 7.75%, 2020 (n) | 20,000 | 22,250 | ||||||
CPI International, Inc., 8%, 2018 | 35,000 | 31,544 | ||||||
Huntington Ingalls Industries, Inc., 7.125%, 2021 | 60,000 | 62,700 | ||||||
Kratos Defense & Security Solutions, Inc., 10%, 2017 | 35,000 | 37,713 | ||||||
|
| |||||||
$ | 247,314 | |||||||
|
| |||||||
Airlines – 0.3% | ||||||||
Continental Airlines, Inc., FRN, 0.816%, 2013 | $ | 94,866 | $ | 92,020 | ||||
|
| |||||||
Apparel Manufacturers – 0.3% | ||||||||
Hanesbrands, Inc., 8%, 2016 | $ | 20,000 | $ | 22,025 | ||||
Hanesbrands, Inc., 6.375%, 2020 | 20,000 | 21,050 | ||||||
Jones Group, Inc., 6.875%, 2019 | 20,000 | 19,200 | ||||||
Levi Strauss & Co., 6.875%, 2022 (n) | 5,000 | 5,131 | ||||||
Phillips-Van Heusen Corp., 7.375%, 2020 | 35,000 | 38,763 | ||||||
|
| |||||||
$ | 106,169 | |||||||
|
| |||||||
Asset-Backed & Securitized – 2.2% | ||||||||
Bayview Financial Revolving Mortgage Loan Trust, FRN, 1.845%, 2040 (z) | $ | 168,323 | $ | 109,529 | ||||
Capital Trust Realty Ltd., CDO, 5.16%, 2035 (n) | 72,528 | 73,072 | ||||||
Crest Ltd., “A1” CDO, FRN, 0.94%, 2018 (z) | 49,598 | 44,639 | ||||||
Crest Ltd., CDO, 7%, 2040 (a)(p) | 157,397 | 7,870 | ||||||
Falcon Franchise Loan LLC, FRN, 5.43%, 2025 (i)(z) | 127,750 | 20,057 | ||||||
First Union National Bank Commercial Mortgage Trust, FRN, 1.819%, 2043 (i)(z) | 68,225 | 109 | ||||||
First Union-Lehman Brothers Bank of America, FRN, 0.606%, 2035 (i) | 983,609 | 13,662 | ||||||
Hertz Global Holdings, Inc., 4.26%, 2014 (n) | 100,000 | 101,802 | ||||||
Lehman Brothers Commercial Conduit Mortgage Trust, FRN, 1.111%, 2030 (i) | 260,482 | 3,325 | ||||||
Morgan Stanley Capital I, Inc., FRN, 1.333%, 2039 (i)(z) | 497,098 | 10,439 | ||||||
Prudential Securities Secured Financing Corp., FRN, 7.266%, 2013 (z) | 171,000 | 170,388 | ||||||
Salomon Brothers Mortgage Securities, Inc., FRN, 7.271%, 2032 (z) | 134,174 | 138,707 | ||||||
|
| |||||||
$ | 693,599 | |||||||
|
| |||||||
Automotive – 1.5% | ||||||||
Accuride Corp., 9.5%, 2018 | $ | 60,000 | $ | 61,800 | ||||
Allison Transmission, Inc., 7.125%, 2019 (n) | 45,000 | 46,913 | ||||||
Ford Motor Co., 7.45%, 2031 | 15,000 | 18,788 | ||||||
Ford Motor Credit Co. LLC, 12%, 2015 | 100,000 | 124,250 | ||||||
General Motors Financial Co., Inc., 6.75%, 2018 | 30,000 | 32,794 | ||||||
Goodyear Tire & Rubber Co., 7%, 2022 | 15,000 | 14,981 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Automotive – continued | ||||||||
Harley-Davidson Financial Services, 3.875%, 2016 (n) | $ | 130,000 | $ | 137,299 | ||||
Lear Corp., 8.125%, 2020 | 20,000 | 22,400 | ||||||
|
| |||||||
$ | 459,225 | |||||||
|
| |||||||
Basic Industry – 0.1% | ||||||||
Trimas Corp., 9.75%, 2017 | $ | 28,000 | $ | 30,800 | ||||
|
| |||||||
Broadcasting – 3.0% | ||||||||
Allbritton Communications Co., 8%, 2018 | $ | 20,000 | $ | 20,900 | ||||
AMC Networks, Inc., 7.75%, 2021 (n) | 21,000 | 23,153 | ||||||
CBS Corp., 5.75%, 2020 | 20,000 | 23,262 | ||||||
CBS Corp., 3.375%, 2022 | 94,000 | 93,652 | ||||||
Clear Channel Communications, Inc., 9%, 2021 | 32,000 | 27,840 | ||||||
Clear Channel Worldwide Holdings, Inc., 7.625%, 2020 (n) | 15,000 | 14,660 | ||||||
Hughes Network Systems LLC, 7.625%, 2021 | 20,000 | 21,750 | ||||||
Intelsat Bermuda Ltd., 11.25%, 2017 | 55,000 | 56,650 | ||||||
Intelsat Bermuda Ltd., 11.5%, 2017 (p) | 50,000 | 51,625 | ||||||
Intelsat Jackson Holdings Ltd., 11.25%, 2016 | 9,000 | 9,428 | ||||||
LBI Media, Inc., 8.5%, 2017 (z) | 30,000 | 6,225 | ||||||
Liberty Media Corp., 8.5%, 2029 | 30,000 | 30,900 | ||||||
Liberty Media Corp., 8.25%, 2030 | 15,000 | 15,413 | ||||||
Local TV Finance LLC, 9.25%, 2015 (p)(z) | 26,074 | 26,302 | ||||||
NBCUniversal Media LLC, 5.95%, 2041 | 113,000 | 133,394 | ||||||
Newport Television LLC, 13%, 2017 (n)(p) | 18,578 | 19,228 | ||||||
Nexstar Broadcasting Group, Inc., 8.875%, 2017 | 15,000 | 15,844 | ||||||
Sinclair Broadcast Group, Inc., 9.25%, 2017 (n) | 15,000 | 16,575 | ||||||
Sinclair Broadcast Group, Inc., 8.375%, 2018 | 5,000 | 5,450 | ||||||
SIRIUS XM Radio, Inc., 13%, 2013 (n) | 20,000 | 22,300 | ||||||
SIRIUS XM Radio, Inc., 8.75%, 2015 (n) | 20,000 | 22,500 | ||||||
SIRIUS XM Radio, Inc., 7.625%, 2018 (n) | 50,000 | 53,750 | ||||||
Townsquare Radio LLC, 9%, 2019 (z) | 10,000 | 10,450 | ||||||
Univision Communications, Inc., 6.875%, 2019 (n) | 45,000 | 46,350 | ||||||
Univision Communications, Inc., 7.875%, 2020 (n) | 15,000 | 16,050 | ||||||
Univision Communications, Inc., 8.5%, 2021 (n) | 30,000 | 30,225 | ||||||
Vivendi S.A., 4.75%, 2022 (n) | 100,000 | 98,687 | ||||||
|
| |||||||
$ | 912,563 | |||||||
|
| |||||||
Brokerage & Asset Managers – 0.7% | ||||||||
BlackRock, Inc., 3.375%, 2022 | $ | 36,000 | $ | 36,530 | ||||
E*TRADE Financial Corp., 7.875%, 2015 | 30,000 | 30,450 | ||||||
E*TRADE Financial Corp., 12.5%, 2017 | 20,000 | 22,925 | ||||||
TD AMERITRADE Holding Corp., 5.6%, 2019 | 110,000 | 125,028 | ||||||
|
| |||||||
$ | 214,933 | |||||||
|
|
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MFS Strategic Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Building – 0.9% | ||||||||
Building Materials Holding Corp., 6.875%, 2018 (n) | $ | 15,000 | $ | 15,938 | ||||
Building Materials Holding Corp., 7%, 2020 (n) | 15,000 | 16,163 | ||||||
Building Materials Holding Corp., 6.75%, 2021 (n) | 10,000 | 10,700 | ||||||
CRH PLC, 8.125%, 2018 | 80,000 | 95,295 | ||||||
HD Supply, Inc., 8.125%, 2019 (n) | 10,000 | 10,800 | ||||||
Masonite International Corp., 8.25%, 2021 (n) | 35,000 | 36,050 | ||||||
Nortek, Inc., 8.5%, 2021 | 55,000 | 53,760 | ||||||
Roofing Supply Group LLC/Roofing Supply Finance, Inc., 10%, 2020 (z) | 10,000 | 10,450 | ||||||
USG Corp., 7.875%, 2020 (n) | 15,000 | 15,525 | ||||||
|
| |||||||
$ | 264,681 | |||||||
|
| |||||||
Business Services – 0.5% | ||||||||
Ceridian Corp., 12.25%, 2015 (p) | $ | 20,000 | $ | 19,400 | ||||
Ceridian Corp., 8.875%, 2019 (z) | 5,000 | 5,163 | ||||||
Fidelity National Information Services, Inc., 7.625%, 2017 | 15,000 | 16,538 | ||||||
Fidelity National Information Services, Inc., 5%, 2022 (n) | 10,000 | 10,175 | ||||||
iGate Corp., 9%, 2016 | 40,000 | 42,800 | ||||||
Iron Mountain, Inc., 8.375%, 2021 | 40,000 | 43,400 | ||||||
SunGard Data Systems, Inc., 10.25%, 2015 | 8,000 | 8,220 | ||||||
SunGard Data Systems, Inc., 7.375%, 2018 | 10,000 | 10,725 | ||||||
|
| |||||||
$ | 156,421 | |||||||
|
| |||||||
Cable TV – 2.1% | ||||||||
Bresnan Broadband Holdings LLC, 8%, 2018 (n) | $ | 5,000 | $ | 5,225 | ||||
CCH II LLC, 13.5%, 2016 | 35,000 | 39,025 | ||||||
CCO Holdings LLC, 7.875%, 2018 | 55,000 | 59,813 | ||||||
CCO Holdings LLC, 8.125%, 2020 | 35,000 | 39,025 | ||||||
Cequel Communications Holdings, 8.625%, 2017 (n) | 15,000 | 16,163 | ||||||
CSC Holdings LLC, 8.5%, 2014 | 20,000 | 22,000 | ||||||
DIRECTV Holdings LLC, 5.875%, 2019 | 40,000 | 45,888 | ||||||
DIRECTV Holdings LLC, 3.8%, 2022 | 140,000 | 141,581 | ||||||
DISH DBS Corp., 6.75%, 2021 | 15,000 | 16,200 | ||||||
EchoStar Corp., 7.125%, 2016 | 20,000 | 21,950 | ||||||
Time Warner Cable, Inc., 8.25%, 2019 | 120,000 | 156,804 | ||||||
Videotron Ltee, 5%, 2022 (n) | 15,000 | 15,225 | ||||||
Ziggo Bond Co. B.V., 8%, 2018 (n) | EUR | 50,000 | 68,653 | |||||
|
| |||||||
$ | 647,552 | |||||||
|
| |||||||
Chemicals – 1.5% | ||||||||
Celanese U.S. Holdings LLC, 6.625%, 2018 | $ | 55,000 | $ | 59,813 | ||||
Dow Chemical Co., 8.55%, 2019 | 170,000 | 226,113 | ||||||
Hexion U.S. Finance Corp./Hexion Nova Scotia Finance, 8.875%, 2018 | 40,000 | 40,800 | ||||||
Hexion U.S. Finance Corp./Hexion Nova Scotia Finance, 9%, 2020 | 5,000 | 4,313 | ||||||
Huntsman International LLC, 8.625%, 2021 | 30,000 | 33,825 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Chemicals – continued | ||||||||
Momentive Performance Materials, Inc., 12.5%, 2014 | $ | 54,000 | $ | 56,295 | ||||
Momentive Performance Materials, Inc., 11.5%, 2016 | 32,000 | 23,840 | ||||||
Polypore International, Inc., 7.5%, 2017 | 30,000 | 31,838 | ||||||
|
| |||||||
$ | 476,837 | |||||||
|
| |||||||
Computer Software – 0.6% | ||||||||
Lawson Software, Inc., 11.5%, 2018 (n) | $ | 35,000 | $ | 39,550 | ||||
Lawson Software, Inc., 9.375%, 2019 (n) | 10,000 | 10,675 | ||||||
Oracle Corp., 5.375%, 2040 | 66,000 | 80,865 | ||||||
Syniverse Holdings, Inc., 9.125%, 2019 | 40,000 | 43,400 | ||||||
TransUnion Holding Co., Inc., 9.625%, 2018 (n)(p) | 10,000 | 10,800 | ||||||
TransUnion LLC/TransUnion Financing Corp., 11.375%, 2018 | 5,000 | 5,881 | ||||||
|
| |||||||
$ | 191,171 | |||||||
|
| |||||||
Computer Software – Systems – 0.3% | ||||||||
Audatex North America, Inc., 6.75%, 2018 (n) | $ | 10,000 | $ | 10,525 | ||||
CDW LLC/CDW Finance Corp., 12.535%, 2017 | 10,000 | 10,850 | ||||||
CDW LLC/CDW Finance Corp., 8.5%, 2019 | 50,000 | 53,250 | ||||||
DuPont Fabros Technology, Inc., REIT, 8.5%, 2017 | 30,000 | 33,000 | ||||||
|
| |||||||
$ | 107,625 | |||||||
|
| |||||||
Conglomerates – 0.5% | ||||||||
Amsted Industries, Inc., 8.125%, 2018 (n) | $ | 55,000 | $ | 58,163 | ||||
Dynacast International LLC, 9.25%, 2019 (z) | 20,000 | 20,750 | ||||||
Griffon Corp., 7.125%, 2018 | 45,000 | 45,675 | ||||||
Tomkins LLC/Tomkins, Inc., 9%, 2018 | 29,000 | 32,262 | ||||||
|
| |||||||
$ | 156,850 | |||||||
|
| |||||||
Consumer Products – 0.5% | ||||||||
ACCO Brands Corp., 6.75%, 2020 | $ | 5,000 | $ | 5,275 | ||||
Easton-Bell Sports, Inc., 9.75%, 2016 | 30,000 | 32,888 | ||||||
Elizabeth Arden, Inc., 7.375%, 2021 | 30,000 | 32,925 | ||||||
FGI Operating Co./FGI Finance, Inc., 7.875%, 2020 (z) | 5,000 | 5,211 | ||||||
Libbey Glass, Inc., 6.875%, 2020 (z) | 5,000 | 5,136 | ||||||
Mattel, Inc., 5.45%, 2041 | 53,000 | 57,931 | ||||||
|
| |||||||
$ | 139,366 | |||||||
|
| |||||||
Consumer Services – 0.9% | ||||||||
Experian Finance PLC, 2.375%, 2017 (z) | $ | 200,000 | $ | 200,224 | ||||
Service Corp. International, 7%, 2017 | 80,000 | 89,000 | ||||||
|
| |||||||
$ | 289,224 | |||||||
|
| |||||||
Containers – 1.0% | ||||||||
Ball Corp., 5%, 2022 | $ | 16,000 | $ | 16,640 | ||||
Consolidated Container Co. LLC/Consolidated Container Finance, Inc., 10.125%, 2020 (z) | 5,000 | 5,150 | ||||||
Greif, Inc., 6.75%, 2017 | 145,000 | 157,325 | ||||||
Reynolds Group, 7.125%, 2019 (n) | 110,000 | 115,225 | ||||||
Sealed Air Corp., 8.125%, 2019 (n) | 5,000 | 5,575 |
5
Table of Contents
MFS Strategic Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Containers – continued | ||||||||
Sealed Air Corp., 8.375%, 2021 (n) | $ | 5,000 | $ | 5,650 | ||||
|
| |||||||
$ | 305,565 | |||||||
|
| |||||||
Defense Electronics – 0.8% | ||||||||
BAE Systems Holdings, Inc., 5.2%, 2015 (n) | $ | 169,000 | $ | 183,874 | ||||
BAE Systems Holdings, Inc., 6.375%, 2019 (n) | 40,000 | 46,782 | ||||||
ManTech International Corp., 7.25%, 2018 | 30,000 | 31,500 | ||||||
|
| |||||||
$ | 262,156 | |||||||
|
| |||||||
Electrical Equipment – 0.3% | ||||||||
Avaya, Inc., 9.75%, 2015 | $ | 25,000 | $ | 20,688 | ||||
Avaya, Inc., 7%, 2019 (z) | 10,000 | 9,275 | ||||||
Ericsson, Inc., 4.125%, 2022 | 73,000 | 73,202 | ||||||
|
| |||||||
$ | 103,165 | |||||||
|
| |||||||
Electronics – 0.4% | ||||||||
Freescale Semiconductor, Inc., 9.25%, 2018 (n) | $ | 30,000 | $ | 32,100 | ||||
Nokia Corp., 5.375%, 2019 | 10,000 | 7,875 | ||||||
Sensata Technologies B.V., 6.5%, 2019 (n) | 60,000 | 61,950 | ||||||
Tyco Electronics Group S.A., 3.5%, 2022 | 31,000 | 30,899 | ||||||
|
| |||||||
$ | 132,824 | |||||||
|
| |||||||
Emerging Market Quasi-Sovereign – 1.3% | ||||||||
IIRSA Norte Finance Ltd., 8.75%, 2024 | $ | 102,522 | $ | 122,514 | ||||
Petrobras International Finance Co., 7.875%, 2019 | 51,000 | 62,034 | ||||||
Petrobras International Finance Co., 6.75%, 2041 | 48,000 | 56,303 | ||||||
Petroleos Mexicanos, 5.5%, 2021 | 100,000 | 113,000 | ||||||
Petroleos Mexicanos, 4.875%, 2022 (n) | 10,000 | 10,800 | ||||||
Petroleos Mexicanos, 6.5%, 2041 (n) | 31,000 | 36,190 | ||||||
|
| |||||||
$ | 400,841 | |||||||
|
| |||||||
Emerging Market Sovereign – 0.5% | ||||||||
Republic of Poland, 5%, 2022 | $ | 41,000 | $ | 44,750 | ||||
Republic of South Africa, 5.5%, 2020 | 100,000 | 115,250 | ||||||
|
| |||||||
$ | 160,000 | |||||||
|
| |||||||
Energy – Independent – 3.7% | ||||||||
ATP Oil & Gas Corp., 11.875%, 2015 | $ | 15,000 | $ | 6,975 | ||||
BreitBurn Energy Partners LP, 8.625%, 2020 | 15,000 | 15,863 | ||||||
BreitBurn Energy Partners LP, 7.875%, 2022 (n) | 15,000 | 15,000 | ||||||
Carrizo Oil & Gas, Inc., 8.625%, 2018 | 20,000 | 20,900 | ||||||
Chaparral Energy, Inc., 7.625%, 2022 (n) | 20,000 | 20,400 | ||||||
Chesapeake Energy Corp., 6.875%, 2020 | 20,000 | 19,700 | ||||||
Concho Resources, Inc., 8.625%, 2017 | 20,000 | 22,050 | ||||||
Concho Resources, Inc., 6.5%, 2022 | 40,000 | 41,600 | ||||||
Continental Resources, Inc., 8.25%, 2019 | 30,000 | 33,525 | ||||||
Denbury Resources, Inc., 8.25%, 2020 | 55,000 | 60,225 | ||||||
Energy XXI Gulf Coast, Inc., 9.25%, 2017 | 50,000 | 53,500 | ||||||
EQT Corp., 4.875%, 2021 | 48,000 | 49,029 | ||||||
Everest Acquisition LLC/Everest Acquisition Finance, Inc., 9.375%, 2020 (n) | 80,000 | 82,900 | ||||||
EXCO Resources, Inc., 7.5%, 2018 | 45,000 | 38,925 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Energy – Independent – continued | ||||||||
Harvest Operations Corp., 6.875%, 2017 (n) | $ | 50,000 | $ | 53,125 | ||||
Hess Corp., 8.125%, 2019 | 30,000 | 38,616 | ||||||
Hilcorp Energy I/Hilcorp Finance Co., 8%, 2020 (n) | 15,000 | 16,163 | ||||||
Laredo Petroleum, Inc., 9.5%, 2019 | 20,000 | 22,300 | ||||||
LINN Energy LLC, 6.5%, 2019 (n) | 10,000 | 9,900 | ||||||
LINN Energy LLC, 8.625%, 2020 | 20,000 | 21,550 | ||||||
LINN Energy LLC, 7.75%, 2021 | 23,000 | 24,035 | ||||||
Newfield Exploration Co., 6.625%, 2016 | 30,000 | 30,750 | ||||||
Newfield Exploration Co., 6.875%, 2020 | 35,000 | 37,275 | ||||||
Pioneer Natural Resources Co., 7.5%, 2020 | 80,000 | 98,983 | ||||||
Plains Exploration & Production Co., 8.625%, 2019 | 25,000 | 27,594 | ||||||
QEP Resources, Inc., 6.875%, 2021 | 60,000 | 66,600 | ||||||
Range Resources Corp., 8%, 2019 | 25,000 | 27,313 | ||||||
SandRidge Energy, Inc., 8%, 2018 (n) | 55,000 | 55,688 | ||||||
SM Energy Co., 6.5%, 2021 | 30,000 | 30,525 | ||||||
Southwestern Energy Co., 4.1%, 2022 (n) | 63,000 | 63,853 | ||||||
Talisman Energy, Inc., 7.75%, 2019 | 10,000 | 12,270 | ||||||
Whiting Petroleum Corp., 6.5%, 2018 | 15,000 | 15,975 | ||||||
|
| |||||||
$ | 1,133,107 | |||||||
|
| |||||||
Energy – Integrated – 0.9% | ||||||||
BP Capital Markets PLC, 4.5%, 2020 | $ | 29,000 | $ | 32,649 | ||||
BP Capital Markets PLC, 4.742%, 2021 | 90,000 | 103,013 | ||||||
Cenovus Energy, Inc., 4.5%, 2014 | 30,000 | 32,032 | ||||||
Petro-Canada Financial Partnership, 5%, 2014 | 110,000 | 118,774 | ||||||
|
| |||||||
$ | 286,468 | |||||||
|
| |||||||
Engineering – Construction – 0.1% | ||||||||
B-Corp. Merger Sub, Inc., 8.25%, 2019 (n) | $ | 25,000 | $ | 24,813 | ||||
|
| |||||||
Entertainment – 0.5% | ||||||||
AMC Entertainment, Inc., 8.75%, 2019 | $ | 55,000 | $ | 58,988 | ||||
AMC Entertainment, Inc., 9.75%, 2020 | 30,000 | 32,400 | ||||||
Cedar Fair LP, 9.125%, 2018 | 20,000 | 22,200 | ||||||
Cinemark USA, Inc., 8.625%, 2019 | 45,000 | 49,838 | ||||||
|
| |||||||
$ | 163,426 | |||||||
|
| |||||||
Financial Institutions – 2.0% | ||||||||
Ally Financial, Inc., 5.5%, 2017 | $ | 25,000 | $ | 25,392 | ||||
CIT Group, Inc., 5.25%, 2014 (n) | 45,000 | 46,575 | ||||||
CIT Group, Inc., 7%, 2017 (z) | 13,437 | 13,462 | ||||||
CIT Group, Inc., 5.25%, 2018 | 20,000 | 20,650 | ||||||
CIT Group, Inc., 6.625%, 2018 (n) | 35,000 | 37,713 | ||||||
CIT Group, Inc., 5.5%, 2019 (n) | 36,000 | 36,990 | ||||||
General Electric Capital Corp., 6%, 2019 | 30,000 | 35,102 | ||||||
General Electric Capital Corp., 5.5%, 2020 | 95,000 | 108,731 | ||||||
GMAC, Inc., 8%, 2031 | 5,000 | 5,863 | ||||||
Icahn Enterprises LP, 8%, 2018 | 15,000 | 15,938 | ||||||
International Lease Finance Corp., 4.875%, 2015 | 10,000 | 10,049 | ||||||
International Lease Finance Corp., 8.625%, 2015 | 15,000 | 16,575 |
6
Table of Contents
MFS Strategic Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Financial Institutions – continued | ||||||||
International Lease Finance Corp., 7.125%, 2018 (n) | $ | 47,000 | $ | 51,818 | ||||
Nationstar Mortgage LLC/Capital Corp., 10.875%, 2015 | 50,000 | 54,000 | ||||||
Nationstar Mortgage LLC/Capital Corp., 9.625%, 2019 (n) | 10,000 | 10,575 | ||||||
PHH Corp., 9.25%, 2016 | 30,000 | 31,875 | ||||||
SLM Corp., 8.45%, 2018 | 15,000 | 16,800 | ||||||
SLM Corp., 8%, 2020 | 70,000 | 76,650 | ||||||
SLM Corp., 7.25%, 2022 | 5,000 | 5,286 | ||||||
|
| |||||||
$ | 620,044 | |||||||
|
| |||||||
Food & Beverages – 3.3% | ||||||||
Anheuser-Busch InBev S.A., 7.75%, 2019 | $ | 140,000 | $ | 184,906 | ||||
ARAMARK Corp., 8.5%, 2015 | 30,000 | 30,713 | ||||||
B&G Foods, Inc., 7.625%, 2018 | 55,000 | 59,125 | ||||||
Conagra Foods, Inc., 5.875%, 2014 | 150,000 | 161,974 | ||||||
JBS USA LLC/JBS USA Finance, 8.25%, 2020 (n) | 15,000 | 14,586 | ||||||
Kraft Foods, Inc., 6.125%, 2018 | 80,000 | 97,352 | ||||||
Kraft Foods, Inc., 3.5%, 2022 (n) | 101,000 | 103,642 | ||||||
Pernod-Ricard S.A., 2.95%, 2017 (n) | 150,000 | 151,837 | ||||||
Pinnacle Foods Finance LLC, 9.25%, 2015 | 45,000 | 46,238 | ||||||
Pinnacle Foods Finance LLC, 8.25%, 2017 | 10,000 | 10,575 | ||||||
TreeHouse Foods, Inc., 7.75%, 2018 | 30,000 | 32,513 | ||||||
Tyson Foods, Inc., 6.85%, 2016 | 70,000 | 80,063 | ||||||
Tyson Foods, Inc., 4.5%, 2022 | 49,000 | 50,470 | ||||||
|
| |||||||
$ | 1,023,994 | |||||||
|
| |||||||
Food & Drug Stores – 0.4% | ||||||||
CVS Caremark Corp., 5.75%, 2041 | $ | 110,000 | $ | 130,946 | ||||
|
| |||||||
Forest & Paper Products – 0.8% | ||||||||
Boise, Inc., 8%, 2020 | $ | 30,000 | $ | 33,150 | ||||
Cascades, Inc., 7.75%, 2017 | 25,000 | 25,188 | ||||||
Georgia-Pacific Corp., 8%, 2024 | 25,000 | 33,392 | ||||||
Graphic Packaging Holding Co., 7.875%, 2018 | 20,000 | 22,000 | ||||||
Tembec Industries, Inc., 11.25%, 2018 (n) | 10,000 | 9,975 | ||||||
Votorantim Participacoes S.A., 6.75%, 2021 (n) | 100,000 | 109,000 | ||||||
|
| |||||||
$ | 232,705 | |||||||
|
| |||||||
Gaming & Lodging – 2.0% | ||||||||
Boyd Gaming Corp., 7.125%, 2016 | $ | 25,000 | $ | 24,125 | ||||
Caesars Operating Escrow LLC, 8.5%, 2020 (n) | 5,000 | 5,036 | ||||||
Choice Hotels International, Inc., 5.75%, 2022 | 5,000 | 5,228 | ||||||
Fontainebleau Las Vegas Holdings LLC, 10.25%, 2015 (a)(d)(n) | 65,000 | 41 | ||||||
GWR Operating Partnership LLP, 10.875%, 2017 | 20,000 | 22,400 | ||||||
Harrah’s Operating Co., Inc., 11.25%, 2017 | 75,000 | 81,844 | ||||||
Harrah’s Operating Co., Inc., 10%, 2018 | 2,000 | 1,325 | ||||||
Host Hotels & Resorts, Inc., 5.25%, 2022 (z) | 20,000 | 20,500 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Gaming & Lodging – continued | ||||||||
Marriott International, Inc., 5.625%, 2013 | $ | 80,000 | $ | 82,190 | ||||
MGM Mirage, 10.375%, 2014 | 5,000 | 5,638 | ||||||
MGM Mirage, 6.625%, 2015 | 10,000 | 10,300 | ||||||
MGM Mirage, 7.5%, 2016 | 5,000 | 5,175 | ||||||
MGM Resorts International, 11.375%, 2018 | 35,000 | 41,213 | ||||||
MGM Resorts International, 9%, 2020 | 30,000 | 33,300 | ||||||
Penn National Gaming, Inc., 8.75%, 2019 | 50,000 | 55,375 | ||||||
Pinnacle Entertainment, Inc., 8.75%, 2020 | 25,000 | 27,375 | ||||||
Rivers Pittsburgh Borrower LP/Rivers Pittsburgh Finance Corp., 9.5%, 2019 (z) | 5,000 | 5,194 | ||||||
Seven Seas Cruises S. de R.L., 9.125%, 2019 | 35,000 | 36,136 | ||||||
Wyndham Worldwide Corp., 5.75%, 2018 | 90,000 | 100,067 | ||||||
Wyndham Worldwide Corp., 7.375%, 2020 | 20,000 | 23,773 | ||||||
Wynn Las Vegas LLC, 7.75%, 2020 | 30,000 | 33,225 | ||||||
|
| |||||||
$ | 619,460 | |||||||
|
| |||||||
Industrial – 0.2% | ||||||||
Altra Holdings, Inc., 8.125%, 2016 | $ | 25,000 | $ | 26,844 | ||||
Mueller Water Products, Inc., 8.75%, 2020 | 23,000 | 25,530 | ||||||
|
| |||||||
$ | 52,374 | |||||||
|
| |||||||
Insurance – 1.9% | ||||||||
Allianz AG, 5.5% to 2014, FRN to 2049 | EUR | 105,000 | $ | 129,994 | ||||
American International Group, Inc., 3%, 2015 | $ | 40,000 | 40,202 | |||||
American International Group, Inc., 8.175% to 2038, FRN to 2068 | 85,000 | 92,225 | ||||||
Metropolitan Life Global Funding I, 5.125%, 2014 (n) | 40,000 | 42,895 | ||||||
Principal Financial Group, Inc., 8.875%, 2019 | 80,000 | 103,695 | ||||||
Prudential Financial, Inc., 6.2%, 2015 | 80,000 | 87,817 | ||||||
Unum Group, 7.125%, 2016 | 90,000 | 103,803 | ||||||
|
| |||||||
$ | 600,631 | |||||||
|
| |||||||
Insurance – Health – 0.1% | ||||||||
AMERIGROUP Corp., 7.5%, 2019 | $ | 15,000 | $ | 16,125 | ||||
|
| |||||||
Insurance – Property & Casualty – 2.6% | ||||||||
Aon Corp., 3.5%, 2015 | $ | 130,000 | $ | 135,854 | ||||
AXIS Capital Holdings Ltd., 5.75%, 2014 | 130,000 | 137,749 | ||||||
AXIS Capital Holdings Ltd., 5.875%, 2020 | 40,000 | 43,319 | ||||||
CNA Financial Corp., 5.875%, 2020 | 100,000 | 109,965 | ||||||
Liberty Mutual Group, Inc., 4.95%, 2022 (n) | 73,000 | 72,547 | ||||||
Liberty Mutual Group, Inc., 10.75% to 2038, FRN to 2088 (n) | 45,000 | 61,200 | ||||||
PartnerRe Ltd., 5.5%, 2020 | 66,000 | 69,628 | ||||||
Travelers Cos., Inc., 3.9%, 2020 | 150,000 | 166,281 | ||||||
|
| |||||||
$ | 796,543 | |||||||
|
| |||||||
International Market Quasi-Sovereign – 2.6% | ||||||||
EDF Energies Nouvelles S.A., 6.5%, 2019 (n) | $ | 120,000 | $ | 141,238 | ||||
ING Bank N.V., 3.9%, 2014 (n) | 150,000 | 157,427 | ||||||
Irish Life & Permanent PLC, 3.6%, 2013 (e)(n) | 400,000 | 387,638 | ||||||
Westpac Banking Corp., 3.45%, 2014 (n) | 100,000 | 105,509 | ||||||
|
| |||||||
$ | 791,812 | |||||||
|
|
7
Table of Contents
MFS Strategic Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
International Market Sovereign – 10.1% | ||||||||
Commonwealth of Australia, 5.75%, 2021 | AUD | 27,000 | $ | 33,656 | ||||
Federal Republic of Germany, 3.75%, 2015 | EUR | 169,000 | 232,964 | |||||
Federal Republic of Germany, 4.25%, 2018 | EUR | 69,000 | 104,496 | |||||
Federal Republic of Germany, 6.25%, 2030 | EUR | 57,000 | 113,238 | |||||
Government of Canada, 4.5%, 2015 | CAD | 60,000 | 64,645 | |||||
Government of Canada, 4.25%, 2018 | CAD | 31,000 | 35,400 | |||||
Government of Canada, 5.75%, 2033 | CAD | 11,000 | 16,953 | |||||
Government of Japan, 1.7%, 2017 | JPY | 24,100,000 | 322,783 | |||||
Government of Japan, 1.1%, 2020 | JPY | 12,000,000 | 156,191 | |||||
Government of Japan, 2.1%, 2024 | JPY | 6,000,000 | 83,816 | |||||
Government of Japan, 2.2%, 2027 | JPY | 13,200,000 | 183,888 | |||||
Government of Japan, 2.4%, 2037 | JPY | 13,900,000 | 193,914 | |||||
Kingdom of Belgium, 5.5%, 2017 | EUR | 79,000 | 116,248 | |||||
Kingdom of Denmark, 3%, 2021 | DKK | 154,000 | 29,723 | |||||
Kingdom of Spain, 4.6%, 2019 | EUR | 118,000 | 136,445 | |||||
Kingdom of Sweden, 5%, 2020 | SEK | 110,000 | 20,278 | |||||
Kingdom of the Netherlands, 3.75%, 2014 | EUR | 132,000 | 178,672 | |||||
Kingdom of the Netherlands, 5.5%, 2028 | EUR | 15,000 | 26,202 | |||||
Republic of Austria, 4.65%, 2018 | EUR | 55,000 | 80,565 | |||||
Republic of Finland, 3.875%, 2017 | EUR | 15,000 | 21,551 | |||||
Republic of France, 6%, 2025 | EUR | 38,000 | 62,992 | |||||
Republic of France, 4.75%, 2035 | EUR | 80,000 | 120,621 | |||||
Republic of Italy, 4.25%, 2015 | EUR | 62,000 | 78,895 | |||||
Republic of Italy, 5.25%, 2017 | EUR | 189,000 | 241,071 | |||||
Republic of Italy, 3.75%, 2021 | EUR | 71,000 | 79,690 | |||||
United Kingdom Treasury, 8%, 2015 | GBP | 76,000 | 149,964 | |||||
United Kingdom Treasury, 8%, 2021 | GBP | 56,000 | 134,844 | |||||
United Kingdom Treasury, 4.25%, 2036 | GBP | 52,000 | 100,407 | |||||
|
| |||||||
$ | 3,120,112 | |||||||
|
| |||||||
Local Authorities – 0.7% | ||||||||
Louisiana Gas & Fuels Tax Rev. (Build America Bonds), FRN, 3%, 2043 | $ | 100,000 | $ | 100,188 | ||||
Province of Ontario, 5.45%, 2016 | 95,000 | 110,160 | ||||||
|
| |||||||
$ | 210,348 | |||||||
|
| |||||||
Machinery & Tools – 1.1% | ||||||||
Atlas Copco AB, 5.6%, 2017 (n) | $ | 135,000 | $ | 152,647 | ||||
Case Corp., 7.25%, 2016 | 15,000 | 16,500 | ||||||
Case New Holland, Inc., 7.875%, 2017 | 85,000 | 98,175 | ||||||
CNH Capital LLC, 6.25%, 2016 (n) | 5,000 | 5,350 | ||||||
NESCO LLC/NESCO Holdings Corp., 11.75%, 2017 (z) | 10,000 | 10,250 | ||||||
RSC Equipment Rental, Inc., 8.25%, 2021 | 30,000 | 31,950 | ||||||
UR Financing Escrow Corp., 5.75%, 2018 (n) | 15,000 | 15,600 | ||||||
UR Financing Escrow Corp., 7.625%, 2022 (n) | 14,000 | 14,665 | ||||||
|
| |||||||
$ | 345,137 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Major Banks – 8.0% | ||||||||
ABN AMRO Bank N.V., 4.25%, 2017 (n) | $ | 200,000 | $ | 203,630 | ||||
Bank of America Corp., 7.375%, 2014 | 50,000 | 53,772 | ||||||
Bank of America Corp., 6.5%, 2016 | 170,000 | 186,683 | ||||||
Barclays Bank PLC, 5.125%, 2020 | 100,000 | 108,517 | ||||||
BNP Paribas, 7.195% to 2037, FRN to 2049 (n) | 100,000 | 85,500 | ||||||
BNP Paribas, FRN, 3.217%, 2014 | 18,000 | 18,004 | ||||||
Commonwealth Bank of Australia, 5%, 2019 (n) | 80,000 | 87,890 | ||||||
DBS Bank Ltd., 2.35%, 2017 (n) | 200,000 | 200,620 | ||||||
Goldman Sachs Group, Inc., 6%, 2014 | 50,000 | 52,843 | ||||||
Goldman Sachs Group, Inc., 5.75%, 2022 | 133,000 | 140,395 | ||||||
HSBC Holdings PLC, 4%, 2022 | 210,000 | 218,064 | ||||||
ING Bank N.V., 3.75%, 2017 (n) | 200,000 | 199,062 | ||||||
Intesa Sanpaolo S.p.A., FRN, 2.866%, 2014 (n) | 100,000 | 93,902 | ||||||
JPMorgan Chase & Co., 4.625%, 2021 | 90,000 | 96,299 | ||||||
JPMorgan Chase Capital XXII, 6.45%, 2087 | 71,000 | 71,000 | ||||||
JPMorgan Chase Capital XXVII, 7%, 2039 | 20,000 | 20,000 | ||||||
Macquarie Bank Ltd., 5%, 2017 (n) | 79,000 | 80,462 | ||||||
Macquarie Group Ltd., 6%, 2020 (n) | 48,000 | 47,752 | ||||||
Merrill Lynch & Co., Inc., 6.4%, 2017 | 30,000 | 32,633 | ||||||
Morgan Stanley, 6%, 2014 | 100,000 | 103,653 | ||||||
Morgan Stanley, 5.625%, 2019 | 100,000 | 98,970 | ||||||
Royal Bank of Scotland Group PLC, 7.648% to 2031, FRN to 2049 | 55,000 | 44,000 | ||||||
Standard Chartered PLC, 3.85%, 2015 (n) | 100,000 | 104,605 | ||||||
UFJ Finance Aruba AEC, 6.75%, 2013 | 70,000 | 73,816 | ||||||
Wells Fargo & Co., 7.98% to 2018, FRN to 2049 | 49,000 | 53,778 | ||||||
|
| |||||||
$ | 2,475,850 | |||||||
|
| |||||||
Medical & Health Technology & Services – 3.2% | ||||||||
Aristotle Holding, Inc., 3.9%, 2022 (n) | $ | 49,000 | $ | 50,789 | ||||
Biomet, Inc., 10%, 2017 | 5,000 | 5,341 | ||||||
Biomet, Inc., 10.375%, 2017 (p) | 15,000 | 16,031 | ||||||
Biomet, Inc., 11.625%, 2017 | 45,000 | 48,544 | ||||||
Cardinal Health, Inc., 5.8%, 2016 | 94,000 | 108,819 | ||||||
Davita, Inc., 6.375%, 2018 | 55,000 | 56,788 | ||||||
Davita, Inc., 6.625%, 2020 | 25,000 | 26,063 | ||||||
Fresenius Medical Care AG & Co. KGaA, 9%, 2015 (n) | 20,000 | 22,975 | ||||||
Fresenius Medical Care Capital Trust III, 5.625%, 2019 (n) | 25,000 | 26,063 | ||||||
HCA, Inc., 8.5%, 2019 | 95,000 | 106,400 | ||||||
HCA, Inc., 7.5%, 2022 | 35,000 | 38,150 | ||||||
HCA, Inc., 5.875%, 2022 | 15,000 | 15,675 | ||||||
HealthSouth Corp., 8.125%, 2020 | 70,000 | 76,475 | ||||||
Hospira, Inc., 6.05%, 2017 | 60,000 | 67,678 | ||||||
IASIS Healthcare LLC/IASIS Capital Corp., 8.375%, 2019 | 25,000 | 24,750 | ||||||
McKesson Corp., 5.7%, 2017 | 40,000 | 46,836 | ||||||
Owens & Minor, Inc., 6.35%, 2016 | 70,000 | 76,425 | ||||||
Physio-Control International, Inc., 9.875%, 2019 (z) | 20,000 | 21,300 |
8
Table of Contents
MFS Strategic Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Medical & Health Technology & Services – continued | ||||||||
Select Medical Corp., 7.625%, 2015 | $ | 15,000 | $ | 15,019 | ||||
Tenet Healthcare Corp., 9.25%, 2015 | 20,000 | 22,250 | ||||||
Truven Health Analytics, Inc., 10.625%, 2020 (z) | 10,000 | 10,400 | ||||||
Universal Health Services, Inc., 7%, 2018 | 25,000 | 26,875 | ||||||
Universal Hospital Services, Inc., 8.5%, 2015 (p) | 35,000 | 35,678 | ||||||
Universal Hospital Services, Inc., FRN, 4.111%, 2015 | 10,000 | 9,500 | ||||||
Vanguard Health Systems, Inc., 8%, 2018 | 25,000 | 25,563 | ||||||
|
| |||||||
$ | 980,387 | |||||||
|
| |||||||
Metals & Mining – 1.4% | ||||||||
Arch Coal, Inc., 7.25%, 2020 | $ | 20,000 | $ | 16,900 | ||||
Cloud Peak Energy, Inc., 8.25%, 2017 | 45,000 | 46,575 | ||||||
Cloud Peak Energy, Inc., 8.5%, 2019 | 50,000 | 51,875 | ||||||
Consol Energy, Inc., 8%, 2017 | 20,000 | 20,750 | ||||||
Consol Energy, Inc., 8.25%, 2020 | 15,000 | 15,750 | ||||||
Fortescue Metals Group Ltd., 8.25%, 2019 (n) | 30,000 | 31,800 | ||||||
Peabody Energy Corp., 6%, 2018 (n) | 10,000 | 9,950 | ||||||
Peabody Energy Corp., 6.25%, 2021 (n) | 10,000 | 9,900 | ||||||
Southern Copper Corp., 6.75%, 2040 | 100,000 | 105,896 | ||||||
Vale Overseas Ltd., 4.375%, 2022 | 90,000 | 91,649 | ||||||
Vale Overseas Ltd., 6.875%, 2039 | 33,000 | 38,556 | ||||||
|
| |||||||
$ | 439,601 | |||||||
|
| |||||||
Mortgage-Backed – 1.3% | ||||||||
Fannie Mae, 6%, 2017 | $ | 32,646 | $ | 35,913 | ||||
Fannie Mae, 5.5%, 2020 (f) | 159,423 | 174,637 | ||||||
Fannie Mae, 5.5%, 2034 | 81,372 | 89,458 | ||||||
Freddie Mac, 4.224%, 2020 | 94,792 | 107,554 | ||||||
|
| |||||||
$ | 407,562 | |||||||
|
| |||||||
Natural Gas – Distribution – 0.1% | ||||||||
AmeriGas Finance LLC, 6.75%, 2020 | $ | 25,000 | $ | 25,500 | ||||
Ferrellgas LP/Ferrellgas Finance Corp., 6.5%, 2021 | 15,000 | 13,688 | ||||||
|
| |||||||
$ | 39,188 | |||||||
|
| |||||||
Natural Gas – Pipeline – 2.8% | ||||||||
Atlas Pipeline Partners LP, 8.75%, 2018 | $ | 50,000 | $ | 53,375 | ||||
Crosstex Energy, Inc., 8.875%, 2018 | 45,000 | 47,531 | ||||||
El Paso Corp., 7%, 2017 | 45,000 | 51,046 | ||||||
El Paso Corp., 7.75%, 2032 | 50,000 | 56,218 | ||||||
Enbridge Energy Partners LP, 4.2%, 2021 | 130,000 | 137,516 | ||||||
Energy Transfer Equity LP, 7.5%, 2020 | 45,000 | 49,388 | ||||||
Energy Transfer Partners LP, 6.5%, 2042 | 87,000 | 93,233 | ||||||
Enterprise Products Partners LP, 8.375% to 2016, FRN to 2066 | 20,000 | 21,675 | ||||||
Enterprise Products Partners LP, 7.034% to 2018, FRN to 2068 | 12,000 | 12,840 | ||||||
Kinder Morgan Energy Partners LP, 5.85%, 2012 | 97,000 | 97,943 | ||||||
Kinder Morgan Energy Partners LP, 6.375%, 2041 | 130,000 | 148,216 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Natural Gas – Pipeline – continued | ||||||||
Rockies Express Pipeline LLC, 5.625%, 2020 (n) | $ | 16,000 | $ | 14,560 | ||||
Spectra Energy Capital LLC, 8%, 2019 | 66,000 | 84,550 | ||||||
|
| |||||||
$ | 868,091 | |||||||
|
| |||||||
Network & Telecom – 2.3% | ||||||||
AT&T, Inc., 5.5%, 2018 | $ | 70,000 | $ | 83,178 | ||||
AT&T, Inc., 3.875%, 2021 | 80,000 | 87,141 | ||||||
Centurylink, Inc., 7.65%, 2042 | 89,000 | 86,380 | ||||||
Cincinnati Bell, Inc., 8.25%, 2017 | 10,000 | 10,400 | ||||||
Citizens Communications Co., 9%, 2031 | 25,000 | 23,875 | ||||||
France Telecom, 4.375%, 2014 | 80,000 | 84,036 | ||||||
Frontier Communications Corp., 8.125%, 2018 | 20,000 | 21,250 | ||||||
Qwest Communications International, Inc., 7.125%, 2018 (n) | 35,000 | 36,925 | ||||||
Qwest Corp., 7.5%, 2014 | 65,000 | 72,458 | ||||||
Telefonica S.A., 5.877%, 2019 | 10,000 | 8,944 | ||||||
Verizon Communications, Inc., 8.75%, 2018 | 80,000 | 109,964 | ||||||
Windstream Corp., 8.125%, 2018 | 5,000 | 5,375 | ||||||
Windstream Corp., 7.75%, 2020 | 60,000 | 63,600 | ||||||
Windstream Corp., 7.75%, 2021 | 10,000 | 10,600 | ||||||
|
| |||||||
$ | 704,126 | |||||||
|
| |||||||
Oil Services – 0.6% | ||||||||
Chesapeake Energy Corp., 6.625%, 2019 (n) | $ | 10,000 | $ | 9,000 | ||||
Dresser-Rand Group, Inc., 6.5%, 2021 | 15,000 | 15,560 | ||||||
Pioneer Energy Services Corp., 9.875%, 2018 | 45,000 | 47,250 | ||||||
Transocean, Inc., 6%, 2018 | 70,000 | 78,190 | ||||||
Unit Corp., 6.625%, 2021 | 20,000 | 19,900 | ||||||
|
| |||||||
$ | 169,900 | |||||||
|
| |||||||
Oils – 0.2% | ||||||||
Phillips 66, 4.3%, 2022 (n) | $ | 60,000 | $ | 63,118 | ||||
|
| |||||||
Other Banks & Diversified Financials – 3.1% | ||||||||
Citigroup, Inc., 6.375%, 2014 | $ | 80,000 | $ | 85,635 | ||||
Citigroup, Inc., 6.01%, 2015 | 60,000 | 64,465 | ||||||
Citigroup, Inc., 8.5%, 2019 | 52,000 | 64,222 | ||||||
Groupe BPCE S.A., 12.5% to 2019, FRN to 2049 (n) | 102,000 | 102,671 | ||||||
Lloyds TSB Bank PLC, 5.8%, 2020 (n) | 110,000 | 117,591 | ||||||
Rabobank Nederland N.V., 3.375%, 2017 | 59,000 | 60,722 | ||||||
Santander Holdings USA, Inc., 4.625%, 2016 | 10,000 | 9,664 | ||||||
Santander International Debt S.A., 2.991%, 2013 (n) | 200,000 | 192,312 | ||||||
Santander UK PLC, 8.963% to 2030, FRN to 2049 | 68,000 | 65,280 | ||||||
SunTrust Banks, Inc., 3.5%, 2017 | 69,000 | 71,431 | ||||||
Svenska Handelsbanken AB, 4.875%, 2014 (n) | 110,000 | 116,110 | ||||||
|
| |||||||
$ | 950,103 | |||||||
|
| |||||||
Pharmaceuticals – 1.3% | ||||||||
Celgene Corp., 3.95%, 2020 | $ | 130,000 | $ | 136,553 | ||||
Pfizer, Inc., 6.2%, 2019 | 160,000 | 200,536 |
9
Table of Contents
MFS Strategic Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Pharmaceuticals – continued | ||||||||
Teva Pharmaceutical Finance LLC, 5.55%, 2016 | $ | 39,000 | $ | 44,240 | ||||
Valeant Pharmaceuticals International, Inc., 6.5%, 2016 (n) | 10,000 | 10,450 | ||||||
Valeant Pharmaceuticals International, Inc., 7%, 2020 (n) | 20,000 | 20,200 | ||||||
|
| |||||||
$ | 411,979 | |||||||
|
| |||||||
Pollution Control – 0.4% | ||||||||
Heckmann Corp., 9.875%, 2018 (z) | $ | 20,000 | $ | 19,000 | ||||
Republic Services, Inc., 5.25%, 2021 | 80,000 | 91,847 | ||||||
|
| |||||||
$ | 110,847 | |||||||
|
| |||||||
Printing & Publishing – 0.2% | ||||||||
American Media, Inc., 13.5%, 2018 (z) | $ | 3,347 | $ | 3,146 | ||||
Nielsen Finance LLC, 11.5%, 2016 | 13,000 | 14,788 | ||||||
Nielsen Finance LLC, 7.75%, 2018 | 30,000 | 33,225 | ||||||
|
| |||||||
$ | 51,159 | |||||||
|
| |||||||
Railroad & Shipping – 0.3% | ||||||||
Kansas City Southern de Mexico S.A. de C.V., 6.125%, 2021 | $ | 15,000 | $ | 16,500 | ||||
Panama Canal Railway Co., 7%, 2026 (n) | 90,200 | 86,689 | ||||||
|
| |||||||
$ | 103,189 | |||||||
|
| |||||||
Real Estate – 2.3% | ||||||||
Boston Properties LP, REIT, 3.7%, 2018 | $ | 47,000 | $ | 49,110 | ||||
Boston Properties LP, REIT, 3.85%, 2023 | 100,000 | 100,939 | ||||||
CNL Lifestyle Properties, Inc., REIT, 7.25%, 2019 | 15,000 | 13,800 | ||||||
Entertainment Properties Trust, REIT, 7.75%, 2020 | 30,000 | 32,985 | ||||||
HCP, Inc., REIT, 5.375%, 2021 | 95,000 | 105,051 | ||||||
Kennedy Wilson, Inc., 8.75%, 2019 | 15,000 | 15,450 | ||||||
Kimco Realty Corp., REIT, 6.875%, 2019 | 22,000 | 26,322 | ||||||
MPT Operating Partnership LP, REIT, 6.875%, 2021 | 25,000 | 26,060 | ||||||
Simon Property Group, Inc., REIT, 6.1%, 2016 | 190,000 | 216,228 | ||||||
WEA Finance LLC, REIT, 5.4%, 2012 (n) | 50,000 | 50,497 | ||||||
WEA Finance LLC, REIT, 6.75%, 2019 (n) | 60,000 | 70,792 | ||||||
|
| |||||||
$ | 707,234 | |||||||
|
| |||||||
Retailers – 2.9% | ||||||||
Academy Ltd., 9.25%, 2019 (n) | $ | 25,000 | $ | 27,125 | ||||
AutoZone, Inc., 6.5%, 2014 | 150,000 | 162,080 | ||||||
AutoZone, Inc., 3.7%, 2022 | 19,000 | 19,570 | ||||||
Burlington Coat Factory Warehouse Corp., 10%, 2019 | 30,000 | 31,800 | ||||||
Dollar General Corp., 4.125%, 2017 | 73,000 | 74,004 | ||||||
Gap, Inc., 5.95%, 2021 | 117,000 | 121,271 | ||||||
J. Crew Group, Inc., 8.125%, 2019 | 25,000 | 25,813 | ||||||
Limited Brands, Inc., 5.25%, 2014 | 25,000 | 26,250 | ||||||
Limited Brands, Inc., 6.9%, 2017 | 25,000 | 27,750 | ||||||
Limited Brands, Inc., 7%, 2020 | 10,000 | 11,100 | ||||||
Limited Brands, Inc., 6.95%, 2033 | 15,000 | 14,550 | ||||||
Macy’s, Inc., 7.875%, 2015 | 120,000 | 140,403 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Retailers – continued | ||||||||
QVC, Inc., 7.375%, 2020 (n) | $ | 25,000 | $ | 27,688 | ||||
Rite Aid Corp., 9.25%, 2020 (z) | 10,000 | 10,000 | ||||||
Sally Beauty Holdings, Inc., 6.875%, 2019 | 10,000 | 10,875 | ||||||
Staples, Inc., 9.75%, 2014 | 80,000 | 89,417 | ||||||
Toys “R” Us Property Co. II LLC, 8.5%, 2017 | 15,000 | 15,619 | ||||||
Toys “R” Us, Inc., 10.75%, 2017 | 30,000 | 32,775 | ||||||
YCC Holdings LLC/Yankee Finance, Inc., 10.25%, 2016 (p) | 15,000 | 15,263 | ||||||
|
| |||||||
$ | 883,353 | |||||||
|
| |||||||
Specialty Chemicals – 0.3% | ||||||||
Ecolab, Inc., 4.35%, 2021 | $ | 80,000 | $ | 88,669 | ||||
Koppers, Inc., 7.875%, 2019 | 10,000 | 10,775 | ||||||
|
| |||||||
$ | 99,444 | |||||||
|
| |||||||
Specialty Stores – 0.2% | ||||||||
Gymboree Corp., 9.125%, 2018 | $ | 5,000 | $ | 4,638 | ||||
Michaels Stores, Inc., 11.375%, 2016 | 25,000 | 26,563 | ||||||
Michaels Stores, Inc., 7.75%, 2018 | 15,000 | 15,825 | ||||||
|
| |||||||
$ | 47,026 | |||||||
|
| |||||||
Supermarkets – 0.3% | ||||||||
Delhaize Group, 5.875%, 2014 | $ | 90,000 | $ | 94,773 | ||||
|
| |||||||
Telecommunications – Wireless – 2.3% | ||||||||
American Tower Corp., REIT, 4.625%, 2015 | $ | 40,000 | $ | 42,340 | ||||
American Tower Corp., REIT, 4.7%, 2022 | 82,000 | 84,180 | ||||||
Clearwire Corp., 12%, 2015 (n) | 30,000 | 27,300 | ||||||
Cricket Communications, Inc., 7.75%, 2020 | 40,000 | 38,200 | ||||||
Crown Castle International Corp., 9%, 2015 | 20,000 | 21,825 | ||||||
Crown Castle International Corp., 7.125%, 2019 | 85,000 | 91,163 | ||||||
Crown Castle Towers LLC, 6.113%, 2020 (n) | 104,000 | 120,392 | ||||||
MetroPCS Wireless, Inc., 7.875%, 2018 | 20,000 | 20,750 | ||||||
Rogers Cable, Inc., 5.5%, 2014 | 79,000 | 84,796 | ||||||
Sprint Capital Corp., 6.875%, 2028 | 25,000 | 20,125 | ||||||
Sprint Nextel Corp., 6%, 2016 | 40,000 | 38,300 | ||||||
Sprint Nextel Corp., 8.375%, 2017 | 35,000 | 35,875 | ||||||
Sprint Nextel Corp., 9%, 2018 (n) | 5,000 | 5,586 | ||||||
Wind Acquisition Finance S.A., 11.75%, 2017 (n) | 100,000 | 80,750 | ||||||
|
| |||||||
$ | 711,582 | |||||||
|
| |||||||
Telephone Services – 0.2% | ||||||||
Cogent Communications Group, Inc., 8.375%, 2018 (n) | $ | 10,000 | $ | 10,675 | ||||
Level 3 Financing, Inc., 9.375%, 2019 | 25,000 | 27,000 | ||||||
Level 3 Financing, Inc., 8.625%, 2020 | 20,000 | 21,000 | ||||||
|
| |||||||
$ | 58,675 | |||||||
|
| |||||||
Tobacco – 2.1% | ||||||||
Altria Group, Inc., 9.25%, 2019 | $ | 130,000 | $ | 180,607 | ||||
B.A.T. International Finance PLC, 3.25%, 2022 (n) | 194,000 | 191,724 | ||||||
Lorillard Tobacco Co., 8.125%, 2019 | 37,000 | 45,920 | ||||||
Lorillard Tobacco Co., 6.875%, 2020 | 50,000 | 59,128 |
10
Table of Contents
MFS Strategic Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Tobacco – continued | ||||||||
Reynolds American, Inc., 6.75%, 2017 | $ | 135,000 | $ | 162,077 | ||||
|
| |||||||
$ | 639,456 | |||||||
|
| |||||||
Transportation – 0.1% | ||||||||
Navios South American Logistics, Inc., 9.25%, 2019 | $ | 26,000 | $ | 23,920 | ||||
|
| |||||||
Transportation – Services – 1.3% | ||||||||
ACL I Corp., 10.625%, 2016 (p) | $ | 38,793 | $ | 37,077 | ||||
Avis Budget Car Rental LLC, 8.25%, 2019 (n) | 5,000 | 5,360 | ||||||
Avis Budget Car Rental LLC, 8.25%, 2019 | 15,000 | 16,088 | ||||||
Avis Budget Car Rental LLC, 9.75%, 2020 | 10,000 | 11,113 | ||||||
Commercial Barge Line Co., 12.5%, 2017 | 65,000 | 73,450 | ||||||
Erac USA Finance Co., 6.375%, 2017 (n) | 110,000 | 128,570 | ||||||
Navios Maritime Acquisition Corp., 8.625%, 2017 | 40,000 | 37,200 | ||||||
Navios Maritime Holdings, Inc., 8.875%, 2017 (z) | 10,000 | 10,024 | ||||||
Navios Maritime Holdings, Inc., 8.875%, 2017 | 20,000 | 20,150 | ||||||
Swift Services Holdings, Inc., 10%, 2018 | 45,000 | 48,825 | ||||||
|
| |||||||
$ | 387,857 | |||||||
|
| |||||||
U.S. Government Agencies and Equivalents – 1.6% | ||||||||
National Credit Union Administration Guaranteed Note, 2.9%, 2020 | $ | 20,000 | $ | 21,325 | ||||
Small Business Administration, 6.35%, 2021 | 33,678 | 37,627 | ||||||
Small Business Administration, 4.34%, 2024 | 86,259 | 94,665 | ||||||
Small Business Administration, 4.99%, 2024 | 103,561 | 115,458 | ||||||
Small Business Administration, 4.86%, 2025 | 121,641 | 135,413 | ||||||
Small Business Administration, 4.625%, 2025 | 47,970 | 52,946 | ||||||
Small Business Administration, 5.11%, 2025 | 43,986 | 49,346 | ||||||
|
| |||||||
$ | 506,780 | |||||||
|
| |||||||
Utilities – Electric Power – 5.0% | ||||||||
AES Corp., 8%, 2017 | $ | 55,000 | $ | 62,563 | ||||
Allegheny Energy, Inc., 5.75%, 2019 (n) | 90,000 | 96,851 | ||||||
Atlantic Power Corp., 9%, 2018 (z) | 15,000 | 15,336 | ||||||
Calpine Corp., 8%, 2016 (n) | 35,000 | 37,800 | ||||||
Calpine Corp., 7.875%, 2020 (n) | 45,000 | 49,613 | ||||||
CMS Energy Corp., 4.25%, 2015 | 90,000 | 93,571 | ||||||
CMS Energy Corp., 5.05%, 2022 | 64,000 | 66,383 | ||||||
Covanta Holding Corp., 7.25%, 2020 | 20,000 | 21,668 | ||||||
Covanta Holding Corp., 6.375%, 2022 | 5,000 | 5,285 | ||||||
Dolphin Subsidiary ll, Inc., 7.25%, 2021 (n) | 25,000 | 27,750 | ||||||
Duke Energy Corp., 3.35%, 2015 | 140,000 | 147,874 | ||||||
Edison Mission Energy, 7%, 2017 | 30,000 | 16,800 | ||||||
EDP Finance B.V., 6%, 2018 (n) | 130,000 | 113,089 | ||||||
Energy Future Holdings Corp., 10%, 2020 | 45,000 | 48,038 | ||||||
Energy Future Holdings Corp., 10%, 2020 | 85,000 | 92,438 | ||||||
Energy Future Holdings Corp., 11.75%, 2022 (n) | 15,000 | 15,336 | ||||||
Exelon Generation Co. LLC, 5.35%, 2014 | 40,000 | 42,370 | ||||||
Exelon Generation Co. LLC, 5.2%, 2019 | 65,000 | 71,095 | ||||||
GenOn Energy, Inc., 9.875%, 2020 | 55,000 | 53,625 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Utilities – Electric Power – continued | ||||||||
NRG Energy, Inc., 7.375%, 2017 | $ | 20,000 | $ | 20,800 | ||||
NRG Energy, Inc., 8.25%, 2020 | 80,000 | 82,800 | ||||||
Oncor Electric Delivery Co., 4.1%, 2022 (n) | 95,000 | 96,857 | ||||||
PPL WEM Holdings PLC, 3.9%, 2016 (n) | 110,000 | 115,286 | ||||||
Progress Energy, Inc., 3.15%, 2022 | 127,000 | 128,164 | ||||||
Texas Competitive Electric Holdings Co. LLC, 11.5%, 2020 (n) | 20,000 | 13,650 | ||||||
|
| |||||||
$ | 1,535,042 | |||||||
|
| |||||||
Total Bonds (Identified Cost, $28,837,375) | $ | 30,189,188 | ||||||
|
| |||||||
PREFERRED STOCKS – 0.1% | ||||||||
Other Banks & Diversified Financials – 0.1% | ||||||||
Ally Financial, Inc., 7% (z) | 20 | $ | 17,818 | |||||
GMAC Capital Trust I, 8.125% | 1,075 | 25,854 | ||||||
|
| |||||||
Total Preferred Stocks (Identified Cost, $46,093) | $ | 43,672 | ||||||
|
| |||||||
CONVERTIBLE BONDS – 0.1% | ||||||||
Network & Telecom – 0.1% | ||||||||
Nortel Networks Corp., 2.125%, 2014 (Identified Cost, $34,544) (a)(d) | $ | 35,000 | $ | 34,650 | ||||
|
| |||||||
COMMON STOCKS – 0.1% | ||||||||
Automotive – 0.0% | ||||||||
Accuride Corp. (a) | 791 | $ | 4,746 | |||||
|
| |||||||
Broadcasting – 0.1% | ||||||||
New Young Broadcasting Holding Co., Inc. (a) | 4 | $ | 11,600 | |||||
|
| |||||||
Printing & Publishing – 0.0% | ||||||||
American Media Operations, Inc. (a) | 858 | $ | 4,762 | |||||
|
| |||||||
Total Common Stocks (Identified Cost, $32,622) | $ | 21,108 | ||||||
|
|
Strike Price | First Exercise | |||||||||||||||
WARRANTS – 0.1% | ||||||||||||||||
Broadcasting – 0.1% | ||||||||||||||||
New Young Broadcasting Holding Co., Inc. (1 share for 1 warrant) (Identified Cost, $14,912) (a) | $ | 0.01 | 7/14/10 | 7 | $ | 20,300 | ||||||||||
|
|
CONVERTIBLE PREFERRED STOCKS – 0.1% | ||||||||
Automotive – 0.1% | ||||||||
General Motors Co., 4.75% (Identified Cost, $26,000) | 520 | $ | 17,264 | |||||
|
| |||||||
FLOATING RATE LOANS (g)(r) – 0.0% | ||||||||
Financial Institutions – 0.0% | ||||||||
Springleaf Finance Corp., Term Loan, 5.5%, 2017 (Identified Cost, $14,562) | $ | 14,622 | $ | 13,742 | ||||
|
|
11
Table of Contents
MFS Strategic Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
MONEY MARKET FUNDS – 1.0% | ||||||||
MFS Institutional Money Market Portfolio, 0.14%, at Cost and Net Asset Value (v) | 319,447 | $ | 319,447 | |||||
|
| |||||||
Total Investments (Identified Cost, $29,325,555) | $ | 30,659,371 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – 0.7% | 219,605 | |||||||
|
| |||||||
Net Assets – 100.0% | $ | 30,878,976 | ||||||
|
|
(a) | Non-income producing security. |
(d) | In default. Interest and/or scheduled principal payment(s) have been missed. |
(e) | Guaranteed by Minister for Finance of Ireland. |
(f) | All or a portion of the security has been segregated as collateral for open futures contracts. |
(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 $7,072,278 representing 22.9% 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 for the MFS Institutional Money Market Portfolio 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 | |||||||
Ally Financial, Inc., 7% (Preferred Stock) | 4/13/11 | $18,750 | $17,818 | |||||||
American Media, Inc., 13.5%, 2018 | 12/22/10 | 3,394 | 3,146 | |||||||
Atlantic Power Corp., 9%, 2018 | 10/26/11-3/02/12 | 14,921 | 15,336 | |||||||
Avaya, Inc., 7%, 2019 | 5/24/12 | 9,158 | 9,275 | |||||||
Bayview Financial Revolving Mortgage Loan Trust, FRN, 1.845%, 2040 | 3/01/06 | 168,323 | 109,529 | |||||||
CIT Group, Inc., 7%, 2017 | 6/26/12 | 13,487 | 13,462 | |||||||
Ceridian Corp., 8.875%, 2019 | 6/28/12 | 5,000 | 5,163 | |||||||
Consolidated Container Co. LLC/Consolidated Container Finance, Inc., 10.125%, 2020 | 6/28/12 | 5,000 | 5,150 | |||||||
Crest Ltd., “A1” CDO, FRN, 0.94%, 2018 | 1/21/10 | 39,447 | 44,639 | |||||||
Dynacast International LLC, 9.25%, 2019 | 7/12/11-7/14/11 | 20,228 | 20,750 | |||||||
Experian Finance PLC, 2.375%, 2017 | 6/26/12 | 199,102 | 200,224 | |||||||
FGI Operating Co./FGI Finance, Inc., 7.875%, 2020 | 4/12/12 | 5,000 | 5,211 | |||||||
Falcon Franchise Loan LLC, FRN, 5.43%, 2025 | 1/29/03 | 9,645 | 20,057 | |||||||
First Union National Bank Commercial Mortgage Trust, FRN, 1.819%, 2043 | 12/11/03 | 162 | 109 | |||||||
Heckmann Corp., 9.875%, 2018 | 4/04/12 | 19,892 | 19,000 | |||||||
Host Hotels & Resorts, Inc., 5.25%, 2022 | 6/26/12-6/27/12 | 20,637 | 20,500 | |||||||
LBI Media, Inc., 8.5%, 2017 | 7/18/07 | 29,697 | 6,225 | |||||||
Libbey Glass, Inc., 6.875%, 2020 | 5/11/12 | 5,000 | 5,136 | |||||||
Local TV Finance LLC, 9.25%, 2015 | 12/10/07-11/30/10 | 25,856 | 26,302 | |||||||
Morgan Stanley Capital I, Inc., FRN, 1.333%, 2039 | 7/20/04 | 16,749 | 10,439 |
12
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MFS Strategic Income Series
Portfolio of Investments (unaudited) – continued
Restricted Securities – continued | Acquisition Date | Cost | Value | |||||||
NESCO LLC/NESCO Holdings Corp., 11.75%, 2017 | 4/05/12 | $9,823 | $10,250 | |||||||
Navios Maritime Holdings, Inc., 8.875%, 2017 | 6/27/12 | 10,000 | 10,024 | |||||||
Physio-Control International, Inc., 9.875%, 2019 | 1/13/12-1/30/12 | 20,359 | 21,300 | |||||||
Prudential Securities Secured Financing Corp., FRN, 7.266%, 2013 | 12/06/04 | 173,106 | 170,388 | |||||||
Rite Aid Corp., 9.25%, 2020 | 5/03/12-5/21/12 | 9,888 | 10,000 | |||||||
Rivers Pittsburgh Borrower LP/Rivers Pittsburgh Finance Corp., 9.5%, 2019 | 5/30/12 | 5,000 | 5,194 | |||||||
Roofing Supply Group LLC/Roofing Supply Finance, Inc., 10%, 2020 | 5/24/12 | 10,000 | 10,450 | |||||||
Salomon Brothers Mortgage Securities, Inc., FRN, 7.271%, 2032 | 1/07/05 | 135,430 | 138,707 | |||||||
Townsquare Radio LLC, 9%, 2019 | 3/30/12 | 9,903 | 10,450 | |||||||
Truven Health Analytics, Inc., 10.625%, 2020 | 5/24/12-6/15/12 | 10,167 | 10,400 | |||||||
Total Restricted Securities | $954,634 | |||||||||
% of Net Assets | 3.1% |
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:
AUD | Australian Dollar |
CAD | Canadian Dollar |
DKK | Danish Krone |
EUR | Euro |
GBP | British Pound |
JPY | Japanese Yen |
SEK | Swedish Krona |
Derivative Contracts at 6/30/12
Forward Foreign Currency Exchange Contracts at 6/30/12
Type | Currency | Counterparty | Contracts to Deliver/Receive | Settlement Date Range | In Exchange For | Contracts at Value | Net Unrealized Appreciation (Depreciation) | |||||||||||||||
Asset Derivatives | ||||||||||||||||||||||
SELL | CAD | Merrill Lynch International Bank | 115,023 | 7/13/12 | $ | 114,742 | $ | 112,953 | $ | 1,789 | ||||||||||||
SELL | DKK | Goldman Sachs International | 170,992 | 7/13/12 | 30,054 | 29,113 | 941 | |||||||||||||||
SELL | GBP | Barclays Bank PLC | 114,932 | 7/13/12 | 182,162 | 179,996 | 2,166 | |||||||||||||||
SELL | GBP | Deutsche Bank AG | 114,932 | 7/13/12 | 182,129 | 179,996 | 2,133 | |||||||||||||||
BUY | JPY | Credit Suisse Group | 19,043,808 | 7/13/12 | 235,510 | 238,275 | 2,765 | |||||||||||||||
SELL | SEK | Credit Suisse Group | 102,773 | 7/13/12 | 15,055 | 14,852 | 203 | |||||||||||||||
|
| |||||||||||||||||||||
$ | 9,997 | |||||||||||||||||||||
|
| |||||||||||||||||||||
Liability Derivatives | ||||||||||||||||||||||
SELL | AUD | Westpac Banking Corp. | 30,859 | 7/13/12 | $ | 31,434 | $ | 31,555 | $ | (121 | ) | |||||||||||
BUY | EUR | JPMorgan Chase Bank N.A. | 644,201 | 7/13/12 | 842,280 | 815,300 | (26,980 | ) | ||||||||||||||
SELL | EUR | UBS AG | 1,042,241 | 7/13/12 | 1,306,518 | 1,319,059 | (12,541 | ) | ||||||||||||||
|
| |||||||||||||||||||||
$ | (39,642 | ) | ||||||||||||||||||||
|
|
13
Table of Contents
MFS Strategic Income Series
Portfolio of Investments (unaudited) – continued
Futures Contracts Outstanding at 6/30/12
Description | Currency | Contracts | Value | Expiration Date | Unrealized Appreciation (Depreciation) | |||||||||||||
Liability Derivatives | ||||||||||||||||||
U.S. Treasury Note 10 yr (Short) | USD | 7 | $933,625 | September - 2012 | $(2,540 | ) | ||||||||||||
|
|
At June 30, 2012, the fund had liquid securities with an aggregate value of $8,456 to cover any commitments for certain derivative contracts.
See Notes to Financial Statements
14
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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 6/30/12 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $29,006,108) | $30,339,924 | |||||||
Underlying affiliated funds, at cost and value | 319,447 | |||||||
Total investments, at value (identified cost, $29,325,555) | $30,659,371 | |||||||
Cash | 27,580 | |||||||
Receivables for | ||||||||
Forward foreign currency exchange contracts | 9,997 | |||||||
Daily variation margin on open futures contracts | 3,828 | |||||||
Investments sold | 193,347 | |||||||
Fund shares sold | 48 | |||||||
Interest | 463,656 | |||||||
Receivable from investment adviser | 10,262 | |||||||
Other assets | 242 | |||||||
Total assets | $31,368,331 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Forward foreign currency exchange contracts | $39,642 | |||||||
Investments purchased | 334,280 | |||||||
Fund shares reacquired | 76,456 | |||||||
Payable to affiliates | ||||||||
Shareholder servicing costs | 88 | |||||||
Distribution and/or service fees | 109 | |||||||
Payable for independent Trustees’ compensation | 15 | |||||||
Accrued expenses and other liabilities | 38,765 | |||||||
Total liabilities | $489,355 | |||||||
Net assets | $30,878,976 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $28,889,843 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 1,299,990 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | (1,545,591 | ) | ||||||
Undistributed net investment income | 2,234,734 | |||||||
Net assets | $30,878,976 | |||||||
Shares of beneficial interest outstanding | 2,938,946 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $25,544,251 | 2,423,480 | $10.54 | |||||||||
Service Class | 5,334,725 | 515,466 | 10.35 |
See Notes to Financial Statements
15
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 6/30/12 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Interest | $865,813 | |||||||
Dividends | 5,151 | |||||||
Dividends from underlying affiliated funds | 497 | |||||||
Foreign taxes withheld | (12 | ) | ||||||
Total investment income | $871,449 | |||||||
Expenses | ||||||||
Management fee | $111,277 | |||||||
Distribution and/or service fees | 7,476 | |||||||
Shareholder servicing costs | 1,869 | |||||||
Administrative services fee | 8,701 | |||||||
Independent Trustees’ compensation | 698 | |||||||
Custodian fee | 10,247 | |||||||
Shareholder communications | 6,973 | |||||||
Audit and tax fees | 32,479 | |||||||
Legal fees | 335 | |||||||
Miscellaneous | 14,360 | |||||||
Total expenses | $194,415 | |||||||
Fees paid indirectly | (7 | ) | ||||||
Reduction of expenses by investment adviser | (59,699 | ) | ||||||
Net expenses | $134,709 | |||||||
Net investment income | $736,740 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $360,909 | |||||||
Futures contracts | (21,869 | ) | ||||||
Swap agreements | 2,744 | |||||||
Foreign currency | 56,253 | |||||||
Net realized gain (loss) on investments and foreign currency | $398,037 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $486,512 | |||||||
Futures contracts | (2,540 | ) | ||||||
Swap agreements | (2,263 | ) | ||||||
Translation of assets and liabilities in foreign currencies | (51,132 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $430,577 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $828,614 | |||||||
Change in net assets from operations | $1,565,354 |
See Notes to Financial Statements
16
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 6/30/12 (unaudited | ) | | Year ended 12/31/11 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $736,740 | $1,534,249 | ||||||
Net realized gain (loss) on investments and foreign currency | 398,037 | 192,275 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 430,577 | (203,039 | ) | |||||
Change in net assets from operations | $1,565,354 | $1,523,485 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(1,781,713 | ) | |||||
Change in net assets from fund share transactions | $(2,031,653 | ) | $(3,257,529 | ) | ||||
Total change in net assets | $(466,299 | ) | $(3,515,757 | ) | ||||
Net assets | ||||||||
At beginning of period | 31,345,275 | 34,861,032 | ||||||
At end of period (including undistributed net investment income of $2,234,734 and | $30,878,976 | $31,345,275 |
See Notes to Financial Statements
17
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 ended 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $10.04 | $10.14 | $9.68 | $8.72 | $10.55 | $10.67 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.24 | $0.48 | $0.50 | $0.51 | $0.56 | $0.59 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 0.26 | (0.01 | ) | 0.45 | 1.41 | (1.76 | ) | (0.20 | ) | |||||||||||||||
Total from investment operations | $0.50 | $0.47 | $0.95 | $1.92 | $(1.20 | ) | $0.39 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.57 | ) | $(0.49 | ) | $(0.96 | ) | $(0.63 | ) | $(0.51 | ) | |||||||||||||
Net asset value, end of period (x) | $10.54 | $10.04 | $10.14 | $9.68 | $8.72 | $10.55 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 4.98 | (n) | 4.74 | 10.11 | 24.25 | (12.12 | ) | 3.79 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.18 | (a) | 1.12 | 1.14 | 1.18 | 1.21 | 1.16 | |||||||||||||||||
Expenses after expense reductions (f) | 0.80 | (a) | 0.80 | 0.82 | 0.85 | 0.85 | 0.85 | |||||||||||||||||
Net investment income | 4.68 | (a) | 4.69 | 5.07 | 5.63 | 5.66 | 5.63 | |||||||||||||||||
Portfolio turnover | 23 | (n) | 30 | 46 | 52 | 41 | 49 | |||||||||||||||||
Net assets at end of period (000 omitted) | $25,544 | $25,048 | $28,120 | $27,652 | $20,331 | $32,507 | ||||||||||||||||||
Service Class | Six months ended 6/30/12 | Years ended 12/31 | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $9.87 | $9.97 | $9.53 | $8.60 | $10.40 | $10.54 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.22 | $0.45 | $0.47 | $0.48 | $0.53 | $0.56 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 0.26 | 0.00 | (w) | 0.44 | 1.39 | (1.73 | ) | (0.21 | ) | |||||||||||||||
Total from investment operations | $0.48 | $0.45 | $0.91 | $1.87 | $(1.20 | ) | $0.35 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.55 | ) | $(0.47 | ) | $(0.94 | ) | $(0.60 | ) | $(0.49 | ) | |||||||||||||
Net asset value, end of period (x) | $10.35 | $9.87 | $9.97 | $9.53 | $8.60 | $10.40 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 4.86 | (n) | 4.53 | 9.79 | 23.88 | (12.26 | ) | 3.42 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.42 | (a) | 1.37 | 1.39 | 1.43 | 1.47 | 1.41 | |||||||||||||||||
Expenses after expense reductions (f) | 1.05 | (a) | 1.05 | 1.07 | 1.10 | 1.10 | 1.10 | |||||||||||||||||
Net investment income | 4.43 | (a) | 4.44 | 4.83 | 5.40 | 5.46 | 5.39 | |||||||||||||||||
Portfolio turnover | 23 | (n) | 30 | 46 | 52 | 41 | 49 | |||||||||||||||||
Net assets at end of period (000 omitted) | $5,335 | $6,298 | $6,741 | $6,749 | $5,834 | $8,192 |
See Notes to Financial Statements
18
Table of Contents
MFS Strategic Income Series
Financial Highlights – continued
(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. |
(x) | The net asset values per share and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
19
Table of Contents
MFS Strategic Income Series
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.
In this reporting period the fund adopted FASB Accounting Standards Update 2011-04, Fair Value Measurement (Topic 820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 seeks to improve the comparability of fair value measurements as presented and disclosed in financial statements prepared in accordance with U.S. GAAP and International Financial Reporting Standards (IFRS) by providing common requirements for fair value measurement and disclosure.
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11, Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. Although still evaluating the potential impacts of ASU 2011-11 to the fund, management expects that the impact of the fund’s adoption will be limited to additional financial statement disclosures.
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. 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. Swap agreements 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
20
Table of Contents
MFS Strategic Income Series
Notes to Financial Statements (unaudited) – continued
movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
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 contracts and forward foreign currency exchange contracts. The following is a summary of the levels used as of June 30, 2012 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities | $47,864 | $49,718 | $4,762 | $102,344 | ||||||||||||
U.S. Treasury Bonds & U.S. Government Agency & Equivalents | — | 506,780 | — | 506,780 | ||||||||||||
Non-U.S. Sovereign Debt | — | 4,472,765 | — | 4,472,765 | ||||||||||||
Corporate Bonds | — | 18,757,893 | — | 18,757,893 | ||||||||||||
Residential Mortgage-Backed Securities | — | 407,562 | — | 407,562 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 356,687 | — | 356,687 | ||||||||||||
Asset-Backed Securities (including CDOs) | — | 336,912 | — | 336,912 | ||||||||||||
Foreign Bonds | — | 5,385,239 | — | 5,385,239 | ||||||||||||
Floating Rate Loans | — | 13,742 | — | 13,742 | ||||||||||||
Mutual Funds | 319,447 | — | — | 319,447 | ||||||||||||
Total Investments | $367,311 | $30,287,298 | $4,762 | $30,659,371 | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Futures Contracts | $(2,540 | ) | $— | $— | $(2,540 | ) | ||||||||||
Forward Foreign Currency Exchange Contracts | — | (29,645 | ) | — | (29,645 | ) |
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 12/31/11 | $10,202 | |||
Change in unrealized appreciation (depreciation) | (5,440 | ) | ||
Balance as of 6/30/12 | $4,762 |
The net change in unrealized appreciation (depreciation) from investments still held as level 3 at June 30, 2012 is $(5,440).
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, primarily to increase or decrease exposure to a particular market or segment of the market, or security, to increase or decrease interest rate or currency exposure, or as alternatives to direct investments. Derivatives are used for hedging or non-hedging purposes. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. When the fund uses derivatives as an investment to increase market exposure, or for hedging purposes, gains and losses from derivative instruments may be substantially greater than the derivative’s original cost.
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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.
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, 2012 as reported in the Statement of Assets and Liabilities:
Fair Value (a) | ||||||||||
Risk | Derivative Contracts | Asset Derivatives | Liability Derivatives | |||||||
Interest Rate | Interest Rate Futures | $— | $(2,540 | ) | ||||||
Foreign Exchange | Forward Foreign Currency Exchange | 9,997 | (39,642 | ) | ||||||
Total | $9,997 | $(42,182 | ) |
(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, 2012 as reported in the Statement of Operations:
Risk | Futures Contracts | Swap Agreements | Foreign Currency | |||||||||
Interest Rate | $(21,869 | ) | $— | $— | ||||||||
Foreign Exchange | — | — | 60,325 | |||||||||
Credit | — | 2,744 | — | |||||||||
Total | $(21,869 | ) | $2,744 | $60,325 |
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, 2012 as reported in the Statement of Operations:
Risk | Futures Contracts | Swap Agreements | Translation of Liabilities in Foreign Currencies | |||||||||
Interest Rate | $(2,540 | ) | $— | $— | ||||||||
Foreign Exchange | — | — | (53,611 | ) | ||||||||
Credit | — | (2,263 | ) | — | ||||||||
Total | $(2,540 | ) | $(2,263 | ) | $(53,611 | ) |
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 contracts and exchange-traded options) while collateral terms are contract specific for over-the-counter traded derivatives (i.e., forward foreign currency exchange contracts, swap agreements 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 exposure, interest rate exposure, currency exposure, or to manage duration. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date.
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Upon entering into a futures contract, the fund is required to deposit with the broker, either in cash or securities, an initial margin in an amount equal to a certain percentage of the notional amount of the contract. Subsequent payments (variation margin) are made or received by the fund each day, depending on the daily fluctuations in the value of the contract, and are recorded for financial statement purposes as unrealized gain or loss by the fund until the contract is closed or expires at which point the gain or loss on futures contracts is realized.
The fund bears the risk of interest rates, exchange rates or securities prices moving unexpectedly, in which case, the fund may not achieve the anticipated benefits of the futures contracts and may realize a loss. While futures contracts may present less counterparty risk to the fund since the contracts are exchange traded and the exchange’s clearinghouse guarantees payments to the broker, there is still counterparty credit risk due to the insolvency of the broker. The fund’s maximum risk of loss due to counterparty credit risk is equal to the margin posted by the fund to the broker plus any gains or minus any losses on the outstanding futures contracts.
Forward Foreign Currency Exchange Contracts – The fund entered into forward foreign currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. These contracts may be used to hedge the fund’s currency risk or for non-hedging purposes. For hedging purposes, the fund may enter into contracts to deliver or receive foreign currency that the fund will receive from or use in its normal investment activities. The fund may also use contracts to hedge against declines in the value of foreign currency denominated securities due to unfavorable exchange rate movements. For non-hedging purposes, the fund may enter into contracts with the intent of changing the relative exposure of the fund’s portfolio of securities to different currencies to take advantage of anticipated exchange rate changes.
Forward foreign currency exchange contracts are adjusted by the daily exchange rate of the underlying currency and any unrealized gains or losses are recorded as a receivable or payable for forward foreign currency exchange contracts until the contract settlement date. On contract settlement date, any gain or loss on the contract is recorded as realized gains or losses on foreign currency.
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 agreement 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 agreements in the Statement of Operations. The value of the swap agreement, 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 agreements in the Statement of Operations. Amounts paid or received at the inception of the swap agreement 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 agreements 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 agreements 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 swap agreements 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 agreement, the protection buyer can make an upfront payment and will make a stream of payments based on a fixed percentage applied to the agreement 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 agreement-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 agreement. 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 emerging country. Upon determination of the final price for the deliverable obligation (or upon delivery of the deliverable obligation in the case of physical
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Notes to Financial Statements (unaudited) – continued
settlement), the difference between the value of the deliverable obligation and the swap agreement’s notional amount is recorded as realized gain or loss on swap agreements in the Statement of Operations.
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 agreement. 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, 2012, 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, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Foreign taxes 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, wash sale loss deferrals, straddle loss deferrals, and derivative transactions.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/11 | ||||
Ordinary income (including any short-term capital gains) | $1,781,713 |
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Notes to Financial Statements (unaudited) – continued
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/12 | ||||
Cost of investments | $29,553,379 | |||
Gross appreciation | 1,953,522 | |||
Gross depreciation | (847,530 | ) | ||
Net unrealized appreciation (depreciation) | $1,105,992 | |||
As of 12/31/11 | ||||
Undistributed ordinary income | 1,788,482 | |||
Capital loss carryforwards | (1,690,793 | ) | ||
Other temporary differences | (289,957 | ) | ||
Net unrealized appreciation (depreciation) | 616,047 |
The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.
Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized after December 31, 2011 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.
As of December 31, 2011, the fund had capital loss carryforwards available to offset future realized gains. Such losses expire as follows:
Pre-enactment losses: | ||||
12/31/16 | $ (734,062 | ) | ||
12/31/17 | (950,250 | ) | ||
Total | $(1,684,312 | ) | ||
Post-enactment losses: | ||||
Long-Term | $(6,481 | ) |
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 6/30/12 | Year ended 12/31/11 | |||||||
Initial Class | $— | $1,441,082 | ||||||
Service Class | — | 340,631 | ||||||
Total | $— | $1,781,713 |
(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 $1billion | 0.65% |
The management fee incurred for the six months ended June 30, 2012 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, 2014. For the six months ended June 30, 2012, this reduction amounted to $59,617 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.
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Notes to Financial Statements (unaudited) – continued
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, 2012, the fee was $1,631, which equated to 0.0103% 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, 2012, these costs amounted to $238.
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, 2012 was equivalent to an annual effective rate of 0.0547% 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, 2012, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $168 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 $82, 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 | $— | $51,189 | ||||||
Investments (non-U.S. Government securities) | $6,968,858 | $7,022,105 |
(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 6/30/12 | Year ended 12/31/11 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 213,001 | $2,187,552 | 327,891 | $3,347,478 | ||||||||||||
Service Class | 20,747 | 211,332 | 159,197 | 1,591,181 | ||||||||||||
233,748 | $2,398,884 | 487,088 | $4,938,659 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 145,124 | $1,441,082 | ||||||||||||
Service Class | — | — | 34,865 | 340,631 | ||||||||||||
— | $— | 179,989 | $1,781,713 |
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Six months ended 6/30/12 | Year ended 12/31/11 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (285,418 | ) | $(2,963,697 | ) | (750,775 | ) | $(7,657,569 | ) | ||||||||
Service Class | (143,628 | ) | (1,466,840 | ) | (231,553 | ) | (2,320,332 | ) | ||||||||
(429,046 | ) | $(4,430,537 | ) | (982,328 | ) | $(9,977,901 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (72,417 | ) | $(776,145 | ) | (277,760 | ) | $(2,869,009 | ) | ||||||||
Service Class | (122,881 | ) | (1,255,508 | ) | (37,491 | ) | (388,520 | ) | ||||||||
(195,298 | ) | $(2,031,653 | ) | (315,251 | ) | $(3,257,529 | ) |
(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, 2012, the fund’s commitment fee and interest expense were $112 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 an affiliated issuer:
Underlying Affiliated Fund | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 1,191,135 | 4,422,835 | (5,294,523 | ) | 319,447 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $497 | $319,447 |
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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, 2012 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 is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and may be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. Copies of the fund’s Form N-Q also may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.
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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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.
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ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
There were no material changes to the procedures by which shareholders may send recommendations to the Board for nominees to the Registrant’s Board since the Registrant last provided disclosure as to such procedures in response to the requirements of Item 407 (c)(2)(iv) of Regulation S-K or this Item.
ITEM 11. | CONTROLS AND PROCEDURES. |
(a) | Based upon their evaluation of the effectiveness of the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as conducted within 90 days of the filing date of this report on Form N-CSR, the registrant’s principal financial officer and principal executive officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. |
(b) | There were no changes in the registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by the report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
ITEM 12. | 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)* | JOHN M. CORCORAN | |
John M. Corcoran, President |
Date: August 16, 2012
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)* | JOHN M. CORCORAN | |
John M. Corcoran, President (Principal Executive Officer) |
Date: August 16, 2012
By (Signature and Title)* | DAVID L. DILORENZO | |
David L. DiLorenzo, Treasurer (Principal Financial Officer and Accounting Officer) |
Date: August 16, 2012
* | Print name and title of each signing officer under his or her signature. |