Table of Contents
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)
111 Huntington Avenue, Boston, Massachusetts 02199
(Address of principal executive offices) (Zip code)
Susan S. Newton
Massachusetts Financial Services Company
111 Huntington Avenue
Boston, Massachusetts 02199
(Name and address of agents for service)
Registrant’s telephone number, including area code: (617) 954-5000
Date of fiscal year end: December 31
Date of reporting period: June 30, 2013
Table of Contents
ITEM 1. | REPORTS TO STOCKHOLDERS. |
Table of Contents
SEMIANNUAL REPORT
June 30, 2013
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:
As the year progresses, the global economy continues to grind ahead slowly, held back by broad austerity measures. The U.S. economy remains a steadying force, driven by resilient consumers, who have taken the payroll tax increase and the sequestration’s early impact in stride. With U.S. housing and jobs showing steady expansion, domestic consumer-driven growth has offset weaker exports and the U.S. government’s spending constraints. In response to these developments, the U.S. Federal Reserve has begun to brace investors for an eventual shift in its monetary policy, causing global market tremors.
Japan has been another bright spot, with government and central bank stimulus policies leading to increased exports, a resurgent stock market and improved economic sentiment. After a six-month rally, Japan’s stocks slipped late in the second quarter, then picked up momentum on fresh signs that the country could soon break free of its chronic deflation. The major deterrent to global growth remains the eurozone, still in the grip of persistent recession. China has seen its pace of economic growth decelerate, a troubling turn for the country’s trading partners, who have come to rely on it as an engine for global growth.
As always, managing risk in the face of uncertainty remains a top priority for investors. At MFS®, our uniquely collaborative investment process employs integrated, global research and active risk management. Our global team of investment professionals shares ideas and evaluates opportunities across continents, investment disciplines and asset classes — all with a goal of building better insights, and ultimately better results, for our clients.
We are mindful of the many economic challenges investors face, and believe it is more important than ever to maintain a long-term view and employ time-tested principles, such as asset allocation and diversification. We remain confident that our unique approach can serve investors well as they work with their financial advisors to identify and pursue the most suitable opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2013
The opinions expressed in this letter are subject to change, may not be relied upon for investment advice, and no forecasts can be guaranteed.
1
Table of Contents
MFS Core Equity Series
Portfolio structure (i)
Top ten holdings (i) | ||||
Exxon Mobil Corp. | 3.9% | |||
Apple, Inc. | 1.9% | |||
ACE Ltd. | 1.9% | |||
Hewlett-Packard Co. | 1.8% | |||
Procter & Gamble Co. | 1.8% | |||
Pfizer, Inc. | 1.7% | |||
Wells Fargo & Co. | 1.7% | |||
JPMorgan Chase & Co. | 1.5% | |||
Johnson & Johnson | 1.5% | |||
Google, Inc., “A” | 1.4% |
Equity sectors (i) | ||||
Financial Services | 18.4% | |||
Technology | 15.0% | |||
Health Care | 12.4% | |||
Energy | 9.3% | |||
Industrial Goods & Services | 7.4% | |||
Consumer Staples | 7.0% | |||
Retailing | 6.9% | |||
Leisure | 6.4% | |||
Utilities & Communications | 6.2% | |||
Basic Materials | 3.3% | |||
Special Products & Services | 2.5% | |||
Autos & Housing | 2.3% | |||
Transportation | 2.2% |
(i) | For purposes of this presentation, the components include the market value of securities, less any securities sold short, and reflect the impact of the equivalent exposure of derivative positions. These amounts may be negative from time to time. Equivalent exposure is a calculated amount that translates the derivative position into a reasonable approximation of the amount of the underlying asset that the portfolio would have to hold at a given point in time to have the same price sensitivity that results from the portfolio’s ownership of the derivative contract. When dealing with derivatives, equivalent exposure is a more representative measure of the potential impact of a position on portfolio performance than market value. |
Percentages are based on net assets as of 6/30/13.
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, 2013 through June 30, 2013
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, 2013 through June 30, 2013.
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 1/01/13 | Ending Account Value | Expenses Paid During Period (p) 1/01/13-6/30/13 | ||||||||||||||
Initial Class | Actual | 0.91% | $1,000.00 | $1,150.45 | $4.85 | |||||||||||||
Hypothetical (h) | 0.91% | $1,000.00 | $1,020.28 | $4.56 | ||||||||||||||
Service Class | Actual | 1.16% | $1,000.00 | $1,149.18 | $6.18 | |||||||||||||
Hypothetical (h) | 1.16% | $1,000.00 | $1,019.04 | $5.81 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
Expenses Impacting Table
Expense ratios include 0.01% of investment related expenses from short sales that are outside of the expense cap arrangement (See Note 3 of the Notes to Financial Statements).
3
Table of Contents
MFS Core Equity Series
PORTFOLIO OF INVESTMENTS – 6/30/13 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 98.6% | ||||||||
Aerospace – 3.3% | ||||||||
Honeywell International, Inc. | 8,830 | $ | 700,572 | |||||
Lockheed Martin Corp. | 1,710 | 185,467 | ||||||
Precision Castparts Corp. | 2,268 | 512,591 | ||||||
United Technologies Corp. | 6,570 | 610,616 | ||||||
|
| |||||||
$ | 2,009,246 | |||||||
|
| |||||||
Apparel Manufacturers – 1.7% | ||||||||
Guess?, Inc. | 8,750 | $ | 271,513 | |||||
Michael Kors Holdings Ltd. (a) | 3,480 | 215,830 | ||||||
NIKE, Inc., “B” | 4,920 | 313,306 | ||||||
VF Corp. | 1,370 | 264,492 | ||||||
|
| |||||||
$ | 1,065,141 | |||||||
|
| |||||||
Automotive – 1.7% | ||||||||
Delphi Automotive PLC | 11,940 | $ | 605,238 | |||||
General Motors Co. (a) | 13,430 | 447,353 | ||||||
|
| |||||||
$ | 1,052,591 | |||||||
|
| |||||||
Biotechnology – 1.9% | ||||||||
Biogen Idec, Inc. (a) | 1,452 | $ | 312,469 | |||||
Celgene Corp. (a) | 3,077 | 359,731 | ||||||
Gilead Sciences, Inc. (a) | 4,870 | 249,392 | ||||||
ViroPharma, Inc. (a) | 9,060 | 259,568 | ||||||
|
| |||||||
$ | 1,181,160 | |||||||
|
| |||||||
Broadcasting – 2.2% | ||||||||
News Corp., “A” | 21,460 | $ | 699,595 | |||||
Time Warner, Inc. | 4,730 | 273,488 | ||||||
Walt Disney Co. | 5,940 | 375,110 | ||||||
|
| |||||||
$ | 1,348,193 | |||||||
|
| |||||||
Brokerage & Asset Managers – 1.4% | ||||||||
BlackRock, Inc. | 678 | $ | 174,143 | |||||
Franklin Resources, Inc. | 1,036 | 140,916 | ||||||
FXCM, Inc., “A” | 6,430 | 105,516 | ||||||
IntercontinentalExchange, Inc. (a) | 1,389 | 246,909 | ||||||
NASDAQ OMX Group, Inc. | 5,452 | 178,771 | ||||||
|
| |||||||
$ | 846,255 | |||||||
|
| |||||||
Business Services – 1.4% | ||||||||
Accenture PLC, “A” | 3,330 | $ | 239,627 | |||||
Fidelity National Information Services, Inc. | 7,470 | 320,015 | ||||||
FleetCor Technologies, Inc. (a) | 2,410 | 195,933 | ||||||
Performant Financial Corp. (a) | 9,110 | 105,585 | ||||||
|
| |||||||
$ | 861,160 | |||||||
|
| |||||||
Cable TV – 1.4% | ||||||||
Comcast Corp., “Special A” | 8,830 | $ | 350,286 | |||||
Time Warner Cable, Inc. | 4,750 | 534,280 | ||||||
|
| |||||||
$ | 884,566 | |||||||
|
| |||||||
Chemicals – 1.3% | ||||||||
Celanese Corp. | 5,460 | $ | 244,608 | |||||
LyondellBasell Industries N.V., “A” | 4,160 | 275,642 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Chemicals – continued | ||||||||
PPG Industries, Inc. | 1,784 | $ | 261,195 | |||||
|
| |||||||
$ | 781,445 | |||||||
|
| |||||||
Computer Software – 4.2% | ||||||||
Autodesk, Inc. (a) | 6,530 | $ | 221,628 | |||||
Check Point Software Technologies Ltd. (a) | 10,070 | 500,278 | ||||||
Citrix Systems, Inc. (a) | 4,710 | 284,154 | ||||||
CommVault Systems, Inc. (a) | 4,810 | 365,031 | ||||||
Microsoft Corp. | 4,830 | 166,780 | ||||||
Oracle Corp. | 12,530 | 384,922 | ||||||
Qlik Technologies, Inc. (a) | 6,620 | 187,147 | ||||||
Salesforce.com, Inc. (a) | 4,407 | 168,259 | ||||||
Symantec Corp. | 13,170 | 295,930 | ||||||
|
| |||||||
$ | 2,574,129 | |||||||
|
| |||||||
Computer Software – Systems – 5.8% | ||||||||
Apple, Inc. | 2,947 | $ | 1,167,248 | |||||
EMC Corp. | 20,440 | 482,793 | ||||||
Hewlett-Packard Co. | 44,530 | 1,104,344 | ||||||
International Business Machines Corp. | 286 | 54,657 | ||||||
NCR Corp. (a) | 2,190 | 72,248 | ||||||
SS&C Technologies Holdings, Inc. (a) | 9,120 | 300,048 | ||||||
Vantiv, Inc., “A” (a) | 13,160 | 363,216 | ||||||
|
| |||||||
$ | 3,544,554 | |||||||
|
| |||||||
Construction – 0.5% | ||||||||
Stanley Black & Decker, Inc. | 4,180 | $ | 323,114 | |||||
|
| |||||||
Consumer Products – 2.5% | ||||||||
Estee Lauder Cos., Inc., “A” | 7,020 | $ | 461,705 | |||||
Procter & Gamble Co. | 13,900 | 1,070,161 | ||||||
|
| |||||||
$ | 1,531,866 | |||||||
|
| |||||||
Consumer Services – 1.1% | ||||||||
Grand Canyon Education, Inc. (a) | 5,730 | $ | 184,678 | |||||
Priceline.com, Inc. (a) | 551 | 455,749 | ||||||
|
| |||||||
$ | 640,427 | |||||||
|
| |||||||
Containers – 0.6% | ||||||||
Packaging Corp. of America | 5,630 | $ | 275,645 | |||||
Silgan Holdings, Inc. | 2,430 | 114,113 | ||||||
|
| |||||||
$ | 389,758 | |||||||
|
| |||||||
Electrical Equipment – 1.6% | ||||||||
AMETEK, Inc. | 5,505 | $ | 232,862 | |||||
Danaher Corp. | 6,230 | 394,359 | ||||||
Sensata Technologies Holding B.V. (a) | 6,570 | 229,293 | ||||||
W.W. Grainger, Inc. | 573 | 144,499 | ||||||
|
| |||||||
$ | 1,001,013 | |||||||
|
| |||||||
Electronics – 2.8% | ||||||||
Altera Corp. | 14,440 | $ | 476,376 | |||||
ASML Holding N.V. | 2,747 | 217,288 | ||||||
KLA-Tencor Corp. | 1,040 | 57,959 |
4
Table of Contents
MFS Core Equity Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Electronics – continued | ||||||||
Linear Technology Corp. | 4,110 | $ | 151,412 | |||||
Microchip Technology, Inc. | 13,420 | 499,895 | ||||||
NXP Semiconductors N.V. (a) | 9,200 | 285,016 | ||||||
|
| |||||||
$ | 1,687,946 | |||||||
|
| |||||||
Energy – Independent – 3.8% | ||||||||
Anadarko Petroleum Corp. | 1,730 | $ | 148,659 | |||||
Cabot Oil & Gas Corp. | 3,730 | 264,905 | ||||||
Concho Resources, Inc. (a) | 1,620 | 135,626 | ||||||
CONSOL Energy, Inc. | 1,420 | 38,482 | ||||||
Energen Corp. | 1,200 | 62,712 | ||||||
EOG Resources, Inc. | 1,491 | 196,335 | ||||||
EQT Corp. | 2,500 | 198,425 | ||||||
Gulfport Energy Corp. (a) | 720 | 33,890 | ||||||
Marathon Petroleum Corp. | 3,530 | 250,842 | ||||||
Noble Energy, Inc. | 6,078 | 364,923 | ||||||
PDC Energy, Inc. (a) | 610 | 31,403 | ||||||
Peabody Energy Corp. | 1,560 | 22,838 | ||||||
Pioneer Natural Resources Co. | 2,581 | 373,600 | ||||||
SM Energy Co. | 514 | 30,830 | ||||||
Valero Energy Corp. | 5,280 | 183,586 | ||||||
|
| |||||||
$ | 2,337,056 | |||||||
|
| |||||||
Energy – Integrated – 3.9% | ||||||||
Exxon Mobil Corp. (s) | 26,550 | $ | 2,398,793 | |||||
|
| |||||||
Food & Beverages – 2.9% | ||||||||
Coca-Cola Co. | 17,380 | $ | 697,112 | |||||
Coca-Cola Enterprises, Inc. | 3,960 | 139,234 | ||||||
General Mills, Inc. | 6,590 | 319,813 | ||||||
Mead Johnson Nutrition Co., “A” | 2,110 | 167,175 | ||||||
Mondelez International, Inc. | 15,320 | 437,080 | ||||||
|
| |||||||
$ | 1,760,414 | |||||||
|
| |||||||
Food & Drug Stores – 1.1% | ||||||||
CVS Caremark Corp. | 9,080 | $ | 519,194 | |||||
Fairway Group Holdings Corp. (a) | 7,480 | 180,792 | ||||||
|
| |||||||
$ | 699,986 | |||||||
|
| |||||||
Gaming & Lodging – 0.6% | ||||||||
Wynn Resorts Ltd. | 3,067 | $ | 392,576 | |||||
|
| |||||||
General Merchandise – 1.9% | ||||||||
Kohl’s Corp. | 6,660 | $ | 336,397 | |||||
Target Corp. | 11,530 | 793,956 | ||||||
|
| |||||||
$ | 1,130,353 | |||||||
|
| |||||||
Health Maintenance Organizations – 0.8% | ||||||||
Aetna, Inc. | 6,020 | $ | 382,511 | |||||
UnitedHealth Group, Inc. | 1,980 | 129,650 | ||||||
|
| |||||||
$ | 512,161 | |||||||
|
| |||||||
Insurance – 4.2% | ||||||||
ACE Ltd. | 12,630 | $ | 1,130,132 | |||||
American International Group, Inc. (a) | 9,840 | 439,848 | ||||||
MetLife, Inc. | 17,900 | 819,104 | ||||||
Validus Holdings Ltd. | 5,200 | 187,824 | ||||||
|
| |||||||
$ | 2,576,908 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Internet – 2.0% | ||||||||
eBay, Inc. (a) | 3,630 | $ | 187,744 | |||||
Google, Inc., “A” (a) | 999 | 879,490 | ||||||
Yahoo!, Inc. (a) | 6,130 | 153,924 | ||||||
|
| |||||||
$ | 1,221,158 | |||||||
|
| |||||||
Leisure & Toys – 0.4% | ||||||||
Brunswick Corp. | 7,180 | $ | 229,401 | |||||
|
| |||||||
Machinery & Tools – 2.3% | ||||||||
Eaton Corp. PLC | 5,170 | $ | 340,238 | |||||
Illinois Tool Works, Inc. | 1,940 | 134,190 | ||||||
Joy Global, Inc. | 5,340 | 259,150 | ||||||
Kennametal, Inc. | 5,430 | 210,847 | ||||||
Roper Industries, Inc. | 3,714 | 461,353 | ||||||
|
| |||||||
$ | 1,405,778 | |||||||
|
| |||||||
Major Banks – 4.6% | ||||||||
Goldman Sachs Group, Inc. | 1,665 | $ | 251,831 | |||||
JPMorgan Chase & Co. (s) | 17,070 | 901,125 | ||||||
Morgan Stanley | 12,480 | 304,886 | ||||||
State Street Corp. | 4,920 | 320,833 | ||||||
Wells Fargo & Co. | 24,490 | 1,010,702 | ||||||
|
| |||||||
$ | 2,789,377 | |||||||
|
| |||||||
Medical & Health Technology & Services – 1.2% | ||||||||
AmerisourceBergen Corp. | 3,510 | $ | 195,963 | |||||
Cerner Corp. (a) | 830 | 79,755 | ||||||
Express Scripts Holding Co. (a) | 5,580 | 344,230 | ||||||
Henry Schein, Inc. (a) | 1,070 | 102,453 | ||||||
|
| |||||||
$ | 722,401 | |||||||
|
| |||||||
Medical Equipment – 2.9% | ||||||||
AtriCure, Inc. (a) | 6,700 | $ | 63,650 | |||||
Cooper Cos., Inc. | 2,246 | 267,386 | ||||||
Covidien PLC | 5,240 | 329,282 | ||||||
DexCom, Inc. (a) | 3,910 | 87,780 | ||||||
Endologix, Inc. (a) | 3,720 | 49,402 | ||||||
NxStage Medical, Inc. (a) | 9,470 | 135,232 | ||||||
Sirona Dental Systems, Inc. (a) | 1,360 | 89,597 | ||||||
St. Jude Medical, Inc. | 5,130 | 234,082 | ||||||
Stryker Corp. | 3,900 | 252,252 | ||||||
Thermo Fisher Scientific, Inc. | 2,790 | 236,118 | ||||||
|
| |||||||
$ | 1,744,781 | |||||||
|
| |||||||
Metals & Mining – 0.3% | ||||||||
Lundin Mining Corp. (a) | 20,300 | $ | 77,208 | |||||
Teck Resources Ltd., “B” | 4,021 | 85,910 | ||||||
Uranium Participation Corp. (a) | 9,790 | 46,637 | ||||||
|
| |||||||
$ | 209,755 | |||||||
|
| |||||||
Natural Gas – Distribution – 0.3% | ||||||||
Spectra Energy Corp. | 4,570 | $ | 157,482 | |||||
|
| |||||||
Natural Gas – Pipeline – 0.4% | ||||||||
Enbridge, Inc. | 6,330 | $ | 266,303 | |||||
|
|
5
Table of Contents
MFS Core Equity Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Network & Telecom – 0.3% | ||||||||
Juniper Networks, Inc. (a) | 3,600 | $ | 69,516 | |||||
Qualcomm, Inc. | 1,500 | 91,620 | ||||||
|
| |||||||
$ | 161,136 | |||||||
|
| |||||||
Oil Services – 1.6% | ||||||||
Cameron International Corp. (a) | 4,330 | $ | 264,823 | |||||
Dresser-Rand Group, Inc. (a) | 3,700 | 221,926 | ||||||
Ensco PLC, “A” | 1,390 | 80,787 | ||||||
FMC Technologies, Inc. (a) | 2,640 | 146,995 | ||||||
Schlumberger Ltd. | 2,600 | 186,316 | ||||||
Superior Energy Services, Inc. (a) | 1,830 | 47,470 | ||||||
|
| |||||||
$ | 948,317 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 4.9% | ||||||||
American Express Co. | 4,140 | $ | 309,506 | |||||
Cathay General Bancorp, Inc. | 6,080 | 123,728 | ||||||
CIT Group, Inc. (a) | 5,060 | 235,948 | ||||||
Citigroup, Inc. | 16,530 | 792,944 | ||||||
EuroDekania Ltd. (a)(z) | 50,820 | 55,070 | ||||||
Fifth Third Bancorp | 22,590 | 407,750 | ||||||
PrivateBancorp, Inc. | 13,810 | 292,910 | ||||||
TCF Financial Corp. | 13,130 | 186,183 | ||||||
Visa, Inc., “A” | 3,354 | 612,944 | ||||||
|
| |||||||
$ | 3,016,983 | |||||||
|
| |||||||
Pharmaceuticals – 5.5% | ||||||||
Bristol-Myers Squibb Co. | 8,250 | $ | 368,693 | |||||
Johnson & Johnson | 10,360 | 889,510 | ||||||
Perrigo Co. | 1,623 | 196,383 | ||||||
Pfizer, Inc. | 36,559 | 1,024,018 | ||||||
Valeant Pharmaceuticals International, Inc. (a) | 6,970 | 599,978 | ||||||
Zoetis, Inc. | 8,730 | 269,670 | ||||||
|
| |||||||
$ | 3,348,252 | |||||||
|
| |||||||
Pollution Control – 0.2% | ||||||||
Stericycle, Inc. (a) | 1,119 | $ | 123,571 | |||||
|
| |||||||
Railroad & Shipping – 1.1% | ||||||||
Canadian Pacific Railway Ltd. | 554 | $ | 67,245 | |||||
Diana Shipping, Inc. (a) | 12,950 | 130,018 | ||||||
Kansas City Southern Co. | 923 | 97,801 | ||||||
Union Pacific Corp. | 2,398 | 369,963 | ||||||
|
| |||||||
$ | 665,027 | |||||||
|
| |||||||
Real Estate – 3.3% | ||||||||
Equity Lifestyle Properties, Inc., REIT | 7,100 | $ | 557,989 | |||||
Mid-America Apartment Communities, Inc., REIT | 9,820 | 665,501 | ||||||
Public Storage, Inc., REIT | 2,180 | 334,259 | ||||||
Tanger Factory Outlet Centers, Inc., REIT | 13,030 | 435,984 | ||||||
|
| |||||||
$ | 1,993,733 | |||||||
|
| |||||||
Restaurants – 1.8% | ||||||||
McDonald’s Corp. | 3,720 | $ | 368,280 | |||||
Starbucks Corp. | 4,100 | 268,509 | ||||||
YUM! Brands, Inc. | 6,340 | 439,616 | ||||||
|
| |||||||
$ | 1,076,405 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Specialty Chemicals – 1.1% | ||||||||
Airgas, Inc. | 1,910 | $ | 182,329 | |||||
Ecolab, Inc. | 2,820 | 240,236 | ||||||
FMC Corp. | 3,710 | 226,533 | ||||||
|
| |||||||
$ | 649,098 | |||||||
|
| |||||||
Specialty Stores – 2.2% | ||||||||
Amazon.com, Inc. (a) | 258 | $ | 71,644 | |||||
AutoZone, Inc. (a) | 793 | 335,986 | ||||||
Bed Bath & Beyond, Inc. (a) | 5,610 | 397,749 | ||||||
Children’s Place Retail Store, Inc. (a) | 3,760 | 206,048 | ||||||
Dick’s Sporting Goods, Inc. | 6,360 | 318,382 | ||||||
|
| |||||||
$ | 1,329,809 | |||||||
|
| |||||||
Telecommunications – Wireless – 1.0% | ||||||||
American Tower Corp., REIT | 5,250 | $ | 384,143 | |||||
SBA Communications Corp. (a) | 3,250 | 240,890 | ||||||
|
| |||||||
$ | 625,033 | |||||||
|
| |||||||
Telephone Services – 1.7% | ||||||||
AT&T, Inc. | 13,610 | $ | 481,794 | |||||
Verizon Communications, Inc. | 11,250 | 566,325 | ||||||
|
| |||||||
$ | 1,048,119 | |||||||
|
| |||||||
Tobacco – 1.6% | ||||||||
Lorillard, Inc. | 5,580 | $ | 243,734 | |||||
Philip Morris International, Inc. | 8,240 | 713,749 | ||||||
|
| |||||||
$ | 957,483 | |||||||
|
| |||||||
Trucking – 1.1% | ||||||||
Expeditors International of Washington, Inc. | 8,320 | $ | 316,243 | |||||
Swift Transportation Co. (a) | 21,260 | 351,640 | ||||||
|
| |||||||
$ | 667,883 | |||||||
|
| |||||||
Utilities – Electric Power – 2.2% | ||||||||
AES Corp. | 10,730 | $ | 128,653 | |||||
American Electric Power Co., Inc. | 4,540 | 203,301 | ||||||
Calpine Corp. (a) | 10,480 | 222,490 | ||||||
CMS Energy Corp. | 7,870 | 213,828 | ||||||
Edison International | 4,240 | 204,198 | ||||||
Great Plains Energy, Inc. | 8,420 | 189,787 | ||||||
PG&E Corp. | 3,820 | 174,689 | ||||||
|
| |||||||
$ | 1,336,946 | |||||||
|
| |||||||
Total Common Stocks (Identified Cost, $51,115,580) | $ | 60,225,042 | ||||||
|
| |||||||
CONVERTIBLE PREFERRED STOCKS – 0.6% | ||||||||
Utilities – Electric Power – 0.6% | ||||||||
PPL Corp., 8.75% | 3,270 | $ | 176,645 | |||||
PPL Corp., 9.5% | 3,660 | 191,821 | ||||||
|
| |||||||
Total Convertible Preferred Stocks (Identified Cost, $352,234) | $ | 368,466 | ||||||
|
| |||||||
Issuer/Expiration Date/Strike Price | Number of Contracts | |||||||
CALL OPTIONS PURCHASED – 0.0% | ||||||||
Pharmaceuticals – 0.0% | ||||||||
Eli Lilly & Co. – October 2013 @ $55 (Premiums Paid, $2,995) | 44 | $ | 2,728 | |||||
|
|
6
Table of Contents
MFS Core Equity Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
MONEY MARKET FUNDS – 0.8% | ||||||||
MFS Institutional Money Market Portfolio, 0.11%, at Cost and Net Asset Value (v) | 477,656 | $ | 477,656 | |||||
|
| |||||||
Total Investments (Identified Cost, $51,948,465) | $ | 61,073,892 | ||||||
|
| |||||||
Issuer/Expiration Date/Strike Price | Number of Contracts | |||||||
PUT OPTIONS WRITTEN – 0.0% | ||||||||
Eli Lilly & Co. – October 2013 @ $42 (Premiums Received, $2,373) | (44 | ) | $ | (2,420 | ) | |||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – 0.0% | 6,957 | |||||||
|
| |||||||
Net Assets – 100.0% | $ | 61,078,429 | ||||||
|
|
(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, 2013, 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 | $55,070 | |||||||
% of Net assets | 0.1% |
At June 30, 2013, the fund had cash collateral of $4,884 and/or other liquid securities with an aggregate value of $591,442 to cover any commitments for securities sold short and certain derivative contracts. Cash collateral is comprised of “Deposits with brokers” in the Statement of Assets and Liabilities.
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
7
Table of Contents
MFS Core Equity Series
FINANCIAL STATEMENTS | STATEMENT OF ASSETS AND LIABILITIES (unaudited)
This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
At 6/30/13 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $51,470,809) | $60,596,236 | |||||||
Underlying affiliated funds, at cost and value | 477,656 | |||||||
Total investments, at value (identified cost, $51,948,465) | $61,073,892 | |||||||
Deposits with brokers | 4,884 | |||||||
Receivables for | ||||||||
Premiums on options written | 2,373 | |||||||
Investments sold | 139,156 | |||||||
Fund shares sold | 40,412 | |||||||
Interest and dividends | 66,914 | |||||||
Receivable from investment adviser | 524 | |||||||
Other assets | 305 | |||||||
Total assets | $61,328,460 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Investments purchased | $145,706 | |||||||
Fund shares reacquired | 59,009 | |||||||
Written options outstanding, at value (premiums received, $2,373) | 2,420 | |||||||
Payable to affiliates | ||||||||
Shareholder servicing costs | 371 | |||||||
Distribution and/or service fees | 105 | |||||||
Payable for independent Trustees’ compensation | 415 | |||||||
Accrued expenses and other liabilities | 42,005 | |||||||
Total liabilities | $250,031 | |||||||
Net assets | $61,078,429 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $63,265,843 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 9,125,331 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | (12,218,430 | ) | ||||||
Undistributed net investment income | 905,685 | |||||||
Net assets | $61,078,429 | |||||||
Shares of beneficial interest outstanding | 3,003,238 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $57,270,833 | 2,815,289 | $20.34 | |||||||||
Service Class | 3,807,596 | 187,949 | 20.26 |
See Notes to Financial Statements
8
Table of Contents
MFS Core Equity Series
FINANCIAL STATEMENTS | STATEMENT OF OPERATIONS (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
Six months ended 6/30/13 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $567,286 | |||||||
Interest | 1,754 | |||||||
Dividends from underlying affiliated funds | 308 | |||||||
Foreign taxes withheld | (1,844 | ) | ||||||
Total investment income | $567,504 | |||||||
Expenses | ||||||||
Management fee | $226,357 | |||||||
Distribution and/or service fees | 4,601 | |||||||
Shareholder servicing costs | 5,862 | |||||||
Administrative services fee | 9,347 | |||||||
Independent Trustees’ compensation | 1,359 | |||||||
Custodian fee | 8,143 | |||||||
Shareholder communications | 14,546 | |||||||
Audit and tax fees | 25,312 | |||||||
Legal fees | 375 | |||||||
Dividend and interest expense on securities sold short | 1,622 | |||||||
Miscellaneous | 7,184 | |||||||
Total expenses | $304,708 | |||||||
Reduction of expenses by investment adviser | (26,447 | ) | ||||||
Net expenses | $278,261 | |||||||
Net investment income | $289,243 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $4,419,521 | |||||||
Written options | 336 | |||||||
Securities sold short | (19,383 | ) | ||||||
Foreign currency | 165 | |||||||
Net realized gain (loss) on investments and foreign currency | $4,400,639 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $3,737,430 | |||||||
Written options | (3,227 | ) | ||||||
Securities sold short | 9,067 | |||||||
Translation of assets and liabilities in foreign currencies | (24 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $3,743,246 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $8,143,885 | |||||||
Change in net assets from operations | $8,433,128 |
See Notes to Financial Statements
9
Table of Contents
MFS Core Equity Series
FINANCIAL STATEMENTS | STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
| Six months ended 6/30/13 (unaudited | ) | | Year ended 12/31/12 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $289,243 | $616,884 | ||||||
Net realized gain (loss) on investments and foreign currency | 4,400,639 | 4,753,714 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 3,743,246 | 3,550,454 | ||||||
Change in net assets from operations | $8,433,128 | $8,921,052 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(445,589 | ) | |||||
Change in net assets from fund share transactions | $(4,297,096 | ) | $(9,541,139 | ) | ||||
Total change in net assets | $4,136,032 | $(1,065,676 | ) | |||||
Net assets | ||||||||
At beginning of period | 56,942,397 | 58,008,073 | ||||||
At end of period (including undistributed net investment income of $905,685 and | $61,078,429 | $56,942,397 |
See Notes to Financial Statements
10
Table of Contents
MFS Core Equity Series
FINANCIAL STATEMENTS | FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund’s financial performance for the semiannual period and the past 5 fiscal year. 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 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $17.68 | $15.33 | $15.65 | $13.49 | $10.38 | $17.18 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.09 | $0.18 | $0.11 | $0.13 | $0.14 | $0.16 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 2.57 | 2.30 | (0.28 | ) | 2.18 | 3.16 | (6.85 | ) | ||||||||||||||||
Total from investment operations | $2.66 | $2.48 | $(0.17 | ) | $2.31 | $3.30 | $(6.69 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.13 | ) | $(0.15 | ) | $(0.15 | ) | $(0.19 | ) | $(0.11 | ) | |||||||||||||
Net asset value, end of period (x) | $20.34 | $17.68 | $15.33 | $15.65 | $13.49 | $10.38 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 15.05 | (n) | 16.23 | (1.02 | ) | 17.21 | 32.43 | (39.15 | ) | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.99 | (a) | 1.00 | 1.00 | 1.01 | 1.01 | 0.95 | |||||||||||||||||
Expenses after expense reductions (f) | 0.91 | (a) | 0.90 | 0.91 | 0.91 | 0.90 | 0.90 | |||||||||||||||||
Net investment income | 0.97 | (a) | 1.05 | 0.72 | 0.93 | 1.20 | 1.13 | |||||||||||||||||
Portfolio turnover | 30 | (n) | 64 | 68 | 69 | 90 | 109 | |||||||||||||||||
Net assets at end of period (000 omitted) | $57,271 | $53,504 | $54,471 | $62,602 | $61,856 | $54,049 | ||||||||||||||||||
Supplemental Ratios (%): | ||||||||||||||||||||||||
Ratio of expenses to average net assets after expense | 0.90 | (a) | 0.90 | 0.90 | 0.90 | 0.90 | N/A |
See Notes to Financial Statements
11
Table of Contents
MFS Core Equity Series
Financial Highlights – continued
Service Class | Six months 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $17.63 | $15.28 | $15.59 | $13.45 | $10.32 | $17.07 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.07 | $0.14 | $0.07 | $0.09 | $0.11 | $0.12 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 2.56 | 2.29 | (0.27 | ) | 2.17 | 3.17 | (6.81 | ) | ||||||||||||||||
Total from investment operations | $2.63 | $2.43 | $(0.20 | ) | $2.26 | $3.28 | $(6.69 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.08 | ) | $(0.11 | ) | $(0.12 | ) | $(0.15 | ) | $(0.06 | ) | |||||||||||||
Net asset value, end of period (x) | $20.26 | $17.63 | $15.28 | $15.59 | $13.45 | $10.32 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 14.92 | (n) | 15.95 | (1.28 | ) | 16.86 | 32.24 | (39.32 | ) | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.24 | (a) | 1.25 | 1.25 | 1.26 | 1.26 | 1.20 | |||||||||||||||||
Expenses after expense reductions (f) | 1.16 | (a) | 1.15 | 1.16 | 1.16 | 1.15 | 1.15 | |||||||||||||||||
Net investment income | 0.72 | (a) | 0.81 | 0.47 | 0.67 | 0.95 | 0.87 | |||||||||||||||||
Portfolio turnover | 30 | (n) | 64 | 68 | 69 | 90 | 109 | |||||||||||||||||
Net assets at end of period (000 omitted) | $3,808 | $3,438 | $3,537 | $4,623 | $4,783 | $4,571 | ||||||||||||||||||
Supplemental Ratios (%): | ||||||||||||||||||||||||
Ratio of expenses to average net assets after expense | 1.15 | (a) | 1.15 | 1.15 | 1.15 | 1.15 | 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. |
(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 the disclosure provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Update 2011-11 (“ASU 2011-11”), Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities along with the related scope clarification provisions of FASB Accounting Standards Update 2013-01 (“ASU 2013-01”) entitled Balance Sheet (Topic 210) – Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 is intended to enhance disclosures on the offsetting of financial assets and liabilities by requiring entities to disclose both gross and net information about financial instruments and transactions that are either offset in the statement of financial position or subject to a Master Netting Agreement or similar arrangement. ASU 2013-01 limits the scope of ASU 2011-11’s disclosure requirements on offsetting to financial assets and financial liabilities related to derivatives, repurchase and reverse repurchase agreements, and securities lending and securities borrowing transactions. The disclosures required by ASU 2011-11, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
In June 2013, FASB issued Accounting Standards Update 2013-08 Financial Services – Investment Companies (Topic 946) – Amendments to the Scope, Measurement, and Disclosure Requirements (“ASU 2013-08”) which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013. ASU 2013-08 sets forth a methodology for determining whether an entity should be characterized as an investment company and prescribes fair value accounting for an investment company’s non-controlling ownership interest in another investment company. FASB has determined that a fund registered under the Investment Company Act of 1940 automatically meets ASU 2013-08’s criteria for an investment company. Although still evaluating the potential impacts of ASU 2013-08 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
13
Table of Contents
MFS Core Equity Series
Notes to Financial Statements (unaudited) – continued
has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. Other financial instruments are derivative instruments not reflected in total investments, such as written options. The following is a summary of the levels used as of June 30, 2013 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $58,265,286 | $— | $— | $58,265,286 | ||||||||||||
Canada | 1,143,281 | — | — | 1,143,281 | ||||||||||||
Netherlands | 502,304 | — | — | 502,304 | ||||||||||||
Israel | 500,278 | — | — | 500,278 | ||||||||||||
Greece | 130,017 | — | — | 130,017 | ||||||||||||
United Kingdom | — | — | 55,070 | 55,070 | ||||||||||||
Mutual Funds | 477,656 | — | — | 477,656 | ||||||||||||
Total Investments | $61,018,822 | $— | $55,070 | $61,073,892 | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Written Options | $(2,420 | ) | $— | $— | $(2,420 | ) |
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 12/31/12 | $65,906 | |||
Change in unrealized appreciation (depreciation) | (10,836 | ) | ||
Balance as of 6/30/13 | $55,070 |
The net change in unrealized appreciation (depreciation) from investments still held as level 3 at June 30, 2013 is $(10,836).
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.
14
Table of Contents
MFS Core Equity Series
Notes to Financial Statements (unaudited) – continued
Derivatives are used for hedging or non-hedging purposes. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. When the fund uses derivatives as an investment to increase market exposure, or for hedging purposes, gains and losses from derivative instruments may be substantially greater than the derivative’s original cost.
The derivative instruments used by the fund were written options and purchased options. The fund’s period end derivatives, as presented in the Portfolio of Investments, generally are indicative of the volume of its derivative activity during the period.
The following table presents, by major type of derivative contract, the fair value, on a gross basis, of the asset and liability components of derivatives held by the fund at June 30, 2013 as reported in the Statement of Assets and Liabilities:
Fair Value (a) | ||||||||||
Risk | Derivative Contracts | Asset Derivatives | Liability Derivatives | |||||||
Equity | Purchased Equity Options | $2,728 | $— | |||||||
Equity | Written Equity Options | — | (2,420 | ) | ||||||
Total | $2,728 | $(2,420 | ) |
(a) | The value of purchased options outstanding is included in total investments, at value, within the fund’s Statement of Assets and Liabilities. |
The following table presents, by major type of derivative contract, the realized gain (loss) on derivatives held by the fund for the six months ended June 30, 2013 as reported in the Statement of Operations:
Risk | Investments (Purchased Options) | Written Options | ||||||
Equity | $(3,831 | ) | $336 |
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, 2013 as reported in the Statement of Operations:
Risk | Investments (Purchased Options) | Written Options | ||||||
Equity | $3,561 | $(3,227 | ) |
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 segregated to cover obligations of the fund under derivative contracts, if any, will be reported separately in the Statement of Assets and Liabilities as “Deposits with brokers”. Securities collateral pledged for the same purpose, if any, is noted in the Portfolio of Investments.
The fund’s accounting policy with respect to balance sheet offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the ISDA Master Agreement does not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty.
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.
15
Table of Contents
MFS Core Equity Series
Notes to Financial Statements (unaudited) – continued
The premium received is initially recorded as a liability in 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.
The following table represents the written option activity in the fund during the six months ended June 30, 2013:
Number of contracts | Premiums received | |||||||
Outstanding, beginning of period | 75 | $32,000 | ||||||
Options written | 44 | 2,373 | ||||||
Options closed | (75 | ) | (32,000 | ) | ||||
Outstanding, end of period | 44 | $2,373 |
Purchased Options – The fund purchased call options for a premium. Purchased call options entitle the holder to buy a specified number of shares or units of a particular security, currency or index at a specified price at a specified date or within a specified period of time. Purchasing call options may hedge against an anticipated increase in the dollar cost of securities or currency to be acquired or increase the fund’s exposure to an underlying instrument.
The premium paid is initially recorded as an investment in the Statement of Assets and Liabilities. That investment is subsequently marked-to-market daily with the difference between the premium paid and the market value of the purchased option being recorded as unrealized appreciation or depreciation. Premiums paid for purchased call options which have expired are treated as realized losses on investments in the Statement of Operations. Upon the exercise or closing of a purchased call option, the premium paid is added to the cost of the security or financial instrument purchased.
Whether or not the option is exercised, the fund’s maximum risk of loss from purchasing an option is the amount of premium paid. All option contracts involve credit risk if the counterparty to the option contract fails to perform. 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, 2013, this expense amounted to $1,622. 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, 2013 the fund had no short sales outstanding.
Security Loans – Under its Securities Lending Agency Agreement with the fund, State Street Bank and Trust Company (“State Street”), as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. 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. In the event of Borrower default, State Street will for the benefit of the fund either purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the fund the market value of the loaned securities. In return, State Street assumes the fund’s rights to the related collateral. If the collateral value is less than the
16
Table of Contents
MFS Core Equity Series
Notes to Financial Statements (unaudited) – continued
cost to purchase identical securities, State Street is responsible for the shortfall, but only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. 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 in the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income. At June 30, 2013, there were no securities on loan or collateral outstanding.
Indemnifications – Under the fund’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund’s maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.
Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend and interest payments received in additional securities are recorded on the ex-dividend or ex-interest date in an amount equal to the value of the security on such date.
The fund may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
Fees Paid Indirectly – The fund’s custody fee may be reduced according to an arrangement that measures the value of cash deposited with the custodian by the fund. For the six months ended June 30, 2013, 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 in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
During the year ended December 31, 2012, there were no significant adjustments due to differences between book and tax.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/12 | ||||
Ordinary income (including any short-term capital gains) | $445,589 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/13 | ||||
Cost of investments | $51,962,718 | |||
Gross appreciation | 10,689,177 | |||
Gross depreciation | (1,578,003 | ) | ||
Net unrealized appreciation (depreciation) | $9,111,174 | |||
As of 12/31/12 | ||||
Undistributed ordinary income | 616,442 | |||
Capital loss carryforwards | (16,594,917 | ) | ||
Other temporary differences | (19,608 | ) | ||
Net unrealized appreciation (depreciation) | 5,377,541 |
The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.
17
Table of Contents
MFS Core Equity Series
Notes to Financial Statements (unaudited) – continued
Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized for fund fiscal years beginning after December 31, 2010 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses (“post-enactment losses”). Previously, net capital losses were carried forward for eight years and treated as short-term losses (“pre-enactment losses”). As a transition rule, the Act requires that all post-enactment net capital losses be used before pre-enactment net capital losses.
As of December 31, 2012, the fund had capital loss carryforwards available to offset future realized gains. Such pre-enactment losses expire as follows:
12/31/16 | $(7,590,612 | ) | ||
12/31/17 | (9,004,305 | ) | ||
Total | $(16,594,917 | ) |
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and/or service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported in the Statements of Changes in Net Assets are presented by class as follows:
From net investment income | ||||||||
Six months ended 6/30/13 | Year ended 12/31/12 | |||||||
Initial Class | $— | $428,757 | ||||||
Service Class | — | 16,832 | ||||||
Total | $— | $445,589 |
(3) | Transactions with Affiliates |
Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates:
First $1 billion of average daily net assets | 0.75% | |||
Average daily net assets in excess of $1 billion | 0.65% |
Effective April 1, 2013, MFS has agreed in writing to reduce its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund’s Board of Trustees. For the period April 1, 2013 through June 30, 2013, this management fee reduction amounted to $83, 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, 2013 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 fund 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, 2015. For the six months ended June 30, 2013, this reduction amounted to $26,250 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, 2013, the fee was $5,592, which equated to 0.0185% 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, 2013, costs amounted to $270.
18
Table of Contents
MFS Core Equity Series
Notes to Financial Statements (unaudited) – continued
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund partially reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the six months ended June 30, 2013 was equivalent to an annual effective rate of 0.0309% 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, 2013, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $232 and are included in “Miscellaneous” expense in 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 $114, 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 current income consistent with preservation of capital and liquidity. Income earned on this investment is included in “Dividends from underlying affiliated funds” in 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, aggregated $17,863,287 and $21,972,536, 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 6/30/13 | Year ended 12/31/12 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 118,714 | $2,285,697 | 320,287 | $5,394,125 | ||||||||||||
Service Class | 11,105 | 218,366 | 11,414 | 193,883 | ||||||||||||
129,819 | $2,504,063 | 331,701 | $5,588,008 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 25,236 | $428,757 | ||||||||||||
Service Class | — | — | 992 | 16,832 | ||||||||||||
— | $— | 26,228 | $445,589 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (329,924 | ) | $(6,440,687 | ) | (872,197 | ) | $(14,755,256 | ) | ||||||||
Service Class | (18,204 | ) | (360,472 | ) | (48,838 | ) | (819,480 | ) | ||||||||
(348,128 | ) | $(6,801,159 | ) | (921,035 | ) | $(15,574,736 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (211,210 | ) | $(4,154,990 | ) | (526,674 | ) | $(8,932,374 | ) | ||||||||
Service Class | (7,099 | ) | (142,106 | ) | (36,432 | ) | (608,765 | ) | ||||||||
(218,309 | ) | $(4,297,096 | ) | (563,106 | ) | $(9,541,139 | ) |
(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
19
Table of Contents
MFS Core Equity Series
Notes to Financial Statements (unaudited) – continued
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, 2013, the fund’s commitment fee and interest expense were $159 and $0, respectively, and are included in “Miscellaneous” expense in 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 | 353,894 | 6,522,206 | (6,398,444 | ) | 477,656 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $308 | $477,656 |
20
Table of Contents
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, 2013 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products” 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” section of mfs.com.
21
Table of Contents
Table of Contents
SEMIANNUAL REPORT
June 30, 2013
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:
As the year progresses, the global economy continues to grind ahead slowly, held back by broad austerity measures. The U.S. economy remains a steadying force, driven by resilient consumers, who have taken the payroll tax increase and the sequestration’s early impact in stride. With U.S. housing and jobs showing steady expansion, domestic consumer-driven growth has offset weaker exports and the U.S. government’s spending constraints. In response to these developments, the U.S. Federal Reserve has begun to brace investors for an eventual shift in its monetary policy, causing global market tremors.
Japan has been another bright spot, with government and central bank stimulus policies leading to increased exports, a resurgent stock market and improved economic sentiment. After a six-month rally, Japan’s stocks slipped late in the second quarter, then picked up momentum on fresh signs that the country could soon break free of its chronic deflation. The major deterrent to global growth remains the eurozone, still in the grip of persistent recession. China has seen its pace of economic growth decelerate, a troubling turn for the country’s trading partners, who have come to rely on it as an engine for global growth.
As always, managing risk in the face of uncertainty remains a top priority for investors. At MFS®, our uniquely collaborative investment process employs integrated, global research and active risk management. Our global team of investment professionals shares ideas and evaluates opportunities across continents, investment disciplines and asset classes — all with a goal of building better insights, and ultimately better results, for our clients.
We are mindful of the many economic challenges investors face, and believe it is more important than ever to maintain a long-term view and employ time-tested principles, such as asset allocation and diversification. We remain confident that our unique approach can serve investors well as they work with their financial advisors to identify and pursue the most suitable opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2013
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 | ||||
Walt Disney Co. | 3.0% | |||
Linde AG | 3.0% | |||
Nestle S.A. | 2.7% | |||
Reckitt Benckiser Group PLC | 2.6% | |||
Honeywell International, Inc. | 2.4% | |||
Diageo PLC | 2.3% | |||
Visa, Inc., “A” | 2.2% | |||
State Street Corp. | 2.2% | |||
Heineken N.V. | 2.1% | |||
Thermo Fisher Scientific, Inc. | 2.1% | |||
Equity sectors | ||||
Consumer Staples | 18.3% | |||
Financial Services | 15.6% | |||
Health Care | 12.5% | |||
Leisure | 9.8% | |||
Industrial Goods & Services | 8.2% | |||
Basic Materials | 7.8% | |||
Retailing | 7.4% | |||
Technology | 6.8% | |||
Special Products & Services | 4.3% | |||
Transportation | 3.6% | |||
Energy | 3.1% | |||
Autos & Housing | 1.2% | |||
Utilities & Communications | 0.3% |
Issuer country weightings (x) | ||||
United States | 51.9% | |||
United Kingdom | 10.1% | |||
Switzerland | 8.6% | |||
France | 8.1% | |||
Germany | 7.5% | |||
Netherlands | 3.4% | |||
Japan | 2.4% | |||
Canada | 1.7% | |||
Sweden | 1.0% | |||
Other Countries | 5.3% | |||
Currency exposure weightings (y) | ||||
United States Dollar | 54.5% | |||
Euro | 20.1% | |||
British Pound Sterling | 10.1% | |||
Swiss Franc | 8.6% | |||
Japanese Yen | 2.4% | |||
Swedish Krona | 1.0% | |||
Danish Krone | 0.9% | |||
South Korean Won | 0.8% | |||
Brazilian Real | 0.7% | |||
Other Currencies | 0.9% |
(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 6/30/13.
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, 2013 through June 30, 2013
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, 2013 through June 30, 2013.
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 1/01/13 | Ending Account Value 6/30/13 | Expenses Paid During Period (p) 1/01/13-6/30/13 | ||||||||||||||
Initial Class | Actual | 1.15% | $1,000.00 | $1,091.15 | $5.96 | |||||||||||||
Hypothetical (h) | 1.15% | $1,000.00 | $1,019.09 | $5.76 | ||||||||||||||
Service Class | Actual | 1.40% | $1,000.00 | $1,089.46 | $7.25 | |||||||||||||
Hypothetical (h) | 1.40% | $1,000.00 | $1,017.85 | $7.00 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
3
Table of Contents
MFS Global Equity Series
PORTFOLIO OF INVESTMENTS – 6/30/13 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 98.9% | ||||||||
Aerospace – 4.3% | ||||||||
Honeywell International, Inc. | 15,580 | $ | 1,236,117 | |||||
United Technologies Corp. | 10,320 | 959,141 | ||||||
|
| |||||||
$ | 2,195,258 | |||||||
|
| |||||||
Alcoholic Beverages – 6.4% | ||||||||
Carlsberg A.S., “B” | 4,945 | $ | 441,372 | |||||
Diageo PLC | 40,600 | 1,164,539 | ||||||
Heineken N.V. | 17,136 | 1,089,377 | ||||||
Pernod Ricard S.A. | 5,028 | 557,542 | ||||||
|
| |||||||
$ | 3,252,830 | |||||||
|
| |||||||
Apparel Manufacturers – 3.9% | ||||||||
Burberry Group PLC | 12,249 | $ | 252,691 | |||||
Compagnie Financiere Richemont S.A. | 7,315 | 641,684 | ||||||
LVMH Moet Hennessy Louis Vuitton S.A. | 5,227 | 841,737 | ||||||
NIKE, Inc., “B” | 3,490 | 222,243 | ||||||
|
| |||||||
$ | 1,958,355 | |||||||
|
| |||||||
Automotive – 1.2% | ||||||||
Delphi Automotive PLC | 10,200 | $ | 517,038 | |||||
Harley-Davidson, Inc. | 1,930 | 105,803 | ||||||
|
| |||||||
$ | 622,841 | |||||||
|
| |||||||
Broadcasting – 7.0% | ||||||||
Omnicom Group, Inc. | 8,380 | $ | 526,851 | |||||
Time Warner, Inc. | 10,580 | 611,736 | ||||||
Viacom, Inc., “B” | 3,750 | 255,188 | ||||||
Walt Disney Co. | 24,500 | 1,547,175 | ||||||
WPP PLC | 36,956 | 631,378 | ||||||
|
| |||||||
$ | 3,572,328 | |||||||
|
| |||||||
Brokerage & Asset Managers – 0.6% | ||||||||
Deutsche Boerse AG | 4,597 | $ | 302,595 | |||||
|
| |||||||
Business Services – 4.3% | ||||||||
Accenture PLC, “A” | 14,260 | $ | 1,026,150 | |||||
Adecco S.A. | 5,460 | 309,936 | ||||||
Brenntag AG | 1,588 | 241,221 | ||||||
Compass Group PLC | 47,260 | 605,665 | ||||||
|
| |||||||
$ | 2,182,972 | |||||||
|
| |||||||
Cable TV – 1.2% | ||||||||
British Sky Broadcasting Group PLC | 18,030 | $ | 217,572 | |||||
Time Warner Cable, Inc. | 3,410 | 383,557 | ||||||
|
| |||||||
$ | 601,129 | |||||||
|
| |||||||
Chemicals – 1.8% | ||||||||
3M Co. | 8,358 | $ | 913,947 | |||||
|
| |||||||
Computer Software – 2.7% | ||||||||
Autodesk, Inc. (a) | 5,210 | $ | 176,827 | |||||
Check Point Software Technologies Ltd. (a) | 3,720 | 184,810 | ||||||
Dassault Systems S.A. | 1,253 | 153,278 | ||||||
Oracle Corp. | 28,460 | 874,291 | ||||||
|
| |||||||
$ | 1,389,206 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Computer Software – Systems – 0.7% | ||||||||
Canon, Inc. | 10,300 | $ | 338,290 | |||||
|
| |||||||
Consumer Products – 6.4% | ||||||||
Colgate-Palmolive Co. | 12,542 | $ | 718,531 | |||||
International Flavors & Fragrances, Inc. | 6,740 | 506,578 | ||||||
Procter & Gamble Co. | 2,483 | 191,166 | ||||||
Reckitt Benckiser Group PLC | 18,465 | 1,308,982 | ||||||
Svenska Cellulosa Aktiebolaget | 21,544 | 539,398 | ||||||
|
| |||||||
$ | 3,264,655 | |||||||
|
| |||||||
Electrical Equipment – 3.9% | ||||||||
Amphenol Corp., “A” | 6,610 | $ | 515,183 | |||||
Legrand S.A. | 13,997 | 646,851 | ||||||
Rockwell Automation, Inc. | 1,350 | 112,239 | ||||||
Schneider Electric S.A. | 9,476 | 683,176 | ||||||
|
| |||||||
$ | 1,957,449 | |||||||
|
| |||||||
Electronics – 2.7% | ||||||||
Altera Corp. | 8,020 | $ | 264,580 | |||||
Hoya Corp. | 19,100 | 391,907 | ||||||
Microchip Technology, Inc. | 9,040 | 336,740 | ||||||
Samsung Electronics Co. Ltd. | 332 | 390,127 | ||||||
|
| |||||||
$ | 1,383,354 | |||||||
|
| |||||||
Energy – Independent – 0.4% | ||||||||
INPEX Corp. | 51 | $ | 213,209 | |||||
|
| |||||||
Food & Beverages – 5.5% | ||||||||
Dr Pepper Snapple Group, Inc. | 7,340 | $ | 337,126 | |||||
Groupe Danone | 12,701 | 953,250 | ||||||
J.M. Smucker Co. | 1,125 | 116,044 | ||||||
Nestle S.A. | 21,108 | 1,380,599 | ||||||
|
| |||||||
$ | 2,787,019 | |||||||
|
| |||||||
Food & Drug Stores – 1.4% | ||||||||
Lawson, Inc. | 2,400 | $ | 183,182 | |||||
Walgreen Co. | 11,320 | 500,344 | ||||||
|
| |||||||
$ | 683,526 | |||||||
|
| |||||||
Gaming & Lodging – 0.4% | ||||||||
William Hill PLC | 33,670 | $ | 226,554 | |||||
|
| |||||||
General Merchandise – 0.8% | ||||||||
Target Corp. | 6,210 | $ | 427,621 | |||||
|
| |||||||
Insurance – 0.7% | ||||||||
Swiss Re Ltd. | 5,091 | $ | 377,123 | |||||
|
| |||||||
Major Banks – 6.1% | ||||||||
Bank of New York Mellon Corp. | 27,930 | $ | 783,437 | |||||
Goldman Sachs Group, Inc. | 3,740 | 565,675 | ||||||
Standard Chartered PLC | 29,712 | 641,476 | ||||||
State Street Corp. | 17,020 | 1,109,874 | ||||||
|
| |||||||
$ | 3,100,462 | |||||||
|
|
4
Table of Contents
MFS Global Equity Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Medical Equipment – 7.6% | ||||||||
DENTSPLY International, Inc. | 9,700 | $ | 397,312 | |||||
Medtronic, Inc. | 12,320 | 634,110 | ||||||
Sonova Holding AG | 2,928 | 310,609 | ||||||
St. Jude Medical, Inc. | 18,470 | 842,786 | ||||||
Thermo Fisher Scientific, Inc. | 12,750 | 1,079,033 | ||||||
Waters Corp. (a) | 5,750 | 575,288 | ||||||
|
| |||||||
$ | 3,839,138 | |||||||
|
| |||||||
Network & Telecom – 0.7% | ||||||||
Cisco Systems, Inc. | 15,260 | $ | 370,971 | |||||
|
| |||||||
Oil Services – 2.7% | ||||||||
National Oilwell Varco, Inc. | 7,090 | $ | 488,501 | |||||
Saipem S.p.A. | 11,040 | 178,625 | ||||||
Schlumberger Ltd. | 9,790 | 701,551 | ||||||
|
| |||||||
$ | 1,368,677 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 8.2% | ||||||||
Aeon Credit Service Co. Ltd. | 3,700 | $ | 105,088 | |||||
American Express Co. | 9,780 | 731,153 | ||||||
Credicorp Ltd. | 898 | 114,908 | ||||||
Erste Group Bank AG | 8,379 | 223,095 | ||||||
ICICI Bank Ltd. (a) | 16,493 | 297,179 | ||||||
Itau Unibanco Holding S.A., ADR | 29,261 | 378,052 | ||||||
Julius Baer Group Ltd. | 9,994 | 388,361 | ||||||
Komercni Banka A.S. | 964 | 178,949 | ||||||
Sberbank of Russia, ADR | 14,209 | 161,841 | ||||||
UBS AG | 27,259 | 463,084 | ||||||
Visa, Inc., “A” | 6,195 | 1,132,136 | ||||||
|
| |||||||
$ | 4,173,846 | |||||||
|
| |||||||
Pharmaceuticals – 4.9% | ||||||||
Bayer AG | 10,020 | $ | 1,068,574 | |||||
Johnson & Johnson | 4,230 | 363,188 | ||||||
Merck KGaA | 4,357 | 662,654 | ||||||
Roche Holding AG | 1,531 | 379,358 | ||||||
|
| |||||||
$ | 2,473,774 | |||||||
|
| |||||||
Railroad & Shipping – 1.9% | ||||||||
Canadian National Railway Co. | 8,814 | $ | 857,338 | |||||
Kuehne & Nagel, Inc. AG | 890 | 97,579 | ||||||
|
| |||||||
$ | 954,917 | |||||||
|
| |||||||
Restaurants – 1.2% | ||||||||
McDonald’s Corp. | 5,266 | $ | 521,334 | |||||
Whitbread PLC | 1,492 | 69,577 | ||||||
|
| |||||||
$ | 590,911 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Specialty Chemicals – 6.0% | ||||||||
Akzo Nobel N.V. | 11,091 | $ | 622,996 | |||||
L’Air Liquide S.A. | 2,236 | 275,074 | ||||||
Linde AG | 8,209 | 1,528,551 | ||||||
Praxair, Inc. | 5,208 | 599,753 | ||||||
|
| |||||||
$ | 3,026,374 | |||||||
|
| |||||||
Specialty Stores – 1.3% | ||||||||
AutoZone, Inc. (a) | 690 | $ | 292,346 | |||||
Sally Beauty Holdings, Inc. (a) | 11,890 | 369,779 | ||||||
|
| |||||||
$ | 662,125 | |||||||
|
| |||||||
Trucking – 1.7% | ||||||||
United Parcel Service, Inc., “B” | 10,020 | $ | 866,530 | |||||
|
| |||||||
Utilities – Electric Power – 0.3% | ||||||||
Red Electrica de Espana | 2,897 | $ | 158,896 | |||||
|
| |||||||
Total Common Stocks (Identified Cost, $36,873,183) | $ | 50,236,882 | ||||||
|
| |||||||
MONEY MARKET FUNDS – 1.0% | ||||||||
MFS Institutional Money Market Portfolio, 0.11%, at Cost and Net Asset Value (v) | 509,139 | $ | 509,139 | |||||
|
| |||||||
Total Investments (Identified Cost, $37,382,322) | $ | 50,746,021 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – 0.1% | 29,962 | |||||||
|
| |||||||
Net Assets – 100.0% | $ | 50,775,983 | ||||||
|
|
(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 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 6/30/13 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $36,873,183) | $50,236,882 | |||||||
Underlying affiliated funds, at cost and value | 509,139 | |||||||
Total investments, at value (identified cost, $37,382,322) | $50,746,021 | |||||||
Foreign currency, at value (identified cost, $1,127) | 1,125 | |||||||
Receivables for | ||||||||
Investments sold | 75,500 | |||||||
Fund shares sold | 27,083 | |||||||
Interest and dividends | 92,364 | |||||||
Other assets | 247 | |||||||
Total assets | $50,942,340 | |||||||
Liabilities | ||||||||
Payable to custodian | $36 | |||||||
Payables for | ||||||||
Investments purchased | 101,314 | |||||||
Fund shares reacquired | 30,707 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 2,157 | |||||||
Shareholder servicing costs | 204 | |||||||
Distribution and/or service fees | 152 | |||||||
Payable for independent Trustees’ compensation | 187 | |||||||
Accrued expenses and other liabilities | 31,600 | |||||||
Total liabilities | $166,357 | |||||||
Net assets | $50,775,983 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $36,999,281 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 13,362,796 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | (436,029 | ) | ||||||
Undistributed net investment income | 849,935 | |||||||
Net assets | $50,775,983 | |||||||
Shares of beneficial interest outstanding | 3,075,742 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $45,232,511 | 2,738,618 | $16.52 | |||||||||
Service Class | 5,543,472 | 337,124 | 16.44 |
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 6/30/13 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $733,530 | |||||||
Interest | 4,362 | |||||||
Dividends from underlying affiliated funds | 498 | |||||||
Foreign taxes withheld | (52,996 | ) | ||||||
Total investment income | $685,394 | |||||||
Expenses | ||||||||
Management fee | $258,973 | |||||||
Distribution and/or service fees | 6,441 | |||||||
Shareholder servicing costs | 3,952 | |||||||
Administrative services fee | 8,838 | |||||||
Independent Trustees’ compensation | 636 | |||||||
Custodian fee | 15,256 | |||||||
Shareholder communications | 7,245 | |||||||
Audit and tax fees | 26,222 | |||||||
Legal fees | 264 | |||||||
Miscellaneous | 6,441 | |||||||
Total expenses | $334,268 | |||||||
Fees paid indirectly | (1 | ) | ||||||
Reduction of expenses by investment adviser | (29,371 | ) | ||||||
Net expenses | $304,896 | |||||||
Net investment income | $380,498 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $127,200 | |||||||
Foreign currency | (6,850 | ) | ||||||
Net realized gain (loss) on investments and foreign currency | $120,350 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments (net of $5,467 decrease in deferred country tax) | $3,753,996 | |||||||
Translation of assets and liabilities in foreign currencies | (1,246 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $3,752,750 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $3,873,100 | |||||||
Change in net assets from operations | $4,253,598 |
See Notes to Financial Statements
7
Table of Contents
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 6/30/13 (unaudited | ) | | Year ended 12/31/12 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $380,498 | $476,137 | ||||||
Net realized gain (loss) on investments and foreign currency | 120,350 | (421,727 | ) | |||||
Net unrealized gain (loss) on investments and foreign currency translation | 3,752,750 | 8,638,309 | ||||||
Change in net assets from operations | $4,253,598 | $8,692,719 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(445,012 | ) | |||||
From net realized gain on investments | — | (927,407 | ) | |||||
Total distributions declared to shareholders | $— | $(1,372,419 | ) | |||||
Change in net assets from fund share transactions | $1,098,601 | $37,085 | ||||||
Total change in net assets | $5,352,199 | $7,357,385 | ||||||
Net assets | ||||||||
At beginning of period | 45,423,784 | 38,066,399 | ||||||
At end of period (including undistributed net investment income of $849,935 and | $50,775,983 | $45,423,784 |
See Notes to Financial Statements
8
Table of Contents
MFS Global Equity Series
FINANCIAL STATEMENTS | FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund’s financial performance for the semiannual period and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
Initial Class | Six months ended 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $15.14 | $12.71 | $13.40 | $12.04 | $9.36 | $15.47 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.12 | $0.16 | $0.14 | $0.11 | $0.12 | $0.20 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.26 | 2.76 | (0.72 | ) | 1.37 | 2.78 | (5.01 | ) | ||||||||||||||||
Total from investment operations | $1.38 | $2.92 | $(0.58 | ) | $1.48 | $2.90 | $(4.81 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.16 | ) | $(0.11 | ) | $(0.12 | ) | $(0.22 | ) | $(0.14 | ) | |||||||||||||
From net realized gain on investments | — | (0.33 | ) | — | — | — | (1.16 | ) | ||||||||||||||||
Total distributions declared to shareholders | $— | $(0.49 | ) | $(0.11 | ) | $(0.12 | ) | $(0.22 | ) | $(1.30 | ) | |||||||||||||
Net asset value, end of period (x) | $16.52 | $15.14 | $12.71 | $13.40 | $12.04 | $9.36 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 9.11 | (n) | 23.34 | (4.32 | ) | 12.36 | 31.98 | (33.77 | ) | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.27 | (a) | 1.30 | 1.40 | 1.38 | 1.52 | 1.36 | |||||||||||||||||
Expenses after expense reductions (f) | 1.15 | (a) | 1.15 | 1.15 | 1.15 | 1.15 | 1.15 | |||||||||||||||||
Net investment income | 1.49 | (a) | 1.15 | 1.08 | 0.88 | 1.18 | 1.61 | |||||||||||||||||
Portfolio turnover | 17 | (n) | 21 | 15 | 18 | 23 | 28 | |||||||||||||||||
Net assets at end of period (000 omitted) | $45,233 | $41,297 | $35,426 | $39,966 | $39,418 | $33,523 | ||||||||||||||||||
Service Class | Six months ended 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $15.09 | $12.68 | $13.37 | $12.03 | $9.35 | $15.47 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.10 | $0.12 | $0.11 | $0.08 | $0.08 | $0.16 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.25 | 2.75 | (0.71 | ) | 1.36 | 2.81 | (5.01 | ) | ||||||||||||||||
Total from investment operations | $1.35 | $2.87 | $(0.60 | ) | $1.44 | $2.89 | $(4.85 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.13 | ) | $(0.09 | ) | $(0.10 | ) | $(0.21 | ) | $(0.11 | ) | |||||||||||||
From net realized gain on investments | — | (0.33 | ) | — | — | — | (1.16 | ) | ||||||||||||||||
Total distributions declared to shareholders | $— | $(0.46 | ) | $(0.09 | ) | $(0.10 | ) | $(0.21 | ) | $(1.27 | ) | |||||||||||||
Net asset value, end of period (x) | $16.44 | $15.09 | $12.68 | $13.37 | $12.03 | $9.35 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 8.95 | (n) | 22.98 | (4.53 | ) | 12.05 | 31.80 | (33.97 | ) | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.52 | (a) | 1.54 | 1.65 | 1.63 | 1.75 | 1.60 | |||||||||||||||||
Expenses after expense reductions (f) | 1.40 | (a) | 1.40 | 1.40 | 1.40 | 1.40 | 1.40 | |||||||||||||||||
Net investment income | 1.27 | (a) | 0.87 | 0.83 | 0.64 | 0.82 | 1.32 | |||||||||||||||||
Portfolio turnover | 17 | (n) | 21 | 15 | 18 | 23 | 28 | |||||||||||||||||
Net assets at end of period (000 omitted) | $5,543 | $4,127 | $2,640 | $2,474 | $2,248 | $695 |
See Notes to Financial Statements
9
Table of Contents
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
10
Table of Contents
MFS Global Equity Series
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) | Business and Organization |
MFS Global Equity Series (the fund) is a series of MFS Variable Insurance Trust (the trust). The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The shareholders of each series of the trust are separate accounts of insurance companies, which offer variable annuity and/or life insurance products, and qualified retirement and pension plans.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued. The fund invests in foreign securities. Investments in foreign securities are vulnerable to the effects of changes in the relative values of the local currency and the U.S. dollar and to the effects of changes in each country’s legal, political, and economic environment.
In this reporting period, the fund adopted the disclosure provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Update 2011-11 (“ASU 2011-11”), Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities along with the related scope clarification provisions of FASB Accounting Standards Update 2013-01 (“ASU 2013-01”) entitled Balance Sheet (Topic 210) – Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 is intended to enhance disclosures on the offsetting of financial assets and liabilities by requiring entities to disclose both gross and net information about financial instruments and transactions that are either offset in the statement of financial position or subject to a Master Netting Agreement or similar arrangement. ASU 2013-01 limits the scope of ASU 2011-11’s disclosure requirements on offsetting to financial assets and financial liabilities related to derivatives, repurchase and reverse repurchase agreements, and securities lending and securities borrowing transactions. The disclosures required by ASU 2011-11, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
In June 2013, FASB issued Accounting Standards Update 2013-08 Financial Services – Investment Companies (Topic 946) – Amendments to the Scope, Measurement, and Disclosure Requirements (“ASU 2013-08”) which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013. ASU 2013-08 sets forth a methodology for determining whether an entity should be characterized as an investment company and prescribes fair value accounting for an investment company’s non-controlling ownership interest in another investment company. FASB has determined that a fund registered under the Investment Company Act of 1940 automatically meets ASU 2013-08’s criteria for an investment company. Although still evaluating the potential impacts of ASU 2013-08 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
11
Table of Contents
MFS Global Equity Series
Notes to Financial Statements (unaudited) – continued
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. The following is a summary of the levels used as of June 30, 2013 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $25,806,971 | $— | $— | $25,806,971 | ||||||||||||
United Kingdom | — | 5,118,434 | — | 5,118,434 | ||||||||||||
Switzerland | 310,609 | 4,037,724 | — | 4,348,333 | ||||||||||||
France | 1,664,070 | 2,446,841 | — | 4,110,911 | ||||||||||||
Germany | 1,612,390 | 2,191,205 | — | 3,803,595 | ||||||||||||
Netherlands | — | 1,712,373 | — | 1,712,373 | ||||||||||||
Japan | 183,182 | 1,048,494 | — | 1,231,676 | ||||||||||||
Canada | 857,338 | — | — | 857,338 | ||||||||||||
Sweden | — | 539,398 | — | 539,398 | ||||||||||||
Other Countries | 1,705,865 | 1,001,988 | — | 2,707,853 | ||||||||||||
Mutual Funds | 509,139 | — | — | 509,139 | ||||||||||||
Total Investments | $32,649,564 | $18,096,457 | $— | $50,746,021 |
For further information regarding security characteristics, see the Portfolio of Investments.
Of the level 2 investments presented above, equity investments amounting to $1,380,599 would have been considered level 1 investments at the beginning of the period. Of the level 1 investments presented above, equity investments amounting to $4,146,948 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 – Under its Securities Lending Agency Agreement with the fund, State Street Bank and Trust Company (“State Street”), as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. 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. In the event of Borrower default, State Street will for the benefit of the fund either purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the fund the market value of the loaned securities. In return, State Street assumes the fund’s rights to the related collateral. If the collateral value is less than the cost to purchase identical securities,
12
Table of Contents
MFS Global Equity Series
Notes to Financial Statements (unaudited) – continued
State Street is responsible for the shortfall, but only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. 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 in the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income. At June 30, 2013, there were no securities on loan or collateral outstanding.
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, 2013, is shown as a reduction of total expenses in the Statement of Operations.
Tax Matters and Distributions – The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Foreign taxes have been accrued by the fund in the accompanying financial statements in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests. Additionally, capital gains realized by the fund on securities issued in or by certain foreign countries may be subject to capital gains tax imposed by those countries.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to wash sale loss deferrals.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/12 | ||||
Ordinary income (including any short-term capital gains) | $445,021 | |||
Long-term capital gains | 927,398 | |||
Total distributions | $1,372,419 |
13
Table of Contents
MFS Global Equity Series
Notes to Financial Statements (unaudited) – continued
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/13 | ||||
Cost of investments | $37,548,606 | |||
Gross appreciation | 14,367,875 | |||
Gross depreciation | (1,170,460 | ) | ||
Net unrealized appreciation (depreciation) | $13,197,415 | |||
As of 12/31/12 | ||||
Undistributed ordinary income | 470,055 | |||
Capital loss carryforwards | (390,095 | ) | ||
Other temporary differences | (5,742 | ) | ||
Net unrealized appreciation (depreciation) | 9,448,886 |
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 for fund fiscal years beginning after December 31, 2010 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses (“post-enactment losses”). Previously, net capital losses were carried forward for eight years and treated as short-term losses (“pre-enactment losses”). As a transition rule, the Act requires that all post-enactment net capital losses be used before pre-enactment net capital losses.
As of December 31, 2012, the fund had capital loss carryforwards available to offset future realized gains. Such post-enactment losses are characterized as follows:
Long-term losses | $(390,095 | ) |
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and/or service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported in the Statements of Changes in Net Assets are presented by class as follows:
From net investment income | From net realized gain on investments | |||||||||||||||
Six months ended 6/30/13 | Year ended 12/31/12 | Six months ended 6/30/13 | Year ended 12/31/12 | |||||||||||||
Initial Class | $— | $413,927 | $— | $849,441 | ||||||||||||
Service Class | — | 31,085 | — | 77,966 | ||||||||||||
Total | $— | $445,012 | $— | $927,407 |
(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, 2015. For the six months ended June 30, 2013, this management fee reduction amounted to $25,862, which is shown as a reduction of total expenses in the Statement of Operations. Effective April 1, 2013, MFS has agreed in writing to reduce its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund’s Board of Trustees. For the period April 1, 2013 through June 30, 2013, this management fee reduction amounted to $72, 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, 2013 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, 2015. For the six months ended June 30, 2013, this reduction amounted to $3,340 and is reflected as a reduction of total expenses in the Statement of Operations.
14
Table of Contents
MFS Global Equity Series
Notes to Financial Statements (unaudited) – continued
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, is the distributor of shares of the fund. The Trustees have adopted a distribution plan for the Service Class shares pursuant to Rule 12b-1 under the Investment Company Act of 1940.
The fund’s distribution plan provides that the fund will pay MFD distribution and/or service fees equal to 0.25% per annum of its average daily net assets attributable to Service Class shares as partial consideration for services performed and expenses incurred by MFD and financial intermediaries (including participating insurance companies that invest in the fund to fund variable annuity and variable life insurance contracts, sponsors of qualified retirement and pension plans that invest in the fund, and affiliates of these participating insurance companies and plan sponsors) in connection with the sale and distribution of the Service Class shares. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries.
Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent. For the six months ended June 30, 2013, the fee was $3,814, which equated to 0.0147% 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, 2013, these costs amounted to $138.
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, 2013 was equivalent to an annual effective rate of 0.0341% 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, 2013, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $193 and are included in “Miscellaneous” expense in 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 $97, 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 current income consistent with preservation of capital and liquidity. Income earned on this investment is included in “Dividends from underlying affiliated funds” in 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 short-term obligations, aggregated $10,025,390 and $8,823,180, respectively.
15
Table of Contents
MFS Global 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 6/30/13 | Year ended 12/31/12 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 660,632 | $10,753,081 | 729,692 | $10,142,333 | ||||||||||||
Service Class | 117,023 | 1,894,505 | 175,454 | 2,470,998 | ||||||||||||
777,655 | $12,647,586 | 905,146 | $12,613,331 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 91,482 | $1,263,368 | ||||||||||||
Service Class | — | — | 7,914 | 109,051 | ||||||||||||
— | $— | 99,396 | $1,372,419 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (649,152 | ) | $(10,665,967 | ) | (881,333 | ) | $(12,259,890 | ) | ||||||||
Service Class | (53,285 | ) | (883,018 | ) | (118,247 | ) | (1,688,775 | ) | ||||||||
(702,437 | ) | $(11,548,985 | ) | (999,580 | ) | $(13,948,665 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | 11,480 | $87,114 | (60,159 | ) | $(854,189 | ) | ||||||||||
Service Class | 63,738 | 1,011,487 | 65,121 | 891,274 | ||||||||||||
75,218 | $1,098,601 | 4,962 | $37,085 |
(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, 2013, the fund’s commitment fee and interest expense were $127 and $0, respectively, and are included in “Miscellaneous” expense in 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 | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 331,146 | 10,861,602 | (10,683,609 | ) | 509,139 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $498 | $509,139 |
16
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, 2013 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products” 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” section of mfs.com.
17
Table of Contents
Table of Contents
SEMIANNUAL REPORT
June 30, 2013
MFS® GROWTH SERIES
MFS® Variable Insurance Trust
VEG-SEM
Table of Contents
MFS® GROWTH SERIES
The report is prepared for the general information of contract owners. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED Ÿ MAY LOSE VALUE Ÿ NO BANK OR CREDIT UNION GUARANTEE Ÿ NOT A DEPOSIT Ÿ NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
Table of Contents
MFS Growth Series
LETTER FROM THE CHAIRMAN AND CEO
Dear Contract Owners:
As the year progresses, the global economy continues to grind ahead slowly, held back by broad austerity measures. The U.S. economy remains a steadying force, driven by resilient consumers, who have taken the payroll tax increase and the sequestration’s early impact in stride. With U.S. housing and jobs showing steady expansion, domestic consumer-driven growth has offset weaker exports and the U.S. government’s spending constraints. In response to these developments, the U.S. Federal Reserve has begun to brace investors for an eventual shift in its monetary policy, causing global market tremors.
Japan has been another bright spot, with government and central bank stimulus policies leading to increased exports, a resurgent stock market and improved economic sentiment. After a six-month rally, Japan’s stocks slipped late in the second quarter, then picked up momentum on fresh signs that the country could soon break free of its chronic deflation. The major deterrent to global growth remains the eurozone, still in the grip of persistent recession. China has seen its pace of economic growth decelerate, a troubling turn for the country’s trading partners, who have come to rely on it as an engine for global growth.
As always, managing risk in the face of uncertainty remains a top priority for investors. At MFS®, our uniquely collaborative investment process employs integrated, global research and active risk management. Our global team of investment professionals shares ideas and evaluates opportunities across continents, investment disciplines and asset classes — all with a goal of building better insights, and ultimately better results, for our clients.
We are mindful of the many economic challenges investors face, and believe it is more important than ever to maintain a long-term view and employ time-tested principles, such as asset allocation and diversification. We remain confident that our unique approach can serve investors well as they work with their financial advisors to identify and pursue the most suitable opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2013
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 Growth Series
Portfolio structure
Top ten holdings | ||||
Google, Inc., “A” | 4.5% | |||
Visa, Inc., “A” | 2.7% | |||
Danaher Corp. | 2.6% | |||
Precision Castparts Corp. | 2.4% | |||
American Tower Corp., REIT | 2.3% | |||
Thermo Fisher Scientific, Inc. | 2.1% | |||
News Corp., “A” | 2.0% | |||
Qualcomm, Inc. | 2.0% | |||
MasterCard, Inc., “A” | 1.9% | |||
EMC Corp. | 1.9% |
Equity sectors | ||||
Technology | 18.6% | |||
Health Care | 16.1% | |||
Leisure | 12.1% | |||
Retailing | 10.2% | |||
Financial Services | 9.9% | |||
Industrial Goods & Services | 8.6% | |||
Consumer Staples | 5.6% | |||
Energy | 5.2% | |||
Special Products & Services | 4.0% | |||
Utilities & Communications | 2.7% | |||
Transportation | 2.1% | |||
Basic Materials | 2.0% | |||
Autos & Housing | 1.3% |
Percentages are based on net assets as of 6/30/13.
The portfolio is actively managed and current holdings may be different.
2
Table of Contents
MFS Growth Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2013 through June 30, 2013
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, 2013 through June 30, 2013.
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 1/01/13 | Ending Account Value | Expenses Paid During Period (p) 1/01/13-6/30/13 | ||||||||||||||
Initial Class | Actual | 0.78% | $1,000.00 | $1,114.12 | $4.09 | |||||||||||||
Hypothetical (h) | 0.78% | $1,000.00 | $1,020.93 | $3.91 | ||||||||||||||
Service Class | Actual | 1.03% | $1,000.00 | $1,112.57 | $5.40 | |||||||||||||
Hypothetical (h) | 1.03% | $1,000.00 | $1,019.69 | $5.16 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
3
Table of Contents
MFS Growth Series
PORTFOLIO OF INVESTMENTS – 6/30/13 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 98.4% | ||||||||
Aerospace – 3.6% | ||||||||
Honeywell International, Inc. | 177,150 | $ | 14,055,080 | |||||
Precision Castparts Corp. | 131,848 | 29,798,965 | ||||||
|
| |||||||
$ | 43,854,045 | |||||||
|
| |||||||
Alcoholic Beverages – 1.2% | ||||||||
Diageo PLC | 276,437 | $ | 7,929,107 | |||||
Pernod Ricard S.A. | 57,397 | 6,364,610 | ||||||
|
| |||||||
$ | 14,293,717 | |||||||
|
| |||||||
Apparel Manufacturers – 2.5% | ||||||||
LVMH Moet Hennessy Louis Vuitton S.A. | 44,648 | $ | 7,189,950 | |||||
Michael Kors Holdings Ltd. (a) | 82,660 | 5,126,573 | ||||||
NIKE, Inc., “B” | 128,222 | 8,165,177 | ||||||
VF Corp. | 51,430 | 9,929,076 | ||||||
|
| |||||||
$ | 30,410,776 | |||||||
|
| |||||||
Automotive – 0.4% | ||||||||
LKQ Corp. (a) | 175,580 | $ | 4,521,185 | |||||
|
| |||||||
Biotechnology – 5.7% | ||||||||
Alexion Pharmaceuticals, Inc. (a) | 105,440 | $ | 9,725,786 | |||||
Biogen Idec, Inc. (a) | 84,459 | 18,175,577 | ||||||
Celgene Corp. (a) | 134,517 | 15,726,382 | ||||||
Gilead Sciences, Inc. (a) | 304,630 | 15,600,102 | ||||||
Illumina, Inc. (a) | 72,590 | 5,432,636 | ||||||
Regeneron Pharmaceuticals, Inc. (a) | 25,685 | 5,776,043 | ||||||
|
| |||||||
$ | 70,436,526 | |||||||
|
| |||||||
Broadcasting – 5.9% | ||||||||
Discovery Communications, Inc., “A” (a) | 180,750 | $ | 13,955,708 | |||||
News Corp., “A” | 763,720 | 24,897,272 | ||||||
Time Warner, Inc. | 143,920 | 8,321,454 | ||||||
Viacom, Inc., “B” | 137,080 | 9,328,294 | ||||||
Walt Disney Co. | 254,860 | 16,094,409 | ||||||
|
| |||||||
$ | 72,597,137 | |||||||
|
| |||||||
Brokerage & Asset Managers – 3.1% | ||||||||
Affiliated Managers Group, Inc. (a) | 79,859 | $ | 13,092,084 | |||||
BlackRock, Inc. | 46,374 | 11,911,162 | ||||||
IntercontinentalExchange, Inc. (a) | 72,880 | 12,955,149 | ||||||
|
| |||||||
$ | 37,958,395 | |||||||
|
| |||||||
Business Services – 2.4% | ||||||||
Cognizant Technology Solutions Corp., “A” (a) | 161,496 | $ | 10,111,265 | |||||
FleetCor Technologies, Inc. (a) | 107,130 | 8,709,669 | ||||||
Verisk Analytics, Inc., “A” (a) | 177,100 | 10,572,870 | ||||||
|
| |||||||
$ | 29,393,804 | |||||||
|
| |||||||
Cable TV – 1.8% | ||||||||
Comcast Corp., “Special A” | 330,650 | $ | 13,116,886 | |||||
Time Warner Cable, Inc. | 83,320 | 9,371,834 | ||||||
|
| |||||||
$ | 22,488,720 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Chemicals – 1.0% | ||||||||
Monsanto Co. | 125,971 | $ | 12,445,935 | |||||
|
| |||||||
Computer Software – 3.8% | ||||||||
Autodesk, Inc. (a) | 132,100 | $ | 4,483,474 | |||||
Citrix Systems, Inc. (a) | 176,872 | 10,670,688 | ||||||
Oracle Corp. | 581,290 | 17,857,229 | ||||||
PTC, Inc. (a) | 122,500 | 3,004,925 | ||||||
Salesforce.com, Inc. (a) | 156,772 | 5,985,555 | ||||||
TIBCO Software, Inc. (a) | 113,620 | 2,431,468 | ||||||
VMware, Inc., “A” (a) | 40,720 | 2,727,833 | ||||||
|
| |||||||
$ | 47,161,172 | |||||||
|
| |||||||
Computer Software – Systems – 3.4% | ||||||||
Apple, Inc. | 47,489 | $ | 18,809,443 | |||||
EMC Corp. | 992,210 | 23,436,000 | ||||||
|
| |||||||
$ | 42,245,443 | |||||||
|
| |||||||
Construction – 0.9% | ||||||||
Stanley Black & Decker, Inc. | 140,240 | $ | 10,840,552 | |||||
|
| |||||||
Consumer Products – 1.1% | ||||||||
Estee Lauder Cos., Inc., “A” | 203,289 | $ | 13,370,318 | |||||
|
| |||||||
Consumer Services – 1.6% | ||||||||
Priceline.com, Inc. (a) | 23,446 | $ | 19,392,890 | |||||
|
| |||||||
Electrical Equipment – 3.4% | ||||||||
AMETEK, Inc. | 227,440 | $ | 9,620,712 | |||||
Danaher Corp. | 511,810 | 32,397,573 | ||||||
|
| |||||||
$ | 42,018,285 | |||||||
|
| |||||||
Electronics – 1.7% | ||||||||
Altera Corp. | 312,730 | $ | 10,316,963 | |||||
Linear Technology Corp. | 179,110 | 6,598,412 | ||||||
NXP Semiconductors N.V. (a) | 136,840 | 4,239,303 | ||||||
|
| |||||||
$ | 21,154,678 | |||||||
|
| |||||||
Energy – Independent – 3.4% | ||||||||
Anadarko Petroleum Corp. | 121,240 | $ | 10,418,153 | |||||
Cabot Oil & Gas Corp. | 112,680 | 8,002,534 | ||||||
Noble Energy, Inc. | 136,931 | 8,221,337 | ||||||
Pioneer Natural Resources Co. | 106,881 | 15,471,025 | ||||||
|
| |||||||
$ | 42,113,049 | |||||||
|
| |||||||
Engineering – Construction – 0.1% | ||||||||
Fluor Corp. | 24,850 | $ | 1,473,854 | |||||
|
| |||||||
Entertainment – 0.2% | ||||||||
Netflix, Inc. (a) | 10,774 | $ | 2,274,284 | |||||
|
| |||||||
Food & Beverages – 2.3% | ||||||||
Groupe Danone | 82,674 | $ | 6,204,941 | |||||
Mead Johnson Nutrition Co., “A” | 143,596 | 11,377,111 | ||||||
Mondelez International, Inc. | 380,640 | 10,859,659 | ||||||
|
| |||||||
$ | 28,441,711 | |||||||
|
|
4
Table of Contents
MFS Growth Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Food & Drug Stores – 0.5% | ||||||||
CVS Caremark Corp. | 107,390 | $ | 6,140,560 | |||||
|
| |||||||
Gaming & Lodging – 2.1% | ||||||||
Las Vegas Sands Corp. | 234,970 | $ | 12,436,962 | |||||
Wynn Resorts Ltd. | 102,362 | 13,102,336 | ||||||
|
| |||||||
$ | 25,539,298 | |||||||
|
| |||||||
General Merchandise – 2.1% | ||||||||
Costco Wholesale Corp. | 105,460 | $ | 11,660,712 | |||||
Target Corp. | 196,034 | 13,498,901 | ||||||
|
| |||||||
$ | 25,159,613 | |||||||
|
| |||||||
Insurance – 0.4% | ||||||||
ACE Ltd. | 48,870 | $ | 4,372,888 | |||||
|
| |||||||
Internet – 7.7% | ||||||||
eBay, Inc. (a) | 395,180 | $ | 20,438,710 | |||||
Facebook, Inc., “A “ (a) | 249,110 | 6,192,875 | ||||||
Google, Inc., “A” (a) | 62,566 | 55,081,229 | ||||||
LinkedIn Corp., “A” (a) | 36,521 | 6,511,694 | ||||||
Yahoo!, Inc. (a) | 232,900 | 5,848,119 | ||||||
|
| |||||||
$ | 94,072,627 | |||||||
|
| |||||||
Leisure & Toys – 0.6% | ||||||||
Polaris Industries, Inc. | 74,979 | $ | 7,123,005 | |||||
|
| |||||||
Machinery & Tools – 1.5% | ||||||||
Cummins, Inc. | 47,059 | $ | 5,104,019 | |||||
Joy Global, Inc. | 77,621 | 3,766,947 | ||||||
Roper Industries, Inc. | 80,695 | 10,023,933 | ||||||
|
| |||||||
$ | 18,894,899 | |||||||
|
| |||||||
Major Banks – 0.6% | ||||||||
Morgan Stanley | 289,300 | $ | 7,067,599 | |||||
|
| |||||||
Medical & Health Technology & Services – 2.7% | ||||||||
Catamaran Corp. (a) | 179,410 | $ | 8,740,855 | |||||
Cerner Corp. (a) | 98,042 | 9,420,856 | ||||||
Express Scripts Holding Co. (a) | 235,238 | 14,511,832 | ||||||
|
| |||||||
$ | 32,673,543 | |||||||
|
| |||||||
Medical Equipment – 4.6% | ||||||||
Abbott Laboratories | 200,370 | $ | 6,988,906 | |||||
Cooper Cos., Inc. | 47,751 | 5,684,757 | ||||||
Covidien PLC | 211,208 | 13,272,311 | ||||||
Intuitive Surgical, Inc. (a) | 8,451 | 4,281,108 | ||||||
Thermo Fisher Scientific, Inc. | 302,289 | 25,582,718 | ||||||
|
| |||||||
$ | 55,809,800 | |||||||
|
| |||||||
Natural Gas – Pipeline – 0.4% | ||||||||
Kinder Morgan, Inc. | 126,530 | $ | 4,827,120 | |||||
|
| |||||||
Network & Telecom – 2.0% | ||||||||
Qualcomm, Inc. | 398,929 | $ | 24,366,583 | |||||
|
| |||||||
Oil Services – 1.8% | ||||||||
Cameron International Corp. (a) | 96,890 | $ | 5,925,792 | |||||
Dresser-Rand Group, Inc. (a) | 174,832 | 10,486,423 | ||||||
FMC Technologies, Inc. (a) | 102,370 | 5,699,962 | ||||||
|
| |||||||
$ | 22,112,177 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Other Banks & Diversified Financials – 5.8% | ||||||||
American Express Co. | 200,880 | $ | 15,017,789 | |||||
MasterCard, Inc., “A” | 40,861 | 23,474,645 | ||||||
Visa, Inc., “A” | 178,708 | 32,658,887 | ||||||
|
| |||||||
$ | 71,151,321 | |||||||
|
| |||||||
Pharmaceuticals – 3.1% | ||||||||
Allergan, Inc. | 37,097 | $ | 3,125,051 | |||||
Bristol-Myers Squibb Co. | 312,800 | 13,979,032 | ||||||
Perrigo Co. | 49,173 | 5,949,933 | ||||||
Valeant Pharmaceuticals International, Inc. (a) | 120,760 | 10,395,021 | ||||||
Zoetis, Inc. | 135,770 | 4,193,935 | ||||||
|
| |||||||
$ | 37,642,972 | |||||||
|
| |||||||
Railroad & Shipping – 1.4% | ||||||||
Kansas City Southern Co. | 84,619 | $ | 8,966,229 | |||||
Union Pacific Corp. | 53,642 | 8,275,888 | ||||||
|
| |||||||
$ | 17,242,117 | |||||||
|
| |||||||
Restaurants – 1.5% | ||||||||
Starbucks Corp. | 187,950 | $ | 12,308,846 | |||||
YUM! Brands, Inc. | 86,111 | 5,970,937 | ||||||
|
| |||||||
$ | 18,279,783 | |||||||
|
| |||||||
Specialty Chemicals – 1.0% | ||||||||
Airgas, Inc. | 88,070 | $ | 8,407,162 | |||||
Praxair, Inc. | 36,932 | 4,253,089 | ||||||
|
| |||||||
$ | 12,660,251 | |||||||
|
| |||||||
Specialty Stores – 5.1% | ||||||||
Amazon.com, Inc. (a) | 72,144 | $ | 20,033,667 | |||||
AutoZone, Inc. (a) | 18,936 | 8,022,994 | ||||||
PetSmart, Inc. | 93,610 | 6,270,934 | ||||||
Ross Stores, Inc. | 205,552 | 13,321,825 | ||||||
Tiffany & Co. | 126,700 | 9,228,828 | ||||||
Tractor Supply Co. | 51,653 | 6,074,909 | ||||||
|
| |||||||
$ | 62,953,157 | |||||||
|
| |||||||
Telecommunications – Wireless – 2.3% | ||||||||
American Tower Corp., REIT | 380,536 | $ | 27,843,819 | |||||
|
| |||||||
Tobacco – 1.0% | ||||||||
Philip Morris International, Inc. | 138,000 | $ | 11,953,560 | |||||
|
| |||||||
Trucking – 0.7% | ||||||||
Expeditors International of Washington, Inc. | 227,271 | $ | 8,638,571 | |||||
|
| |||||||
Total Common Stocks (Identified Cost, $1,001,699,200) | $ | 1,205,411,739 | ||||||
|
|
5
Table of Contents
MFS Growth Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
MONEY MARKET FUNDS – 1.8% | ||||||||
MFS Institutional Money Market Portfolio, 0.11%, at Cost and Net Asset Value (v) | 22,035,982 | $ | 22,035,982 | |||||
|
| |||||||
Total Investments (Identified Cost, $1,023,735,182) | $ | 1,227,447,721 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – (0.2)% | (2,666,059 | ) | ||||||
|
| |||||||
Net Assets – 100.0% | $ | 1,224,781,662 | ||||||
|
|
(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 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 6/30/13 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $1,001,699,200) | $1,205,411,739 | |||||||
Underlying affiliated funds, at cost and value | 22,035,982 | |||||||
Total investments, at value (identified cost, $1,023,735,182) | $1,227,447,721 | |||||||
Cash | 22,938 | |||||||
Receivables for | ||||||||
Fund shares sold | 2,237,931 | |||||||
Interest and dividends | 713,865 | |||||||
Other assets | 4,081 | |||||||
Total assets | $1,230,426,536 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Investments purchased | $188,687 | |||||||
Fund shares reacquired | 5,210,053 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 106,329 | |||||||
Shareholder servicing costs | 1,392 | |||||||
Distribution and/or service fees | 4,506 | |||||||
Payable for independent Trustees’ compensation | 1,823 | |||||||
Accrued expenses and other liabilities | 132,084 | |||||||
Total liabilities | $5,644,874 | |||||||
Net assets | $1,224,781,662 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $939,765,278 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 203,712,539 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | 77,792,461 | |||||||
Undistributed net investment income | 3,511,384 | |||||||
Net assets | $1,224,781,662 | |||||||
Shares of beneficial interest outstanding | 38,243,716 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $1,059,998,483 | 33,001,539 | $32.12 | |||||||||
Service Class | 164,783,179 | 5,242,177 | 31.43 |
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 6/30/13 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $5,465,703 | |||||||
Interest | 72,116 | |||||||
Dividends from underlying affiliated funds | 10,066 | |||||||
Foreign taxes withheld | (46,633 | ) | ||||||
Total investment income | $5,501,252 | |||||||
Expenses | ||||||||
Management fee | $4,419,566 | |||||||
Distribution and/or service fees | 189,010 | |||||||
Shareholder servicing costs | 31,948 | |||||||
Administrative services fee | 80,615 | |||||||
Independent Trustees’ compensation | 11,134 | |||||||
Custodian fee | 49,411 | |||||||
Shareholder communications | 61,755 | |||||||
Audit and tax fees | 25,638 | |||||||
Legal fees | 3,870 | |||||||
Miscellaneous | 26,151 | |||||||
Total expenses | $4,899,098 | |||||||
Fees paid indirectly | (7 | ) | ||||||
Reduction of expenses by investment adviser | (3,935 | ) | ||||||
Net expenses | $4,895,156 | |||||||
Net investment income | $606,096 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $78,604,624 | |||||||
Foreign currency | 6,473 | |||||||
Net realized gain (loss) on investments and foreign currency | $78,611,097 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $50,048,192 | |||||||
Translation of assets and liabilities in foreign currencies | 8 | |||||||
Net unrealized gain (loss) on investments and foreign currency translation | $50,048,200 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $128,659,297 | |||||||
Change in net assets from operations | $129,265,393 |
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 6/30/13 (unaudited | ) | | Year ended 12/31/12 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $606,096 | $2,894,532 | ||||||
Net realized gain (loss) on investments and foreign currency | 78,611,097 | 49,498,669 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 50,048,200 | 48,166,563 | ||||||
Change in net assets from operations | $129,265,393 | $100,559,764 | ||||||
Change in net assets from fund share transactions | $(46,152,723 | ) | $522,916,983 | |||||
Total change in net assets | $83,112,670 | $623,476,747 | ||||||
Net assets | ||||||||
At beginning of period | 1,141,668,992 | 518,192,245 | ||||||
At end of period (including undistributed net investment income of $3,511,384 and | $1,224,781,662 | $1,141,668,992 |
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 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $28.83 | $24.56 | $24.69 | $21.43 | $15.62 | $25.01 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.02 | $0.13 | $(0.00 | )(w) | $0.05 | $0.03 | $0.05 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 3.27 | 4.14 | (0.08 | ) | 3.24 | 5.83 | (9.39 | ) | ||||||||||||||||
Total from investment operations | $3.29 | $4.27 | $(0.08 | ) | $3.29 | $5.86 | $(9.34 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $— | $(0.05 | ) | $(0.03 | ) | $(0.05 | ) | $(0.05 | ) | ||||||||||||||
Net asset value, end of period (x) | $32.12 | $28.83 | $24.56 | $24.69 | $21.43 | $15.62 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 11.41 | (n) | 17.39 | (0.32 | ) | 15.34 | 37.67 | (37.42 | ) | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.78 | (a) | 0.82 | 0.84 | 0.85 | 0.86 | 0.84 | |||||||||||||||||
Expenses after expense reductions (f) | 0.78 | (a) | 0.82 | 0.84 | 0.85 | 0.86 | 0.84 | |||||||||||||||||
Net investment income | 0.13 | (a) | 0.45 | (0.00 | )(w) | 0.24 | 0.14 | 0.25 | ||||||||||||||||
Portfolio turnover | 23 | (n) | 52 | 75 | 100 | 100 | 129 | |||||||||||||||||
Net assets at end of period (000 omitted) | $1,059,998 | $1,007,422 | $461,382 | $503,497 | $498,288 | $389,813 | ||||||||||||||||||
Service Class | Six months 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $28.25 | $24.13 | $24.27 | $21.10 | $15.37 | $24.61 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (loss) (d) | $(0.02 | ) | $0.07 | $(0.06 | ) | $0.00 | (w) | $(0.02 | ) | $0.00 | (w) | |||||||||||||
Net realized and unrealized gain (loss) on investments | 3.20 | 4.05 | (0.08 | ) | 3.17 | 5.76 | (9.24 | ) | ||||||||||||||||
Total from investment operations | $3.18 | $4.12 | $(0.14 | ) | $3.17 | $5.74 | $(9.24 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $— | $(0.00 | )(w) | $— | $(0.01 | ) | $— | ||||||||||||||||
Net asset value, end of period (x) | $31.43 | $28.25 | $24.13 | $24.27 | $21.10 | $15.37 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 11.26 | (n) | 17.07 | (0.56 | ) | 15.02 | 37.33 | (37.55 | ) | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.03 | (a) | 1.07 | 1.09 | 1.10 | 1.10 | 1.09 | |||||||||||||||||
Expenses after expense reductions (f) | �� | 1.03 | (a) | 1.07 | 1.09 | 1.10 | 1.10 | 1.08 | ||||||||||||||||
Net investment income (loss) | (0.11 | )(a) | 0.26 | (0.25 | ) | 0.02 | (0.11 | ) | 0.01 | |||||||||||||||
Portfolio turnover | 23 | (n) | 52 | 75 | 100 | 100 | 129 | |||||||||||||||||
Net assets at end of period (000 omitted) | $164,783 | $134,247 | $56,810 | $43,161 | $31,861 | $18,684 |
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
11
Table of Contents
MFS Growth Series
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) | Business and Organization |
MFS Growth Series (the fund) is a series of MFS Variable Insurance Trust (the trust). The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The shareholders of each series of the trust are separate accounts of insurance companies, which offer variable annuity and/or life insurance products, and qualified retirement and pension plans.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued.
In this reporting period, the fund adopted the disclosure provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Update 2011-11 (“ASU 2011-11”), Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities along with the related scope clarification provisions of FASB Accounting Standards Update 2013-01 (“ASU 2013-01”) entitled Balance Sheet (Topic 210) – Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 is intended to enhance disclosures on the offsetting of financial assets and liabilities by requiring entities to disclose both gross and net information about financial instruments and transactions that are either offset in the statement of financial position or subject to a Master Netting Agreement or similar arrangement. ASU 2013-01 limits the scope of ASU 2011-11’s disclosure requirements on offsetting to financial assets and financial liabilities related to derivatives, repurchase and reverse repurchase agreements, and securities lending and securities borrowing transactions. The disclosures required by ASU 2011-11, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
In June 2013, FASB issued Accounting Standards Update 2013-08 Financial Services – Investment Companies (Topic 946) – Amendments to the Scope, Measurement, and Disclosure Requirements (“ASU 2013-08”) which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013. ASU 2013-08 sets forth a methodology for determining whether an entity should be characterized as an investment company and prescribes fair value accounting for an investment company’s non-controlling ownership interest in another investment company. FASB has determined that a fund registered under the Investment Company Act of 1940 automatically meets ASU 2013-08’s criteria for an investment company. Although still evaluating the potential impacts of ASU 2013-08 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
12
Table of Contents
MFS Growth 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. The following is a summary of the levels used as of June 30, 2013 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $1,154,347,952 | $— | $— | $1,154,347,952 | ||||||||||||
France | 12,569,551 | 7,189,950 | — | 19,759,501 | ||||||||||||
Canada | 19,135,876 | — | — | 19,135,876 | ||||||||||||
United Kingdom | — | 7,929,107 | — | 7,929,107 | ||||||||||||
Netherlands | 4,239,303 | — | — | 4,239,303 | ||||||||||||
Mutual Funds | 22,035,982 | — | — | 22,035,982 | ||||||||||||
Total Investments | $1,212,328,664 | $15,119,057 | $— | $1,227,447,721 |
For further information regarding security characteristics, see the Portfolio of Investments.
Of the level 1 investments presented above, equity investments amounting to $12,569,551 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 – Under its Securities Lending Agency Agreement with the fund, State Street Bank and Trust Company (“State Street”), as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. 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. In the event of Borrower default, State Street will for the benefit of the fund either purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the fund the market value of the loaned securities. In return, State Street assumes the fund’s rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, State Street is responsible for the shortfall, but only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. 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 in the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income. At June 30, 2013, there were no securities on loan or collateral outstanding.
13
Table of Contents
MFS Growth 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, 2013, is shown as a reduction of total expenses in the Statement of Operations.
Tax Matters and Distributions – The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Foreign taxes have been accrued by the fund in the accompanying financial statements in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests.
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 fund declared no distributions for the current period or for the year ended December 31, 2012.
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/13 | ||||
Cost of investments | $1,024,131,557 | |||
Gross appreciation | 221,531,491 | |||
Gross depreciation | (18,215,327 | ) | ||
Net unrealized appreciation (depreciation) | $203,316,164 | |||
As of 12/31/12 | ||||
Undistributed ordinary income | 2,905,288 | |||
Undistributed long-term capital gain | 9,914,525 | |||
Capital loss carryforwards | (10,171,567 | ) | ||
Other temporary differences | (166,349 | ) | ||
Net unrealized appreciation (depreciation) | 153,269,094 |
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 for fund fiscal years beginning after December 31, 2010 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses (“post-enactment losses”). Previously, net capital losses were carried forward for eight years and treated as short-term losses (“pre-enactment losses”). As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.
14
Table of Contents
MFS Growth Series
Notes to Financial Statements (unaudited) – continued
As of December 31, 2012 the fund had capital loss carryforwards available to offset future realized gains. Such pre-enactment losses expire as follows:
12/31/16 | $(4,835,046 | ) | ||
12/31/17 | (5,336,521 | ) | ||
Total | $(10,171,567 | ) |
The availability of $4,835,046 of the capital loss carryforwards, which were acquired on August 17, 2012 in connection with the MFS Growth Portfolio merger, may be limited in a given year.
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and/or service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses.
(3) | Transactions with Affiliates |
Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates:
First $1 billion of average daily net assets | 0.75% | |||
Average daily net assets in excess of $1 billion | 0.65% |
Effective April 1, 2013, MFS has agreed in writing to reduce its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund’s Board of Trustees. For the period April 1, 2013 through June 30, 2013, this management fee reduction amounted to $1,657, 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, 2013 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, 2013, the fee was $30,756, which equated to 0.0051% 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, 2013, these costs amounted to $1,192.
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, 2013 was equivalent to an annual effective rate of 0.0134% 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, 2013, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $4,482 and are included in “Miscellaneous” expense in the Statement of Operations. MFS has agreed to reimburse the fund for a portion of the
15
Table of Contents
MFS Growth Series
Notes to Financial Statements (unaudited) – continued
payments made by the fund in the amount of $2,278, 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 current income consistent with preservation of capital and liquidity. Income earned on this investment is included in “Dividends from underlying affiliated funds” in 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 short-term obligations, aggregated $277,608,373 and $329,726,588, 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 6/30/13 | Year ended 12/31/12 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 1,563,100 | $48,895,574 | 4,032,529 | $110,039,913 | ||||||||||||
Service Class | 1,056,828 | 32,504,820 | 2,536,052 | 68,492,337 | ||||||||||||
2,619,928 | $81,400,394 | 6,568,581 | $178,532,250 | |||||||||||||
Shares issued in connection with acquisition of MFS Growth Portfolio | ||||||||||||||||
Initial Class | 5,123,763 | $144,080,230 | ||||||||||||||
Service Class | 491,709 | 13,561,334 | ||||||||||||||
5,615,472 | $157,641,564 | |||||||||||||||
Shares issued in connection with acquisition of SC WMC Large Cap Growth Fund | ||||||||||||||||
Initial Class | 11,289,645 | $321,190,385 | ||||||||||||||
Service Class | 556,484 | 15,514,779 | ||||||||||||||
11,846,129 | $336,705,164 | |||||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (3,508,472 | ) | $(110,122,963 | ) | (4,281,886 | ) | $(118,022,809 | ) | ||||||||
Service Class | (567,153 | ) | (17,430,154 | ) | (1,186,136 | ) | (31,939,186 | ) | ||||||||
(4,075,625 | ) | $(127,553,117 | ) | (5,468,022 | ) | $(149,961,995 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (1,945,372 | ) | $(61,227,389 | ) | 16,164,051 | $457,287,719 | ||||||||||
Service Class | 489,675 | 15,074,666 | 2,398,109 | 65,629,264 | ||||||||||||
(1,455,697 | ) | $(46,152,723 | ) | 18,562,160 | $522,916,983 |
The fund is one of several mutual funds in which the MFS funds-of-funds may invest. The MFS funds-of-funds do not invest in the underlying MFS funds for the purpose of exercising management or control. At the end of the period, the MFS Moderate Allocation Portfolio, the MFS Conservative Allocation Portfolio, and the MFS Growth Allocation Portfolio were the owners of record of approximately 15%, 5%, and 5%, respectively, of the value of outstanding voting shares of the fund.
(6) | Line of Credit |
The fund and certain other funds managed by MFS participate in a $1.1 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, 2013, the fund’s commitment fee and interest expense were $2,703 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.
16
Table of Contents
MFS Growth Series
Notes to Financial Statements (unaudited) – continued
(7) | Transactions in Underlying Affiliated Funds – Affiliated Issuers |
An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the fund assumes the following to be 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 | 11,917,356 | 131,292,776 | (121,174,150 | ) | 22,035,982 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $10,066 | $22,035,982 |
(8) | Acquisitions |
At close of business on August 17, 2012, the fund with net assets of approximately $629,077,130, acquired all of the assets and liabilities of MFS Growth Portfolio, a series of MFS Variable Insurance Trust. The purpose of the transaction was to provide shareholders of the MFS Growth Portfolio the opportunity to participate in a larger combined portfolio with an identical investment objective and similar investment policies and strategies. The acquisition was accomplished by a tax-free exchange of approximately 5,615,472 shares of the fund (valued at approximately $157,641,564) for all of the assets and liabilities of MFS Growth Portfolio. MFS Growth Portfolio then distributed the shares of the fund that MFS Growth Portfolio received from the fund to its shareholders. MFS Growth Portfolio’s investments on that date were valued at approximately $158,214,214 with a cost basis of approximately $127,245,941. For financial reporting purposes, assets received and shares issued by the fund were recorded at fair value; however, the cost basis of the investments received from MFS Growth Portfolio were carried forward to align ongoing reporting of the fund’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.
At close of business on December 7, 2012 the fund with net assets of approximately $781,080,976, acquired all of the assets and liabilities of SC WMC Large Cap Growth Fund, a series of Sun Capital Advisers Trust. The purpose of the transaction was to provide shareholders of the SC WMC Large Cap Growth Fund the opportunity to participate in a larger combined portfolio with a similar investment objective and similar investment policies and strategies. The acquisition was accomplished by a tax-free exchange of approximately 11,846,129 shares of the fund (valued at approximately $336,705,164) for all of the assets and liabilities of SC WMC Large Cap Growth Fund. SC WMC Large Cap Growth Fund then distributed the shares of the fund that SC WMC Large Cap Growth Fund received from the fund to its shareholders. SC WMC Large Cap Growth Fund’s investments on that date were valued at approximately $328,346,705 with a cost basis of approximately $315,494,167. For financial reporting purposes, assets received and shares issued by the fund were recorded at fair value; however, the cost basis of the investments received from SC WMC Large Cap Growth Fund were carried forward to align ongoing reporting of the fund’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.
17
Table of Contents
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, 2013 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products” 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” section of mfs.com.
18
Table of Contents
Table of Contents
SEMIANNUAL REPORT
June 30, 2013
MFS® HIGH INCOME SERIES
MFS® Variable Insurance Trust
VHI-SEM
Table of Contents
MFS® HIGH INCOME SERIES
The report is prepared for the general information of contract owners. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED Ÿ MAY LOSE VALUE Ÿ NO BANK OR CREDIT UNION GUARANTEE Ÿ NOT A DEPOSIT Ÿ NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
Table of Contents
MFS High Income Series
LETTER FROM THE CHAIRMAN AND CEO
Dear Contract Owners:
As the year progresses, the global economy continues to grind ahead slowly, held back by broad austerity measures. The U.S. economy remains a steadying force, driven by resilient consumers, who have taken the payroll tax increase and the sequestration’s early impact in stride. With U.S. housing and jobs showing steady expansion, domestic consumer-driven growth has offset weaker exports and the U.S. government’s spending constraints. In response to these developments, the U.S. Federal Reserve has begun to brace investors for an eventual shift in its monetary policy, causing global market tremors.
Japan has been another bright spot, with government and central bank stimulus policies leading to increased exports, a resurgent stock market and improved economic sentiment. After a six-month rally, Japan’s stocks slipped late in the second quarter, then picked up momentum on fresh signs that the country could soon break free of its chronic deflation. The major deterrent to global growth remains the eurozone, still in the grip of persistent recession. China has seen its pace of economic growth decelerate, a troubling turn for the country’s trading partners, who have come to rely on it as an engine for global growth.
As always, managing risk in the face of uncertainty remains a top priority for investors. At MFS®, our uniquely collaborative investment process employs integrated, global research and active risk management. Our global team of investment professionals shares ideas and evaluates opportunities across continents, investment disciplines and asset classes — all with a goal of building better insights, and ultimately better results, for our clients.
We are mindful of the many economic challenges investors face, and believe it is more important than ever to maintain a long-term view and employ time-tested principles, such as asset allocation and diversification. We remain confident that our unique approach can serve investors well as they work with their financial advisors to identify and pursue the most suitable opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2013
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 High Income Series
Portfolio structure (i)
Top five industries (i) | ||||
Energy-Independent | 8.2% | |||
Broadcasting | 5.4% | |||
Medical & Health Technology & Services | 5.2% | |||
Telecommunications-Wireless | 4.4% | |||
Utilities-Electric Power | 3.8% |
Composition including fixed income credit quality (a)(i) | ||||
A (o) | 0.0% | |||
BBB | 3.8% | |||
BB | 36.7% | |||
B | 43.2% | |||
CCC | 13.4% | |||
C | 0.1% | |||
D (o) | 0.0% | |||
Not Rated | 1.0% | |||
Non-Fixed Income | 1.4% | |||
Cash & Other | 0.4% | |||
Portfolio facts (i) | ||||
Average Duration (d) | 4.5 | |||
Average Effective Maturity (m) | 6.9 yrs. |
(a) | For all securities other than those specifically described below, ratings are assigned to underlying securities utilizing ratings from Moody’s, Fitch, and Standard & Poor’s rating agencies and applying the following hierarchy: If all three agencies provide a rating, the middle rating (after dropping the highest and lowest ratings) is assigned; if two of the three agencies rate a security, the lower of the two is assigned. Ratings are shown in the S&P and Fitch scale (e.g., AAA). 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. 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. The bond component will include any accrued interest amounts. |
(m) | In determining an instrument’s effective maturity for purposes of calculating the fund’s dollar-weighted average effective maturity, MFS uses the instrument’s stated maturity or, if applicable, an earlier date on which MFS believes it is probable that a maturity-shortening device (such as a put, pre-refunding or prepayment) will cause the instrument to be repaid. Such an earlier date can be substantially shorter than the instrument’s stated maturity. |
(o) | Less than 0.1%. |
Where the fund holds convertible bonds, these are treated as part of the equity portion of the portfolio.
Percentages are based on net assets as of 6/30/13.
The portfolio is actively managed and current holdings may be different.
2
Table of Contents
MFS High Income Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2013 through June 30, 2013
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, 2013 through June 30, 2013.
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 1/01/13 | Ending Account Value | Expenses Paid During Period (p) 1/01/13-6/30/13 | ||||||||||||||
Initial Class | Actual | 0.79% | $1,000.00 | $1,010.25 | $3.94 | |||||||||||||
Hypothetical (h) | 0.79% | $1,000.00 | $1,020.88 | $3.96 | ||||||||||||||
Service Class | Actual | 1.04% | $1,000.00 | $1,009.15 | $5.18 | |||||||||||||
Hypothetical (h) | 1.04% | $1,000.00 | $1,019.64 | $5.21 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
3
Table of Contents
MFS High Income Series
PORTFOLIO OF INVESTMENTS – 6/30/13 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
BONDS – 93.5% | ||||||||
Aerospace – 2.1% | ||||||||
Bombardier, Inc., 4.25%, 2016 (n) | $ | 199,000 | $ | 203,478 | ||||
Bombardier, Inc., 7.5%, 2018 (n) | 870,000 | 965,700 | ||||||
Bombardier, Inc., 7.75%, 2020 (n) | 740,000 | 821,400 | ||||||
CPI International, Inc., 8%, 2018 | 1,040,000 | 1,071,169 | ||||||
Heckler & Koch GmbH, 9.5%, 2018 (z) | EUR | 386,000 | 449,681 | |||||
Huntington Ingalls Industries, Inc., 7.125%, 2021 | $ | 985,000 | 1,058,875 | |||||
Kratos Defense & Security Solutions, Inc., 10%, 2017 | 1,030,000 | 1,102,100 | ||||||
|
| |||||||
$ | 5,672,403 | |||||||
|
| |||||||
Apparel Manufacturers – 1.1% | ||||||||
Hanesbrands, Inc., 6.375%, 2020 | $ | 805,000 | $ | 858,331 | ||||
Jones Group, Inc., 6.875%, 2019 | 480,000 | 482,400 | ||||||
PVH Corp., 7.375%, 2020 | 885,000 | 960,225 | ||||||
PVH Corp., 4.5%, 2022 | 600,000 | 576,000 | ||||||
|
| |||||||
$ | 2,876,956 | |||||||
|
| |||||||
Asset-Backed & Securitized – 0.4% | ||||||||
Arbor Realty Mortgage Securities, CDO, FRN, 2.576%, 2038 (z) | $ | 568,229 | $ | 170,469 | ||||
Citigroup Commercial Mortgage Trust, FRN, 5.884%, 2049 | 985,952 | 128,174 | ||||||
Crest Ltd., CDO, 7%, 2040 (a)(p) | 1,042,106 | 52,105 | ||||||
CWCapital Cobalt Ltd., CDO, 6.23%, 2045 (a)(p)(z) | 1,238,850 | 12,389 | ||||||
CWCapital Cobalt Ltd., CDO, “F”, FRN, 1.575%, 2050 (p)(z) | 530,196 | 1,325 | ||||||
First Union National Bank Commercial Mortgage Trust, 6.75%, 2032 | 546,636 | 273,064 | ||||||
G-Force LLC, CDO, “A2”, 4.83%, 2036 (z) | 299,760 | 301,259 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., “C”, FRN, 6.197%, 2051 | 750,000 | 153,487 | ||||||
|
| |||||||
$ | 1,092,272 | |||||||
|
| |||||||
Automotive – 3.4% | ||||||||
Accuride Corp., 9.5%, 2018 | $ | 1,130,000 | $ | 1,149,775 | ||||
Allison Transmission, Inc., 7.125%, 2019 (n) | 980,000 | 1,036,350 | ||||||
Continental Rubber of America Corp., 4.5%, 2019 (n) | 235,000 | 241,974 | ||||||
Delphi Corp., 5%, 2023 | 810,000 | 832,275 | ||||||
Ford Motor Credit Co. LLC, 8.125%, 2020 | 395,000 | 475,806 | ||||||
General Motors Financial Co., Inc., 4.75%, 2017 (n) | 100,000 | 102,500 | ||||||
General Motors Financial Co., Inc., 6.75%, 2018 | 655,000 | 712,313 | ||||||
General Motors Financial Co., Inc., 4.25%, 2023 (n) | 320,000 | 298,000 | ||||||
Goodyear Tire & Rubber Co., 8.25%, 2020 | 230,000 | 251,850 | ||||||
Goodyear Tire & Rubber Co., 6.5%, 2021 | 595,000 | 605,413 | ||||||
Goodyear Tire & Rubber Co., 7%, 2022 | 425,000 | 435,625 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Automotive – continued | ||||||||
Jaguar Land Rover PLC, 7.75%, 2018 (n) | $ | 200,000 | $ | 216,000 | ||||
Jaguar Land Rover PLC, 8.125%, 2021 (n) | 1,295,000 | 1,424,500 | ||||||
Jaguar Land Rover PLC, 5.625%, 2023 (n) | 355,000 | 344,350 | ||||||
Lear Corp., 8.125%, 2020 | 250,000 | 273,750 | ||||||
Lear Corp., 4.75%, 2023 (n) | 240,000 | 228,000 | ||||||
LKQ Corp., 4.75%, 2023 (n) | 365,000 | 348,575 | ||||||
|
| |||||||
$ | 8,977,056 | |||||||
|
| |||||||
Broadcasting – 5.0% | ||||||||
Allbritton Communications Co., 8%, 2018 | $ | 240,000 | $ | 255,000 | ||||
AMC Networks, Inc., 7.75%, 2021 | 1,031,000 | 1,126,368 | ||||||
Clear Channel Communications, Inc., 9%, 2021 | 703,000 | 667,850 | ||||||
Clear Channel Worldwide Holdings, Inc., 6.5%, 2022 (n) | 235,000 | 240,875 | ||||||
Clear Channel Worldwide Holdings, Inc., 6.5%, 2022 (n) | 585,000 | 602,550 | ||||||
Clear Channel Worldwide Holdings, Inc., “A”, 7.625%, 2020 | 50,000 | 51,500 | ||||||
Clear Channel Worldwide Holdings, Inc., “B”, 7.625%, 2020 | 335,000 | 346,725 | ||||||
Hughes Network Systems LLC, 7.625%, 2021 | 380,000 | 403,750 | ||||||
IAC/InterActiveCorp, 4.75%, 2022 (n) | 270,000 | 255,150 | ||||||
Inmarsat Finance PLC, 7.375%, 2017 (n) | 610,000 | 634,400 | ||||||
Intelsat Jackson Holdings S.A., 6.625%, 2022 (n) | 740,000 | 717,800 | ||||||
Intelsat Jackson Holdings S.A., 6.625%, 2022 (n) | 145,000 | 140,650 | ||||||
Intelsat S.A., 8.125%, 2023 (n) | 535,000 | 552,388 | ||||||
LBI Media, Inc., 13.5% to 2015, 11.5% to 2020 (p)(z) | 424,221 | 161,204 | ||||||
Liberty Media Corp., 8.5%, 2029 | 875,000 | 958,125 | ||||||
Local TV Finance LLC, 9.25%, 2015 (p)(z) | 632,946 | 633,737 | ||||||
Netflix, Inc., 5.375%, 2021 (n) | 475,000 | 472,625 | ||||||
Nexstar Broadcasting Group, Inc., 8.875%, 2017 | 430,000 | 460,100 | ||||||
Nexstar Broadcasting Group, Inc., 6.875%, 2020 (n) | 305,000 | 314,150 | ||||||
Sinclair Broadcast Group, Inc., 9.25%, 2017 (n) | 335,000 | 355,100 | ||||||
Sinclair Broadcast Group, Inc., 8.375%, 2018 | 175,000 | 188,125 | ||||||
SIRIUS XM Radio, Inc., 8.75%, 2015 (n) | 595,000 | 654,500 | ||||||
SIRIUS XM Radio, Inc., 7.625%, 2018 (n) | 665,000 | 724,850 | ||||||
SIRIUS XM Radio, Inc., 4.25%, 2020 (n) | 195,000 | 183,300 | ||||||
SIRIUS XM Radio, Inc., 5.25%, 2022 (n) | 150,000 | 145,500 | ||||||
Univision Communications, Inc., 6.875%, 2019 (n) | 345,000 | 362,250 | ||||||
Univision Communications, Inc., 7.875%, 2020 (n) | 820,000 | 887,650 |
4
Table of Contents
MFS High Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Broadcasting – continued | ||||||||
Univision Communications, Inc., 8.5%, 2021 (n) | $ | 675,000 | $ | 717,188 | ||||
|
| |||||||
$ | 13,213,410 | |||||||
|
| |||||||
Brokerage & Asset Managers – 0.6% | ||||||||
E*TRADE Financial Corp., 6.375%, 2019 | $ | 1,435,000 | $ | 1,456,525 | ||||
|
| |||||||
Building – 2.6% | ||||||||
ABC Supply Co., Inc., 5.625%, 2021 (n) | $ | 175,000 | $ | 171,938 | ||||
Boise Cascade Co., 6.375%, 2020 | 610,000 | 617,625 | ||||||
Building Materials Holding Corp., 6.875%, 2018 (n) | 315,000 | 332,325 | ||||||
Building Materials Holding Corp., 7%, 2020 (n) | 480,000 | 511,200 | ||||||
Building Materials Holding Corp., 6.75%, 2021 (n) | 445,000 | 472,813 | ||||||
CEMEX S.A.B. de C.V., 5.875%, 2019 (n) | 202,000 | 195,940 | ||||||
CEMEX S.A.B. de C.V., 9.25%, 2020 | 415,000 | 437,825 | ||||||
HD Supply, Inc., 8.125%, 2019 | 470,000 | 514,650 | ||||||
HD Supply, Inc., 11.5%, 2020 | 560,000 | 649,600 | ||||||
HD Supply, Inc., 10.5%, 2021 | 65,000 | 67,275 | ||||||
Nortek, Inc., 8.5%, 2021 | 1,100,000 | 1,177,000 | ||||||
Roofing Supply Group LLC/Roofing Supply Finance, Inc., 10%, 2020 (n) | 320,000 | 346,400 | ||||||
USG Corp., 6.3%, 2016 | 947,000 | 965,940 | ||||||
USG Corp., 7.875%, 2020 (n) | 490,000 | 534,100 | ||||||
|
| |||||||
$ | 6,994,631 | |||||||
|
| |||||||
Business Services – 1.8% | ||||||||
Equinix, Inc., 4.875%, 2020 | $ | 530,000 | $ | 519,400 | ||||
Fidelity National Information Services, Inc., 5%, 2022 | 870,000 | 875,438 | ||||||
iGate Corp., 9%, 2016 | 1,072,000 | 1,114,880 | ||||||
Iron Mountain, Inc., 8.375%, 2021 | 920,000 | 978,650 | ||||||
Legend Acquisition Sub, Inc., 10.75%, 2020 (n) | 475,000 | 382,375 | ||||||
Neustar, Inc., 4.5%, 2023 (n) | 490,000 | 463,050 | ||||||
SunGard Data Systems, Inc., 7.375%, 2018 | 315,000 | 332,325 | ||||||
|
| |||||||
$ | 4,666,118 | |||||||
|
| |||||||
Cable TV – 3.4% | ||||||||
CCO Holdings LLC, 8.125%, 2020 | $ | 1,020,000 | $ | 1,114,350 | ||||
CCO Holdings LLC, 7.375%, 2020 | 385,000 | 418,688 | ||||||
CCO Holdings LLC, 6.5%, 2021 | 625,000 | 651,563 | ||||||
CCO Holdings LLC, 5.125%, 2023 | 340,000 | 318,750 | ||||||
CCO Holdings LLC/CCO Capital Corp., 5.75%, 2024 | 400,000 | 386,000 | ||||||
Cequel Communications Holdings, 6.375%, 2020 (n) | 270,000 | 274,725 | ||||||
DISH DBS Corp., 6.75%, 2021 | 530,000 | 563,125 | ||||||
DISH DBS Corp., 5%, 2023 | 315,000 | 303,188 | ||||||
EchoStar Corp., 7.125%, 2016 | 575,000 | 622,438 | ||||||
Lynx I Corp., 5.375%, 2021 (n) | 435,000 | 437,175 | ||||||
Lynx II Corp., 6.375%, 2023 (n) | 290,000 | 292,175 | ||||||
Telenet Finance Luxembourg, 6.375%, 2020 (n) | EUR | 460,000 | 612,530 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Cable TV – continued | ||||||||
Unitymedia Hessen, 5.5%, 2023 (n) | $ | 205,000 | $ | 193,725 | ||||
UPC Holding B.V., 9.875%, 2018 (n) | 635,000 | 688,975 | ||||||
UPCB Finance III Ltd., 6.625%, 2020 (n) | 1,021,000 | 1,056,735 | ||||||
Virgin Media Finance PLC, 8.375%, 2019 | 81,000 | 87,885 | ||||||
Ziggo Bond Co. B.V., 8%, 2018 (n) | EUR | 700,000 | 972,658 | |||||
|
| |||||||
$ | 8,994,685 | |||||||
|
| |||||||
Chemicals – 1.9% | ||||||||
Celanese U.S. Holdings LLC, 6.625%, 2018 | $ | 585,000 | $ | 618,638 | ||||
Flash Dutch 2 B.V./U.S. Coatings Acquisition, 7.375%, 2021 (n) | 360,000 | 367,200 | ||||||
Hexion U.S. Finance Corp., 6.625%, 2020 (n) | 360,000 | 359,100 | ||||||
Hexion U.S. Finance Corp./Hexion Nova Scotia Finance, 8.875%, 2018 | 775,000 | 790,500 | ||||||
Hexion U.S. Finance Corp./Hexion Nova Scotia Finance, 9%, 2020 | 585,000 | 558,675 | ||||||
Huntsman International LLC, 8.625%, 2021 | 855,000 | 938,363 | ||||||
INEOS Finance PLC, 8.375%, 2019 (n) | 660,000 | 721,050 | ||||||
INEOS Group Holdings S.A., 6.125%, 2018 (n) | 270,000 | 257,850 | ||||||
LyondellBasell Industries N.V., 5%, 2019 | 255,000 | 277,464 | ||||||
Polypore International, Inc., 7.5%, 2017 | 205,000 | 213,713 | ||||||
|
| |||||||
$ | 5,102,553 | |||||||
|
| |||||||
Computer Software – 1.1% | ||||||||
Infor U.S., Inc., 11.5%, 2018 | $ | 495,000 | $ | 560,588 | ||||
Nuance Communications, Inc., 5.375%, 2020 (n) | 305,000 | 298,138 | ||||||
Syniverse Holdings, Inc., 9.125%, 2019 | 990,000 | 1,056,825 | ||||||
TransUnion Holding Co., Inc., 9.625%, 2018 | 410,000 | 437,675 | ||||||
TransUnion LLC/TransUnion Financing Corp., 11.375%, 2018 | 195,000 | 215,963 | ||||||
Verisign, Inc., 4.625%, 2023 (n) | 395,000 | 383,150 | ||||||
|
| |||||||
$ | 2,952,339 | |||||||
|
| |||||||
Computer Software – Systems – 0.9% | ||||||||
Audatex North America, Inc., 6.75%, 2018 | $ | 730,000 | $ | 766,500 | ||||
CDW LLC/CDW Finance Corp., 12.535%, 2017 | 582,000 | 614,010 | ||||||
CDW LLC/CDW Finance Corp., 8.5%, 2019 | 920,000 | 989,000 | ||||||
|
| |||||||
$ | 2,369,510 | |||||||
|
| |||||||
Conglomerates – 1.8% | ||||||||
Amsted Industries, Inc., 8.125%, 2018 (n) | $ | 960,000 | $ | 1,012,800 | ||||
BC Mountain LLC, 7%, 2021 (n) | 500,000 | 510,000 | ||||||
Dynacast International LLC, 9.25%, 2019 | 745,000 | 812,050 | ||||||
Griffon Corp., 7.125%, 2018 | 780,000 | 817,050 | ||||||
Rexel S.A., 6.125%, 2019 (n) | 545,000 | 555,900 | ||||||
Rexel S.A., 5.25%, 2020 (n) | 215,000 | 214,463 |
5
Table of Contents
MFS High Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Conglomerates – continued | ||||||||
Silver II Borrower, 7.75%, 2020 (n) | $ | 720,000 | $ | 723,600 | ||||
|
| |||||||
$ | 4,645,863 | |||||||
|
| |||||||
Construction – 0.1% | ||||||||
Empresas ICA S.A.B. de C.V., 8.9%, 2021 | $ | 195,000 | $ | 171,600 | ||||
|
| |||||||
Consumer Products – 1.0% | ||||||||
Elizabeth Arden, Inc., 7.375%, 2021 | $ | 660,000 | $ | 706,200 | ||||
Jarden Corp., 7.5%, 2020 | 770,000 | 823,900 | ||||||
Libbey Glass, Inc., 6.875%, 2020 | 288,000 | 301,320 | ||||||
Prestige Brands, Inc., 8.125%, 2020 | 384,000 | 419,520 | ||||||
Spectrum Brands Escrow Corp., 6.375%, 2020 (n) | 295,000 | 309,013 | ||||||
Spectrum Brands Escrow Corp., 6.625%, 2022 (n) | 75,000 | 78,563 | ||||||
|
| |||||||
$ | 2,638,516 | |||||||
|
| |||||||
Consumer Services – 0.6% | ||||||||
QVC, Inc., 7.375%, 2020 (n) | $ | 455,000 | $ | 496,334 | ||||
Service Corp. International, 7%, 2017 | 1,015,000 | 1,119,038 | ||||||
|
| |||||||
$ | 1,615,372 | |||||||
|
| |||||||
Containers – 3.1% | ||||||||
Ardagh Packaging Finance PLC , 7%, 2020 (n) | $ | 330,000 | $ | 318,038 | ||||
Ardagh Packaging Finance PLC, 7.375%, 2017 (n) | 755,000 | 805,019 | ||||||
Ardagh Packaging Finance PLC, 9.125%, 2020 (n) | 200,000 | 213,250 | ||||||
Ardagh Packaging Finance PLC, 9.125%, 2020 (n) | 970,000 | 1,029,413 | ||||||
Ball Corp., 5%, 2022 | 521,000 | 518,395 | ||||||
Ball Corp., 4%, 2023 | 165,000 | 152,625 | ||||||
Berry Plastics Group, Inc., 9.5%, 2018 | 330,000 | 358,875 | ||||||
Berry Plastics Group, Inc., 9.75%, 2021 | 335,000 | 378,550 | ||||||
Crown Americas LLC, 4.5%, 2023 (n) | 555,000 | 523,088 | ||||||
Greif, Inc., 6.75%, 2017 | 820,000 | 902,000 | ||||||
Greif, Inc., 7.75%, 2019 | 155,000 | 177,475 | ||||||
Reynolds Group, 7.125%, 2019 | 695,000 | 734,094 | ||||||
Reynolds Group, 9.875%, 2019 | 330,000 | 353,100 | ||||||
Reynolds Group, 5.75%, 2020 | 505,000 | 508,788 | ||||||
Reynolds Group, 8.25%, 2021 | 1,205,000 | 1,192,950 | ||||||
|
| |||||||
$ | 8,165,660 | |||||||
|
| |||||||
Defense Electronics – 0.5% | ||||||||
Ducommun, Inc., 9.75%, 2018 | $ | 695,000 | $ | 759,288 | ||||
MOOG, Inc., 7.25%, 2018 | 495,000 | 512,325 | ||||||
|
| |||||||
$ | 1,271,613 | |||||||
|
| |||||||
Electrical Equipment – 0.2% | ||||||||
Avaya, Inc., 9.75%, 2015 | $ | 340,000 | $ | 336,600 | ||||
Avaya, Inc., 7%, 2019 (n) | 250,000 | 225,625 | ||||||
|
| |||||||
$ | 562,225 | |||||||
|
| |||||||
Electronics – 1.2% | ||||||||
Freescale Semiconductor, Inc., 9.25%, 2018 (n) | $ | 970,000 | $ | 1,045,175 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Electronics – continued | ||||||||
Nokia Corp., 5.375%, 2019 | $ | 335,000 | $ | 325,788 | ||||
Nokia Corp., 6.625%, 2039 | 220,000 | 198,550 | ||||||
NXP B.V., 9.75%, 2018 (n) | 100,000 | 111,875 | ||||||
NXP B.V., 5.75%, 2021 (n) | 235,000 | 237,938 | ||||||
NXP B.V., 5.75%, 2023 (n) | 445,000 | 448,338 | ||||||
Sensata Technologies B.V., 6.5%, 2019 (n) | 710,000 | 763,250 | ||||||
|
| |||||||
$ | 3,130,914 | |||||||
|
| |||||||
Energy – Independent – 7.9% | ||||||||
Berry Petroleum Corp., 6.75%, 2020 | $ | 200,000 | $ | 207,000 | ||||
BreitBurn Energy Partners LP, 8.625%, 2020 | 195,000 | 206,700 | ||||||
Breitburn Energy Partners LP, 7.875%, 2022 | 710,000 | 724,200 | ||||||
Carrizo Oil & Gas, Inc., 8.625%, 2018 | 385,000 | 411,950 | ||||||
Chaparral Energy, Inc., 7.625%, 2022 | 505,000 | 515,100 | ||||||
Chesapeake Energy Corp., 6.875%, 2020 | 790,000 | 857,150 | ||||||
Concho Resources, Inc., 6.5%, 2022 | 770,000 | 814,275 | ||||||
Concho Resources, Inc., 5.5%, 2023 | 360,000 | 354,600 | ||||||
Continental Resources, Inc., 8.25%, 2019 | 925,000 | 1,012,875 | ||||||
Continental Resources, Inc., 7.375%, 2020 | 325,000 | 360,750 | ||||||
Continental Resources, Inc., 4.5%, 2023 (n) | 258,000 | 250,905 | ||||||
Denbury Resources, Inc., 8.25%, 2020 | 1,020,000 | 1,101,600 | ||||||
Denbury Resources, Inc., 4.625%, 2023 | 340,000 | 313,650 | ||||||
Energy XXI Gulf Coast, Inc., 9.25%, 2017 | 990,000 | 1,086,525 | ||||||
EP Energy LLC, 9.375%, 2020 | 995,000 | 1,124,350 | ||||||
EP Energy LLC, 7.75%, 2022 | 890,000 | 952,300 | ||||||
EPL Oil & Gas, Inc., 8.25%, 2018 | 695,000 | 715,850 | ||||||
Halcon Resources Corp., 8.875%, 2021 | 410,000 | 397,700 | ||||||
Harvest Operations Corp., 6.875%, 2017 | 995,000 | 1,109,425 | ||||||
Hilcorp Energy I/Hilcorp Finance Co., 8%, 2020 (n) | 350,000 | 376,250 | ||||||
Laredo Petroleum, Inc., 9.5%, 2019 | 365,000 | 401,500 | ||||||
LINN Energy LLC, 8.625%, 2020 | 710,000 | 745,500 | ||||||
LINN Energy LLC, 7.75%, 2021 | 546,000 | 547,365 | ||||||
MEG Energy Corp., 6.5%, 2021 (n) | 515,000 | 510,494 | ||||||
QEP Resources, Inc., 6.875%, 2021 | 1,265,000 | 1,363,038 | ||||||
Range Resources Corp., 8%, 2019 | 295,000 | 314,175 | ||||||
Range Resources Corp., 5%, 2022 | 300,000 | 293,250 | ||||||
Rosetta Resources, Inc., 5.625%, 2021 | 330,000 | 322,163 | ||||||
Samson Investment Co., 10%, 2020 (n) | 875,000 | 922,031 | ||||||
SandRidge Energy, Inc., 8.125%, 2022 | 870,000 | 861,300 | ||||||
SM Energy Co., 6.5%, 2021 | 890,000 | 934,500 | ||||||
Whiting Petroleum Corp., 6.5%, 2018 | 590,000 | 623,925 | ||||||
|
| |||||||
$ | 20,732,396 | |||||||
|
| |||||||
Engineering – Construction – 0.3% | ||||||||
BakerCorp International, Inc., 8.25%, 2019 | $ | 800,000 | $ | 784,000 | ||||
|
| |||||||
Entertainment – 1.1% | ||||||||
AMC Entertainment, Inc., 8.75%, 2019 | $ | 440,000 | $ | 470,800 | ||||
Cedar Fair LP, 9.125%, 2018 | 345,000 | 376,050 |
6
Table of Contents
MFS High Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Entertainment – continued | ||||||||
Cedar Fair LP, 5.25%, 2021 (n) | $ | 395,000 | $ | 379,200 | ||||
Cinemark USA, Inc., 4.875%, 2023 (n) | 485,000 | 465,600 | ||||||
Cinemark USA, Inc., 5.125%, 2022 | 180,000 | 173,700 | ||||||
NAI Entertainment Holdings LLC, 8.25%, 2017 (n) | 405,000 | 433,350 | ||||||
Six Flags Entertainment Corp., 5.25%, 2021 (n) | 695,000 | 670,675 | ||||||
|
| |||||||
$ | 2,969,375 | |||||||
|
| |||||||
Financial Institutions – 4.5% | ||||||||
Aviation Capital Group, 4.625%, 2018 (n) | $ | 545,000 | $ | 536,536 | ||||
CIT Group, Inc., 5.25%, 2014 (n) | 420,000 | 426,300 | ||||||
CIT Group, Inc., 5.25%, 2018 | 680,000 | 698,700 | ||||||
CIT Group, Inc., 6.625%, 2018 (n) | 919,000 | 992,520 | ||||||
CIT Group, Inc., 5.5%, 2019 (n) | 736,000 | 759,920 | ||||||
CIT Group, Inc., 5%, 2022 | 200,000 | 198,500 | ||||||
Credit Acceptance Corp., 9.125%, 2017 | 565,000 | 597,488 | ||||||
Icahn Enterprises LP, 7.75%, 2016 | 200,000 | 206,500 | ||||||
Icahn Enterprises LP, 8%, 2018 | 825,000 | 866,250 | ||||||
International Lease Finance Corp., 4.875%, 2015 | 415,000 | 421,744 | ||||||
International Lease Finance Corp., 8.625%, 2015 | 420,000 | 459,900 | ||||||
International Lease Finance Corp., 7.125%, 2018 (n) | 678,000 | 749,190 | ||||||
Nationstar Mortgage LLC/Capital Corp., 10.875%, 2015 | 720,000 | 754,200 | ||||||
Nationstar Mortgage LLC/Capital Corp., 9.625%, 2019 | 350,000 | 392,000 | ||||||
Nationstar Mortgage LLC/Capital Corp., 7.875%, 2020 | 430,000 | 455,800 | ||||||
PHH Corp., 9.25%, 2016 | 545,000 | 606,313 | ||||||
PHH Corp., 7.375%, 2019 | 570,000 | 604,200 | ||||||
SLM Corp., 8.45%, 2018 | 525,000 | 582,750 | ||||||
SLM Corp., 8%, 2020 | 1,055,000 | 1,142,038 | ||||||
SLM Corp., 7.25%, 2022 | 415,000 | 435,750 | ||||||
|
| |||||||
$ | 11,886,599 | |||||||
|
| |||||||
Food & Beverages – 1.0% | ||||||||
ARAMARK Corp., 5.75%, 2020 (n) | $ | 265,000 | $ | 270,963 | ||||
B&G Foods, Inc., 4.625%, 2021 | 390,000 | 372,450 | ||||||
Constellation Brands, Inc., 7.25%, 2016 | 240,000 | 272,700 | ||||||
Constellation Brands, Inc., 3.75%, 2021 | 130,000 | 121,713 | ||||||
Constellation Brands, Inc., 4.25%, 2023 | 260,000 | 245,375 | ||||||
Hawk Acquisition Sub, Inc., 4.25%, 2020 (n) | 675,000 | 645,469 | ||||||
TreeHouse Foods, Inc., 7.75%, 2018 | 600,000 | 635,250 | ||||||
|
| |||||||
$ | 2,563,920 | |||||||
|
| |||||||
Forest & Paper Products – 1.0% | ||||||||
Boise, Inc., 8%, 2020 | $ | 415,000 | $ | 441,975 | ||||
Graphic Packaging Holding Co., 7.875%, 2018 | 415,000 | 448,200 | ||||||
Sappi Papier Holding GmbH, 7.75%, 2017 (n) | 320,000 | 337,600 | ||||||
Smurfit Kappa Group PLC, 4.875%, 2018 (n) | 290,000 | 281,300 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Forest & Paper Products – continued | ||||||||
Smurfit Kappa Group PLC, 7.75%, 2019 (n) | EUR | 465,000 | $ | 649,149 | ||||
Tembec Industries, Inc., 11.25%, 2018 | $ | 480,000 | 518,400 | |||||
|
| |||||||
$ | 2,676,624 | |||||||
|
| |||||||
Gaming & Lodging – 3.1% | ||||||||
Caesars Entertainment Operating Co., Inc., 8.5%, 2020 | $ | 430,000 | $ | 405,275 | ||||
Chester Downs & Marina LLC, 9.25%, 2020 (z) | 185,000 | 178,525 | ||||||
Choice Hotels International, Inc., 5.75%, 2022 | 150,000 | 159,000 | ||||||
CityCenter Holdings LLC, 10.75%, 2017 (p) | 345,000 | 372,600 | ||||||
Fontainebleau Las Vegas Holdings LLC, 10.25%, 2015 (a)(d)(n) | 1,190,000 | 744 | ||||||
GWR Operating Partnership LLP, 10.875%, 2017 | 220,000 | 240,350 | ||||||
Host Hotels & Resorts, Inc., REIT, 5.25%, 2022 | 495,000 | 512,810 | ||||||
Isle of Capri Casinos, Inc., 8.875%, 2020 | 785,000 | 820,325 | ||||||
MGM Resorts International, 11.375%, 2018 | 850,000 | 1,062,500 | ||||||
MGM Resorts International, 6.625%, 2021 | 360,000 | 371,250 | ||||||
NCL Corp., 5%, 2018 (n) | 335,000 | 328,300 | ||||||
Penn National Gaming, Inc., 8.75%, 2019 | 845,000 | 925,275 | ||||||
Pinnacle Entertainment, Inc., 8.75%, 2020 | 415,000 | 445,088 | ||||||
Ryman Hospitality Properties, Inc., REIT, 5%, 2021 (n) | 345,000 | 334,650 | ||||||
Seven Seas Cruises S. DE R.L., 9.125%, 2019 | 940,000 | 996,400 | ||||||
Viking Cruises Ltd., 8.5%, 2022 (n) | 565,000 | 618,675 | ||||||
Wynn Las Vegas LLC, 7.75%, 2020 | 395,000 | 438,608 | ||||||
|
| |||||||
$ | 8,210,375 | |||||||
|
| |||||||
Industrial – 1.0% | ||||||||
Dematic S.A., 7.75%, 2020 (z) | $ | 620,000 | $ | 647,900 | ||||
Hyva Global B.V., 8.625%, 2016 (n) | 695,000 | 653,300 | ||||||
Mueller Water Products, Inc., 8.75%, 2020 | 442,000 | 481,780 | ||||||
SPL Logistics Escrow LLC, 8.875%, 2020 (n) | 810,000 | 842,400 | ||||||
|
| |||||||
$ | 2,625,380 | |||||||
|
| |||||||
Insurance – 0.1% | ||||||||
MetLife, Inc., 9.25% to 2038, FRN to 2068 (n) | $ | 300,000 | $ | 396,000 | ||||
|
| |||||||
Insurance – Property & Casualty – 0.9% | ||||||||
Liberty Mutual Group, Inc., 10.75% to 2038, FRN to 2088 (n) | $ | 775,000 | $ | 1,181,875 | ||||
XL Group PLC, 6.5% to 2017, FRN to 2049 | 1,220,000 | 1,189,500 | ||||||
|
| |||||||
$ | 2,371,375 | |||||||
|
|
7
Table of Contents
MFS High Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
International Market Quasi-Sovereign – 0.3% | ||||||||
Eksportfinans A.S.A., 5.5%, 2016 | $ | 300,000 | $ | 312,525 | ||||
Eksportfinans A.S.A., 5.5%, 2017 | 400,000 | 414,000 | ||||||
Electricite de France, FRN, 5.25%, 2049 (n) | 101,000 | 96,556 | ||||||
|
| |||||||
$ | 823,081 | |||||||
|
| |||||||
Machinery & Tools – 2.3% | ||||||||
Case New Holland, Inc., 7.875%, 2017 | $ | 1,000,000 | $ | 1,132,500 | ||||
CNH America LLC, 7.25%, 2016 | 545,000 | 591,325 | ||||||
CNH Capital LLC, 3.875%, 2015 | 180,000 | 180,900 | ||||||
CNH Capital LLC, 6.25%, 2016 | 255,000 | 271,575 | ||||||
CNH Capital LLC, 3.625%, 2018 (n) | 660,000 | 628,650 | ||||||
H&E Equipment Services Co., 7%, 2022 | 830,000 | 865,275 | ||||||
NESCO LLC/NESCO Holdings Corp., 11.75%, 2017 (n) | 795,000 | 862,575 | ||||||
RSC Equipment Rental, Inc., 8.25%, 2021 | 680,000 | 744,600 | ||||||
United Rentals North America, Inc., 5.75%, 2018 | 205,000 | 215,250 | ||||||
United Rentals North America, Inc., 7.625%, 2022 | 454,000 | 491,455 | ||||||
|
| |||||||
$ | 5,984,105 | |||||||
|
| |||||||
Major Banks – 1.1% | ||||||||
Bank of America Corp., FRN, 5.2%, 2049 | $ | 670,000 | $ | 629,800 | ||||
Barclays Bank PLC, 7.625%, 2022 | 660,000 | 647,625 | ||||||
Royal Bank of Scotland Group PLC, 7.648% to 2031, FRN to 2049 | 1,330,000 | 1,216,950 | ||||||
Royal Bank of Scotland Group PLC,, 6.99% to 2017, FRN to 2049 (n) | 530,000 | 495,550 | ||||||
|
| |||||||
$ | 2,989,925 | |||||||
|
| |||||||
Medical & Health Technology & Services – 5.1% | ||||||||
AmSurg Corp., 5.625%, 2020 | $ | 705,000 | $ | 705,000 | ||||
CDRT Holding Corp., 9.25%, 2017 (n)(p) | 205,000 | 207,563 | ||||||
Davita, Inc., 6.375%, 2018 | 1,050,000 | 1,095,938 | ||||||
Davita, Inc., 6.625%, 2020 | 780,000 | 826,800 | ||||||
Fresenius Medical Care AG & Co. KGaA, 9%, 2015 (n) | 365,000 | 403,325 | ||||||
Fresenius Medical Care Capital Trust III, 5.625%, 2019 (n) | 735,000 | 764,400 | ||||||
Fresenius Medical Care Capital Trust III, 5.875%, 2022 (n) | 410,000 | 431,525 | ||||||
HCA, Inc., 8.5%, 2019 | 1,670,000 | 1,792,119 | ||||||
HCA, Inc., 7.25%, 2020 | 145,000 | 155,694 | ||||||
HCA, Inc., 7.5%, 2022 | 1,215,000 | 1,345,613 | ||||||
HCA, Inc., 5.875%, 2022 | 860,000 | 882,575 | ||||||
HealthSouth Corp., 8.125%, 2020 | 945,000 | 1,022,963 | ||||||
IASIS Healthcare LLC/IASIS Capital Corp., 8.375%, 2019 | 435,000 | 439,078 | ||||||
Kinetic Concepts, Inc., 12.5%, 2019 | 210,000 | 216,300 | ||||||
Tenet Healthcare Corp., 9.25%, 2015 | 325,000 | 352,219 | ||||||
Tenet Healthcare Corp., 8%, 2020 | 590,000 | 609,913 | ||||||
Tenet Healthcare Corp., 4.5%, 2021 (n) | 695,000 | 648,088 | ||||||
Universal Health Services, Inc., 7%, 2018 | 465,000 | 489,994 | ||||||
Universal Health Services, Inc., 7.625%, 2020 | 955,000 | 997,975 | ||||||
|
| |||||||
$ | 13,387,082 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Medical Equipment – 0.7% | ||||||||
Biomet, Inc., 6.5%, 2020 | $ | 595,000 | $ | 613,222 | ||||
Physio-Control International, Inc., 9.875%, 2019 (n) | 595,000 | 654,500 | ||||||
Teleflex, Inc., 6.875%, 2019 | 545,000 | 574,975 | ||||||
|
| |||||||
$ | 1,842,697 | |||||||
|
| |||||||
Metals & Mining – 2.7% | ||||||||
ArcelorMittal S.A., 7.25%, 2041 | $ | 335,000 | $ | 313,225 | ||||
Arch Coal, Inc., 7.25%, 2020 | 740,000 | 606,800 | ||||||
Century Aluminum Co., 7.5%, 2021 (n) | 520,000 | 504,400 | ||||||
Cloud Peak Energy, Inc., 8.25%, 2017 | 1,005,000 | 1,057,763 | ||||||
Commercial Metals Co., 4.875%, 2023 | 325,000 | 299,000 | ||||||
Consol Energy, Inc., 8%, 2017 | 595,000 | 626,238 | ||||||
Consol Energy, Inc., 8.25%, 2020 | 335,000 | 350,913 | ||||||
First Quantum Minerals Ltd., 7.25%, 2019 (n) | 919,000 | 863,860 | ||||||
Fortescue Metals Group Ltd., 8.25%, 2019 (n) | 675,000 | 695,250 | ||||||
Peabody Energy Corp., 6%, 2018 | 420,000 | 421,050 | ||||||
Peabody Energy Corp., 6.25%, 2021 | 420,000 | 405,300 | ||||||
Plains Exploration & Production Co., 6.125%, 2019 | 710,000 | 752,829 | ||||||
Plains Exploration & Production Co., 6.5%, 2020 | 340,000 | 360,470 | ||||||
|
| |||||||
$ | 7,257,098 | |||||||
|
| |||||||
Municipals – 0.2% | ||||||||
New Jersey Tobacco Settlement Financing Corp., “1-A”, 4.5%, 2023 | $ | 445,000 | $ | 431,138 | ||||
|
| |||||||
Natural Gas – Distribution – 0.6% | ||||||||
AmeriGas Finance LLC, 6.75%, 2020 | $ | 970,000 | $ | 1,003,950 | ||||
Ferrellgas LP/Ferrellgas Finance Corp., 6.5%, 2021 | 540,000 | 541,350 | ||||||
|
| |||||||
$ | 1,545,300 | |||||||
|
| |||||||
Natural Gas – Pipeline – 3.3% | ||||||||
Access Midstream Partners Co., 4.875%, 2023 | $ | 340,000 | $ | 315,350 | ||||
Atlas Pipeline Partners LP, 4.75%, 2021 (n) | 255,000 | 229,500 | ||||||
Atlas Pipeline Partners LP, 5.875%, 2023 (n) | 510,000 | 484,500 | ||||||
Crosstex Energy, Inc., 8.875%, 2018 | 935,000 | 991,100 | ||||||
El Paso Corp., 7%, 2017 | 735,000 | 799,062 | ||||||
El Paso Corp., 7.75%, 2032 | 1,370,000 | 1,455,528 | ||||||
Energy Transfer Equity LP, 7.5%, 2020 | 700,000 | 764,750 | ||||||
Enterprise Products Partners LP, 8.375% to 2016, FRN to 2066 | 500,000 | 557,500 | ||||||
Enterprise Products Partners LP, 7.034% to 2018, FRN to 2068 | 391,000 | 438,898 | ||||||
Inergy Midstream LP, 6%, 2020 (n) | 785,000 | 757,525 | ||||||
MarkWest Energy Partners LP, 5.5%, 2023 | 630,000 | 620,550 | ||||||
MarkWest Energy Partners LP, 4.5%, 2023 | 160,000 | 146,400 |
8
Table of Contents
MFS High Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Natural Gas – Pipeline – continued | ||||||||
Sabine Pass Liquefaction, 5.625%, 2021 (n) | $ | 575,000 | $ | 557,750 | ||||
Sabine Pass Liquefaction, 5.625%, 2023 (n) | 670,000 | 633,150 | ||||||
|
| |||||||
$ | 8,751,563 | |||||||
|
| |||||||
Network & Telecom – 1.2% | ||||||||
Centurylink, Inc., 7.65%, 2042 | $ | 865,000 | $ | 821,750 | ||||
Citizens Communications Co., 9%, 2031 | 400,000 | 396,000 | ||||||
Frontier Communications Corp., 8.125%, 2018 | 530,000 | 581,675 | ||||||
TW Telecom Holdings, Inc., 5.375%, 2022 | 535,000 | 530,988 | ||||||
Windstream Corp., 8.125%, 2018 | 215,000 | 228,975 | ||||||
Windstream Corp., 7.75%, 2020 | 445,000 | 460,575 | ||||||
Windstream Corp., 7.75%, 2021 | 200,000 | 207,000 | ||||||
|
| |||||||
$ | 3,226,963 | |||||||
|
| |||||||
Oil Services – 1.7% | ||||||||
Bristow Group, Inc., 6.25%, 2022 | $ | 695,000 | $ | 712,375 | ||||
Chesapeake Energy Corp., 6.625%, 2019 (n) | 325,000 | 321,750 | ||||||
Dresser-Rand Group, Inc., 6.5%, 2021 | 415,000 | 439,900 | ||||||
Edgen Murray Corp., 8.75%, 2020 (n) | 965,000 | 960,175 | ||||||
Shale-Inland Holdings LLC/Finance Co., 8.75%, 2019 (n) | 1,035,000 | 1,055,700 | ||||||
Unit Corp., 6.625%, 2021 | 1,050,000 | 1,071,000 | ||||||
|
| |||||||
$ | 4,560,900 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 2.5% | ||||||||
Ally Financial, Inc., 5.5%, 2017 | $ | 1,400,000 | $ | 1,462,734 | ||||
Ally Financial, Inc., 6.25%, 2017 | 460,000 | 492,094 | ||||||
Groupe BPCE S.A., 12.5% to 2019, FRN to 2049 (n) | 1,010,000 | 1,224,625 | ||||||
LBG Capital No. 1 PLC, 7.875%, 2020 (n) | 1,275,000 | 1,315,800 | ||||||
Santander UK PLC, 8.963% to 2030, FRN to 2049 | 1,415,000 | 1,698,000 | ||||||
UBS AG, 7.625%, 2022 | 430,000 | 471,903 | ||||||
|
| |||||||
$ | 6,665,156 | |||||||
|
| |||||||
Pharmaceuticals – 0.7% | ||||||||
Capsugel FinanceCo. SCA, 9.875%, 2019 (n) | EUR | 385,000 | $ | 554,255 | ||||
Valeant Pharmaceuticals International, Inc., 7%, 2020 (n) | $ | 840,000 | 856,800 | |||||
Valeant Pharmaceuticals International, Inc., 7.25%, 2022 (n) | 520,000 | 527,800 | ||||||
|
| |||||||
$ | 1,938,855 | |||||||
|
| |||||||
Pollution Control – 0.4% | ||||||||
Heckmann Corp., 9.875%, 2018 | $ | 670,000 | $ | 703,500 | ||||
Heckmann Corp., 9.875%, 2018 (n) | 215,000 | 224,138 | ||||||
|
| |||||||
$ | 927,638 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Precious Metals & Minerals – 0.6% | ||||||||
Eldorado Gold Corp., 6.125%, 2020 (n) | $ | 545,000 | $ | 525,925 | ||||
IAMGOLD Corp., 6.75%, 2020 (n) | 1,102,000 | 931,190 | ||||||
|
| |||||||
$ | 1,457,115 | |||||||
|
| |||||||
Printing & Publishing – 0.6% | ||||||||
American Media, Inc., 13.5%, 2018 (z) | $ | 94,618 | $ | 87,522 | ||||
Lamar Media Corp., 5%, 2023 | 335,000 | 321,600 | ||||||
Nielsen Finance LLC, 7.75%, 2018 | 635,000 | 682,625 | ||||||
Nielsen Finance LLC, 4.5%, 2020 (n) | 435,000 | 417,600 | ||||||
|
| |||||||
$ | 1,509,347 | |||||||
|
| |||||||
Railroad & Shipping – 0.2% | ||||||||
Kansas City Southern de Mexico S.A. de C.V., 6.125%, 2021 | $ | 81,000 | $ | 91,935 | ||||
Watco Cos. LLC, 6.375%, 2023 (n) | 415,000 | 412,925 | ||||||
|
| |||||||
$ | 504,860 | |||||||
|
| |||||||
Real Estate – 1.6% | ||||||||
CNL Lifestyle Properties, Inc., REIT, 7.25%, 2019 | $ | 465,000 | $ | 463,838 | ||||
DuPont Fabros Technology, Inc., REIT, 8.5%, 2017 | 560,000 | 590,800 | ||||||
ERP Properties, REIT, 7.75%, 2020 | 765,000 | 868,634 | ||||||
ERP Properties, REIT, 5.75%, 2022 | 185,000 | 187,197 | ||||||
Felcor Lodging LP, REIT, 5.625%, 2023 | 135,000 | 131,288 | ||||||
Kennedy Wilson, Inc., 8.75%, 2019 | 390,000 | 419,250 | ||||||
MPT Operating Partnership LP, REIT, 6.875%, 2021 | 780,000 | 826,800 | ||||||
MPT Operating Partnership LP, REIT, 6.375%, 2022 | 630,000 | 661,500 | ||||||
|
| |||||||
$ | 4,149,307 | |||||||
|
| |||||||
Retailers – 2.9% | ||||||||
Academy Ltd., 9.25%, 2019 (n) | $ | 470,000 | $ | 520,525 | ||||
Burlington Coat Factory Warehouse Corp., 10%, 2019 | 665,000 | 734,825 | ||||||
CST Brands, Inc., 5%, 2023 (n) | 80,000 | 78,000 | ||||||
J. Crew Group, Inc., 8.125%, 2019 | 750,000 | 787,500 | ||||||
Jo-Ann Stores Holdings, Inc., 9.75%, 2019 (n)(p) | 415,000 | 426,413 | ||||||
Limited Brands, Inc., 6.9%, 2017 | 560,000 | 623,000 | ||||||
Limited Brands, Inc., 7%, 2020 | 300,000 | 333,000 | ||||||
Limited Brands, Inc., 6.95%, 2033 | 415,000 | 412,925 | ||||||
Rite Aid Corp., 9.5%, 2017 | 340,000 | 352,852 | ||||||
Rite Aid Corp., 9.25%, 2020 | 960,000 | 1,059,600 | ||||||
Sally Beauty Holdings, Inc., 6.875%, 2019 | 170,000 | 182,325 | ||||||
The Pantry, Inc., 8.375%, 2020 | 370,000 | 397,288 | ||||||
Toys “R” Us Property Co. II LLC, 8.5%, 2017 | 355,000 | 368,756 | ||||||
Toys “R” Us, Inc., 10.75%, 2017 | 1,060,000 | 1,118,300 | ||||||
YCC Holdings LLC/Yankee Finance, Inc., 10.25%, 2016 (p) | 145,000 | 148,625 | ||||||
|
| |||||||
$ | 7,543,934 | |||||||
|
|
9
Table of Contents
MFS High Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Specialty Chemicals – 0.3% | ||||||||
Eagle Spinco, Inc., 4.625%, 2021 (n) | $ | 170,000 | $ | 163,200 | ||||
Koppers, Inc., 7.875%, 2019 | 510,000 | 545,700 | ||||||
|
| |||||||
$ | 708,900 | |||||||
|
| |||||||
Specialty Stores – 0.3% | ||||||||
Michaels Stores, Inc., 11.375%, 2016 | $ | 287,000 | $ | 299,200 | ||||
Michaels Stores, Inc., 7.75%, 2018 | 510,000 | 545,700 | ||||||
|
| |||||||
$ | 844,900 | |||||||
|
| |||||||
Telecommunications – Wireless – 4.3% | ||||||||
Clearwire Corp., 12%, 2015 (n) | $ | 650,000 | $ | 690,625 | ||||
Cricket Communications, Inc., 7.75%, 2020 | 605,000 | 580,800 | ||||||
Crown Castle International Corp., 7.125%, 2019 | 865,000 | 923,388 | ||||||
Crown Castle International Corp., 5.25%, 2023 | 455,000 | 436,800 | ||||||
Digicel Group Ltd., 8.25%, 2017 (n) | 655,000 | 681,200 | ||||||
Digicel Group Ltd., 10.5%, 2018 (n) | 430,000 | 455,800 | ||||||
Eileme 2 AB, 11.625%, 2020 (n) | 686,000 | 775,180 | ||||||
MetroPCS Wireless, Inc., 7.875%, 2018 | 560,000 | 596,400 | ||||||
MetroPCS Wireless, Inc., 6.25%, 2021 (n) | 460,000 | 468,050 | ||||||
Sprint Capital Corp., 6.875%, 2028 | 950,000 | 912,000 | ||||||
Sprint Nextel Corp., 6%, 2016 | 800,000 | 844,000 | ||||||
Sprint Nextel Corp., 8.375%, 2017 | 825,000 | 926,063 | ||||||
Sprint Nextel Corp., 9%, 2018 (n) | 440,000 | 514,800 | ||||||
Sprint Nextel Corp., 6%, 2022 | 770,000 | 754,600 | ||||||
Wind Acquisition Finance S.A., 11.75%, 2017 (n) | 875,000 | 910,000 | ||||||
Wind Acquisition Finance S.A., 7.25%, 2018 (n) | 930,000 | 936,975 | ||||||
|
| |||||||
$ | 11,406,681 | |||||||
|
| |||||||
Telephone Services – 0.5% | ||||||||
Cogent Communications Group, Inc., 8.375%, 2018 (n) | $ | 470,000 | $ | 512,300 | ||||
Level 3 Financing, Inc., 9.375%, 2019 | 550,000 | 594,000 | ||||||
Level 3 Financing, Inc., 8.625%, 2020 | 165,000 | 175,725 | ||||||
|
| |||||||
$ | 1,282,025 | |||||||
|
| |||||||
Transportation – Services – 2.4% | ||||||||
Aguila American Resources Ltd., 7.875%, 2018 (n) | $ | 890,000 | $ | 916,700 | ||||
Avis Budget Car Rental LLC, 8.25%, 2019 | 375,000 | 407,813 | ||||||
Avis Budget Car Rental LLC, 9.75%, 2020 | 365,000 | 419,750 | ||||||
CEVA Group PLC, 8.375%, 2017 (n) | 1,185,000 | 1,161,300 | ||||||
Navios Maritime Acquisition Corp., 8.625%, 2017 | 920,000 | 940,700 | ||||||
Navios Maritime Holdings, Inc., 8.875%, 2017 | 315,000 | 326,025 | ||||||
Navios South American Logistics, Inc., 9.25%, 2019 | 529,000 | 567,353 | ||||||
Navios South American Logistics, Inc., 9.25%, 2019 (n) | 42,000 | 45,045 | ||||||
Swift Services Holdings, Inc., 10%, 2018 | 1,140,000 | 1,259,700 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Transportation – Services – continued | ||||||||
Ultrapetrol (Bahamas) Ltd., 8.875%, 2021 (n) | $ | 373,000 | $ | 373,000 | ||||
|
| |||||||
$ | 6,417,386 | |||||||
|
| |||||||
Utilities – Electric Power – 3.3% | ||||||||
AES Corp., 8%, 2017 | $ | 76,000 | $ | 85,500 | ||||
AES Corp., 7.375%, 2021 | 280,000 | 307,300 | ||||||
AES Corp., 4.875%, 2023 | 70,000 | 65,275 | ||||||
Calpine Corp., 7.875%, 2020 (n) | 839,000 | 910,315 | ||||||
Covanta Holding Corp., 7.25%, 2020 | 715,000 | 749,739 | ||||||
Covanta Holding Corp., 6.375%, 2022 | 275,000 | 277,915 | ||||||
EDP Finance B.V., 6%, 2018 (n) | 1,085,000 | 1,117,550 | ||||||
Energy Future Holdings Corp., 10%, 2020 | 1,948,000 | 2,133,060 | ||||||
Energy Future Holdings Corp., 10%, 2020 (n) | 780,000 | 852,150 | ||||||
Energy Future Holdings Corp., 12.25%, 2022 (n) | 600,000 | 663,000 | ||||||
InterGen N.V., 7%, 2023 (z) | 295,000 | 287,625 | ||||||
NRG Energy, Inc., 8.25%, 2020 | 960,000 | 1,034,400 | ||||||
Texas Competitive Electric Holdings Co. LLC, 11.5%, 2020 (n) | 470,000 | 351,325 | ||||||
|
| |||||||
$ | 8,835,154 | |||||||
|
| |||||||
Total Bonds (Identified Cost, $247,480,863) | $ | 246,777,375 | ||||||
|
| |||||||
FLOATING RATE LOANS (g)(r) – 2.4% | ||||||||
Aerospace – 0.2% | ||||||||
TransDigm, Inc., Term Loan C, 3.75%, 2020 | $ | 471,558 | $ | 465,074 | ||||
|
| |||||||
Building – 0.4% | ||||||||
ABC Supply Co., Inc., Term Loan, 3.5%, 2020 | $ | 187,145 | $ | 185,608 | ||||
Calpine Construction Finance Co., L.P., Term Loan B1, 3%, 2020 | 965,254 | 953,188 | ||||||
|
| |||||||
$ | 1,138,796 | |||||||
|
| |||||||
Conglomerates – 0.2% | ||||||||
Silver II U.S. Holdings LLC, Term Loan, 4%, 2019 | $ | 466,741 | $ | 462,293 | ||||
|
| |||||||
Consumer Services – 0.1% | ||||||||
Realogy Corp., Term Loan, 4.5%, 2020 | $ | 307,631 | $ | 308,400 | ||||
|
| |||||||
Energy – Independent – 0.2% | ||||||||
MEG Energy Corp., Term Loan, 3.75%, 2020 | $ | 447,922 | $ | 445,496 | ||||
|
| |||||||
Entertainment – 0.2% | ||||||||
Cedar Fair L.P., Term Loan B, 3.25%, 2020 | $ | 399,010 | $ | 399,808 | ||||
|
| |||||||
Food & Beverages – 0.3% | ||||||||
Aramark Corp., Term Loan D, 4%, 2019 | $ | 473,156 | $ | 473,866 | ||||
H.J. Heinz Co., Term Loan B2, 3.5%, 2020 | 283,455 | 283,136 | ||||||
|
| |||||||
$ | 757,002 | |||||||
|
|
10
Table of Contents
MFS High Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
FLOATING RATE LOANS (g)(r) – continued | ||||||||
Machinery & Tools – 0.3% | ||||||||
Gardner Denver, Inc., Term Loan, 2014 (o) | $ | 815,000 | $ | 815,000 | ||||
|
| |||||||
Transportation – Services – 0.5% | ||||||||
Commercial Barge Line Co., Term Loan, 7.5%, 2019 | $ | 1,482,353 | $ | 1,430,470 | ||||
|
| |||||||
Total Floating Rate Loans (Identified Cost, $6,279,840) | $ | 6,222,339 | ||||||
|
| |||||||
COMMON STOCKS – 0.1% | ||||||||
Automotive – 0.0% | ||||||||
Accuride Corp. (a) | 24,851 | $ | 125,744 | |||||
|
| |||||||
Printing & Publishing – 0.1% | ||||||||
American Media Operations, Inc. (a) | 24,246 | $ | 127,292 | |||||
|
| |||||||
Total Common Stocks (Identified Cost, $736,809) | $ | 253,036 | ||||||
|
| |||||||
CONVERTIBLE PREFERRED STOCKS – 0.2% | ||||||||
Automotive – 0.2% | ||||||||
General Motors Co., 4.75% (Identified Cost, $538,000) | 10,760 | $ | 518,202 | |||||
|
| |||||||
PREFERRED STOCKS – 0.5% | ||||||||
Other Banks & Diversified Financials – 0.5% | ||||||||
Ally Financial, Inc., 7% (z) | 511 | $ | 485,690 | |||||
GMAC Capital Trust I, 8.125% | 28,350 | 738,518 | ||||||
|
| |||||||
Total Preferred Stocks (Identified Cost, $1,193,270) | $ | 1,224,208 | ||||||
|
|
Issuer | Strike Price | First Exercise | Shares/Par | Value ($) | ||||||||||||
WARRANTS – 0.3% | ||||||||||||||||
Broadcasting – 0.3% | ||||||||||||||||
New Young Broadcasting Holding Co., Inc. (1 share for 1 warrant) (Identified Cost, $217,308) (a) | $ | 0.01 | 7/14/10 | 113 | $ | 757,100 | ||||||||||
|
| |||||||||||||||
CONVERTIBLE BONDS – 0.3% | ||||||||||||||||
Network & Telecom – 0.3% | ||||||||||||||||
Nortel Networks Corp., 2.125%, 2014 (Identified Cost, $947,481) (a)(d) | $ | 960,000 | $ | 931,800 | ||||||||||||
MONEY MARKET FUNDS – 0.0% | ||||||||||||||||
MFS Institutional Money Market Portfolio, 0.11%, at Cost and Net Asset Value (v) | 165 | $ | 165 | |||||||||||||
|
| |||||||||||||||
Total Investments (Identified Cost, $257,393,736) | $ | 256,684,225 | ||||||||||||||
|
| |||||||||||||||
OTHER ASSETS, LESS LIABILITIES – 2.7% | 7,229,729 | |||||||||||||||
|
| |||||||||||||||
Net Assets – 100.0% | $ | 263,913,954 | ||||||||||||||
|
|
(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 $80,922,961, representing 30.7% of net assets. |
(o) | All or a portion of this position has not settled. Upon settlement date, interest rates for unsettled amounts will be determined. The rate shown, if any, represents the weighted average coupon rate for settled amounts. |
(p) | Payment-in-kind security. |
(r) | Remaining maturities of floating rate loans may be less than stated maturities shown as a result of contractual or optional prepayments by the borrower. Such prepayments cannot be predicted with certainty. These loans may be subject to restrictions on resale. Floating rate loans generally have rates of interest which are determined periodically by reference to a base lending rate plus a premium. |
(v) | Underlying affiliated fund that is available only to investment companies managed by MFS. The rate quoted 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) | 4/13/11-4/14/11 | $479,063 | $485,690 | |||||||
American Media, Inc., 13.5%, 2018 | 12/22/10 | 95,772 | 87,522 | |||||||
Arbor Realty Mortgage Securities, CDO, FRN, 2.576%, 2038 | 12/20/05 | 568,229 | 170,469 | |||||||
CWCapital Cobalt Ltd., CDO, 6.23%, 2045 | 3/20/06 | 1,075,300 | 12,389 | |||||||
CWCapital Cobalt Ltd., CDO, “F”, FRN, 1.575%, 2050 | 4/12/06 | 530,418 | 1,325 | |||||||
Chester Downs & Marina LLC, 9.25%, 2020 | 6/18/13 | 185,000 | 178,525 |
11
Table of Contents
MFS High Income Series
Portfolio of Investments (unaudited) – continued
Restricted Securities - continued | Acquisition Date | Cost | Value | |||||||
Dematic S.A., 7.75%, 2020 | 12/13/12 | $620,000 | $647,900 | |||||||
G-Force LLC, CDO, “A2”, 4.83%, 2036 | 2/14/11 | 292,103 | 301,259 | |||||||
Heckler & Koch GmbH, 9.5%, 2018 | 5/06/11-5/10/11 | 548,411 | 449,681 | |||||||
InterGen N.V., 7%, 2023 | 6/07/13 | 289,799 | 287,625 | |||||||
LBI Media, Inc., 13.5% to 2015, 11.5% to 2020 | 12/26/12-5/15/13 | 213,739 | 161,204 | |||||||
Local TV Finance LLC, 9.25%, 2015 | 12/10/07-2/06/13 | 632,019 | 633,737 | |||||||
Total Restricted Securities | $3,417,326 | |||||||||
% of Net assets | 1.3% |
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 |
Derivative Contracts at 6/30/13
Forward Foreign Currency Exchange Contracts at 6/30/13
Type | Currency | Counterparty | Contracts to Deliver/Receive | Settlement Date Range | In Exchange For | Contracts at Value | Net Unrealized Appreciation (Depreciation) | |||||||||||
Asset Derivatives | ||||||||||||||||||
SELL | EUR | Deutsche Bank AG | 1,341,490 | 7/16/13 | $1,753,542 | $ | 1,746,246 | $ | 7,296 | |||||||||
SELL | EUR | JPMorgan Chase N.A. | 1,341,490 | 7/16/13 | 1,753,570 | 1,746,246 | 7,324 | |||||||||||
SELL | EUR | UBS AG | 209,903 | 7/16/13 | 275,025 | 273,236 | 1,789 | |||||||||||
|
| |||||||||||||||||
$ | 16,409 | |||||||||||||||||
|
| |||||||||||||||||
Liability Derivatives | ||||||||||||||||||
BUY | EUR | Goldman Sachs International | 285,981 | 7/16/13 | $ 374,151 | $ | 372,268 | $ | (1,884 | ) | ||||||||
|
|
Swap Agreements at 6/30/13
Expiration | Notional Amount | Counterparty | Cash Flows to Receive | Cash Flows to Pay | Fair Value | |||||||||||||
Asset Derivatives | ||||||||||||||||||
Credit Default Swap Agreements | ||||||||||||||||||
12/20/17 | USD | 1,600,000 | Goldman Sachs International (a) | 5.00% (fixed rate) | (1) | $74,089 |
(1) | Fund, as protection seller, to pay notional amount upon a defined credit event by a reference obligation specified in the CDX. NA. HY. 19 Index, a B rated credit default index. The fund entered into the agreement to manage market/sector exposure. |
(a) | Net unamortized premiums paid by the fund amounted to $64,303. |
The credit ratings presented here are an indicator of the current payment/performance risk of the related swap agreement, the reference obligation for which may be either a single security or, in the case of a credit default index, a basket of securities issued by corporate or sovereign issuers. Ratings are assigned to each reference security, including each individual security within a reference basket of securities, utilizing ratings from Moody’s, Fitch, and Standard & Poor’s rating agencies and applying the following hierarchy: If all three agencies provide a rating, the middle rating (after dropping the highest and lowest ratings) is assigned; if two of the three agencies rate a security, the lower of the two is assigned. Ratings are shown in the S&P and Fitch scale (e.g., AAA). The ratings for a credit default index are calculated by MFS as a weighted average of the external credit ratings of the individual securities that compose the index’s reference basket of securities.
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 6/30/13 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $257,393,571) | $256,684,060 | |||||||
Underlying affiliated funds, at cost and value | 165 | |||||||
Total investments, at value (identified cost, $257,393,736) | $256,684,225 | |||||||
Receivables for | ||||||||
Forward foreign currency exchange contracts | 16,409 | |||||||
Investments sold | 6,855,439 | |||||||
Fund shares sold | 489 | |||||||
Interest | 4,585,757 | |||||||
Swaps, at value (net unamortized premiums paid, $64,303) | 74,089 | |||||||
Other assets | 1,215 | |||||||
Total assets | $268,217,623 | |||||||
Liabilities | ||||||||
Payable to custodian | $2,005,244 | |||||||
Payables for | ||||||||
Forward foreign currency exchange contracts | 1,884 | |||||||
Investments purchased | 815,000 | |||||||
Fund shares reacquired | 1,370,033 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 20,598 | |||||||
Shareholder servicing costs | 306 | |||||||
Distribution and/or service fees | 149 | |||||||
Payable for independent Trustees’ compensation | 1,460 | |||||||
Accrued expenses and other liabilities | 88,995 | |||||||
Total liabilities | $4,303,669 | |||||||
Net assets | $263,913,954 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $253,369,909 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | (685,481 | ) | ||||||
Accumulated net realized gain (loss) on investments and foreign currency | (20,771,898 | ) | ||||||
Undistributed net investment income | 32,001,424 | |||||||
Net assets | $263,913,954 | |||||||
Shares of beneficial interest outstanding | 29,754,237 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $258,472,685 | 29,137,160 | $8.87 | |||||||||
Service Class | 5,441,269 | 617,077 | 8.82 |
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 6/30/13 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Interest | $10,558,105 | |||||||
Dividends | 62,993 | |||||||
Dividends from underlying affiliated funds | 2,639 | |||||||
Foreign taxes withheld | (5 | ) | ||||||
Total investment income | $10,623,732 | |||||||
Expenses | ||||||||
Management fee | $1,085,091 | |||||||
Distribution and/or service fees | 7,336 | |||||||
Shareholder servicing costs | 9,709 | |||||||
Administrative services fee | 24,900 | |||||||
Independent trustees’ compensation | 4,723 | |||||||
Custodian fee | 19,913 | |||||||
Shareholder communications | 22,763 | |||||||
Audit and tax fees | 36,214 | |||||||
Legal fees | 2,197 | |||||||
Miscellaneous | 13,969 | |||||||
Total expenses | $1,226,815 | |||||||
Fees paid indirectly | (228 | ) | ||||||
Reduction of expenses by investment adviser | (1,008 | ) | ||||||
Net expenses | $1,225,579 | |||||||
Net investment income | $9,398,153 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $8,752,283 | |||||||
Swap agreements | 17,581 | |||||||
Foreign currency | (41,893 | ) | ||||||
Net realized gain (loss) on investments and foreign currency | $8,727,971 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $(13,887,646 | ) | ||||||
Swap agreements | 9,786 | |||||||
Translation of assets and liabilities in foreign currencies | 95,080 | |||||||
Net unrealized gain (loss) on investments and foreign currency translation | $(13,782,780 | ) | ||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $(5,054,809 | ) | ||||||
Change in net assets from operations | $4,343,344 |
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 6/30/13 (unaudited |
) |
| Year ended 12/31/12 |
| |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $9,398,153 | $21,601,858 | ||||||
Net realized gain (loss) on investments and foreign currency | 8,727,971 | 968,773 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | (13,782,780 | ) | 21,510,545 | |||||
Change in net assets from operations | $4,343,344 | $44,081,176 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(25,020,251 | ) | |||||
Change in net assets from fund share transactions | $(66,878,250 | ) | $(13,021,145 | ) | ||||
Total change in net assets | $(62,534,906 | ) | $6,039,780 | |||||
Net assets | ||||||||
At beginning of period | 326,448,860 | 320,409,080 | ||||||
At end of period (including undistributed net investment income of $32,001,424 and | $263,913,954 | $326,448,860 |
See Notes to Financial Statements
15
Table of Contents
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 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $8.78 | $8.29 | $8.78 | $8.25 | $6.25 | $9.52 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.27 | $0.57 | $0.61 | $0.63 | $0.63 | $0.71 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.18 | ) | 0.61 | (0.28 | ) | 0.53 | 1.98 | (3.18 | ) | |||||||||||||||
Total from investment operations | $0.09 | $1.18 | $0.33 | $1.16 | $2.61 | $(2.47 | ) | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.69 | ) | $(0.82 | ) | $(0.63 | ) | $(0.61 | ) | $(0.80 | ) | |||||||||||||
Net asset value, end of period (x) | $8.87 | $8.78 | $8.29 | $8.78 | $8.25 | $6.25 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 1.03 | (n) | 14.69 | 4.10 | 14.73 | 45.08 | (28.26 | ) | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.79 | (a) | 0.80 | 0.79 | 0.80 | 0.81 | 0.87 | |||||||||||||||||
Expenses after expense reductions (f) | 0.79 | (a) | 0.80 | 0.79 | 0.80 | 0.81 | 0.82 | |||||||||||||||||
Net investment income | 6.07 | (a) | 6.62 | 7.01 | 7.55 | 8.89 | 8.66 | |||||||||||||||||
Portfolio turnover | 19 | (n) | 42 | 59 | 70 | 52 | 60 | |||||||||||||||||
Net assets at end of period (000 omitted) | $258,473 | $320,147 | $313,703 | $372,412 | $344,186 | $203,800 | ||||||||||||||||||
Service Class | Six months ended | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $8.73 | $8.25 | $8.74 | $8.22 | $6.22 | $9.47 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.26 | $0.55 | $0.59 | $0.61 | $0.62 | $0.69 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.17 | ) | 0.60 | (0.28 | ) | 0.53 | 1.96 | (3.17 | ) | |||||||||||||||
Total from investment operations | $0.09 | $1.15 | $0.31 | $1.14 | $2.58 | $(2.48 | ) | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.67 | ) | $(0.80 | ) | $(0.62 | ) | $(0.58 | ) | $(0.77 | ) | |||||||||||||
Net asset value, end of period (x) | $8.82 | $8.73 | $8.25 | $8.74 | $8.22 | $6.22 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 1.03 | (n) | 14.30 | 3.85 | 14.40 | 44.75 | (28.43 | ) | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.04 | (a) | 1.05 | 1.04 | 1.05 | 1.07 | 1.12 | |||||||||||||||||
Expenses after expense reductions (f) | 1.04 | (a) | 1.05 | 1.04 | 1.05 | 1.06 | 1.07 | |||||||||||||||||
Net investment income | 5.81 | (a) | 6.38 | 6.77 | 7.31 | 8.78 | 8.40 | |||||||||||||||||
Portfolio turnover | 19 | (n) | 42 | 59 | 70 | 52 | 60 | |||||||||||||||||
Net assets at end of period (000 omitted) | $5,441 | $6,302 | $6,706 | $7,432 | $7,210 | $6,442 |
See Notes to Financial Statements
16
Table of Contents
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
17
Table of Contents
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 the disclosure provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Update 2011-11 (“ASU 2011-11”), Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities along with the related scope clarification provisions of FASB Accounting Standards Update 2013-01 (“ASU 2013-01”) entitled Balance Sheet (Topic 210) – Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 is intended to enhance disclosures on the offsetting of financial assets and liabilities by requiring entities to disclose both gross and net information about financial instruments and transactions that are either offset in the statement of financial position or subject to a Master Netting Agreement or similar arrangement. ASU 2013-01 limits the scope of ASU 2011-11’s disclosure requirements on offsetting to financial assets and financial liabilities related to derivatives, repurchase and reverse repurchase agreements, and securities lending and securities borrowing transactions. The disclosures required by ASU 2011-11, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
In June 2013, FASB issued Accounting Standards Update 2013-08 Financial Services – Investment Companies (Topic 946) – Amendments to the Scope, Measurement, and Disclosure Requirements (“ASU 2013-08”) which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013. ASU 2013-08 sets forth a methodology for determining whether an entity should be characterized as an investment company and prescribes fair value accounting for an investment company’s non-controlling ownership interest in another investment company. FASB has determined that a fund registered under the Investment Company Act of 1940 automatically meets ASU 2013-08’s criteria for an investment company. Although still evaluating the potential impacts of ASU 2013-08 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. Swap agreements are generally valued at valuations provided by a third-party pricing service, which for cleared swaps includes an evaluation of any trading activity at the clearinghouses. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. Values obtained from third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.
18
Table of Contents
MFS High Income Series
Notes to Financial Statements (unaudited) – continued
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. Other financial instruments are derivative instruments not reflected in total investments, such as forward foreign currency exchange contracts and swap agreements. The following is a summary of the levels used as of June 30, 2013 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities | $1,382,464 | $1,242,790 | $127,292 | $2,752,546 | ||||||||||||
Non-U.S. Sovereign Debt | — | 823,081 | — | 823,081 | ||||||||||||
Municipal Bonds | — | 431,138 | — | 431,138 | ||||||||||||
U.S. Corporate Bonds | — | 200,855,534 | — | 200,855,534 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 554,725 | — | 554,725 | ||||||||||||
Asset-Backed Securities (including CDOs) | — | 537,547 | — | 537,547 | ||||||||||||
Foreign Bonds | — | 44,507,149 | — | 44,507,149 | ||||||||||||
Floating Rate Loans | — | 6,222,340 | — | 6,222,340 | ||||||||||||
Mutual Funds | 165 | — | — | 165 | ||||||||||||
Total Investments | $1,382,629 | $255,174,304 | $127,292 | $256,684,225 | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Swap Agreements | $— | $74,089 | $— | $74,089 | ||||||||||||
Forward Foreign Currency Exchange Contracts | — | 14,525 | — | 14,525 |
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 12/31/12 | $115,169 | |||
Change in unrealized appreciation (depreciation) | 12,123 | |||
Balance as of 6/30/13 | $127,292 |
The net change in unrealized appreciation (depreciation) from investments still held as level 3 at June 30, 2013 is $12,123.
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
19
Table of Contents
MFS High Income Series
Notes to Financial Statements (unaudited) – continued
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, 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, 2013 as reported in the Statement of Assets and Liabilities:
Fair Value | ||||||||||
Risk | Derivative Contracts | Asset Derivatives | Liability Derivatives | |||||||
Foreign Exchange | Forward Foreign Currency Exchange | $16,409 | $(1,884 | ) | ||||||
Credit | Credit Default Swaps | 74,089 | — | |||||||
Total | $90,498 | $(1,884 | ) |
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, 2013 as reported in the Statement of Operations:
Risk | Swap Agreements | Foreign Currency | Investments (Purchased Options) | |||||||||
Foreign Exchange | $— | $(41,345 | ) | $— | ||||||||
Equity | — | — | 547,113 | |||||||||
Credit | 17,581 | — | — | |||||||||
Total | $17,581 | $(41,345 | ) | $547,113 |
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, 2013 as reported in the Statement of Operations:
Risk | Swap Agreements | Translation of Assets and Liabilities in Foreign Currencies | Investments (Purchased Options) | |||||||||
Foreign Exchange | $— | $96,329 | $— | |||||||||
Equity | — | — | (6,463 | ) | ||||||||
Credit | 9,786 | — | — | |||||||||
Total | $9,786 | $96,329 | $(6,463 | ) |
Derivative counterparty credit risk is managed through formal evaluation of the creditworthiness of all potential counterparties. On certain, but not all, 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. Upon an event of default or a termination of the ISDA Master Agreement, the non-defaulting party has the right to close out all transactions traded under such agreement and to net amounts owed under each 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.
Collateral and margin requirements differ by type of derivative. Margin requirements are set by the broker or clearing house for cleared derivatives (i.e., futures contracts, cleared swaps and exchange-traded options) while collateral terms are contract specific for over-the-counter traded derivatives (i.e., forward foreign currency exchange contracts, uncleared swap agreements, and over-the-counter options). For derivatives traded under an ISDA Master Agreement, the collateral requirements are netted across all
20
Table of Contents
MFS High Income Series
Notes to Financial Statements (unaudited) – continued
transactions traded under such agreement and one amount is posted from one party to the other to collateralize such obligations. Cash that has been segregated to cover the fund’s collateral or margin obligations under derivative contracts, if any, will be reported separately on the Statement of Assets and Liabilities as restricted cash. Securities pledged as collateral or margin for the same purpose, if any, is noted in the Portfolio of Investments.
The fund’s accounting policy with respect to balance sheet offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the ISDA Master Agreement does not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty.
Purchased Options – The fund purchased call options for a premium. Purchased call options entitle the holder to buy a specified number of shares or units of a particular security, currency or index at a specified price at a specified date or within a specified period of time. Purchasing call options may hedge against an anticipated increase in the dollar cost of securities or currency to be acquired or increase the fund’s exposure to an underlying instrument. Purchasing put options may hedge against an anticipated decline in the value of portfolio securities or currency or decrease the fund’s exposure to an underlying instrument.
The premium paid is initially recorded as an investment in the Statement of Assets and Liabilities. That investment is subsequently marked-to-market daily with the difference between the premium paid and the market value of the purchased option being recorded as unrealized appreciation or depreciation. Premiums paid for purchased call options which have expired are treated as realized losses on investments in the Statement of Operations. Upon the exercise or closing of a purchased call option, the premium paid is added to the cost of the security or financial instrument purchased.
Whether or not the option is exercised, the fund’s maximum risk of loss from purchasing an option is the amount of premium paid. All option contracts involve credit risk if the counterparty to the option contract fails to perform. 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.
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 – During the period the fund entered into swap agreements. Effective June 10, 2013, certain types of swaps (“cleared swaps”) are required to be centrally cleared under provisions of the Dodd-Frank Regulatory Reform Bill. In a cleared swap transaction, the swap agreement is novated to a central counterparty (the “clearinghouse”) immediately following execution of the swap contract with an executing broker. Thereafter, throughout the term of the cleared swap, the fund interfaces indirectly with the clearinghouse through a clearing broker.
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 in 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. The daily change in valuation of centrally cleared swaps is recorded as a receivable or payable for variation margin in the Statement of Assets and Liabilities. Amounts paid or received at the inception of the swap agreement are reflected as premiums paid or received in 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.
21
Table of Contents
MFS High Income Series
Notes to Financial Statements (unaudited) – continued
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. For uncleared swaps, that risk is further reduced 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. Although not covered by an ISDA Master Agreement, the fund’s counterparty risk due to cleared swaps is mitigated by the clearinghouses’ margining requirements and financial safeguards in the event of a clearing broker default.
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 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.
Credit default swap agreements are considered to have credit-risk-related contingent features since they trigger payment by the protection seller to the protection buyer upon the occurrence of a defined credit event. The maximum amount of future, undiscounted payments that the fund, as protection seller, could be required to make is equal to the swap agreement’s notional amount. The protection seller’s payment obligation would be offset to the extent of the value of the agreement’s deliverable obligation. At June 30, 2013, the fund did not hold any credit default swap agreements at an unrealized loss where it is the protection seller.
The fund’s maximum risk of loss from counterparty risk, either as the protection seller or as the protection buyer, is the fair value of the agreement. For uncleared swaps, counterparty risk is reduced 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. For cleared swaps, the fund’s counterparty risk is mitigated by the clearinghouses’ margining requirements and financial safeguards in the event of a clearing broker default.
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.
22
Table of Contents
MFS High Income 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, 2013, is shown as a reduction of total expenses in the Statement of Operations.
Tax Matters and Distributions – The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Foreign taxes have been accrued by the fund in the accompanying financial statements in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to amortization and accretion of debt securities.
The tax character of distributions made during the current period will be determined at fiscal year end. The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/12 | ||||
Ordinary income (including any short-term capital gains) | $25,020,251 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/13 | ||||
Cost of investments | $258,837,994 | |||
Gross appreciation | 7,747,335 | |||
Gross depreciation | (9,901,104 | ) | ||
Net unrealized appreciation (depreciation) | $(2,153,769 | ) | ||
As of 12/31/12 | ||||
Undistributed ordinary income | 22,627,917 | |||
Capital loss carryforwards | (27,953,606 | ) | ||
Other temporary differences | (111,945 | ) | ||
Net unrealized appreciation (depreciation) | 11,638,335 |
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, 2010 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses (“post-enactment losses”). Previously, net capital losses were carried forward for eight years and treated as short-term losses (“pre-enactment 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, 2012, the fund had capital loss carryforwards available to offset future realized gains as follows:
Pre-enactment losses which expire as follows: | ||||
12/31/16 | $(20,426,634 | ) | ||
12/31/17 | (7,524,848 | ) | ||
Total | $(27,951,482 | ) | ||
Post-enactment losses which are characterized as follows: | ||||
Long-Term | $(2,124 | ) |
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
23
Table of Contents
MFS High Income Series
Notes to Financial Statements (unaudited) – continued
shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported in the Statements of Changes in Net Assets are presented by class as follows:
From net investment income | ||||||||
Six months ended 6/30/13 | Year ended 12/31/12 | |||||||
Initial Class | $— | $24,535,958 | ||||||
Service Class | — | 484,293 | ||||||
Total | $— | $25,020,251 |
(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% |
Effective April 1, 2013, MFS has agreed in writing to reduce its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund’s Board of Trustees. For the period April 1, 2013 through June 30, 2013, this management fee reduction amounted to $405, 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, 2013 was equivalent to an annual effective rate of 0.70% of the fund’s average daily net assets.
The investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, exclusive of interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses, such that total annual operating expenses do not exceed 0.85% of average daily net assets for the Initial Class shares and 1.10% of average daily net assets for 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, 2013, 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, 2013, the fee was $9,481, which equated to 0.0061% 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, 2013, these costs amounted to $228.
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, 2013 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
24
Table of Contents
MFS High Income Series
Notes to Financial Statements (unaudited) – continued
ended June 30, 2013, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $1,220 and are included in “Miscellaneous” expense in 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 $603, 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 current income consistent with preservation of capital and liquidity. Income earned on this investment is included in “Dividends from underlying affiliated funds” in 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, aggregated $57,240,931 and $108,177,287, 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 6/30/13 | Year ended 12/31/12 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 786,179 | $7,044,688 | 6,196,321 | $54,301,955 | ||||||||||||
Service Class | 35,570 | 319,946 | 84,162 | 724,686 | ||||||||||||
821,749 | $7,364,634 | 6,280,483 | $55,026,641 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 2,927,919 | $24,535,958 | ||||||||||||
Service Class | — | — | 57,999 | 484,293 | ||||||||||||
— | $— | 2,985,918 | $25,020,251 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (8,125,507 | ) | $(72,996,799 | ) | (10,507,653 | ) | $(91,048,875 | ) | ||||||||
Service Class | (139,913 | ) | (1,246,085 | ) | (233,988 | ) | (2,019,162 | ) | ||||||||
(8,265,420 | ) | $(74,242,884 | ) | (10,741,641 | ) | $(93,068,037 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (7,339,328 | ) | $(65,952,111 | ) | (1,383,413 | ) | $(12,210,962 | ) | ||||||||
Service Class | (104,343 | ) | (926,139 | ) | (91,827 | ) | (810,183 | ) | ||||||||
(7,443,671 | ) | $(66,878,250 | ) | (1,475,240 | ) | $(13,021,145 | ) |
(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, 2013, the fund’s commitment fee and interest expense were $883 and $0, respectively, and are included in “Miscellaneous” expense in 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 | 3,715,610 | 52,596,674 | (56,312,119 | ) | 165 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $2,639 | $165 |
25
Table of Contents
MFS High Income Series
Notes to Financial Statements (unaudited) – continued
(8) | Subsequent Event |
On April 9, 2013, the Board of Trustees of the fund approved the proposed Agreement and Plan of Reorganization, whereby MFS High Income Series would be reorganized into MFS High Yield Portfolio, a series of MFS Variable Insurance Trust II. The Agreement and Plan of Reorganization is subject to the approval of the shareholders of the MFS High Income Series. The proposed Agreement and Plan of Reorganization provides for the transfer of the assets of the MFS High Income Series to the MFS High Yield Portfolio and the assumption by the MFS High Yield Portfolio of the liabilities of the MFS High Income Series in exchange solely for shares of beneficial interest in the MFS High Yield Portfolio. Immediately following the transfer, the MFS High Yield Portfolio shares received by the MFS High Income Series will be distributed to shareholders, pro rata, and the MFS High Income Series will be liquidated and terminated. On August 8, 2013, shareholders approved the reorganization. It is expected that the reorganization will occur on or around August 16, 2013.
26
Table of Contents
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, 2013 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products” 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” section of mfs.com.
27
Table of Contents
Table of Contents
SEMIANNUAL REPORT
June 30, 2013
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:
As the year progresses, the global economy continues to grind ahead slowly, held back by broad austerity measures. The U.S. economy remains a steadying force, driven by resilient consumers, who have taken the payroll tax increase and the sequestration’s early impact in stride. With U.S. housing and jobs showing steady expansion, domestic consumer-driven growth has offset weaker exports and the U.S. government’s spending constraints. In response to these developments, the U.S. Federal Reserve has begun to brace investors for an eventual shift in its monetary policy, causing global market tremors.
Japan has been another bright spot, with government and central bank stimulus policies leading to increased exports, a resurgent stock market and improved economic sentiment. After a six-month rally, Japan’s stocks slipped late in the second quarter, then picked up momentum on fresh signs that the country could soon break free of its chronic deflation. The major deterrent to global growth remains the eurozone, still in the grip of persistent recession. China has seen its pace of economic growth decelerate, a troubling turn for the country’s trading partners, who have come to rely on it as an engine for global growth.
As always, managing risk in the face of uncertainty remains a top priority for investors. At MFS®, our uniquely collaborative investment process employs integrated, global research and active risk management. Our global team of investment professionals shares ideas and evaluates opportunities across continents, investment disciplines and asset classes — all with a goal of building better insights, and ultimately better results, for our clients.
We are mindful of the many economic challenges investors face, and believe it is more important than ever to maintain a long-term view and employ time-tested principles, such as asset allocation and diversification. We remain confident that our unique approach can serve investors well as they work with their financial advisors to identify and pursue the most suitable opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2013
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 | ||||
Google, Inc., “A” | 4.5% | |||
United Technologies Corp. | 3.7% | |||
Danaher Corp. | 3.7% | |||
Visa, Inc., “A” | 3.4% | |||
Procter & Gamble Co. | 3.2% | |||
Colgate-Palmolive Co. | 3.1% | |||
Thermo Fisher Scientific, Inc. | 3.0% | |||
Accenture PLC, “A” | 2.9% | |||
EMC Corp. | 2.6% | |||
Oracle Corp. | 2.6% |
Equity sectors | ||||
Technology | 18.0% | |||
Industrial Goods & Services | 15.4% | |||
Health Care | 13.3% | |||
Consumer Staples | 13.0% | |||
Leisure | 8.2% | |||
Financial Services | 7.8% | |||
Retailing | 7.7% | |||
Special Products & Services | 4.7% | |||
Energy | 4.3% | |||
Transportation | 3.3% | |||
Basic Materials | 2.4% | |||
Autos & Housing | 1.0% |
Percentages are based on net assets as of 6/30/13.
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, 2013 through June 30, 2013
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, 2013 through June 30, 2013.
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 1/01/13 | Ending Account Value | Expenses Paid During Period (p) 1/01/13-6/30/13 | ||||||||||||||
Initial Class | Actual | 0.82% | $1,000.00 | $1,106.47 | $4.28 | |||||||||||||
Hypothetical (h) | 0.82% | $1,000.00 | $1,020.73 | $4.11 | ||||||||||||||
Service Class | Actual | 1.07% | $1,000.00 | $1,105.62 | $5.59 | |||||||||||||
Hypothetical (h) | 1.07% | $1,000.00 | $1,019.49 | $5.36 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
3
Table of Contents
MFS Investors Growth Stock Series
PORTFOLIO OF INVESTMENTS – 6/30/13 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 99.1% | ||||||||
Aerospace – 5.5% | ||||||||
Precision Castparts Corp. | 29,860 | $ | 6,748,656 | |||||
United Technologies Corp. | 147,910 | 13,746,755 | ||||||
|
| |||||||
$ | 20,495,411 | |||||||
|
| |||||||
Alcoholic Beverages – 1.2% | ||||||||
Pernod Ricard S.A. | 39,667 | $ | 4,398,575 | |||||
|
| |||||||
Apparel Manufacturers – 3.1% | ||||||||
LVMH Moet Hennessy Louis Vuitton S.A. | 40,576 | $ | 6,534,211 | |||||
NIKE, Inc., “B” | 77,180 | 4,914,822 | ||||||
|
| |||||||
$ | 11,449,033 | |||||||
|
| |||||||
Automotive – 1.0% | ||||||||
Johnson Controls, Inc. | 106,600 | $ | 3,815,214 | |||||
|
| |||||||
Broadcasting – 6.1% | ||||||||
Discovery Communications, Inc., “A” (a) | 44,630 | $ | 3,445,882 | |||||
Omnicom Group, Inc. | 27,940 | 1,756,588 | ||||||
Time Warner, Inc. | 104,240 | 6,027,157 | ||||||
Viacom, Inc., “B” | 53,150 | 3,616,858 | ||||||
Walt Disney Co. | 127,360 | 8,042,784 | ||||||
|
| |||||||
$ | 22,889,269 | |||||||
|
| |||||||
Brokerage & Asset Managers – 3.0% | ||||||||
Charles Schwab Corp. | 111,970 | $ | 2,377,123 | |||||
CME Group, Inc. | 33,280 | 2,528,614 | ||||||
Franklin Resources, Inc. | 44,735 | 6,084,855 | ||||||
|
| |||||||
$ | 10,990,592 | |||||||
|
| |||||||
Business Services – 4.7% | ||||||||
Accenture PLC, “A” | 148,620 | $ | 10,694,695 | |||||
Cognizant Technology Solutions Corp., “A” (a) | 32,960 | 2,063,626 | ||||||
MSCI, Inc., “A” (a) | 65,330 | 2,173,529 | ||||||
Verisk Analytics, Inc., “A” (a) | 39,710 | 2,370,687 | ||||||
|
| |||||||
$ | 17,302,537 | |||||||
|
| |||||||
Chemicals – 0.6% | ||||||||
Monsanto Co. | 21,880 | $ | 2,161,744 | |||||
|
| |||||||
Computer Software – 3.9% | ||||||||
Autodesk, Inc. (a) | 139,650 | $ | 4,739,721 | |||||
Oracle Corp. | 318,010 | 9,769,267 | ||||||
|
| |||||||
$ | 14,508,988 | |||||||
|
| |||||||
Computer Software – Systems – 5.2% | ||||||||
Apple, Inc. | 11,324 | $ | 4,485,210 | |||||
EMC Corp. | 415,200 | 9,807,024 | ||||||
International Business Machines Corp. | 26,630 | 5,089,259 | ||||||
|
| |||||||
$ | 19,381,493 | |||||||
|
| |||||||
Consumer Products – 7.0% | ||||||||
Church & Dwight Co., Inc. | 42,160 | $ | 2,601,694 | |||||
Colgate-Palmolive Co. | 203,784 | 11,674,785 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Consumer Products – continued | ||||||||
Procter & Gamble Co. | 154,313 | $ | 11,880,558 | |||||
|
| |||||||
$ | 26,157,037 | |||||||
|
| |||||||
Electrical Equipment – 9.9% | ||||||||
Amphenol Corp., “A” | 38,030 | $ | 2,964,058 | |||||
Danaher Corp. | 216,940 | 13,732,302 | ||||||
Mettler-Toledo International, Inc. (a) | 25,618 | 5,154,342 | ||||||
Sensata Technologies Holding B.V. (a) | 227,110 | 7,926,139 | ||||||
W.W. Grainger, Inc. | 28,810 | 7,265,306 | ||||||
|
| |||||||
$ | 37,042,147 | |||||||
|
| |||||||
Electronics – 3.6% | ||||||||
Microchip Technology, Inc. | 241,600 | $ | 8,999,600 | |||||
Taiwan Semiconductor Manufacturing Co. Ltd., ADR | 235,776 | 4,319,416 | ||||||
|
| |||||||
$ | 13,319,016 | |||||||
|
| |||||||
Energy – Independent – 1.1% | ||||||||
Occidental Petroleum Corp. | 46,390 | $ | 4,139,380 | |||||
|
| |||||||
Food & Beverages – 4.8% | ||||||||
Groupe Danone | 111,075 | $ | 8,336,524 | |||||
Mead Johnson Nutrition Co., “A” | 52,050 | 4,123,922 | ||||||
PepsiCo, Inc. | 65,600 | 5,365,424 | ||||||
|
| |||||||
$ | 17,825,870 | |||||||
|
| |||||||
Food & Drug Stores – 2.3% | ||||||||
CVS Caremark Corp. | 151,303 | $ | 8,651,506 | |||||
|
| |||||||
General Merchandise – 1.4% | ||||||||
Kohl’s Corp. | 42,980 | $ | 2,170,920 | |||||
Target Corp. | 42,890 | 2,953,405 | ||||||
|
| |||||||
$ | 5,124,325 | |||||||
|
| |||||||
Internet – 5.3% | ||||||||
eBay, Inc. (a) | 61,180 | $ | 3,164,230 | |||||
Google, Inc., “A” (a) | 19,015 | 16,740,236 | ||||||
|
| |||||||
$ | 19,904,466 | |||||||
|
| |||||||
Medical & Health Technology & Services – 2.9% | ||||||||
Express Scripts Holding Co. (a) | 147,216 | $ | 9,081,755 | |||||
Patterson Cos., Inc. | 49,040 | 1,843,904 | ||||||
|
| |||||||
$ | 10,925,659 | |||||||
|
| |||||||
Medical Equipment – 7.6% | ||||||||
Becton, Dickinson & Co. | 20,530 | $ | 2,028,980 | |||||
DENTSPLY International, Inc. | 190,080 | 7,785,677 | ||||||
St. Jude Medical, Inc. | 51,900 | 2,368,197 | ||||||
Thermo Fisher Scientific, Inc. | 131,470 | 11,126,306 | ||||||
Waters Corp. (a) | 49,900 | 4,992,495 | ||||||
|
| |||||||
$ | 28,301,655 | |||||||
|
| |||||||
Metals & Mining – 0.4% | ||||||||
Rio Tinto Ltd. | 36,470 | $ | 1,494,779 | |||||
|
|
4
Table of Contents
MFS Investors Growth Stock Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Oil Services – 3.2% | ||||||||
National Oilwell Varco, Inc. | 32,090 | $ | 2,211,001 | |||||
Schlumberger Ltd. | 134,630 | 9,647,586 | ||||||
|
| |||||||
$ | 11,858,587 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 4.8% | ||||||||
MasterCard, Inc., “A” | 9,000 | $ | 5,170,500 | |||||
Visa, Inc., “A” | 69,490 | 12,699,298 | ||||||
|
| |||||||
$ | 17,869,798 | |||||||
|
| |||||||
Pharmaceuticals – 2.8% | ||||||||
Allergan, Inc. | 27,230 | $ | 2,293,855 | |||||
Johnson & Johnson | 93,450 | 8,023,617 | ||||||
Zoetis, Inc. | 7,100 | 219,319 | ||||||
|
| |||||||
$ | 10,536,791 | |||||||
|
| |||||||
Railroad & Shipping – 1.4% | ||||||||
Kuehne & Nagel, Inc. AG | 46,490 | $ | 5,097,136 | |||||
|
| |||||||
Restaurants – 2.1% | ||||||||
McDonald’s Corp. | 77,530 | $ | 7,675,470 | |||||
|
| |||||||
Specialty Chemicals – 1.4% | ||||||||
Praxair, Inc. | 45,850 | $ | 5,280,086 | |||||
|
| |||||||
Specialty Stores – 0.9% | ||||||||
Industria de Diseno Textil S.A. | 27,283 | $ | 3,368,044 | |||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Trucking – 1.9% | ||||||||
Expeditors International of Washington, Inc. | 190,050 | $ | 7,223,801 | |||||
|
| |||||||
Total Common Stocks (Identified Cost, $277,850,833) | $ | 369,188,409 | ||||||
|
| |||||||
MONEY MARKET FUNDS – 1.0% | ||||||||
MFS Institutional Money Market Portfolio, 0.11%, at Cost and Net Asset Value (v) | 3,649,466 | $ | 3,649,466 | |||||
|
| |||||||
Total Investments (Identified Cost, $281,500,299) | $ | 372,837,875 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – (0.1)% | (211,645 | ) | ||||||
|
| |||||||
Net Assets – 100.0% | $ | 372,626,230 | ||||||
|
|
(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 6/30/13 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $277,850,833) | $369,188,409 | |||||||
Underlying affiliated funds, at cost and value | 3,649,466 | |||||||
Total investments, at value (identified cost, $281,500,299) | $372,837,875 | |||||||
Receivables for | ||||||||
Fund shares sold | 172,210 | |||||||
Interest and dividends | 308,812 | |||||||
Other assets | 1,216 | |||||||
Total assets | $373,320,113 | |||||||
Liabilities | ||||||||
Payable for fund shares reacquired | $585,610 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 31,261 | |||||||
Shareholder servicing costs | 655 | |||||||
Distribution and/or service fees | 8,344 | |||||||
Payable for independent Trustees’ compensation | 1,463 | |||||||
Accrued expenses and other liabilities | 66,550 | |||||||
Total liabilities | $693,883 | |||||||
Net assets | $372,626,230 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $258,747,887 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 91,337,778 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | 19,948,383 | |||||||
Undistributed net investment income | 2,592,182 | |||||||
Net assets | $372,626,230 | |||||||
Shares of beneficial interest outstanding | 28,129,249 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $69,652,807 | 5,155,177 | $13.51 | |||||||||
Service Class | 302,973,423 | 22,974,072 | 13.19 |
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 6/30/13 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $2,760,615 | |||||||
Interest | 7,226 | |||||||
Dividends from underlying affiliated funds | 2,806 | |||||||
Foreign taxes withheld | (73,123 | ) | ||||||
Total investment income | $2,697,524 | |||||||
Expenses | ||||||||
Management fee | $1,378,224 | |||||||
Distribution and/or service fees | 367,934 | |||||||
Shareholder servicing costs | 15,090 | |||||||
Administrative services fee | 28,454 | |||||||
Independent Trustees’ compensation | 4,747 | |||||||
Custodian fee | 22,013 | |||||||
Shareholder communications | 25,644 | |||||||
Audit and tax fees | 24,930 | |||||||
Legal fees | 2,167 | |||||||
Miscellaneous | 10,207 | |||||||
Total expenses | $1,879,410 | |||||||
Reduction of expenses by investment adviser | (1,200 | ) | ||||||
Net expenses | $1,878,210 | |||||||
Net investment income | $819,314 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $8,186,963 | |||||||
Foreign currency | (4,704 | ) | ||||||
Net realized gain (loss) on investments and foreign currency | $8,182,259 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $27,281,294 | |||||||
Translation of assets and liabilities in foreign currencies | 43 | |||||||
Net unrealized gain (loss) on investments and foreign currency translation | $27,281,337 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $35,463,596 | |||||||
Change in net assets from operations | $36,282,910 |
See Notes to Financial Statements
7
Table of Contents
MFS Investors Growth Stock Series
FINANCIAL STATEMENTS | STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
| Six months ended 6/30/13 (unaudited | ) | | Year ended 12/31/12 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $819,314 | $1,774,566 | ||||||
Net realized gain (loss) on investments and foreign currency | 8,182,259 | 12,257,001 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 27,281,337 | 39,358,918 | ||||||
Change in net assets from operations | $36,282,910 | $53,390,485 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(942,129 | ) | |||||
From net realized gain on investments | — | (16,768,960 | ) | |||||
Total distributions declared to shareholders | $— | $(17,711,089 | ) | |||||
Change in net assets from fund share transactions | $(8,828,607 | ) | $(19,701,316 | ) | ||||
Total change in net assets | $27,454,303 | $15,978,080 | ||||||
Net assets | ||||||||
At beginning of period | 345,171,927 | 329,193,847 | ||||||
At end of period (including undistributed net investment income of $2,592,182 and | $372,626,230 | $345,171,927 |
See Notes to Financial Statements
8
Table of Contents
MFS Investors Growth Stock Series
FINANCIAL STATEMENTS | FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund’s financial performance for the semiannual period and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
Initial Class | Six months ended 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $12.21 | $11.01 | $11.01 | $9.83 | $7.10 | $11.82 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.04 | $0.08 | $0.05 | $0.05 | $0.05 | $0.06 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.26 | 1.77 | 0.01 | 1.17 | 2.74 | (4.24 | ) | |||||||||||||||||
Total from investment operations | $1.30 | $1.85 | $0.06 | $1.22 | $2.79 | $(4.18 | ) | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.06 | ) | $(0.06 | ) | $(0.04 | ) | $(0.06 | ) | $(0.06 | ) | |||||||||||||
From net realized gain on investments | — | (0.59 | ) | — | — | — | (0.48 | ) | ||||||||||||||||
Total distributions declared to shareholders | $— | �� | $(0.65 | ) | $(0.06 | ) | $(0.04 | ) | $(0.06 | ) | $(0.54 | ) | ||||||||||||
Net asset value, end of period (x) | $13.51 | $12.21 | $11.01 | $11.01 | $9.83 | $7.10 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 10.65 | (n) | 16.97 | 0.58 | 12.47 | 39.55 | (36.87 | ) | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.82 | (a) | 0.83 | 0.82 | 0.88 | 0.86 | 0.85 | |||||||||||||||||
Expenses after expense reductions (f) | 0.82 | (a) | 0.83 | 0.82 | 0.88 | 0.86 | 0.85 | |||||||||||||||||
Net investment income | 0.64 | (a) | 0.70 | 0.46 | 0.49 | 0.63 | 0.60 | |||||||||||||||||
Portfolio turnover | 14 | (n) | 30 | 28 | 44 | 50 | 50 | |||||||||||||||||
Net assets at end of period (000 omitted) | $69,653 | $71,432 | $77,136 | $83,355 | $93,011 | $75,444 | ||||||||||||||||||
Service Class | Six months ended 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $11.93 | $10.77 | $10.76 | $9.62 | $6.95 | $11.57 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.03 | $0.05 | $0.02 | $0.02 | $0.03 | $0.03 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 1.23 | 1.73 | 0.02 | 1.15 | 2.68 | (4.14 | ) | |||||||||||||||||
Total from investment operations | $1.26 | $1.78 | $0.04 | $1.17 | $2.71 | $(4.11 | ) | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.03 | ) | $(0.03 | ) | $(0.03 | ) | $(0.04 | ) | $(0.03 | ) | |||||||||||||
From net realized gain on investments | — | (0.59 | ) | — | — | — | (0.48 | ) | ||||||||||||||||
Total distributions declared to shareholders | $— | $(0.62 | ) | $(0.03 | ) | $(0.03 | ) | $(0.04 | ) | $(0.51 | ) | |||||||||||||
Net asset value, end of period (x) | $13.19 | $11.93 | $10.77 | $10.76 | $9.62 | $6.95 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 10.56 | (n) | 16.68 | 0.37 | 12.15 | 39.10 | (36.98 | ) | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.07 | (a) | 1.08 | 1.07 | 1.12 | 1.11 | 1.10 | |||||||||||||||||
Expenses after expense reductions (f) | 1.07 | (a) | 1.08 | 1.07 | 1.12 | 1.11 | 1.10 | |||||||||||||||||
Net investment income | 0.40 | (a) | 0.46 | 0.21 | 0.23 | 0.38 | 0.35 | |||||||||||||||||
Portfolio turnover | 14 | (n) | 30 | 28 | 44 | 50 | 50 | |||||||||||||||||
Net assets at end of period (000 omitted) | $302,973 | $273,740 | $252,058 | $276,777 | $406,039 | $178,256 |
See Notes to Financial Statements
9
Table of Contents
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
10
Table of Contents
MFS Investors Growth Stock Series
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) | Business and Organization |
MFS Investors Growth Stock Series (the fund) is a series of MFS Variable Insurance Trust (the trust). The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The shareholders of each series of the trust are separate accounts of insurance companies, which offer variable annuity and/or life insurance products, and qualified retirement and pension plans.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued.
In this reporting period, the fund adopted the disclosure provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Update 2011-11 (“ASU 2011-11”), Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities along with the related scope clarification provisions of FASB Accounting Standards Update 2013-01 (“ASU 2013-01”) entitled Balance Sheet (Topic 210) – Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 is intended to enhance disclosures on the offsetting of financial assets and liabilities by requiring entities to disclose both gross and net information about financial instruments and transactions that are either offset in the statement of financial position or subject to a Master Netting Agreement or similar arrangement. ASU 2013-01 limits the scope of ASU 2011-11’s disclosure requirements on offsetting to financial assets and financial liabilities related to derivatives, repurchase and reverse repurchase agreements, and securities lending and securities borrowing transactions. The disclosures required by ASU 2011-11, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
In June 2013, FASB issued Accounting Standards Update 2013-08 Financial Services – Investment Companies (Topic 946) – Amendments to the Scope, Measurement, and Disclosure Requirements (“ASU 2013-08”) which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013. ASU 2013-08 sets forth a methodology for determining whether an entity should be characterized as an investment company and prescribes fair value accounting for an investment company’s non-controlling ownership interest in another investment company. FASB has determined that a fund registered under the Investment Company Act of 1940 automatically meets ASU 2013-08’s criteria for an investment company. Although still evaluating the potential impacts of ASU 2013-08 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
11
Table of Contents
MFS Investors Growth Stock 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. The following is a summary of the levels used as of June 30, 2013 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $335,639,724 | $— | $— | $335,639,724 | ||||||||||||
France | 12,735,099 | 6,534,211 | — | 19,269,310 | ||||||||||||
Switzerland | — | 5,097,136 | — | 5,097,136 | ||||||||||||
Taiwan | 4,319,416 | — | — | 4,319,416 | ||||||||||||
Spain | 3,368,044 | — | — | 3,368,044 | ||||||||||||
United Kingdom | — | 1,494,779 | — | 1,494,779 | ||||||||||||
Mutual Funds | 3,649,466 | — | — | 3,649,466 | ||||||||||||
Total Investments | $359,711,749 | $13,126,126 | $— | $372,837,875 |
For further information regarding security characteristics, see the Portfolio of Investments.
Of the level 1 investments presented above, equity investments amounting to $11,704,568 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 – Under its Securities Lending Agency Agreement with the fund, State Street Bank and Trust Company (“State Street”), as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. 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. In the event of Borrower default, State Street will for the benefit of the fund either purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the fund the market value of the loaned securities. In return, State Street assumes the fund’s rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, State Street is responsible for the shortfall, but only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. 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 in the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income. At June 30, 2013, there were no securities on loan or collateral outstanding.
12
Table of Contents
MFS Investors Growth Stock 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. For the six months ended June 30, 2013, 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 in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests.
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:
12/31/12 | ||||
Ordinary income (including any short-term capital gains) | $3,580,811 | |||
Long-term capital gains | 14,130,278 | |||
Total distributions | $17,711,089 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/13 | ||||
Cost of investments | $281,976,247 | |||
Gross appreciation | 93,529,134 | |||
Gross depreciation | (2,667,506 | ) | ||
Net unrealized appreciation (depreciation) | $90,861,628 | |||
As of 12/31/12 | ||||
Undistributed ordinary income | 4,012,533 | |||
Undistributed long-term capital gain | 10,002,407 | |||
Other temporary differences | 159 | |||
Net unrealized appreciation (depreciation) | 63,580,334 |
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
13
Table of Contents
MFS Investors Growth Stock Series
Notes to Financial Statements (unaudited) – continued
shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported in the Statements of Changes in Net Assets are presented by class as follows:
From net investment income | From net realized gain on investments | |||||||||||||||
Six months ended 6/30/13 | Year ended 12/31/12 | Six months ended 6/30/13 | Year ended 12/31/12 | |||||||||||||
Initial Class | $— | $343,877 | $— | $3,585,439 | ||||||||||||
Service Class | — | 598,252 | — | 13,183,521 | ||||||||||||
Total | $— | $942,129 | $— | $16,768,960 |
(3) | Transactions with Affiliates |
Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates:
First $1 billion of average daily net assets | 0.75% | |||
Average daily net assets in excess of $1 billion | 0.65% |
Effective April 1, 2013, MFS has agreed in writing to reduce its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund’s Board of Trustees. For the period April 1, 2013 through June 30, 2013, this management fee reduction amounted to $508, 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, 2013 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, 2013, the fee was $14,660, which equated to 0.0080% 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, 2013, these costs amounted to $430.
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, 2013 was equivalent to an annual effective rate of 0.0155% 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, 2013, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $1,411 and are included in “Miscellaneous” expense in 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 $692, 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.
14
Table of Contents
MFS Investors Growth Stock Series
Notes to Financial Statements (unaudited) – continued
The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks current income consistent with preservation of capital and liquidity. Income earned on this investment is included in “Dividends from underlying affiliated funds” in 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 short-term obligations, aggregated $49,638,583 and $56,701,404, 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 6/30/13 | Year ended 12/31/12 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 297,443 | $3,963,798 | 828,069 | $9,940,364 | ||||||||||||
Service Class | 1,763,900 | 22,955,032 | 1,972,214 | 22,952,516 | ||||||||||||
2,061,343 | $26,918,830 | 2,800,283 | $32,892,880 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 333,842 | $3,929,316 | ||||||||||||
Service Class | — | — | 1,196,334 | 13,781,773 | ||||||||||||
— | $— | 1,530,176 | $17,711,089 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (994,263 | ) | $(13,186,009 | ) | (2,315,460 | ) | $(27,950,049 | ) | ||||||||
Service Class | (1,737,514 | ) | (22,561,428 | ) | (3,617,367 | ) | (42,355,236 | ) | ||||||||
(2,731,777 | ) | $(35,747,437 | ) | (5,932,827 | ) | $(70,305,285 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (696,820 | ) | $(9,222,211 | ) | (1,153,549 | ) | $(14,080,369 | ) | ||||||||
Service Class | 26,386 | 393,604 | (448,819 | ) | (5,620,947 | ) | ||||||||||
(670,434 | ) | $(8,828,607 | ) | (1,602,368 | ) | $(19,701,316 | ) |
(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, 2013, the fund’s commitment fee and interest expense were $953 and $0, respectively, and are included in “Miscellaneous” expense in 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 | 4,494,232 | 23,592,085 | (24,436,851 | ) | 3,649,466 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $2,806 | $3,649,466 |
15
Table of Contents
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, 2013 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products” 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” section of mfs.com.
16
Table of Contents
Table of Contents
SEMIANNUAL REPORT
June 30, 2013
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:
As the year progresses, the global economy continues to grind ahead slowly, held back by broad austerity measures. The U.S. economy remains a steadying force, driven by resilient consumers, who have taken the payroll tax increase and the sequestration’s early impact in stride. With U.S. housing and jobs showing steady expansion, domestic consumer-driven growth has offset weaker exports and the U.S. government’s spending constraints. In response to these developments, the U.S. Federal Reserve has begun to brace investors for an eventual shift in its monetary policy, causing global market tremors.
Japan has been another bright spot, with government and central bank stimulus policies leading to increased exports, a resurgent stock market and improved economic sentiment. After a six-month rally, Japan’s stocks slipped late in the second quarter, then picked up momentum on fresh signs that the country could soon break free of its chronic deflation. The major deterrent to global growth remains the eurozone, still in the grip of persistent recession. China has seen its pace of economic growth decelerate, a troubling turn for the country’s trading partners, who have come to rely on it as an engine for global growth.
As always, managing risk in the face of uncertainty remains a top priority for investors. At MFS®, our uniquely collaborative investment process employs integrated, global research and active risk management. Our global team of investment professionals shares ideas and evaluates opportunities across continents, investment disciplines and asset classes — all with a goal of building better insights, and ultimately better results, for our clients.
We are mindful of the many economic challenges investors face, and believe it is more important than ever to maintain a long-term view and employ time-tested principles, such as asset allocation and diversification. We remain confident that our unique approach can serve investors well as they work with their financial advisors to identify and pursue the most suitable opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2013
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 Trust Series
Portfolio structure
Top ten holdings | ||||
JPMorgan Chase & Co. | 2.9% | |||
Danaher Corp. | 2.7% | |||
Johnson & Johnson | 2.5% | |||
Pfizer, Inc. | 2.5% | |||
Apple, Inc. | 2.3% | |||
Google, Inc., “A” | 2.3% | |||
Exxon Mobil Corp. | 2.3% | |||
Procter & Gamble Co. | 2.2% | |||
Walt Disney Co. | 2.1% | |||
Visa, Inc., “A” | 2.0% |
Equity sectors | ||||
Financial Services | 17.8% | |||
Health Care | 13.5% | |||
Technology | 13.2% | |||
Consumer Staples | 10.2% | |||
Energy | 9.8% | |||
Industrial Goods & Services | 9.6% | |||
Retailing | 6.0% | |||
Leisure | 5.5% | |||
Utilities & Communications | 4.0% | |||
Basic Materials | 3.0% | |||
Special Products & Services | 2.8% | |||
Autos & Housing | 2.3% | |||
Transportation | 2.1% |
Percentages are based on net assets as of 6/30/13.
The portfolio is actively managed and current holdings may be different.
2
Table of Contents
MFS Investors Trust Series
Fund expenses borne by the contract holders during the period,
January 1, 2013 through June 30, 2013
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, 2013 through June 30, 2013.
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 1/01/13 | Ending Account Value | Expenses Paid During Period (p) 1/01/13-6/30/13 | ||||||||||||||
Initial Class | Actual | 0.81% | $1,000.00 | $1,124.29 | $4.27 | |||||||||||||
Hypothetical (h) | 0.81% | $1,000.00 | $1,020.78 | $4.06 | ||||||||||||||
Service Class | Actual | 1.06% | $1,000.00 | $1,122.92 | $5.58 | |||||||||||||
Hypothetical (h) | 1.06% | $1,000.00 | $1,019.54 | $5.31 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
3
Table of Contents
MFS Investors Trust Series
PORTFOLIO OF INVESTMENTS – 6/30/13 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 99.8% | ||||||||
Aerospace – 5.4% | ||||||||
Honeywell International, Inc. | 146,570 | $ | 11,628,863 | |||||
Precision Castparts Corp. | 49,583 | 11,206,254 | ||||||
United Technologies Corp. | 118,520 | 11,015,249 | ||||||
|
| |||||||
$ | 33,850,366 | |||||||
|
| |||||||
Alcoholic Beverages – 2.0% | ||||||||
Diageo PLC | 203,069 | $ | 5,824,676 | |||||
Heineken N.V. | 52,846 | 3,359,549 | ||||||
Pernod Ricard S.A. | 30,310 | 3,361,001 | ||||||
|
| |||||||
$ | 12,545,226 | |||||||
|
| |||||||
Apparel Manufacturers – 3.1% | ||||||||
LVMH Moet Hennessy Louis Vuitton S.A. | 37,012 | $ | 5,960,277 | |||||
NIKE, Inc., “B” | 100,120 | 6,375,642 | ||||||
VF Corp. | 37,910 | 7,318,905 | ||||||
|
| |||||||
$ | 19,654,824 | |||||||
|
| |||||||
Automotive – 1.0% | ||||||||
Bayerische Motoren Werke AG | 29,874 | $ | 2,609,941 | |||||
Delphi Automotive PLC | 73,850 | 3,743,457 | ||||||
|
| |||||||
$ | 6,353,398 | |||||||
|
| |||||||
Biotechnology – 1.2% | ||||||||
Celgene Corp. (a) | 28,949 | $ | 3,384,428 | |||||
Gilead Sciences, Inc. (a) | 77,840 | 3,986,186 | ||||||
|
| |||||||
$ | 7,370,614 | |||||||
|
| |||||||
Broadcasting – 3.0% | ||||||||
News Corp., “A” | 180,860 | $ | 5,896,036 | |||||
Walt Disney Co. | 204,980 | 12,944,487 | ||||||
|
| |||||||
$ | 18,840,523 | |||||||
|
| |||||||
Brokerage & Asset Managers – 2.1% | ||||||||
BlackRock, Inc. | 43,022 | $ | 11,050,201 | |||||
Franklin Resources, Inc. | 17,648 | 2,400,481 | ||||||
|
| |||||||
$ | 13,450,682 | |||||||
|
| |||||||
Business Services – 2.8% | ||||||||
Accenture PLC, “A” | 104,810 | $ | 7,542,128 | |||||
Cognizant Technology Solutions Corp., “A” (a) | 86,420 | 5,410,756 | ||||||
Fidelity National Information Services, Inc. | 110,760 | 4,744,958 | ||||||
|
| |||||||
$ | 17,697,842 | |||||||
|
| |||||||
Cable TV – 1.2% | ||||||||
Comcast Corp., “A” | 178,230 | $ | 7,464,272 | |||||
|
| |||||||
Chemicals – 0.6% | ||||||||
Celanese Corp. | 78,570 | $ | 3,519,936 | |||||
|
| |||||||
Computer Software – 2.3% | ||||||||
Autodesk, Inc. (a) | 72,840 | $ | 2,472,190 | |||||
Citrix Systems, Inc. (a) | 53,390 | 3,221,019 | ||||||
Oracle Corp. | 278,940 | �� | 8,569,037 | |||||
|
| |||||||
$ | 14,262,246 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Computer Software – Systems – 5.8% | ||||||||
Apple, Inc. | 36,658 | $ | 14,519,501 | |||||
EMC Corp. | 524,160 | 12,380,659 | ||||||
Hewlett-Packard Co. | 386,640 | 9,588,672 | ||||||
|
| |||||||
$ | 36,488,832 | |||||||
|
| |||||||
Construction – 1.3% | ||||||||
Sherwin-Williams Co. | 16,914 | $ | 2,987,012 | |||||
Stanley Black & Decker, Inc. | 70,590 | 5,456,607 | ||||||
|
| |||||||
$ | 8,443,619 | |||||||
|
| |||||||
Consumer Products – 3.9% | ||||||||
Colgate-Palmolive Co. | 90,152 | $ | 5,164,808 | |||||
Procter & Gamble Co. | 178,610 | 13,751,184 | ||||||
Reckitt Benckiser Group PLC | 75,944 | 5,383,663 | ||||||
|
| |||||||
$ | 24,299,655 | |||||||
|
| |||||||
Electrical Equipment – 3.4% | ||||||||
Danaher Corp. | 268,480 | $ | 16,994,784 | |||||
W.W. Grainger, Inc. | 17,770 | 4,481,239 | ||||||
|
| |||||||
$ | 21,476,023 | |||||||
|
| |||||||
Electronics – 2.7% | ||||||||
Altera Corp. | 215,170 | $ | 7,098,458 | |||||
Microchip Technology, Inc. | 263,120 | 9,801,220 | ||||||
|
| |||||||
$ | 16,899,678 | |||||||
|
| |||||||
Energy – Independent – 2.3% | ||||||||
EOG Resources, Inc. | 56,667 | $ | 7,461,911 | |||||
Occidental Petroleum Corp. | 79,970 | 7,135,723 | ||||||
|
| |||||||
$ | 14,597,634 | |||||||
|
| |||||||
Energy – Integrated – 3.9% | ||||||||
Chevron Corp. | 86,763 | $ | 10,267,533 | |||||
Exxon Mobil Corp. | 159,230 | 14,386,431 | ||||||
|
| |||||||
$ | 24,653,964 | |||||||
|
| |||||||
Engineering – Construction – 0.8% | ||||||||
Fluor Corp. | 88,930 | $ | 5,274,438 | |||||
|
| |||||||
Food & Beverages – 3.1% | ||||||||
General Mills, Inc. | 61,400 | $ | 2,979,742 | |||||
Groupe Danone | 124,225 | 9,323,472 | ||||||
Mondelez International, Inc. | 247,700 | 7,066,881 | ||||||
|
| |||||||
$ | 19,370,095 | |||||||
|
| |||||||
General Merchandise – 2.4% | ||||||||
Kohl’s Corp. | 106,310 | $ | 5,369,718 | |||||
Target Corp. | 137,460 | 9,465,496 | ||||||
|
| |||||||
$ | 14,835,214 | |||||||
|
| |||||||
Insurance – 1.8% | ||||||||
ACE Ltd. | 128,770 | $ | 11,522,340 | |||||
|
|
4
Table of Contents
MFS Investors Trust Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Internet – 2.4% | ||||||||
Facebook, Inc., “A “ (a) | 37,990 | $ | 944,431 | |||||
Google, Inc., “A” (a) | 16,383 | 14,423,102 | ||||||
|
| |||||||
$ | 15,367,533 | |||||||
|
| |||||||
Major Banks – 8.7% | ||||||||
Bank of America Corp. | 483,850 | $ | 6,222,311 | |||||
Goldman Sachs Group, Inc. | 68,631 | 10,380,439 | ||||||
JPMorgan Chase & Co. | 350,990 | 18,528,762 | ||||||
Morgan Stanley | 127,570 | 3,116,535 | ||||||
State Street Corp. | 55,830 | 3,640,674 | ||||||
Wells Fargo & Co. | 307,450 | 12,688,462 | ||||||
|
| |||||||
$ | 54,577,183 | |||||||
|
| |||||||
Medical Equipment – 5.9% | ||||||||
Baxter International, Inc. | 55,650 | $ | 3,854,876 | |||||
Covidien PLC | 164,630 | 10,345,349 | ||||||
St. Jude Medical, Inc. | 207,380 | 9,462,749 | ||||||
Stryker Corp. | 62,890 | 4,067,725 | ||||||
Thermo Fisher Scientific, Inc. | 115,210 | 9,750,222 | ||||||
|
| |||||||
$ | 37,480,921 | |||||||
|
| |||||||
Oil Services – 3.6% | ||||||||
Cameron International Corp. (a) | 83,840 | $ | 5,127,654 | |||||
Dresser-Rand Group, Inc. (a) | 126,150 | 7,566,477 | ||||||
National Oilwell Varco, Inc. | 86,040 | 5,928,156 | ||||||
Schlumberger Ltd. | 57,560 | 4,124,750 | ||||||
|
| |||||||
$ | 22,747,037 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 5.2% | ||||||||
American Express Co. | 153,860 | $ | 11,502,574 | |||||
MasterCard, Inc., “A” | 14,713 | 8,452,619 | ||||||
Visa, Inc., “A” | 69,731 | 12,743,340 | ||||||
|
| |||||||
$ | 32,698,533 | |||||||
|
| |||||||
Pharmaceuticals – 6.4% | ||||||||
Bristol-Myers Squibb Co. | 68,720 | $ | 3,071,097 | |||||
Johnson & Johnson | 182,126 | 15,637,338 | ||||||
Pfizer, Inc. | 556,590 | 15,590,086 | ||||||
Valeant Pharmaceuticals International, Inc. (a) | 72,060 | 6,202,925 | ||||||
|
| |||||||
$ | 40,501,446 | |||||||
|
| |||||||
Railroad & Shipping – 1.1% | ||||||||
Canadian National Railway Co. | 69,820 | $ | 6,791,391 | |||||
|
| |||||||
Restaurants – 1.3% | ||||||||
McDonald’s Corp. | 85,048 | $ | 8,419,752 | �� | ||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Specialty Chemicals – 2.4% | ||||||||
FMC Corp. | 47,260 | $ | 2,885,696 | |||||
Linde AG | 32,333 | 6,020,543 | ||||||
Praxair, Inc. | 51,727 | 5,956,881 | ||||||
|
| |||||||
$ | 14,863,120 | |||||||
|
| |||||||
Specialty Stores – 0.5% | ||||||||
Tiffany & Co. | 45,030 | $ | 3,279,985 | |||||
|
| |||||||
Telecommunications – Wireless – 1.4% | ||||||||
American Tower Corp., REIT | 117,460 | $ | 8,594,548 | |||||
|
| |||||||
Tobacco – 1.2% | ||||||||
Philip Morris International, Inc. | 88,120 | $ | 7,632,954 | |||||
|
| |||||||
Trucking – 1.0% | ||||||||
United Parcel Service, Inc., “B” | 70,270 | $ | 6,076,950 | |||||
|
| |||||||
Utilities – Electric Power – 2.6% | ||||||||
American Electric Power Co., Inc. | 132,190 | $ | 5,919,468 | |||||
CMS Energy Corp. | 243,760 | 6,622,959 | ||||||
Wisconsin Energy Corp. | 96,120 | 3,939,959 | ||||||
|
| |||||||
$ | 16,482,386 | |||||||
|
| |||||||
Total Common Stocks (Identified Cost, $478,570,492) | $ | 628,385,160 | ||||||
|
| |||||||
MONEY MARKET FUNDS – 0.5% | ||||||||
MFS Institutional Money Market Portfolio, 0.11%, at Cost and Net Asset Value (v) | 3,263,206 | $ | 3,263,206 | |||||
|
| |||||||
Total Investments (Identified Cost, $481,833,698) | $ | 631,648,366 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – (0.3)% | (1,644,932 | ) | ||||||
|
| |||||||
Net Assets – 100.0% | $ | 630,003,434 | ||||||
|
|
(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
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 6/30/13 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $478,570,492) | $628,385,160 | |||||||
Underlying affiliated funds, at cost and value | 3,263,206 | |||||||
Total investments, at value (identified cost, $481,833,698) | $631,648,366 | |||||||
Receivables for | ||||||||
Fund shares sold | 240,139 | |||||||
Interest and dividends | 529,549 | |||||||
Other assets | 1,993 | |||||||
Total assets | $632,420,047 | |||||||
Liabilities | ||||||||
Payable to custodian | $283 | |||||||
Payable for fund shares reacquired | 2,240,083 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 52,760 | |||||||
Shareholder servicing costs | 933 | |||||||
Distribution and/or service fees | 5,234 | |||||||
Payable for independent Trustees’ compensation | 2,539 | |||||||
Accrued expenses and other liabilities | 114,781 | |||||||
Total liabilities | $2,416,613 | |||||||
Net assets | $630,003,434 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $453,154,466 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 149,816,264 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | 17,428,988 | |||||||
Undistributed net investment income | 9,603,716 | |||||||
Net assets | $630,003,434 | |||||||
Shares of beneficial interest outstanding | 24,496,618 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $439,638,460 | 17,054,049 | $25.78 | |||||||||
Service Class | 190,364,974 | 7,442,569 | 25.58 |
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 6/30/13 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $5,959,854 | |||||||
Interest | 24,828 | |||||||
Dividends from underlying affiliated funds | 3,426 | |||||||
Foreign taxes withheld | (96,539 | ) | ||||||
Total investment income | $5,891,569 | |||||||
Expenses | ||||||||
Management fee | $2,380,492 | |||||||
Distribution and/or service fees | 212,998 | |||||||
Shareholder servicing costs | 25,064 | |||||||
Administrative services fee | 45,083 | |||||||
Independent Trustees’ compensation | 7,986 | |||||||
Custodian fee | 34,206 | |||||||
Shareholder communications | 45,456 | |||||||
Audit and tax fees | 24,930 | |||||||
Legal fees | 3,642 | |||||||
Miscellaneous | 14,177 | |||||||
Total expenses | $2,794,034 | |||||||
Reduction of expenses by investment adviser | (2,068 | ) | ||||||
Net expenses | $2,791,966 | |||||||
Net investment income | $3,099,603 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $22,663,069 | |||||||
Foreign currency | (8,083 | ) | ||||||
Net realized gain (loss) on investments and foreign currency | $22,654,986 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $47,784,967 | |||||||
Translation of assets and liabilities in foreign currencies | 155 | |||||||
Net unrealized gain (loss) on investments and foreign currency translation | $47,785,122 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $70,440,108 | |||||||
Change in net assets from operations | $73,539,711 |
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 6/30/13 (unaudited |
) |
| Year ended 12/31/12 |
| |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $3,099,603 | $6,508,641 | ||||||
Net realized gain (loss) on investments and foreign currency | 22,654,986 | 40,699,013 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 47,785,122 | 54,990,561 | ||||||
Change in net assets from operations | $73,539,711 | $102,198,215 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(5,015,022 | ) | |||||
Change in net assets from fund share transactions | $(40,637,433 | ) | $(64,974,502 | ) | ||||
Total change in net assets | $32,902,278 | $32,208,691 | ||||||
Net assets | ||||||||
At beginning of period | 597,101,156 | 564,892,465 | ||||||
At end of period (including undistributed net investment income of $9,603,716 and | $630,003,434 | $597,101,156 |
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 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $22.93 | $19.41 | $20.04 | $18.24 | $14.64 | $23.52 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.13 | $0.25 | $0.17 | $0.16 | $0.19 | $0.24 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 2.72 | 3.46 | (0.61 | ) | 1.86 | 3.67 | (7.54 | ) | ||||||||||||||||
Total from investment operations | $2.85 | $3.71 | $(0.44 | ) | $2.02 | $3.86 | $(7.30 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.19 | ) | $(0.19 | ) | $(0.22 | ) | $(0.26 | ) | $(0.17 | ) | |||||||||||||
From net realized gain on investments | — | — | — | — | — | (1.41 | ) | |||||||||||||||||
Total distributions declared to shareholders | $— | $(0.19 | ) | $(0.19 | ) | $(0.22 | ) | $(0.26 | ) | $(1.58 | ) | |||||||||||||
Net asset value, end of period (x) | $25.78 | $22.93 | $19.41 | $20.04 | $18.24 | $14.64 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 12.43 | (n) | 19.18 | (2.18 | ) | 11.10 | 26.90 | (33.08 | ) | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.81 | (a) | 0.82 | 0.82 | 0.83 | 0.86 | 0.84 | |||||||||||||||||
Expenses after expense reductions (f) | 0.81 | (a) | 0.82 | 0.82 | 0.83 | 0.86 | 0.84 | |||||||||||||||||
Net investment income | 1.04 | (a) | 1.15 | 0.84 | 0.87 | 1.25 | 1.25 | |||||||||||||||||
Portfolio turnover | 11 | (n) | 28 | 22 | 22 | 34 | 29 | |||||||||||||||||
Net assets at end of period (000 omitted) | $439,638 | $455,295 | $486,500 | $603,279 | $636,809 | $560,356 | ||||||||||||||||||
Service Class | Six months ended 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $22.78 | $19.31 | $19.95 | $18.16 | $14.56 | $23.39 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.10 | $0.20 | $0.12 | $0.11 | $0.15 | $0.19 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 2.70 | 3.43 | (0.61 | ) | 1.86 | 3.65 | (7.51 | ) | ||||||||||||||||
Total from investment operations | $2.80 | $3.63 | $(0.49 | ) | $1.97 | $3.80 | $(7.32 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.16 | ) | $(0.15 | ) | $(0.18 | ) | $(0.20 | ) | $(0.10 | ) | |||||||||||||
From net realized gain on investments | — | — | — | — | — | (1.41 | ) | |||||||||||||||||
Total distributions declared to shareholders | $— | $(0.16 | ) | $(0.15 | ) | $(0.18 | ) | $(0.20 | ) | $(1.51 | ) | |||||||||||||
Net asset value, end of period (x) | $25.58 | $22.78 | $19.31 | $19.95 | $18.16 | $14.56 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 12.29 | (n) | 18.83 | (2.42 | ) | 10.88 | 26.56 | (33.25 | ) | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.06 | (a) | 1.07 | 1.07 | 1.08 | 1.11 | 1.09 | |||||||||||||||||
Expenses after expense reductions (f) | 1.06 | (a) | 1.07 | 1.07 | 1.08 | 1.11 | 1.09 | |||||||||||||||||
Net investment income | 0.80 | (a) | 0.93 | 0.60 | 0.63 | 0.99 | 1.00 | |||||||||||||||||
Portfolio turnover | 11 | (n) | 28 | 22 | 22 | 34 | 29 | |||||||||||||||||
Net assets at end of period (000 omitted) | $190,365 | $141,806 | $78,392 | $62,309 | $46,267 | $38,259 |
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.
In this reporting period, the fund adopted the disclosure provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Update 2011-11 (“ASU 2011-11”), Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities along with the related scope clarification provisions of FASB Accounting Standards Update 2013-01 (“ASU 2013-01”) entitled Balance Sheet (Topic 210) – Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 is intended to enhance disclosures on the offsetting of financial assets and liabilities by requiring entities to disclose both gross and net information about financial instruments and transactions that are either offset in the statement of financial position or subject to a Master Netting Agreement or similar arrangement. ASU 2013-01 limits the scope of ASU 2011-11’s disclosure requirements on offsetting to financial assets and financial liabilities related to derivatives, repurchase and reverse repurchase agreements, and securities lending and securities borrowing transactions. The disclosures required by ASU 2011-11, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
In June 2013, FASB issued Accounting Standards Update 2013-08 Financial Services – Investment Companies (Topic 946) – Amendments to the Scope, Measurement, and Disclosure Requirements (“ASU 2013-08”) which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013. ASU 2013-08 sets forth a methodology for determining whether an entity should be characterized as an investment company and prescribes fair value accounting for an investment company’s non-controlling ownership interest in another investment company. FASB has determined that a fund registered under the Investment Company Act of 1940 automatically meets ASU 2013-08’s criteria for an investment company. Although still evaluating the potential impacts of ASU 2013-08 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
11
Table of Contents
MFS Investors Trust 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. The following is a summary of the levels used as of June 30, 2013 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $573,547,721 | $— | $— | $573,547,721 | ||||||||||||
France | 12,684,473 | 5,960,277 | — | 18,644,750 | ||||||||||||
Canada | 12,994,316 | — | — | 12,994,316 | ||||||||||||
United Kingdom | — | 11,208,340 | — | 11,208,340 | ||||||||||||
Germany | — | 8,630,484 | — | 8,630,484 | ||||||||||||
Netherlands | — | 3,359,549 | — | 3,359,549 | ||||||||||||
Mutual Funds | 3,263,206 | — | — | 3,263,206 | ||||||||||||
Total Investments | $602,489,716 | $29,158,650 | $— | $631,648,366 |
For further information regarding security characteristics, see the Portfolio of Investments.
Of the level 1 investments presented above, equity investments amounting to $9,323,472 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 – Under its Securities Lending Agency Agreement with the fund, State Street Bank and Trust Company (“State Street”), as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. 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. In the event of Borrower default, State Street will for the benefit of the fund either purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the fund the market value of the loaned securities. In return, State Street assumes the fund’s rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, State Street is responsible for the shortfall, but only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. 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, in the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income. At June 30, 2013, there were no securities on loan or collateral outstanding.
12
Table of Contents
MFS Investors Trust 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. For the six months ended June 30, 2013, 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 in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests.
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:
12/31/12 | ||||
Ordinary income (including any short-term capital gains) | $5,015,022 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/13 | ||||
Cost of investments | $482,538,389 | |||
Gross appreciation | 154,643,661 | |||
Gross depreciation | (5,533,684 | ) | ||
Net unrealized appreciation (depreciation) | $149,109,977 | |||
As of 12/31/12 | ||||
Undistributed ordinary income | 6,504,113 | |||
Capital loss carryforwards | (4,521,307 | ) | ||
Other temporary differences | 1,441 | |||
Net unrealized appreciation (depreciation) | 101,325,010 |
Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized for fund fiscal years beginning after December 31, 2011 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses (“post-enactment losses”). Previously, net capital losses were carried forward for eight years and treated as short-term losses (“pre-enactment losses”). As a transition rule, the Act requires that all post-enactment net capital losses be used before pre-enactment net capital losses.
As of December 31, 2012, the fund had capital loss carryforwards available to offset future realized gains. Such pre-enactment losses expire as follows:
12/31/17 | $(4,524,307 | ) |
13
Table of Contents
MFS Investors Trust Series
Notes to Financial Statements (unaudited) – continued
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and/or service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported in the Statements of Changes in Net Assets are presented by class as follows:
From net investment income | ||||||||
Six months ended 6/30/13 | Year ended 12/31/12 | |||||||
Initial Class | $— | $4,202,375 | ||||||
Service Class | — | 812,647 | ||||||
Total | $— | $5,015,022 |
(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, 2015. For the six months ended June 30, 2013, the fund’s average daily net assets did not exceed $2.5 billion and therefore, the management fee was not reduced. Effective April 1, 2013, MFS has agreed in writing to reduce its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund’s Board of Trustees. For the period April 1, 2013 through June 30, 2013, this management fee reduction amounted to $868, 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, 2013 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, 2013, the fee was $24,473, which equated to 0.0077% 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, 2013, these costs amounted to $591.
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, 2013 was equivalent to an annual effective rate of 0.0142% 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
14
Table of Contents
MFS Investors Trust Series
Notes to Financial Statements (unaudited) – continued
ended June 30, 2013, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $2,433 and are included in “Miscellaneous” expense in 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 $1,200, 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 current income consistent with preservation of capital and liquidity. Income earned on this investment is included in “Dividends from underlying affiliated funds” in 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 short-term obligations, aggregated $67,026,256 and $99,470,515, 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 6/30/13 | Year ended 12/31/12 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 311,831 | $7,660,332 | 1,072,356 | $23,443,603 | ||||||||||||
Service Class | 1,808,308 | 45,062,937 | 3,048,806 | 66,280,256 | ||||||||||||
2,120,139 | $52,723,269 | 4,121,162 | $89,723,859 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 191,452 | $4,202,375 | ||||||||||||
Service Class | — | — | 37,226 | 812,647 | ||||||||||||
— | $— | 228,678 | $5,015,022 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (3,115,912 | ) | $(78,529,798 | ) | (6,464,022 | ) | $(139,811,290 | ) | ||||||||
Service Class | (591,736 | ) | (14,830,904 | ) | (920,519 | ) | (19,902,093 | ) | ||||||||
(3,707,648 | ) | $(93,360,702 | ) | (7,384,541 | ) | $(159,713,383 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (2,804,081 | ) | $(70,869,466 | ) | (5,200,214 | ) | $(112,165,312 | ) | ||||||||
Service Class | 1,216,572 | 30,232,033 | 2,165,513 | 47,190,810 | ||||||||||||
(1,587,509 | ) | $(40,637,433 | ) | (3,034,701 | ) | $(64,974,502 | ) |
(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, 2013, the fund’s commitment fee and interest expense were $1,654 and $0, respectively, and are included in “Miscellaneous” expense in 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 | Acquisitions Shares/Par Amount | Dispositions Shares/Par | Ending Shares/Par Amount | ||||||||||||
MFS Institutional Money Market Portfolio | 5,740,723 | 46,588,421 | (49,065,938 | ) | 3,263,206 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $3,426 | $3,263,206 |
15
Table of Contents
MFS Investors Trust Series
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board’s most recent review and renewal of the fund’s Investment Advisory Agreement with MFS will be available on or about November 1, 2013 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products” 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” section of mfs.com.
16
Table of Contents
Table of Contents
SEMIANNUAL REPORT
June 30, 2013
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:
As the year progresses, the global economy continues to grind ahead slowly, held back by broad austerity measures. The U.S. economy remains a steadying force, driven by resilient consumers, who have taken the payroll tax increase and the sequestration’s early impact in stride. With U.S. housing and jobs showing steady expansion, domestic consumer-driven growth has offset weaker exports and the U.S. government’s spending constraints. In response to these developments, the U.S. Federal Reserve has begun to brace investors for an eventual shift in its monetary policy, causing global market tremors.
Japan has been another bright spot, with government and central bank stimulus policies leading to increased exports, a resurgent stock market and improved economic sentiment. After a six-month rally, Japan’s stocks slipped late in the second quarter, then picked up momentum on fresh signs that the country could soon break free of its chronic deflation. The major deterrent to global growth remains the eurozone, still in the grip of persistent recession. China has seen its pace of economic growth decelerate, a troubling turn for the country’s trading partners, who have come to rely on it as an engine for global growth.
As always, managing risk in the face of uncertainty remains a top priority for investors. At MFS®, our uniquely collaborative investment process employs integrated, global research and active risk management. Our global team of investment professionals shares ideas and evaluates opportunities across continents, investment disciplines and asset classes — all with a goal of building better insights, and ultimately better results, for our clients.
We are mindful of the many economic challenges investors face, and believe it is more important than ever to maintain a long-term view and employ time-tested principles, such as asset allocation and diversification. We remain confident that our unique approach can serve investors well as they work with their financial advisors to identify and pursue the most suitable opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2013
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 | ||||
MasterCard, Inc., “A” | 2.0% | |||
American Tower Corp., REIT | 1.8% | |||
LKQ Corp. | 1.6% | |||
FleetCor Technologies, Inc. | 1.6% | |||
Affiliated Managers Group, Inc. | 1.6% | |||
AMETEK, Inc. | 1.5% | |||
Gartner, Inc. | 1.5% | |||
Henry Schein, Inc. | 1.5% | |||
Cabot Oil & Gas Corp. | 1.4% | |||
Delphi Automotive PLC | 1.4% |
Equity sectors | ||||
Health Care | 16.8% | |||
Industrial Goods & Services | 14.9% | |||
Technology | 10.6% | |||
Retailing | 9.9% | |||
Leisure | 9.5% | |||
Special Products & Services | 8.7% | |||
Financial Services | 6.9% | |||
Energy | 5.5% | |||
Autos & Housing | 5.5% | |||
Basic Materials | 4.0% | |||
Utilities & Communications | 2.9% | |||
Consumer Staples | 2.6% | |||
Transportation | 1.5% |
Percentages are based on net assets as of 6/30/13.
The portfolio is actively managed and current holdings may be different.
2
Table of Contents
MFS Mid Cap Growth Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2013 through June 30, 2013
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, 2013 through June 30, 2013.
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 1/01/13 | Ending Account Value 6/30/13 | Expenses Paid During Period (p) 1/01/13-6/30/13 | ||||||||||||||
Initial Class | Actual | 0.81% | $1,000.00 | $1,138.72 | $4.30 | |||||||||||||
Hypothetical (h) | 0.81% | $1,000.00 | $1,020.78 | $4.06 | ||||||||||||||
Service Class | Actual | 1.06% | $1,000.00 | $1,136.36 | $5.61 | |||||||||||||
Hypothetical (h) | 1.06% | $1,000.00 | $1,019.54 | $5.31 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
3
Table of Contents
MFS Mid Cap Growth Series
PORTFOLIO OF INVESTMENTS – 6/30/13 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 99.3% | ||||||||
Aerospace – 2.6% | ||||||||
Precision Castparts Corp. | 25,980 | $ | 5,871,733 | |||||
TransDigm Group, Inc. | 37,256 | 5,840,623 | ||||||
|
| |||||||
$ | 11,712,356 | |||||||
|
| |||||||
Alcoholic Beverages – 0.9% | ||||||||
Beam, Inc. | 61,630 | $ | 3,889,469 | |||||
|
| |||||||
Apparel Manufacturers – 2.1% | ||||||||
Guess?, Inc. | 65,930 | $ | 2,045,808 | |||||
Michael Kors Holdings Ltd. (a) | 57,860 | 3,588,477 | ||||||
VF Corp. | 19,826 | 3,827,608 | ||||||
|
| |||||||
$ | 9,461,893 | |||||||
|
| |||||||
Automotive – 3.7% | ||||||||
Delphi Automotive PLC | 124,400 | $ | 6,305,836 | |||||
LKQ Corp. (a) | 284,010 | 7,313,258 | ||||||
TRW Automotive Holdings Corp. (a) | 42,440 | 2,819,714 | ||||||
|
| |||||||
$ | 16,438,808 | |||||||
|
| |||||||
Biotechnology – 3.0% | ||||||||
Alexion Pharmaceuticals, Inc. (a) | 36,510 | $ | 3,367,682 | |||||
Illumina, Inc. (a) | 39,770 | 2,976,387 | ||||||
Regeneron Pharmaceuticals, Inc. (a) | 9,368 | 2,106,676 | ||||||
Vertex Pharmaceuticals, Inc. (a) | 23,490 | 1,876,146 | ||||||
ViroPharma, Inc. (a) | 97,720 | 2,799,678 | ||||||
|
| |||||||
$ | 13,126,569 | |||||||
|
| |||||||
Broadcasting – 2.2% | ||||||||
Discovery Communications, Inc., “A” (a) | 75,652 | $ | 5,841,091 | |||||
Scripps Networks Interactive, Inc., “A” | 60,610 | 4,046,324 | ||||||
|
| |||||||
$ | 9,887,415 | |||||||
|
| |||||||
Brokerage & Asset Managers – 3.2% | ||||||||
Affiliated Managers Group, Inc. (a) | 42,555 | $ | 6,976,467 | |||||
Evercore Partners, Inc. | 62,400 | 2,451,072 | ||||||
IntercontinentalExchange, Inc. (a) | 27,386 | 4,868,135 | ||||||
|
| |||||||
$ | 14,295,674 | |||||||
|
| |||||||
Business Services – 7.4% | ||||||||
Bright Horizons Family Solutions, Inc. (a) | 86,570 | $ | 3,004,845 | |||||
Cognizant Technology Solutions Corp., “A” (a) | 48,535 | 3,038,776 | ||||||
FleetCor Technologies, Inc. (a) | 87,280 | 7,095,864 | ||||||
Gartner, Inc. (a) | 115,560 | 6,585,764 | ||||||
IHS, Inc., “A” (a) | 17,300 | 1,805,774 | ||||||
Jones Lang LaSalle, Inc. | 57,580 | 5,247,841 | ||||||
Realogy Holdings Corp. (a) | 36,810 | 1,768,352 | ||||||
Verisk Analytics, Inc., “A” (a) | 76,450 | 4,564,065 | ||||||
|
| |||||||
$ | 33,111,281 | |||||||
|
| |||||||
Cable TV – 2.1% | ||||||||
Charter Communications, Inc., “A” (a) | 42,903 | $ | 5,313,537 | |||||
Liberty Global PLC, “A” (a) | 51,850 | 3,841,048 | ||||||
|
| |||||||
$ | 9,154,585 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Computer Software – 4.3% | ||||||||
Autodesk, Inc. (a) | 69,060 | $ | 2,343,896 | |||||
Citrix Systems, Inc. (a) | 74,790 | 4,512,081 | ||||||
CommVault Systems, Inc. (a) | 41,080 | 3,117,561 | ||||||
PTC, Inc. (a) | 53,350 | 1,308,676 | ||||||
Qlik Technologies, Inc. (a) | 140,680 | 3,977,024 | ||||||
TIBCO Software, Inc. (a) | 172,480 | 3,691,072 | ||||||
|
| |||||||
$ | 18,950,310 | |||||||
|
| |||||||
Computer Software – Systems – 1.5% | ||||||||
SS&C Technologies Holdings, Inc. (a) | 93,550 | $ | 3,077,795 | |||||
Vantiv, Inc., “A” (a) | 137,220 | 3,787,272 | ||||||
|
| |||||||
$ | 6,865,067 | |||||||
|
| |||||||
Construction – 1.8% | ||||||||
Pool Corp. | 64,030 | $ | 3,355,812 | |||||
Stanley Black & Decker, Inc. | 59,045 | 4,564,179 | ||||||
|
| |||||||
$ | 7,919,991 | |||||||
|
| |||||||
Consumer Services – 1.3% | ||||||||
Anhanguera Educacional Participacoes S.A. | 53,900 | $ | 311,610 | |||||
Priceline.com, Inc. (a) | 6,567 | 5,431,763 | ||||||
|
| |||||||
$ | 5,743,373 | |||||||
|
| |||||||
Containers – 1.8% | ||||||||
Ball Corp. | 138,990 | $ | 5,773,645 | |||||
Silgan Holdings, Inc. | 51,820 | 2,433,467 | ||||||
|
| |||||||
$ | 8,207,112 | |||||||
|
| |||||||
Electrical Equipment – 7.9% | ||||||||
AMETEK, Inc. | 157,739 | $ | 6,672,360 | |||||
Amphenol Corp., “A” | 80,620 | 6,283,523 | ||||||
Mettler-Toledo International, Inc. (a) | 17,103 | 3,441,124 | ||||||
MSC Industrial Direct Co., Inc., “A” | 32,890 | 2,547,659 | ||||||
Pentair Ltd. | 37,720 | 2,176,067 | ||||||
Sensata Technologies Holding B.V. (a) | 82,300 | 2,872,270 | ||||||
TriMas Corp. (a) | 87,010 | 3,243,733 | ||||||
W.W. Grainger, Inc. | 18,266 | 4,606,320 | ||||||
WESCO International, Inc. (a) | 49,450 | 3,360,622 | ||||||
|
| |||||||
$ | 35,203,678 | |||||||
|
| |||||||
Electronics – 3.7% | ||||||||
Altera Corp. | 104,740 | $ | 3,455,373 | |||||
Linear Technology Corp. | 65,000 | 2,394,600 | ||||||
Microchip Technology, Inc. | 88,700 | 3,304,075 | ||||||
NXP Semiconductors N.V. (a) | 86,920 | 2,692,782 | ||||||
Stratasys Ltd. (a) | 23,240 | 1,946,118 | ||||||
Ultratech, Inc. (a) | 73,730 | 2,707,366 | ||||||
|
| |||||||
$ | 16,500,314 | |||||||
|
| |||||||
Energy – Independent – 2.9% | ||||||||
Cabot Oil & Gas Corp. | 89,730 | $ | 6,372,625 | |||||
Pioneer Natural Resources Co. | 27,463 | 3,975,269 | ||||||
SM Energy Co. | 46,270 | 2,775,275 | ||||||
|
| |||||||
$ | 13,123,169 | |||||||
|
|
4
Table of Contents
MFS Mid Cap Growth Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Entertainment – 1.3% | ||||||||
AMC Networks, Inc., “A” (a) | 57,320 | $ | 3,749,301 | |||||
Six Flags Entertainment Corp. | 63,120 | 2,219,299 | ||||||
|
| |||||||
$ | 5,968,600 | |||||||
|
| |||||||
Food & Beverages – 1.7% | ||||||||
Chr. Hansen Holding A/S | 99,554 | $ | 3,408,753 | |||||
Mead Johnson Nutrition Co., “A” | 54,420 | 4,311,697 | ||||||
|
| |||||||
$ | 7,720,450 | |||||||
|
| |||||||
Food & Drug Stores – 0.2% | ||||||||
Brazil Pharma S.A. (a) | 220,113 | $ | 1,012,105 | |||||
|
| |||||||
Gaming & Lodging – 1.2% | ||||||||
Wynn Resorts Ltd. | 40,830 | $ | 5,226,240 | |||||
|
| |||||||
General Merchandise – 0.7% | ||||||||
Five Below, Inc. (a) | 87,450 | $ | 3,214,662 | |||||
|
| |||||||
Health Maintenance Organizations – 0.4% | ||||||||
BioScrip, Inc. (a) | 103,740 | $ | 1,711,710 | |||||
|
| |||||||
Insurance – 0.3% | ||||||||
Lincoln National Corp. | 37,320 | $ | 1,361,060 | |||||
|
| |||||||
Internet – 1.1% | ||||||||
ChannelAdvisor Corp. (a) | 40,100 | $ | 630,773 | |||||
LinkedIn Corp., “A” (a) | 22,908 | 4,084,496 | ||||||
|
| |||||||
$ | 4,715,269 | |||||||
|
| |||||||
Leisure & Toys – 1.6% | ||||||||
Brunswick Corp. | 60,480 | $ | 1,932,336 | |||||
Polaris Industries, Inc. | 53,780 | 5,109,100 | ||||||
|
| |||||||
$ | 7,041,436 | |||||||
|
| |||||||
Machinery & Tools – 3.6% | ||||||||
Cummins, Inc. | 10,910 | $ | 1,183,299 | |||||
Flowserve Corp. | 33,460 | 1,807,175 | ||||||
Joy Global, Inc. | 59,860 | 2,905,006 | ||||||
Roper Industries, Inc. | 48,218 | 5,989,640 | ||||||
WABCO Holdings, Inc. (a) | 58,230 | 4,349,199 | ||||||
|
| |||||||
$ | 16,234,319 | |||||||
|
| |||||||
Major Banks – 0.4% | ||||||||
Morgan Stanley | 77,390 | $ | 1,890,638 | |||||
|
| |||||||
Medical & Health Technology & Services – 4.9% | ||||||||
Advisory Board Co. (a) | 69,220 | $ | 3,782,873 | |||||
Catamaran Corp. (a) | 106,750 | 5,200,860 | ||||||
Cerner Corp. (a) | 44,900 | 4,314,441 | ||||||
Covance, Inc. (a) | 25,980 | 1,978,117 | ||||||
Henry Schein, Inc. (a) | 68,550 | 6,563,663 | ||||||
|
| |||||||
$ | 21,839,954 | |||||||
|
| |||||||
Medical Equipment – 4.8% | ||||||||
Cooper Cos., Inc. | 52,724 | $ | 6,276,792 | |||||
Endologix, Inc. (a) | 119,410 | 1,585,765 | ||||||
Intuitive Surgical, Inc. (a) | 6,510 | 3,297,836 | ||||||
PerkinElmer, Inc. | 71,330 | 2,318,225 | ||||||
Sirona Dental Systems, Inc. (a) | 45,040 | 2,967,235 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Medical Equipment – continued | ||||||||
Thermo Fisher Scientific, Inc. | 58,220 | $ | 4,927,159 | |||||
|
| |||||||
$ | 21,373,012 | |||||||
|
| |||||||
Oil Services – 2.6% | ||||||||
Core Laboratories N.V. | 16,988 | $ | 2,576,400 | |||||
Dresser-Rand Group, Inc. (a) | 85,340 | 5,118,693 | ||||||
FMC Technologies, Inc. (a) | 69,380 | 3,863,078 | ||||||
|
| |||||||
$ | 11,558,171 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 2.4% | ||||||||
MasterCard, Inc., “A” | 15,521 | $ | 8,916,815 | |||||
TCF Financial Corp. | 114,820 | 1,628,148 | ||||||
|
| |||||||
$ | 10,544,963 | |||||||
|
| |||||||
Pharmaceuticals – 3.7% | ||||||||
Actavis, Inc. (a) | 18,350 | $ | 2,316,137 | |||||
Perrigo Co. | 48,399 | 5,856,279 | ||||||
Valeant Pharmaceuticals International, Inc. (a) | 62,730 | 5,399,798 | ||||||
Zoetis, Inc. | 93,140 | 2,877,095 | ||||||
|
| |||||||
$ | 16,449,309 | |||||||
|
| |||||||
Pollution Control – 0.8% | ||||||||
Stericycle, Inc. (a) | 30,562 | $ | 3,374,962 | |||||
|
| |||||||
Railroad & Shipping – 1.0% | ||||||||
Kansas City Southern Co. | 43,720 | $ | 4,632,571 | |||||
|
| |||||||
Real Estate – 0.6% | ||||||||
Host Hotels & Resorts, Inc., REIT | 156,060 | $ | 2,632,732 | |||||
|
| |||||||
Restaurants – 1.1% | ||||||||
Arcos Dorados Holdings, Inc. | 147,510 | $ | 1,722,917 | |||||
Chipotle Mexican Grill, Inc., “A” | 3,928 | 1,431,167 | ||||||
Chuy’s Holdings, Inc. (a) | 40,420 | 1,549,703 | ||||||
|
| |||||||
$ | 4,703,787 | |||||||
|
| |||||||
Specialty Chemicals – 2.2% | ||||||||
Airgas, Inc. | 32,240 | $ | 3,077,630 | |||||
Ecolab, Inc. | 22,890 | 1,949,999 | ||||||
FMC Corp. | 36,710 | 2,241,513 | ||||||
Rockwood Holdings, Inc. | 41,010 | 2,625,870 | ||||||
|
| |||||||
$ | 9,895,012 | |||||||
|
| |||||||
Specialty Stores – 6.9% | ||||||||
AutoZone, Inc. (a) | 11,200 | $ | 4,745,328 | |||||
Children’s Place Retail Store, Inc. (a) | 46,360 | 2,540,528 | ||||||
Dick’s Sporting Goods, Inc. | 35,450 | 1,774,627 | ||||||
Express, Inc. (a) | 8,920 | 187,052 | ||||||
Monro Muffler Brake, Inc. | 53,400 | 2,565,870 | ||||||
O’Reilly Automotive, Inc. (a) | 36,543 | 4,115,473 | ||||||
PetSmart, Inc. | 34,740 | 2,327,233 | ||||||
Ross Stores, Inc. | 85,510 | 5,541,903 | ||||||
Tiffany & Co. | 41,980 | 3,057,823 | ||||||
Tractor Supply Co. | 32,886 | 3,867,722 | ||||||
|
| |||||||
$ | 30,723,559 | |||||||
|
|
5
Table of Contents
MFS Mid Cap Growth Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Telecommunications – Wireless – 2.2% | ||||||||
American Tower Corp., REIT | 106,630 | $ | 7,802,117 | |||||
SBA Communications Corp. (a) | 28,720 | 2,128,726 | ||||||
|
| |||||||
$ | 9,930,843 | |||||||
|
| |||||||
Trucking – 0.5% | ||||||||
Expeditors International of Washington, Inc. | 59,470 | $ | 2,260,455 | |||||
|
| |||||||
Utilities – Electric Power – 0.7% | ||||||||
CMS Energy Corp. | 110,480 | $ | 3,001,742 | |||||
|
| |||||||
Total Common Stocks (Identified Cost, $380,342,782) | $ | 442,608,625 | ||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
MONEY MARKET FUNDS – 1.2% | ||||||||
MFS Institutional Money Market Portfolio, 0.11%, at Cost and Net Asset Value (v) | 5,210,928 | $ | 5,210,928 | |||||
|
| |||||||
Total Investments (Identified Cost, $385,553,710) | $ | 447,819,553 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – (0.5)% | (2,177,676 | ) | ||||||
|
| |||||||
Net Assets – 100.0% | $ | 445,641,877 | ||||||
|
|
(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 6/30/13 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $380,342,782) | $442,608,625 | |||||||
Underlying affiliated funds, at cost and value | 5,210,928 | |||||||
Total investments, at value (identified cost, $385,553,710) | $447,819,553 | |||||||
Foreign currency, at value (identified cost, $22) | 22 | |||||||
Receivables for | ||||||||
Investments sold | 5,444,394 | |||||||
Fund shares sold | 101,198 | |||||||
Interest and dividends | 165,929 | |||||||
Other assets | 1,768 | |||||||
Total assets | $453,532,864 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Investments purchased | $5,011,018 | |||||||
Fund shares reacquired | 2,763,810 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 37,250 | |||||||
Shareholder servicing costs | 352 | |||||||
Distribution and/or service fees | 2,187 | |||||||
Payable for independent Trustees’ compensation | 370 | |||||||
Accrued expenses and other liabilities | 76,000 | |||||||
Total liabilities | $7,890,987 | |||||||
Net assets | $445,641,877 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $370,235,164 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 62,265,843 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | 13,688,994 | |||||||
Accumulated net investment loss | (548,124 | ) | ||||||
Net assets | $445,641,877 | |||||||
Shares of beneficial interest outstanding | 59,965,154 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $365,991,037 | 48,979,235 | $7.47 | |||||||||
Service Class | 79,650,840 | 10,985,919 | 7.25 |
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 6/30/13 | ||||||||
Net investment loss | ||||||||
Income | ||||||||
Dividends | $1,341,235 | |||||||
Interest | 39,110 | |||||||
Dividends from underlying affiliated funds | 3,367 | |||||||
Foreign taxes withheld | (1,776 | ) | ||||||
Total investment income | $1,381,936 | |||||||
Expenses | ||||||||
Management fee | $1,700,942 | |||||||
Distribution and/or service fees | 100,044 | |||||||
Shareholder servicing costs | 9,042 | |||||||
Administrative services fee | 33,808 | |||||||
Independent Trustees’ compensation | 3,953 | |||||||
Custodian fee | 25,417 | |||||||
Shareholder communications | 22,182 | |||||||
Audit and tax fees | 25,054 | |||||||
Legal fees | 773 | |||||||
Miscellaneous | 10,330 | |||||||
Total expenses | $1,931,545 | |||||||
Fees paid indirectly | (10 | ) | ||||||
Reduction of expenses by investment adviser | (1,475 | ) | ||||||
Net expenses | $1,930,060 | |||||||
Net investment loss | $(548,124 | ) | ||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $28,072,817 | |||||||
Foreign currency | 3,669 | |||||||
Net realized gain (loss) on investments and foreign currency | $28,076,486 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $31,430,278 | |||||||
Translation of assets and liabilities in foreign currencies | (64 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $31,430,214 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $59,506,700 | |||||||
Change in net assets from operations | $58,958,576 |
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 6/30/13 (unaudited | ) | | Year ended 12/31/12 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment loss | $(548,124 | ) | $(239,624 | ) | ||||
Net realized gain (loss) on investments and foreign currency | 28,076,486 | 14,110,638 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 31,430,214 | 10,922,534 | ||||||
Change in net assets from operations | $58,958,576 | $24,793,548 | ||||||
Change in net assets from fund share transactions | $(49,584,129 | ) | $296,944,917 | |||||
Total change in net assets | $9,374,447 | $321,738,465 | ||||||
Net assets | ||||||||
At beginning of period | 436,267,430 | 114,528,965 | ||||||
At end of period (including accumulated net investment loss of $548,124 and | $445,641,877 | $436,267,430 |
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 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $6.56 | $5.63 | $5.99 | $4.62 | $3.27 | $7.66 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (loss) (d) | $(0.01 | ) | $(0.01 | ) | $(0.03 | ) | $(0.00 | )(w) | $(0.00 | )(w) | $0.01 | |||||||||||||
Net realized and unrealized gain (loss) on | 0.92 | 0.94 | (0.33 | ) | 1.37 | 1.36 | (3.55 | ) | ||||||||||||||||
Total from investment operations | $0.91 | $0.93 | $(0.36 | ) | $1.37 | $1.36 | $(3.54 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $— | $— | $— | $(0.01 | ) | $— | |||||||||||||||||
From net realized gain on investments | — | — | — | — | — | (0.85 | ) | |||||||||||||||||
From tax return of capital | — | — | — | — | (0.00 | )(w) | — | |||||||||||||||||
Total distributions declared to shareholders | $— | $— | $— | $— | $(0.01 | ) | $(0.85 | ) | ||||||||||||||||
Net asset value, end of period (x) | $7.47 | $6.56 | $5.63 | $5.99 | $4.62 | $3.27 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 13.87 | (n) | 16.52 | (6.01 | ) | 29.65 | 41.78 | (51.56 | ) | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.81 | (a) | 0.89 | 0.88 | 0.88 | 0.90 | 0.87 | |||||||||||||||||
Expenses after expense reductions (f) | 0.81 | (a) | 0.89 | 0.88 | 0.88 | 0.90 | 0.87 | |||||||||||||||||
Net investment income (loss) | (0.20 | )(a) | (0.10 | ) | (0.44 | ) | 0.09 | (0.09 | ) | 0.21 | ||||||||||||||
Portfolio turnover | 34 | (n) | 65 | 71 | 91 | 114 | 104 | |||||||||||||||||
Net assets at end of period (000 omitted) | $365,991 | $359,488 | $84,387 | $137,567 | $107,989 | $73,066 | ||||||||||||||||||
Service Class | Six months 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $6.38 | $5.48 | $5.84 | $4.52 | $3.20 | $7.52 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (loss) (d) | $(0.02 | ) | $(0.02 | ) | $(0.04 | ) | $(0.01 | ) | $(0.01 | ) | $(0.00 | )(w) | ||||||||||||
Net realized and unrealized gain (loss) on | 0.89 | 0.92 | (0.32 | ) | 1.33 | 1.33 | (3.47 | ) | ||||||||||||||||
Total from investment operations | $0.87 | $0.90 | $(0.36 | ) | $1.32 | $1.32 | $(3.47 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net realized gain on investments | $— | $— | $— | $— | $— | $(0.85 | ) | |||||||||||||||||
Net asset value, end of period (x) | $7.25 | $6.38 | $5.48 | $5.84 | $4.52 | $3.20 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 13.64 | (n) | 16.42 | (6.16 | ) | 29.20 | 41.25 | (51.59 | ) | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.06 | (a) | 1.14 | 1.13 | 1.13 | 1.16 | 1.12 | |||||||||||||||||
Expenses after expense reductions (f) | 1.06 | (a) | 1.14 | 1.13 | 1.13 | 1.15 | 1.12 | |||||||||||||||||
Net investment loss | (0.45 | )(a) | (0.35 | ) | (0.70 | ) | (0.16 | ) | (0.33 | ) | (0.05 | ) | ||||||||||||
Portfolio turnover | 34 | (n) | 65 | 71 | 91 | 114 | 104 | |||||||||||||||||
Net assets at end of period (000 omitted) | $79,651 | $76,779 | $30,142 | $35,722 | $29,524 | $22,511 |
See Notes to Financial Statements
10
Table of Contents
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
Table of Contents
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 the disclosure provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Update 2011-11 (“ASU 2011-11”), Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities along with the related scope clarification provisions of FASB Accounting Standards Update 2013-01 (“ASU 2013-01”) entitled Balance Sheet (Topic 210) – Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 is intended to enhance disclosures on the offsetting of financial assets and liabilities by requiring entities to disclose both gross and net information about financial instruments and transactions that are either offset in the statement of financial position or subject to a Master Netting Agreement or similar arrangement. ASU 2013-01 limits the scope of ASU 2011-11’s disclosure requirements on offsetting to financial assets and financial liabilities related to derivatives, repurchase and reverse repurchase agreements, and securities lending and securities borrowing transactions. The disclosures required by ASU 2011-11, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
In June 2013, FASB issued Accounting Standards Update 2013-08 Financial Services – Investment Companies (Topic 946) – Amendments to the Scope, Measurement, and Disclosure Requirements (“ASU 2013-08”) which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013. ASU 2013-08 sets forth a methodology for determining whether an entity should be characterized as an investment company and prescribes fair value accounting for an investment company’s non-controlling ownership interest in another investment company. FASB has determined that a fund registered under the Investment Company Act of 1940 automatically meets ASU 2013-08’s criteria for an investment company. Although still evaluating the potential impacts of ASU 2013-08 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
12
Table of Contents
MFS Mid Cap Growth 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. The following is a summary of the levels used as of June 30, 2013 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities | $442,608,625 | $— | $— | $442,608,625 | ||||||||||||
Mutual Funds | 5,210,928 | — | — | 5,210,928 | ||||||||||||
Total Investments | $447,819,553 | $— | $— | $447,819,553 |
For further information regarding security characteristics, see the Portfolio of Investments.
Of the level 1 investments presented above, equity investments amounting to $3,720,362 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 – Under its Securities Lending Agency Agreement with the fund, State Street Bank and Trust Company (“State Street”), as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. 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. In the event of Borrower default, State Street will for the benefit of the fund either purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the fund the market value of the loaned securities. In return, State Street assumes the fund’s rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, State Street is responsible for the shortfall, but only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. 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 in the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income. At June 30, 2013, there were no securities on loan or collateral outstanding.
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.
13
Table of Contents
MFS Mid Cap Growth Series
Notes to Financial Statements (unaudited) – continued
Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend and interest payments received in additional securities are recorded on the ex-dividend or ex-interest date in an amount equal to the value of the security on such date.
The fund may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
Fees Paid Indirectly – The fund’s custody fee may be reduced according to an arrangement that measures the value of cash deposited with the custodian by the fund. This amount, for the six months ended June 30, 2013, is shown as a reduction of total expenses in the Statement of Operations.
Tax Matters and Distributions – The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Foreign taxes have been accrued by the fund in the accompanying financial statements in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
During the year ended December 31, 2012, there were no significant adjustments due to differences between book and tax accounting.
The fund declared no distributions for the current period or for the year ended December 31, 2012.
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/13 | ||||
Cost of investments | $385,761,502 | |||
Gross appreciation | 67,061,195 | |||
Gross depreciation | (5,003,144 | ) | ||
Net unrealized appreciation (depreciation) | $62,058,051 | |||
As of 12/31/12 | ||||
Capital loss carryforwards | (14,179,699 | ) | ||
Other temporary differences | 64 | |||
Net unrealized appreciation (depreciation) | 30,627,772 |
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 for fund fiscal years beginning after December 31, 2010 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses (“post-enactment losses”). Previously, net capital losses were carried forward for eight years and treated as short-term losses (“pre-enactment losses”). As a transition rule, the Act requires that all post-enactment net capital losses be used before pre-enactment net capital losses.
As of December 31, 2012, the fund had capital loss carryforwards available to offset future realized gains. Such pre-enactment losses expire as follows:
12/31/15 | $(8,394,469 | ) | ||
12/31/16 | (4,433,720 | ) | ||
12/31/17 | (1,351,510 | ) | ||
Total | $(14,179,699 | ) |
14
Table of Contents
MFS Mid Cap Growth Series
Notes to Financial Statements (unaudited) – continued
The availability of $12,828,189 of the capital loss carryforwards, which were acquired on August 17, 2012 in connection with the MFS Mid Cap Growth Portfolio merger, may be limited in a given year.
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and/or service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses.
(3) | Transactions with Affiliates |
Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates:
First $1 billion of average daily net assets | 0.75% | |||
Average daily net assets in excess of $1 billion | 0.70% |
Effective April 1, 2013, MFS has agreed in writing to reduce its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund’s Board of Trustees. For the period April 1, 2013 through June 30, 2013, this management fee reduction amounted to $613, 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, 2013 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, 2013, the fee was $8,840, which equated to 0.0039% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses paid by MFSC on behalf of the fund. For the six months ended June 30, 2013, these costs amounted to $202.
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, 2013 was equivalent to an annual effective rate of 0.0149% of the fund’s average daily net assets.
Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – This fund and certain other funds managed by MFS (the funds) have entered into services agreements (the Agreements) which provide for payment of fees by the funds to Tarantino LLC and Griffin Compliance LLC in return for the provision of services of an Independent Chief Compliance Officer (ICCO) and Assistant ICCO, respectively, for the funds. The ICCO and Assistant ICCO are officers of the funds and the sole members of Tarantino LLC and Griffin Compliance LLC, respectively. The funds can terminate the Agreements with Tarantino LLC and Griffin Compliance LLC at any time under the terms of the Agreements. For the six months ended June 30, 2013, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $1,640 and are included in “Miscellaneous” expense in 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 $862, 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 current income consistent with preservation of capital and liquidity. Income earned on this investment is included in “Dividends from underlying affiliated funds” in the Statement of Operations. This money market fund does not pay a management fee to MFS.
15
Table of Contents
MFS Mid Cap Growth Series
Notes to Financial Statements (unaudited) – continued
(4) | Portfolio Securities |
Purchases and sales of investments, other than short-term obligations, aggregated $140,138,032 and $189,903,659, 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 6/30/13 | Year ended 12/31/12 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 1,064,403 | $7,464,206 | 959,760 | $5,983,020 | ||||||||||||
Service Class | 450,638 | 3,150,065 | 992,068 | 6,016,557 | ||||||||||||
1,515,041 | $10,614,271 | 1,951,828 | $11,999,577 | |||||||||||||
Shares issued in connection with acquisition of MFS Mid Cap Growth Portfolio | ||||||||||||||||
Initial Class | — | $— | 3,130,532 | $19,816,269 | ||||||||||||
Service Class | — | — | 1,761,981 | 10,836,185 | ||||||||||||
— | $— | 4,892,513 | $30,652,454 | |||||||||||||
Shares issued in connection with acquisition of SC WMC Blue Chip Mid Cap Fund | ||||||||||||||||
Initial Class | — | $— | 40,449,941 | $260,093,122 | ||||||||||||
Service Class | — | — | 5,344,503 | 33,403,141 | ||||||||||||
— | $— | 45,794,444 | $293,496,263 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (6,860,550 | ) | $(49,607,745 | ) | (4,759,917 | ) | $(29,732,542 | ) | ||||||||
Service Class | (1,507,212 | ) | (10,590,655 | ) | (1,559,316 | ) | (9,470,835 | ) | ||||||||
(8,367,762 | ) | $(60,198,400 | ) | (6,319,233 | ) | $(39,203,377 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (5,796,147 | ) | $(42,143,539 | ) | 39,780,316 | $256,159,869 | ||||||||||
Service Class | (1,056,574 | ) | (7,440,590 | ) | 6,539,236 | 40,785,048 | ||||||||||
(6,852,721 | ) | $(49,584,129 | ) | 46,319,552 | $296,944,917 |
The fund is one of several mutual funds in which the MFS funds-of-funds may invest. The MFS funds-of-funds do not invest in the underlying MFS funds for the purpose of exercising management or control. At the end of the period, the MFS Moderate Allocation Portfolio, the MFS Growth Allocation Portfolio, and the MFS Conservative Allocation Portfolio were the owners of record of approximately 32%, 12%, and 8%, respectively, of the value of outstanding voting shares of the fund.
(6) | Line of Credit |
The fund and certain other funds managed by MFS participate in a $1.1 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, 2013, the fund’s commitment fee and interest expense were $864 and $0, respectively, and are included in “Miscellaneous” expense in 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 | 1,598,892 | 65,714,151 | (62,102,115 | ) | 5,210,928 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $3,367 | $5,210,928 |
16
Table of Contents
MFS Mid Cap Growth Series
Notes to Financial Statements (unaudited) – continued
(8) | Acquisitions |
At close of business on August 17, 2012, the fund with net assets of approximately $114,276,515, acquired all of the assets and liabilities of MFS Mid Cap Growth Portfolio, a series of MFS Variable Insurance Trust II. The purpose of the transaction was to provide shareholders of the MFS Mid Cap Growth Portfolio the opportunity to participate in a larger combined portfolio with an identical investment objective and identical investment policies and strategies. The acquisition was accomplished by a tax-free exchange of approximately 4,892,513 shares of the fund (valued at approximately $30,652,454) for all of the assets and liabilities of MFS Mid Cap Growth Portfolio. MFS Mid Cap Growth Portfolio then distributed the shares of the fund that MFS Mid Cap Growth Portfolio received from the fund to its shareholders. MFS Mid Cap Growth Portfolio’s investments on that date were valued at approximately $30,646,648 with a cost basis of approximately $26,191,922. For financial reporting purposes, assets received and shares issued by the fund were recorded at fair value; however, the cost basis of the investments received from MFS Mid Cap Growth Portfolio were carried forward to align ongoing reporting of the fund’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.
At close of business on December 7, 2012, the fund with net assets of approximately $138,538,778, acquired all of the assets and liabilities of SC WMC Blue Chip Mid Cap Fund, a series of Sun Capital Advisers Trust. The purpose of the transaction was to provide shareholders of the SC WMC Blue Chip Mid Cap Fund the opportunity to participate in a larger combined portfolio with a similar investment objective and similar investment policies and strategies. The acquisition was accomplished by a tax-free exchange of approximately 45,794,444 shares of the fund (valued at approximately $293,496,263) for all of the assets and liabilities of SC WMC Blue Chip Mid Cap Fund. SC WMC Blue Chip Mid Cap Fund then distributed the shares of the fund that SC WMC Blue Chip Mid Cap Fund received from the fund to its shareholders. SC WMC Blue Chip Mid Cap Fund’s investments on that date were valued at approximately $290,124,383 with a cost basis of approximately $283,276,379. For financial reporting purposes, assets received and shares issued by the fund were recorded at fair value; however, the cost basis of the investments received from SC WMC Blue Chip Mid Cap Fund were carried forward to align ongoing reporting of the fund’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.
17
Table of Contents
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, 2013 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products” 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” section of mfs.com.
18
Table of Contents
Table of Contents
SEMIANNUAL REPORT
June 30, 2013
MFS® NEW DISCOVERY SERIES
MFS® Variable Insurance Trust
VND-SEM
Table of Contents
MFS® NEW DISCOVERY SERIES
The report is prepared for the general information of contract owners. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED Ÿ MAY LOSE VALUE Ÿ NO BANK OR CREDIT UNION GUARANTEE Ÿ NOT A DEPOSIT Ÿ NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
Table of Contents
MFS New Discovery Series
LETTER FROM THE CHAIRMAN AND CEO
Dear Contract Owners:
As the year progresses, the global economy continues to grind ahead slowly, held back by broad austerity measures. The U.S. economy remains a steadying force, driven by resilient consumers, who have taken the payroll tax increase and the sequestration’s early impact in stride. With U.S. housing and jobs showing steady expansion, domestic consumer-driven growth has offset weaker exports and the U.S. government’s spending constraints. In response to these developments, the U.S. Federal Reserve has begun to brace investors for an eventual shift in its monetary policy, causing global market tremors.
Japan has been another bright spot, with government and central bank stimulus policies leading to increased exports, a resurgent stock market and improved economic sentiment. After a six-month rally, Japan’s stocks slipped late in the second quarter, then picked up momentum on fresh signs that the country could soon break free of its chronic deflation. The major deterrent to global growth remains the eurozone, still in the grip of persistent recession. China has seen its pace of economic growth decelerate, a troubling turn for the country’s trading partners, who have come to rely on it as an engine for global growth.
As always, managing risk in the face of uncertainty remains a top priority for investors. At MFS®, our uniquely collaborative investment process employs integrated, global research and active risk management. Our global team of investment professionals shares ideas and evaluates opportunities across continents, investment disciplines and asset classes — all with a goal of building better insights, and ultimately better results, for our clients.
We are mindful of the many economic challenges investors face, and believe it is more important than ever to maintain a long-term view and employ time-tested principles, such as asset allocation and diversification. We remain confident that our unique approach can serve investors well as they work with their financial advisors to identify and pursue the most suitable opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2013
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 | ||||
Tronox Ltd., “A” | 2.3% | |||
Swift Transportation Co. | 2.0% | |||
Diana Shipping, Inc. | 1.9% | |||
Constant Contact, Inc. | 1.9% | |||
Cabot Oil & Gas Corp. | 1.9% | |||
Polypore International, Inc. | 1.9% | |||
Atwood Oceanics, Inc. | 1.8% | |||
Endologix, Inc. | 1.8% | |||
FleetMatics Group PLC | 1.8% | |||
CommVault Systems, Inc. | 1.7% |
Equity sectors | ||||
Technology | 23.0% | |||
Industrial Goods & Services | 14.5% | |||
Health Care | 14.2% | |||
Basic Materials | 10.2% | |||
Energy | 9.8% | |||
Special Products & Services | 9.4% | |||
Transportation | 6.5% | |||
Retailing | 4.2% | |||
Leisure | 2.8% | |||
Financial Services | 2.4% | |||
Consumer Staples | 1.6% | |||
Autos & Housing | 1.0% |
Percentages are based on net assets as of 6/30/13.
The portfolio is actively managed and current holdings may be different.
2
Table of Contents
MFS New Discovery Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2013 through June 30, 2013
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, 2013 through June 30, 2013.
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 1/01/13 | Ending Account Value | Expenses Paid During Period (p) 1/01/13-6/30/13 | ||||||||||||||
Initial Class | Actual | 0.96% | $1,000.00 | $1,189.57 | $5.21 | |||||||||||||
Hypothetical (h) | 0.96% | $1,000.00 | $1,020.03 | $4.81 | ||||||||||||||
Service Class | Actual | 1.21% | $1,000.00 | $1,188.54 | $6.57 | |||||||||||||
Hypothetical (h) | 1.21% | $1,000.00 | $1,018.79 | $6.06 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
3
Table of Contents
MFS New Discovery Series
PORTFOLIO OF INVESTMENTS – 6/30/13 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 99.6% | ||||||||
Brokerage & Asset Managers – 1.4% | ||||||||
LPL Financial Holdings, Inc. | 327,000 | $ | 12,347,519 | |||||
|
| |||||||
Business Services – 7.2% | ||||||||
Bright Horizons Family Solutions, Inc. (a) | 416,550 | $ | 14,458,451 | |||||
Concur Technologies, Inc. (a) | 77,040 | 6,269,515 | ||||||
Constant Contact, Inc. (a) | 1,066,368 | 17,136,534 | ||||||
FleetCor Technologies, Inc. (a) | 75,946 | 6,174,410 | ||||||
Gartner, Inc. (a) | 114,270 | 6,512,247 | ||||||
Performant Financial Corp. (a) | 560,715 | 6,498,687 | ||||||
Xoom Corp. (a) | 351,020 | 8,045,378 | ||||||
|
| |||||||
$ | 65,095,222 | |||||||
|
| |||||||
Chemicals – 1.4% | ||||||||
Intrepid Potash, Inc. | 638,250 | $ | 12,158,663 | |||||
|
| |||||||
Computer Software – 4.3% | ||||||||
ANSYS, Inc. (a) | 86,080 | $ | 6,292,448 | |||||
CommVault Systems, Inc. (a) | 198,690 | 15,078,584 | ||||||
Qlik Technologies, Inc. (a) | 302,784 | 8,559,704 | ||||||
SolarWinds, Inc. (a) | 219,620 | 8,523,452 | ||||||
|
| |||||||
$ | 38,454,188 | |||||||
|
| |||||||
Computer Software – Systems – 8.3% | ||||||||
Exa Corp. (a) | 284,720 | $ | 2,932,616 | |||||
FleetMatics Group PLC (a) | 474,620 | 15,771,623 | ||||||
Greenway Medical Technologies, Inc. (a) | 252,461 | 3,115,369 | ||||||
Guidewire Software, Inc. (a) | 183,500 | 7,716,175 | ||||||
Linx S.A. | 217,500 | 3,509,086 | ||||||
Model N, Inc. (a) | 562,532 | 13,140,748 | ||||||
SciQuest, Inc. (a) | 582,681 | 14,596,159 | ||||||
SS&C Technologies Holdings, Inc. (a) | 344,934 | 11,348,329 | ||||||
Tableau Software, Inc., “A” (a) | 45,270 | 2,508,863 | ||||||
|
| |||||||
$ | 74,638,968 | |||||||
|
| |||||||
Consumer Services – 2.2% | ||||||||
HomeAway, Inc. (a) | 414,827 | $ | 13,415,505 | |||||
MakeMyTrip Ltd. (a) | 469,437 | 6,698,866 | ||||||
|
| |||||||
$ | 20,114,371 | |||||||
|
| |||||||
Electrical Equipment – 2.5% | ||||||||
MSC Industrial Direct Co., Inc., “A” | 139,610 | $ | 10,814,191 | |||||
Sensata Technologies Holding B.V. (a) | 340,706 | 11,890,639 | ||||||
|
| |||||||
$ | 22,704,830 | |||||||
|
| |||||||
Electronics – 7.0% | ||||||||
Mellanox Technologies Ltd. (a) | 220,360 | $ | 10,907,820 | |||||
Monolithic Power Systems, Inc. | 253,524 | 6,112,464 | ||||||
Silicon Laboratories, Inc. (a) | 249,360 | 10,325,998 | ||||||
Stratasys Ltd. (a) | 114,050 | 9,550,547 | ||||||
Ultratech, Inc. (a) | 331,800 | 12,183,696 | ||||||
Universal Display Corp. (a) | 110,640 | 3,110,090 | ||||||
Veeco Instruments, Inc. (a) | 307,209 | 10,881,343 | ||||||
|
| |||||||
$ | 63,071,958 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Energy – Independent – 6.2% | ||||||||
Alpha Natural Resources, Inc. (a) | 689,930 | $ | 3,615,233 | |||||
Arch Coal, Inc. | 892,170 | 3,372,403 | ||||||
Cabot Oil & Gas Corp. | 240,918 | 17,109,996 | ||||||
CONSOL Energy, Inc. | 459,030 | 12,439,713 | ||||||
Peabody Energy Corp. | 250,820 | 3,672,005 | ||||||
Range Resources Corp. | 166,689 | 12,888,393 | ||||||
Walter Energy, Inc. (l) | 292,830 | 3,045,432 | ||||||
|
| |||||||
$ | 56,143,175 | |||||||
|
| |||||||
Food & Beverages – 1.6% | ||||||||
Flowers Foods, Inc. | 152,980 | $ | 3,373,209 | |||||
Green Mountain Coffee Roasters, Inc. (a) | 151,190 | 11,348,321 | ||||||
|
| |||||||
$ | 14,721,530 | |||||||
|
| |||||||
Food & Drug Stores – 1.2% | ||||||||
Fairway Group Holdings Corp. (a) | 443,050 | $ | 10,708,519 | |||||
|
| |||||||
Furniture & Appliances – 1.0% | ||||||||
SodaStream International Ltd. (a)(l) | 123,280 | $ | 8,956,292 | |||||
|
| |||||||
Gaming & Lodging – 0.9% | ||||||||
Norwegian Cruise Line Holdings Ltd. (a) | 268,360 | $ | 8,133,992 | |||||
|
| |||||||
General Merchandise – 0.7% | ||||||||
Five Below, Inc. (a) | 173,094 | $ | 6,362,935 | |||||
|
| |||||||
Internet – 2.9% | ||||||||
ChannelAdvisor Corp. (a) | 138,110 | $ | 2,172,470 | |||||
Millennial Media, Inc. (a) | 481,990 | 4,198,133 | ||||||
Pandora Media, Inc. (a) | 142,490 | 2,621,816 | ||||||
Shutterfly, Inc. (a) | 212,520 | 11,856,491 | ||||||
Shutterstock, Inc. (a) | 98,090 | 5,471,460 | ||||||
|
| |||||||
$ | 26,320,370 | |||||||
|
| |||||||
Machinery & Tools – 12.0% | ||||||||
Allison Transmission Holdings, Inc. | 565,240 | $ | 13,045,739 | |||||
IPG Photonics Corp. | 205,355 | 12,471,209 | ||||||
Joy Global, Inc. | 231,382 | 11,228,968 | ||||||
Kennametal, Inc. | 309,466 | 12,016,565 | ||||||
Nordson Corp. | 92,540 | 6,413,947 | ||||||
Polypore International, Inc. (a) | 416,340 | 16,778,502 | ||||||
Proto Labs, Inc. (a) | 224,760 | 14,602,657 | ||||||
United Rentals, Inc. (a) | 181,326 | 9,049,981 | ||||||
WABCO Holdings, Inc. (a) | 171,611 | 12,817,626 | ||||||
|
| |||||||
$ | 108,425,194 | |||||||
|
| |||||||
Medical & Health Technology & Services – 4.9% | ||||||||
Advisory Board Co. (a) | 166,262 | $ | 9,086,218 | |||||
Community Health Systems, Inc. | 122,700 | 5,752,176 | ||||||
Health Management Associates, Inc., “A” (a) | 385,750 | 6,063,990 | ||||||
Healthcare Services Group, Inc. | 559,438 | 13,717,420 | ||||||
HealthStream, Inc. (a) | 186,100 | 4,712,052 | ||||||
LifePoint Hospitals, Inc. (a) | 100,740 | 4,920,142 | ||||||
|
| |||||||
$ | 44,251,998 | |||||||
|
|
4
Table of Contents
MFS New Discovery Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Medical Equipment – 8.3% | ||||||||
Align Technology, Inc. (a) | 347,637 | $ | 12,876,474 | |||||
Cardiovascular Systems, Inc. (a) | 493,480 | 10,461,776 | ||||||
Cepheid, Inc. (a) | 371,778 | 12,796,599 | ||||||
Endologix, Inc. (a) | 1,193,241 | 15,846,240 | ||||||
Genmark Diagnostics, Inc. (a) | 331,580 | 3,428,537 | ||||||
Globus Medical, Inc., “A” (a) | 485,280 | 8,181,821 | ||||||
Novadaq Technologies, Inc. (a) | 171,790 | 2,312,293 | ||||||
NxStage Medical, Inc. (a) | 484,251 | 6,915,104 | ||||||
TearLab Corp. (a) | 44,520 | 472,802 | ||||||
Uroplasty, Inc. (a) | 705,933 | 1,461,281 | ||||||
|
| |||||||
$ | 74,752,927 | |||||||
|
| |||||||
Metals & Mining – 5.7% | ||||||||
Century Aluminum Co. (a) | 729,670 | $ | 6,771,338 | |||||
Globe Specialty Metals, Inc. | 1,040,169 | 11,306,637 | ||||||
GrafTech International Ltd. (a) | 1,359,500 | 9,897,160 | ||||||
Horsehead Holding Corp. (a) | 382,530 | 4,900,209 | ||||||
Iluka Resources Ltd. | 1,229,022 | 11,096,179 | ||||||
Molycorp, Inc. (a)(l) | 1,155,330 | 7,163,046 | ||||||
|
| |||||||
$ | 51,134,569 | |||||||
|
| |||||||
Network & Telecom – 0.5% | ||||||||
Palo Alto Networks, Inc. (a) | 108,460 | $ | 4,572,674 | |||||
|
| |||||||
Oil Services – 3.6% | ||||||||
Atwood Oceanics, Inc. (a) | 312,388 | $ | 16,259,795 | |||||
Dresser-Rand Group, Inc. (a) | 211,817 | 12,704,784 | ||||||
Superior Energy Services, Inc. (a) | 149,620 | 3,881,143 | ||||||
|
| |||||||
$ | 32,845,722 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 1.0% | ||||||||
First Republic Bank | 222,410 | $ | 8,558,337 | |||||
|
| |||||||
Pharmaceuticals – 1.0% | ||||||||
Kythera Biopharmaceuticals, Inc. (a) | 133,130 | $ | 3,601,167 | |||||
Perrigo Co. | 43,765 | 5,295,565 | ||||||
|
| |||||||
$ | 8,896,732 | |||||||
|
| |||||||
Railroad & Shipping – 2.8% | ||||||||
Diana Shipping, Inc. (a) | 1,718,040 | $ | 17,249,122 | |||||
Navios Maritime Holdings, Inc. | 1,428,041 | 7,997,030 | ||||||
|
| |||||||
$ | 25,246,152 | |||||||
|
| |||||||
Restaurants – 1.9% | ||||||||
Arcos Dorados Holdings, Inc. | 844,008 | $ | 9,858,013 | |||||
Chuy’s Holdings, Inc. (a) | 182,487 | 6,996,552 | ||||||
|
| |||||||
$ | 16,854,565 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Specialty Chemicals – 3.1% | ||||||||
Rockwood Holdings, Inc. | 115,220 | $ | 7,377,537 | |||||
Tronox Ltd., “A” | 1,015,530 | 20,462,930 | ||||||
|
| |||||||
$ | 27,840,467 | |||||||
|
| |||||||
Specialty Stores – 2.3% | ||||||||
Citi Trends, Inc. (a) | 606,710 | $ | 8,815,496 | |||||
Monro Muffler Brake, Inc. | 247,918 | 11,912,460 | ||||||
|
| |||||||
$ | 20,727,956 | |||||||
|
| |||||||
Trucking – 3.7% | ||||||||
Atlas Air Worldwide Holdings, Inc. (a) | 261,823 | $ | 11,457,374 | |||||
Celadon Group, Inc. | 195,470 | 3,567,328 | ||||||
Swift Transportation Co. (a) | 1,096,931 | 18,143,239 | ||||||
|
| |||||||
$ | 33,167,941 | |||||||
|
| |||||||
Total Common Stocks (Identified Cost, $759,206,540) | $ | 897,207,766 | ||||||
|
| |||||||
MONEY MARKET FUNDS – 0.0% | ||||||||
MFS Institutional Money Market Portfolio, 0.11%, at Cost and Net Asset Value (v) | 213 | $ | 213 | |||||
|
| |||||||
COLLATERAL FOR SECURITIES LOANED – 1.4% | ||||||||
Navigator Securities Lending Prime Portfolio, 0.17%, at Cost and Net Asset Value (j) | 12,363,167 | $ | 12,363,167 | |||||
|
| |||||||
Total Investments (Identified Cost, $771,569,920) | $ | 909,571,146 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – (1.0)% | (8,880,517 | ) | ||||||
|
| |||||||
Net Assets – 100.0% | $ | 900,690,629 | ||||||
|
|
(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:
PLC | Public Limited Company |
See Notes to Financial Statements
5
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 6/30/13 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $771,569,707) | $909,570,933 | |||||||
Underlying affiliated funds, at cost and value | 213 | |||||||
Total investments, at value, including $12,637,184 of securities on loan (identified cost, $771,569,920) | $909,571,146 | |||||||
Receivables for | ||||||||
Investments sold | 16,868,006 | |||||||
Fund shares sold | 414,776 | |||||||
Interest and dividends | 91,580 | |||||||
Other assets | 2,605 | |||||||
Total assets | $926,948,113 | |||||||
Liabilities | ||||||||
Payable to custodian | $1,917,700 | |||||||
Payables for | ||||||||
Investments purchased | 9,658,547 | |||||||
Fund shares reacquired | 2,088,737 | |||||||
Collateral for securities loaned, at value | 12,363,167 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 95,332 | |||||||
Shareholder servicing costs | 1,323 | |||||||
Distribution and/or service fees | 13,161 | |||||||
Payable for independent Trustees’ compensation | 2,601 | |||||||
Accrued expenses and other liabilities | 116,916 | |||||||
Total liabilities | $26,257,484 | |||||||
Net assets | $900,690,629 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $678,806,649 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 138,001,196 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | 86,336,931 | |||||||
Accumulated net investment loss | (2,454,147 | ) | ||||||
Net assets | $900,690,629 | |||||||
Shares of beneficial interest outstanding | 49,428,666 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $418,379,255 | 22,381,473 | $18.69 | |||||||||
Service Class | 482,311,374 | 27,047,193 | 17.83 |
See Notes to Financial Statements
6
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 6/30/13 | ||||||||
Net Investment loss | ||||||||
Income | ||||||||
Dividends | $1,931,770 | |||||||
Income on securities loaned | 348,133 | |||||||
Dividends from underlying affiliated funds | 2,146 | |||||||
Total investment income | $2,282,049 | |||||||
Expenses | ||||||||
Management fee | $3,918,026 | |||||||
Distribution and/or service fees | 559,022 | |||||||
Shareholder servicing costs | 29,237 | |||||||
Administrative services fee | 59,681 | |||||||
Independent Trustees’ compensation | 8,267 | |||||||
Custodian fee | 41,861 | |||||||
Shareholder communications | 65,518 | |||||||
Audit and tax fees | 26,106 | |||||||
Legal fees | 4,492 | |||||||
Miscellaneous | 26,854 | |||||||
Total expenses | $4,739,064 | |||||||
Fees paid indirectly | (34 | ) | ||||||
Reduction of expenses by investment adviser | (2,834 | ) | ||||||
Net expenses | $4,736,196 | |||||||
Net investment loss | $(2,454,147 | ) | ||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $90,334,686 | |||||||
Foreign currency | (5,047 | ) | ||||||
Net realized gain (loss) on investments and foreign currency | $90,329,639 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $60,345,719 | |||||||
Translation of assets and liabilities in foreign currencies | 2,799 | |||||||
Net unrealized gain (loss) on investments and foreign currency translation | $60,348,518 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $150,678,157 | |||||||
Change in net assets from operations | $148,224,010 |
See Notes to Financial Statements
7
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 6/30/13 (unaudited |
) |
| Year ended 12/31/12 |
| |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment loss | $(2,454,147 | ) | $(2,951,779 | ) | ||||
Net realized gain (loss) on investments and foreign currency | 90,329,639 | 17,644,328 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 60,348,518 | 121,534,136 | ||||||
Change in net assets from operations | $148,224,010 | $136,226,685 | ||||||
Distributions declared to shareholders | ||||||||
From net realized gain on investments | $— | $(66,916,984 | ) | |||||
Change in net assets from fund share transactions | $(35,864,337 | ) | $43,021,119 | |||||
Total change in net assets | $112,359,673 | $112,330,820 | ||||||
Net assets | ||||||||
At beginning of period | 788,330,956 | 676,000,136 | ||||||
At end of period (including accumulated net investment loss of $2,454,147 and | $900,690,629 | $788,330,956 |
See Notes to Financial Statements
8
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 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $15.72 | $14.29 | $18.31 | $13.43 | $8.23 | $16.63 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment loss (d) | $(0.04 | ) | $(0.05 | ) | $(0.10 | ) | $(0.08 | ) | $(0.06 | ) | $(0.04 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | 3.01 | 3.00 | (1.70 | ) | 4.96 | 5.26 | (5.54 | ) | ||||||||||||||||
Total from investment operations | $2.97 | $2.95 | $(1.80 | ) | $4.88 | $5.20 | $(5.58 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net realized gain on investments | $— | $(1.52 | ) | $(2.22 | ) | $— | $— | $(2.82 | ) | |||||||||||||||
Net asset value, end of period (x) | $18.69 | $15.72 | $14.29 | $18.31 | $13.43 | $8.23 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 18.89 | (n) | 21.22 | (10.27 | ) | 36.34 | 63.18 | (39.33 | ) | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.96 | (a) | 0.97 | 0.98 | 1.01 | 1.03 | 1.01 | |||||||||||||||||
Expenses after expense reductions (f) | 0.96 | (a) | 0.97 | 0.98 | 1.01 | 1.03 | 1.01 | |||||||||||||||||
Net investment loss | (0.44 | )(a) | (0.29 | ) | (0.56 | ) | (0.54 | ) | (0.57 | ) | (0.36 | ) | ||||||||||||
Portfolio turnover | 61 | (n) | 122 | 177 | 195 | 158 | 121 | |||||||||||||||||
Net assets at end of period (000 omitted) | $418,379 | $395,107 | $363,412 | $499,020 | $423,042 | $289,596 | ||||||||||||||||||
Service Class | Six months ended 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $15.01 | $13.74 | $17.74 | $13.05 | $8.01 | $16.31 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment loss (d) | $(0.06 | ) | $(0.08 | ) | $(0.14 | ) | $(0.11 | ) | $(0.08 | ) | $(0.07 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | 2.88 | 2.87 | (1.64 | ) | 4.80 | 5.12 | (5.41 | ) | ||||||||||||||||
Total from investment operations | $2.82 | $2.79 | $(1.78 | ) | $4.69 | $5.04 | $(5.48 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net realized gain on investments | $— | $(1.52 | ) | $(2.22 | ) | $— | $— | $(2.82 | ) | |||||||||||||||
Net asset value, end of period (x) | $17.83 | $15.01 | $13.74 | $17.74 | $13.05 | $8.01 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 18.79 | (n) | 20.90 | (10.49 | ) | 35.94 | 62.92 | (39.52 | ) | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.21 | (a) | 1.22 | 1.23 | 1.26 | 1.28 | 1.26 | |||||||||||||||||
Expenses after expense reductions (f) | 1.21 | (a) | 1.22 | 1.23 | 1.26 | 1.28 | 1.26 | |||||||||||||||||
Net investment loss | (0.68 | )(a) | (0.53 | ) | (0.80 | ) | (0.79 | ) | (0.82 | ) | (0.60 | ) | ||||||||||||
Portfolio turnover | 61 | (n) | 122 | 177 | 195 | 158 | 121 | |||||||||||||||||
Net assets at end of period (000 omitted) | $482,311 | $393,224 | $312,589 | $324,557 | $219,982 | $125,421 |
See Notes to Financial Statements
9
Table of Contents
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
10
Table of Contents
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 the disclosure provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Update 2011-11 (“ASU 2011-11”), Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities along with the related scope clarification provisions of FASB Accounting Standards Update 2013-01 (“ASU 2013-01”) entitled Balance Sheet (Topic 210) – Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 is intended to enhance disclosures on the offsetting of financial assets and liabilities by requiring entities to disclose both gross and net information about financial instruments and transactions that are either offset in the statement of financial position or subject to a Master Netting Agreement or similar arrangement. ASU 2013-01 limits the scope of ASU 2011-11’s disclosure requirements on offsetting to financial assets and financial liabilities related to derivatives, repurchase and reverse repurchase agreements, and securities lending and securities borrowing transactions. The disclosures required by ASU 2011-11, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
In June 2013, FASB issued Accounting Standards Update 2013-08 Financial Services – Investment Companies (Topic 946) – Amendments to the Scope, Measurement, and Disclosure Requirements (“ASU 2013-08”) which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013. ASU 2013-08 sets forth a methodology for determining whether an entity should be characterized as an investment company and prescribes fair value accounting for an investment company’s non-controlling ownership interest in another investment company. FASB has determined that a fund registered under the Investment Company Act of 1940 automatically meets ASU 2013-08’s criteria for an investment company. Although still evaluating the potential impacts of ASU 2013-08 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
11
Table of Contents
MFS New Discovery Series
Notes to Financial Statements (unaudited) – continued
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. The following is a summary of the levels used as of June 30, 2013 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $809,072,517 | $— | $— | $809,072,517 | ||||||||||||
Israel | 29,414,659 | — | — | 29,414,659 | ||||||||||||
Greece | 25,246,151 | — | — | 25,246,151 | ||||||||||||
Australia | — | 11,096,179 | — | 11,096,179 | ||||||||||||
Argentina | 9,858,014 | — | — | 9,858,014 | ||||||||||||
India | 6,698,866 | — | — | 6,698,866 | ||||||||||||
Brazil | 3,509,087 | — | — | 3,509,087 | ||||||||||||
Canada | 2,312,293 | — | — | 2,312,293 | ||||||||||||
Mutual Funds | 12,363,380 | — | — | 12,363,380 | ||||||||||||
Total Investments | $898,474,967 | $11,096,179 | $— | $909,571,146 |
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 – Under its Securities Lending Agency Agreement with the fund, State Street Bank and Trust Company (“State Street”), as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. 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. In the event of Borrower default, State Street will for the benefit of the fund either purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the fund the market value of the loaned securities. In return, State Street assumes the fund’s rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, State Street is responsible for the shortfall, but only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. On loans collateralized by cash, the cash collateral is invested in a money market fund or short-term securities. At period end, the fund had investment securities on loan with a fair value of $12,637,184 and a related liability of $12,363,167 for collateral received on securities loaned, both of which are presented gross on the Statement of Assets and Liabilities. The carrying value of the collateral for securities loaned approximates fair value which would have been considered level 2 under the fair value hierarchy if the collateral for securities loaned were carried at fair value. The value of the fund’s securities on loan net of the related collateral is $274,017 at period end. 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
12
Table of Contents
MFS New Discovery Series
Notes to Financial Statements (unaudited) – continued
Borrower, and is allocated between the fund and the lending agent. Income from securities lending is separately reported in the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income.
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, 2013, is shown as a reduction of total expenses in the Statement of Operations.
Tax Matters and Distributions – The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns, when filed, will remain subject to examination by the Internal Revenue Service for a three year period.
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:
12/31/12 | ||||
Ordinary income (including any short-term capital gains) | $63,972,122 | |||
Long-term capital gains | 2,944,862 | |||
Total distributions | $66,916,984 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/13 | ||||
Cost of investments | $783,204,411 | |||
Gross appreciation | 159,870,734 | |||
Gross depreciation | (33,503,999 | ) | ||
Net unrealized appreciation (depreciation) | $126,366,735 | |||
As of 12/31/12 | ||||
Undistributed ordinary income | 7,641,783 | |||
Other temporary differences | (2,829 | ) | ||
Net unrealized appreciation (depreciation) | 66,021,016 |
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
Table of Contents
MFS New Discovery 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 in the Statements of Changes in Net Assets are presented by class as follows:
From net realized gain on investments | ||||||||
Six months ended 6/30/13 | Year ended 12/31/12 | |||||||
Initial Class | $— | $32,481,201 | ||||||
Service Class | — | 34,435,783 | ||||||
Total | $— | $66,916,984 |
(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 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% |
Effective April 1, 2013, MFS has agreed in writing to reduce its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund’s Board of Trustees. For the period April 1, 2013 through June 30, 2013, this management fee reduction amounted to $1,194, 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, 2013 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, 2013, the fee was $28,045, which equated to 0.0064% 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, 2013, these costs amounted to $1,192.
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, 2013 was equivalent to an annual effective rate of 0.0137% 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, 2013, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $3,260 and are included in “Miscellaneous” expense in 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 $1,640, 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.
14
Table of Contents
MFS New Discovery Series
Notes to Financial Statements (unaudited) – continued
The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks current income consistent with preservation of capital and liquidity. Income earned on this investment is included in “Dividends from underlying affiliated funds” in 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 short-term obligations, aggregated $521,644,355 and $560,954,880, 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 6/30/13 | Year ended 12/31/12 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 1,606,169 | $27,672,786 | 2,746,390 | $43,775,613 | ||||||||||||
Service Class | 4,135,493 | 69,036,529 | 6,587,168 | 98,896,957 | ||||||||||||
5,741,662 | $96,709,315 | 9,333,558 | $142,672,570 | |||||||||||||
Shares issued in connection with acquisition of SC Invesco Small Cap Growth Fund | ||||||||||||||||
Initial Class | 3,344,064 | $50,696,015 | ||||||||||||||
Service Class | 978,602 | 14,170,159 | ||||||||||||||
4,322,666 | $64,866,174 | |||||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 2,175,566 | $32,481,201 | ||||||||||||
Service Class | — | — | 2,413,159 | 34,435,783 | ||||||||||||
— | $— | 4,588,725 | $66,916,984 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (4,362,239 | ) | $(77,323,831 | ) | (8,565,708 | ) | $(133,371,779 | ) | ||||||||
Service Class | (3,281,176 | ) | (55,249,821 | ) | (6,538,410 | ) | (98,062,830 | ) | ||||||||
(7,643,415 | ) | $(132,573,652 | ) | (15,104,118 | ) | $(231,434,609 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (2,756,070 | ) | $(49,651,045 | ) | (299,688 | ) | $(6,418,950 | ) | ||||||||
Service Class | 854,317 | 13,786,708 | 3,440,519 | 49,440,069 | ||||||||||||
(1,901,753 | ) | $(35,864,337 | ) | 3,140,831 | $43,021,119 |
The fund is one of several mutual funds in which the MFS funds-of-funds may invest. The MFS funds-of-funds do not invest in the underlying MFS funds for the purpose of exercising management or control. At the end of the period, the MFS Moderate Allocation Portfolio, the MFS Conservative Allocation Portfolio, and the MFS Growth Allocation Portfolio were the owners of record of approximately 3%, 1%, and 1%, respectively, of the value of outstanding voting shares of the fund.
(6) | Line of Credit |
The fund and certain other funds managed by MFS participate in a $1.1 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, 2013, the fund’s commitment fee and interest expense were $2,138 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.
15
Table of Contents
MFS New Discovery Series
Notes to Financial Statements (unaudited) – continued
(7) | Transactions in Underlying Affiliated Funds – Affiliated Issuers |
An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the fund assumes the following to be 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 | 2,899,425 | 109,232,753 | (112,131,965 | ) | 213 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $2,146 | $213 |
(8) | Acquisitions |
At close of business on December 7, 2012, the fund with net assets of approximately $696,346,137, acquired all of the assets and liabilities of SC Invesco Small Cap Growth Fund, a series of Sun Capital Advisers Trust. The purpose of the transaction was to provide shareholders of SC Invesco Small Cap Growth Fund the opportunity to participate in a larger combined portfolio with a similar investment objective and similar investment policies and strategies. The acquisition was accomplished by a tax-free exchange of approximately 4,322,666 shares of the fund (valued at approximately $64,866,174) for all of the assets and liabilities of SC Invesco Small Cap Growth Fund. SC Invesco Small Cap Growth Fund then distributed the shares of the fund that SC Invesco Small Cap Growth Fund received from the fund to its shareholders. SC Invesco Small Cap Growth Fund’s investments on that date were valued at approximately $64,381,321 with a cost basis of approximately $63,503,848. For financial reporting purposes, assets received and shares issued by the fund were recorded at fair value; however, the cost basis of the investments received from SC Invesco Small Cap Growth Fund were carried forward to align ongoing reporting of the fund’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes. No pro forma information is provided as it is not material to the combined fund results.
16
Table of Contents
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, 2013 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products” 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” section of mfs.com.
17
Table of Contents
Table of Contents
SEMIANNUAL REPORT
June 30, 2013
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
Table of Contents
MFS Research Bond Series
LETTER FROM THE CHAIRMAN AND CEO
Dear Contract Owners:
As the year progresses, the global economy continues to grind ahead slowly, held back by broad austerity measures. The U.S. economy remains a steadying force, driven by resilient consumers, who have taken the payroll tax increase and the sequestration’s early impact in stride. With U.S. housing and jobs showing steady expansion, domestic consumer-driven growth has offset weaker exports and the U.S. government’s spending constraints. In response to these developments, the U.S. Federal Reserve has begun to brace investors for an eventual shift in its monetary policy, causing global market tremors.
Japan has been another bright spot, with government and central bank stimulus policies leading to increased exports, a resurgent stock market and improved economic sentiment. After a six-month rally, Japan’s stocks slipped late in the second quarter, then picked up momentum on fresh signs that the country could soon break free of its chronic deflation. The major deterrent to global growth remains the eurozone, still in the grip of persistent recession. China has seen its pace of economic growth decelerate, a troubling turn for the country’s trading partners, who have come to rely on it as an engine for global growth.
As always, managing risk in the face of uncertainty remains a top priority for investors. At MFS®, our uniquely collaborative investment process employs integrated, global research and active risk management. Our global team of investment professionals shares ideas and evaluates opportunities across continents, investment disciplines and asset classes — all with a goal of building better insights, and ultimately better results, for our clients.
We are mindful of the many economic challenges investors face, and believe it is more important than ever to maintain a long-term view and employ time-tested principles, such as asset allocation and diversification. We remain confident that our unique approach can serve investors well as they work with their financial advisors to identify and pursue the most suitable opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2013
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 Research Bond Series
Portfolio structure (i)
Fixed income sectors (i) | ||||
High Grade Corporates | 36.7% | |||
Mortgage-Backed Securities | 21.0% | |||
Commercial Mortgage-Backed Securities | 10.0% | |||
U.S. Treasury Securities | 9.9% | |||
High Yield Corporates | 6.2% | |||
Emerging Markets Bonds | 4.5% | |||
Asset-Backed Securities | 2.6% | |||
U.S. Government Agencies | 1.6% | |||
Collateralized Debt Obligations | 1.1% | |||
Non-U.S. Government Bonds | 0.7% | |||
Residential Mortgage-Backed Securities | 0.1% | |||
Municipal Bonds | 0.1% |
Composition including fixed income credit quality (a)(i) | ||||
AAA | 6.8% | |||
AA | 2.5% | |||
A | 15.5% | |||
BBB | 28.6% | |||
BB | 6.4% | |||
B | 2.1% | |||
CCC | 0.1% | |||
CC (o) | 0.0% | |||
C (o) | 0.0% | |||
D (o) | 0.0% | |||
U.S. Government | 18.0% | |||
Federal Agencies | 22.6% | |||
Not Rated | (8.1)% | |||
Cash & Other | 5.5% | |||
Portfolio facts (i) | ||||
Average Duration (d) | 5.0 | |||
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. 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. 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. The bond component will include any accrued interest amounts. |
(m) | In determining an instrument’s effective maturity for purposes of calculating the fund’s dollar-weighted average effective maturity, MFS uses the instrument’s stated maturity or, if applicable, an earlier date on which MFS believes it is probable that a maturity-shortening device (such as a put, pre-refunding or prepayment) will cause the instrument to be repaid. Such an earlier date can be substantially shorter than the instrument’s stated maturity. |
(o) | Less than 0.1%. |
Where the fund holds convertible bonds, these are treated as part of the equity portion of the portfolio.
Percentages are based on net assets as of 6/30/13.
The portfolio is actively managed and current holdings may be different.
2
Table of Contents
MFS Research Bond Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2013 through June 30, 2013
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, 2013 through June 30, 2013.
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 1/01/13 | Ending Account Value 6/30/13 | Expenses Paid During Period (p) 1/01/13-6/30/13 | ||||||||||||||
Initial Class | Actual | 0.54% | $1,000.00 | $975.54 | $2.65 | |||||||||||||
Hypothetical (h) | 0.54% | $1,000.00 | $1,022.12 | $2.71 | ||||||||||||||
Service Class | Actual | 0.79% | $1,000.00 | $974.44 | $3.87 | |||||||||||||
Hypothetical (h) | 0.79% | $1,000.00 | $1,020.88 | $3.96 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
3
Table of Contents
MFS Research Bond Series
PORTFOLIO OF INVESTMENTS – 6/30/13 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
BONDS – 101.8% | ||||||||
Aerospace – 0.3% | ||||||||
Bombardier, Inc., 7.75%, 2020 (n) | $ | 2,620,000 | $ | 2,908,200 | ||||
Huntington Ingalls Industries, Inc., 6.875%, 2018 | 4,750,000 | 5,076,563 | ||||||
|
| |||||||
$ | 7,984,763 | |||||||
|
| |||||||
Apparel Manufacturers – 0.1% | ||||||||
PVH Corp., 7.375%, 2020 | $ | 1,455,000 | $ | 1,578,675 | ||||
PVH Corp., 4.5%, 2022 | 60,000 | 57,600 | ||||||
|
| |||||||
$ | 1,636,275 | |||||||
|
| |||||||
Asset-Backed & Securitized – 13.7% | ||||||||
Ameriquest Mortgage Securities, Inc., “M1”, FRN, 0.663%, 2035 | $ | 2,800,000 | $ | 2,515,512 | ||||
Anthracite Ltd., “A”, CDO, FRN, 0.553%, 2019 (z) | 792,740 | 786,160 | ||||||
Anthracite Ltd., “CFL”, CDO, FRN, 1.443%, 2037 (z) | 124,415 | 123,482 | ||||||
ARI Fleet Lease Trust, “A”, FRN, 0.741%, 2020 (n) | 1,172,290 | 1,173,611 | ||||||
ARI Fleet Lease Trust, “A”, FRN, 0.491%, 2021 (n) | 1,740,698 | 1,737,434 | ||||||
Babson Ltd., CLO, “A1”, FRN, 0.526%, 2019 (z) | 1,311,759 | 1,300,679 | ||||||
Banc of America Commercial Mortgage, Inc., 5.337%, 2043 (z) | 2,801,036 | 3,000,400 | ||||||
Banc of America Commercial Mortgage, Inc., FRN, 5.787%, 2049 (z) | 637,169 | 708,469 | ||||||
Banc of America Large Loan, Inc., FRN, 5.325%, 2044 (z) | 7,500,000 | 7,988,970 | ||||||
Bayview Commercial Asset Trust, FRN, 3.843%, 2036 (i)(z) | 760,373 | 17,433 | ||||||
Bayview Commercial Asset Trust, FRN, 3.835%, 2036 (i)(z) | 383,393 | 10,611 | ||||||
Bayview Commercial Asset Trust, FRN, 4.036%, 2037 (i)(z) | 852,937 | 30,771 | ||||||
Bayview Commercial Asset Trust, FRN, 0%, 2036 (i)(z) | 385,834 | 751 | ||||||
Bayview Commercial Asset Trust, FRN, 0%, 2036 (i)(z) | 290,519 | 2,653 | ||||||
Bayview Financial Acquisition Trust, FRN, 5.483%, 2041 | 23,410 | 23,970 | ||||||
Bayview Financial Revolving Mortgage Loan Trust, FRN, 1.795%, 2040 (z) | 157,298 | 75,958 | ||||||
Bear Stearns Commercial Mortgage Securities, Inc., “A3”, 5.793%, 2042 | 798,994 | 818,308 | ||||||
Bear Stearns Commercial Mortgage Securities, Inc., “A4”, FRN, 5.471%, 2045 | 5,150,000 | 5,773,135 | ||||||
Bear Stearns Commercial Mortgage Securities, Inc., “A4”, FRN, 5.742%, 2042 | 2,810,000 | 3,186,866 | ||||||
Bear Stearns Cos., Inc., “A2”, FRN, 0.643%, 2042 | 1,719,213 | 1,666,624 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Asset-Backed & Securitized – continued | ||||||||
Capital Trust Realty Ltd., CDO, 5.267%, 2035 (z) | $ | 1,677,300 | $ | 1,677,971 | ||||
Capital Trust Realty Ltd., CDO, 5.16%, 2035 (n) | 166,116 | 166,215 | ||||||
Cent CDO XI Ltd., “A1”, FRN, 0.535%, 2019 (n) | 4,005,563 | 3,938,514 | ||||||
Chesapeake Funding LLC, “A”, FRN, 0.643%, 2025 (n) | 12,486,000 | 12,472,265 | ||||||
Chesapeake Funding LLC, “A”, FRN, 0.944%, 2023 (z) | 2,055,680 | 2,060,920 | ||||||
Citibank OMNI Master Trust, “A4”, FRN, 2.942%, 2018 (z) | 2,700,000 | 2,772,800 | ||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust, 5.322%, 2049 | 25,289,455 | 27,839,542 | ||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust, FRN, 5.392%, 2044 | 500,000 | 533,018 | ||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust, FRN, 5.392%, 2044 | 750,000 | 759,242 | ||||||
Commercial Mortgage Acceptance Corp., FRN, 2.116%, 2030 (i) | 90,305 | 3,206 | ||||||
Commercial Mortgage Asset Trust, FRN, 0.659%, 2032 (i)(z) | 1,369,132 | 6,282 | ||||||
Commercial Mortgage Pass-Through Certificates, “A4”, 5.306%, 2046 | 1,361,478 | 1,502,011 | ||||||
Commercial Mortgage Trust, “A4”, 3.147%, 2045 | 3,950,000 | 3,776,875 | ||||||
Credit Acceptance Auto Loan Trust, “A”, 2.2%, 2019 (z) | 939,000 | 949,297 | ||||||
Credit Acceptance Auto Loan Trust, “A”, 1.52%, 2020 (n) | 1,490,000 | 1,493,043 | ||||||
Credit Suisse Commercial Mortgage Trust, “A4”, FRN, 5.954%, 2039 | 5,032,870 | 5,612,002 | ||||||
Credit Suisse Commercial Mortgage Trust, “AM”, FRN, 5.871%, 2039 | 6,214,470 | 6,511,963 | ||||||
Credit Suisse Mortgage Capital Certificate, 5.311%, 2039 | 2,250,000 | 2,470,802 | ||||||
Credit Suisse Mortgage Capital Certificate, FRN, 5.694%, 2040 | 375,725 | 385,335 | ||||||
Credit-Based Asset Servicing & Securitization LLC, 4.619%, 2035 | 30,376 | 28,414 | ||||||
CWCapital Cobalt Ltd., “A4”, FRN, 5.985%, 2046 | 2,286,764 | 2,563,135 | ||||||
CWCapital LLC, 5.223%, 2048 | 600,000 | 650,244 | ||||||
Duane Street CLO, “A”, FRN, 0.525%, 2017 | 765,959 | 765,460 | ||||||
Falcon Franchise Loan LLC, FRN, 11.363%, 2025 (i)(z) | 28,566 | 4,285 | ||||||
First Union National Bank Commercial Mortgage Trust, FRN, 1.893%, 2043 (i)(z) | 204,146 | 350 | ||||||
Ford Credit Floorplan Master Owner Trust, “A”, FRN, 0.541%, 2016 | 11,322,000 | 11,337,036 |
4
Table of Contents
MFS Research Bond Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Asset-Backed & Securitized – continued | ||||||||
GE Capital Commercial Mortgage Corp., “A”, 5.543%, 2049 | $ | 974,966 | $ | 1,081,360 | ||||
GE Equipment Transportation LLC, “A2”, 0.77%, 2014 | 479,542 | 479,655 | ||||||
GMAC LLC, FRN, 8.388%, 2034 (d)(n)(q) | 69,867 | 45,197 | ||||||
Goldman Sachs Mortgage Securities Corp., FRN, 5.981%, 2045 | 16,320,002 | 18,186,325 | ||||||
Greenwich Capital Commercial Funding Corp., 5.736%, 2049 | 25,105,137 | 28,116,699 | ||||||
Hertz Vehicle Financing LLC, 2010-1A, “A1”, 2.6%, 2015 (n) | 1,205,000 | 1,214,523 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., 5.552%, 2045 | 717,986 | 791,585 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., “A3”, 4.171%, 2046 | 600,000 | 626,212 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., “A3”, FRN, 6.002%, 2049 | 3,564,937 | 3,739,826 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., “A3”, FRN, 5.396%, 2044 | 550,000 | 560,067 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., “A3”, FRN, 6.125%, 2051 | 4,621,335 | 4,802,792 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., “A4”, FRN, 6.002%, 2049 | 22,721,942 | 25,428,034 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., “A4”, FRN, 4.879%, 2038 | 2,146,007 | 2,167,308 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 5.443%, 2042 (n) | 130,000 | 22,107 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 5.9%, 2049 | 763,398 | 855,969 | ||||||
JPMorgan Mortgage Trust, “A1”, FRN, 2.142%, 2033 | 563,896 | 563,591 | ||||||
Kingsland CLO Ltd., “A1”, FRN, 0.488%, 2021 (z) | 3,532,782 | 3,471,764 | ||||||
KKR Financial CLO Ltd., “A1”, FRN, 0.545%, 2017 (z) | 192,716 | 191,748 | ||||||
LB-UBS Commercial Mortgage Trust, “A4”, 5.372%, 2039 | 2,900,000 | 3,190,046 | ||||||
LB-UBS Commercial Mortgage Trust, “A4”, 5.156%, 2031 | 2,000,000 | 2,160,330 | ||||||
Lehman Brothers Commercial Conduit Mortgage Trust, FRN, 1.176%, 2030 (i) | 73,448 | 1,458 | ||||||
Mach One Trust Commercial Mortgage, CDO, “B”, 5.43%, 2040 (z) | 67,875 | 67,875 | ||||||
Merrill Lynch Mortgage Investors Inc., “A”, FRN, 2.2%, 2036 | 1,318,552 | 1,275,775 | ||||||
Merrill Lynch Mortgage Investors Inc., “A5”, FRN, 2.25%, 2035 | 942,908 | 898,288 | ||||||
Merrill Lynch Mortgage Trust, “A3”, FRN, 6.038%, 2050 | 3,575,513 | 3,726,124 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Asset-Backed & Securitized – continued | ||||||||
Merrill Lynch/Countrywide Commercial Mortgage Trust, FRN, 5.81%, 2050 | $ | 19,690,646 | $ | 22,001,836 | ||||
Morgan Stanley Bank of America/Merrill Lynch Trust, “A4”, 3.176%, 2045 | 5,000,000 | 4,795,910 | ||||||
Morgan Stanley Capital I Trust, “A4”, FRN, 5.815%, 2042 | 2,382,000 | 2,693,099 | ||||||
Morgan Stanley Capital I Trust, “A5”, FRN, 5.11%, 2040 | 571,244 | 586,439 | ||||||
Morgan Stanley Capital I, Inc., FRN, 1.117%, 2030 (i)(n) | 122,697 | 3,619 | ||||||
Morgan Stanley Re-REMIC Trust, FRN, 5.981%, 2045 (z) | 11,500,000 | 12,546,765 | ||||||
Pacifica CDO Ltd., “A1”, FRN, 0.535%, 2020 | 2,594,647 | 2,575,932 | ||||||
Preferred Term Securities XIX Ltd., CDO, FRN, 0.623%, 2035 (z) | 397,009 | 314,503 | ||||||
Race Point CLO Ltd., “A1A”, FRN, 0.474%, 2021 (n) | 12,847,000 | 12,616,987 | ||||||
Residential Funding Mortgage Securities, Inc., FRN, 5.32%, 2035 | 165,345 | 94,796 | ||||||
Santander Drive Auto Receivable Trust, “A2”, 0.91%, 2015 | 593,307 | 593,866 | ||||||
Santander Drive Auto Receivable Trust, “A2”, 0.57%, 2015 | 9,829,633 | 9,828,208 | ||||||
Smart Trust, “A2B”, FRN, 0.741%, 2014 (n) | 1,164,643 | 1,165,695 | ||||||
Smart Trust, “A2B”, FRN, 0.521%, 2015 (n) | 4,707,338 | 4,709,546 | ||||||
Smart Trust, “A2B”, FRN, 0.442%, 2015 | 6,161,000 | 6,154,159 | ||||||
Wachovia Bank Commercial Mortgage Trust, “A3”, FRN, 6.122%, 2051 | 2,901,381 | 2,970,210 | ||||||
Wachovia Bank Commercial Mortgage Trust, “A4”, FRN, 6.122%, 2051 | 12,115,917 | 13,478,122 | ||||||
Wachovia Bank Commercial Mortgage Trust, FRN, 5.937%, 2049 | 18,489,441 | 20,680,255 | ||||||
|
| |||||||
$ | 342,696,629 | |||||||
|
| |||||||
Automotive – 1.6% | ||||||||
Daimler Finance North America LLC, 1.875%, 2018 (n) | $ | 5,009,000 | $ | 4,887,948 | ||||
Delphi Corp., 5%, 2023 | 6,027,000 | 6,192,743 | ||||||
Ford Motor Credit Co. LLC, 8%, 2014 | 1,350,000 | 1,427,809 | ||||||
Ford Motor Credit Co. LLC, 5%, 2018 | 3,350,000 | 3,572,520 | ||||||
Ford Motor Credit Co. LLC, 8%, 2016 | 910,000 | 1,065,735 | ||||||
Ford Motor Credit Co. LLC, 3.984%, 2016 | 891,000 | 933,438 | ||||||
Ford Motor Credit Co. LLC, 12%, 2015 | 1,400,000 | 1,650,848 | ||||||
Ford Motor Credit Co. LLC, 7%, 2015 | 1,900,000 | 2,059,811 | ||||||
Ford Motor Credit Co. LLC, 5.625%, 2015 | 1,300,000 | 1,396,747 | ||||||
Ford Motor Credit Co. LLC, 3%, 2017 | 3,250,000 | 3,256,851 | ||||||
General Motors Financial Co., Inc., 3.25%, 2018 (z) | 1,100,000 | 1,069,750 | ||||||
Harley-Davidson Financial Services, 3.875%, 2016 (n) | 6,870,000 | 7,284,213 |
5
Table of Contents
MFS Research Bond Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Automotive – continued | ||||||||
Hyundai Capital America, 2.125%, 2017 (n) | $ | 1,001,000 | $ | 967,748 | ||||
Lear Corp., 8.125%, 2020 | 3,595,000 | 3,936,525 | ||||||
|
| |||||||
$ | 39,702,686 | |||||||
|
| |||||||
Biotechnology – 0.4% | ||||||||
Life Technologies Corp., 5%, 2021 | $ | 10,372,000 | $ | 11,028,102 | ||||
|
| |||||||
Broadcasting – 0.8% | ||||||||
Discovery Communications, Inc., 4.95%, 2042 | $ | 3,823,000 | $ | 3,579,467 | ||||
News America, Inc., 8.5%, 2025 | 152,000 | 193,401 | ||||||
SES S.A., 3.6%, 2023 (n) | 2,386,000 | 2,319,621 | ||||||
SIRIUS XM Radio, Inc., 4.25%, 2020 (n) | 3,680,000 | 3,459,200 | ||||||
Vivendi S.A., 4.75%, 2022 (n) | 7,852,000 | 7,853,335 | ||||||
WPP Finance, 3.625%, 2022 | 3,675,000 | 3,467,462 | ||||||
|
| |||||||
$ | 20,872,486 | |||||||
|
| |||||||
Brokerage & Asset Managers – 0.7% | ||||||||
E*Trade Financial Corp., 6%, 2017 | $ | 9,560,000 | $ | 9,655,600 | ||||
Invesco Finance PLC, 3.125%, 2022 | 2,470,000 | 2,304,038 | ||||||
TD Ameritrade Holding Corp., 5.6%, 2019 | 3,959,000 | 4,602,124 | ||||||
|
| |||||||
$ | 16,561,762 | |||||||
|
| |||||||
Building – 0.6% | ||||||||
CEMEX Finance LLC, 9.375%, 2022 | $ | 5,436,000 | $ | 5,925,240 | ||||
Mohawk Industries, Inc., 3.85%, 2023 | 2,668,000 | 2,560,450 | ||||||
Mohawk Industries, Inc., 6.375%, 2016 | 4,334,000 | 4,784,294 | ||||||
Owens Corning, Inc., 6.5%, 2016 | 465,000 | 519,073 | ||||||
|
| |||||||
$ | 13,789,057 | |||||||
|
| |||||||
Business Services – 0.3% | ||||||||
Tencent Holdings Ltd., 3.375%, 2018 (n) | $ | 2,600,000 | $ | 2,590,162 | ||||
Tencent Holdings Ltd., 3.375%, 2018 | 4,851,000 | 4,832,644 | ||||||
|
| |||||||
$ | 7,422,806 | |||||||
|
| |||||||
Cable TV – 0.6% | ||||||||
Cox Communications, Inc., 9.375%, 2019 (n) | $ | 1,055,000 | $ | 1,393,474 | ||||
Lynx I Corp., 5.375%, 2021 (n) | 335,000 | 336,675 | ||||||
Myriad International Holdings B.V., 6.375%, 2017 (n) | 2,074,000 | 2,271,030 | ||||||
NBCUniversal Enterprise, Inc., 1.974%, 2019 (n) | 1,741,000 | 1,694,440 | ||||||
NBCUniversal Media LLC, 5.95%, 2041 | 2,838,000 | 3,241,351 | ||||||
NBCUniversal Media LLC, 2.875%, 2023 | 1,820,000 | 1,728,705 | ||||||
Time Warner Entertainment Co. LP, 8.375%, 2033 | 290,000 | 341,799 | ||||||
Videotron Ltee, 5%, 2022 | 3,610,000 | 3,519,750 | ||||||
|
| |||||||
$ | 14,527,224 | |||||||
|
| |||||||
Chemicals – 0.5% | ||||||||
Dow Chemical Co., 8.55%, 2019 | $ | 5,739,000 | $ | 7,322,252 | ||||
LyondellBasell Industries N.V., 5.75%, 2024 | 5,090,000 | 5,597,300 | ||||||
|
| |||||||
$ | 12,919,552 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Computer Software – 0.1% | ||||||||
Oracle Corp., 2.5%, 2022 | $ | 2,550,000 | $ | 2,351,554 | ||||
Verisign, Inc., 4.625%, 2023 (n) | 40,000 | 38,800 | ||||||
|
| |||||||
$ | 2,390,354 | |||||||
|
| |||||||
Computer Software – Systems – 0.2% | ||||||||
Apple, Inc., 2.4%, 2023 | $ | 5,741,000 | $ | 5,324,571 | ||||
|
| |||||||
Conglomerates – 0.2% | ||||||||
Roper Industries, Inc., 2.05%, 2018 | $ | 3,806,000 | $ | 3,732,879 | ||||
|
| |||||||
Consumer Products – 0.7% | ||||||||
Avon Products, Inc., 4.6%, 2020 | $ | 4,636,000 | $ | 4,687,251 | ||||
Mattel, Inc., 5.45%, 2041 | 5,867,000 | 6,039,783 | ||||||
Newell Rubbermaid, Inc., 2.05%, 2017 | 3,072,000 | 3,010,456 | ||||||
Newell Rubbermaid, Inc., 4.7%, 2020 | 2,840,000 | 3,032,978 | ||||||
|
| |||||||
$ | 16,770,468 | |||||||
|
| |||||||
Consumer Services – 0.3% | ||||||||
eBay, Inc., 2.6%, 2022 | $ | 2,250,000 | $ | 2,096,267 | ||||
Experian Finance PLC, 2.375%, 2017 (n) | 4,321,000 | 4,281,065 | ||||||
|
| |||||||
$ | 6,377,332 | |||||||
|
| |||||||
Containers – 0.7% | ||||||||
Ardagh Packaging Finance PLC, 4.875%, 2022 (z) | $ | 5,420,000 | $ | 5,067,700 | ||||
Ball Corp., 4%, 2023 | 3,515,000 | 3,251,375 | ||||||
Crown Americas LLC, 4.5%, 2023 (n) | 5,280,000 | 4,976,400 | ||||||
Greif, Inc., 7.75%, 2019 | 4,075,000 | 4,665,875 | ||||||
|
| |||||||
$ | 17,961,350 | |||||||
|
| |||||||
Defense Electronics – 0.0% | ||||||||
BAE Systems Holdings, Inc., 6.375%, 2019 (n) | $ | 500,000 | $ | 578,954 | ||||
|
| |||||||
Electrical Equipment – 0.2% | ||||||||
Ericsson, Inc., 4.125%, 2022 | $ | 4,239,000 | $ | 4,145,394 | ||||
|
| |||||||
Electronics – 0.1% | ||||||||
Intel Corp., 4.25%, 2042 | $ | 187,000 | $ | 169,855 | ||||
NXP B.V./NXP Funding LLC, 3.75%, 2018 (z) | 1,470,000 | 1,440,600 | ||||||
Tyco Electronics Group S.A., 3.5%, 2022 | 949,000 | 919,609 | ||||||
Tyco Electronics Group S.A., 6.55%, 2017 | 708,000 | 819,581 | ||||||
|
| |||||||
$ | 3,349,645 | |||||||
|
| |||||||
Emerging Market Quasi-Sovereign – 1.1% | ||||||||
Banco do Brasil S.A., 5.875%, 2022 | $ | 2,307,000 | $ | 2,249,325 | ||||
Gaz Capital S.A., 3.85%, 2020 (n) | 3,050,000 | 2,836,500 | ||||||
Gazprom Neft, 4.375%, 2022 (n) | 362,000 | 331,538 | ||||||
Kazagro National Management Holdings, 4.625%, 2023 (n) | 2,883,000 | 2,652,360 | ||||||
Petrobras International Finance Co., 7.875%, 2019 | 2,900,000 | 3,353,453 | ||||||
Petrobras International Finance Co., 5.375%, 2021 | 1,980,000 | 1,989,294 | ||||||
PTT PLC, 3.375%, 2022 (n) | 5,038,000 | 4,571,668 | ||||||
PTT PLC, 4.5%, 2042 (n) | 1,784,000 | 1,440,275 | ||||||
Rosneft, 4.199%, 2022 (n) | 3,090,000 | 2,862,885 |
6
Table of Contents
MFS Research Bond Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Emerging Market Quasi-Sovereign – continued | ||||||||
Sinopec Capital (2013) Ltd., 3.125%, 2023 (n) | $ | 3,009,000 | $ | 2,706,313 | ||||
Sinopec Capital (2013) Ltd., 4.25%, 2043 (n) | 2,475,000 | 2,043,682 | ||||||
|
| |||||||
$ | 27,037,293 | |||||||
|
| |||||||
Energy – Independent – 1.2% | ||||||||
Anadarko Petroleum Corp., 6.95%, 2019 | $ | 1,400,000 | $ | 1,682,135 | ||||
Anadarko Petroleum Corp., 6.375%, 2017 | 1,253,000 | 1,440,925 | ||||||
ConocoPhillips, 6%, 2020 | 740,000 | 880,566 | ||||||
EOG Resources, Inc., 2.625%, 2023 | 3,172,000 | 2,968,174 | ||||||
EQT Corp., 4.875%, 2021 | 3,718,000 | 3,825,034 | ||||||
Noble Energy, Inc., 4.15%, 2021 | 7,180,000 | 7,413,443 | ||||||
Pioneer Natural Resources Co., 6.65%, 2017 | 5,160,000 | 5,886,012 | ||||||
Southwestern Energy Co., 4.1%, 2022 | 3,180,000 | 3,166,437 | ||||||
Southwestern Energy Co., 7.5%, 2018 | 2,144,000 | 2,542,377 | ||||||
|
| |||||||
$ | 29,805,103 | |||||||
|
| |||||||
Energy – Integrated – 1.3% | ||||||||
BG Energy Capital PLC, 2.875%, 2016 (n) | $ | 1,855,000 | $ | 1,941,610 | ||||
Cenovus Energy, Inc., 4.45%, 2042 | 7,324,000 | 6,566,720 | ||||||
Chevron Corp., 1.104%, 2017 | 1,560,000 | 1,524,295 | ||||||
Chevron Corp., 3.191%, 2023 | 3,610,000 | 3,592,495 | ||||||
Lukoil International Finance B.V., 3.416%, 2018 (n) | 3,109,000 | 3,023,503 | ||||||
Lukoil International Finance B.V., 4.563%, 2023 (n) | 4,351,000 | 4,046,430 | ||||||
Pacific Rubiales Energy Corp., 5.125%, 2023 (n) | 6,254,000 | 5,910,030 | ||||||
Total Capital International S.A., 1.55%, 2017 | 6,036,000 | 5,982,189 | ||||||
|
| |||||||
$ | 32,587,272 | |||||||
|
| |||||||
Entertainment – 0.1% | ||||||||
Six Flags Entertainment Corp., 5.25%, 2021 (n) | $ | 3,630,000 | $ | 3,502,950 | ||||
|
| |||||||
Financial Institutions – 2.3% | ||||||||
CIT Group, Inc., 5.5%, 2019 (n) | $ | 5,769,000 | $ | 5,956,493 | ||||
General Electric Capital Corp., 3.1%, 2023 | 3,000,000 | 2,833,998 | ||||||
General Electric Capital Corp., 6.375% to 2017, FRN to 2067 | 5,150,000 | 5,356,000 | ||||||
General Electric Capital Corp., 4.65%, 2021 | 1,733,000 | 1,838,301 | ||||||
General Electric Capital Corp., 3.15%, 2022 | 5,800,000 | 5,480,542 | ||||||
General Electric Capital Corp., 7.5%, 2035 | 4,000,000 | 5,158,840 | ||||||
General Electric Capital Corp., 5.55%, 2020 | 5,100,000 | 5,760,853 | ||||||
General Electric Capital Corp., 2.1%, 2019 | 2,064,000 | 2,008,835 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Financial Institutions – continued | ||||||||
General Electric Capital Corp., FRN, 7.125%, 2049 | $ | 1,000,000 | $ | 1,130,000 | ||||
International Lease Finance Corp., 5.75%, 2016 | 3,705,000 | 3,807,384 | ||||||
International Lease Finance Corp., 7.125%, 2018 (n) | 1,190,000 | 1,314,950 | ||||||
Nationstar Mortgage LLC/Capital Corp., 9.625%, 2019 | 1,320,000 | 1,478,400 | ||||||
NYSE Euronext, 2%, 2017 | 3,115,000 | 3,098,235 | ||||||
SLM Corp., 6.25%, 2016 | 1,081,000 | 1,145,860 | ||||||
SLM Corp., 6%, 2017 | 540,000 | 564,300 | ||||||
SLM Corp., 4.625%, 2017 | 7,121,000 | 7,014,185 | ||||||
SLM Corp., 8.45%, 2018 | 2,300,000 | 2,553,000 | ||||||
SLM Corp., 8%, 2020 | 1,100,000 | 1,190,750 | ||||||
|
| |||||||
$ | 57,690,926 | |||||||
|
| |||||||
Food & Beverages – 1.5% | ||||||||
Anheuser-Busch InBev S.A., 5.375%, 2020 | $ | 3,000,000 | $ | 3,458,619 | ||||
Anheuser-Busch InBev S.A., 7.75%, 2019 | 4,567,000 | 5,776,492 | ||||||
BRF S.A., 5.875%, 2022 (n) | 1,469,000 | 1,507,635 | ||||||
BRF S.A., 3.95%, 2023 (n) | 5,038,000 | 4,433,440 | ||||||
Grupo Bimbo S.A.B. de C.V., 4.5%, 2022 (n) | 3,618,000 | 3,618,355 | ||||||
Kraft Foods Group, Inc., 5%, 2042 | 3,604,000 | 3,649,742 | ||||||
Kraft Foods Group, Inc., 3.5%, 2022 | 2,480,000 | 2,455,889 | ||||||
Kraft Foods, Inc., 5.375%, 2020 | 810,000 | 908,540 | ||||||
Kraft Foods, Inc., 6.125%, 2018 | 1,819,000 | 2,102,280 | ||||||
Mead Johnson Nutrition Co., “A”, 4.9%, 2019 | 903,000 | 991,208 | ||||||
Tyson Foods, Inc., 6.6%, 2016 | 2,065,000 | 2,332,492 | ||||||
Tyson Foods, Inc., 4.5%, 2022 | 5,671,000 | 5,794,764 | ||||||
|
| |||||||
$ | 37,029,456 | |||||||
|
| |||||||
Food & Drug Stores – 0.3% | ||||||||
CVS Caremark Corp., 2.75%, 2022 | $ | 7,000,000 | $ | 6,540,072 | ||||
|
| |||||||
Forest & Paper Products – 0.9% | ||||||||
Fibria Overseas Finance Ltd., 7.5%, 2020 | $ | 3,201,000 | $ | 3,457,080 | ||||
Fibria Overseas Finance Ltd., 6.75%, 2021 | 2,542,000 | 2,723,753 | ||||||
Georgia-Pacific LLC, 3.734%, 2023 (n) | 7,576,000 | 7,368,804 | ||||||
Georgia-Pacific LLC, 5.4%, 2020 (n) | 3,608,000 | 4,023,284 | ||||||
Smurfit Kappa Group PLC, 4.875%, 2018 (n) | 4,715,000 | 4,573,550 | ||||||
|
| |||||||
$ | 22,146,471 | |||||||
|
| |||||||
Gaming & Lodging – 0.2% | ||||||||
Hyatt Hotels Corp., 3.375%, 2023 | $ | 1,123,000 | $ | 1,046,921 | ||||
Wyndham Worldwide Corp., 4.25%, 2022 | 3,977,000 | 3,873,216 | ||||||
|
| |||||||
$ | 4,920,137 | |||||||
|
|
7
Table of Contents
MFS Research Bond Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Insurance – 1.7% | ||||||||
American International Group, Inc., 6.4%, 2020 | $ | 8,142,000 | $ | 9,442,163 | ||||
American International Group, Inc., 4.875%, 2016 | 9,468,000 | 10,370,916 | ||||||
American International Group, Inc., 8.25%, 2018 | 1,000,000 | 1,240,143 | ||||||
American International Group, Inc., 5.85%, 2018 | 950,000 | 1,068,190 | ||||||
ING U.S., Inc., 2.9%, 2018 (n) | 2,290,000 | 2,301,523 | ||||||
Metropolitan Life Global Funding I, 5.125%, 2014 (n) | 1,890,000 | 1,971,419 | ||||||
Metropolitan Life Global Funding I, 1.7%, 2015 (z) | 5,295,000 | 5,378,084 | ||||||
Pacific Lifecorp, 5.125%, 2043 (n) | 5,527,000 | 5,011,419 | ||||||
Unum Group, 7.125%, 2016 | 2,028,000 | 2,345,356 | ||||||
UnumProvident Corp., 6.85%, 2015 (n) | 2,243,000 | 2,499,124 | ||||||
|
| |||||||
$ | 41,628,337 | |||||||
|
| |||||||
Insurance – Health – 0.3% | ||||||||
Humana, Inc., 7.2%, 2018 | $ | 6,739,000 | $ | 8,027,517 | ||||
|
| |||||||
Insurance – Property & Casualty – 2.3% | ||||||||
Allied World Assurance, 5.5%, 2020 | $ | 2,640,000 | $ | 2,859,165 | ||||
AXIS Capital Holdings Ltd., 5.75%, 2014 | 555,000 | 588,269 | ||||||
Berkshire Hathaway, Inc., 4.5%, 2043 | 7,108,000 | 6,754,178 | ||||||
CNA Financial Corp., 5.875%, 2020 | 3,280,000 | 3,712,065 | ||||||
CNA Financial Corp., 7.35%, 2019 | 1,500,000 | 1,816,215 | ||||||
Liberty Mutual Group, Inc., 4.25%, 2023 (n) | 6,075,000 | 5,869,829 | ||||||
Marsh & McLennan Cos., Inc., 4.8%, 2021 | 7,863,000 | 8,483,131 | ||||||
PartnerRe Ltd., 5.5%, 2020 | 3,483,000 | 3,833,529 | ||||||
QBE Capital Funding III Ltd., FRN, 7.25%, 2041 (n) | 5,170,000 | 5,459,520 | ||||||
QBE Insurance Group Ltd., 2.4%, 2018 (n) | 2,546,000 | 2,495,953 | ||||||
Swiss Re Ltd., 4.25%, 2042 (n) | 926,000 | 814,757 | ||||||
XL Group PLC, 6.5% to 2017, FRN to 2049 | 8,654,000 | 8,437,650 | ||||||
ZFS Finance USA Trust II, 6.45% to 2016, FRN to 2065 (n) | 1,842,000 | 1,970,940 | ||||||
ZFS Finance USA Trust V, 6.5% to 2017, FRN to 2067 (n) | 4,852,000 | 5,167,380 | ||||||
|
| |||||||
$ | 58,262,581 | |||||||
|
| |||||||
International Market Quasi-Sovereign – 0.7% | ||||||||
Achmea Hypotheekbank N.V., 3.2%, 2014 (n) | $ | 699,000 | $ | 725,562 | ||||
Electricite de France, FRN, 5.25%, 2049 (n) | 5,047,000 | 4,824,932 | ||||||
Israel Electric Corp. Ltd., 5.625%, 2018 (z) | 4,510,000 | 4,574,070 | ||||||
Israel Electric Corp. Ltd., 6.875%, 2023 (z) | 4,497,000 | 4,524,805 | ||||||
Societe Financement de l’ Economie Francaise, 3.375%, 2014 (n) | 842,000 | 862,713 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
International Market Quasi-Sovereign – continued | ||||||||
Statoil A.S.A., 2.45%, 2023 | $ | 2,114,000 | $ | 1,958,372 | ||||
|
| |||||||
$ | 17,470,454 | |||||||
|
| |||||||
Internet – 0.0% | ||||||||
Baidu, Inc., 3.5%, 2022 | $ | 869,000 | $ | 776,467 | ||||
|
| |||||||
Local Authorities – 0.7% | ||||||||
State of California (Build America Bonds), 7.625%, 2040 | $ | 860,000 | $ | 1,155,126 | ||||
State of California (Build America Bonds), 7.6%, 2040 | 7,175,000 | 9,716,672 | ||||||
State of Illinois (Build America Bonds), 6.9%, 2035 | 3,635,000 | 3,836,815 | ||||||
State of Illinois (Build America Bonds), 6.725%, 2035 | 1,055,000 | 1,098,171 | ||||||
State of Illinois (Build America Bonds), 6.63%, 2035 | 2,320,000 | 2,392,802 | ||||||
|
| |||||||
$ | 18,199,586 | |||||||
|
| |||||||
Machinery & Tools – 0.5% | ||||||||
Case New Holland, Inc., 7.75%, 2013 | $ | 1,000,000 | $ | 1,006,250 | ||||
Case New Holland, Inc., 7.875%, 2017 | 7,420,000 | 8,403,150 | ||||||
United Rentals North America, Inc., 7.375%, 2020 | 3,615,000 | 3,859,013 | ||||||
|
| |||||||
$ | 13,268,413 | |||||||
|
| |||||||
Major Banks – 7.2% | ||||||||
ABN AMRO Bank N.V., 4.25%, 2017 (n) | $ | 5,664,000 | $ | 6,038,617 | ||||
Banco Santander U.S. Debt S.A.U., 3.781%, 2015 (n) | 1,500,000 | 1,528,929 | ||||||
Bank of America Corp., 3.3%, 2023 | 10,475,000 | 9,900,415 | ||||||
Bank of America Corp., 5.65%, 2018 | 5,215,000 | 5,793,771 | ||||||
Bank of America Corp., 6.5%, 2016 | 10,085,000 | 11,370,293 | ||||||
Bank of America Corp., 5.875%, 2042 | 3,383,000 | 3,782,228 | ||||||
Bank of America Corp., 6.1%, 2017 | 1,725,000 | 1,923,944 | ||||||
Bank of America Corp., 5.625%, 2020 | 8,555,000 | 9,418,773 | ||||||
Bank of America Corp., 5.875%, 2021 | 1,670,000 | 1,879,562 | ||||||
Bank of America Corp., FRN, 5.2%, 2049 | 2,651,000 | 2,491,940 | ||||||
BNP Paribas, FRN, 1.168%, 2014 | 2,100,000 | 2,105,777 | ||||||
DBS Bank Ltd., 3.625% to 2017, FRN to 2022 (n) | 4,108,000 | 4,112,999 | ||||||
Goldman Sachs Group, Inc., 2.375%, 2018 | 5,005,000 | 4,914,069 | ||||||
Goldman Sachs Group, Inc., 3.625%, 2023 | 11,855,000 | 11,342,544 | ||||||
Goldman Sachs Group, Inc., 5.625%, 2017 | 2,636,000 | 2,856,857 | ||||||
HSBC Holdings PLC, 4%, 2022 | 5,466,000 | 5,596,217 | ||||||
HSBC USA, Inc., 4.875%, 2020 | 4,090,000 | 4,381,527 | ||||||
ING Bank N.V., 3.75%, 2017 (n) | 5,855,000 | 6,128,077 | ||||||
ING Bank N.V., 2%, 2015 (n) | 1,900,000 | 1,916,112 | ||||||
JPMorgan Chase & Co., 3.2%, 2023 | 12,685,000 | 12,041,959 | ||||||
JPMorgan Chase & Co., 4.25%, 2020 | 2,800,000 | 2,910,424 | ||||||
JPMorgan Chase & Co., 4.5%, 2022 | 1,800,000 | 1,884,820 | ||||||
JPMorgan Chase & Co., 3.25%, 2022 | 1,376,000 | 1,306,377 |
8
Table of Contents
MFS Research Bond Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Major Banks – continued | ||||||||
JPMorgan Chase & Co., 2%, 2017 | $ | 3,637,000 | $ | 3,609,526 | ||||
JPMorgan Chase & Co., 6.3%, 2019 | 3,850,000 | 4,472,537 | ||||||
JPMorgan Chase Bank N.A., 5.875%, 2016 | 250,000 | 278,747 | ||||||
Merrill Lynch & Co., Inc., 6.05%, 2016 | 4,869,000 | 5,272,187 | ||||||
Morgan Stanley, 3.75%, 2023 | 3,585,000 | 3,428,275 | ||||||
Morgan Stanley, 5.75%, 2016 | 944,000 | 1,042,081 | ||||||
Morgan Stanley, 5.5%, 2021 | 14,214,000 | 15,178,107 | ||||||
Morgan Stanley, 5.95%, 2017 | 400,000 | 443,816 | ||||||
Morgan Stanley, 4.875%, 2022 | 11,903,000 | 11,758,986 | ||||||
Morgan Stanley, 5.5%, 2020 | 1,600,000 | 1,723,014 | ||||||
PNC Funding Corp., 5.625%, 2017 | 6,173,000 | 6,848,678 | ||||||
Regions Financial Corp., 2%, 2018 | 2,524,000 | 2,385,960 | ||||||
Royal Bank of Scotland PLC, 2.55%, 2015 | 3,137,000 | 3,189,573 | ||||||
Santander International Debt S.A., 2.991%, 2013 (n) | 1,800,000 | 1,810,264 | ||||||
Wachovia Corp., 6.605%, 2025 | 1,764,000 | 2,123,775 | ||||||
|
| |||||||
$ | 179,191,757 | |||||||
|
| |||||||
Medical & Health Technology & Services – 0.8% | ||||||||
Catholic Health Initiatives, 2.95%, 2022 | $ | 6,666,000 | $ | 6,229,810 | ||||
Express Scripts Holding Co., 2.65%, 2017 | 5,011,000 | 5,102,466 | ||||||
HCA, Inc., 7.875%, 2020 | 6,230,000 | 6,708,931 | ||||||
McKesson Corp., 5.7%, 2017 | 1,210,000 | 1,366,678 | ||||||
|
| |||||||
$ | 19,407,885 | |||||||
|
| |||||||
Metals & Mining – 1.0% | ||||||||
Barrick North America Finance LLC, 5.75%, 2043 (n) | $ | 6,000,000 | $ | 4,852,782 | ||||
Freeport-McMoRan Copper & Gold, Inc., 5.45%, 2043 (n) | 467,000 | 411,825 | ||||||
Plains Exploration & Production Co., 6.875%, 2023 | 2,660,000 | 2,845,939 | ||||||
Rio Tinto Finance (USA) PLC, 2.875%, 2022 | 3,887,000 | 3,563,983 | ||||||
Rio Tinto Finance (USA) PLC, 3.5%, 2022 | 5,351,000 | 5,159,953 | ||||||
Southern Copper Corp., 6.75%, 2040 | 7,362,000 | 7,238,377 | ||||||
|
| |||||||
$ | 24,072,859 | |||||||
|
| |||||||
Mortgage-Backed – 20.9% | ||||||||
Fannie Mae, 5.214%, 2013 | $ | 451,680 | $ | 451,338 | ||||
Fannie Mae, 4.606%, 2014 | 60,316 | 60,765 | ||||||
Fannie Mae, 4.629%, 2014 | 68,151 | 69,243 | ||||||
Fannie Mae, 4.77%, 2014 - 2019 | 490,581 | 544,273 | ||||||
Fannie Mae, 3%, 2015 - 2027 | 12,981,635 | 13,370,069 | ||||||
Fannie Mae, 4.53%, 2015 | 95,740 | 101,018 | ||||||
Fannie Mae, 4.56%, 2015 | 49,877 | 52,565 | ||||||
Fannie Mae, 4.6%, 2015 - 2019 | 797,960 | 889,317 | ||||||
Fannie Mae, 4.665%, 2015 | 34,192 | 35,757 | ||||||
Fannie Mae, 4.7%, 2015 | 188,321 | 200,107 | ||||||
Fannie Mae, 4.74%, 2015 | 44,876 | 47,127 | ||||||
Fannie Mae, 4.78%, 2015 | 95,670 | 101,285 | ||||||
Fannie Mae, 4.815%, 2015 | 50,682 | 53,393 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Mortgage-Backed – continued | ||||||||
Fannie Mae, 4.85%, 2015 | $ | 159,097 | $ | 166,185 | ||||
Fannie Mae, 4.86%, 2015 | 81,727 | 85,107 | ||||||
Fannie Mae, 4.87%, 2015 | 30,996 | 32,654 | ||||||
Fannie Mae, 4.89%, 2015 | 87,974 | 93,184 | ||||||
Fannie Mae, 4.908%, 2015 | 50,251 | 52,843 | ||||||
Fannie Mae, 4.94%, 2015 | 120,000 | 127,283 | ||||||
Fannie Mae, 5.1%, 2015 | 275,000 | 292,138 | ||||||
Fannie Mae, 5.464%, 2015 | 735,211 | 794,128 | ||||||
Fannie Mae, 2.82%, 2016 | 600,803 | 625,239 | ||||||
Fannie Mae, 5.08%, 2016 | 335,944 | 360,903 | ||||||
Fannie Mae, 5.09%, 2016 | 111,362 | 120,878 | ||||||
Fannie Mae, 5.137%, 2016 | 2,546,851 | 2,759,563 | ||||||
Fannie Mae, 5.35%, 2016 | 664,468 | 726,467 | ||||||
Fannie Mae, 5.395%, 2016 | 124,852 | 136,539 | ||||||
Fannie Mae, 5.424%, 2016 | 1,086,293 | 1,199,347 | ||||||
Fannie Mae, 5.724%, 2016 | 1,564,339 | 1,738,620 | ||||||
Fannie Mae, 1.18%, 2017 | 2,466,247 | 2,447,304 | ||||||
Fannie Mae, 2.71%, 2017 | 379,568 | 395,748 | ||||||
Fannie Mae, 3.22%, 2017 | 509,674 | 540,972 | ||||||
Fannie Mae, 3.308%, 2017 | 1,346,260 | 1,435,484 | ||||||
Fannie Mae, 4.992%, 2017 | 142,776 | 149,902 | ||||||
Fannie Mae, 5.05%, 2017 | 247,800 | 270,161 | ||||||
Fannie Mae, 5.28%, 2017 | 134,161 | 146,986 | ||||||
Fannie Mae, 5.479%, 2017 | 754,846 | 858,531 | ||||||
Fannie Mae, 5.5%, 2017 - 2040 | 39,141,252 | 42,666,700 | ||||||
Fannie Mae, 5.54%, 2017 | 102,338 | 112,425 | ||||||
Fannie Mae, 5.65%, 2017 | 153,423 | 175,986 | ||||||
Fannie Mae, 2.578%, 2018 | 4,500,000 | 4,621,869 | ||||||
Fannie Mae, 3.738%, 2018 | 2,758,846 | 3,015,319 | ||||||
Fannie Mae, 3.84%, 2018 | 678,438 | 735,814 | ||||||
Fannie Mae, 3.99%, 2018 | 600,000 | 654,511 | ||||||
Fannie Mae, 5.341%, 2018 | 490,550 | 559,361 | ||||||
Fannie Mae, 1.97%, 2019 | 1,088,669 | 1,075,288 | ||||||
Fannie Mae, 1.99%, 2019 | 2,700,000 | 2,698,055 | ||||||
Fannie Mae, 2.03%, 2019 | 1,358,857 | 1,346,756 | ||||||
Fannie Mae, 4.45%, 2019 | 523,975 | 582,150 | ||||||
Fannie Mae, 5.18%, 2019 | 126,992 | 140,214 | ||||||
Fannie Mae, 5.51%, 2019 | 190,212 | 210,823 | ||||||
Fannie Mae, 4.88%, 2020 | 28,496 | 31,252 | ||||||
Fannie Mae, 5%, 2020 - 2040 | 25,930,248 | 28,000,064 | ||||||
Fannie Mae, 5.19%, 2020 | 180,812 | 199,166 | ||||||
Fannie Mae, 3.89%, 2021 | 1,200,000 | 1,285,553 | ||||||
Fannie Mae, 6%, 2022 - 2039 | 12,994,907 | 14,179,035 | ||||||
Fannie Mae, 4.5%, 2024 - 2040 | 55,910,408 | 59,283,842 | ||||||
Fannie Mae, 3.5%, 2025 - 2042 | 12,859,571 | 13,317,277 | ||||||
Fannie Mae, 4%, 2025 - 2041 | 16,550,574 | 17,289,509 | ||||||
Fannie Mae, 4.5%, 2025 | 340,599 | 361,308 | ||||||
Fannie Mae, 6.5%, 2032 - 2033 | 17,407 | 19,481 | ||||||
Fannie Mae, TBA, 3.5%, 2043 | 48,600,000 | 49,055,623 | ||||||
Fannie Mae, TBA, 4%, 2043 | 1,688,000 | 1,750,575 | ||||||
Federal Home Loan Bank, 5%, 2035 | 8,342,635 | 8,941,090 | ||||||
Federal Home Loan Bank, 3%, 2043 | 2,695,285 | 2,634,452 | ||||||
Freddie Mac, 1.655%, 2016 | 1,696,158 | 1,720,678 | ||||||
Freddie Mac, 1.426%, 2017 | 9,701,000 | 9,735,691 | ||||||
Freddie Mac, 3.882%, 2017 | 1,936,000 | 2,090,712 |
9
Table of Contents
MFS Research Bond Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Mortgage-Backed – continued | ||||||||
Freddie Mac, 2.22%, 2018 | $ | 1,175,000 | $ | 1,181,793 | ||||
Freddie Mac, 2.303%, 2018 | 8,971,000 | 9,074,068 | ||||||
Freddie Mac, 2.323%, 2018 | 1,194,000 | 1,208,715 | ||||||
Freddie Mac, 2.412%, 2018 | 2,300,000 | 2,339,512 | ||||||
Freddie Mac, 3.154%, 2018 | 935,000 | 983,406 | ||||||
Freddie Mac, 5%, 2018 - 2040 | 2,372,780 | 2,557,876 | ||||||
Freddie Mac, 1.869%, 2019 | 5,821,000 | 5,654,176 | ||||||
Freddie Mac, 1.883%, 2019 | 14,950,000 | 14,677,835 | ||||||
Freddie Mac, 2.086%, 2019 | 7,200,000 | 7,110,144 | ||||||
Freddie Mac, 2.13%, 2019 | 4,704,000 | 4,700,143 | ||||||
Freddie Mac, 4.186%, 2019 | 1,110,000 | 1,216,903 | ||||||
Freddie Mac, 5.5%, 2019 - 2038 | 1,870,063 | 2,021,140 | ||||||
Freddie Mac, 2.757%, 2020 | 1,300,027 | 1,358,135 | ||||||
Freddie Mac, 3.32%, 2020 | 2,700,472 | 2,865,709 | ||||||
Freddie Mac, 4.251%, 2020 | 807,000 | 885,407 | ||||||
Freddie Mac, 4%, 2025 - 2040 | 4,625,154 | 4,824,610 | ||||||
Freddie Mac, 4.5%, 2025 - 2041 | 1,012,837 | 1,072,564 | ||||||
Freddie Mac, 3.5%, 2026 - 2042 | 3,672,580 | 3,747,761 | ||||||
Freddie Mac, 6%, 2034 - 2038 | 511,307 | 559,564 | ||||||
Freddie Mac, 4%, 2040 | 47,612 | 49,540 | ||||||
Freddie Mac, 3%, 2043 | 3,319,714 | 3,243,785 | ||||||
Freddie Mac, TBA, 3.5%, 2043 | 64,380,186 | 65,205,057 | ||||||
Ginnie Mae, 4.5%, 2041 | 2,314,442 | 2,470,804 | ||||||
Ginnie Mae, 6%, 2036 - 2039 | 1,152,090 | 1,281,587 | ||||||
Ginnie Mae, 5.5%, 2038 - 2042 | 2,890,328 | 3,160,068 | ||||||
Ginnie Mae, 4.5%, 2039 - 2041 | 45,889,217 | 49,480,267 | ||||||
Ginnie Mae, 3.5%, 2040 - 2042 | 6,337,815 | 6,526,564 | ||||||
Ginnie Mae, 4%, 2040 - 2042 | 12,131,596 | 12,770,465 | ||||||
Ginnie Mae, TBA, 3.5%, 2043 | 11,500,000 | 11,801,874 | ||||||
|
| |||||||
$ | 524,052,474 | |||||||
|
| |||||||
Municipals – 0.1% | ||||||||
Florida Hurricane Catastrophe Fund Finance Corp. Rev., “A”, 1.298%, 2016 | $ | 1,750,000 | $ | 1,732,588 | ||||
|
| |||||||
Natural Gas – Distribution – 0.1% | ||||||||
ONEOK, Inc., 4.25%, 2022 | $ | 2,645,000 | $ | 2,602,312 | ||||
|
| |||||||
Natural Gas – Pipeline – 1.1% | ||||||||
DCP Midstream LLC, 3.875%, 2023 | $ | 1,430,000 | $ | 1,341,176 | ||||
Energy Transfer Partners LP, 5.15%, 2043 | 3,573,000 | 3,247,578 | ||||||
Energy Transfer Partners LP, 4.65%, 2021 | 6,198,000 | 6,414,168 | ||||||
Enterprise Products Partners LP, 7.034% to 2018, FRN to 2068 | 3,000,000 | 3,367,500 | ||||||
Kinder Morgan Energy Partners LP, 6.375%, 2041 | 2,240,000 | 2,500,532 | ||||||
Kinder Morgan Energy Partners LP, 6.95%, 2038 | 3,181,000 | 3,760,899 | ||||||
Kinder Morgan Energy Partners LP, 7.4%, 2031 | 103,000 | 122,128 | ||||||
Kinder Morgan Finance Corp., 6%, 2018 (z) | 3,000,000 | 3,149,697 | ||||||
MarkWest Energy Partners LP, 5.5%, 2023 | 1,810,000 | 1,782,850 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Natural Gas – Pipeline – continued | ||||||||
Spectra Energy Capital LLC, 8%, 2019 | $ | 613,000 | $ | 775,815 | ||||
Williams Cos., Inc., 3.7%, 2023 | 1,921,000 | 1,784,768 | ||||||
|
| |||||||
$ | 28,247,111 | |||||||
|
| |||||||
Network & Telecom – 0.4% | ||||||||
AT&T, Inc., 5.35%, 2040 | $ | 3,870,000 | $ | 3,915,817 | ||||
AT&T, Inc., 5.55%, 2041 | 533,000 | 554,962 | ||||||
Centurylink, Inc., 7.65%, 2042 | 6,370,000 | 6,051,500 | ||||||
|
| |||||||
$ | 10,522,279 | |||||||
|
| |||||||
Oil Services – 0.7% | ||||||||
Qgog Constellation S.A., 6.25%, 2019 (n) | $ | 2,566,000 | $ | 2,514,680 | ||||
Rowan Cos., Inc., 5.4%, 2042 | 6,573,000 | 5,957,918 | ||||||
Schlumberger Norge A.S., 1.25%, 2017 (n) | 8,144,000 | 7,892,627 | ||||||
Transocean, Inc., 3.8%, 2022 | 1,100,000 | 1,047,807 | ||||||
|
| |||||||
$ | 17,413,032 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 3.3% | ||||||||
Ally Financial, Inc., 8.3%, 2015 | $ | 2,400,000 | $ | 2,586,000 | ||||
American Express Co., 4.875%, 2013 | 500,000 | 500,750 | ||||||
American Express Co., 7%, 2018 | 2,000,000 | 2,406,160 | ||||||
American Express Credit Corp., 5.125%, 2014 | 4,200,000 | 4,401,928 | ||||||
Banco Santander Brasil, FRN, 2.372%, 2014 (z) | 1,000,000 | 995,171 | ||||||
BBVA Bancomer S.A. de C.V., 6.75%, 2022 (n) | 3,317,000 | 3,582,360 | ||||||
BBVA Bancomer S.A. de C.V., 6.5%, 2021 (n) | 600,000 | 630,000 | ||||||
Capital One Bank (USA) N.A., 3.375%, 2023 | 3,111,000 | 2,940,685 | ||||||
Capital One Financial Corp., 6.15%, 2016 | 1,970,000 | 2,198,347 | ||||||
Citigroup, Inc., 3.375%, 2023 | 3,490,000 | 3,338,583 | ||||||
Citigroup, Inc., 8.5%, 2019 | 3,510,000 | 4,422,695 | ||||||
Citigroup, Inc., 5.375%, 2020 | 2,500,000 | 2,764,498 | ||||||
Citigroup, Inc., 4.45%, 2017 | 1,711,000 | 1,832,122 | ||||||
Citigroup, Inc., 4.5%, 2022 | 3,500,000 | 3,646,402 | ||||||
Citigroup, Inc., 4.875%, 2015 | 1,000,000 | 1,054,915 | ||||||
Citigroup, Inc., 5.5%, 2014 | 400,000 | 420,713 | ||||||
Citigroup, Inc., 6.125%, 2018 | 559,000 | 639,909 | ||||||
Discover Bank, 7%, 2020 | 7,009,000 | 8,179,699 | ||||||
Fifth Third Bancorp, 3.5%, 2022 | 2,780,000 | 2,755,550 | ||||||
Groupe BPCE S.A., 12.5% to 2019, FRN to 2049 (n) | 7,880,000 | 9,554,500 | ||||||
Grupo Financiero BBVA Bancomer S.A. de C.V., 7.25%, 2020 (n) | 1,100,000 | 1,199,000 | ||||||
Intesa Sanpaolo S.p.A., 3.875%, 2018 | 3,267,000 | 3,137,009 | ||||||
Itau Unibanco Holding S.A., 6.2%, 2020 (z) | 1,800,000 | 1,849,500 | ||||||
LBG Capital No. 1 PLC, 7.875%, 2020 (n) | 3,000,000 | 3,096,000 | ||||||
Rabobank Nederland N.V., 3.95%, 2022 | 4,408,000 | 4,215,247 |
10
Table of Contents
MFS Research Bond Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | �� | |||||
BONDS – continued | ||||||||
Other Banks & Diversified Financials – continued | ||||||||
Santander Holdings USA, Inc., 4.625%, 2016 | $ | 2,621,000 | $ | 2,764,937 | ||||
Santander UK PLC, 8.963% to 2030, FRN to 2049 | 4,290,000 | 5,148,000 | ||||||
SunTrust Banks, Inc., 3.5%, 2017 | 2,732,000 | 2,858,951 | ||||||
|
| |||||||
$ | 83,119,631 | |||||||
|
| |||||||
Personal Computers & Peripherals – 0.3% | ||||||||
Equifax, Inc., 3.3%, 2022 | $ | 6,210,000 | $ | 5,829,389 | ||||
Motorola Solutions, Inc., 3.5%, 2023 | 2,010,000 | 1,894,805 | ||||||
|
| |||||||
$ | 7,724,194 | |||||||
|
| |||||||
Pharmaceuticals – 0.7% | ||||||||
Celgene Corp., 1.9%, 2017 | $ | 5,062,000 | $ | 5,025,660 | ||||
Celgene Corp., 2.45%, 2015 | 4,949,000 | 5,096,693 | ||||||
Teva Pharmaceutical Finance B.V., 2.95%, 2022 | 4,149,000 | 3,887,256 | ||||||
Vantage Point Imaging, 6.75%, 2018 (z) | 3,795,000 | 3,889,875 | ||||||
|
| |||||||
$ | 17,899,484 | |||||||
|
| |||||||
Printing & Publishing – 0.2% | ||||||||
Moody’s Corp., 4.5%, 2022 | $ | 1,855,000 | $ | 1,858,027 | ||||
Pearson Funding Five PLC, 3.25%, 2023 (z) | 2,113,000 | 1,947,842 | ||||||
Pearson Funding Four PLC, 3.75%, 2022 (n) | 1,784,000 | 1,740,802 | ||||||
|
| |||||||
$ | 5,546,671 | |||||||
|
| |||||||
Railroad & Shipping – 0.0% | ||||||||
Canadian Pacific Railway Co., 4.45%, 2023 | $ | 862,000 | $ | 899,358 | ||||
|
| |||||||
Real Estate – 1.6% | ||||||||
Alexandria Real Estate Equities, Inc., REIT, 4.6%, 2022 | $ | 3,461,000 | $ | 3,527,202 | ||||
Boston Properties LP, REIT, 3.8%, 2024 | 3,803,000 | 3,735,090 | ||||||
Boston Properties LP, REIT, 3.7%, 2018 | 1,395,000 | 1,465,163 | ||||||
Boston Properties LP, REIT, 3.85%, 2023 | 3,100,000 | 3,044,287 | ||||||
DDR Corp., REIT, 3.375%, 2023 | 5,368,000 | 4,919,874 | ||||||
DDR Corp., REIT, 4.625%, 2022 | 2,365,000 | 2,390,043 | ||||||
ERP Operating LP, REIT, 3%, 2023 | 2,349,000 | 2,158,783 | ||||||
HCP, Inc., REIT, 5.375%, 2021 | 1,134,000 | 1,230,095 | ||||||
HCP, Inc., REIT, 3.75%, 2019 | 1,264,000 | 1,297,032 | ||||||
HCP, Inc., REIT, 2.625%, 2020 | 4,000,000 | 3,747,216 | ||||||
Kimco Realty Corp., REIT, 5.783%, 2016 | 1,794,000 | 1,981,739 | ||||||
Liberty Property LP, REIT, 5.5%, 2016 | 1,013,000 | 1,118,339 | ||||||
Simon Property Group, Inc., REIT, 10.35%, 2019 | 3,213,000 | 4,449,787 | ||||||
WEA Finance LLC, 6.75%, 2019 (n) | 3,612,000 | 4,265,765 | ||||||
|
| |||||||
$ | 39,330,415 | |||||||
|
| |||||||
Retailers – 1.1% | ||||||||
Cencosud S.A., 4.875%, 2023 (n) | $ | 2,960,000 | $ | 2,901,664 | ||||
Cencosud S.A., 5.5%, 2021 | 3,126,000 | 3,207,717 | ||||||
Gap, Inc., 5.95%, 2021 | 10,460,000 | 11,569,053 | ||||||
Home Depot, Inc., 5.95%, 2041 | 2,318,000 | 2,761,547 | ||||||
Kohl’s Corp., 3.25%, 2023 | 5,182,000 | 4,793,765 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Retailers – continued | ||||||||
Target Corp., 4%, 2042 | $ | 3,278,000 | $ | 2,980,895 | ||||
|
| |||||||
$ | 28,214,641 | |||||||
|
| |||||||
Specialty Chemicals – 0.6% | ||||||||
Ecolab, Inc., 4.35%, 2021 | $ | 5,300,000 | $ | 5,595,305 | ||||
Mexichem S.A.B. de C.V., 6.75%, 2042 (n) | 5,346,000 | 5,239,080 | ||||||
SIBUR Securities Ltd., 3.914%, 2018 (n) | 4,216,000 | 3,899,800 | ||||||
|
| |||||||
$ | 14,734,185 | |||||||
|
| |||||||
Specialty Stores – 0.2% | ||||||||
Advance Auto Parts, Inc., 4.5%, 2022 | $ | 481,000 | $ | 467,762 | ||||
Advance Auto Parts, Inc., 5.75%, 2020 | 3,649,000 | 3,870,691 | ||||||
|
| |||||||
$ | 4,338,453 | |||||||
|
| |||||||
Supermarkets – 0.0% | ||||||||
Delhaize Group, 4.125%, 2019 | $ | 718,000 | $ | 739,613 | ||||
|
| |||||||
Telecommunications – Wireless – 1.0% | ||||||||
American Tower Corp., REIT, 3.5%, 2023 | $ | 1,599,000 | $ | 1,464,164 | ||||
American Tower Corp., REIT, 5.05%, 2020 | 4,000,000 | 4,203,572 | ||||||
American Tower Corp., REIT, 4.5%, 2018 | 3,373,000 | 3,597,331 | ||||||
Crown Castle Towers LLC, 6.113%, 2020 (n) | 5,096,000 | 5,847,533 | ||||||
Crown Castle Towers LLC, 4.883%, 2020 (n) | 2,400,000 | 2,580,799 | ||||||
MTS International Funding Ltd., 5%, 2023 (n) | 6,298,000 | 6,030,335 | ||||||
Rogers Cable, Inc., 5.5%, 2014 | 734,000 | 757,881 | ||||||
|
| |||||||
$ | 24,481,615 | |||||||
|
| |||||||
Tobacco – 1.1% | ||||||||
Altria Group, Inc., 2.95%, 2023 | $ | 2,030,000 | $ | 1,880,281 | ||||
Altria Group, Inc., 2.85%, 2022 | 7,089,000 | 6,555,035 | ||||||
Lorillard Tobacco Co., 8.125%, 2019 | 8,616,000 | 10,557,874 | ||||||
Reynolds American, Inc., 6.75%, 2017 | 7,300,000 | 8,459,109 | ||||||
|
| |||||||
$ | 27,452,299 | |||||||
|
| |||||||
Transportation – Services – 0.1% | ||||||||
ERAC USA Finance Co., 7%, 2037 (n) | $ | 2,690,000 | $ | 3,167,478 | ||||
|
| |||||||
U.S. Government Agencies and Equivalents – 1.6% | ||||||||
National Credit Union Administration Guaranteed Note, 2.9%, 2020 | $ | 980,000 | $ | 1,022,878 | ||||
Small Business Administration, 2.45%, 2033 | 8,291,000 | 8,028,282 | ||||||
Small Business Administration, 2.13%, 2033 | 4,991,000 | 4,784,996 | ||||||
Small Business Administration, 2.21%, 2033 | 1,272,000 | 1,224,842 | ||||||
Small Business Administration, 2.22%, 2033 | 4,575,000 | 4,407,838 | ||||||
Small Business Administration, 4.43%, 2029 | 893,821 | 966,232 |
11
Table of Contents
MFS Research Bond Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
U.S. Government Agencies and Equivalents – continued | ||||||||
Small Business Administration, 4.34%, 2024 | $ | 80,276 | $ | 86,622 | ||||
Small Business Administration, 4.99%, 2024 | 63,433 | 69,179 | ||||||
Small Business Administration, 5.11%, 2025 | 102,097 | 112,517 | ||||||
Small Business Administration, 2.85%, 2031 | 1,672,363 | 1,685,703 | ||||||
Small Business Administration, 2.37%, 2032 | 1,470,452 | 1,420,173 | ||||||
Small Business Administration, 3.21%, 2030 | 8,453,680 | 8,794,552 | ||||||
Small Business Administration, 2.08%, 2033 | 6,738,000 | 6,407,027 | ||||||
Small Business Administration, 4.93%, 2024 | 54,228 | 58,896 | ||||||
Small Business Administration, 4.86%, 2025 | 142,632 | 156,332 | ||||||
Small Business Administration, 4.625%, 2025 | 141,971 | 154,451 | ||||||
Small Business Administration, 3.25%, 2030 | 794,284 | 820,588 | ||||||
|
| |||||||
$ | 40,201,108 | |||||||
|
| |||||||
U.S. Treasury Obligations – 17.9% | ||||||||
U.S. Treasury Bonds, 3.375%, 2019 | $ | 1,800,000 | $ | 1,980,562 | ||||
U.S. Treasury Bonds, 5.375%, 2031 | 4,842,000 | 6,307,460 | ||||||
U.S. Treasury Bonds, 4.5%, 2036 | 116,000 | 138,131 | ||||||
U.S. Treasury Bonds, 4.75%, 2037 | 22,300,000 | 27,512,625 | ||||||
U.S. Treasury Bonds, 4.375%, 2038 | 22,650,000 | 26,521,746 | ||||||
U.S. Treasury Bonds, 4.5%, 2039 | 20,171,600 | 24,117,669 | ||||||
U.S. Treasury Bonds, 3.125%, 2041 | 500,000 | 468,750 | ||||||
U.S. Treasury Bonds, 3.125%, 2042 | 1,300,000 | 1,217,125 | ||||||
U.S. Treasury Notes, 3.125%, 2013 | 201,000 | 202,508 | ||||||
U.S. Treasury Notes, 0.25%, 2013 | 28,200,000 | 28,214,326 | ||||||
U.S. Treasury Notes, 2.375%, 2014 | 7,100,000 | 7,278,054 | ||||||
U.S. Treasury Notes, 0.5%, 2014 | 7,275,000 | 7,301,146 | ||||||
U.S. Treasury Notes, 4.25%, 2014 | 41,100,000 | 43,360,500 | ||||||
U.S. Treasury Notes, 2.125%, 2015 (f) | 76,244,000 | 78,829,129 | ||||||
U.S. Treasury Notes, 1.75%, 2015 | 51,500,000 | 52,956,472 | ||||||
U.S. Treasury Notes, 1.25%, 2015 | 12,900,000 | 13,137,850 | ||||||
U.S. Treasury Notes, 0.375%, 2015 | 5,600,000 | 5,587,747 | ||||||
U.S. Treasury Notes, 0.875%, 2016 | 101,350,000 | 101,286,656 | ||||||
U.S. Treasury Notes, 2.875%, 2018 | 2,000,000 | 2,145,000 | ||||||
U.S. Treasury Notes, 2.625%, 2018 | 1,600,000 | 1,697,000 | ||||||
U.S. Treasury Notes, 1.5%, 2018 | 4,300,000 | 4,312,092 | ||||||
U.S. Treasury Notes, 1%, 2019 | 5,600,000 | 5,362,000 | ||||||
U.S. Treasury Notes, 3.625%, 2020 | 4,200,000 | 4,685,297 | ||||||
U.S. Treasury Notes, TIPS, 2%, 2014 | 790,313 | 801,303 | ||||||
U.S. Treasury Notes, TIPS, 1.625%, 2015 | 840,275 | 873,689 | ||||||
U.S. Treasury Notes, TIPS, 2%, 2016 | 1,441,031 | 1,547,644 | ||||||
|
| |||||||
$ | 447,842,481 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Utilities – Electric Power – 2.6% | ||||||||
American Electric Power Co., Inc., 2.95%, 2022 | $ | 3,200,000 | $ | 2,978,867 | ||||
APT Pipelines Ltd., 3.875%, 2022 (n) | 3,640,000 | 3,357,190 | ||||||
CenterPoint Energy, Inc., 5.95%, 2017 | 540,000 | 614,033 | ||||||
CMS Energy Corp., 4.7%, 2043 | 2,483,000 | 2,293,416 | ||||||
CMS Energy Corp., 6.25%, 2020 | 1,925,000 | 2,236,242 | ||||||
CMS Energy Corp., 5.05%, 2018 | 1,000,000 | 1,110,846 | ||||||
CMS Energy Corp., 5.05%, 2022 | 3,094,000 | 3,342,764 | ||||||
Constellation Energy Group, Inc., 5.15%, 2020 | 2,487,000 | 2,727,545 | ||||||
Duke Energy Corp., 5.05%, 2019 | 4,636,000 | 5,188,579 | ||||||
Enel Finance International S.A., 6%, 2039 (n) | 3,700,000 | 3,416,957 | ||||||
Enel Finance International S.A., 6.25%, 2017 (n) | 3,623,000 | 3,974,721 | ||||||
Exelon Corp., 4.9%, 2015 | 5,842,000 | 6,252,395 | ||||||
Exelon Generation Co. LLC, 4.25%, 2022 | 3,983,000 | 3,983,442 | ||||||
FirstEnergy Corp., 4.25%, 2023 | 3,642,000 | 3,383,837 | ||||||
Florida Power & Light Co., 3.8%, 2042 | 4,292,000 | 3,844,924 | ||||||
Pacific Gas & Electric Co., 3.25%, 2023 | 4,335,000 | 4,245,170 | ||||||
PPL Corp., 3.5%, 2022 | 1,050,000 | 1,004,500 | ||||||
PPL WEM Holdings PLC, 5.375%, 2021 (n) | 6,909,000 | 7,576,589 | ||||||
Progress Energy, Inc., 3.15%, 2022 | 2,679,000 | 2,566,144 | ||||||
Waterford 3 Funding Corp., 8.09%, 2017 | 47,110 | 47,683 | ||||||
|
| |||||||
$ | 64,145,844 | |||||||
|
| |||||||
Total Bonds (Identified Cost, $2,580,076,947) | $ | 2,545,745,091 | ||||||
|
| |||||||
SHORT-TERM OBLIGATIONS (y) – 0.3% | ||||||||
Itau Unibanco Holding S.A., 0.01%, due 10/31/13 | $ | 5,800,000 | $ | 5,770,913 | ||||
U.S. Treasury Bills, 0.176%, due 7/25/13 | 280,000 | 279,970 | ||||||
U.S. Treasury Bills, 0.19%, due 8/22/13 | 1,939,000 | 1,938,566 | ||||||
U.S. Treasury Bills, 0.01%, due 9/19/13 | 116,000 | 115,991 | ||||||
|
| |||||||
Total Short-Term Obligations | $ | 8,105,440 | ||||||
|
| |||||||
MONEY MARKET FUNDS – 2.3% | ||||||||
MFS Institutional Money Market Portfolio, 0.11%, at Cost and Net Asset Value (v) | 57,848,397 | $ | 57,848,397 | |||||
|
| |||||||
Total Investments (Identified Cost, $2,646,027,856) | $ | 2,611,698,928 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – (4.4)% | (109,863,511 | ) | ||||||
|
| |||||||
Net Assets – 100.0% | $ | 2,501,835,417 | ||||||
|
|
12
Table of Contents
MFS Research Bond Series
Portfolio of Investments (unaudited) – continued
(d) | In default. Interest and/or scheduled principal payment(s) have been missed. |
(f) | All or a portion of the security has been segregated as collateral for open futures contracts. |
(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 $308,508,832 representing 12.3% 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. |
(y) | The rate shown represents an annualized yield at time of purchase. |
(z) | Restricted securities are not registered under the Securities Act of 1933 and are subject to legal restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are subsequently registered. Disposal of these securities may involve time-consuming negotiations and prompt sale at an acceptable price may be difficult. The fund holds the following restricted securities: |
Restricted Securities | Acquisition Date | Cost | Value | |||||||
Anthracite Ltd., “A”, CDO, FRN, 0.553%, 2019 | 1/15/10-8/11/11 | $634,372 | $786,160 | |||||||
Anthracite Ltd., “CFL”, CDO, FRN, 1.443%, 2037 | 3/03/11 | 117,752 | 123,482 | |||||||
Ardagh Packaging Finance PLC, 4.875%, 2022 | 1/16/13-4/17/13 | 5,425,928 | 5,067,700 | |||||||
Babson Ltd., CLO, “A1”, FRN, 0.526%, 2019 | 3/13/13 | 1,297,656 | 1,300,679 | |||||||
Banc of America Commercial Mortgage, Inc., 5.337%, 2043 | 10/26/12 | 3,054,027 | 3,000,400 | |||||||
Banc of America Commercial Mortgage, Inc., FRN, 5.787%, 2049 | 10/03/12 | 701,787 | 708,469 | |||||||
Banc of America Large Loan Ball, FRN, 5.325%, 2044 | 11/16/12 | 8,048,524 | 7,988,970 | |||||||
Banco Santander Brasil, FRN, 2.372%, 2014 | 3/17/11-3/22/11 | 1,000,000 | 995,171 | |||||||
Bayview Commercial Asset Trust, FRN, 0%, 2036 | 2/28/06 | 33,387 | 751 | |||||||
Bayview Commercial Asset Trust, FRN, 0%, 2036 | 5/16/06 | 21,939 | 2,653 | |||||||
Bayview Commercial Asset Trust, FRN, 3.843%, 2036 | 9/11/06 | 74,561 | 17,433 | |||||||
Bayview Commercial Asset Trust, FRN, 3.835%, 2036 | 10/25/06 | 45,619 | 10,611 | |||||||
Bayview Commercial Asset Trust, FRN, 4.036%, 2037 | 1/26/07 | 20,843 | 30,771 | |||||||
Bayview Financial Revolving Mortgage Loan Trust, FRN, 1.795%, 2040 | 3/01/06 | 157,298 | 75,958 | |||||||
Capital Trust Realty Ltd., CDO, 5.267%, 2035 | 9/14/10-3/25/11 | 1,550,918 | 1,677,971 | |||||||
Chesapeake Funding LLC, “A”, FRN, 0.944%, 2023 | 5/10/12 | 2,055,680 | 2,060,920 | |||||||
Citibank OMNI Master Trust, “A4”, FRN, 2.942%, 2018 | 2/18/11 | 2,862,248 | 2,772,800 | |||||||
Commercial Mortgage Asset Trust, FRN, 0.659%, 2032 | 4/09/12 | 6,295 | 6,282 | |||||||
Credit Acceptance Auto Loan Trust, “A”, 2.2%, 2019 | 3/22/12 | 938,910 | 949,297 | |||||||
Falcon Franchise Loan LLC, FRN, 11.363%, 2025 | 1/29/03 | 2,363 | 4,285 | |||||||
First Union National Bank Commercial Mortgage Trust, FRN, 1.893%, 2043 | 4/09/12 | 6 | 350 | |||||||
General Motors Financial Co., Inc., 3.25%, 2018 | 5/07/13 | 1,100,000 | 1,069,750 | |||||||
Israel Electric Corp. Ltd., 5.625%, 2018 | 6/18/13 | 4,510,000 | 4,574,070 | |||||||
Israel Electric Corp. Ltd., 6.875%, 2023 | 6/18/13 | 4,497,000 | 4,524,805 | |||||||
Itau Unibanco Holding S.A., 6.2%, 2020 | 4/08/10 | 1,794,010 | 1,849,500 | |||||||
KKR Financial CLO Ltd., “A1”, FRN, 0.545%, 2017 | 4/11/11 | 187,129 | 191,748 | |||||||
Kinder Morgan Finance Corp., 6%, 2018 | 12/06/10 | 2,999,837 | 3,149,697 | |||||||
Kingsland CLO Ltd., “A1”, FRN, 0.488%, 2021 | 6/14/13 | 3,482,968 | 3,471,764 | |||||||
Mach One Trust Commercial Mortgage, CDO, “B”, 5.43%, 2040 | 3/10/10 | 64,100 | 67,875 | |||||||
Metropolitan Life Global Funding I, 1.7%, 2015 | 10/25/12-10/26/12 | 5,381,600 | 5,378,084 | |||||||
Morgan Stanley Re-REMIC Trust, FRN, 5.981%, 2045 | 12/06/12-1/07/13 | 13,004,999 | 12,546,765 | |||||||
NXP B.V./NXP Funding LLC, 3.75%, 2018 | 5/06/13 | 1,470,000 | 1,440,600 | |||||||
Pearson Funding Five PLC, 3.25%, 2023 | 5/01/13 | 2,110,350 | 1,947,842 |
13
Table of Contents
MFS Research Bond Series
Portfolio of Investments (unaudited) – continued
Restricted Securities – continued | Acquisition Date | Cost | Value | |||||||
Preferred Term Securities XIX Ltd., CDO, FRN, 0.623%, 2035 | 9/08/05-3/28/11 | $269,903 | $314,503 | |||||||
Vantage Point Imaging, 6.75%, 2018 | 6/27/13 | 3,795,000 | 3,889,875 | |||||||
Total Restricted Securities | $71,997,991 | |||||||||
% of Net assets | 2.9% |
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 |
Derivative Contracts at 6/30/13
Futures Contracts Outstanding at 6/30/13
Description | Currency | Contracts | Value | Expiration Date | Unrealized Appreciation (Depreciation) | |||||||||||||
Asset Derivatives | ||||||||||||||||||
Interest Rate Futures | ||||||||||||||||||
U.S. Treasury Note 10 yr (Short) | USD | 1,500 | $189,843,750 | September - 2013 | $4,194,749 | |||||||||||||
U.S. Treasury Bond 30 yr (Short) | USD | 95 | 12,905,156 | September - 2013 | 460,844 | |||||||||||||
|
| |||||||||||||||||
$4,655,593 | ||||||||||||||||||
|
|
At June 30, 2013, the fund had liquid securities with an aggregate value of $2,016,125 to cover any commitments for certain derivative contracts.
See Notes to Financial Statements
14
Table of Contents
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 6/30/13 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $2,588,179,459) | $2,553,850,531 | |||||||
Underlying affiliated funds, at cost and value | 57,848,397 | |||||||
Total investments, at value (identified cost, $2,646,027,856) | $2,611,698,928 | |||||||
Cash | 5,677,600 | |||||||
Receivables for | ||||||||
Daily variation margin on open futures contracts | 93,438 | |||||||
Investments sold | 3,667,602 | |||||||
TBA sale commitments | 51,966,377 | |||||||
Fund shares sold | 7,569,752 | |||||||
Interest | 20,167,760 | |||||||
Other assets | 9,095 | |||||||
Total assets | $2,700,850,552 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Investments purchased | $9,716,100 | |||||||
TBA purchase commitments | 185,064,430 | |||||||
Fund shares reacquired | 3,856,263 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 139,095 | |||||||
Shareholder servicing costs | 819 | |||||||
Distribution and/or service fees | 45,430 | |||||||
Payable for independent Trustees’ compensation | 874 | |||||||
Accrued expenses and other liabilities | 192,124 | |||||||
Total liabilities | $199,015,135 | |||||||
Net assets | $2,501,835,417 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $2,459,857,691 | |||||||
Unrealized appreciation (depreciation) on investments | (29,673,335 | ) | ||||||
Accumulated net realized gain (loss) on investments | 10,660,276 | |||||||
Undistributed net investment income | 60,990,785 | |||||||
Net assets | $2,501,835,417 | |||||||
Shares of beneficial interest outstanding | 192,037,835 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $841,169,422 | 63,910,857 | $13.16 | |||||||||
Service Class | 1,660,665,995 | 128,126,978 | 12.96 |
See Notes to Financial Statements
15
Table of Contents
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 6/30/13 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Interest | $38,192,806 | |||||||
Dividends from underlying affiliated funds | 106,702 | |||||||
Total investment income | $38,299,508 | |||||||
Expenses | ||||||||
Management fee | $6,203,455 | |||||||
Distribution and/or service fees | 2,074,340 | |||||||
Shareholder servicing costs | 49,786 | |||||||
Administrative services fee | 160,065 | |||||||
Independent Trustees’ compensation | 17,047 | |||||||
Custodian fee | 72,565 | |||||||
Shareholder communications | 82,081 | |||||||
Audit and tax fees | 34,250 | |||||||
Legal fees | 5,542 | |||||||
Miscellaneous | 38,018 | |||||||
Total expenses | $8,737,149 | |||||||
Fees paid indirectly | (1,156 | ) | ||||||
Reduction of expenses by investment adviser | (8,119 | ) | ||||||
Net expenses | $8,727,874 | |||||||
Net investment income | $29,571,634 | |||||||
Realized and unrealized gain (loss) on investments | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $(428,696 | ) | ||||||
Futures contracts | 4,438,365 | |||||||
Net realized gain (loss) on investments | $4,009,669 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $(100,692,162 | ) | ||||||
Futures contracts | 4,204,827 | |||||||
Net unrealized gain (loss) on investments | $(96,487,335 | ) | ||||||
Net realized and unrealized gain (loss) on investments | $(92,477,666 | ) | ||||||
Change in net assets from operations | $(62,906,032 | ) |
See Notes to Financial Statements
16
Table of Contents
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 6/30/13 (unaudited | ) | | Year ended 12/31/12 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $29,571,634 | $26,275,209 | ||||||
Net realized gain (loss) on investments | 4,009,669 | 15,186,880 | ||||||
Net unrealized gain (loss) on investments | (96,487,335 | ) | 21,110,252 | |||||
Change in net assets from operations | $(62,906,032 | ) | $62,572,341 | |||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(25,375,106 | ) | |||||
From net realized gain on investments | — | (6,259,882 | ) | |||||
Total distributions declared to shareholders | $— | $(31,634,988 | ) | |||||
Change in net assets from fund share transactions | $68,033,645 | $1,692,099,620 | ||||||
Total change in net assets | $5,127,613 | $1,723,036,973 | ||||||
Net assets | ||||||||
At beginning of period | 2,496,707,804 | 773,670,831 | ||||||
At end of period (including undistributed net investment income of $60,990,785 and | $2,501,835,417 | $2,496,707,804 |
See Notes to Financial Statements
17
Table of Contents
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 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $13.49 | $13.01 | $12.66 | $12.20 | $11.00 | $11.60 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.17 | $0.37 | $0.44 | $0.44 | $0.51 | $0.52 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.50 | ) | 0.57 | 0.41 | 0.45 | 1.20 | (0.78 | ) | ||||||||||||||||
Total from investment operations | $(0.33 | ) | $0.94 | $0.85 | $0.89 | $1.71 | $(0.26 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.37 | ) | $(0.35 | ) | $(0.39 | ) | $(0.51 | ) | $(0.34 | ) | |||||||||||||
From net realized gain on investments | — | (0.09 | ) | (0.15 | ) | (0.04 | ) | — | — | |||||||||||||||
Total distributions declared to shareholders | $— | $(0.46 | ) | $(0.50 | ) | $(0.43 | ) | $(0.51 | ) | $(0.34 | ) | |||||||||||||
Net asset value, end of period (x) | $13.16 | $13.49 | $13.01 | $12.66 | $12.20 | $11.00 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | (2.45 | )(n) | 7.35 | 6.75 | 7.47 | 16.16 | (2.37 | ) | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.54 | (a) | 0.56 | 0.57 | 0.59 | 0.62 | 0.74 | |||||||||||||||||
Expenses after expense reductions (f) | 0.54 | (a) | 0.56 | 0.57 | 0.59 | 0.62 | 0.64 | |||||||||||||||||
Net investment income | 2.55 | (a) | 2.76 | 3.41 | 3.51 | 4.38 | 4.63 | |||||||||||||||||
Portfolio turnover | 50 | (n) | 114 | 60 | 66 | 113 | 115 | |||||||||||||||||
Net assets at end of period (000 omitted) | $841,169 | $850,417 | $367,398 | $371,865 | $317,851 | $184,984 | ||||||||||||||||||
Service Class | Six months ended 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $13.30 | $12.85 | $12.53 | $12.10 | $10.91 | $11.51 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.15 | $0.33 | $0.40 | $0.40 | $0.47 | $0.49 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.49 | ) | 0.57 | 0.41 | 0.45 | 1.20 | (0.78 | ) | ||||||||||||||||
Total from investment operations | $(0.34 | ) | $0.90 | $0.81 | $0.85 | $1.67 | $(0.29 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.36 | ) | $(0.34 | ) | $(0.38 | ) | $(0.48 | ) | $(0.31 | ) | |||||||||||||
From net realized gain on investments | — | (0.09 | ) | (0.15 | ) | (0.04 | ) | — | — | |||||||||||||||
Total distributions declared to shareholders | $— | $(0.45 | ) | $(0.49 | ) | $(0.42 | ) | $(0.48 | ) | $(0.31 | ) | |||||||||||||
Net asset value, end of period (x) | $12.96 | $13.30 | $12.85 | $12.53 | $12.10 | $10.91 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | (2.56 | )(n) | 7.06 | 6.48 | 7.20 | 15.91 | (2.64 | ) | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.79 | (a) | 0.81 | 0.82 | 0.84 | 0.87 | 0.99 | |||||||||||||||||
Expenses after expense reductions (f) | 0.79 | (a) | 0.81 | 0.82 | 0.84 | 0.87 | 0.89 | |||||||||||||||||
Net investment income | 2.30 | (a) | 2.48 | 3.13 | 3.20 | 4.07 | 4.37 | |||||||||||||||||
Portfolio turnover | 50 | (n) | 114 | 60 | 66 | 113 | 115 | |||||||||||||||||
Net assets at end of period (000 omitted) | $1,660,666 | $1,646,291 | $406,273 | $211,077 | $44,776 | $14,518 |
See Notes to Financial Statements
18
Table of Contents
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
19
Table of Contents
MFS Research Bond Series
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) | Business and Organization |
MFS Research Bond Series (the fund) is a series of MFS Variable Insurance Trust (the trust). The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The shareholders of each series of the trust are separate accounts of insurance companies, which offer variable annuity and/or life insurance products, and qualified retirement and pension plans.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued. The fund invests a significant portion of its assets in asset-backed and/or mortgage-backed securities. The value of these securities may depend, in part, on the issuer’s or borrower’s credit quality or ability to pay principal and interest when due and may fall if an issuer or borrower defaults on its obligation to pay principal or interest or if the instrument’s credit rating is downgraded by a credit rating agency. U.S. Government securities not supported as to the payment of principal or interest by the U.S. Treasury, such as those issued by Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, are subject to greater credit risk than are U.S. Government securities supported by the U.S. Treasury, such as those issued by Ginnie Mae. The fund invests in foreign securities. Investments in foreign securities are vulnerable to the effects of changes in the relative values of the local currency and the U.S. dollar and to the effects of changes in each country’s legal, political, and economic environment.
In this reporting period, the fund adopted the disclosure provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Update 2011-11 (“ASU 2011-11”), Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities along with the related scope clarification provisions of FASB Accounting Standards Update 2013-01 (“ASU 2013-01”) entitled Balance Sheet (Topic 210) – Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 is intended to enhance disclosures on the offsetting of financial assets and liabilities by requiring entities to disclose both gross and net information about financial instruments and transactions that are either offset in the statement of financial position or subject to a Master Netting Agreement or similar arrangement. ASU 2013-01 limits the scope of ASU 2011-11’s disclosure requirements on offsetting to financial assets and financial liabilities related to derivatives, repurchase and reverse repurchase agreements, and securities lending and securities borrowing transactions. The disclosures required by ASU 2011-11, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
In June 2013, FASB issued Accounting Standards Update 2013-08 Financial Services – Investment Companies (Topic 946) – Amendments to the Scope, Measurement, and Disclosure Requirements (“ASU 2013-08”) which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013. ASU 2013-08 sets forth a methodology for determining whether an entity should be characterized as an investment company and prescribes fair value accounting for an investment company’s non-controlling ownership interest in another investment company. FASB has determined that a fund registered under the Investment Company Act of 1940 automatically meets ASU 2013-08’s criteria for an investment company. Although still evaluating the potential impacts of ASU 2013-08 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. 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. 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
20
Table of Contents
MFS Research Bond Series
Notes to Financial Statements (unaudited) – continued
and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair 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. The following is a summary of the levels used as of June 30, 2013 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 | $— | $488,043,589 | $— | $488,043,589 | ||||||||||||
Non-U.S. Sovereign Debt | — | 44,507,747 | — | 44,507,747 | ||||||||||||
Municipal Bonds | — | 1,732,588 | — | 1,732,588 | ||||||||||||
U.S. Corporate Bonds | — | 879,763,264 | — | 879,763,264 | ||||||||||||
Residential Mortgage-Backed Securities | — | 531,679,511 | — | 531,679,511 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 248,854,286 | — | 248,854,286 | ||||||||||||
Asset-Backed Securities (including CDOs) | — | 86,215,306 | — | 86,215,306 | ||||||||||||
Foreign Bonds | — | 264,948,800 | — | 264,948,800 | ||||||||||||
Short Term Securities | — | 8,105,440 | — | 8,105,440 | ||||||||||||
Mutual Funds | 57,848,397 | — | — | 57,848,397 | ||||||||||||
Total Investments | $57,848,397 | $2,553,850,531 | $— | $2,611,698,928 | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Futures Contracts | $4,655,593 | $— | $— | $4,655,593 |
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.
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.
21
Table of Contents
MFS Research Bond Series
Notes to Financial Statements (unaudited) – continued
The derivative instruments used by the fund futures 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, 2013 as reported in the Statement of Assets and Liabilities:
Fair Value (a) | ||||||
Risk | Derivative Contracts | Asset Derivatives | ||||
Interest Rate | Interest Rate Futures | $4,655,593 |
(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, 2013 as reported in the Statement of Operations:
Risk | Futures Contracts | |||
Interest Rate | $4,438,365 |
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, 2013 as reported in the Statement of Operations:
Risk | Futures Contracts | |||
Interest Rate | $4,204,827 |
Derivative counterparty credit risk is managed through formal evaluation of the creditworthiness of all potential counterparties. On certain, but not all, 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. Upon an event of default or a termination of the ISDA Master Agreement, the non-defaulting party has the right to close out all transactions traded under such agreement and to net amounts owed under each 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.
Collateral and margin requirements differ by type of derivative. Margin requirements are set by the broker or clearing house for cleared derivatives (i.e., futures contracts, cleared swaps, and exchange-traded options) while collateral terms are contract specific for over-the-counter traded derivatives (i.e., forward foreign currency exchange contracts, uncleared 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 that has been segregated to cover the fund’s collateral or margin obligations under derivative contracts, if any, will be reported separately in the Statement of Assets and Liabilities as restricted cash. Securities pledged as collateral or margin for the same purpose, if any, is noted in the Portfolio of Investments.
The fund’s accounting policy with respect to balance sheet offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the ISDA Master Agreement does not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty.
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.
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.
22
Table of Contents
MFS Research Bond Series
Notes to Financial Statements (unaudited) – continued
Indemnifications – Under the fund’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund’s maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.
Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. All premium and discount is amortized or accreted for financial statement purposes in accordance with U.S. generally accepted accounting principles. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted upward or downward to the rate of inflation. Interest is accrued based on the principal value, which is adjusted for inflation. Any increase or decrease in the principal amount of an inflation-indexed bond is generally recorded as an increase or decrease in interest income, respectively, even though the adjusted principal is not received until maturity. Interest payments received in additional securities are recorded on the ex-interest date in an amount equal to the value of the security on such date. 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. TBA purchase commitments are held at carrying amount, which approximates fair value and are categorized as level 2 within the fair value hierarchy disclosure. 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, 2013, is shown as a reduction of total expenses in the Statement of Operations.
Tax Matters and Distributions – The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns, when filed, will remain subject to examination by the Internal Revenue Service for a three year period.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to amortization and accretion of debt securities.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/12 | ||||
Ordinary income (including any short-term capital gains) | $27,596,422 | |||
Long-term capital gains | 4,038,566 | |||
Total distributions | $31,634,988 |
23
Table of Contents
MFS Research Bond Series
Notes to Financial Statements (unaudited) – continued
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/13 | ||||
Cost of investments | $2,656,916,560 | |||
Gross appreciation | 23,396,163 | |||
Gross depreciation | (68,613,795 | ) | ||
Net unrealized appreciation (depreciation) | $(45,217,632 | ) | ||
As of 12/31/12 | ||||
Undistributed ordinary income | 40,363,291 | |||
Undistributed long-term capital gain | 3,375,776 | |||
Other temporary differences | (147,750 | ) | ||
Net unrealized appreciation (depreciation) | $(61,292,441 | ) |
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 in 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 6/30/13 | Year ended 12/31/12 | Six months ended 6/30/13 | Year ended 12/31/12 | |||||||||||||
Initial Class | $— | $10,286,289 | $— | $2,460,677 | ||||||||||||
Service Class | — | 15,088,817 | — | 3,799,205 | ||||||||||||
Total | $— | $25,375,106 | $— | $6,259,882 |
(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.
Effective April 1, 2013, MFS has agreed in writing to reduce its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund’s Board of Trustees. For the period April 1, 2013 through June 30, 2013, this management fee reduction amounted to $3,385, 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, 2013 was equivalent to an annual effective rate of 0.50% of the fund’s average daily net assets.
Effective August 1, 2013, the investment adviser has agreed in writing to reduce its management fee to 0.45% 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, 2015.
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 was terminated on April 30, 2013. For the period January 1, 2013 through April 30, 2013, 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.
24
Table of Contents
MFS Research Bond Series
Notes to Financial Statements (unaudited) – continued
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, 2013, the fee was $49,433, which equated to 0.0040% 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, 2013, these costs amounted to $353.
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, 2013 was equivalent to an annual effective rate of 0.0129% 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, 2013, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $9,236 and are included in “Miscellaneous” expense in 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 $4,734, 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 current income consistent with preservation of capital and liquidity. Income earned on this investment is included in “Dividends from underlying affiliated funds” in 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 short-term obligations, were as follows:
Purchases | Sales | |||||||
U.S. Government securities | $792,430,400 | $858,465,841 | ||||||
Investments (non-U.S. Government securities) | $556,571,434 | $302,049,539 |
(5) | Shares of Beneficial Interest |
The fund’s Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
Year ended 6/30/13 | Year ended 12/31/12 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 5,801,779 | $77,185,102 | 4,329,547 | $57,444,729 | ||||||||||||
Service Class | 13,232,466 | 175,372,620 | 22,342,590 | 294,271,747 | ||||||||||||
19,034,245 | $252,557,722 | 26,672,137 | $351,716,476 | |||||||||||||
Shares issued in connection with the acquisition of Sun Capital Investment Grade Bond Fund | ||||||||||||||||
Initial Class | — | $— | 17,749,996 | $239,447,454 | ||||||||||||
Service Class | — | — | 14,383,246 | 191,297,167 | ||||||||||||
— | $— | 32,133,242 | $430,744,621 | |||||||||||||
Shares issued in connection with the acquisition of SC PIMCO Total Return Fund | ||||||||||||||||
Initial Class | — | $— | 17,168,406 | $231,601,801 | ||||||||||||
Service Class | — | — | 58,945,677 | 783,977,506 | ||||||||||||
— | $— | 76,114,083 | $1,015,579,307 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 968,614 | $12,746,966 | ||||||||||||
Service Class | — | — | 1,454,043 | 18,888,022 | ||||||||||||
— | $— | 2,422,657 | $31,634,988 |
25
Table of Contents
MFS Research Bond Series
Notes to Financial Statements (unaudited) – continued
Year ended 6/30/13 | Year ended 12/31/12 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (4,935,054 | ) | $(66,577,727 | ) | (5,409,472 | ) | $(72,146,580 | ) | ||||||||
Service Class | (8,887,229 | ) | (117,946,350 | ) | (4,950,913 | ) | (65,429,192 | ) | ||||||||
(13,822,283 | ) | $(184,524,077 | ) | (10,360,385 | ) | $(137,575,772 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | 866,725 | $10,607,375 | 34,807,091 | $469,094,370 | ||||||||||||
Service Class | 4,345,237 | 57,426,270 | 92,174,643 | 1,223,005,250 | ||||||||||||
5,211,962 | $68,033,645 | 126,981,734 | $1,692,099,620 |
The fund is one of several mutual funds in which the MFS funds-of-funds may invest. The MFS funds-of-funds do not invest in the underlying MFS funds for the purpose of exercising management or control. At the end of the period, the MFS Moderate Allocation Portfolio, the MFS Conservative Allocation Portfolio, and the MFS Growth Allocation Portfolio were the owners of record of approximately 10%, 6%, and 1%, respectively, of the value of outstanding voting shares of the fund.
(6) | Line of Credit |
The fund and certain other funds managed by MFS participate in a $1.1 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, 2013, the fund’s commitment fee and interest expense were $5,011 and $0, respectively, and are included in “Miscellaneous” expense in 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 | 224,031,860 | 359,093,628 | (525,277,091 | ) | 57,848,397 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $106,702 | $57,848,397 |
(8) | Acquisitions |
At close of business on December 7, 2012, the fund with net assets of approximately $1,048,429,345, acquired all of the assets and liabilities of Sun Capital Investment Grade Bond Fund and SC PIMCO Total Return Fund, each a series of Sun Capital Advisers Trust. The purpose of the transaction was to provide shareholders of both Sun Capital Investment Grade Bond Fund and SC PIMCO Total Return Fund the opportunity to participate in a larger combined portfolio with similar investment policies and strategies. The acquisition was accomplished by a tax-free exchange of approximately 32,133,242 shares of the fund to Sun Capital Investment Grade Bond Fund (valued at approximately $430,744,621) and approximately 76,114,083 shares of the fund to SC PIMCO Total Return Fund (valued at approximately $1,015,579,307) for all of the assets and liabilities of Sun Capital Investment Grade Bond Fund and SC PIMCO Total Return Fund. Sun Capital Investment Grade Bond Fund and SC PIMCO Total Return Fund then distributed the shares of the fund that they each received from the fund to their respective shareholders. Sun Capital Investment Grade Bond Fund’s investments on that date were valued at approximately $415,216,875 with a cost basis of approximately $406,114,379. SC PIMCO Total Return Fund’s investments on that date were valued at approximately $956,816,504 with a cost basis of approximately $948,823,374. For financial reporting purposes, assets received and shares issued by the fund were recorded at fair value; however, the cost basis of the investments received from Sun Capital Investment Grade Bond Fund and SC PIMCO Total Return Fund were carried forward to align ongoing reporting of the fund’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.
26
Table of Contents
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, 2013 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products” 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” section of mfs.com.
27
Table of Contents
Table of Contents
SEMIANNUAL REPORT
June 30, 2013
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:
As the year progresses, the global economy continues to grind ahead slowly, held back by broad austerity measures. The U.S. economy remains a steadying force, driven by resilient consumers, who have taken the payroll tax increase and the sequestration’s early impact in stride. With U.S. housing and jobs showing steady expansion, domestic consumer-driven growth has offset weaker exports and the U.S. government’s spending constraints. In response to these developments, the U.S. Federal Reserve has begun to brace investors for an eventual shift in its monetary policy, causing global market tremors.
Japan has been another bright spot, with government and central bank stimulus policies leading to increased exports, a resurgent stock market and improved economic sentiment. After a six-month rally, Japan’s stocks slipped late in the second quarter, then picked up momentum on fresh signs that the country could soon break free of its chronic deflation. The major deterrent to global growth remains the eurozone, still in the grip of persistent recession. China has seen its pace of economic growth decelerate, a troubling turn for the country’s trading partners, who have come to rely on it as an engine for global growth.
As always, managing risk in the face of uncertainty remains a top priority for investors. At MFS®, our uniquely collaborative investment process employs integrated, global research and active risk management. Our global team of investment professionals shares ideas and evaluates opportunities across continents, investment disciplines and asset classes — all with a goal of building better insights, and ultimately better results, for our clients.
We are mindful of the many economic challenges investors face, and believe it is more important than ever to maintain a long-term view and employ time-tested principles, such as asset allocation and diversification. We remain confident that our unique approach can serve investors well as they work with their financial advisors to identify and pursue the most suitable opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2013
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 Research International Series
Portfolio structure
Top ten holdings | ||||
Royal Dutch Shell PLC, “A” | 2.6% | |||
Nestle S.A. | 2.6% | |||
HSBC Holdings PLC | 2.5% | |||
Novartis AG | 2.3% | |||
Roche Holding AG | 2.3% | |||
GlaxoSmithKline PLC | 2.1% | |||
Sumitomo Mitsui Financial Group, Inc. | 2.0% | |||
Honda Motor Co. Ltd. | 1.9% | |||
Groupe Danone | 1.9% | |||
Rio Tinto Ltd. | 1.9% | |||
Global equity sectors | ||||
Financial Services | 24.7% | |||
Capital Goods | 22.8% | |||
Health Care | 10.7% | |||
Energy | 10.5% | |||
Consumer Staples | 9.6% | |||
Consumer Cyclicals | 7.8% | |||
Technology | 7.4% | |||
Telecommunications/Cable Television | 5.5% |
Issuer country weightings (x) | ||||
Japan | 23.9% | |||
United Kingdom | 19.5% | |||
Switzerland | 10.7% | |||
France | 10.0% | |||
Germany | 6.0% | |||
Hong Kong | 4.4% | |||
Netherlands | 3.7% | |||
Australia | 3.2% | |||
Sweden | 3.2% | |||
Other Countries | 15.4% | |||
Currency exposure weightings (y) | ||||
Japanese Yen | 23.9% | |||
Euro | 22.8% | |||
British Pound Sterling | 19.5% | |||
Swiss Franc | 10.7% | |||
Hong Kong Dollar | 5.5% | |||
United States Dollar | 4.5% | |||
Australian Dollar | 3.2% | |||
Swedish Krona | 3.2% | |||
Brazilian Real | 2.1% | |||
Other Currencies | 4.6% |
(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 6/30/13.
The portfolio is actively managed and current holdings may be different.
2
Table of Contents
MFS Research International Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2013 through June 30, 2013
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, 2013 through June 30, 2013.
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 1/01/13 | Ending Account Value | Expenses Paid During Period (p) 1/01/13-6/30/13 | ||||||||||||||
Initial Class | Actual | 1.08% | $1,000.00 | $1,034.76 | $5.45 | |||||||||||||
Hypothetical (h) | 1.08% | $1,000.00 | $1,019.44 | $5.41 | ||||||||||||||
Service Class | Actual | 1.33% | $1,000.00 | $1,033.36 | $6.71 | |||||||||||||
Hypothetical (h) | 1.33% | $1,000.00 | $1,018.20 | $6.66 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
3
Table of Contents
MFS Research International Series
PORTFOLIO OF INVESTMENTS – 6/30/13 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 99.0% | ||||||||
Alcoholic Beverages – 1.8% | ||||||||
Heineken N.V. | 14,825 | $ | 942,461 | |||||
Pernod Ricard S.A. | 13,536 | 1,500,973 | ||||||
|
| |||||||
$ | 2,443,434 | |||||||
|
| |||||||
Apparel Manufacturers – 2.0% | ||||||||
Li & Fung Ltd. | 1,024,000 | $ | 1,396,390 | |||||
LVMH Moet Hennessy Louis Vuitton S.A. | 7,863 | 1,266,227 | ||||||
|
| |||||||
$ | 2,662,617 | |||||||
|
| |||||||
Automotive – 4.6% | ||||||||
Autoliv, Inc. | 14,750 | $ | 1,141,503 | |||||
DENSO Corp. | 51,000 | 2,391,938 | ||||||
Honda Motor Co. Ltd. | 69,800 | 2,593,396 | ||||||
|
| |||||||
$ | 6,126,837 | |||||||
|
| |||||||
Broadcasting – 1.7% | ||||||||
Nippon Television Holdings, Inc. | 50,600 | $ | 925,473 | |||||
Publicis Groupe S.A. | 19,829 | 1,406,083 | ||||||
|
| |||||||
$ | 2,331,556 | |||||||
|
| |||||||
Business Services – 3.1% | ||||||||
Amadeus IT Holding S.A. | 6,810 | $ | 217,661 | |||||
Cognizant Technology Solutions Corp., “A” (a) | 9,100 | 569,751 | ||||||
Compass Group PLC | 54,100 | 693,324 | ||||||
Experian Group Ltd. | 51,166 | 887,451 | ||||||
Mitsubishi Corp. | 44,000 | 753,741 | ||||||
Nomura Research, Inc. | 32,000 | 1,044,356 | ||||||
|
| |||||||
$ | 4,166,284 | |||||||
|
| |||||||
Computer Software – 0.4% | ||||||||
Dassault Systems S.A. | 4,683 | $ | 572,867 | |||||
|
| |||||||
Computer Software – Systems – 0.9% | ||||||||
Canon, Inc. | 34,900 | $ | 1,146,245 | |||||
|
| |||||||
Conglomerates – 0.8% | ||||||||
Hutchison Whampoa Ltd. | 106,000 | $ | 1,107,802 | |||||
|
| |||||||
Consumer Products – 1.0% | ||||||||
Reckitt Benckiser Group PLC | 18,641 | $ | 1,321,459 | |||||
|
| |||||||
Electrical Equipment – 3.4% | ||||||||
Legrand S.A. | 9,697 | $ | 448,133 | |||||
Schneider Electric S.A. | 28,138 | 2,028,620 | ||||||
Siemens AG | 20,858 | 2,108,182 | ||||||
|
| |||||||
$ | 4,584,935 | |||||||
|
| |||||||
Electronics – 1.2% | ||||||||
Infineon Technologies AG | 85,303 | $ | 713,953 | |||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 234,174 | 847,475 | ||||||
|
| |||||||
$ | 1,561,428 | |||||||
|
| |||||||
Energy – Independent – 2.1% | ||||||||
Cairn Energy PLC (a) | 71,781 | $ | 275,288 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Energy – Independent – continued | ||||||||
Cenovus Energy, Inc. | 22,180 | $ | 632,690 | |||||
INPEX Corp. | 187 | 781,767 | ||||||
Oil Search Ltd. | 61,920 | 434,793 | ||||||
Reliance Industries Ltd. | 52,004 | 754,878 | ||||||
|
| |||||||
$ | 2,879,416 | |||||||
|
| |||||||
Energy – Integrated – 5.5% | ||||||||
BG Group PLC | 83,204 | $ | 1,420,042 | |||||
BP PLC | 351,351 | 2,437,383 | ||||||
Royal Dutch Shell PLC, “A” | 110,497 | 3,526,091 | ||||||
|
| |||||||
$ | 7,383,516 | |||||||
|
| |||||||
Engineering – Construction – 1.4% | ||||||||
JGC Corp. | 54,000 | $ | 1,943,739 | |||||
|
| |||||||
Food & Beverages – 5.0% | ||||||||
Groupe Danone | 34,267 | $ | 2,571,845 | |||||
M. Dias Branco S.A. Industria e Comercio de Alimentos | 18,700 | 699,778 | ||||||
Nestle S.A. | 53,390 | 3,492,049 | ||||||
|
| |||||||
$ | 6,763,672 | |||||||
|
| |||||||
Food & Drug Stores – 0.8% | ||||||||
Lawson, Inc. | 9,900 | $ | 755,626 | |||||
Wumart Stores, Inc., “H” | 163,000 | 300,527 | ||||||
|
| |||||||
$ | 1,056,153 | |||||||
|
| |||||||
Gaming & Lodging – 0.9% | ||||||||
Sands China Ltd. | 267,600 | $ | 1,249,900 | |||||
|
| |||||||
Insurance – 4.1% | ||||||||
AIA Group Ltd. | 528,000 | $ | 2,218,955 | |||||
Delta Lloyd N.V. | 27,110 | 540,091 | ||||||
Hiscox Ltd. (a) | 68,941 | 598,856 | ||||||
ING Groep N.V. (a) | 175,269 | 1,601,555 | ||||||
Sony Financial Holdings, Inc. | 33,900 | 535,605 | ||||||
|
| |||||||
$ | 5,495,062 | |||||||
|
| |||||||
Internet – 0.8% | ||||||||
Yahoo Japan Corp. | 2,097 | $ | 1,036,221 | |||||
|
| |||||||
Machinery & Tools – 3.8% | ||||||||
Atlas Copco AB, “A” | 64,953 | $ | 1,559,924 | |||||
Glory Ltd. | 41,200 | 966,235 | ||||||
Joy Global, Inc. | 20,710 | 1,005,056 | ||||||
Schindler Holding AG | 11,121 | 1,546,820 | ||||||
Sinotruk Hong Kong Ltd. | 8,000 | 3,893 | ||||||
|
| |||||||
$ | 5,081,928 | |||||||
|
| |||||||
Major Banks – 12.1% | ||||||||
Banco Santander S.A. | 105,116 | $ | 665,479 | |||||
Barclays PLC | 469,514 | 2,012,688 | ||||||
BNP Paribas | 38,406 | 2,098,378 | ||||||
HSBC Holdings PLC | 320,815 | 3,327,774 | ||||||
Mitsubishi UFJ Financial Group, Inc. | 247,400 | 1,535,233 |
4
Table of Contents
MFS Research International Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Major Banks – continued | ||||||||
Standard Chartered PLC | 67,453 | $ | 1,456,297 | |||||
Sumitomo Mitsui Financial Group, Inc. | 59,300 | 2,720,458 | ||||||
Westpac Banking Corp. | 94,530 | 2,474,737 | ||||||
|
| |||||||
$ | 16,291,044 | |||||||
|
| |||||||
Medical & Health Technology & Services – 0.9% | ||||||||
Diagnosticos da America S.A. | 70,900 | $ | 367,631 | |||||
Kobayashi Pharmaceutical Co. Ltd. | 6,500 | 343,378 | ||||||
Miraca Holdings, Inc. | 9,400 | 433,077 | ||||||
|
| |||||||
$ | 1,144,086 | |||||||
|
| |||||||
Medical Equipment – 0.6% | ||||||||
Sonova Holding AG | 7,048 | $ | 747,668 | |||||
|
| |||||||
Metals & Mining – 2.8% | ||||||||
Iluka Resources Ltd. | 136,639 | $ | 1,233,640 | |||||
Rio Tinto Ltd. | 62,320 | 2,554,282 | ||||||
|
| |||||||
$ | 3,787,922 | |||||||
|
| |||||||
Natural Gas – Distribution – 1.9% | ||||||||
China Resources Gas Group Ltd. | 158,000 | $ | 405,362 | |||||
GDF SUEZ | 48,028 | 936,465 | ||||||
Tokyo Gas Co. Ltd. | 224,000 | 1,239,740 | ||||||
|
| |||||||
$ | 2,581,567 | |||||||
|
| |||||||
Network & Telecom – 1.0% | ||||||||
Ericsson, Inc., “B” | 113,804 | $ | 1,288,888 | |||||
|
| |||||||
Other Banks & Diversified Financials – 6.9% | ||||||||
Aeon Credit Service Co. Ltd. | 25,300 | $ | 718,574 | |||||
Bank Rakyat Indonesia | 324,000 | 251,022 | ||||||
DBS Group Holdings Ltd. | 81,000 | 986,023 | ||||||
Erste Group Bank AG (a) | 41,581 | 1,107,113 | ||||||
HDFC Bank Ltd., ADR | 20,960 | 759,590 | ||||||
ICICI Bank Ltd. | 22,497 | 405,362 | ||||||
Itau Unibanco Holding S.A., ADR | 27,177 | 351,127 | ||||||
Kasikornbank PLC, NVDR | 105,200 | 640,775 | ||||||
KBC Group N.V. | 32,357 | 1,196,797 | ||||||
Sberbank of Russia, ADR | 67,692 | 771,012 | ||||||
UBS AG | 89,119 | 1,513,982 | ||||||
UniCredit S.p.A. (a) | 136,102 | 637,411 | ||||||
|
| |||||||
$ | 9,338,788 | |||||||
|
| |||||||
Pharmaceuticals – 9.2% | ||||||||
Bayer AG | 17,635 | $ | 1,880,669 | |||||
GlaxoSmithKline PLC | 112,113 | 2,804,711 | ||||||
Novartis AG | 44,280 | 3,138,097 | ||||||
Roche Holding AG | 12,278 | 3,042,296 | ||||||
Santen Pharmaceutical Co. Ltd. | 34,200 | 1,472,414 | ||||||
|
| |||||||
$ | 12,338,187 | |||||||
|
| |||||||
Precious Metals & Minerals – 0.2% | ||||||||
Newcrest Mining Ltd. | 21,753 | $ | 195,374 | |||||
|
| |||||||
Railroad & Shipping – 0.7% | ||||||||
Kuehne & Nagel, Inc. AG | 8,640 | $ | 947,284 | |||||
|
| |||||||
Real Estate – 1.6% | ||||||||
GSW Immobilien AG | 11,967 | $ | 461,342 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Real Estate – continued | ||||||||
Mitsubishi Estate Co. Ltd. | 65,000 | $ | 1,730,843 | |||||
|
| |||||||
$ | 2,192,185 | |||||||
|
| |||||||
Restaurants – 1.8% | ||||||||
Arcos Dorados Holdings, Inc. | 94,750 | $ | 1,106,680 | |||||
Whitbread PLC | 26,712 | 1,245,664 | ||||||
|
| |||||||
$ | 2,352,344 | |||||||
|
| |||||||
Specialty Chemicals – 3.7% | ||||||||
Akzo Nobel N.V. | 33,363 | $ | 1,874,042 | |||||
Chugoku Marine Paints Ltd. | 45,000 | 222,777 | ||||||
Linde AG | 12,449 | 2,318,057 | ||||||
Symrise AG | 15,291 | 617,387 | ||||||
|
| |||||||
$ | 5,032,263 | |||||||
|
| |||||||
Specialty Stores – 0.6% | ||||||||
Hennes & Mauritz AB, “B” | 25,910 | $ | 848,401 | �� | ||||
|
| |||||||
Telecommunications – Wireless – 3.4% | ||||||||
KDDI Corp. | 48,800 | $ | 2,538,899 | |||||
Tele2 AB, “B” | 46,030 | 538,567 | ||||||
TIM Participacoes S.A., ADR | 31,960 | 594,456 | ||||||
Vodafone Group PLC | 322,232 | 924,715 | ||||||
|
| |||||||
$ | 4,596,637 | |||||||
|
| |||||||
Telephone Services – 2.1% | ||||||||
Bezeq – The Israel Telecommunication Corp. Ltd. | 152,200 | $ | 202,303 | |||||
BT Group PLC | 166,330 | 778,364 | ||||||
China Unicom (Hong Kong) Ltd. | 584,000 | 768,810 | ||||||
TDC A.S. | 81,797 | 661,743 | ||||||
Telecom Italia S.p.A. – Savings Shares | 739,839 | 408,818 | ||||||
|
| |||||||
$ | 2,820,038 | |||||||
|
| |||||||
Tobacco – 1.8% | ||||||||
Japan Tobacco, Inc. | 69,900 | $ | 2,470,251 | |||||
|
| |||||||
Trucking – 1.4% | ||||||||
Yamato Holdings Co. Ltd. | 90,500 | $ | 1,908,001 | |||||
|
| |||||||
Utilities – Electric Power – 0.6% | ||||||||
Energias do Brasil S.A. | 165,700 | $ | 841,366 | |||||
|
| |||||||
Utilities – Water – 0.4% | ||||||||
SUEZ Environnement | 43,350 | $ | 558,140 | |||||
|
| |||||||
Total Common Stocks (Identified Cost, $132,885,051) | $ | 133,195,505 | ||||||
|
| |||||||
MONEY MARKET FUNDS – 0.5% | ||||||||
MFS Institutional Money Market Portfolio, 0.11%, at Cost and Net Asset Value (v) | 686,284 | $ | 686,284 | |||||
|
| |||||||
Total Investments (Identified Cost, $133,571,335) | $ | 133,881,789 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – 0.5% | 713,021 | |||||||
|
| |||||||
Net Assets – 100.0% | $ | 134,594,810 | ||||||
|
|
5
Table of Contents
MFS Research International Series
Portfolio of Investments (unaudited) – continued
(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 |
NVDR | Non-Voting 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 6/30/13 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $132,885,051) | $133,195,505 | |||||||
Underlying affiliated funds, at cost and value | 686,284 | |||||||
Total investments, at value (identified cost, $133,571,335) | $133,881,789 | |||||||
Foreign currency, at value (identified cost, $107,332) | 106,087 | |||||||
Receivables for | ||||||||
Investments sold | 211,263 | |||||||
Fund shares sold | 320,966 | |||||||
Interest and dividends | 490,458 | |||||||
Other assets | 583 | |||||||
Total assets | $135,011,146 | |||||||
Liabilities | ||||||||
Payable for fund shares reacquired | $321,550 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 13,488 | |||||||
Shareholder servicing costs | 414 | |||||||
Distribution and/or service fees | 1,020 | |||||||
Payable for independent Trustees’ compensation | 705 | |||||||
Accrued expenses and other liabilities | 79,159 | |||||||
Total liabilities | $416,336 | |||||||
Net assets | $134,594,810 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $150,301,893 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 291,124 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | (20,469,449 | ) | ||||||
Undistributed net investment income | 4,471,242 | |||||||
Net assets | $134,594,810 | |||||||
Shares of beneficial interest outstanding | 10,539,527 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $97,345,033 | 7,606,251 | $12.80 | |||||||||
Service Class | 37,249,777 | 2,933,276 | 12.70 |
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 6/30/13 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $2,900,512 | |||||||
Interest | 35,669 | |||||||
Dividends from underlying affiliated funds | 404 | |||||||
Foreign taxes withheld | (252,133 | ) | ||||||
Total investment income | $2,684,452 | |||||||
Expenses | ||||||||
Management fee | $629,157 | |||||||
Distribution and/or service fees | 49,207 | |||||||
Shareholder servicing costs | 6,089 | |||||||
Administrative services fee | 14,296 | |||||||
Independent Trustees’ compensation | 2,315 | |||||||
Custodian fee | 45,815 | |||||||
Shareholder communications | 18,067 | |||||||
Audit and tax fees | 32,900 | |||||||
Legal fees | 820 | |||||||
Miscellaneous | 8,637 | |||||||
Total expenses | $807,303 | |||||||
Reduction of expenses by investment adviser | (456 | ) | ||||||
Net expenses | $806,847 | |||||||
Net investment income | $1,877,605 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments (net of $25,163 country tax) | $6,103,747 | |||||||
Foreign currency | (37,555 | ) | ||||||
Net realized gain (loss) on investments and foreign currency | $6,066,192 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments (net of $33,169 decrease in deferred country tax) | $(3,124,910 | ) | ||||||
Translation of assets and liabilities in foreign currencies | (19,086 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $(3,143,996 | ) | ||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $2,922,196 | |||||||
Change in net assets from operations | $4,799,801 |
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 6/30/13 (unaudited |
) |
| Year ended 12/31/12 |
| |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $1,877,605 | $2,638,264 | ||||||
Net realized gain (loss) on investments and foreign currency | 6,066,192 | (145,420 | ) | |||||
Net unrealized gain (loss) on investments and foreign currency translation | (3,143,996 | ) | 18,218,742 | |||||
Change in net assets from operations | $4,799,801 | $20,711,586 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(3,113,056 | ) | |||||
Change in net assets from fund share transactions | $(9,222,274 | ) | $(2,678,640 | ) | ||||
Total change in net assets | $(4,422,473 | ) | $14,919,890 | |||||
Net assets | ||||||||
At beginning of period | 139,017,283 | 124,097,393 | ||||||
At end of period (including undistributed net investment income of $4,471,242 and | $134,594,810 | $139,017,283 |
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 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $12.37 | $10.86 | $12.44 | $11.40 | $8.89 | $16.12 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.18 | $0.24 | $0.25 | $0.18 | $0.17 | $0.25 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.25 | 1.55 | (1.59 | ) | 1.03 | 2.51 | (6.82 | ) | ||||||||||||||||
Total from investment operations | $0.43 | $1.79 | $(1.34 | ) | $1.21 | $2.68 | $(6.57 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.28 | ) | $(0.24 | ) | $(0.17 | ) | $(0.17 | ) | $(0.10 | ) | |||||||||||||
From net realized gain on investments | — | — | — | — | — | (0.56 | ) | |||||||||||||||||
Total distributions declared to shareholders | $— | $(0.28 | ) | $(0.24 | ) | $(0.17 | ) | $(0.17 | ) | $(0.66 | ) | |||||||||||||
Net asset value, end of period (x) | $12.80 | $12.37 | $10.86 | $12.44 | $11.40 | $8.89 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 3.48 | (n) | 16.70 | (10.88 | ) | 10.81 | 30.86 | (42.39 | ) | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.08 | (a) | 1.10 | 1.14 | 1.15 | 1.23 | 1.35 | |||||||||||||||||
Expenses after expense reductions (f) | 1.08 | (a) | 1.10 | 1.10 | 1.10 | 1.10 | 1.10 | |||||||||||||||||
Net investment income | 2.74 | (a) | 2.08 | 2.04 | 1.60 | 1.78 | 2.06 | |||||||||||||||||
Portfolio turnover | 20 | (n) | 37 | 47 | 61 | 92 | 77 | |||||||||||||||||
Net assets at end of period (000 omitted) | $97,345 | $101,016 | $95,151 | $145,085 | $146,044 | $115,944 | ||||||||||||||||||
Service Class | Six months ended 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $12.29 | $10.79 | $12.35 | $11.33 | $8.83 | $16.02 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.16 | $0.20 | $0.21 | $0.14 | $0.15 | $0.25 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.25 | 1.55 | (1.56 | ) | 1.03 | 2.49 | (6.81 | ) | ||||||||||||||||
Total from investment operations | $0.41 | $1.75 | $(1.35 | ) | $1.17 | $2.64 | $(6.56 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.25 | ) | $(0.21 | ) | $(0.15 | ) | $(0.14 | ) | $(0.07 | ) | |||||||||||||
From net realized gain on investments | — | — | — | — | — | (0.56 | ) | |||||||||||||||||
Total distributions declared to shareholders | $— | $(0.25 | ) | $(0.21 | ) | $(0.15 | ) | $(0.14 | ) | $(0.63 | ) | |||||||||||||
Net asset value, end of period (x) | $12.70 | $12.29 | $10.79 | $12.35 | $11.33 | $8.83 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 3.34 | (n) | 16.41 | (11.06 | ) | 10.48 | 30.57 | (42.52 | ) | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.33 | (a) | 1.35 | 1.39 | 1.40 | 1.49 | 1.58 | |||||||||||||||||
Expenses after expense reductions (f) | 1.33 | (a) | 1.35 | 1.35 | 1.35 | 1.35 | 1.35 | |||||||||||||||||
Net investment income | 2.54 | (a) | 1.78 | 1.72 | 1.27 | 1.56 | 2.01 | |||||||||||||||||
Portfolio turnover | 20 | (n) | 37 | 47 | 61 | 92 | 77 | |||||||||||||||||
Net assets at end of period (000 omitted) | $37,250 | $38,001 | $28,947 | $42,482 | $34,215 | $22,000 |
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 the disclosure provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Update 2011-11 (“ASU 2011-11”), Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities along with the related scope clarification provisions of FASB Accounting Standards Update 2013-01 (“ASU 2013-01”) entitled Balance Sheet (Topic 210) – Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 is intended to enhance disclosures on the offsetting of financial assets and liabilities by requiring entities to disclose both gross and net information about financial instruments and transactions that are either offset in the statement of financial position or subject to a Master Netting Agreement or similar arrangement. ASU 2013-01 limits the scope of ASU 2011-11’s disclosure requirements on offsetting to financial assets and financial liabilities related to derivatives, repurchase and reverse repurchase agreements, and securities lending and securities borrowing transactions. The disclosures required by ASU 2011-11, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
In June 2013, FASB issued Accounting Standards Update 2013-08 Financial Services – Investment Companies (Topic 946) – Amendments to the Scope, Measurement, and Disclosure Requirements (“ASU 2013-08”) which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013. ASU 2013-08 sets forth a methodology for determining whether an entity should be characterized as an investment company and prescribes fair value accounting for an investment company’s non-controlling ownership interest in another investment company. FASB has determined that a fund registered under the Investment Company Act of 1940 automatically meets ASU 2013-08’s criteria for an investment company. Although still evaluating the potential impacts of ASU 2013-08 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
12
Table of Contents
MFS Research International Series
Notes to Financial Statements (unaudited) – continued
significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted 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, 2013 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
Japan | $21,537,456 | $10,670,529 | $— | $32,207,985 | ||||||||||||
United Kingdom | 3,327,774 | 22,936,615 | — | 26,264,389 | ||||||||||||
Switzerland | 747,668 | 13,680,529 | — | 14,428,197 | ||||||||||||
France | 6,744,064 | 6,643,669 | — | 13,387,733 | ||||||||||||
Germany | 4,702,804 | 3,396,785 | — | 8,099,589 | ||||||||||||
Hong Kong | — | 5,973,047 | — | 5,973,047 | ||||||||||||
Netherlands | — | 4,958,148 | — | 4,958,148 | ||||||||||||
Australia | — | 4,338,544 | — | 4,338,544 | ||||||||||||
Sweden | 1,288,888 | 2,946,893 | — | 4,235,781 | ||||||||||||
Other Countries | 11,358,782 | 7,943,310 | — | 19,302,092 | ||||||||||||
Mutual Funds | 686,284 | — | — | 686,284 | ||||||||||||
Total Investments | $50,393,720 | $83,488,069 | $— | $133,881,789 |
For further information regarding security characteristics, see the Portfolio of Investments.
Of the level 2 investments presented above, equity investments amounting to $6,090,256 would have been considered level 1 investments at the beginning of the period. Of the level 1 investments presented above, equity investments amounting to $32,151,506 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 – Under its Securities Lending Agency Agreement with the fund, State Street Bank and Trust Company (“State Street”), as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. 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. In the event of Borrower default, State Street will for the benefit of the fund either
13
Table of Contents
MFS Research International Series
Notes to Financial Statements (unaudited) – continued
purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the fund the market value of the loaned securities. In return, State Street assumes the fund’s rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, State Street is responsible for the shortfall, but only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. 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 in the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income. At June 30, 2013, there were no securities on loan or collateral outstanding.
Indemnifications – Under the fund’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund’s maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.
Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend and interest payments received in additional securities are recorded on the ex-dividend or ex-interest date in an amount equal to the value of the security on such date.
The fund may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
Fees Paid Indirectly – The fund’s custody fee may be reduced according to an arrangement that measures the value of cash deposited with the custodian by the fund. For the six months ended June 30, 2013, 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 in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests. Additionally, capital gains realized by the fund on securities issued in or by certain foreign countries may be subject to capital gains tax imposed by those countries.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to wash sale loss deferrals.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/12 | ||||
Ordinary income (including any short-term capital gains) | $3,113,056 |
14
Table of Contents
MFS Research International Series
Notes to Financial Statements (unaudited) – continued
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/13 | ||||
Cost of investments | $134,366,827 | |||
Gross appreciation | 15,439,450 | |||
Gross depreciation | (15,924,488 | ) | ||
Net unrealized appreciation (depreciation) | $(485,038 | ) | ||
As of 12/31/12 | ||||
Undistributed ordinary income | 2,601,468 | |||
Capital loss carryforwards | (25,740,150 | ) | ||
Other temporary differences | (41,244 | ) | ||
Net unrealized appreciation (depreciation) | 2,673,042 |
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 for fund fiscal years beginning after December 31, 2010 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses (“post-enactment losses”). Previously, net capital losses were carried forward for eight years and treated as short-term losses (“pre-enactment losses”). As a transition rule, the Act requires that all post-enactment net capital losses be used before pre-enactment net capital losses. As of December 31, 2012, the fund had capital loss carryforwards available to offset future realized gains as follows:
Pre-enactment losses which expire as follows: | ||||
12/31/16 | $(20,084,186 | ) | ||
12/31/17 | (3,004,405 | ) | ||
12/31/18 | (2,184,929 | ) | ||
Total | $(25,273,520 | ) | ||
Post-enactment losses which are characterized as follows: | ||||
Long-Term | $(466,630 | ) |
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and/or service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported in the Statements of Changes in Net Assets are presented by class as follows:
From net investment income | ||||||||
Six months ended 6/30/13 | Year ended 12/31/12 | |||||||
Initial Class | $— | $2,394,595 | ||||||
Service Class | — | 718,461 | ||||||
Total | $— | $3,113,056 |
(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. Effective April 1, 2013, MFS has agreed in writing to reduce its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund’s Board of Trustees. For the period April 1, 2013 through June 30, 2013, this management fee reduction amounted to $189, 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, 2013 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 1.10% 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, 2015. For the six months ended June 30, 2013, 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.
15
Table of Contents
MFS Research International Series
Notes to Financial Statements (unaudited) – continued
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, is the distributor of shares of the fund. The Trustees have adopted a distribution plan for the Service Class shares pursuant to Rule 12b-1 under the Investment Company Act of 1940.
The fund’s distribution plan provides that the fund will pay MFD distribution and/or service fees equal to 0.25% per annum of its average daily net assets attributable to Service Class shares as partial consideration for services performed and expenses incurred by MFD and financial intermediaries (including participating insurance companies that invest in the fund to fund variable annuity and variable life insurance contracts, sponsors of qualified retirement and pension plans that invest in the fund, and affiliates of these participating insurance companies and plan sponsors) in connection with the sale and distribution of the Service Class shares. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries.
Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent. For the six months ended June 30, 2013, the fee was $5,666, which equated to 0.0081% 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, 2013, these costs amounted to $423.
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, 2013 was equivalent to an annual effective rate of 0.0204% 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, 2013, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $553 and are included in “Miscellaneous” expense in 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 $267, 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 current income consistent with preservation of capital and liquidity. Income earned on this investment is included in “Dividends from underlying affiliated funds” in 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 short-term obligations, aggregated $27,183,422 and $35,282,968, respectively.
(5) | Shares of Beneficial Interest |
The fund’s Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
Six months ended 6/30/13 | Year ended 12/31/12 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 564,124 | $7,425,354 | 978,518 | $10,913,908 | ||||||||||||
Service Class | 330,772 | 4,237,627 | 858,903 | 9,908,302 | ||||||||||||
894,896 | $11,662,981 | 1,837,421 | $20,822,210 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 210,421 | $2,394,595 | ||||||||||||
Service Class | — | — | 63,468 | 718,461 | ||||||||||||
— | $— | 273,889 | $3,113,056 |
16
Table of Contents
MFS Research International Series
Notes to Financial Statements (unaudited) – continued
Six months ended 6/30/13 | Year ended 12/31/12 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (1,123,165 | ) | $(14,495,811 | ) | (1,783,237 | ) | $(20,723,000 | ) | ||||||||
Service Class | (489,339 | ) | (6,389,444 | ) | (512,636 | ) | (5,890,906 | ) | ||||||||
(1,612,504 | ) | $(20,885,255 | ) | (2,295,873 | ) | $(26,613,906 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (559,041 | ) | $(7,070,457 | ) | (594,298 | ) | $(7,414,497 | ) | ||||||||
Service Class | (158,567 | ) | (2,151,817 | ) | 409,735 | 4,735,857 | ||||||||||
(717,608 | ) | $(9,222,274 | ) | (184,563 | ) | $(2,678,640 | ) |
(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, 2013, the fund’s commitment fee and interest expense were $372 and $0, respectively, and are included in “Miscellaneous” expense in 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 | 739,736 | 13,368,640 | (13,422,092 | ) | 686,284 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $404 | $686,284 |
17
Table of Contents
MFS Research International Series
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board’s most recent review and renewal of the fund’s Investment Advisory Agreement with MFS will be available on or about November 1, 2013 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products” 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” section of mfs.com.
18
Table of Contents
Table of Contents
SEMIANNUAL REPORT
June 30, 2013
MFS® RESEARCH SERIES
MFS® Variable Insurance Trust
VFR-SEM
Table of Contents
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
Table of Contents
MFS Research Series
LETTER FROM THE CHAIRMAN AND CEO
Dear Contract Owners:
As the year progresses, the global economy continues to grind ahead slowly, held back by broad austerity measures. The U.S. economy remains a steadying force, driven by resilient consumers, who have taken the payroll tax increase and the sequestration’s early impact in stride. With U.S. housing and jobs showing steady expansion, domestic consumer-driven growth has offset weaker exports and the U.S. government’s spending constraints. In response to these developments, the U.S. Federal Reserve has begun to brace investors for an eventual shift in its monetary policy, causing global market tremors.
Japan has been another bright spot, with government and central bank stimulus policies leading to increased exports, a resurgent stock market and improved economic sentiment. After a six-month rally, Japan’s stocks slipped late in the second quarter, then picked up momentum on fresh signs that the country could soon break free of its chronic deflation. The major deterrent to global growth remains the eurozone, still in the grip of persistent recession. China has seen its pace of economic growth decelerate, a troubling turn for the country’s trading partners, who have come to rely on it as an engine for global growth.
As always, managing risk in the face of uncertainty remains a top priority for investors. At MFS®, our uniquely collaborative investment process employs integrated, global research and active risk management. Our global team of investment professionals shares ideas and evaluates opportunities across continents, investment disciplines and asset classes — all with a goal of building better insights, and ultimately better results, for our clients.
We are mindful of the many economic challenges investors face, and believe it is more important than ever to maintain a long-term view and employ time-tested principles, such as asset allocation and diversification. We remain confident that our unique approach can serve investors well as they work with their financial advisors to identify and pursue the most suitable opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2013
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 Research Series
Portfolio structure (i)
Top ten holdings (i) | ||||
Exxon Mobil Corp. | 3.7% | |||
Apple, Inc. | 2.4% | |||
Danaher Corp. | 2.3% | |||
Google, Inc., “A” | 2.1% | |||
JPMorgan Chase & Co. | 2.1% | |||
Johnson & Johnson | 2.1% | |||
Hewlett-Packard Co. | 2.1% | |||
Wells Fargo & Co. | 2.0% | |||
Pfizer, Inc. | 1.8% | |||
Visa, Inc., “A” | 1.8% |
Global equity sectors (i) | ||||
Financial Services | 17.3% | |||
Technology (s) | 16.4% | |||
Capital Goods | 14.7% | |||
Energy | 14.1% | |||
Health Care | 12.8% | |||
Consumer Cyclicals | 12.3% | |||
Consumer Staples | 8.0% | |||
Telecommunications/Cable Television | 4.4% |
(i) | For purposes of this presentation, the components include the market value of securities, less any securities sold short, and reflect the impact of the equivalent exposure of derivative positions. These amounts may be negative from time to time. Equivalent exposure is a calculated amount that translates the derivative position into a reasonable approximation of the amount of the underlying asset that the portfolio would have to hold at a given point in time to have the same price sensitivity that results from the portfolio’s ownership of the derivative contract. When dealing with derivatives, equivalent exposure is a more representative measure of the potential impact of a position on portfolio performance than market value. |
(o) | Less than 0.1%. |
(s) | Includes securities sold short. |
Percentages are based on net assets as of 6/30/13.
The portfolio is actively managed and current holdings may be different.
2
Table of Contents
MFS Research Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2013 through June 30, 2013
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, 2013 through June 30, 2013.
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 1/01/13 | Ending Account Value | Expenses Paid During Period (p) 1/01/13-6/30/13 | ||||||||||||||
Initial Class | Actual | 0.80% | $1,000.00 | $1,138.67 | $4.24 | |||||||||||||
Hypothetical (h) | 0.80% | $1,000.00 | $1,020.83 | $4.01 | ||||||||||||||
Service Class | Actual | 1.05% | $1,000.00 | $1,137.79 | $5.57 | |||||||||||||
Hypothetical (h) | 1.05% | $1,000.00 | $1,019.59 | $5.26 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
3
Table of Contents
MFS Research Series
PORTFOLIO OF INVESTMENTS – 6/30/13 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 99.6% | ||||||||
Aerospace – 3.3% | ||||||||
Honeywell International, Inc. | 109,110 | $ | 8,656,781 | |||||
Precision Castparts Corp. | 39,774 | 8,989,322 | ||||||
United Technologies Corp. | 69,060 | 6,418,436 | ||||||
|
| |||||||
$ | 24,064,539 | |||||||
|
| |||||||
Alcoholic Beverages – 0.5% | ||||||||
Diageo PLC | 117,986 | $ | 3,384,220 | |||||
|
| |||||||
Apparel Manufacturers – 2.2% | ||||||||
Guess?, Inc. | 112,080 | $ | 3,477,842 | |||||
Li & Fung Ltd. | 1,540,000 | 2,100,039 | ||||||
NIKE, Inc., “B” | 56,470 | 3,596,010 | ||||||
PVH Corp. | 23,338 | 2,918,417 | ||||||
VF Corp. | 19,624 | 3,788,609 | ||||||
|
| |||||||
$ | 15,880,917 | |||||||
|
| |||||||
Automotive – 1.4% | ||||||||
Delphi Automotive PLC | 122,090 | $ | 6,188,742 | |||||
General Motors Co. (a) | 124,780 | 4,156,422 | ||||||
|
| |||||||
$ | 10,345,164 | |||||||
|
| |||||||
Biotechnology – 1.7% | ||||||||
Biogen Idec, Inc. (a) | 16,160 | $ | 3,477,632 | |||||
Celgene Corp. (a) | 39,230 | 4,586,379 | ||||||
Gilead Sciences, Inc. (a) | 42,160 | 2,159,014 | ||||||
ViroPharma, Inc. (a) | 78,350 | 2,244,728 | ||||||
|
| |||||||
$ | 12,467,753 | |||||||
|
| |||||||
Broadcasting – 2.9% | ||||||||
News Corp., “A” | 345,570 | $ | 11,265,582 | |||||
Time Warner, Inc. | 58,100 | 3,359,342 | ||||||
Walt Disney Co. | 111,510 | 7,041,857 | ||||||
|
| |||||||
$ | 21,666,781 | |||||||
|
| |||||||
Brokerage & Asset Managers – 1.2% | ||||||||
BlackRock, Inc. | 17,055 | $ | 4,380,577 | |||||
Franklin Resources, Inc. | 30,939 | 4,208,323 | ||||||
|
| |||||||
$ | 8,588,900 | |||||||
|
| |||||||
Business Services – 1.8% | ||||||||
Accenture PLC, “A” | 84,050 | $ | 6,048,238 | |||||
Fidelity National Information Services, Inc. | 99,170 | 4,248,443 | ||||||
FleetCor Technologies, Inc. (a) | 35,830 | 2,912,979 | ||||||
|
| |||||||
$ | 13,209,660 | |||||||
|
| |||||||
Cable TV – 2.0% | ||||||||
Comcast Corp., “Special A” | 232,720 | $ | 9,232,002 | |||||
Time Warner Cable, Inc. | 45,830 | 5,154,958 | ||||||
|
| |||||||
$ | 14,386,960 | |||||||
|
| |||||||
Chemicals – 0.5% | ||||||||
Celanese Corp. | 75,550 | $ | 3,384,640 | |||||
|
| |||||||
Computer Software – 3.4% | ||||||||
Autodesk, Inc. (a) | 31,920 | $ | 1,083,365 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Computer Software – continued | ||||||||
CDW Corp. (a) | 108,200 | $ | 2,014,684 | |||||
Citrix Systems, Inc. (a) | 65,830 | 3,971,524 | ||||||
Oracle Corp. | 271,720 | 8,347,238 | ||||||
Salesforce.com, Inc. (a) | 98,918 | 3,776,689 | ||||||
Symantec Corp. | 166,860 | 3,749,344 | ||||||
TIBCO Software, Inc. (a) | 87,830 | 1,879,562 | ||||||
|
| |||||||
$ | 24,822,406 | |||||||
|
| |||||||
Computer Software – Systems – 5.4% | ||||||||
Apple, Inc. (s) | 45,164 | $ | 17,888,557 | |||||
EMC Corp. | 283,630 | 6,699,341 | ||||||
Hewlett-Packard Co. | 608,590 | 15,093,032 | ||||||
|
| |||||||
$ | 39,680,930 | |||||||
|
| |||||||
Construction – 0.9% | ||||||||
Stanley Black & Decker, Inc. | 83,450 | $ | 6,450,685 | |||||
|
| |||||||
Consumer Products – 1.9% | ||||||||
Estee Lauder Cos., Inc., “A” | 52,360 | $ | 3,443,717 | |||||
International Flavors & Fragrances, Inc. | 60,380 | 4,538,161 | ||||||
Procter & Gamble Co. | 78,670 | 6,056,803 | ||||||
|
| |||||||
$ | 14,038,681 | |||||||
|
| |||||||
Consumer Services – 0.6% | ||||||||
Priceline.com, Inc. (a) | 5,237 | $ | 4,331,680 | |||||
|
| |||||||
Containers – 0.3% | ||||||||
Packaging Corp. of America | 45,240 | $ | 2,214,950 | |||||
|
| |||||||
Electrical Equipment – 2.9% | ||||||||
Danaher Corp. | 269,520 | $ | 17,060,616 | |||||
W.W. Grainger, Inc. | 16,958 | 4,276,468 | ||||||
|
| |||||||
$ | 21,337,084 | |||||||
|
| |||||||
Electronics – 2.5% | ||||||||
Altera Corp. | 138,900 | $ | 4,582,311 | |||||
JDS Uniphase Corp. (a) | 202,070 | 2,905,767 | ||||||
Mellanox Technologies Ltd. (a) | 46,270 | 2,290,365 | ||||||
Microchip Technology, Inc. | 144,060 | 5,366,235 | ||||||
NXP Semiconductors N.V. (a) | 105,820 | 3,278,304 | ||||||
|
| |||||||
$ | 18,422,982 | |||||||
|
| |||||||
Energy – Independent – 4.5% | ||||||||
Anadarko Petroleum Corp. | 51,300 | $ | 4,408,209 | |||||
Cabot Oil & Gas Corp. | 81,630 | 5,797,363 | ||||||
EOG Resources, Inc. | 21,707 | 2,858,378 | ||||||
EQT Corp. | 36,890 | 2,927,959 | ||||||
Marathon Petroleum Corp. | 28,020 | 1,991,101 | ||||||
Noble Energy, Inc. | 61,143 | 3,671,026 | ||||||
Occidental Petroleum Corp. | 62,190 | 5,549,214 | ||||||
Pioneer Natural Resources Co. | 39,253 | 5,681,872 | ||||||
|
| |||||||
$ | 32,885,122 | |||||||
|
| |||||||
Energy – Integrated – 3.7% | ||||||||
Exxon Mobil Corp. (s) | 302,270 | $ | 27,310,095 | |||||
|
|
4
Table of Contents
MFS Research Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Engineering – Construction – 0.6% | ||||||||
Fluor Corp. | 78,800 | $ | 4,673,628 | |||||
|
| |||||||
Food & Beverages – 3.5% | ||||||||
Coca-Cola Co. | 243,580 | $ | 9,769,994 | |||||
General Mills, Inc. | 92,980 | 4,512,319 | ||||||
Groupe Danone | 57,913 | 4,346,551 | ||||||
Mondelez International, Inc. | 238,570 | 6,806,402 | ||||||
|
| |||||||
$ | 25,435,266 | |||||||
|
| |||||||
Food & Drug Stores – 1.0% | ||||||||
CVS Caremark Corp. | 126,950 | $ | 7,259,001 | |||||
|
| |||||||
Gaming & Lodging – 0.2% | ||||||||
Wynn Resorts Ltd. | 11,000 | $ | 1,408,000 | |||||
|
| |||||||
General Merchandise – 2.1% | ||||||||
Kohl’s Corp. | 68,410 | $ | 3,455,389 | |||||
Target Corp. | 174,530 | 12,018,136 | ||||||
|
| |||||||
$ | 15,473,525 | |||||||
|
| |||||||
Health Maintenance Organizations – 1.0% | ||||||||
Aetna, Inc. | 25,840 | $ | 1,641,874 | |||||
UnitedHealth Group, Inc. | 89,610 | 5,867,663 | ||||||
|
| |||||||
$ | 7,509,537 | |||||||
|
| |||||||
Insurance – 3.3% | ||||||||
ACE Ltd. | 82,720 | $ | 7,401,786 | |||||
American International Group, Inc. (a) | 148,670 | 6,645,549 | ||||||
MetLife, Inc. | 227,610 | 10,415,434 | ||||||
|
| |||||||
$ | 24,462,769 | |||||||
|
| |||||||
Internet – 3.1% | ||||||||
eBay, Inc. (a) | 137,280 | $ | 7,100,122 | |||||
Google, Inc., “A” (a) | 17,837 | 15,703,160 | ||||||
|
| |||||||
$ | 22,803,282 | |||||||
|
| |||||||
Machinery & Tools – 2.2% | ||||||||
Eaton Corp. PLC | 70,360 | $ | 4,630,392 | |||||
Joy Global, Inc. | 88,850 | 4,311,891 | ||||||
Roper Industries, Inc. | 60,997 | 7,577,047 | ||||||
|
| |||||||
$ | 16,519,330 | |||||||
|
| |||||||
Major Banks – 6.5% | ||||||||
Goldman Sachs Group, Inc. | 32,775 | $ | 4,957,219 | |||||
JPMorgan Chase & Co. (s) | 296,560 | 15,655,402 | ||||||
Morgan Stanley | 273,160 | 6,673,299 | ||||||
State Street Corp. | 84,070 | 5,482,205 | ||||||
Wells Fargo & Co. | 356,290 | 14,704,088 | ||||||
|
| |||||||
$ | 47,472,213 | |||||||
|
| |||||||
Medical & Health Technology & Services – 1.5% | ||||||||
AmerisourceBergen Corp. | 53,290 | $ | 2,975,181 | |||||
Cerner Corp. (a) | 19,790 | 1,901,621 | ||||||
Express Scripts Holding Co. (a) | 95,940 | 5,918,539 | ||||||
|
| |||||||
$ | 10,795,341 | |||||||
|
| |||||||
Medical Equipment – 2.7% | ||||||||
Covidien PLC | 101,300 | $ | 6,365,692 | |||||
St. Jude Medical, Inc. | 67,520 | 3,080,938 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Medical Equipment – continued | ||||||||
Stryker Corp. | 69,990 | $ | 4,526,953 | |||||
Thermo Fisher Scientific, Inc. | 69,150 | 5,852,165 | ||||||
|
| |||||||
$ | 19,825,748 | |||||||
|
| |||||||
Natural Gas – Distribution – 0.5% | ||||||||
Spectra Energy Corp. | 108,180 | $ | 3,727,883 | |||||
|
| |||||||
Natural Gas – Pipeline – 0.4% | ||||||||
Kinder Morgan, Inc. | 82,978 | $ | 3,165,611 | |||||
|
| |||||||
Network & Telecom – 0.3% | ||||||||
Qualcomm, Inc. | 39,990 | $ | 2,442,589 | |||||
|
| |||||||
Oil Services – 1.9% | ||||||||
Cameron International Corp. (a) | 83,740 | $ | 5,121,538 | |||||
Dresser-Rand Group, Inc. (a) | 68,890 | 4,132,022 | ||||||
Ensco PLC, “A” | 32,550 | 1,891,806 | ||||||
Schlumberger Ltd. | 42,170 | 3,021,902 | ||||||
|
| |||||||
$ | 14,167,268 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 6.4% | ||||||||
American Express Co. | 113,300 | $ | 8,470,308 | |||||
Citigroup, Inc. | 267,060 | 12,810,868 | ||||||
Discover Financial Services | 109,250 | 5,204,670 | ||||||
Fifth Third Bancorp | 172,000 | 3,104,600 | ||||||
SunTrust Banks, Inc. | 114,190 | 3,604,978 | ||||||
Visa, Inc., “A” | 74,183 | 13,556,943 | ||||||
|
| |||||||
$ | 46,752,367 | |||||||
|
| |||||||
Pharmaceuticals – 5.9% | ||||||||
Bristol-Myers Squibb Co. | 102,340 | $ | 4,573,575 | |||||
Johnson & Johnson | 178,030 | 15,285,656 | ||||||
Perrigo Co. | 26,584 | 3,216,664 | ||||||
Pfizer, Inc. | 485,340 | 13,594,373 | ||||||
Valeant Pharmaceuticals International, Inc. (a) | 44,340 | 3,816,787 | ||||||
Zoetis, Inc. | 100,820 | 3,114,330 | ||||||
|
| |||||||
$ | 43,601,385 | |||||||
|
| |||||||
Railroad & Shipping – 0.9% | ||||||||
Union Pacific Corp. | 44,743 | $ | 6,902,950 | |||||
|
| |||||||
Restaurants – 1.1% | ||||||||
McDonald’s Corp. | 47,833 | $ | 4,735,467 | |||||
YUM! Brands, Inc. | 50,790 | 3,521,779 | ||||||
|
| |||||||
$ | 8,257,246 | |||||||
|
| |||||||
Specialty Chemicals – 0.7% | ||||||||
Airgas, Inc. | 26,230 | $ | 2,503,916 | |||||
FMC Corp. | 48,360 | 2,952,862 | ||||||
|
| |||||||
$ | 5,456,778 | |||||||
|
| |||||||
Specialty Stores – 2.2% | ||||||||
Amazon.com, Inc. (a) | 14,144 | $ | 3,927,647 | |||||
AutoZone, Inc. (a) | 9,736 | 4,125,046 | ||||||
Bed Bath & Beyond, Inc. (a) | 61,460 | 4,357,514 | ||||||
Dick’s Sporting Goods, Inc. | 74,730 | 3,740,984 | ||||||
|
| |||||||
$ | 16,151,191 | |||||||
|
|
5
Table of Contents
MFS Research Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Telecommunications – Wireless – 0.9% | ||||||||
American Tower Corp., REIT | 60,150 | $ | 4,401,176 | |||||
SBA Communications Corp. (a) | 34,230 | 2,537,128 | ||||||
|
| |||||||
$ | 6,938,304 | |||||||
|
| |||||||
Telephone Services – 1.5% | ||||||||
AT&T, Inc. | 119,900 | $ | 4,244,460 | |||||
Verizon Communications, Inc. | 138,370 | 6,965,546 | ||||||
|
| |||||||
$ | 11,210,006 | |||||||
|
| |||||||
Tobacco – 2.1% | ||||||||
Lorillard, Inc. | 87,550 | $ | 3,824,184 | |||||
Philip Morris International, Inc. | 138,450 | 11,992,539 | ||||||
|
| |||||||
$ | 15,816,723 | |||||||
|
| |||||||
Trucking – 0.9% | ||||||||
Expeditors International of Washington, Inc. | 168,530 | $ | 6,405,825 | |||||
|
| |||||||
Utilities – Electric Power – 2.6% | ||||||||
AES Corp. | 174,290 | $ | 2,089,737 | |||||
American Electric Power Co., Inc. | 79,060 | 3,540,307 | ||||||
Calpine Corp. (a) | 182,380 | 3,871,927 | ||||||
CMS Energy Corp. | 203,950 | 5,541,322 | ||||||
Edison International | 78,510 | 3,781,042 | ||||||
|
| |||||||
$ | 18,824,335 | |||||||
|
| |||||||
Total Common Stocks (Identified Cost, $643,671,979) | $ | 732,332,250 | ||||||
|
| |||||||
CONVERTIBLE PREFERRED STOCKS – 0.4% | ||||||||
Utilities – Electric Power – 0.4% | ||||||||
PPL Corp., 9.5% (Identified Cost, $3,227,740) | 59,946 | $ | 3,141,770 | |||||
|
|
Strike Price | First Exercise | |||||||||||||||
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 | $ | 78,904 | ||||||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
MONEY MARKET FUNDS – 0.8% | ||||||||
MFS Institutional Money Market Portfolio, 0.11%, at Cost and Net Asset Value (v) | 5,603,263 | $ | 5,603,263 | |||||
|
| |||||||
Total Investments (Identified Cost, $652,532,340) | $ | 741,156,187 | ||||||
|
| |||||||
Issuer/Expiration Date/Strike Price | Number of Contracts | |||||||
CALL OPTIONS WRITTEN – 0.0% | ||||||||
Accenture PLC – July 2013 @ $75 (Premiums Received, $2,662) | (92 | ) | $ | (4,140 | ) | |||
|
| |||||||
Issuer | Shares/Par | |||||||
SECURITIES SOLD SHORT – (0.1)% | ||||||||
Network & Telecom – (0.1)% | ||||||||
Research In Motion Ltd. (Proceeds Received, $761,255) | (49,600 | ) | $ | (519,312 | ) | |||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – (0.7)% | (5,214,652 | ) | ||||||
|
| |||||||
Net Assets – 100.0% | $ | 735,418,083 | ||||||
|
|
(a) | Non-income producing security. |
(s) | Security or a portion of the security was pledged to cover collateral requirements for securities sold short and certain derivative transactions. |
(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, 2013, the fund had cash collateral of $1,771 and other liquid securities with an aggregate value of $1,580,641 to cover any commitments for securities sold short and certain derivative contracts. Cash collateral is comprised of “Deposits with brokers” in the Statement of Assets and Liabilities.
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 Research 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 6/30/13 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $646,929,077) | $735,552,924 | |||||||
Underlying affiliated funds, at cost and value | 5,603,263 | |||||||
Total investments, at value (identified cost, $652,532,340) | $741,156,187 | |||||||
Foreign currency, at value (identified cost, $46) | 46 | |||||||
Deposits with brokers | 1,771 | |||||||
Receivables for | ||||||||
Premiums on options written | 2,662 | |||||||
Investments sold | 2,917,475 | |||||||
Fund shares sold | 197,760 | |||||||
Interest and dividends | 797,274 | |||||||
Other assets | 2,373 | |||||||
Total assets | $745,075,548 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Securities sold short, at value (proceeds received, $761,255) | $519,312 | |||||||
Investments purchased | 5,541,089 | |||||||
Fund shares reacquired | 3,417,468 | |||||||
Written options outstanding, at value (premiums received, $2,662) | 4,140 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 66,398 | |||||||
Shareholder servicing costs | 883 | |||||||
Distribution and/or service fees | 7,329 | |||||||
Payable for independent Trustees’ compensation | 64 | |||||||
Accrued expenses and other liabilities | 100,782 | |||||||
Total liabilities | $9,657,465 | |||||||
Net assets | $735,418,083 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $614,359,373 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 88,862,577 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | 26,828,343 | |||||||
Undistributed net investment income | 5,367,790 | |||||||
Net assets | $735,418,083 | |||||||
Shares of beneficial interest outstanding | 29,642,641 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||||
Initial Class | $468,446,643 | 18,828,449 | $24.88 | |||||||||||
Service Class | 266,971,440 | 10,814,192 | 24.69 |
See Notes to Financial Statements
7
Table of Contents
MFS Research Series
FINANCIAL STATEMENTS | STATEMENT OF OPERATIONS (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
Six months ended 6/30/13 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $6,397,036 | |||||||
Interest | 33,434 | |||||||
Dividends from underlying affiliated funds | 2,860 | |||||||
Foreign taxes withheld | (18,478 | ) | ||||||
Total investment income | $6,414,852 | |||||||
Expenses | ||||||||
Management fee | $2,811,560 | |||||||
Distribution and/or service fees | 341,827 | |||||||
Shareholder servicing costs | 20,151 | |||||||
Administrative services fee | 52,183 | |||||||
Independent Trustees’ compensation | 6,082 | |||||||
Custodian fee | 37,083 | |||||||
Shareholder communications | 39,085 | |||||||
Audit and tax fees | 25,435 | |||||||
Legal fees | 1,186 | |||||||
Dividend and interest expense on securities sold short | 8,293 | |||||||
Miscellaneous | 13,212 | |||||||
Total expenses | $3,356,097 | |||||||
Fees paid indirectly | (78 | ) | ||||||
Reduction of expenses by investment adviser | (2,437 | ) | ||||||
Net expenses | $3,353,582 | |||||||
Net investment income | $3,061,270 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $43,485,791 | |||||||
Written options | 23,269 | |||||||
Foreign currency | (974 | ) | ||||||
Net realized gain (loss) on investments and foreign currency | $43,508,086 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $50,830,668 | |||||||
Written options | (1,478 | ) | ||||||
Securities sold short | 241,943 | |||||||
Translation of assets and liabilities in foreign currencies | (1,936 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $51,069,197 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $94,577,283 | |||||||
Change in net assets from operations | $97,638,553 |
See Notes to Financial Statements
8
Table of Contents
MFS Research 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 6/30/13 (unaudited | ) | | Year ended 12/31/12 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $3,061,270 | $2,307,776 | ||||||
Net realized gain (loss) on investments and foreign currency | 43,508,086 | 18,509,511 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 51,069,197 | 16,036,010 | ||||||
Change in net assets from operations | $97,638,553 | $36,853,297 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(1,473,011 | ) | |||||
Change in net assets from fund share transactions | $(89,094,011 | ) | $510,586,595 | |||||
Total change in net assets | $8,544,542 | $545,966,881 | ||||||
Net assets | ||||||||
At beginning of period | 726,873,541 | 180,906,660 | ||||||
At end of period (including undistributed net investment income of $5,367,790 and | $735,418,083 | $726,873,541 |
See Notes to Financial Statements
9
Table of Contents
MFS Research 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 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $21.84 | $18.78 | $19.04 | $16.57 | $12.90 | $20.28 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.11 | $0.22 | $0.15 | $0.15 | $0.15 | $0.18 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 2.93 | 3.01 | (0.24 | ) | 2.47 | 3.72 | (7.47 | ) | ||||||||||||||||
Total from investment operations | $3.04 | $3.23 | $(0.09 | ) | $2.62 | $3.87 | $(7.29 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.17 | ) | $(0.17 | ) | $(0.15 | ) | $(0.20 | ) | $(0.09 | ) | |||||||||||||
Net asset value, end of period (x) | $24.88 | $21.84 | $18.78 | $19.04 | $16.57 | $12.90 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 13.92 | (n) | 17.22 | (0.45 | ) | 15.90 | 30.54 | (36.09 | ) | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.80 | (a) | 0.88 | 0.88 | 0.89 | 0.90 | 0.88 | |||||||||||||||||
Expenses after expense reductions (f) | 0.80 | (a) | 0.88 | 0.88 | 0.89 | 0.90 | 0.88 | |||||||||||||||||
Net investment income | 0.91 | (a) | 1.06 | 0.79 | 0.86 | 1.05 | 1.04 | |||||||||||||||||
Portfolio turnover | 27 | (n) | 83 | 70 | 71 | 107 | 123 | |||||||||||||||||
Net assets at end of period (000 omitted) | $468,447 | $460,834 | $160,892 | $182,895 | $180,229 | $149,517 | ||||||||||||||||||
Supplemental Ratios (%): | ||||||||||||||||||||||||
Ratio of expenses to average net assets after expense reductions excluding short sale dividend and interest expense (f) | 0.80 | (a) | 0.87 | 0.86 | 0.89 | 0.90 | N/A |
See Notes to Financial Statements
10
Table of Contents
MFS Research Series
Financial Highlights – continued
Service Class | Six months 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $21.70 | $18.67 | $18.93 | $16.48 | $12.82 | $20.16 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.08 | $0.18 | $0.10 | $0.10 | $0.11 | $0.13 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 2.91 | 2.97 | (0.24 | ) | 2.47 | 3.71 | (7.42 | ) | ||||||||||||||||
Total from investment operations | $2.99 | $3.15 | $(0.14 | ) | $2.57 | $3.82 | $(7.29 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.12 | ) | $(0.12 | ) | $(0.12 | ) | $(0.16 | ) | $(0.05 | ) | |||||||||||||
Net asset value, end of period (x) | $24.69 | $21.70 | $18.67 | $18.93 | $16.48 | $12.82 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 13.78 | (n) | 16.90 | (0.69 | ) | 15.64 | 30.20 | (36.25 | ) | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.05 | (a) | 1.11 | 1.13 | 1.14 | 1.15 | 1.14 | |||||||||||||||||
Expenses after expense reductions (f) | 1.05 | (a) | 1.11 | 1.13 | 1.14 | 1.15 | 1.13 | |||||||||||||||||
Net investment income | 0.66 | (a) | 0.82 | 0.55 | 0.61 | 0.80 | 0.78 | |||||||||||||||||
Portfolio turnover | 27 | (n) | 83 | 70 | 71 | 107 | 123 | |||||||||||||||||
Net assets at end of period (000 omitted) | $266,971 | $266,040 | $20,015 | $19,825 | $17,196 | $12,951 | ||||||||||||||||||
Supplemental Ratios (%): | ||||||||||||||||||||||||
Ratio of expenses to average net assets after expense | 1.05 | (a) | 1.11 | 1.11 | 1.14 | 1.15 | 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
11
Table of Contents
MFS Research Series
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 the disclosure provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Update 2011-11 (“ASU 2011-11”), Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities along with the related scope clarification provisions of FASB Accounting Standards Update 2013-01 (“ASU 2013-01”) entitled Balance Sheet (Topic 210) – Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 is intended to enhance disclosures on the offsetting of financial assets and liabilities by requiring entities to disclose both gross and net information about financial instruments and transactions that are either offset in the statement of financial position or subject to a Master Netting Agreement or similar arrangement. ASU 2013-01 limits the scope of ASU 2011-11’s disclosure requirements on offsetting to financial assets and financial liabilities related to derivatives, repurchase and reverse repurchase agreements, and securities lending and securities borrowing transactions. The disclosures required by ASU 2011-11, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
In June 2013, FASB issued Accounting Standards Update 2013-08 Financial Services – Investment Companies (Topic 946) – Amendments to the Scope, Measurement, and Disclosure Requirements (“ASU 2013-08”) which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013. ASU 2013-08 sets forth an approach for determining whether an entity should be characterized as an investment company and prescribes fair value accounting for an investment company’s non-controlling ownership interest in another investment company. FASB has determined that a fund registered under the Investment Company Act of 1940 automatically meets ASU 2013-08’s criteria for an investment company. Although still evaluating the potential impacts of ASU 2013-08 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
12
Table of Contents
MFS Research Series
Notes to Financial Statements (unaudited) – continued
has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. Other financial instruments are derivative instruments not reflected in total investments, such as written options. The following is a summary of the levels used as of June 30, 2013 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $716,336,658 | $— | $— | $716,336,658 | ||||||||||||
France | 4,346,551 | — | — | 4,346,551 | ||||||||||||
United Kingdom | — | 3,384,220 | — | 3,384,220 | ||||||||||||
Canada | 3,816,787 | — | — | 3,816,787 | ||||||||||||
Netherlands | 3,278,304 | — | — | 3,278,304 | ||||||||||||
Israel | 2,290,365 | — | — | 2,290,365 | ||||||||||||
Hong Kong | — | 2,100,039 | — | 2,100,039 | ||||||||||||
Mutual Funds | 5,603,263 | — | — | 5,603,263 | ||||||||||||
Total Investments | $735,671,928 | $5,484,259 | $— | $741,156,187 | ||||||||||||
Short Sales | $(519,312 | ) | $— | $— | $(519,312 | ) | ||||||||||
Other Financial Instruments | ||||||||||||||||
Written Options | $(4,140 | ) | $— | $— | $(4,140 | ) |
For further information regarding security characteristics, see the Portfolio of Investments.
Of the level 1 investments presented above, equity investments amounting to $4,346,551 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.
13
Table of Contents
MFS Research Series
Notes to Financial Statements (unaudited) – continued
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. The fund’s period end derivatives, as presented in the Portfolio of Investments, generally are indicative of the volume of its derivative activity during the period.
The following table presents, by major type of derivative contract, the fair value, on a gross basis, of the asset and liability components of derivatives held by the fund at June 30, 2013 as reported in the Statement of Assets and Liabilities:
Fair Value | ||||||||||
Risk | Derivative Contracts | Asset Derivatives | Liability Derivatives | |||||||
Equity | Written Equity Options | $— | $(4,140 | ) |
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, 2013 as reported in the Statement of Operations:
Risk | Written Options | |||
Equity | $23,269 |
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, 2013 as reported in the Statement of Operations:
Risk | Written Options | |||
Equity | $(1,478 | ) |
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.
Collateral and margin requirements differ by type of derivative. Margin requirements are set by the broker or clearing house for cleared derivatives (i.e., futures contracts, cleared swaps, and exchange-traded options) while collateral terms are contract specific for over-the-counter traded derivatives (i.e., forward foreign currency exchange contracts, uncleared 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 that has been segregated to cover the fund’s collateral or margin obligations under derivative contracts, if any, will be reported separately in the Statement of Assets and Liabilities as “Deposits with brokers.” Securities pledged as collateral or margin for the same purpose, if any, is noted in the Portfolio of Investments.
The fund’s accounting policy with respect to balance sheet offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the ISDA Master Agreement does not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty.
Written Options – In exchange for a premium, the fund wrote call options on securities that it anticipated the price would decline. 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 in 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.
14
Table of Contents
MFS Research Series
Notes to Financial Statements (unaudited) – continued
At the initiation of the written option contract, for exchange traded options, the fund is required to deposit securities or cash as collateral with the custodian for the benefit of the broker. For over-the-counter options, the fund may post collateral subject to the terms of an ISDA Master Agreement as generally described above if the market value of the options contract moves against it. The fund, as writer of an option, may have no control over whether the underlying securities may be sold (call) or purchased (put) and, as a result, bears the market risk of an unfavorable change in the price of the securities underlying the written option. Losses from writing options can exceed the premium received and can exceed the potential loss from an ordinary buy and sell transaction. Although the fund’s market risk may be significant, the maximum counterparty credit risk to the fund is equal to the market value of any collateral posted to the broker. For over-the-counter options, this risk is mitigated in cases where there is an ISDA Master Agreement between the fund and the counterparty providing for netting as described above.
The following table represents the written option activity in the fund during the six months ended June 30, 2013:
Number of contracts | Premiums received | |||||||
Outstanding, beginning of period | — | $— | ||||||
Options written | 1,497 | 37,933 | ||||||
Options closed | — | — | ||||||
Options exercised | (289 | ) | (12,002 | ) | ||||
Options expired | (1,116 | ) | (23,269 | ) | ||||
Outstanding, end of period | 92 | $2,662 |
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, 2013, this expense amounted to $8,293. 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 – Under its Securities Lending Agency Agreement with the fund, State Street Bank and Trust Company (“State Street”), as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. 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. In the event of Borrower default, State Street will for the benefit of the fund either purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the fund the market value of the loaned securities. In return, State Street assumes the fund’s rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, State Street is responsible for the shortfall, but only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. 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 in the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income. At June 30, 2013, there were no securities on loan or collateral outstanding.
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.
15
Table of Contents
MFS Research 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, 2013, is shown as a reduction of total expenses in the Statement of Operations.
Tax Matters and Distributions – The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Foreign taxes have been accrued by the fund in the accompanying financial statements in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests.
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:
12/31/12 | ||||
Ordinary income (including any short-term capital gains) | $1,473,011 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/13 | ||||
Cost of investments | $652,724,714 | |||
Gross appreciation | 100,401,173 | |||
Gross depreciation | (11,969,700 | ) | ||
Net unrealized appreciation (depreciation) | $88,431,473 | |||
As of 12/31/12 | ||||
Undistributed ordinary income | 2,760,030 | |||
Undistributed long-term capital gain | 398,673 | |||
Capital loss carryforwards | (17,267,993 | ) | ||
Other temporary differences | (71,359 | ) | ||
Net unrealized appreciation (depreciation) | 37,600,806 |
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 for fund fiscal years beginning after December 31, 2010 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses (“post-enactment losses”). Previously, net capital losses were carried forward for eight years and treated as short-term losses (“pre-enactment losses”). As a transition rule, the Act requires that all post-enactment net capital losses be used before pre-enactment net capital losses.
As of December 31, 2012, the fund had capital loss carryforwards available to offset future realized gains. Such pre-enactment losses expire as follows:
12/31/17 | $(17,267,993 | ) |
The availability of $10,944,648 of the capital loss carryforwards of MFS Research Series may be limited in a given year due to the acquisition of SC Davis Venture Value Fund on December 7, 2012.
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
16
Table of Contents
MFS Research 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 in the Statements of Changes in Net Assets are presented by class as follows:
From net investment income | ||||||||
Six months ended 6/30/13 | Year ended 12/31/12 | |||||||
Initial Class | $— | $1,340,066 | ||||||
Service Class | — | 132,945 | ||||||
Total | $— | $1,473,011 |
(3) | Transactions with Affiliates |
Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates:
First $1 billion of average daily net assets | 0.75% | |||
Average daily net assets in excess of $1 billion | 0.65% |
Effective April 1, 2013, MFS has agreed in writing to reduce its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund’s Board of Trustees. For the period April 1, 2013 through June 30, 2013, this management fee reduction amounted to $1,017, 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, 2013 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, 2013, the fee was $19,483, which equated to 0.0052% 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, 2013, these costs amounted to $668.
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, 2013 was equivalent to an annual effective rate of 0.0139% 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, 2013, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $2,699 and are included in “Miscellaneous” expense in 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 $1,420, 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.
17
Table of Contents
MFS Research Series
Notes to Financial Statements (unaudited) – continued
The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks current income consistent with preservation of capital and liquidity. Income earned on this investment is included in “Dividends from underlying affiliated funds” in 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 short sales and short-term obligations, aggregated $183,066,774 and $259,583,650, 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 6/30/13 | Year ended 12/31/12 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 382,619 | $9,094,184 | 6,498,659 | $139,065,054 | ||||||||||||
Service Class | 263,922 | 6,242,340 | 532,555 | 11,233,338 | ||||||||||||
646,541 | $15,336,524 | 7,031,214 | $150,298,392 | |||||||||||||
Shares issued in connection with acquisition of SC Davis Venture Value Fund | ||||||||||||||||
Initial Class | — | $— | 7,909,441 | $170,764,822 | ||||||||||||
Service Class | — | — | 10,939,229 | 234,646,460 | ||||||||||||
— | $— | 18,848,670 | $405,411,282 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 63,601 | $1,340,066 | ||||||||||||
Service Class | — | — | 6,346 | 132,945 | ||||||||||||
— | $— | 69,947 | $1,473,011 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (2,650,270 | ) | $(63,585,906 | ) | (1,941,319 | ) | $(40,506,604 | ) | ||||||||
Service Class | (1,708,428 | ) | (40,844,629 | ) | (291,546 | ) | (6,089,486 | ) | ||||||||
(4,358,698 | ) | $(104,430,535 | ) | (2,232,865 | ) | $(46,596,090 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (2,267,651 | ) | $(54,491,722 | ) | 12,530,382 | $270,663,338 | ||||||||||
Service Class | (1,444,506 | ) | (34,602,289 | ) | 11,186,584 | 239,923,257 | ||||||||||
(3,712,157 | ) | $(89,094,011 | ) | 23,716,966 | $510,586,595 |
The fund is one of several mutual funds in which the MFS funds-of-funds may invest. The MFS funds-of-funds do not invest in the underlying MFS funds for the purpose of exercising management or control. At the end of the period, the MFS Moderate Allocation Portfolio, the MFS Growth Allocation Portfolio, and the MFS Conservative Allocation Portfolio were the owners of record of approximately 22%, 8%, and 7%, respectively, of the value of outstanding voting shares of the fund.
(6) | Line of Credit |
The fund and certain other funds managed by MFS participate in a $1.1 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, 2013, the fund’s commitment fee and interest expense were $1,392 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.
18
Table of Contents
MFS Research Series
Notes to Financial Statements (unaudited) – continued
(7) | Transactions in Underlying Affiliated Funds – Affiliated Issuers |
An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the fund assumes the following to be 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 | 8,219,431 | 90,705,730 | (93,321,898 | ) | 5,603,263 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $2,860 | $5,603,263 |
(8) | Acquisitions |
At close of business on December 7, 2012, the fund with net assets of approximately $313,994,783, acquired all of the assets and liabilities of SC Davis Venture Value Fund, a series of Sun Capital Advisers Trust. The purpose of the transaction was to provide shareholders of the SC Davis Venture Value Fund the opportunity to participate in a larger combined portfolio with a similar investment objective and similar investment policies and strategies. The acquisition was accomplished by a tax-free exchange of approximately 18,848,670 shares of the fund (valued at approximately $405,411,282) for all of the assets and liabilities of SC Davis Venture Value Fund. SC Davis Venture Value Fund then distributed the shares of the fund that SC Davis Venture Value Fund received from the fund to its shareholders. SC Davis Venture Value Fund’s investments on that date were valued at approximately $397,521,486 with a cost basis of approximately $385,723,569. For financial reporting purposes, assets received and shares issued by the fund were recorded at fair value; however, the cost basis of the investments received from SC Davis Venture Value Fund were carried forward to align ongoing reporting of the fund’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.
19
Table of Contents
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, 2013 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products” 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” section of mfs.com.
20
Table of Contents
Table of Contents
SEMIANNUAL REPORT
June 30, 2013
MFS® STRATEGIC
INCOME SERIES
MFS® Variable Insurance Trust
VWG-SEM
Table of Contents
MFS® STRATEGIC INCOME SERIES
The report is prepared for the general information of contract owners. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED Ÿ MAY LOSE VALUE Ÿ NO BANK OR CREDIT UNION GUARANTEE Ÿ NOT A DEPOSIT Ÿ NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
Table of Contents
MFS Strategic Income Series
LETTER FROM THE CHAIRMAN AND CEO
Dear Contract Owners:
As the year progresses, the global economy continues to grind ahead slowly, held back by broad austerity measures. The U.S. economy remains a steadying force, driven by resilient consumers, who have taken the payroll tax increase and the sequestration’s early impact in stride. With U.S. housing and jobs showing steady expansion, domestic consumer-driven growth has offset weaker exports and the U.S. government’s spending constraints. In response to these developments, the U.S. Federal Reserve has begun to brace investors for an eventual shift in its monetary policy, causing global market tremors.
Japan has been another bright spot, with government and central bank stimulus policies leading to increased exports, a resurgent stock market and improved economic sentiment. After a six-month rally, Japan’s stocks slipped late in the second quarter, then picked up momentum on fresh signs that the country could soon break free of its chronic deflation. The major deterrent to global growth remains the eurozone, still in the grip of persistent recession. China has seen its pace of economic growth decelerate, a troubling turn for the country’s trading partners, who have come to rely on it as an engine for global growth.
As always, managing risk in the face of uncertainty remains a top priority for investors. At MFS®, our uniquely collaborative investment process employs integrated, global research and active risk management. Our global team of investment professionals shares ideas and evaluates opportunities across continents, investment disciplines and asset classes — all with a goal of building better insights, and ultimately better results, for our clients.
We are mindful of the many economic challenges investors face, and believe it is more important than ever to maintain a long-term view and employ time-tested principles, such as asset allocation and diversification. We remain confident that our unique approach can serve investors well as they work with their financial advisors to identify and pursue the most suitable opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2013
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 Strategic Income Series
Portfolio structure (i)
Fixed income sectors (i) | ||||
High Grade Corporates | 51.0% | |||
High Yield Corporates | 32.0% | |||
Non-U.S. Government Bonds | 8.1% | |||
Emerging Markets Bonds | 3.2% | |||
U.S. Government Agencies | 1.5% | |||
Mortgage-Backed Securities | 1.0% | |||
Floating Rate Loans | 0.7% | |||
Municipal Bonds | 0.3% | |||
Asset-Backed Securities | 0.3% | |||
Collateralized Debt Obligations | 0.1% | |||
Commercial Mortgage-Backed Securities | 0.1% | |||
U.S. Treasury Securities | (7.5)% |
Composition including fixed income credit quality (a)(i) | ||||
AAA | 1.6% | |||
AA | 6.1% | |||
A | 18.5% | |||
BBB | 35.1% | |||
BB | 13.9% | |||
B | 15.0% | |||
CCC | 4.6% | |||
C | 0.3% | |||
Federal Agencies | 2.5% | |||
Not Rated | (6.8)% | |||
Non-Fixed Income | 0.3% | |||
Cash & Other | 8.9% | |||
Portfolio facts (i) | ||||
Average Duration (d) | 4.7 | |||
Average Effective Maturity (m) | 7.4 yrs. | |||
Issuer country weightings (i)(x) | ||||
United States | 70.3% | |||
United Kingdom | 4.9% | |||
France | 3.7% | |||
Canada | 2.5% | |||
Italy | 2.0% | |||
Netherlands | 1.9% | |||
Germany | 1.8% | |||
Australia | 1.8% | |||
Japan | 1.5% | |||
Other Countries | 9.6% |
(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. 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. The bond component will include any accrued interest amounts. |
(m) | In determining an instrument’s effective maturity for purposes of calculating the fund’s dollar-weighted average effective maturity, MFS uses the instrument’s stated maturity or, if applicable, an earlier date on which MFS believes it is probable that a maturity-shortening device (such as a put, pre-refunding or prepayment) will cause the instrument to be repaid. Such an earlier date can be substantially shorter than the instrument’s stated maturity. |
(x) | Represents the portfolio’s exposure to issuer countries as a percentage of a portfolio’s net assets. |
Where the fund holds convertible bonds, these are treated as part of the equity portion of the portfolio.
The fund invests a portion of its assets in the MFS High Yield Pooled Portfolio. Percentages reflect exposure to the underlying holdings of the MFS High Yield Pooled Portfolio and not to the exposure from investing directly in the MFS High Yield Pooled Portfolio itself.
Percentages are based on net assets as of 6/30/13.
The portfolio is actively managed and current holdings may be different.
2
Table of Contents
MFS Strategic Income Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2013 through June 30, 2013
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.
In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying MFS Pooled Portfolio in which the fund invests. MFS Pooled Portfolios are mutual funds advised by MFS that do not pay management fees to MFS but do incur investment and operating costs. If these transactional and indirect costs were included, your costs would have been higher.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2013 through June 30, 2013.
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 1/01/13 | Ending Account Value 6/30/13 | Expenses Paid During Period (p) 1/01/13-6/30/13 | ||||||||||||||
Initial Class | Actual | 0.80% | $1,000.00 | $983.79 | $3.93 | |||||||||||||
Hypothetical (h) | 0.80% | $1,000.00 | $1,020.83 | $4.01 | ||||||||||||||
Service Class | Actual | 1.05% | $1,000.00 | $982.54 | $5.16 | |||||||||||||
Hypothetical (h) | 1.05% | $1,000.00 | $1,019.59 | $5.26 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying funds in which the fund invests. If these indirect costs were included, your costs would have been higher. |
3
Table of Contents
MFS Strategic Income Series
PORTFOLIO OF INVESTMENTS – 6/30/13 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
BONDS – 64.1% | ||||||||
Asset-Backed & Securitized – 0.5% | ||||||||
Bayview Financial Revolving Mortgage Loan Trust, FRN, 1.795%, 2040 (z) | $ | 157,298 | $ | 75,958 | ||||
Capital Trust Realty Ltd., CDO, 5.16%, 2035 (n) | 22,976 | 22,989 | ||||||
Crest Ltd., CDO, 7%, 2040 (a)(p) | 168,707 | 8,435 | ||||||
Falcon Franchise Loan LLC, FRN, 11.464%, 2025 (i)(z) | 46,522 | 6,978 | ||||||
First Union National Bank Commercial Mortgage Trust, FRN, 1.893%, 2043 (i)(z) | 54,370 | 93 | ||||||
First Union-Lehman Brothers Bank of America, FRN, 0.686%, 2035 (i) | 546,099 | 10,743 | ||||||
Lehman Brothers Commercial Conduit Mortgage Trust, FRN, 1.176%, 2030 (i) | 120,051 | 2,383 | ||||||
Morgan Stanley Capital I, Inc., FRN, 1.384%, 2039 (i)(z) | 358,305 | 7,614 | ||||||
|
| |||||||
$ | 135,193 | |||||||
|
| |||||||
Automotive – 1.0% | ||||||||
Daimler Finance North America LLC, 1.875%, 2018 (n) | $ | 152,000 | $ | 148,327 | ||||
Harley-Davidson Financial Services, 3.875%, 2016 (n) | 130,000 | 137,838 | ||||||
|
| |||||||
$ | 286,165 | |||||||
|
| |||||||
Biotechnology – 0.3% | ||||||||
Life Technologies Corp., 6%, 2020 | $ | 90,000 | $ | 101,391 | ||||
|
| |||||||
Broadcasting – 0.8% | ||||||||
CBS Corp., 5.75%, 2020 | $ | 20,000 | $ | 22,684 | ||||
CBS Corp., 3.375%, 2022 | 94,000 | 90,612 | ||||||
News America, Inc., 8.5%, 2025 | 10,000 | 12,724 | ||||||
Vivendi S.A., 4.75%, 2022 (n) | 100,000 | 100,017 | ||||||
|
| |||||||
$ | 226,037 | |||||||
|
| |||||||
Brokerage & Asset Managers – 1.0% | ||||||||
Blackstone Holdings Finance Co. LLC, 4.75%, 2023 (n) | $ | 92,000 | $ | 97,322 | ||||
Invesco Finance PLC, 3.125%, 2022 | 66,000 | 61,565 | ||||||
TD Ameritrade Holding Corp., 5.6%, 2019 | 110,000 | 127,869 | ||||||
|
| |||||||
$ | 286,756 | |||||||
|
| |||||||
Building – 0.5% | ||||||||
CRH PLC, 8.125%, 2018 | $ | 80,000 | $ | 97,340 | ||||
Owens Corning, Inc., 4.2%, 2022 | 40,000 | 38,759 | ||||||
|
| |||||||
$ | 136,099 | |||||||
|
| |||||||
Cable TV – 1.5% | ||||||||
Cox Communications, Inc., 3.25%, 2022 (n) | $ | 113,000 | $ | 106,313 | ||||
DIRECTV Holdings LLC, 5.875%, 2019 | 40,000 | 45,016 | ||||||
NBCUniversal Media LLC, 5.95%, 2041 | 113,000 | 129,060 | ||||||
Time Warner Cable, Inc., 8.25%, 2019 | 120,000 | 144,479 | ||||||
|
| |||||||
$ | 424,868 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Chemicals – 0.9% | ||||||||
CF Industries, Inc., 3.45%, 2023 | $ | 43,000 | $ | 41,324 | ||||
Dow Chemical Co., 8.55%, 2019 | 170,000 | 216,899 | ||||||
|
| |||||||
$ | 258,223 | |||||||
|
| |||||||
Computer Software – 0.3% | ||||||||
Oracle Corp., 5.375%, 2040 | $ | 66,000 | $ | 73,570 | ||||
|
| |||||||
Conglomerates – 0.5% | ||||||||
Ingersoll-Rand Global Holding Co. Ltd., 9.5%, 2014 | $ | 38,000 | $ | 40,556 | ||||
Votorantim Participacoes S.A., 6.75%, 2021 (n) | 100,000 | 106,500 | ||||||
|
| |||||||
$ | 147,056 | |||||||
|
| |||||||
Consumer Products – 1.0% | ||||||||
Avon Products, Inc., 4.6%, 2020 | $ | 70,000 | $ | 70,774 | ||||
Mattel, Inc., 5.45%, 2041 | 53,000 | 54,561 | ||||||
Newell Rubbermaid, Inc., 2.05%, 2017 | 43,000 | 42,139 | ||||||
Newell Rubbermaid, Inc., 4.7%, 2020 | 60,000 | 64,077 | ||||||
Tupperware Brands Corp., 4.75%, 2021 | 47,000 | 47,669 | ||||||
|
| |||||||
$ | 279,220 | |||||||
|
| |||||||
Consumer Services – 0.7% | ||||||||
Experian Finance PLC, 2.375%, 2017 (n) | $ | 200,000 | $ | 198,152 | ||||
|
| |||||||
Defense Electronics – 0.8% | ||||||||
BAE Systems Holdings, Inc., 5.2%, 2015 (n) | $ | 169,000 | $ | 181,859 | ||||
BAE Systems Holdings, Inc., 6.375%, 2019 (n) | 40,000 | 46,316 | ||||||
|
| |||||||
$ | 228,175 | |||||||
|
| |||||||
Electrical Equipment – 0.4% | ||||||||
Arrow Electronics, Inc., 3%, 2018 | $ | 31,000 | $ | 30,955 | ||||
Ericsson, Inc., 4.125%, 2022 | 73,000 | 71,388 | ||||||
|
| |||||||
$ | 102,343 | |||||||
|
| |||||||
Electronics – 0.1% | ||||||||
Tyco Electronics Group S.A., 3.5%, 2022 | $ | 31,000 | $ | 30,040 | ||||
|
| |||||||
Emerging Market Quasi-Sovereign – 1.3% | ||||||||
IIRSA Norte Finance Ltd., 8.75%, 2024 | $ | 96,889 | $ | 113,360 | ||||
Petrobras Global Finance Co., 4.375%, 2023 | 3,000 | 2,752 | ||||||
Petrobras International Finance Co., 7.875%, 2019 | 51,000 | 58,975 | ||||||
Petrobras International Finance Co., 6.75%, 2041 | 48,000 | 47,955 | ||||||
Petroleos Mexicanos, 5.5%, 2021 | 100,000 | 106,500 | ||||||
Petroleos Mexicanos, 4.875%, 2022 | 10,000 | 10,200 | ||||||
Petroleos Mexicanos, 6.5%, 2041 | 31,000 | 32,008 | ||||||
|
| |||||||
$ | 371,750 | |||||||
|
| |||||||
Emerging Market Sovereign – 0.1% | ||||||||
Republic of Hungary, 5.375%, 2023 | $ | 4,000 | $ | 3,850 | ||||
Republic of Poland, 5%, 2022 | 14,000 | 15,050 |
4
Table of Contents
MFS Strategic Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Emerging Market Sovereign – continued | ||||||||
Republic of Romania, 4.375%, 2023 (n) | $ | 2,000 | $ | 1,900 | ||||
|
| |||||||
$ | 20,800 | |||||||
|
| |||||||
Energy – Independent – 0.3% | ||||||||
EQT Corp., 4.875%, 2021 | $ | 48,000 | $ | 49,382 | ||||
Hess Corp., 8.125%, 2019 | 30,000 | 37,604 | ||||||
|
| |||||||
$ | 86,986 | |||||||
|
| |||||||
Energy – Integrated – 1.3% | ||||||||
BP Capital Markets PLC, 4.5%, 2020 | $ | 29,000 | $ | 31,462 | ||||
BP Capital Markets PLC, 4.742%, 2021 | 90,000 | 97,928 | ||||||
Cenovus Energy, Inc., 4.5%, 2014 | 30,000 | 31,322 | ||||||
Chevron Corp., 2.427%, 2020 | 100,000 | 99,430 | ||||||
Petro-Canada Financial Partnership, 5%, 2014 | 110,000 | 115,999 | ||||||
|
| |||||||
$ | 376,141 | |||||||
|
| |||||||
Financial Institutions – 1.0% | ||||||||
General Electric Capital Corp., 6%, 2019 | $ | 30,000 | $ | 34,828 | ||||
General Electric Capital Corp., 5.5%, 2020 | 95,000 | 107,111 | ||||||
General Electric Capital Corp., 3.15%, 2022 | 49,000 | 46,301 | ||||||
General Electric Capital Corp., 3.1%, 2023 | 46,000 | 43,455 | ||||||
NYSE Euronext, 2%, 2017 | 54,000 | 53,709 | ||||||
|
| |||||||
$ | 285,404 | |||||||
|
| |||||||
Food & Beverages – 2.4% | ||||||||
Anheuser-Busch InBev S.A., 7.75%, 2019 | $ | 140,000 | $ | 177,077 | ||||
Campbell Soup Co., 2.5%, 2022 | 40,000 | 36,476 | ||||||
Conagra Foods, Inc., 3.2%, 2023 | 70,000 | 66,939 | ||||||
Kraft Foods Group, Inc., 6.125%, 2018 | 80,000 | 93,932 | ||||||
Mead Johnson Nutrition Co., “A”, 4.9%, 2019 | 26,000 | 28,540 | ||||||
Pernod-Ricard S.A., 2.95%, 2017 (n) | 150,000 | 153,482 | ||||||
Tyson Foods, Inc., 6.6%, 2016 | 70,000 | 79,068 | ||||||
Tyson Foods, Inc., 4.5%, 2022 | 49,000 | 50,070 | ||||||
|
| |||||||
$ | 685,584 | |||||||
|
| |||||||
Food & Drug Stores – 0.4% | ||||||||
CVS Caremark Corp., 5.75%, 2041 | $ | 110,000 | $ | 123,995 | ||||
|
| |||||||
Forest & Paper Products – 0.3% | ||||||||
Georgia-Pacific LLC, 3.734%, 2023 (n) | $ | 97,000 | $ | 94,347 | ||||
|
| |||||||
Gaming & Lodging – 0.1% | ||||||||
Hyatt Hotels Corp., 3.375%, 2023 | $ | 36,000 | $ | 33,561 | ||||
|
| |||||||
Insurance – 2.2% | ||||||||
Allianz AG, 5.5% to 2014, FRN to 2049 | EUR | 105,000 | $ | 136,793 | ||||
American International Group, Inc., 3%, 2015 | $ | 40,000 | 41,223 | |||||
American International Group, Inc., 5.85%, 2018 | 47,000 | 52,847 | ||||||
ING U.S., Inc., 2.9%, 2018 (n) | 40,000 | 40,201 | ||||||
MetLife, Inc., 1.756%, 2017 | 20,000 | 19,689 | ||||||
Metropolitan Life Global Funding I, 5.125%, 2014 (n) | 40,000 | 41,723 | ||||||
Principal Financial Group, Inc., 8.875%, 2019 | 80,000 | 103,544 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Insurance – continued | ||||||||
Prudential Financial, Inc., 6.2%, 2015 | $ | 80,000 | $ | 86,196 | ||||
Unum Group, 7.125%, 2016 | 90,000 | 104,084 | ||||||
|
| |||||||
$ | 626,300 | |||||||
|
| |||||||
Insurance – Property & Casualty – 2.0% | ||||||||
Aon Corp., 3.5%, 2015 | $ | 130,000 | $ | 136,320 | ||||
AXIS Capital Holdings Ltd., 5.75%, 2014 | 130,000 | 137,793 | ||||||
AXIS Capital Holdings Ltd., 5.875%, 2020 | 40,000 | 44,365 | ||||||
CNA Financial Corp., 5.875%, 2020 | 100,000 | 113,173 | ||||||
Liberty Mutual Group, Inc., 4.95%, 2022 (n) | 73,000 | 74,948 | ||||||
PartnerRe Ltd., 5.5%, 2020 | 66,000 | 72,642 | ||||||
|
| |||||||
$ | 579,241 | |||||||
|
| |||||||
International Market Quasi-Sovereign – 1.2% | ||||||||
EDF Energies Nouvelles S.A., 6.5%, 2019 (n) | $ | 120,000 | $ | 142,186 | ||||
Eksportfinans A.S.A., 5.5%, 2016 | 90,000 | 93,758 | ||||||
Westpac Banking Corp., 3.45%, 2014 (n) | 100,000 | 103,224 | ||||||
|
| |||||||
$ | 339,168 | |||||||
|
| |||||||
International Market Sovereign – 6.7% | ||||||||
Commonwealth of Australia, 5.75%, 2021 | AUD | 27,000 | $ | 28,331 | ||||
Federal Republic of Germany, 4.25%, 2018 | EUR | 52,000 | 79,314 | |||||
Federal Republic of Germany, 6.25%, 2030 | EUR | 44,000 | 88,383 | |||||
Government of Canada, 4.5%, 2015 | CAD | 46,000 | 46,448 | |||||
Government of Canada, 4.25%, 2018 | CAD | 36,000 | 38,119 | |||||
Government of Canada, 5.75%, 2033 | CAD | 9,000 | 12,286 | |||||
Government of Japan, 1.1%, 2020 | JPY | 9,100,000 | 95,020 | |||||
Government of Japan, 2.1%, 2024 | JPY | 4,250,000 | 48,012 | |||||
Government of Japan, 2.2%, 2027 | JPY | 10,350,000 | 117,383 | |||||
Government of Japan, 2.4%, 2037 | JPY | 10,750,000 | 121,935 | |||||
Government of Japan, 1.8%, 2043 | JPY | 3,500,000 | 34,982 | |||||
Kingdom of Belgium, 5.5%, 2017 | EUR | 68,000 | 104,157 | |||||
Kingdom of Denmark, 3%, 2021 | DKK | 130,000 | 25,338 | |||||
Kingdom of Spain, 4.6%, 2019 | EUR | 110,000 | 148,093 | |||||
Kingdom of Sweden, 5%, 2020 | SEK | 95,000 | 17,125 | |||||
Kingdom of the Netherlands, 5.5%, 2028 | EUR | 14,000 | 25,047 | |||||
Republic of Austria, 4.65%, 2018 | EUR | 47,000 | 70,948 | |||||
Republic of Finland, 3.875%, 2017 | EUR | 13,000 | 19,025 | |||||
Republic of France, 6%, 2025 | EUR | 26,000 | 45,750 | |||||
Republic of France, 4.75%, 2035 | EUR | 60,000 | 96,954 | |||||
Republic of Ireland, 4.6%, 2016 | EUR | 39,000 | 54,376 | |||||
Republic of Ireland, 4.5%, 2020 | EUR | 20,000 | 27,179 | |||||
Republic of Italy, 4.25%, 2015 | EUR | 52,000 | 70,222 | |||||
Republic of Italy, 5.25%, 2017 | EUR | 155,000 | 217,240 | |||||
Republic of Italy, 3.75%, 2021 | EUR | 89,000 | 114,294 | |||||
Republic of Portugal, 4.8%, 2020 | EUR | 10,000 | 12,014 | |||||
United Kingdom Treasury, 8%, 2021 | GBP | 45,000 | 97,859 | |||||
United Kingdom Treasury, 4.25%, 2036 | GBP | 42,000 | 72,704 | |||||
|
| |||||||
$ | 1,928,538 | |||||||
|
|
5
Table of Contents
MFS Strategic Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Local Authorities – 0.7% | ||||||||
Louisiana Gas & Fuels Tax Rev. (Build America Bonds), FRN, 3%, 2043 | $ | 100,000 | $ | 100,221 | ||||
State of Illinois (Build America Bonds), 6.725%, 2035 | 95,000 | 98,887 | ||||||
|
| |||||||
$ | 199,108 | |||||||
|
| |||||||
Machinery & Tools – 0.5% | ||||||||
Atlas Copco AB, 5.6%, 2017 (n) | $ | 135,000 | $ | 151,935 | ||||
|
| |||||||
Major Banks – 7.9% | ||||||||
Bank of America Corp., 7.375%, 2014 | $ | 50,000 | $ | 52,604 | ||||
Bank of America Corp., 6.5%, 2016 | 170,000 | 191,666 | ||||||
Bank of America Corp., 3.3%, 2023 | 99,000 | 93,570 | ||||||
Barclays Bank PLC, 5.125%, 2020 | 100,000 | 110,629 | ||||||
BNP Paribas, 7.195% to 2037, FRN to 2049 (n) | 100,000 | 96,750 | ||||||
BNP Paribas, FRN, 3.022%, 2014 | 18,000 | 18,568 | ||||||
Commonwealth Bank of Australia, 5%, 2019 (n) | 80,000 | 89,522 | ||||||
DBS Bank Ltd., 2.35%, 2017 (n) | 200,000 | 202,507 | ||||||
Goldman Sachs Group, Inc., 5.125%, 2015 | 50,000 | 52,743 | ||||||
Goldman Sachs Group, Inc., 5.75%, 2022 | 133,000 | 146,701 | ||||||
HSBC Holdings PLC, 4%, 2022 | 110,000 | 112,621 | ||||||
JPMorgan Chase & Co., 4.625%, 2021 | 90,000 | 95,133 | ||||||
Macquarie Bank Ltd., 5%, 2017 (n) | 79,000 | 84,648 | ||||||
Macquarie Group Ltd., 6%, 2020 (n) | 48,000 | 49,842 | ||||||
Merrill Lynch & Co., Inc., 6.4%, 2017 | 30,000 | 33,875 | ||||||
Morgan Stanley, 6%, 2014 | 100,000 | 104,005 | ||||||
Morgan Stanley, 5.625%, 2019 | 100,000 | 107,483 | ||||||
Morgan Stanley, FRN, 1.522%, 2016 | 80,000 | 79,774 | ||||||
Royal Bank of Scotland PLC, 2.55%, 2015 | 53,000 | 53,888 | ||||||
Santander International Debt S.A., 2.991%, 2013 (n) | 200,000 | 201,140 | ||||||
Standard Chartered PLC, 3.85%, 2015 (n) | 100,000 | 104,171 | ||||||
Wells Fargo & Co., 7.98% to 2018, FRN to 2049 | 49,000 | 55,370 | ||||||
Westpac Banking Corp., 2%, 2017 | 150,000 | 150,515 | ||||||
|
| |||||||
$ | 2,287,725 | |||||||
|
| |||||||
Medical & Health Technology & Services – 0.8% | ||||||||
Cardinal Health, Inc., 5.8%, 2016 | $ | 94,000 | $ | 106,692 | ||||
McKesson Corp., 5.7%, 2017 | 40,000 | 45,179 | ||||||
Owens & Minor, Inc., 6.35%, 2016 | 70,000 | 75,932 | ||||||
|
| |||||||
$ | 227,803 | |||||||
|
| |||||||
Metals & Mining – 1.1% | ||||||||
Barrick Gold Corp., 4.1%, 2023 (n) | $ | 128,000 | $ | 106,938 | ||||
Freeport-McMoRan Copper & Gold, Inc., 2.375%, 2018 (n) | 50,000 | 47,554 | ||||||
Freeport-McMoRan Copper & Gold, Inc., 3.1%, 2020 (n) | 70,000 | 64,702 | ||||||
Glencore Funding LLC, FRN, 1.431%, 2016 (z) | 70,000 | 68,161 | ||||||
Vale Overseas Ltd., 4.375%, 2022 | 45,000 | 42,743 | ||||||
|
| |||||||
$ | 330,098 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Mortgage-Backed – 1.0% | ||||||||
Fannie Mae, 6%, 2017 | $ | 21,889 | $ | 22,774 | ||||
Fannie Mae, 5.5%, 2020 (f) | 109,246 | 115,389 | ||||||
Fannie Mae, 5.5%, 2034 | 49,259 | 53,912 | ||||||
Freddie Mac, 4.224%, 2020 | 94,792 | 103,799 | ||||||
|
| |||||||
$ | 295,874 | |||||||
|
| |||||||
Municipals – 0.3% | ||||||||
Florida Hurricane Catastrophe Fund Finance Corp. Rev, “A”, 2.107%, 2018 | $ | 90,000 | $ | 87,062 | ||||
|
| |||||||
Natural Gas – Distribution – 0.4% | ||||||||
GDF Suez, 1.625%, 2017 (n) | $ | 120,000 | $ | 118,178 | ||||
|
| |||||||
Natural Gas – Pipeline – 2.1% | ||||||||
DCP Midstream LLC, 3.875%, 2023 | $ | 62,000 | $ | 58,149 | ||||
Energy Transfer Partners LP, 3.6%, 2023 | 55,000 | 51,474 | ||||||
Energy Transfer Partners LP, 6.5%, 2042 | 87,000 | 92,779 | ||||||
Enterprise Products Partners LP, 6.3%, 2017 | 90,000 | 105,264 | ||||||
Kinder Morgan Energy Partners LP, 6.375%, 2041 | 130,000 | 145,120 | ||||||
Spectra Energy Capital LLC, 8%, 2019 | 66,000 | 83,530 | ||||||
Sunoco Logistics Partner LP, 3.45%, 2023 | 59,000 | 54,812 | ||||||
Williams Cos., Inc., 3.7%, 2023 | 27,000 | 25,085 | ||||||
|
| |||||||
$ | 616,213 | |||||||
|
| |||||||
Network & Telecom – 1.4% | ||||||||
AT&T, Inc., 5.5%, 2018 | $ | 70,000 | $ | 80,063 | ||||
AT&T, Inc., 3.875%, 2021 | 80,000 | 82,511 | ||||||
Centurylink, Inc., 7.65%, 2042 | 89,000 | 84,550 | ||||||
France Telecom, 4.375%, 2014 | 80,000 | 82,391 | ||||||
Verizon Communications, Inc., 8.75%, 2018 | 52,000 | 67,774 | ||||||
|
| |||||||
$ | 397,289 | |||||||
|
| |||||||
Oil Services – 0.4% | ||||||||
Transocean, Inc., 2.5%, 2017 | $ | 33,000 | $ | 32,612 | ||||
Transocean, Inc., 6%, 2018 | 70,000 | 78,445 | ||||||
|
| |||||||
$ | 111,057 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 4.2% | ||||||||
Bancolombia S.A., 5.125%, 2022 | $ | 2,000 | $ | 1,905 | ||||
Citigroup, Inc., 6.375%, 2014 | 80,000 | 84,422 | ||||||
Citigroup, Inc., 6.01%, 2015 | 60,000 | 64,076 | ||||||
Citigroup, Inc., 8.5%, 2019 | 84,000 | 105,842 | ||||||
Deutsche Bank Capital Funding Trust, FRN, 5.33%, 2049 | EUR | 75,000 | 79,563 | |||||
Groupe BPCE S.A., 12.5% to 2019, FRN to 2049 (n) | 102,000 | 123,675 | ||||||
Intesa Sanpaolo S.p.A., FRN, 2.673%, 2014 (n) | 100,000 | 100,367 | ||||||
Lloyds TSB Bank PLC, 5.8%, 2020 (n) | 110,000 | 123,773 | ||||||
Rabobank Nederland N.V., 3.375%, 2017 | 59,000 | 61,964 | ||||||
Rabobank Nederland N.V., 3.95%, 2022 | 250,000 | 239,068 | ||||||
Santander Holdings USA, Inc., 4.625%, 2016 | 10,000 | 10,549 | ||||||
SunTrust Banks, Inc., 3.5%, 2017 | 69,000 | 72,206 |
6
Table of Contents
MFS Strategic Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Other Banks & Diversified Financials – continued | ||||||||
Svenska Handelsbanken AB, 4.875%, 2014 (n) | $ | 110,000 | $ | 114,164 | ||||
U.S. Bancorp, 2.95%, 2022 | 46,000 | 42,672 | ||||||
|
| |||||||
$ | 1,224,246 | |||||||
|
| |||||||
Personal Computers & Peripherals – 0.4% | ||||||||
Equifax, Inc., 3.3%, 2022 | $ | 62,000 | $ | 58,200 | ||||
Motorola Solutions, Inc., 3.5%, 2023 | 46,000 | 43,364 | ||||||
|
| |||||||
$ | 101,564 | |||||||
|
| |||||||
Pharmaceuticals – 0.7% | ||||||||
Celgene Corp., 3.95%, 2020 | $ | 130,000 | $ | 134,673 | ||||
Hospira, Inc., 6.05%, 2017 | 60,000 | 64,204 | ||||||
|
| |||||||
$ | 198,877 | |||||||
|
| |||||||
Pollution Control – 0.3% | ||||||||
Republic Services, Inc., 5.25%, 2021 | $ | 80,000 | $ | 87,833 | ||||
|
| |||||||
Railroad & Shipping – 0.8% | ||||||||
CSX Corp., 4.1%, 2044 | $ | 186,000 | $ | 161,510 | ||||
Panama Canal Railway Co., 7%, 2026 (n) | 87,600 | 84,096 | ||||||
|
| |||||||
$ | 245,606 | |||||||
|
| |||||||
Real Estate – 1.9% | ||||||||
Boston Properties LP, REIT, 3.7%, 2018 | $ | 47,000 | $ | 49,364 | ||||
DDR Corp., REIT, 4.625%, 2022 | 87,000 | 87,921 | ||||||
DDR Corp., REIT, 3.375%, 2023 | 122,000 | 111,815 | ||||||
ERP Operating LP, REIT, 3%, 2023 | 63,000 | 57,898 | ||||||
HCP, Inc., REIT, 5.375%, 2021 | 95,000 | 103,050 | ||||||
Health Care, Inc., REIT, 2.25%, 2018 | 30,000 | 29,455 | ||||||
Kimco Realty Corp., REIT, 6.875%, 2019 | 22,000 | 26,594 | ||||||
WEA Finance LLC, 6.75%, 2019 (n) | 60,000 | 70,860 | ||||||
|
| |||||||
$ | 536,957 | |||||||
|
| |||||||
Retailers – 1.6% | ||||||||
Dollar General Corp., 4.125%, 2017 | $ | 73,000 | $ | 76,999 | ||||
Gap, Inc., 5.95%, 2021 | 117,000 | 129,405 | ||||||
Kohl’s Corp., 3.25%, 2023 | 96,000 | 88,808 | ||||||
Limited Brands, Inc., 5.25%, 2014 | 25,000 | 25,938 | ||||||
Macy’s, Inc., 7.875%, 2015 | 120,000 | 136,062 | ||||||
|
| |||||||
$ | 457,212 | |||||||
|
| |||||||
Supranational – 0.5% | ||||||||
Corporacion Andina de Fomento, 4.375%, 2022 | $ | 130,000 | $ | 132,378 | ||||
|
| |||||||
Telecommunications – Wireless – 1.1% | ||||||||
American Tower Corp., REIT, 4.625%, 2015 | $ | 40,000 | $ | 42,270 | ||||
American Tower Corp., REIT, 4.7%, 2022 | 82,000 | 82,705 | ||||||
Crown Castle Towers LLC, 6.113%, 2020 (n) | 104,000 | 119,337 | ||||||
Rogers Cable, Inc., 5.5%, 2014 | 79,000 | 81,570 | ||||||
|
| |||||||
$ | 325,882 | |||||||
|
| |||||||
Tobacco – 1.6% | ||||||||
Altria Group, Inc., 9.25%, 2019 | $ | 44,000 | $ | 58,273 | ||||
Lorillard Tobacco Co., 8.125%, 2019 | 61,000 | 74,748 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Tobacco – continued | ||||||||
Lorillard Tobacco Co., 6.875%, 2020 | $ | 50,000 | $ | 57,454 | ||||
Reynolds American, Inc., 6.75%, 2017 | 135,000 | 156,436 | ||||||
Reynolds American, Inc., 4.75%, 2042 | 124,000 | 110,740 | ||||||
|
| |||||||
$ | 457,651 | |||||||
|
| |||||||
Transportation – Services – 0.4% | ||||||||
ERAC USA Finance Co., 6.375%, 2017 (n) | $ | 110,000 | $ | 127,728 | ||||
|
| |||||||
U.S. Government Agencies and Equivalents – 1.4% | ||||||||
National Credit Union Administration Guaranteed Note, 2.9%, 2020 | $ | 20,000 | $ | 20,875 | ||||
Small Business Administration, 6.35%, 2021 | 27,042 | 29,845 | ||||||
Small Business Administration, 4.34%, 2024 | 71,041 | 76,657 | ||||||
Small Business Administration, 4.99%, 2024 | 83,955 | 91,561 | ||||||
Small Business Administration, 4.86%, 2025 | 101,880 | 111,666 | ||||||
Small Business Administration, 4.625%, 2025 | 40,563 | 44,129 | ||||||
Small Business Administration, 5.11%, 2025 | 37,210 | 40,933 | ||||||
|
| |||||||
$ | 415,666 | |||||||
|
| |||||||
Utilities – Electric Power – 3.0% | ||||||||
CMS Energy Corp., 4.25%, 2015 | $ | 90,000 | $ | 95,450 | ||||
CMS Energy Corp., 5.05%, 2022 | 64,000 | 69,146 | ||||||
Duke Energy Corp., 3.35%, 2015 | 140,000 | 145,817 | ||||||
Exelon Generation Co. LLC, 5.35%, 2014 | 40,000 | 40,963 | ||||||
Exelon Generation Co. LLC, 5.2%, 2019 | 65,000 | 71,481 | ||||||
Exelon Generation Co. LLC, 4.25%, 2022 | 21,000 | 21,002 | ||||||
Oncor Electric Delivery Co., 4.1%, 2022 | 95,000 | 98,018 | ||||||
Pacific Gas & Electric Co., 3.25%, 2023 | 95,000 | 93,031 | ||||||
PPL WEM Holdings PLC, 3.9%, 2016 (n) | 110,000 | 114,961 | ||||||
Progress Energy, Inc., 3.15%, 2022 | 127,000 | 121,650 | ||||||
|
| |||||||
$ | 871,519 | |||||||
|
| |||||||
Total Bonds (Identified Cost, $18,068,192) | $ | 18,470,564 | ||||||
|
|
Strike Price | First Exercise | |||||||||||||||
WARRANTS – 0.1% | ||||||||||||||||
Broadcasting – 0.1% | ||||||||||||||||
New Young Broadcasting Holding Co., Inc. (1 share for 1 warrant) (Identified Cost, $7,035) (a) | $ | 0.01 | 7/14/10 | 3 | $ | 20,100 | ||||||||||
|
| |||||||||||||||
COMMON STOCKS – 0.0% | ||||||||||||||||
Printing & Publishing – 0.0% | ||||||||||||||||
American Media Operations, Inc. (Identified Cost, $12,248) (a) | 858 | $ | 4,505 | |||||||||||||
|
|
7
Table of Contents
MFS Strategic Income Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
UNDERLYING AFFILIATED FUNDS – 33.8% | ||||||||
MFS High Yield Pooled Portfolio (v) (Identified Cost, $9,637,582) | 1,004,619 | $ | 9,744,815 | |||||
|
| |||||||
MONEY MARKET FUNDS – 1.3% | ||||||||
MFS Institutional Money Market Portfolio, 0.11%, at Cost and Net Asset Value (v) | 366,776 | $ | 366,776 | |||||
|
| |||||||
Total Investments (Identified Cost, $28,091,833) | $ | 28,606,760 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – 0.7% | 209,074 | |||||||
|
| |||||||
Net Assets – 100.0% | $ | 28,815,834 | ||||||
|
|
(a) | Non-income producing security. |
(f) | All or a portion of the security has been segregated as collateral for open futures contracts. |
(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 $4,094,492 representing 14.2% of net assets. |
(p) | Payment-in-kind 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. |
(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, 1.795%, 2040 | 3/01/06 | $157,298 | $75,958 | |||||||||
Falcon Franchise Loan LLC, FRN, 11.464%, 2025 | 1/29/03 | 3,743 | 6,978 | |||||||||
First Union National Bank Commercial Mortgage Trust, FRN, 1.893%, 2043 | 12/11/03 | 36 | 93 | |||||||||
Glencore Funding LLC, FRN, 1.431%, 2016 | 5/22/13 | 70,000 | 68,161 | |||||||||
Morgan Stanley Capital I, Inc., FRN, 1.384%, 2039 | 7/20/04 | 5,650 | 7,614 | |||||||||
Total Restricted Securities | $158,804 | |||||||||||
% of Net assets | 0.6% |
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 |
8
Table of Contents
MFS Strategic Income Series
Portfolio of Investments (unaudited) – continued
Derivative Contracts at 6/30/13
Forward Foreign Currency Exchange Contracts at 6/30/13
Type | Currency | Counterparty | Contracts to Deliver/Receive | Settlement Date Range | In Exchange For | Contracts at Value | Net Unrealized Appreciation (Depreciation) | |||||||||||||||||
Asset Derivatives | ||||||||||||||||||||||||
SELL | AUD | Goldman Sachs International | 4,769 | 7/16/13 | $ | 4,863 | $ | 4,357 | $ | 506 | ||||||||||||||
SELL | AUD | Westpac Banking Corp. | 25,866 | 7/16/13 | 26,912 | 23,632 | 3,280 | |||||||||||||||||
SELL | CAD | Goldman Sachs International | 13,979 | 7/16/13 | 13,855 | 13,288 | 567 | |||||||||||||||||
SELL | CAD | Merrill Lynch International Bank | 88,326 | 7/16/13 | 86,673 | 83,956 | 2,717 | |||||||||||||||||
SELL | DKK | Deutsche Bank AG | 142,358 | 7/16/13 | 24,960 | 24,847 | 113 | |||||||||||||||||
SELL | EUR | Citibank N.A. | 98,604 | 7/16/13 | 129,085 | 128,355 | 730 | |||||||||||||||||
SELL | EUR | Deutsche Bank AG | 107,775 | 7/16/13 | 140,997 | 140,294 | 703 | |||||||||||||||||
SELL | EUR | Goldman Sachs International | 66,943 | 7/16/13 | 87,642 | 87,141 | 501 | |||||||||||||||||
SELL | EUR | JPMorgan Chase Bank N.A. | 81,221 | 7/16/13 | 106,171 | 105,728 | 443 | |||||||||||||||||
SELL | GBP | Credit Suisse Group | 93,848 | 7/16/13 | 143,811 | 142,724 | 1,087 | |||||||||||||||||
SELL | GBP | Deutsche Bank AG | 93,848 | 7/16/13 | 143,815 | 142,724 | 1,091 | |||||||||||||||||
SELL | GBP | Goldman Sachs International | 8,293 | 7/16/13 | 12,832 | 12,611 | 221 | |||||||||||||||||
BUY | JPY | Credit Suisse Group | 12,364,973 | 7/16/13 | 124,218 | 124,679 | 461 | |||||||||||||||||
BUY | JPY | Merrill Lynch International Bank | 12,364,975 | 7/16/13 | 124,188 | 124,679 | 491 | |||||||||||||||||
SELL | JPY | Goldman Sachs International | 344,791 | 7/16/13 | 3,486 | 3,477 | 9 | |||||||||||||||||
SELL | SEK | Deutsche Bank AG | 82,691 | 7/16/13 | 12,898 | 12,327 | 571 | |||||||||||||||||
|
| |||||||||||||||||||||||
$ | 13,491 | |||||||||||||||||||||||
|
| |||||||||||||||||||||||
Liability Derivatives | ||||||||||||||||||||||||
BUY | EUR | Deutsche Bank AG | 248,350 | 7/16/13 | $ | 325,736 | $ | 323,283 | $ | (2,453 | ) | |||||||||||||
BUY | GBP | Barclays Bank PLC | 70,276 | 7/16/13 | 109,317 | 106,876 | (2,441 | ) | ||||||||||||||||
BUY | JPY | Citibank N.A. | 15,730,449 | 7/16/13 | 159,179 | 158,613 | (566 | ) | ||||||||||||||||
|
| |||||||||||||||||||||||
$ | (5,460 | ) | ||||||||||||||||||||||
|
|
Futures Contracts Outstanding at 6/30/13
Description | Currency | Contracts | Value | Expiration Date | Unrealized Appreciation (Depreciation) | |||||||||||||
Asset Derivatives | ||||||||||||||||||
Interest Rate Futures | ||||||||||||||||||
U.S. Treasury Note 10 yr (Short) | USD | 17 | $2,151,563 | September - 2013 | $48,417 | |||||||||||||
|
|
At June 30, 2013, the fund had liquid securities with an aggregate value of $20,041 to cover any commitments for certain derivative contracts.
See Notes to Financial Statements
9
Table of Contents
MFS Strategic Income Series
FINANCIAL STATEMENTS | STATEMENT OF ASSETS AND LIABILITIES (unaudited)
This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
At 6/30/13 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $18,087,475) | $18,495,169 | |||||||
Underlying affiliated funds, at value (identified cost, $10,004,358) | 10,111,591 | |||||||
Total investments, at value (identified cost, $28,091,833) | $28,606,760 | |||||||
Receivables for | ||||||||
Forward foreign currency exchange contracts | 13,491 | |||||||
Daily variation margin on open futures contracts | 1,328 | |||||||
Investments sold | 28,751 | |||||||
Fund shares sold | 3,161 | |||||||
Interest | 234,198 | |||||||
Receivable from investment adviser | 8,312 | |||||||
Other assets | 202 | |||||||
Total assets | $28,896,203 | |||||||
Liabilities | ||||||||
Payable to custodian | $10,358 | |||||||
Payables for | ||||||||
Forward foreign currency exchange contracts | 5,460 | |||||||
Investments purchased | 295 | |||||||
Fund shares reacquired | 33,346 | |||||||
Payable to affiliates | ||||||||
Shareholder servicing costs | 316 | |||||||
Distribution and/or service fees | 139 | |||||||
Payable for independent Trustees’ compensation | 195 | |||||||
Accrued expenses and other liabilities | 30,260 | |||||||
Total liabilities | $80,369 | |||||||
Net assets | $28,815,834 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $27,392,540 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 571,196 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | (1,219,643 | ) | ||||||
Undistributed net investment income | 2,071,741 | |||||||
Net assets | $28,815,834 | |||||||
Shares of beneficial interest outstanding | 2,801,830 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $23,733,176 | 2,299,974 | $10.32 | |||||||||
Service Class | 5,082,658 | 501,856 | 10.13 |
See Notes to Financial Statements
10
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 6/30/13 |
| |||||||
Net investment income |
| |||||||
Income | ||||||||
Interest | $570,924 | |||||||
Dividends | 1,221 | |||||||
Dividends from underlying affiliated funds | 190,813 | |||||||
Total investment income | $762,958 | |||||||
Expenses | ||||||||
Management fee | $105,695 | |||||||
Distribution and/or service fees | 6,672 | |||||||
Shareholder servicing costs | 4,571 | |||||||
Administrative services fee | 8,679 | |||||||
Independent Trustees’ compensation | 609 | |||||||
Custodian fee | 9,732 | |||||||
Shareholder communications | 6,016 | |||||||
Audit and tax fees | 34,354 | |||||||
Legal fees | 205 | |||||||
Miscellaneous | 10,109 | |||||||
Total expenses | $186,642 | |||||||
Fees paid indirectly | (14 | ) | ||||||
Reduction of expenses by investment adviser | (58,948 | ) | ||||||
Net expenses | $127,680 | |||||||
Net investment income | $635,278 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments: | ||||||||
Non-affiliated issuers | $191,626 | |||||||
Underlying affiliated funds | 123,393 | |||||||
Futures contracts | 13,172 | |||||||
Foreign currency | (57,107 | ) | ||||||
Net realized gain (loss) on investments and foreign currency | $271,084 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $(1,466,589 | ) | ||||||
Futures contracts | 43,586 | |||||||
Translation of assets and liabilities in foreign currencies | 48,457 | |||||||
Net unrealized gain (loss) on investments and foreign currency translation | $(1,374,546 | ) | ||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $(1,103,462 | ) | ||||||
Change in net assets from operations | $(468,184 | ) |
See Notes to Financial Statements
11
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 6/30/13 (unaudited | ) | | Year ended 12/31/12 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $635,278 | $1,392,943 | ||||||
Net realized gain (loss) on investments and foreign currency | 271,084 | 788,435 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | (1,374,546 | ) | 1,076,329 | |||||
Change in net assets from operations | $(468,184 | ) | $3,257,707 | |||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(1,790,008 | ) | |||||
Change in net assets from fund share transactions | $(1,357,211 | ) | $(2,171,745 | ) | ||||
Total change in net assets | $(1,825,395 | ) | $(704,046 | ) | ||||
Net assets | ||||||||
At beginning of period | 30,641,229 | 31,345,275 | ||||||
At end of period (including undistributed net investment income of $2,071,741 and | $28,815,834 | $30,641,229 |
See Notes to Financial Statements
12
Table of Contents
MFS Strategic Income Series
FINANCIAL STATEMENTS | FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund’s financial performance for the semiannual period and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
Initial Class | Six months 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $10.49 | $10.04 | $10.14 | $9.68 | $8.72 | $10.55 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.22 | $0.46 | $0.48 | $0.50 | $0.51 | $0.56 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | (0.39 | ) | 0.61 | (0.01 | ) | 0.45 | 1.41 | (1.76 | ) | |||||||||||||||
Total from investment operations | $(0.17 | ) | $1.07 | $0.47 | $0.95 | $1.92 | $(1.20 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.62 | ) | $(0.57 | ) | $(0.49 | ) | $(0.96 | ) | $(0.63 | ) | |||||||||||||
Net asset value, end of period (x) | $10.32 | $10.49 | $10.04 | $10.14 | $9.68 | $8.72 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | (1.62 | )(n) | 10.86 | 4.74 | 10.11 | 24.25 | (12.12 | ) | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.19 | (a) | 1.24 | 1.12 | 1.14 | 1.18 | 1.21 | |||||||||||||||||
Expenses after expense reductions (f)(h) | 0.80 | (a) | 0.80 | 0.80 | 0.82 | 0.85 | 0.85 | |||||||||||||||||
Net investment income | 4.25 | (a) | 4.45 | 4.69 | 5.07 | 5.63 | 5.66 | |||||||||||||||||
Portfolio turnover | 15 | (n) | 40 | 30 | 46 | 52 | 41 | |||||||||||||||||
Net assets at end of period (000 omitted) | $23,733 | $25,349 | $25,048 | $28,120 | $27,652 | $20,331 | ||||||||||||||||||
Service Class | Six months ended 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $10.31 | $9.87 | $9.97 | $9.53 | $8.60 | $10.40 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.21 | $0.43 | $0.45 | $0.47 | $0.48 | $0.53 | �� | |||||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | (0.39 | ) | 0.60 | (0.00 | )(w) | 0.44 | 1.39 | (1.73 | ) | |||||||||||||||
Total from investment operations | $(0.18 | ) | $1.03 | $0.45 | $0.91 | $1.87 | $(1.20 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.59 | ) | $(0.55 | ) | $(0.47 | ) | $(0.94 | ) | $(0.60 | ) | |||||||||||||
Net asset value, end of period (x) | $10.13 | $10.31 | $9.87 | $9.97 | $9.53 | $8.60 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | (1.75 | )(n) | 10.60 | 4.53 | 9.79 | 23.88 | (12.26 | ) | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f)(h) | 1.44 | (a) | 1.49 | 1.37 | 1.39 | 1.43 | 1.47 | |||||||||||||||||
Expenses after expense reductions (f)(h) | 1.05 | (a) | 1.05 | 1.05 | 1.07 | 1.10 | 1.10 | |||||||||||||||||
Net investment income | 4.00 | (a) | 4.20 | 4.44 | 4.83 | 5.40 | 5.46 | |||||||||||||||||
Portfolio turnover | 15 | (n) | 40 | 30 | 46 | 52 | 41 | |||||||||||||||||
Net assets at end of period (000 omitted) | $5,083 | $5,292 | $6,298 | $6,741 | $6,749 | $5,834 |
See Notes to Financial Statements
13
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. |
(h) | For the six months ended June 30, 2013, in addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying affiliated funds in which the fund invests. Accordingly, the expense ratio for the fund reflects only those fees and expenses borne directly by the fund. Because the underlying affiliated funds have varied expense and fee levels and the fund may own different proportions of the underlying affiliated funds at different times, the amount of fees and expenses incurred indirectly by the fund will vary. |
(k) | The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown. |
(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
14
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 accounting policies of the underlying funds in which the fund invests are outlined in the underlying funds’ shareholder reports, which are available without charge by calling 1-800-225-2606, at mfs.com and on the Securities and Exchange Commission (SEC) web site at http://www.sec.gov or at the SEC’s public reference room in Washington, D.C. The underlying funds’ shareholder reports are not covered by this report. 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 the disclosure provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Update 2011-11 (“ASU 2011-11”), Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities along with the related scope clarification provisions of FASB Accounting Standards Update 2013-01 (“ASU 2013-01”) entitled Balance Sheet (Topic 210) – Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 is intended to enhance disclosures on the offsetting of financial assets and liabilities by requiring entities to disclose both gross and net information about financial instruments and transactions that are either offset in the statement of financial position or subject to a Master Netting Agreement or similar arrangement. ASU 2013-01 limits the scope of ASU 2011-11’s disclosure requirements on offsetting to financial assets and financial liabilities related to derivatives, repurchase and reverse repurchase agreements, and securities lending and securities borrowing transactions. The disclosures required by ASU 2011-11, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
In June 2013, FASB issued Accounting Standards Update 2013-08 Financial Services – Investment Companies (Topic 946) – Amendments to the Scope, Measurement, and Disclosure Requirements (“ASU 2013-08”) which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013. ASU 2013-08 sets forth a methodology for determining whether an entity should be characterized as an investment company and prescribes fair value accounting for an investment company’s non-controlling ownership interest in another investment company. FASB has determined that a fund registered under the Investment Company Act of 1940 automatically meets ASU 2013-08’s criteria for an investment company. Although still evaluating the potential impacts of ASU 2013-08 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. 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.
15
Table of Contents
MFS Strategic Income Series
Notes to Financial Statements (unaudited) – continued
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair 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, 2013 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities | $— | $20,100 | $4,505 | $24,605 | ||||||||||||
U.S. Treasury Bonds & U.S. Government Agency & Equivalents | — | 415,666 | — | 415,666 | ||||||||||||
Non-U.S. Sovereign Debt | — | 2,792,634 | — | 2,792,634 | ||||||||||||
Municipal Bonds | — | 87,062 | — | 87,062 | ||||||||||||
U.S. Corporate Bonds | — | 10,734,136 | — | 10,734,136 | ||||||||||||
Residential Mortgage-Backed Securities | — | 295,874 | — | 295,874 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 27,811 | — | 27,811 | ||||||||||||
Asset-Backed Securities (including CDOs) | — | 107,382 | — | 107,382 | ||||||||||||
Foreign Bonds | — | 4,009,999 | — | 4,009,999 | ||||||||||||
Mutual Funds | 10,111,591 | — | — | 10,111,591 | ||||||||||||
Total Investments | $10,111,591 | $18,490,664 | $4,505 | $28,606,760 | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Futures Contracts | $48,417 | $— | $— | $48,417 | ||||||||||||
Forward Foreign Currency Exchange Contracts | — | 8,031 | — | 8,031 |
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 12/31/12 | $4,076 | |||
Change in unrealized appreciation (depreciation) | 429 | |||
Balance as of 6/30/13 | $4,505 |
The net change in unrealized appreciation (depreciation) from investments still held as level 3 at June 30, 2013 is $429.
16
Table of Contents
MFS Strategic Income Series
Notes to Financial Statements (unaudited) – continued
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 futures contracts and forward foreign currency exchange contracts. The fund’s period end derivatives, as presented in the Portfolio of Investments and the associated Derivative Contract tables, generally are indicative of the volume of its derivative activity during the period.
The following table presents, by major type of derivative contract, the fair value, on a gross basis, of the asset and liability components of derivatives held by the fund at June 30, 2013 as reported in the Statement of Assets and Liabilities:
Fair Value (a) | ||||||||||
Risk | Derivative Contracts | Asset Derivatives | Liability Derivatives | |||||||
Interest Rate | Interest Rate Futures | $48,417 | $— | |||||||
Foreign Exchange | Forward Foreign Currency Exchange | 13,491 | (5,460 | ) | ||||||
Total | $61,908 | $(5,460 | ) |
(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, 2013 as reported in the Statement of Operations:
Risk | Futures Contracts | Foreign Currency | ||||||
Interest Rate | $13,172 | $— | ||||||
Foreign Exchange | — | (56,854 | ) | |||||
Total | $13,172 | $(56,854 | ) |
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, 2013 as reported in the Statement of Operations:
Risk | Futures Contracts | Translation of Assets and Liabilities in Foreign Currencies | ||||||
Interest Rate | $43,586 | $— | ||||||
Foreign Exchange | — | 49,428 | ||||||
Total | $43,586 | $49,428 |
Derivative counterparty credit risk is managed through formal evaluation of the creditworthiness of all potential counterparties. On certain, but not all, 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. Upon an event of default or a termination of the ISDA Master Agreement, the non-defaulting party has the right to close out all transactions traded under such agreement and to net amounts owed under each 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.
Collateral and margin requirements differ by type of derivative. Margin requirements are set by the broker or clearing house for cleared derivatives (i.e., futures contracts, cleared swaps, and exchange-traded options) while collateral terms are contract specific for over-the-counter traded derivatives (i.e., forward foreign currency exchange contracts, uncleared swap agreements, and
17
Table of Contents
MFS Strategic Income Series
Notes to Financial Statements (unaudited) – continued
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 that has been segregated to cover the fund’s collateral or margin obligations under derivative contracts, if any, will be reported separately in the Statement of Assets and Liabilities as restricted cash. Securities pledged as collateral or margin for the same purpose, if any, is noted in the Portfolio of Investments.
The fund’s accounting policy with respect to balance sheet offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the ISDA Master Agreement does not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty.
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.
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.
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. 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.
18
Table of Contents
MFS Strategic Income 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, 2013, is shown as a reduction of total expenses in the Statement of Operations.
Tax Matters and Distributions – The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns, when filed, will remain subject to examination by the Internal Revenue Service for a three year period.
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, straddle loss deferrals and, derivative transactions.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/12 | ||||
Ordinary income (including any short-term capital gains) | $1,790,008 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/13 | ||||
Cost of investments | $28,250,550 | |||
Gross appreciation | 1,022,373 | |||
Gross depreciation | (666,163 | ) | ||
Net unrealized appreciation (depreciation) | $356,210 | |||
As of 12/31/12 | ||||
Undistributed ordinary income | 1,514,729 | |||
Capital loss carryforwards | (1,277,691 | ) | ||
Other temporary differences | (142,164 | ) | ||
Net unrealized appreciation (depreciation) | 1,796,604 |
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 for fund fiscal years beginning after December 30, 2010 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses (“post-enactment losses”). Previously, net capital losses were carried forward for eight years and treated as short-term losses (“pre-enactment losses”). As a transition rule, the Act requires that all post-enactment net capital losses be used before pre-enactment net capital losses.
As of December 31, 2012, the fund had capital loss carryforwards available to offset future realized gains. Such pre-enactment losses expire as follows:
12/31/16 | $(327,441 | ) | ||
12/31/17 | (950,250 | ) | ||
Total | $(1,277,691 | ) |
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and/or service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported in the Statements of Changes in Net Assets are presented by class as follows:
From net investment income | ||||||||
Six months ended 6/30/13 | Year ended 12/31/12 | |||||||
Initial Class | $— | $1,490,845 | ||||||
Service Class | — | 299,163 | ||||||
Total | $— | $1,790,008 |
19
Table of Contents
MFS Strategic Income 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 | 0.70% | |||
Average daily net assets in excess of $1 billion | 0.65% |
Effective April 1, 2013, MFS has agreed in writing to reduce its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund’s Board of Trustees. For the period April 1, 2013 through June 30, 2013, this management fee reduction amounted to $41, 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, 2013 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 (including fees and expenses associated with investments in investment companies and other similar investment vehicles), 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, 2013, this reduction amounted to $58,849 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, 2013, the fee was $4,291, which equated to 0.0284% 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, 2013, these costs amounted to $280.
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, 2013 was equivalent to an annual effective rate of 0.0575% 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, 2013, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $121 and are included in “Miscellaneous” expense in 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 $58, 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 current income consistent with preservation of capital and liquidity. Income earned on this investment is included in “Dividends from underlying affiliated funds” in the Statement of Operations. This money market fund does not pay a management fee to MFS.
20
Table of Contents
MFS Strategic Income Series
Notes to Financial Statements (unaudited) – continued
The fund invests in the MFS High Yield Pooled Portfolio (the “High Yield Pooled Portfolio”). MFS Pooled Portfolios are mutual funds advised by MFS that do not pay management fees to MFS but do incur investment and operating costs. MFS Pooled Portfolios are designed to be used by MFS funds to invest in a particular security type rather than invest in the security type directly. The fund invests in the High Yield Pooled Portfolio to gain exposure to high income debt instruments, rather than investing in high income debt instruments directly.
At close of business on March 22, 2013, the fund and certain other MFS funds transferred high income debt instruments, accrued interest and cash to the High Yield Pooled Portfolio, a series of MFS Series Trust III, in exchange for shares of the High Yield Pooled Portfolio. The purpose of the transaction was to pool the portion of the assets of the fund and certain other MFS funds invested in high income debt instruments in the High Yield Pooled Portfolio. The transfer was accomplished by a tax-free exchange by the fund of investments valued at approximately $9,776,794 with a cost basis of approximately $9,245,917, accrued interest of approximately $190,195 and cash of approximately $129,297 for approximately 1,009,629 shares of the High Yield Pooled Portfolio (valued at approximately $10,096,286). For financial reporting purposes, investments transferred and shares received by the fund were recorded at fair value; however, the cost basis of the investments delivered to the High Yield Pooled Portfolio was carried forward to the shares received. Income earned on this investment is included in “Dividends from underlying affiliated funds” in the Statement of Operations. The High Yield Pooled Portfolio does not charge a management fee, distribution and/or service fee, or sales charge.
(4) | Portfolio Securities |
Purchases and sales of investments, other than short-term obligations, were as follows:
Purchases | Sales | |||||||
U.S. Government securities | $— | $44,650 | ||||||
Investments (non-U.S. Government securities) | $4,274,221 | $4,952,184 |
(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 6/30/13 | Year ended 12/31/12 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 253,491 | $2,677,281 | 396,729 | $4,105,591 | ||||||||||||
Service Class | 44,361 | 457,961 | 54,317 | 555,317 | ||||||||||||
297,852 | $3,135,242 | 451,046 | $4,660,908 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 147,171 | $1,490,845 | ||||||||||||
Service Class | — | — | 30,006 | 299,163 | ||||||||||||
— | $— | 177,177 | $1,790,008 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (370,713 | ) | $(3,912,401 | ) | (622,601 | ) | $(6,484,155 | ) | ||||||||
Service Class | (55,982 | ) | (580,052 | ) | (209,193 | ) | (2,138,506 | ) | ||||||||
(426,695 | ) | $(4,492,453 | ) | (831,794 | ) | $(8,622,661 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (117,222 | ) | $(1,235,120 | ) | (78,701 | ) | $(887,719 | ) | ||||||||
Service Class | (11,621 | ) | (122,091 | ) | (124,870 | ) | (1,284,026 | ) | ||||||||
(128,843 | ) | $(1,357,211 | ) | (203,571 | ) | $(2,171,745 | ) |
(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, 2013, the fund’s commitment fee and interest expense were $83 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.
21
Table of Contents
MFS Strategic Income Series
Notes to Financial Statements (unaudited) – continued
(7) | Transactions in Underlying Affiliated Funds – Affiliated Issuers |
An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the fund assumes the following to be affiliated issuers:
Underlying Affiliated Funds | Beginning Shares/Par Amount | Acquisitions Shares/Par Amount | Dispositions Shares/Par Amount | Ending Shares/Par Amount | ||||||||||||
MFS High Yield Pooled Portfolio | — | 1,088,753 | (84,134 | ) | 1,004,619 | |||||||||||
MFS Institutional Money Market Portfolio | 523,656 | 5,299,533 | (5,456,413 | ) | 366,776 | |||||||||||
Underlying Affiliated Funds | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS High Yield Pooled Portfolio | $123,393 | $— | $190,373 | $9,744,815 | ||||||||||||
MFS Institutional Money Market Portfolio | — | — | 440 | 366,776 | ||||||||||||
Total | $123,393 | $— | $190,813 | $10,111,591 |
(8) | Subsequent Event |
On April 9, 2013, the Board of Trustees of the fund approved the proposed Agreement and Plan of Reorganization, whereby MFS Strategic Income Series would be reorganized into MFS Strategic Income Portfolio, a portfolio of MFS Variable Insurance Trust II. The Agreement and Plan of Reorganization is subject to the approval of the shareholders of the MFS Strategic Income Series. The proposed Agreement and Plan of Reorganization provides for the transfer of the assets of the MFS Strategic Income Series to the MFS Strategic Income Portfolio and the assumption by the MFS Strategic Income Portfolio of the liabilities of the MFS Strategic Income Series in exchange solely for shares of beneficial interest in the Strategic Income Portfolio. Immediately following the transfer, the MFS Strategic Income Portfolio shares received by the MFS Strategic Income Series will be distributed to shareholders, pro rata, and the MFS Startegic Income Series will be liquidated and terminated. On August 8, 2013, shareholders approved the reorganization. It is expected that the reorganization will occur on or around August 16, 2013.
22
Table of Contents
MFS Strategic Income Series
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board’s most recent review and renewal of the fund’s Investment Advisory Agreement with MFS will be available on or about November 1, 2013 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products” 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” section of mfs.com.
23
Table of Contents
Table of Contents
SEMIANNUAL REPORT
June 30, 2013
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:
As the year progresses, the global economy continues to grind ahead slowly, held back by broad austerity measures. The U.S. economy remains a steadying force, driven by resilient consumers, who have taken the payroll tax increase and the sequestration’s early impact in stride. With U.S. housing and jobs showing steady expansion, domestic consumer-driven growth has offset weaker exports and the U.S. government’s spending constraints. In response to these developments, the U.S. Federal Reserve has begun to brace investors for an eventual shift in its monetary policy, causing global market tremors.
Japan has been another bright spot, with government and central bank stimulus policies leading to increased exports, a resurgent stock market and improved economic sentiment. After a six-month rally, Japan’s stocks slipped late in the second quarter, then picked up momentum on fresh signs that the country could soon break free of its chronic deflation. The major deterrent to global growth remains the eurozone, still in the grip of persistent recession. China has seen its pace of economic growth decelerate, a troubling turn for the country’s trading partners, who have come to rely on it as an engine for global growth.
As always, managing risk in the face of uncertainty remains a top priority for investors. At MFS®, our uniquely collaborative investment process employs integrated, global research and active risk management. Our global team of investment professionals shares ideas and evaluates opportunities across continents, investment disciplines and asset classes — all with a goal of building better insights, and ultimately better results, for our clients.
We are mindful of the many economic challenges investors face, and believe it is more important than ever to maintain a long-term view and employ time-tested principles, such as asset allocation and diversification. We remain confident that our unique approach can serve investors well as they work with their financial advisors to identify and pursue the most suitable opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2013
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, 0.875%, 2016 | 3.4% | |||
U.S. Treasury Bonds, 4.5%, 2039 | 2.3% | |||
JPMorgan Chase & Co. | 2.2% | |||
Johnson & Johnson | 1.8% | |||
Exxon Mobil Corp. | 1.8% | |||
Philip Morris International, Inc. | 1.8% | |||
Fannie Mae, 5.5%, 30 Years | 1.7% | |||
Pfizer, Inc. | 1.7% | |||
Wells Fargo & Co. | 1.5% | |||
Lockheed Martin Corp. | 1.3% | |||
Composition including fixed income credit quality (a)(i) | ||||
AAA | 1.7% | |||
AA | 1.3% | |||
A | 4.6% | |||
BBB | 6.1% | |||
BB | 0.4% | |||
CCC (o) | 0.0% | |||
CC | 0.1% | |||
C (o) | 0.0% | |||
U.S. Government | 11.2% | |||
Federal Agencies | 12.9% | |||
Not Rated (o) | 0.0% | |||
Non-Fixed Income | 60.7% | |||
Cash & Other | 1.0% |
Equity sectors | ||||
Financial Services | 13.1% | |||
Health Care | 7.6% | |||
Consumer Staples | 6.4% | |||
Energy | 5.9% | |||
Industrial Goods & Services | 5.6% | |||
Utilities & Communications | 4.4% | |||
Leisure | 4.2% | |||
Technology | 4.2% | |||
Retailing | 3.3% | |||
Basic Materials | 2.4% | |||
Autos & Housing | 2.1% | |||
Transportation | 0.8% | |||
Special Products & Services | 0.7% | |||
Fixed income sectors (i) | ||||
Mortgage-Backed Securities | 12.6% | |||
U.S. Treasury Securities | 11.2% | |||
High Grade Corporates | 9.1% | |||
Commercial Mortgage-Backed Securities | 2.4% | |||
Emerging Markets Bonds | 1.4% | |||
Non-U.S. Government Bonds | 0.7% | |||
U.S. Government Agencies | 0.3% | |||
High Yield Corporates | 0.3% | |||
Asset-Backed Securities | 0.2% | |||
Collateralized Debt Obligations | 0.1% |
2
Table of Contents
MFS Total Return Series
Portfolio Composition – continued
(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. 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. The bond component will include any accrued interest amounts. |
(o) | Less that 0.1%. |
Where the fund holds convertible bonds, these are treated as part of the equity portion of the portfolio.
Percentages are based on net assets as of 6/30/13.
The portfolio is actively managed and current holdings may be different.
3
Table of Contents
MFS Total Return Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2013 through June 30, 2013
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, 2013 through June 30, 2013.
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 1/01/13 | Ending Account Value | Expenses Paid During Period (p) 1/01/13-6/30/13 | ||||||||||||||
Initial Class | Actual | 0.77% | $1,000.00 | $1,083.79 | $3.98 | |||||||||||||
Hypothetical (h) | 0.77% | $1,000.00 | $1,020.98 | $3.86 | ||||||||||||||
Service Class | Actual | 1.02% | $1,000.00 | $1,082.32 | $5.27 | |||||||||||||
Hypothetical (h) | 1.02% | $1,000.00 | $1,019.74 | $5.11 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
Expense Changes Impacting the Table
Changes to the fund’s fee arrangements will occur during the fund’s next six month period. Had these fee changes been in effect throughout the entire six month period, the annualized expense ratios would have been 0.72% and 0.97% for Initial Class and Service Class, respectively; the actual expenses paid during the period would have been approximately $3.72 and $5.01 for Initial Class and Service Class, respectively; and the hypothetical expenses paid during the period would have been approximately $3.61 and $4.86 for Initial Class and Service Class, respectively. For further information about the fund’s fee arrangements and changes to those fee arrangements, please see Note 3 in the Notes to Financial Statements.
4
Table of Contents
MFS Total Return Series
PORTFOLIO OF INVESTMENTS – 6/30/13 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 60.3% | ||||||||
Aerospace – 3.4% | ||||||||
General Dynamics Corp. | 29,624 | $ | 2,320,436 | |||||
Honeywell International, Inc. | 221,230 | 17,552,388 | ||||||
Lockheed Martin Corp. | 239,143 | 25,937,450 | ||||||
Northrop Grumman Corp. | 48,343 | 4,002,800 | ||||||
Precision Castparts Corp. | 10,508 | 2,374,913 | ||||||
United Technologies Corp. | 174,524 | 16,220,261 | ||||||
|
| |||||||
$ | 68,408,248 | |||||||
|
| |||||||
Airlines – 0.1% | ||||||||
Copa Holdings S.A., “A” | 15,965 | $ | 2,093,331 | |||||
|
| |||||||
Alcoholic Beverages – 0.5% | ||||||||
Diageo PLC | 357,321 | $ | 10,249,123 | |||||
|
| |||||||
Automotive – 1.6% | ||||||||
Delphi Automotive PLC | 276,470 | $ | 14,014,264 | |||||
General Motors Co. (a) | 146,720 | 4,887,243 | ||||||
Johnson Controls, Inc. | 227,992 | 8,159,834 | ||||||
Magna International, Inc. | 80,230 | 5,710,771 | ||||||
|
| |||||||
$ | 32,772,112 | |||||||
|
| |||||||
Broadcasting – 1.6% | ||||||||
News Corp., “A” | 64,274 | $ | 2,095,332 | |||||
Omnicom Group, Inc. | 118,400 | 7,443,808 | ||||||
Time Warner, Inc. | 59,420 | 3,435,664 | ||||||
Viacom, Inc., “B” | 75,907 | 5,165,471 | ||||||
Walt Disney Co. | 216,468 | 13,669,954 | ||||||
|
| |||||||
$ | 31,810,229 | |||||||
|
| |||||||
Brokerage & Asset Managers – 0.7% | ||||||||
BlackRock, Inc. | 26,271 | $ | 6,747,706 | |||||
Franklin Resources, Inc. | 48,786 | 6,635,872 | ||||||
NASDAQ OMX Group, Inc. | 31,340 | 1,027,639 | ||||||
|
| |||||||
$ | 14,411,217 | |||||||
|
| |||||||
Business Services – 0.7% | ||||||||
Accenture PLC, “A” | 133,627 | $ | 9,615,799 | |||||
Dun & Bradstreet Corp. | 11,680 | 1,138,216 | ||||||
Fidelity National Information Services, Inc. | 15,080 | 646,027 | ||||||
Fiserv, Inc. (a) | 22,903 | 2,001,951 | ||||||
|
| |||||||
$ | 13,401,993 | |||||||
|
| |||||||
Cable TV – 1.4% | ||||||||
Comcast Corp., “Special A” | 423,150 | $ | 16,786,361 | |||||
Time Warner Cable, Inc. | 99,620 | 11,205,258 | ||||||
|
| |||||||
$ | 27,991,619 | |||||||
|
| |||||||
Chemicals – 1.5% | ||||||||
3M Co. | 134,518 | $ | 14,709,543 | |||||
Celanese Corp. | 53,164 | 2,381,747 | ||||||
LyondellBasell Industries N.V., “A” | 34,420 | 2,280,669 | ||||||
PPG Industries, Inc. | 80,320 | 11,759,651 | ||||||
|
| |||||||
$ | 31,131,610 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Computer Software – 1.2% | ||||||||
CA, Inc. | 51,230 | $ | 1,466,715 | |||||
Microsoft Corp. | 334,200 | 11,539,926 | ||||||
Oracle Corp. | 298,923 | 9,182,915 | ||||||
Symantec Corp. | 79,420 | 1,784,567 | ||||||
|
| |||||||
$ | 23,974,123 | |||||||
|
| |||||||
Computer Software – Systems – 1.8% | ||||||||
Apple, Inc. | 13,444 | $ | 5,324,900 | |||||
Canon, Inc. | 97,500 | 3,202,261 | ||||||
Hewlett-Packard Co. | 573,261 | 14,216,873 | ||||||
International Business Machines Corp. | 54,756 | 10,464,419 | ||||||
Western Digital Corp. | 44,450 | 2,759,901 | ||||||
|
| |||||||
$ | 35,968,354 | |||||||
|
| |||||||
Construction – 0.3% | ||||||||
Stanley Black & Decker, Inc. | 71,900 | $ | 5,557,870 | |||||
|
| |||||||
Consumer Products – 0.8% | ||||||||
Nu Skin Enterprises, Inc., “A” | 38,210 | $ | 2,335,395 | |||||
Procter & Gamble Co. | 142,791 | 10,993,479 | ||||||
Reckitt Benckiser Group PLC | 34,455 | 2,442,512 | ||||||
|
| |||||||
$ | 15,771,386 | |||||||
|
| |||||||
Containers – 0.1% | ||||||||
Packaging Corp. of America | 31,440 | $ | 1,539,302 | |||||
|
| |||||||
Electrical Equipment – 1.3% | ||||||||
Danaher Corp. | 240,692 | $ | 15,235,804 | |||||
Pentair Ltd. | 37,513 | 2,164,125 | ||||||
Siemens AG | 30,059 | 3,038,156 | ||||||
Tyco International Ltd. | 193,981 | 6,391,674 | ||||||
|
| |||||||
$ | 26,829,759 | |||||||
|
| |||||||
Electronics – 0.8% | ||||||||
Hoya Corp. | 78,600 | $ | 1,612,770 | |||||
Intel Corp. | 118,723 | 2,875,471 | ||||||
Microchip Technology, Inc. | 247,600 | 9,223,100 | ||||||
Taiwan Semiconductor Manufacturing Co. Ltd., ADR | 165,610 | 3,033,975 | ||||||
|
| |||||||
$ | 16,745,316 | |||||||
|
| |||||||
Energy – Independent – 2.4% | ||||||||
Anadarko Petroleum Corp. | 69,360 | $ | 5,960,105 | |||||
Apache Corp. | 88,313 | 7,403,279 | ||||||
Canadian Natural Resources Ltd. | 65,390 | 1,847,921 | ||||||
EOG Resources, Inc. | 19,887 | 2,618,720 | ||||||
EQT Corp. | 40,740 | 3,233,534 | ||||||
HollyFrontier Corp. | 90,800 | 3,884,424 | ||||||
Marathon Petroleum Corp. | 43,640 | 3,101,058 | ||||||
Noble Energy, Inc. | 111,842 | 6,714,994 | ||||||
Occidental Petroleum Corp. | 114,814 | 10,244,853 | ||||||
Valero Energy Corp. | 97,030 | 3,373,733 | ||||||
|
| |||||||
$ | 48,382,621 | |||||||
|
|
5
Table of Contents
MFS Total Return Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Energy – Integrated – 3.2% | ||||||||
Chevron Corp. | 205,007 | $ | 24,260,528 | |||||
Exxon Mobil Corp. | 394,252 | 35,620,668 | ||||||
Royal Dutch Shell PLC, “A” | 173,738 | 5,544,187 | ||||||
|
| |||||||
$ | 65,425,383 | |||||||
|
| |||||||
Engineering – Construction – 0.1% | ||||||||
Fluor Corp. | 39,100 | $ | 2,319,021 | |||||
|
| |||||||
Food & Beverages – 2.3% | ||||||||
Coca-Cola Co. | 74,734 | $ | 2,997,581 | |||||
Coca-Cola Enterprises, Inc. | 39,224 | 1,379,116 | ||||||
Dr Pepper Snapple Group, Inc. | 41,407 | 1,901,824 | ||||||
General Mills, Inc. | 232,350 | 11,275,946 | ||||||
Groupe Danone | 94,097 | 7,062,272 | ||||||
Ingredion, Inc. | 27,650 | 1,814,393 | ||||||
J.M. Smucker Co. | 11,190 | 1,154,249 | ||||||
Kellogg Co. | 22,838 | 1,466,885 | ||||||
Kraft Foods Group, Inc. | 15,055 | 841,123 | ||||||
Mondelez International, Inc. | 82,237 | 2,346,222 | ||||||
Nestle S.A. | 167,162 | 10,933,469 | ||||||
PepsiCo, Inc. | 17,373 | 1,420,938 | ||||||
Tyson Foods, Inc., “A” | 86,190 | 2,213,359 | ||||||
|
| |||||||
$ | 46,807,377 | |||||||
|
| |||||||
Food & Drug Stores – 1.7% | ||||||||
CVS Caremark Corp. | 317,230 | $ | 18,139,211 | |||||
Kroger Co. | 238,180 | 8,226,737 | ||||||
Safeway, Inc. | 71,020 | 1,680,333 | ||||||
Walgreen Co. | 158,460 | 7,003,932 | ||||||
|
| |||||||
$ | 35,050,213 | |||||||
|
| |||||||
Gaming & Lodging – 0.1% | ||||||||
Wynn Resorts Ltd. | 17,509 | $ | 2,241,152 | |||||
|
| |||||||
General Merchandise – 1.3% | ||||||||
Kohl’s Corp. | 91,410 | $ | 4,617,119 | |||||
Macy’s, Inc. | 135,250 | 6,492,000 | ||||||
Target Corp. | 229,210 | 15,783,401 | ||||||
|
| |||||||
$ | 26,892,520 | |||||||
|
| |||||||
Health Maintenance Organizations – 0.1% | ||||||||
Aetna, Inc. | 15,990 | $ | 1,016,005 | |||||
|
| |||||||
Insurance – 4.3% | ||||||||
ACE Ltd. | 135,947 | $ | 12,164,538 | |||||
American International Group, Inc. (a) | 121,970 | 5,452,059 | ||||||
Aon PLC | 105,171 | 6,767,754 | ||||||
Chubb Corp. | 32,684 | 2,766,701 | ||||||
Delta Lloyd N.V. | 213,540 | 4,254,184 | ||||||
MetLife, Inc. | 446,680 | 20,440,077 | ||||||
Prudential Financial, Inc. | 238,730 | 17,434,452 | ||||||
Swiss Re Ltd. | 24,930 | 1,846,727 | ||||||
Travelers Cos., Inc. | 115,084 | 9,197,513 | ||||||
Validus Holdings Ltd. | 156,930 | 5,668,312 | ||||||
Zurich Insurance Group AG | 4,987 | 1,292,424 | ||||||
|
| |||||||
$ | 87,284,741 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Internet – 0.4% | ||||||||
Google, Inc., “A” (a) | 6,126 | $ | 5,393,147 | |||||
Yahoo!, Inc. (a) | 81,040 | 2,034,914 | ||||||
|
| |||||||
$ | 7,428,061 | |||||||
|
| |||||||
Leisure & Toys – 0.7% | ||||||||
Activision Blizzard, Inc. | 375,660 | $ | 5,356,912 | |||||
Hasbro, Inc. | 105,177 | 4,715,085 | ||||||
Mattel, Inc. | 53,940 | 2,444,021 | ||||||
Polaris Industries, Inc. | 15,720 | 1,493,400 | ||||||
|
| |||||||
$ | 14,009,418 | |||||||
|
| |||||||
Machinery & Tools – 0.7% | ||||||||
Cummins, Inc. | 35,371 | $ | 3,836,339 | |||||
Eaton Corp. PLC | 111,894 | 7,363,744 | ||||||
Illinois Tool Works, Inc. | 51,787 | 3,582,107 | ||||||
|
| |||||||
$ | 14,782,190 | |||||||
|
| |||||||
Major Banks – 6.8% | ||||||||
Bank of America Corp. | 403,279 | $ | 5,186,168 | |||||
Bank of New York Mellon Corp. | 438,717 | 12,306,012 | ||||||
BOC Hong Kong Holdings Ltd. | 487,500 | 1,488,862 | ||||||
Goldman Sachs Group, Inc. | 100,248 | 15,162,510 | ||||||
JPMorgan Chase & Co. | 850,304 | 44,887,548 | ||||||
Mizuho Financial Group, Inc. | 1,986,800 | 4,135,246 | ||||||
Morgan Stanley | 130,251 | 3,182,032 | ||||||
PNC Financial Services Group, Inc. | 73,120 | 5,331,910 | ||||||
State Street Corp. | 145,408 | 9,482,056 | ||||||
Sumitomo Mitsui Financial Group, Inc. | 62,400 | 2,862,674 | ||||||
Wells Fargo & Co. | 742,610 | 30,647,515 | ||||||
Westpac Banking Corp. | 129,550 | 3,391,539 | ||||||
|
| |||||||
$ | 138,064,072 | |||||||
|
| |||||||
Medical & Health Technology & Services – 0.5% | ||||||||
AmerisourceBergen Corp. | 52,450 | $ | 2,928,284 | |||||
Express Scripts Holding Co. (a) | 81,364 | 5,019,345 | ||||||
Quest Diagnostics, Inc. | 30,660 | 1,858,916 | ||||||
|
| |||||||
$ | 9,806,545 | |||||||
|
| |||||||
Medical Equipment – 1.8% | ||||||||
Abbott Laboratories | 156,394 | $ | 5,455,023 | |||||
Becton, Dickinson & Co. | 8,537 | 843,712 | ||||||
Covidien PLC | 118,437 | 7,442,581 | ||||||
Medtronic, Inc. | 92,421 | 4,756,909 | ||||||
St. Jude Medical, Inc. | 150,847 | 6,883,149 | ||||||
Thermo Fisher Scientific, Inc. | 129,348 | 10,946,721 | ||||||
|
| |||||||
$ | 36,328,095 | |||||||
|
| |||||||
Metals & Mining – 0.3% | ||||||||
Iluka Resources Ltd. | 210,464 | $ | 1,900,166 | |||||
Rio Tinto Ltd. | 62,880 | 2,577,234 | ||||||
Vale S.A., ADR | 195,160 | 2,566,354 | ||||||
|
| |||||||
$ | 7,043,754 | |||||||
|
| |||||||
Natural Gas – Distribution – 0.2% | ||||||||
GDF SUEZ | 210,817 | $ | 4,110,574 | |||||
|
|
6
Table of Contents
MFS Total Return Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Natural Gas – Pipeline – 0.2% | ||||||||
Williams Cos., Inc. | 120,606 | $ | 3,916,077 | |||||
|
| |||||||
Oil Services – 0.2% | ||||||||
Noble Corp. | 75,797 | $ | 2,848,451 | |||||
Schlumberger Ltd. | 26,013 | 1,864,092 | ||||||
|
| |||||||
$ | 4,712,543 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 0.9% | ||||||||
American Express Co. | 33,007 | $ | 2,467,603 | |||||
Fifth Third Bancorp | 71,820 | 1,296,351 | ||||||
MasterCard, Inc., “A” | 2,914 | 1,674,093 | ||||||
SunTrust Banks, Inc. | 57,720 | 1,822,220 | ||||||
Visa, Inc., “A” | 31,998 | 5,847,635 | ||||||
Western Union Co. | 177,244 | 3,032,645 | ||||||
Zions Bancorporation | 83,617 | 2,414,859 | ||||||
|
| |||||||
$ | 18,555,406 | |||||||
|
| |||||||
Pharmaceuticals – 5.3% | ||||||||
AbbVie, Inc. | 107,980 | $ | 4,463,893 | |||||
Bayer AG | 23,910 | 2,549,861 | ||||||
Bristol-Myers Squibb Co. | 130,640 | 5,838,302 | ||||||
Eli Lilly & Co. | 125,770 | 6,177,822 | ||||||
Johnson & Johnson | 421,990 | 36,232,061 | ||||||
Merck & Co., Inc. | 250,630 | 11,641,764 | ||||||
Pfizer, Inc. | 1,211,156 | 33,924,480 | ||||||
Roche Holding AG | 9,640 | 2,388,641 | ||||||
Teva Pharmaceutical Industries Ltd., ADR | 51,230 | 2,008,216 | ||||||
Valeant Pharmaceuticals International, Inc. (a) | 21,150 | 1,820,592 | ||||||
Zoetis, Inc. | 10,353 | 319,804 | ||||||
|
| |||||||
$ | 107,365,436 | |||||||
|
| |||||||
Printing & Publishing – 0.2% | ||||||||
McGraw-Hill Cos., Inc. | 32,780 | $ | 1,743,568 | |||||
Moody’s Corp. | 37,677 | 2,295,660 | ||||||
|
| |||||||
$ | 4,039,228 | |||||||
|
| |||||||
Railroad & Shipping – 0.2% | ||||||||
Canadian National Railway Co. | 18,533 | $ | 1,802,705 | |||||
Union Pacific Corp. | 13,349 | 2,059,484 | ||||||
|
| |||||||
$ | 3,862,189 | |||||||
|
| |||||||
Real Estate – 0.4% | ||||||||
Annaly Mortgage Management, Inc., REIT | 200,840 | $ | 2,524,559 | |||||
Corio N.V., REIT | 32,254 | 1,278,867 | ||||||
Digital Realty Trust, Inc., REIT | 34,150 | 2,083,150 | ||||||
EPR Properties, REIT | 35,780 | 1,798,661 | ||||||
|
| |||||||
$ | 7,685,237 | |||||||
|
| |||||||
Restaurants – 0.3% | ||||||||
McDonald’s Corp. | 53,802 | $ | 5,326,398 | |||||
|
| |||||||
Specialty Chemicals – 0.5% | ||||||||
Air Products & Chemicals, Inc. | 84,444 | $ | 7,732,537 | |||||
FMC Corp. | 33,940 | 2,072,376 | ||||||
|
| |||||||
$ | 9,804,913 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Specialty Stores – 0.2% | ||||||||
Advance Auto Parts, Inc. | 27,893 | $ | 2,264,075 | |||||
Staples, Inc. | 171,125 | 2,714,043 | ||||||
|
| |||||||
$ | 4,978,118 | |||||||
|
| |||||||
Telecommunications – Wireless – 0.3% | ||||||||
Vodafone Group PLC | 1,764,963 | $ | 5,064,947 | |||||
|
| |||||||
Telephone Services – 2.1% | ||||||||
AT&T, Inc. | 325,804 | $ | 11,533,462 | |||||
Bezeq – The Israel Telecommunication Corp. Ltd. | 613,380 | 815,300 | ||||||
CenturyLink, Inc. | 153,391 | 5,422,372 | ||||||
Frontier Communications Corp. (l) | 1,444,010 | 5,848,241 | ||||||
TDC A.S. | 396,969 | 3,211,504 | ||||||
Telecom Italia S.p.A. - Savings Shares | 2,223,875 | 1,228,863 | ||||||
Telefonica Brasil S.A., ADR | 103,010 | 2,350,688 | ||||||
Verizon Communications, Inc. | 175,020 | 8,810,507 | ||||||
Windstream Corp. (l) | 367,810 | 2,835,815 | ||||||
|
| |||||||
$ | 42,056,752 | |||||||
|
| |||||||
Tobacco – 2.8% | ||||||||
Altria Group, Inc. | 156,083 | $ | 5,461,344 | |||||
Lorillard, Inc. | 351,260 | 15,343,037 | ||||||
Philip Morris International, Inc. | 409,178 | 35,442,998 | ||||||
|
| |||||||
$ | 56,247,379 | |||||||
|
| |||||||
Trucking – 0.5% | ||||||||
United Parcel Service, Inc., “B” | 113,124 | $ | 9,782,964 | |||||
|
| |||||||
Utilities – Electric Power – 1.5% | ||||||||
American Electric Power Co., Inc. | 115,730 | $ | 5,182,389 | |||||
Companhia Energetica de Minas Gerais, IPS | 187,800 | 1,675,711 | ||||||
Duke Energy Corp. | 29,370 | 1,982,475 | ||||||
Fortum Corp. | 105,165 | 1,964,556 | ||||||
NRG Energy, Inc. | 241,190 | 6,439,773 | ||||||
PG&E Corp. | 96,490 | 4,412,488 | ||||||
PPL Corp. | 186,540 | 5,644,700 | ||||||
Public Service Enterprise Group, Inc. | 95,640 | 3,123,602 | ||||||
|
| |||||||
$ | 30,425,694 | |||||||
|
| |||||||
Total Common Stocks (Identified Cost, $1,074,046,240) | $ | 1,219,470,615 | ||||||
|
| |||||||
BONDS – 38.0% | ||||||||
Agency – Other – 0.1% | ||||||||
Financing Corp., 9.65%, 2018 | $ | 740,000 | $ | 1,025,841 | ||||
|
| |||||||
Asset-Backed & Securitized – 2.7% | ||||||||
Bayview Financial Revolving Mortgage Loan Trust, FRN, 1.795%, 2040 (z) | $ | 1,893,237 | $ | 914,236 | ||||
Capital Trust Realty Ltd., CDO, 5.16%, 2035 (n) | 478,769 | 479,056 | ||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust, 5.322%, 2049 | 4,124,280 | 4,540,156 | ||||||
Credit Suisse Mortgage Capital Certificate, FRN, 5.695%, 2040 | 3,818,128 | 4,263,429 |
7
Table of Contents
MFS Total Return Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Asset-Backed & Securitized – continued | ||||||||
GMAC Mortgage Corp. Loan Trust, FRN, 5.805%, 2036 | $ | 1,003,497 | $ | 949,363 | ||||
Goldman Sachs Mortgage Securities Corp., FRN, 5.981%, 2045 | 5,738,908 | 6,395,198 | ||||||
Greenwich Capital Commercial Funding Corp., 5.475%, 2039 | 5,978,000 | 6,283,805 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., 4.78%, 2042 | 2,485,000 | 2,612,466 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., “A3”, FRN, 6.125%, 2051 | 5,259,422 | 5,465,933 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 4.948%, 2037 | 2,548,000 | 2,680,657 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 5.383%, 2041 | 2,550,000 | 2,613,811 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 5.475%, 2043 | 3,029,922 | 3,315,198 | ||||||
Merrill Lynch Mortgage Trust, “A3”, FRN, 6.038%, 2050 | 808,563 | 842,622 | ||||||
Merrill Lynch/Countrywide Commercial Mortgage Trust, FRN, 5.81%, 2050 | 4,602,142 | 5,142,318 | ||||||
Morgan Stanley Capital I, Inc., FRN, 1.117%, 2030 (i)(n) | 1,536,064 | 45,302 | ||||||
Race Point CLO Ltd., “A1A”, FRN, 0.474%, 2021 (n) | 1,910,000 | 1,875,803 | ||||||
Residential Asset Mortgage Products, Inc., FRN, 4.97%, 2034 | 34,615 | 34,548 | ||||||
Residential Funding Mortgage Securities, Inc., FRN, 5.32%, 2035 | 2,056,358 | 1,178,959 | ||||||
Spirit Master Funding LLC, 5.05%, 2023 (z) | 1,586,422 | 1,591,181 | ||||||
Wachovia Bank Commercial Mortgage Trust, FRN, 5.937%, 2049 | 2,609,347 | 2,918,529 | ||||||
|
| |||||||
�� | $ | 54,142,570 | ||||||
|
| |||||||
Automotive – 0.3% | ||||||||
Hyundai Capital America, 2.125%, 2017 (n) | $ | 154,000 | $ | 148,884 | ||||
Toyota Motor Credit Corp., 3.2%, 2015 | 1,430,000 | 1,494,971 | ||||||
Toyota Motor Credit Corp., 3.4%, 2021 | 2,050,000 | 2,031,351 | ||||||
Volkswagen International Finance N.V., 2.375%, 2017 (n) | 1,948,000 | 1,977,469 | ||||||
|
| |||||||
$ | 5,652,675 | |||||||
|
| |||||||
Broadcasting – 0.2% | ||||||||
Discovery Communications, Inc., 4.875%, 2043 | $ | 1,420,000 | $ | 1,312,655 | ||||
News America, Inc., 8.5%, 2025 | 1,586,000 | 2,017,988 | ||||||
|
| |||||||
$ | 3,330,643 | |||||||
|
| |||||||
Cable TV – 0.4% | ||||||||
Comcast Corp., 2.85%, 2023 | $ | 2,290,000 | $ | 2,174,099 | ||||
DIRECTV Holdings LLC, 4.6%, 2021 | 1,270,000 | 1,317,172 | ||||||
Time Warner Entertainment Co. LP, 8.375%, 2033 | 3,421,000 | 4,032,052 | ||||||
|
| |||||||
$ | 7,523,323 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Computer Software – Systems – 0.0% | ||||||||
Apple, Inc., 3.85%, 2043 | $ | 842,000 | $ | 747,891 | ||||
|
| |||||||
Conglomerates – 0.1% | ||||||||
ABB Finance (USA), Inc., 2.875%, 2022 | $ | 703,000 | $ | 673,517 | ||||
General Electric Co., 2.7%, 2022 | 1,450,000 | 1,372,270 | ||||||
United Technologies Corp., 3.1%, 2022 | 970,000 | 958,194 | ||||||
|
| |||||||
$ | 3,003,981 | |||||||
|
| |||||||
Consumer Services – 0.0% | ||||||||
eBay, Inc., 1.35%, 2017 | $ | 657,000 | $ | 645,732 | ||||
|
| |||||||
Defense Electronics – 0.1% | ||||||||
BAE Systems Holdings, Inc., 5.2%, 2015 (n) | $ | 1,074,000 | $ | 1,155,717 | ||||
|
| |||||||
Emerging Market Quasi-Sovereign – 0.6% | ||||||||
CNOOC Finance (2012) Ltd., 3.875%, 2022 (n) | $ | 2,350,000 | $ | 2,269,061 | ||||
Corporacion Nacional del Cobre de Chile, 3.75%, 2020 (n) | 746,000 | 725,962 | ||||||
Gaz Capital S.A., 3.85%, 2020 (n) | 651,000 | 605,430 | ||||||
Petrobras Global Finance Co., FRN, 2.414%, 2019 | 1,421,000 | 1,392,580 | ||||||
Petrobras International Finance Co., 5.375%, 2021 | 882,000 | 886,140 | ||||||
Petrobras International Finance Co., 6.75%, 2041 | 637,000 | 636,402 | ||||||
Petroleos Mexicanos, 8%, 2019 | 1,753,000 | 2,121,130 | ||||||
Ras Laffan Liquefied Natural Gas Co. Ltd., 5.832%, 2016 (n) | 1,579,316 | 1,678,023 | ||||||
State Grid International Development Co. Ltd., 1.75%, 2018 (z) | 1,029,000 | 986,229 | ||||||
|
| |||||||
$ | 11,300,957 | |||||||
|
| |||||||
Emerging Market Sovereign – 0.4% | ||||||||
Republic of Peru, 7.35%, 2025 | $ | 184,000 | $ | 235,520 | ||||
Russian Federation, 3.625%, 2015 (z) | 5,000,000 | 5,175,000 | ||||||
United Mexican States, 4.75%, 2044 | 3,200,000 | 2,848,000 | ||||||
|
| |||||||
$ | 8,258,520 | |||||||
|
| |||||||
Energy – Independent – 0.1% | ||||||||
Apache Corp., 3.25%, 2022 | $ | 959,000 | $ | 944,667 | ||||
Apache Corp., 4.75%, 2043 | 734,000 | 696,209 | ||||||
EOG Resources, Inc., 2.625%, 2023 | 687,000 | 642,855 | ||||||
Hess Corp., 8.125%, 2019 | 700,000 | 877,437 | ||||||
|
| |||||||
$ | 3,161,168 | |||||||
|
| |||||||
Energy – Integrated – 0.5% | ||||||||
BP Capital Markets PLC, 4.5%, 2020 | $ | 683,000 | $ | 740,979 | ||||
BP Capital Markets PLC, 4.742%, 2021 | 1,966,000 | 2,139,189 | ||||||
Husky Energy, Inc., 5.9%, 2014 | 1,758,000 | 1,839,183 | ||||||
Husky Energy, Inc., 7.25%, 2019 | 1,793,000 | 2,209,297 | ||||||
Total Capital International S.A., 1.55%, 2017 | 2,841,000 | 2,815,672 | ||||||
|
| |||||||
$ | 9,744,320 | |||||||
|
| |||||||
Financial Institutions – 0.0% | ||||||||
General Electric Capital Corp., 3.1%, 2023 | $ | 924,000 | $ | 872,871 | ||||
|
|
8
Table of Contents
MFS Total Return Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Food & Beverages – 0.3% | ||||||||
Anheuser-Busch InBev S.A., 8%, 2039 | $ | 2,330,000 | $ | 3,353,364 | ||||
Conagra Foods, Inc., 3.2%, 2023 | 1,168,000 | 1,116,925 | ||||||
Kraft Foods Group, Inc., 3.5%, 2022 | 938,000 | 928,881 | ||||||
|
| |||||||
$ | 5,399,170 | |||||||
|
| |||||||
Insurance – 0.2% | ||||||||
American International Group, Inc., 4.875%, 2022 | $ | 2,898,000 | $ | 3,089,048 | ||||
Metropolitan Life Global Funding I, 5.125%, 2014 (n) | 1,060,000 | 1,105,664 | ||||||
|
| |||||||
$ | 4,194,712 | |||||||
|
| |||||||
Insurance – Health – 0.1% | ||||||||
WellPoint, Inc., 3.3%, 2023 | $ | 1,363,000 | $ | 1,297,512 | ||||
|
| |||||||
Insurance – Property & Casualty – 0.5% | ||||||||
ACE Ltd., 2.7%, 2023 | $ | 2,310,000 | $ | 2,155,812 | ||||
Chubb Corp., 6.375% to 2017, FRN to 2067 | 3,516,000 | 3,762,120 | ||||||
Marsh & McLennan Cos., Inc., 4.8%, 2021 | 2,110,000 | 2,276,409 | ||||||
ZFS Finance USA Trust V, 6.5% to 2017, FRN to 2067 (n) | 990,000 | 1,054,350 | ||||||
|
| |||||||
$ | 9,248,691 | |||||||
|
| |||||||
International Market Quasi-Sovereign – 0.4% | ||||||||
Achmea Hypotheekbank N.V., 3.2%, 2014 (n) | $ | 163,000 | $ | 169,194 | ||||
KFW International Finance, Inc., 4.875%, 2019 | 2,980,000 | 3,455,310 | ||||||
Societe Financement de l’ Economie Francaise, 3.375%, 2014 (n) | 1,664,000 | 1,704,934 | ||||||
Temasek Financial I Ltd., 2.375%, 2023 (n) | 4,130,000 | 3,668,733 | ||||||
|
| |||||||
$ | 8,998,171 | |||||||
|
| |||||||
International Market Sovereign – 0.1% | ||||||||
Republic of Iceland, 4.875%, 2016 (n) | $ | 2,240,000 | $ | 2,340,800 | ||||
|
| |||||||
Internet – 0.1% | ||||||||
Baidu, Inc., 3.5%, 2022 | $ | 2,570,000 | $ | 2,296,341 | ||||
|
| |||||||
Local Authorities – 0.2% | ||||||||
New Jersey Turnpike Authority Rev. (Build America Bonds), “F”, 7.414%, 2040 | $ | 2,405,000 | $ | 3,201,801 | ||||
|
| |||||||
Machinery & Tools – 0.2% | ||||||||
Atlas Copco AB, 5.6%, 2017 (n) | $ | 3,117,000 | $ | 3,508,012 | ||||
|
| |||||||
Major Banks – 1.7% | ||||||||
ABN AMRO Bank N.V., FRN, 2.045%, 2014 (n) | $ | 2,400,000 | $ | 2,420,832 | ||||
Banco Santander U.S. Debt S.A.U., 3.781%, 2015 (n) | 1,100,000 | 1,121,215 | ||||||
Bank of America Corp., 7.375%, 2014 | 1,160,000 | 1,220,419 | ||||||
Bank of America Corp., 5.49%, 2019 | 2,160,000 | 2,328,998 | ||||||
Bank of America Corp., 7.625%, 2019 | 1,640,000 | 1,970,911 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Major Banks – continued | ||||||||
BNP Paribas, 7.195% to 2037, FRN to 2049 (n) | $ | 1,042,000 | $ | 1,008,135 | ||||
Commonwealth Bank of Australia, 5%, 2019 (n) | 1,620,000 | 1,812,814 | ||||||
Credit Suisse New York, 5.5%, 2014 | 2,200,000 | 2,289,659 | ||||||
Goldman Sachs Group, Inc., 5.625%, 2017 | 2,680,000 | 2,904,544 | ||||||
HSBC Holdings PLC, 5.1%, 2021 | 1,568,000 | 1,722,699 | ||||||
ING Bank N.V., 3.75%, 2017 (n) | 1,918,000 | 2,007,456 | ||||||
JPMorgan Chase & Co., 6.3%, 2019 | 2,000,000 | 2,323,396 | ||||||
JPMorgan Chase & Co., 3.25%, 2022 | 694,000 | 658,885 | ||||||
Morgan Stanley, 6.625%, 2018 | 3,380,000 | 3,831,078 | ||||||
PNC Funding Corp., 5.625%, 2017 | 2,078,000 | 2,305,452 | ||||||
Royal Bank of Scotland PLC, 2.55%, 2015 | 563,000 | 572,435 | ||||||
Wachovia Corp., 5.25%, 2014 | 2,143,000 | 2,238,428 | ||||||
Wells Fargo & Co., 2.1%, 2017 | 2,290,000 | 2,298,189 | ||||||
|
| |||||||
$ | 35,035,545 | |||||||
|
| |||||||
Medical & Health Technology & Services – 0.4% | ||||||||
Baxter International, Inc., 3.2%, 2023 | $ | 1,290,000 | $ | 1,265,333 | ||||
CareFusion Corp., 6.375%, 2019 | 2,550,000 | 2,943,238 | ||||||
Express Scripts Holding Co., 2.65%, 2017 | 2,980,000 | 3,034,394 | ||||||
|
| |||||||
$ | 7,242,965 | |||||||
|
| |||||||
Metals & Mining – 0.3% | ||||||||
Freeport-McMoRan Copper & Gold, Inc., 3.875%, 2023 (n) | $ | 2,320,000 | $ | 2,099,813 | ||||
Rio Tinto Finance (USA) PLC, 3.5%, 2022 | 2,090,000 | 2,015,381 | ||||||
Vale Overseas Ltd., 4.625%, 2020 | 669,000 | 660,769 | ||||||
Vale Overseas Ltd., 6.875%, 2039 | 525,000 | 529,925 | ||||||
|
| |||||||
$ | 5,305,888 | |||||||
|
| |||||||
Mortgage-Backed – 12.5% | ||||||||
Fannie Mae, 4.007%, 2013 | $ | 250,294 | $ | 250,279 | ||||
Fannie Mae, 4.629%, 2014 | 654,315 | 664,801 | ||||||
Fannie Mae, 4.826%, 2014 | 1,553,078 | 1,589,270 | ||||||
Fannie Mae, 4.858%, 2014 | 684,475 | 686,821 | ||||||
Fannie Mae, 5.19%, 2015 | 396,920 | 427,490 | ||||||
Fannie Mae, 5.27%, 2016 | 1,088,732 | 1,236,686 | ||||||
Fannie Mae, 5.661%, 2016 | 302,263 | 330,111 | ||||||
Fannie Mae, 5.724%, 2016 | 684,006 | 760,210 | ||||||
Fannie Mae, 5.5%, 2017 – 2038 | 34,374,461 | 37,495,051 | ||||||
Fannie Mae, 6%, 2017 – 2037 | 16,511,108 | 18,047,052 | ||||||
Fannie Mae, 2.578%, 2018 | 1,545,000 | 1,586,842 | ||||||
Fannie Mae, 3.8%, 2018 | 325,232 | 348,778 | ||||||
Fannie Mae, 3.91%, 2018 | 474,946 | 515,223 | ||||||
Fannie Mae, 4.5%, 2018 – 2041 | 9,023,955 | 9,623,174 | ||||||
Fannie Mae, 5%, 2018 – 2041 | 17,017,172 | 18,396,541 | ||||||
Fannie Mae, 4.6%, 2019 | 313,121 | 350,316 | ||||||
Fannie Mae, 4.88%, 2020 | 789,671 | 866,051 | ||||||
Fannie Mae, 3%, 2027 | 2,063,171 | 2,124,284 | ||||||
Fannie Mae, 2.5%, 2028 | 1,831,619 | 1,845,424 | ||||||
Fannie Mae, 7.5%, 2030 – 2032 | 183,388 | 217,305 | ||||||
Fannie Mae, 6.5%, 2031 – 2037 | 4,770,762 | 5,302,481 |
9
Table of Contents
MFS Total Return Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Mortgage-Backed – continued | ||||||||
Fannie Mae, 4%, 2040 – 2041 | $ | 1,402,303 | $ | 1,464,167 | ||||
Fannie Mae, 3.5%, 2041 – 2042 | 3,222,250 | 3,278,520 | ||||||
Fannie Mae, TBA, 2.5%, 2028 | 3,934,000 | 3,956,743 | ||||||
Fannie Mae, TBA, 3%, 2028 | 4,853,000 | 4,967,501 | ||||||
Fannie Mae, TBA, 4%, 2028 | 1,530,000 | 1,612,656 | ||||||
Fannie Mae, TBA, 3.5%, 2043 | 3,977,000 | 4,014,284 | ||||||
Fannie Mae, TBA, 4.5%, 2043 | 4,410,000 | 4,651,174 | ||||||
Freddie Mac, 6%, 2016 – 2037 | 7,841,949 | 8,608,295 | ||||||
Freddie Mac, 3.882%, 2017 | 839,798 | 906,909 | ||||||
Freddie Mac, 5%, 2017 – 2039 | 9,758,364 | 10,553,788 | ||||||
Freddie Mac, 2.303%, 2018 | 401,707 | 406,322 | ||||||
Freddie Mac, 2.412%, 2018 | 1,226,000 | 1,247,061 | ||||||
Freddie Mac, 3.154%, 2018 | 274,000 | 288,185 | ||||||
Freddie Mac, 4.5%, 2018 – 2039 | 5,470,500 | 5,756,935 | ||||||
Freddie Mac, 1.869%, 2019 | 824,000 | 800,385 | ||||||
Freddie Mac, 5.085%, 2019 | 2,793,000 | 3,203,406 | ||||||
Freddie Mac, 5.5%, 2019 – 2037 | 4,721,576 | 5,128,643 | ||||||
Freddie Mac, 3.808%, 2020 | 2,402,000 | 2,564,464 | ||||||
Freddie Mac, 6.5%, 2034 – 2038 | 2,910,582 | 3,272,887 | ||||||
Freddie Mac, 4%, 2040 – 2041 | 9,194,267 | 9,566,624 | ||||||
Freddie Mac, 3.5%, 2042 – 2043 | 6,145,267 | 6,248,351 | ||||||
Freddie Mac, 3%, 2043 | 8,066,951 | 7,882,099 | ||||||
Freddie Mac, TBA, 3%, 2043 | 5,289,000 | 5,155,122 | ||||||
Freddie Mac, TBA, 3.5%, 2043 | 6,626,000 | 6,679,266 | ||||||
Ginnie Mae, 4.5%, 2041 | 671,797 | 717,183 | ||||||
Ginnie Mae, 4%, 2042 | 2,438,886 | 2,563,818 | ||||||
Ginnie Mae, 3%, 2043 | 5,379,475 | 5,331,474 | ||||||
Ginnie Mae, 6%, 2032 – 2038 | 3,890,069 | 4,397,663 | ||||||
Ginnie Mae, 4.5%, 2033 – 2041 | 9,188,562 | 9,875,573 | ||||||
Ginnie Mae, 5.5%, 2033 – 2035 | 4,280,394 | 4,708,499 | ||||||
Ginnie Mae, 5%, 2034 | 938,752 | 1,021,065 | ||||||
Ginnie Mae, 3.5%, 2041 – 2042 | 1,800,235 | 1,856,722 | ||||||
Ginnie Mae, 4%, 2041 | 7,828,731 | 8,256,321 | ||||||
Ginnie Mae, TBA, 3%, 2043 | 2,150,000 | 2,126,149 | ||||||
Ginnie Mae, TBA, 3.5%, 2043 | 7,698,000 | 7,900,072 | ||||||
|
| |||||||
$ | 253,632,516 | |||||||
|
| |||||||
Natural Gas – Pipeline – 0.3% | ||||||||
Energy Transfer Partners LP, 3.6%, 2023 | $ | 1,267,000 | $ | 1,185,771 | ||||
Enterprise Products Operating LLC, 6.5%, 2019 | 1,953,000 | 2,329,915 | ||||||
Kinder Morgan Energy Partners LP, 7.4%, 2031 | 219,000 | 259,670 | ||||||
Kinder Morgan Energy Partners LP, 7.75%, 2032 | 1,000,000 | 1,235,506 | ||||||
Spectra Energy Capital LLC, 8%, 2019 | 1,694,000 | 2,143,933 | ||||||
|
| |||||||
$ | 7,154,795 | |||||||
|
| |||||||
Network & Telecom – 0.1% | ||||||||
AT&T, Inc., 5.55%, 2041 | $ | 574,000 | $ | 597,652 | ||||
Telecom Italia Capital, 5.25%, 2013 | 2,176,000 | 2,203,270 | ||||||
|
| |||||||
$ | 2,800,922 | |||||||
|
| |||||||
Oil Services – 0.1% | ||||||||
Transocean, Inc., 3.8%, 2022 | $ | 1,147,000 | $ | 1,092,577 | ||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Other Banks & Diversified Financials – 1.0% | ||||||||
American Express Co., 5.5%, 2016 | $ | 2,287,000 | $ | 2,553,973 | ||||
Banco Bradesco S.A., 6.75%, 2019 (n) | 1,391,000 | 1,502,280 | ||||||
Banco de Credito del Peru, 5.375%, 2020 | 1,929,000 | 1,972,403 | ||||||
BBVA Bancomer S.A. de C.V., 6.75%, 2022 (n) | 1,880,000 | 2,030,400 | ||||||
Capital One Financial Corp., 6.15%, 2016 | 2,872,000 | 3,204,899 | ||||||
Citigroup, Inc., 5%, 2014 | 2,679,000 | 2,784,089 | ||||||
Citigroup, Inc., 3.375%, 2023 | 798,000 | 763,378 | ||||||
Groupe BPCE S.A., 12.5% to 2019, FRN to 2049 (n) | 2,025,000 | 2,455,313 | ||||||
Svenska Handelsbanken AB, 4.875%, 2014 (n) | 2,240,000 | 2,324,762 | ||||||
Swedbank AB, 2.125%, 2017 (n) | 527,000 | 523,780 | ||||||
|
| |||||||
$ | 20,115,277 | |||||||
|
| |||||||
Pharmaceuticals – 0.2% | ||||||||
Hospira, Inc., 6.05%, 2017 | $ | 1,927,000 | $ | 2,062,004 | ||||
Teva Pharmaceutical Finance IV LLC, 3.65%, 2021 | 2,950,000 | 2,950,271 | ||||||
|
| |||||||
$ | 5,012,275 | |||||||
|
| |||||||
Real Estate – 0.6% | ||||||||
Boston Properties, Inc., REIT, 5%, 2015 | $ | 1,871,000 | $ | 2,010,882 | ||||
ERP Operating LP, REIT, 5.375%, 2016 | 590,000 | 657,671 | ||||||
ERP Operating LP, REIT, 4.625%, 2021 | 2,097,000 | 2,221,254 | ||||||
HCP, Inc., REIT, 5.375%, 2021 | 1,703,000 | 1,847,312 | ||||||
HRPT Properties Trust, REIT, 6.65%, 2018 | 1,620,000 | 1,768,167 | ||||||
WEA Finance LLC, 6.75%, 2019 (n) | 604,000 | 713,323 | ||||||
WEA Finance LLC, REIT, 4.625%, 2021 (n) | 2,300,000 | 2,426,371 | ||||||
|
| |||||||
$ | 11,644,980 | |||||||
|
| |||||||
Retailers – 0.4% | ||||||||
Gap, Inc., 5.95%, 2021 | $ | 1,420,000 | $ | 1,570,560 | ||||
Home Depot, Inc., 5.95%, 2041 | 643,000 | 766,037 | ||||||
Limited Brands, Inc., 5.25%, 2014 | 779,000 | 808,213 | ||||||
Target Corp., 4%, 2042 | 2,356,000 | 2,142,462 | ||||||
Wal-Mart Stores, Inc., 5.25%, 2035 | 3,496,000 | 3,795,663 | ||||||
|
| |||||||
$ | 9,082,935 | |||||||
|
| |||||||
Supranational – 0.2% | ||||||||
Asian Development Bank, 2.75%, 2014 | $ | 2,220,000 | $ | 2,268,352 | ||||
Asian Development Bank, 1.125%, 2017 | 1,340,000 | 1,348,442 | ||||||
|
| |||||||
$ | 3,616,794 | |||||||
|
| |||||||
Telecommunications – Wireless – 0.4% | ||||||||
American Tower Trust I, 3.07%, 2023 (n) | $ | 2,310,000 | $ | 2,206,362 | ||||
Crown Castle Towers LLC, 6.113%, 2020 (n) | 1,605,000 | 1,841,697 | ||||||
Crown Castle Towers LLC, 4.883%, 2020 (n) | 830,000 | 892,526 | ||||||
Rogers Communications, Inc., 6.8%, 2018 | 3,340,000 | 4,032,322 | ||||||
|
| |||||||
$ | 8,972,907 | |||||||
|
|
10
Table of Contents
MFS Total Return Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Tobacco – 0.2% | ||||||||
Altria Group, Inc., 2.85%, 2022 | $ | 2,370,000 | $ | 2,191,484 | ||||
B.A.T. International Finance PLC, 3.25%, 2022 (n) | 2,334,000 | 2,284,596 | ||||||
|
| |||||||
$ | 4,476,080 | |||||||
|
| |||||||
Transportation – Services – 0.1% | ||||||||
ERAC USA Finance Co., 7%, 2037 (n) | $ | 2,572,000 | $ | 3,028,533 | ||||
|
| |||||||
U.S. Government Agencies and Equivalents – 0.3% | ||||||||
Small Business Administration, 4.77%, 2024 | $ | 394,737 | $ | 423,146 | ||||
Small Business Administration, 5.18%, 2024 | 671,665 | 738,553 | ||||||
Small Business Administration, 4.99%, 2024 | 704,479 | 768,298 | ||||||
Small Business Administration, 5.11%, 2025 | 3,036,482 | 3,340,363 | ||||||
|
| |||||||
$ | 5,270,360 | |||||||
|
| |||||||
U.S. Treasury Obligations – 11.1% | ||||||||
U.S. Treasury Bonds, 8.5%, 2020 | $ | 3,204,000 | $ | 4,558,440 | ||||
U.S. Treasury Bonds, 8%, 2021 | 366,000 | 530,614 | ||||||
U.S. Treasury Bonds, 6%, 2026 | 278,000 | 373,215 | ||||||
U.S. Treasury Bonds, 6.75%, 2026 | 2,129,000 | 3,048,462 | ||||||
U.S. Treasury Bonds, 5.375%, 2031 | 495,000 | 644,815 | ||||||
U.S. Treasury Bonds, 4.5%, 2036 | 1,109,000 | 1,320,576 | ||||||
U.S. Treasury Bonds, 5%, 2037 | 252,000 | 321,654 | ||||||
U.S. Treasury Bonds, 4.5%, 2039 | 38,155,400 | 45,619,550 | ||||||
U.S. Treasury Notes, 1.875%, 2014 | 19,217,000 | 19,436,939 | ||||||
U.S. Treasury Notes, 1.875%, 2014 | 1,365,000 | 1,384,195 | ||||||
U.S. Treasury Notes, 0.5%, 2014 | 8,728,000 | 8,756,637 | ||||||
U.S. Treasury Notes, 4.125%, 2015 | 6,910,000 | 7,397,480 | ||||||
U.S. Treasury Notes, 2.125%, 2015 | 11,906,000 | 12,309,685 | ||||||
U.S. Treasury Notes, 9.875%, 2015 | 2,793,000 | 3,410,951 | ||||||
U.S. Treasury Notes, 2.625%, 2016 | 1,737,000 | 1,832,129 | ||||||
U.S. Treasury Notes, 0.875%, 2016 | 67,839,000 | 67,796,601 | ||||||
U.S. Treasury Notes, 3.75%, 2018 | 15,935,000 | 17,813,593 | ||||||
U.S. Treasury Notes, 2.75%, 2019 | 6,001,500 | 6,387,847 | ||||||
U.S. Treasury Notes, 3.125%, 2019 | 514,000 | 557,810 | ||||||
U.S. Treasury Notes, 3.5%, 2020 | 18,971,000 | 20,988,148 | ||||||
|
| |||||||
$ | 224,489,341 | |||||||
|
| |||||||
Utilities – Electric Power – 0.5% | ||||||||
MidAmerican Funding LLC, 6.927%, 2029 | $ | 387,000 | $ | 479,937 | ||||
Oncor Electric Delivery Co., 7%, 2022 | 1,822,000 | 2,261,696 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Utilities – Electric Power – continued | ||||||||
Pacific Gas & Electric Co., 4.6%, 2043 | $ | 1,840,000 | $ | 1,811,403 | ||||
PPL Corp., 3.4%, 2023 | 1,850,000 | 1,752,825 | ||||||
Progress Energy, Inc., 3.15%, 2022 | 2,519,000 | 2,412,885 | ||||||
PSEG Power LLC, 5.32%, 2016 | 1,603,000 | 1,777,953 | ||||||
System Energy Resources, Inc., 5.129%, 2014 (z) | 215,124 | 216,563 | ||||||
Waterford 3 Funding Corp., 8.09%, 2017 | 111,124 | 112,496 | ||||||
|
| |||||||
$ | 10,825,758 | |||||||
|
| |||||||
Total Bonds (Identified Cost, $750,721,112) | $ | 769,851,867 | ||||||
|
| |||||||
CONVERTIBLE PREFERRED STOCKS – 0.4% | ||||||||
Aerospace – 0.0% | ||||||||
United Technologies Corp., 7.5% | 10,493 | $ | 622,864 | |||||
|
| |||||||
Automotive – 0.2% | ||||||||
General Motors Co., 4.75% | 77,870 | $ | 3,750,219 | |||||
|
| |||||||
Utilities – Electric Power – 0.2% | ||||||||
PPL Corp., 9.5% | 22,830 | $ | 1,196,520 | |||||
PPL Corp., 8.75% | 55,980 | 3,024,040 | ||||||
|
| |||||||
$ | 4,220,560 | |||||||
|
| |||||||
Total Convertible Preferred Stocks (Identified Cost, $8,691,642) | $ | 8,593,643 | ||||||
|
| |||||||
MONEY MARKET FUNDS – 2.4% | ||||||||
MFS Institutional Money Market Portfolio, 0.11%, at Cost and Net Asset Value (v) | 47,951,169 | $ | 47,951,169 | |||||
|
| |||||||
COLLATERAL FOR SECURITIES LOANED – 0.3% | ||||||||
Navigator Securities Lending Prime Portfolio, 0.17%, at Cost and Net Asset Value (j) | 6,563,978 | $ | 6,563,978 | |||||
|
| |||||||
Total Investments (Identified Cost, $1,887,974,141) | $ | 2,052,431,272 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – (1.4)% | (29,124,512 | ) | ||||||
|
| |||||||
Net Assets – 100.0% | $ | 2,023,306,760 | ||||||
|
|
(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 $57,212,602, representing 2.8% 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. |
11
Table of Contents
MFS Total Return 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 | |||||||
Bayview Financial Revolving Mortgage Loan Trust, FRN, 1.795%, 2040 | 3/01/06 | $1,893,237 | $914,236 | |||||||
Russian Federation, 3.625%, 2015 | 4/22/10 | 4,989,841 | 5,175,000 | |||||||
Spirit Master Funding LLC, 5.05%, 2023 | 10/04/05 | 1,573,941 | 1,591,181 | |||||||
State Grid International Development Co. Ltd., 1.75%, 2018 | 5/15/13 | 1,027,418 | 986,229 | |||||||
System Energy Resources, Inc., 5.129%, 2014 | 4/16/04-11/22/04 | 215,567 | 216,563 | |||||||
Total Restricted Securities | $8,883,209 | |||||||||
% of Net assets | 0.4% |
The following abbreviations are used in this report and are defined:
ADR | American Depositary Receipt |
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. |
IPS | International Preference Stock |
PLC | Public Limited Company |
REIT | Real Estate Investment Trust |
TBA | To Be Announced |
See Notes to Financial Statements
12
Table of Contents
MFS Total Return Series
FINANCIAL STATEMENTS | STATEMENT OF ASSETS AND LIABILITIES (unaudited)
This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
At 6/30/13 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $1,840,022,972) | $2,004,480,103 | |||||||
Underlying affiliated funds, at cost and value | 47,951,169 | |||||||
Total investments, at value, including $6,278,358 of securities on loan (identified cost, $1,887,974,141) | $2,052,431,272 | |||||||
Cash | 10,866 | |||||||
Receivables for | ||||||||
Investments sold | 41,468,095 | |||||||
Fund shares sold | 2,475,923 | |||||||
Interest and dividends | 7,756,633 | |||||||
Other assets | 7,095 | |||||||
Total assets | $2,104,149,884 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Investments purchased | $3,762,674 | |||||||
TBA purchase commitments | 64,809,188 | |||||||
Fund shares reacquired | 5,206,601 | |||||||
Collateral for securities loaned, at value | 6,563,978 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 162,899 | |||||||
Shareholder servicing costs | 1,551 | |||||||
Distribution and/or service fees | 17,920 | |||||||
Payable for independent trustees’ compensation | 6,264 | |||||||
Accrued expenses and other liabilities | 312,049 | |||||||
Total liabilities | $80,843,124 | |||||||
Net assets | $2,023,306,760 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $1,799,536,035 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 164,438,662 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | (18,810,096 | ) | ||||||
Undistributed net investment income | 78,142,159 | |||||||
Net assets | $2,023,306,760 | |||||||
Shares of beneficial interest outstanding | 93,532,147 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $1,369,135,086 | 63,009,388 | $21.73 | |||||||||
Service Class | 654,171,674 | 30,522,759 | 21.43 |
See Notes to Financial Statements
13
Table of Contents
MFS Total Return Series
FINANCIAL STATEMENTS | STATEMENT OF OPERATIONS (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
Six months ended 6/30/13 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $17,817,577 | |||||||
Interest | 14,621,141 | |||||||
Dividends from underlying affiliated funds | 47,387 | |||||||
Foreign taxes withheld | (227,643 | ) | ||||||
Total investment income | $32,258,462 | |||||||
Expenses | ||||||||
Management fee | $8,592,869 | |||||||
Distribution and/or service fees | 1,068,040 | |||||||
Shareholder servicing costs | 60,052 | |||||||
Administrative services fee | 148,298 | |||||||
Independent trustees’ compensation | 22,226 | |||||||
Custodian fee | 80,187 | |||||||
Shareholder communications | 132,497 | |||||||
Audit and tax fees | 33,656 | |||||||
Legal fees | 15,047 | |||||||
Miscellaneous | 43,522 | |||||||
Total expenses | $10,196,394 | |||||||
Fees paid indirectly | (148 | ) | ||||||
Reduction of expenses by investment adviser | (332,342 | ) | ||||||
Net expenses | $9,863,904 | |||||||
Net investment income | $22,394,558 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $204,873,833 | |||||||
Foreign currency | 9,418 | |||||||
Net realized gain (loss) on investments and foreign currency | $204,883,251 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $(28,701,050 | ) | ||||||
Translation of assets and liabilities in foreign currencies | (26,267 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $(28,727,317 | ) | ||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $176,155,934 | |||||||
Change in net assets from operations | $198,550,492 |
See Notes to Financial Statements
14
Table of Contents
MFS Total Return Series
FINANCIAL STATEMENTS | STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
| Six months ended 6/30/13 (unaudited | ) | | Year ended 12/31/12 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $22,394,558 | $52,054,989 | ||||||
Net realized gain (loss) on investments and foreign currency | 204,883,251 | 91,116,114 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | (28,727,317 | ) | 111,046,870 | |||||
Change in net assets from operations | $198,550,492 | $254,217,973 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(62,960,127 | ) | |||||
Change in net assets from fund share transactions | $(488,507,816 | ) | $(311,739,490 | ) | ||||
Total change in net assets | $(289,957,324 | ) | $(120,481,644 | ) | ||||
Net assets | ||||||||
At beginning of period | 2,313,264,084 | 2,433,745,728 | ||||||
At end of period (including undistributed net investment income of $78,142,159 and | $2,023,306,760 | $2,313,264,084 |
See Notes to Financial Statements
15
Table of Contents
MFS Total Return Series
FINANCIAL STATEMENTS | FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund’s financial performance for the semiannual period and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
Initial Class | Six months 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $20.05 | $18.53 | $18.71 | $17.48 | $15.42 | $21.68 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.22 | $0.44 | $0.44 | $0.41 | $0.44 | $0.52 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.46 | 1.63 | (0.12 | ) | 1.31 | 2.20 | (4.97 | ) | ||||||||||||||||
Total from investment operations | $1.68 | $2.07 | $0.32 | $1.72 | $2.64 | $(4.45 | ) | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.55 | ) | $(0.50 | ) | $(0.49 | ) | $(0.58 | ) | $(0.61 | ) | |||||||||||||
From net realized gain on investments | — | — | — | — | — | (1.20 | ) | |||||||||||||||||
Total distributions declared to shareholders | $— | $(0.55 | ) | $(0.50 | ) | $(0.49 | ) | $(0.58 | ) | $(1.81 | ) | |||||||||||||
Net asset value, end of period (x) | $21.73 | $20.05 | $18.53 | $18.71 | $17.48 | $15.42 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 8.38 | (n) | 11.26 | 1.77 | 9.93 | 18.03 | (22.13 | ) | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.80 | (a) | 0.80 | 0.81 | 0.81 | 0.82 | 0.82 | |||||||||||||||||
Expenses after expense reductions (f) | 0.77 | (a) | 0.77 | 0.78 | 0.81 | 0.82 | 0.80 | |||||||||||||||||
Net investment income | 2.05 | (a) | 2.26 | 2.36 | 2.30 | 2.80 | 2.80 | |||||||||||||||||
Portfolio turnover | 35 | (n) | 22 | 19 | 30 | 43 | 55 | |||||||||||||||||
Net assets at end of period (000 omitted) | $1,369,135 | $1,440,525 | $1,574,503 | $1,860,233 | $1,967,226 | $1,901,307 | ||||||||||||||||||
Service Class | Six months 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $19.80 | $18.31 | $18.48 | $17.28 | $15.24 | $21.44 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.19 | $0.39 | $0.39 | $0.36 | $0.39 | $0.46 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.44 | 1.60 | (0.11 | ) | 1.29 | 2.18 | (4.91 | ) | ||||||||||||||||
Total from investment operations | $1.63 | $1.99 | $0.28 | $1.65 | $2.57 | $(4.45 | ) | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.50 | ) | $(0.45 | ) | $(0.45 | ) | $(0.53 | ) | $(0.55 | ) | |||||||||||||
From net realized gain on investments | — | — | — | — | — | (1.20 | ) | |||||||||||||||||
Total distributions declared to shareholders | $— | $(0.50 | ) | $(0.45 | ) | $(0.45 | ) | $(0.53 | ) | $(1.75 | ) | |||||||||||||
Net asset value, end of period (x) | $21.43 | $19.80 | $18.31 | $18.48 | $17.28 | $15.24 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 8.23 | (n) | 10.93 | 1.58 | 9.63 | 17.72 | (22.32 | ) | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.05 | (a) | 1.05 | 1.06 | 1.06 | 1.07 | 1.07 | |||||||||||||||||
Expenses after expense reductions (f) | 1.02 | (a) | 1.02 | 1.03 | 1.06 | 1.07 | 1.05 | |||||||||||||||||
Net investment income | 1.79 | (a) | 2.02 | 2.11 | 2.05 | 2.54 | 2.55 | |||||||||||||||||
Portfolio turnover | 35 | (n) | 22 | 19 | 30 | 43 | 55 | |||||||||||||||||
Net assets at end of period (000 omitted) | $654,172 | $872,739 | $859,243 | $925,027 | $872,466 | $804,493 |
See Notes to Financial Statements
16
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
17
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 the disclosure provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Update 2011-11 (“ASU 2011-11”), Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities along with the related scope clarification provisions of FASB Accounting Standards Update 2013-01 (“ASU 2013-01”) entitled Balance Sheet (Topic 210) – Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 is intended to enhance disclosures on the offsetting of financial assets and liabilities by requiring entities to disclose both gross and net information about financial instruments and transactions that are either offset in the statement of financial position or subject to a Master Netting Agreement or similar arrangement. ASU 2013-01 limits the scope of ASU 2011-11’s disclosure requirements on offsetting to financial assets and financial liabilities related to derivatives, repurchase and reverse repurchase agreements, and securities lending and securities borrowing transactions. The disclosures required by ASU 2011-11, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
In June 2013, FASB issued Accounting Standards Update 2013-08 Financial Services – Investment Companies (Topic 946) – Amendments to the Scope, Measurement, and Disclosure Requirements (“ASU 2013-08”) which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013. ASU 2013-08 sets forth a methodology for determining whether an entity should be characterized as an investment company and prescribes fair value accounting for an investment company’s non-controlling ownership interest in another investment company. FASB has determined that a fund registered under the Investment Company Act of 1940 automatically meets ASU 2013-08’s criteria for an investment company. Although still evaluating the potential impacts of ASU 2013-08 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
18
Table of Contents
MFS Total Return Series
Notes to Financial Statements (unaudited) – continued
has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted 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, 2013 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $1,112,707,077 | $— | $— | $1,112,707,077 | ||||||||||||
United Kingdom | — | 25,878,003 | — | 25,878,003 | ||||||||||||
Switzerland | — | 16,461,261 | — | 16,461,261 | ||||||||||||
Japan | 2,862,674 | 8,950,276 | — | 11,812,950 | ||||||||||||
Canada | 11,181,989 | — | 11,181,989 | |||||||||||||
France | 7,062,272 | 4,110,574 | — | 11,172,846 | ||||||||||||
Brazil | 6,592,753 | — | — | 6,592,753 | ||||||||||||
Germany | 5,588,017 | — | — | 5,588,017 | ||||||||||||
Netherlands | — | 5,533,051 | — | 5,533,051 | ||||||||||||
Other Countries | 7,950,821 | 13,185,490 | — | 21,136,311 | ||||||||||||
U.S. Treasury Bonds & U.S. Government Agency & Equivalents | — | 230,785,542 | — | 230,785,542 | ||||||||||||
Non-U.S. Sovereign Debt | — | 34,515,241 | — | 34,515,241 | ||||||||||||
U.S. Corporate Bonds | — | 132,266,375 | — | 132,266,375 | ||||||||||||
Residential Mortgage-Backed Securities | — | 255,795,389 | — | 255,795,389 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 48,710,603 | — | 48,710,603 | ||||||||||||
Asset-Backed Securities (including CDOs) | — | 3,269,095 | — | 3,269,095 | ||||||||||||
Foreign Bonds | — | 64,509,622 | — | 64,509,622 | ||||||||||||
Mutual Funds | 54,515,147 | — | — | 54,515,147 | ||||||||||||
Total Investments | $1,208,460,750 | $843,970,522 | $— | $2,052,431,272 |
For further information regarding security characteristics, see the Portfolio of Investments.
Of the level 2 investments presented above, equity investments amounting to $10,933,469 would have been considered level 1 investments at the beginning of the period. Of the level 1 investments presented above, equity investments amounting to $9,612,134 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
19
Table of Contents
MFS Total Return Series
Notes to Financial Statements (unaudited) – continued
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 – Under its Securities Lending Agency Agreement with the fund, State Street Bank and Trust Company (“State Street”), as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. 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. In the event of Borrower default, State Street will for the benefit of the fund either purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the fund the market value of the loaned securities. In return, State Street assumes the fund’s rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, State Street is responsible for the shortfall, but only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. On loans collateralized by cash, the cash collateral is invested in a money market fund or short term securities. At period end, the fund had investment securities on loan with a fair value of $6,278,358 and a related liability of $6,563,978 for collateral received on securities loaned, both of which are presented gross on the Statement of Assets and Liabilities. The carrying value of the collateral for securities loaned approximates fair value which would have been considered level 2 under the fair value hierarchy if the collateral for securities loaned were carried at fair value. The collateral received on securities loaned exceeded the value of securities on loan at period end. 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 in the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income.
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.
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. TBA purchase commitments are held at carrying amount, which approximates fair value and are categorized as level 2 within the fair value hierarchy disclosure. 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, 2013, is shown as a reduction of total expenses in the Statement of Operations.
20
Table of Contents
MFS Total Return Series
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 in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests.
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:
12/31/12 | ||||
Ordinary income (including any short-term capital gains) | $62,960,127 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/13 | ||||
Cost of investments | $1,904,461,851 | |||
Gross appreciation | 206,070,263 | |||
Gross depreciation | (58,100,842 | ) | ||
Net unrealized appreciation (depreciation) | $147,969,421 | |||
As of 12/31/12 | ||||
Undistributed ordinary income | 55,747,601 | |||
Capital loss carryforwards | (206,583,434 | ) | ||
Other temporary differences | 7,798 | |||
Net unrealized appreciation (depreciation) | 176,048,268 |
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 for fund fiscal years beginning after December 31, 2010 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses (“post-enactment losses”). Previously, net capital losses were carried forward for eight years and treated as short-term losses (“pre-enactment losses”). As a transition rule, the Act requires that all post-enactment net capital losses be used before pre-enactment net capital losses.
As of December 31, 2012, the fund had capital loss carryforwards available to offset future realized gains. Such pre-enactment losses expire as follows:
12/31/16 | $(145,924,046 | ) | ||
12/31/17 | (60,659,388 | ) | ||
Total | $(206,583,434 | ) |
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and/or service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported in the Statements of Changes in Net Assets are presented by class as follows:
From net investment income | ||||||||
Six months ended 6/30/13 | Year ended 12/31/12 | |||||||
Initial Class | $— | $41,257,304 | ||||||
Service Class | — | 21,702,823 | ||||||
Total | $— | $62,960,127 |
21
Table of Contents
MFS Total Return 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 $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% |
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 April 30, 2014. This management fee reduction amounted to $324,913, which is shown as a reduction of total expenses in the Statement of Operations. Effective April 1, 2013, MFS has agreed in writing to reduce its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund’s Board of Trustees. For the period April 1, 2013 through June 30, 2013, this management fee reduction amounted to $3,030, 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, 2013 was equivalent to an annual effective rate of 0.72% of the fund’s average daily net assets.
Effective August 1, 2013, the investment adviser has agreed in writing to reduce its management fee to 0.70% of average daily net assets for the first $1 billion, 0.65% of average daily net assets in excess of $1 billion up to $2.5 billion, and 0.60% of average daily net assets in excess of $2.5 billion up to $5 billion. This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until August 31, 2016.
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, 2013, the fee was $58,786, which equated to 0.0051% 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, 2013, these costs amounted to $1,266.
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, 2013 was equivalent to an annual effective rate of 0.0129% 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, 2013, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $9,156 and are included in “Miscellaneous” expense in 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 $4,399, 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.
22
Table of Contents
MFS Total Return Series
Notes to Financial Statements (unaudited) – continued
The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks current income consistent with preservation of capital and liquidity. Income earned on this investment is included in “Dividends from underlying affiliated funds” in 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 and short-term obligations, were as follows:
Purchases | Sales | |||||||
U.S. Government securities | $344,487,807 | $417,839,932 | ||||||
Investments (non-U.S. Government securities) | $442,495,590 | $828,281,586 |
(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 6/30/13 | Year ended 12/31/12 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 736,733 | $15,810,245 | 1,388,031 | $27,195,466 | ||||||||||||
Service Class | 4,023,985 | 85,031,516 | 5,450,651 | 105,686,433 | ||||||||||||
4,760,718 | $100,841,761 | 6,838,682 | $132,881,899 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 2,117,931 | $41,257,304 | ||||||||||||
Service Class | — | — | 1,126,834 | 21,702,823 | ||||||||||||
— | $— | 3,244,765 | $62,960,127 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (9,575,702 | ) | $(205,461,451 | ) | (16,612,377 | ) | $(325,336,787 | ) | ||||||||
Service Class | (17,574,542 | ) | (383,888,126 | ) | (9,435,964 | ) | (182,244,729 | ) | ||||||||
(27,150,244 | ) | $(589,349,577 | ) | (26,048,341 | ) | $(507,581,516 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (8,838,969 | ) | $(189,651,206 | ) | (13,106,415 | ) | $(256,884,017 | ) | ||||||||
Service Class | (13,550,557 | ) | (298,856,610 | ) | (2,858,479 | ) | (54,855,473 | ) | ||||||||
(22,389,526 | ) | $(488,507,816 | ) | (15,964,894 | ) | $(311,739,490 | ) |
(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, 2013, the fund’s commitment fee and interest expense were $6,364 and $0, respectively, and are included in “Miscellaneous” expense in 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 | 61,232,279 | 296,410,170 | (309,691,280 | ) | 47,951,169 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $47,387 | $47,951,169 |
23
Table of Contents
MFS Total Return Series
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board’s most recent review and renewal of the fund’s Investment Advisory Agreement with MFS will be available on or about November 1, 2013 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products” 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” section of mfs.com.
24
Table of Contents
Table of Contents
SEMIANNUAL REPORT
June 30, 2013
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
Table of Contents
MFS Utilities Series
LETTER FROM THE CHAIRMAN AND CEO
Dear Contract Owners:
As the year progresses, the global economy continues to grind ahead slowly, held back by broad austerity measures. The U.S. economy remains a steadying force, driven by resilient consumers, who have taken the payroll tax increase and the sequestration’s early impact in stride. With U.S. housing and jobs showing steady expansion, domestic consumer-driven growth has offset weaker exports and the U.S. government’s spending constraints. In response to these developments, the U.S. Federal Reserve has begun to brace investors for an eventual shift in its monetary policy, causing global market tremors.
Japan has been another bright spot, with government and central bank stimulus policies leading to increased exports, a resurgent stock market and improved economic sentiment. After a six-month rally, Japan’s stocks slipped late in the second quarter, then picked up momentum on fresh signs that the country could soon break free of its chronic deflation. The major deterrent to global growth remains the eurozone, still in the grip of persistent recession. China has seen its pace of economic growth decelerate, a troubling turn for the country’s trading partners, who have come to rely on it as an engine for global growth.
As always, managing risk in the face of uncertainty remains a top priority for investors. At MFS®, our uniquely collaborative investment process employs integrated, global research and active risk management. Our global team of investment professionals shares ideas and evaluates opportunities across continents, investment disciplines and asset classes — all with a goal of building better insights, and ultimately better results, for our clients.
We are mindful of the many economic challenges investors face, and believe it is more important than ever to maintain a long-term view and employ time-tested principles, such as asset allocation and diversification. We remain confident that our unique approach can serve investors well as they work with their financial advisors to identify and pursue the most suitable opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2013
The opinions expressed in this letter are subject to change, may not be relied upon for investment advice, and no forecasts can be guaranteed.
1
Table of Contents
MFS Utilities Series
Portfolio structure (i)
Top ten holdings (i) | ||||
Comcast Corp., “Special A” | 3.8% | |||
Energias de Portugal S.A. | 3.0% | |||
Kinder Morgan, Inc. | 2.8% | |||
Calpine Corp. | 2.7% | |||
Edison International | 2.6% | |||
CMS Energy Corp. | 2.5% | |||
NRG Energy, Inc. | 2.5% | |||
Time Warner Cable, Inc. | 2.3% | |||
AES Corp. | 2.1% | |||
EQT Corp. | 2.0% |
Top five industries (i) | ||||
Utilities-Electric Power | 45.7% | |||
Cable TV | 10.6% | |||
Natural Gas-Pipeline | 8.9% | |||
Telecommunications-Wireless | 8.7% | |||
Natural Gas-Pipeline | 8.0% | |||
Issuer country weightings (i)(x) | ||||
United States | 67.3% | |||
Brazil | 5.9% | |||
Portugal | 5.0% | |||
Spain | 3.9% | |||
United Kingdom | 2.6% | |||
Russia | 1.7% | |||
Canada | 1.5% | |||
Italy | 1.4% | |||
Israel | 1.3% | |||
Other Countries | 9.4% |
(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. 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. The bond component will include any accrued interest amounts. |
(x) | Represents the portfolio’s exposure to issuer countries as a percentage of a portfolio’s net assets. |
Where the fund holds convertible bonds, these are treated as part of the equity portion of the portfolio.
Percentages are based on net assets as of 6/30/13.
The portfolio is actively managed and current holdings may be different.
2
Table of Contents
MFS Utilities Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2013 through June 30, 2013
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, 2013 through June 30, 2013.
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 1/01/13 | Ending Account Value | Expenses Paid During Period (p) 1/01/13-6/30/13 | ||||||||||||||
Initial Class | Actual | 0.81% | $1,000.00 | $1,096.63 | $4.21 | |||||||||||||
Hypothetical (h) | 0.81% | $1,000.00 | $1,020.78 | $4.06 | ||||||||||||||
Service Class | Actual | 1.06% | $1,000.00 | $1,095.27 | $5.51 | |||||||||||||
Hypothetical (h) | 1.06% | $1,000.00 | $1,019.54 | $5.31 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
3
Table of Contents
MFS Utilities Series
PORTFOLIO OF INVESTMENTS – 6/30/13 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 90.9% | ||||||||
Broadcasting – 0.0% | ||||||||
SIRIUS XM Radio, Inc. | 125,530 | $ | 420,521 | |||||
|
| |||||||
Cable TV – 10.6% | ||||||||
Astro Malaysia Holdings Berhad | 7,604,900 | $ | 7,293,194 | |||||
Comcast Corp., “Special A” | 1,363,115 | 54,074,772 | ||||||
Kabel Deutschland Holding AG | 45,978 | 5,049,910 | ||||||
Liberty Global PLC, “A” (a) | 271,209 | 20,091,163 | ||||||
Liberty Global PLC, “C” (a) | 148,797 | 10,101,828 | ||||||
Telenet Group Holding N.V. | 74,485 | 3,410,306 | ||||||
Time Warner Cable, Inc. | 287,443 | 32,331,589 | ||||||
Ziggo N.V. | 414,476 | 16,546,252 | ||||||
|
| |||||||
$ | 148,899,014 | |||||||
|
| |||||||
Energy – Independent – 5.7% | ||||||||
Anadarko Petroleum Corp. | 82,360 | $ | 7,077,195 | |||||
Cabot Oil & Gas Corp. | 81,861 | 5,813,768 | ||||||
CONSOL Energy, Inc. | 113,660 | 3,080,186 | ||||||
Energen Corp. | 240,106 | 12,547,940 | ||||||
EQT Corp. | 360,369 | 28,602,488 | ||||||
Noble Energy, Inc. | 159,340 | 9,566,774 | ||||||
QEP Resources, Inc. | 468,180 | 13,006,040 | ||||||
|
| |||||||
$ | 79,694,391 | |||||||
|
| |||||||
Natural Gas – Distribution – 8.0% | ||||||||
AGL Energy Ltd. | 320,680 | $ | 4,230,492 | |||||
China Resources Gas Group Ltd. | 1,382,000 | 3,545,634 | ||||||
Gas Natural SDG S.A. | 316,260 | 6,350,120 | ||||||
GDF SUEZ | 604,811 | 11,792,790 | ||||||
Hong Kong & China Gas Co. Ltd. | 600,000 | 1,462,164 | ||||||
Infraestructura Energetica Nova, S.A. de C.V (a) | 655,900 | 2,362,413 | ||||||
NiSource, Inc. | 419,556 | 12,016,084 | ||||||
ONEOK, Inc. | 417,326 | 17,239,737 | ||||||
Questar Corp. | 88,160 | 2,102,616 | ||||||
Sempra Energy | 288,082 | 23,553,584 | ||||||
Snam Rete Gas S.p.A. | 2,464,990 | 11,229,935 | ||||||
Spectra Energy Corp. | 495,167 | 17,063,455 | ||||||
|
| |||||||
$ | 112,949,024 | |||||||
|
| |||||||
Natural Gas – Pipeline – 8.9% | ||||||||
APA Group | 337,585 | $ | 1,842,101 | |||||
Cheniere Energy, Inc. (a) | 132,067 | 3,666,180 | ||||||
Enagas S.A. | 783,473 | 19,361,040 | ||||||
Enbridge, Inc. | 321,010 | 13,494,202 | ||||||
Kinder Morgan, Inc. | 1,043,294 | 39,801,666 | ||||||
TransCanada Corp. | 195,890 | 8,433,868 | ||||||
Williams Cos., Inc. | 612,492 | 19,887,615 | ||||||
Williams Partners LP | 360,260 | 18,589,416 | ||||||
|
| |||||||
$ | 125,076,088 | |||||||
|
| |||||||
Oil Services – 1.4% | ||||||||
Ensco PLC, “A” | 206,420 | $ | 11,997,130 | |||||
Noble Corp. | 206,810 | 7,771,920 | ||||||
|
| |||||||
$ | 19,769,050 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Telecommunications – Wireless – 7.9% | ||||||||
American Tower Corp., REIT | 288,388 | $ | 21,101,350 | |||||
Cellcom Israel Ltd. | 516,087 | 4,763,483 | ||||||
KDDI Corp. | 14,500 | 754,386 | ||||||
MegaFon OAO, GDR | 117,690 | 3,677,813 | ||||||
Mobile TeleSystems OJSC | 169,370 | 1,335,423 | ||||||
Mobile TeleSystems OJSC, ADR | 910,651 | 17,247,730 | ||||||
SBA Communications Corp. (a) | 144,498 | 10,710,192 | ||||||
Tele2 AB, “B” | 481,415 | 5,632,726 | ||||||
Telefonica Deutschland Holding AG | 509,750 | 3,689,148 | ||||||
TIM Participacoes S.A., ADR | 966,062 | 17,968,753 | ||||||
Turkcell Iletisim Hizmetleri A.S. (a) | 1,707,450 | 9,915,197 | ||||||
Vodafone Group PLC | 5,250,183 | 15,066,547 | ||||||
|
| |||||||
$ | 111,862,748 | |||||||
|
| |||||||
Telephone Services – 7.9% | ||||||||
Bezeq - The Israel Telecommunication Corp. Ltd. | 9,738,281 | $ | 12,944,039 | |||||
BT Group PLC | 1,214,310 | 5,682,531 | ||||||
CenturyLink, Inc. | 353,582 | 12,499,124 | ||||||
Frontier Communications Corp. (l) | 1,534,433 | 6,214,454 | ||||||
Oi S.A., IPS | 1,193,300 | 2,096,370 | ||||||
Portugal Telecom, SGPS, S.A. | 1,662,313 | 6,469,609 | ||||||
PT XL Axiata Tbk | 10,007,000 | 4,854,293 | ||||||
TDC A.S. | 1,792,375 | 14,500,427 | ||||||
Telecom Italia S.p.A. - Savings Shares | 15,170,576 | 8,382,919 | ||||||
Telefonica Brasil S.A., ADR | 337,667 | 7,705,561 | ||||||
Verizon Communications, Inc. | 252,650 | 12,718,401 | ||||||
Windstream Corp. (l) | 2,231,440 | 17,204,402 | ||||||
|
| |||||||
$ | 111,272,130 | |||||||
|
| |||||||
Utilities – Electric Power – 40.1% | ||||||||
AES Corp. | 2,452,454 | $ | 29,404,923 | |||||
Aksa Enerji Uretim A.S. (a) | 3,440,698 | 6,029,740 | ||||||
Alliant Energy Corp. | 169,540 | 8,548,207 | ||||||
Ameren Corp. | 42,980 | 1,480,231 | ||||||
American Electric Power Co., Inc. | 360,797 | 16,156,490 | ||||||
Calpine Corp. (a) | 1,779,302 | 37,774,581 | ||||||
CenterPoint Energy, Inc. | 660,684 | 15,519,467 | ||||||
CEZ A.S. | 342,914 | 8,218,626 | ||||||
Cheung Kong Infrastructure Holdings Ltd. | 1,143,000 | 7,600,211 | ||||||
China Longyuan Power Group | 3,718,000 | 3,830,021 | ||||||
CLP Holdings Ltd. | 834,000 | �� | 6,733,684 | |||||
CMS Energy Corp. | 1,288,569 | 35,010,420 | ||||||
Companhia Energetica de Minas Gerais, IPS | 1,741,583 | 15,539,883 | ||||||
Companhia Paranaense de Energia, ADR | 282,407 | 3,507,495 | ||||||
Companhia Paranaense de Energia, IPS | 549,300 | 6,814,092 | ||||||
Dominion Resources, Inc. | 124,080 | 7,050,226 | ||||||
DTE Energy Co. | 42,160 | 2,825,142 | ||||||
Duke Energy Corp. | 260,990 | 17,616,825 | ||||||
Dynegy, Inc. (a) | 18,730 | 422,362 | ||||||
E.On Russia JSC | 20,766,243 | 1,487,174 |
4
Table of Contents
MFS Utilities Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Utilities – Electric Power – continued | ||||||||
Edison International | 755,188 | $ | 36,369,854 | |||||
EDP Renovaveis S.A. | 4,512,461 | 23,078,087 | ||||||
Energias de Portugal S.A. | 12,941,984 | 41,693,668 | ||||||
Energias do Brasil S.A. | 2,233,600 | 11,341,425 | ||||||
Fortum Corp. | 102,521 | 1,915,164 | ||||||
Great Plains Energy, Inc. | 322,876 | 7,277,625 | ||||||
Iberdrola S.A. | 2,036,381 | 10,687,772 | ||||||
ITC Holdings Corp. | 103,404 | 9,440,785 | ||||||
Light S.A. | 730,770 | 5,092,645 | ||||||
National Grid PLC | 309,039 | 3,495,690 | ||||||
NextEra Energy, Inc. | 277,332 | 22,597,011 | ||||||
Northeast Utilities | 255,173 | 10,722,369 | ||||||
NRG Energy, Inc. | 1,305,284 | 34,851,083 | ||||||
OGE Energy Corp. | 320,845 | 21,881,629 | ||||||
PG&E Corp. | 122,460 | 5,600,096 | ||||||
Pinnacle West Capital Corp. | 96,333 | 5,343,592 | ||||||
Portland General Electric Co. | 460,920 | 14,099,543 | ||||||
PPL Corp. | 208,016 | 6,294,564 | ||||||
Public Service Enterprise Group, Inc. | 758,971 | 24,787,993 | ||||||
Red Electrica de Espana | 335,042 | 18,376,537 | ||||||
SSE PLC | 436,429 | 10,075,612 | ||||||
Terna Participacoes S.A., IEU | 472,740 | 4,527,507 | ||||||
Tractebel Energia S.A. | 259,100 | 4,025,813 | ||||||
|
| |||||||
$ | 565,145,864 | |||||||
|
| |||||||
Utilities – Water – 0.4% | ||||||||
Aguas Andinas S.A. | 1,338,972 | $ | 953,792 | |||||
Companhia de Saneamento de Minas Gerais – Copasa MG | 258,700 | 4,173,796 | ||||||
|
| |||||||
$ | 5,127,588 | |||||||
|
| |||||||
Total Common Stocks (Identified Cost, $1,188,466,873) | $ | 1,280,216,418 | ||||||
|
| |||||||
CONVERTIBLE PREFERRED STOCKS – 5.5% | ||||||||
Utilities – Electric Power – 5.5% | ||||||||
Dominion Resources, Inc., “A”, 6.125% | 141,970 | $ | 7,126,894 | |||||
Dominion Resources, Inc., “B”, 6% | 141,970 | 7,105,599 |
Issuer | Shares/Par | Value ($) | ||||||
CONVERTIBLE PREFERRED STOCKS – continued | ||||||||
Utilities – Electric Power – continued | ||||||||
NextEra Energy, Inc., 7% | 276,762 | $ | 16,813,292 | |||||
NextEra Energy, Inc., 8.375% | 184,870 | 10,267,680 | ||||||
PPL Corp., 9.5% | 297,113 | 15,571,692 | ||||||
PPL Corp., 8.75% | 375,089 | 20,262,308 | ||||||
|
| |||||||
Total Convertible Preferred Stocks (Identified Cost, $74,347,899) | $ | 77,147,465 | ||||||
|
| |||||||
BONDS – 0.1% | ||||||||
Asset-Backed & Securitized – 0.0% | ||||||||
Falcon Franchise Loan LLC, FRN, 7.269%, 2023 (i)(z) | $ | 54,819 | $ | 6,578 | ||||
|
| |||||||
Utilities – Electric Power – 0.1% | ||||||||
Viridian Group FundCo II, Ltd., 11.125%, 2017 (z) | $ | 1,994,000 | $ | 2,048,835 | ||||
|
| |||||||
Total Bonds (Identified Cost, $1,944,289) | $ | 2,055,413 | ||||||
|
| |||||||
CONVERTIBLE BONDS – 0.7% | ||||||||
Telecommunications – Wireless – 0.7% | ||||||||
SBA Communications Corp., 4%, 2014 (Identified Cost, $5,029,455) | $ | 4,282,807 | $ | 10,498,231 | ||||
|
| |||||||
MONEY MARKET FUNDS – 3.1% | ||||||||
MFS Institutional Money Market Portfolio, 0.11%, at Cost and Net Asset Value (v) | 43,140,696 | $ | 43,140,696 | |||||
|
| |||||||
COLLATERAL FOR SECURITIES LOANED – 1.2% | ||||||||
Navigator Securities Lending Prime Portfolio, 0.17%, at Cost and Net Asset Value (j) | 17,143,534 | $ | 17,143,534 | |||||
|
| |||||||
Total Investments (Identified Cost, $1,330,072,746) | $ | 1,430,201,757 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – (1.5)% | (22,032,398 | ) | ||||||
|
| |||||||
Net Assets – 100.0% | $ | 1,408,169,359 | ||||||
|
|
(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. |
(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 | |||||||
Falcon Franchise Loan LLC, FRN, 7.269%, 2023 | 1/18/02 | $2,098 | $6,578 | |||||||
Viridian Group FundCo II, Ltd., 11.125%, 2017 | 3/01/12 | 1,942,191 | 2,048,835 | |||||||
Total Restricted Securities | $2,055,413 | |||||||||
% of Net assets | 0.1% |
5
Table of Contents
MFS Utilities Series
Portfolio of Investments (unaudited) – continued
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. |
GDR | Global Depositary Receipt |
IEU | International Equity Unit |
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:
EUR | Euro |
GBP | British Pound |
Derivative Contracts at 6/30/13
Forward Foreign Currency Exchange Contracts at 6/30/13
Type | Currency | Counterparty | Contracts to Deliver/Receive | Settlement Date Range | In Exchange For | Contracts at Value | Net Unrealized Appreciation | |||||||||||||||||
Asset Derivatives | ||||||||||||||||||||||||
BUY | EUR | UBS AG | 224,876 | 7/16/13 | $ | 292,421 | $ | 292,726 | $ | 305 | ||||||||||||||
SELL | EUR | Barclays Bank PLC | 46,193,678 | 9/18/13 | 61,560,005 | 60,148,444 | 1,411,561 | |||||||||||||||||
SELL | EUR | Citibank N.A. | 131,939 | 7/16/13 | 171,806 | 171,747 | 59 | |||||||||||||||||
SELL | EUR | Credit Suisse Group | 565,892 | 7/16/13 | 740,946 | 736,634 | 4,312 | |||||||||||||||||
SELL | EUR | Deutsche Bank AG | 434,929 | 7/16/13 | 570,130 | 566,156 | 3,974 | |||||||||||||||||
SELL | EUR | JPMorgan Chase Bank N.A. | 6,817,259 | 7/16/13 | 8,940,520 | 8,874,174 | 66,346 | |||||||||||||||||
SELL | EUR | UBS AG | 46,355,285 | 7/16/13-9/18/13 | 61,772,704 | 60,358,812 | 1,413,892 | |||||||||||||||||
SELL | GBP | Barclays Bank PLC | 2,924,506 | 7/15/13-7/16/13 | 4,537,416 | 4,447,613 | 89,803 | |||||||||||||||||
SELL | GBP | Credit Suisse Group | 13,374,842 | 7/16/13 | 20,495,475 | 20,340,527 | 154,948 | |||||||||||||||||
SELL | GBP | Deutsche Bank AG | 13,925,111 | 7/16/13 | 21,354,126 | 21,177,378 | 176,748 | |||||||||||||||||
SELL | GBP | JPMorgan Chase Bank N.A. | 3,141,887 | 7/16/13 | 4,778,517 | 4,778,197 | 320 | |||||||||||||||||
|
| |||||||||||||||||||||||
$ | 3,322,268 | |||||||||||||||||||||||
|
| |||||||||||||||||||||||
Liability Derivatives | ||||||||||||||||||||||||
BUY | EUR | Barclays Bank PLC | 518,886 | 7/16/13 | $ | 680,251 | $ | 675,445 | $ | (4,806 | ) | |||||||||||||
BUY | EUR | Credit Suisse Group | 607,739 | 7/16/13 | 803,714 | 791,107 | (12,607 | ) | ||||||||||||||||
BUY | EUR | Deutsche Bank AG | 3,306,660 | 7/16/13 | 4,328,710 | 4,304,351 | (24,359 | ) | ||||||||||||||||
BUY | EUR | Goldman Sachs International | 66,864 | 7/16/13 | 87,292 | 87,039 | (253 | ) | ||||||||||||||||
BUY | EUR | JPMorgan Chase Bank N.A. | 4,582,231 | 7/16/13 | 6,011,830 | 5,964,790 | (47,040 | ) | ||||||||||||||||
BUY | EUR | UBS AG | 1,569,649 | 7/16/13 | 2,067,167 | 2,043,246 | (23,921 | ) | ||||||||||||||||
SELL | EUR | Barclays Bank PLC | 5,458 | 7/16/13 | 7,092 | 7,105 | (13 | ) | ||||||||||||||||
SELL | EUR | Deutsche Bank AG | 821,932 | 7/16/13 | 1,064,294 | 1,069,926 | (5,632 | ) | ||||||||||||||||
SELL | EUR | Goldman Sachs International | 391,586 | 7/16/13 | 502,508 | 509,737 | (7,229 | ) | ||||||||||||||||
SELL | EUR | JPMorgan Chase Bank N.A. | 7,707,920 | 7/16/13 | 9,975,772 | 10,033,566 | (57,794 | ) | ||||||||||||||||
BUY | GBP | Barclays Bank PLC | 2,300,000 | 9/18/13 | 3,606,688 | 3,496,402 | (110,286 | ) | ||||||||||||||||
BUY | GBP | Credit Suisse Group | 340,898 | 7/16/13 | 521,045 | 518,439 | (2,606 | ) | ||||||||||||||||
BUY | GBP | JPMorgan Chase Bank N.A. | 16,850,021 | 7/16/13 | 26,063,574 | 25,625,597 | (437,977 | ) | ||||||||||||||||
SELL | GBP | Citibank N.A. | 925,443 | 7/16/13 | 1,404,217 | 1,407,418 | (3,201 | ) | ||||||||||||||||
SELL | GBP | UBS AG | 122,989 | 7/16/13 | 186,827 | 187,043 | (216 | ) | ||||||||||||||||
|
| |||||||||||||||||||||||
$ | (737,940 | ) | ||||||||||||||||||||||
|
|
At June 30, 2013, the fund had cash collateral of $820,000 to cover any commitments for securities sold short and certain derivative contracts. Cash collateral is comprised of “Restricted cash” on the Statement of Assets and Liabilities.
See Notes to Financial Statements
6
Table of Contents
MFS Utilities Series
FINANCIAL STATEMENTS | STATEMENT OF ASSETS AND LIABILITIES (unaudited)
This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
At 6/30/13 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $1,286,932,050) | $1,387,061,061 | |||||||
Underlying affiliated funds, at cost and value | 43,140,696 | |||||||
Total investments, at value, including $16,472,211 of securities on loan (identified cost, $1,330,072,746) | $1,430,201,757 | |||||||
Cash | 518,155 | |||||||
Restricted cash | 820,000 | |||||||
Foreign currency, at value (identified cost, $538,608) | 532,840 | |||||||
Receivables for | ||||||||
Forward foreign currency exchange contracts | 3,322,268 | |||||||
Investments sold | 11,907,692 | |||||||
Fund shares sold | 390,949 | |||||||
Interest and dividends | 6,845,029 | |||||||
Other assets | 3,608 | |||||||
Total assets | $1,454,542,298 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Forward foreign currency exchange contracts | $737,940 | |||||||
Investments purchased | 24,725,829 | |||||||
Fund shares reacquired | 2,442,099 | |||||||
Collateral for securities loaned, at value | 17,143,534 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 121,630 | |||||||
Shareholder servicing costs | 1,410 | |||||||
Distribution and/or service fees | 24,714 | |||||||
Payable for independent Trustees’ compensation | 5,534 | |||||||
Deferred country tax expense payable | 955,570 | |||||||
Accrued expenses and other liabilities | 214,679 | |||||||
Total liabilities | $46,372,939 | |||||||
Net assets | $1,408,169,359 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $1,173,222,743 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies (net of $83,030 deferred country tax) | 102,426,825 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | 72,754,612 | |||||||
Undistributed net investment income | 59,765,179 | |||||||
Net assets | $1,408,169,359 | |||||||
Shares of beneficial interest outstanding | 46,906,547 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $503,556,028 | 16,626,758 | $30.29 | |||||||||
Service Class | 904,613,331 | 30,279,789 | 29.88 |
See Notes to Financial Statements
7
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 6/30/13 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $33,160,176 | |||||||
Interest | 555,966 | |||||||
Dividends from underlying affiliated funds | 33,308 | |||||||
Foreign taxes withheld | (1,980,794 | ) | ||||||
Total investment income | $31,768,656 | |||||||
Expenses | ||||||||
Management fee | $5,159,850 | |||||||
Distribution and/or service fees | 1,124,015 | |||||||
Shareholder servicing costs | 42,350 | |||||||
Administrative services fee | 92,830 | |||||||
Independent Trustees’ compensation | 14,250 | |||||||
Custodian fee | 171,251 | |||||||
Shareholder communications | 90,366 | |||||||
Audit and tax fees | 26,403 | |||||||
Legal fees | 8,831 | |||||||
Miscellaneous | 53,411 | |||||||
Total expenses | $6,783,557 | |||||||
Fees paid indirectly | (62 | ) | ||||||
Reduction of expenses by investment adviser | (4,606 | ) | ||||||
Net expenses | $6,778,889 | |||||||
Net investment income | $24,989,767 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments (net of $321,505 country tax) | $52,771,317 | |||||||
Foreign currency | (916,143 | ) | ||||||
Net realized gain (loss) on investments and foreign currency | $51,855,174 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments (net of $319,472 decrease in deferred country tax) | $44,269,262 | |||||||
Translation of assets and liabilities in foreign currencies | 4,292,277 | |||||||
Net unrealized gain (loss) on investments and foreign currency translation | $48,561,539 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $100,416,713 | |||||||
Change in net assets from operations | $125,406,480 |
See Notes to Financial Statements
8
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 6/30/13 (unaudited | ) | | Year ended 12/31/12 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $24,989,767 | $39,327,628 | ||||||
Net realized gain (loss) on investments and foreign currency | 51,855,174 | 144,335,375 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 48,561,539 | 7,858,172 | ||||||
Change in net assets from operations | $125,406,480 | $191,521,175 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(83,800,084 | ) | |||||
Change in net assets from fund share transactions | $(31,117,892 | ) | $(784,544,229 | ) | ||||
Total change in net assets | $94,288,588 | $(676,823,138 | ) | |||||
Net assets | ||||||||
At beginning of period | 1,313,880,771 | 1,990,703,909 | ||||||
At end of period (including undistributed net investment income of $59,765,179 and | $1,408,169,359 | $1,313,880,771 |
See Notes to Financial Statements
9
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 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $27.61 | $26.08 | $25.27 | $22.92 | $18.21 | $34.48 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.55 | $0.84 | $0.97 | $0.79 | $0.80 | $0.73 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 2.13 | 2.57 | 0.70 | 2.29 | 4.90 | (11.97 | ) | |||||||||||||||||
Total from investment operations | $2.68 | $3.41 | $1.67 | $3.08 | $5.70 | $(11.24 | ) | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(1.88 | ) | $(0.86 | ) | $(0.73 | ) | $(0.99 | ) | $(0.44 | ) | |||||||||||||
From net realized gain on investments | — | — | — | — | — | (4.59 | ) | |||||||||||||||||
Total distributions declared to shareholders | $— | $(1.88 | ) | $(0.86 | ) | $(0.73 | ) | $(0.99 | ) | $(5.03 | ) | |||||||||||||
Net asset value, end of period (x) | $30.29 | $27.61 | $26.08 | $25.27 | $22.92 | $18.21 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 9.71 | (n) | 13.40 | 6.78 | 13.81 | 33.44 | (37.77 | ) | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.81 | (a) | 0.82 | 0.80 | 0.81 | 0.83 | 0.84 | |||||||||||||||||
Expenses after expense reductions (f) | 0.81 | (a) | 0.82 | 0.80 | 0.81 | 0.83 | 0.81 | |||||||||||||||||
Net investment income | 3.71 | (a) | 3.11 | 3.71 | 3.47 | 4.11 | 2.76 | |||||||||||||||||
Portfolio turnover | 31 | (n) | 51 | 53 | 56 | 70 | 68 | |||||||||||||||||
Net assets at end of period (000 omitted) | $503,556 | $476,685 | $532,447 | $541,653 | $564,822 | $495,297 | ||||||||||||||||||
Service Class | Six months ended 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $27.27 | $25.73 | $24.95 | $22.65 | $17.98 | $34.11 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.51 | $0.71 | $0.89 | $0.73 | $0.73 | $0.66 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 2.10 | 2.59 | 0.70 | 2.25 | 4.86 | (11.82 | ) | |||||||||||||||||
Total from investment operations | $2.61 | $3.30 | $1.59 | $2.98 | $5.59 | $(11.16 | ) | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(1.76 | ) | $(0.81 | ) | $(0.68 | ) | $(0.92 | ) | $(0.38 | ) | |||||||||||||
From net realized gain on investments | — | — | — | — | — | (4.59 | ) | |||||||||||||||||
Total distributions declared to shareholders | $— | $(1.76 | ) | $(0.81 | ) | $(0.68 | ) | $(0.92 | ) | $(4.97 | ) | |||||||||||||
Net asset value, end of period (x) | $29.88 | $27.27 | $25.73 | $24.95 | $22.65 | $17.98 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 9.57 | (n) | 13.13 | 6.51 | 13.51 | 33.09 | (37.91 | ) | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.06 | (a) | 1.07 | 1.05 | 1.06 | 1.08 | 1.09 | |||||||||||||||||
Expenses after expense reductions (f) | 1.06 | (a) | 1.07 | 1.05 | 1.06 | 1.07 | 1.06 | |||||||||||||||||
Net investment income | 3.48 | (a) | 2.66 | 3.45 | 3.23 | 3.83 | 2.54 | |||||||||||||||||
Portfolio turnover | 31 | (n) | 51 | 53 | 56 | 70 | 68 | |||||||||||||||||
Net assets at end of period (000 omitted) | $904,613 | $837,196 | $1,458,257 | $1,335,305 | $1,209,765 | $992,502 |
See Notes to Financial Statements
10
Table of Contents
MFS Utilities 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 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 the disclosure provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Update 2011-11 (“ASU 2011-11”), Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities along with the related scope clarification provisions of FASB Accounting Standards Update 2013-01 (“ASU 2013-01”) entitled Balance Sheet (Topic 210) – Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 is intended to enhance disclosures on the offsetting of financial assets and liabilities by requiring entities to disclose both gross and net information about financial instruments and transactions that are either offset in the statement of financial position or subject to a Master Netting Agreement or similar arrangement. ASU 2013-01 limits the scope of ASU 2011-11’s disclosure requirements on offsetting to financial assets and financial liabilities related to derivatives, repurchase and reverse repurchase agreements, and securities lending and securities borrowing transactions. The disclosures required by ASU 2011-11, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
In June 2013, FASB issued Accounting Standards Update 2013-08 Financial Services – Investment Companies (Topic 946) – Amendments to the Scope, Measurement, and Disclosure Requirements (“ASU 2013-08”) which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013. ASU 2013-08 sets forth a methodology for determining whether an entity should be characterized as an investment company and prescribes fair value accounting for an investment company’s non-controlling ownership interest in another investment company. FASB has determined that a fund registered under the Investment Company Act of 1940 automatically meets ASU 2013-08’s criteria for an investment company. Although still evaluating the potential impacts of ASU 2013-08 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
12
Table of Contents
MFS Utilities Series
Notes to Financial Statements (unaudited) – continued
good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted 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, 2013 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $899,074,074 | $— | $— | $899,074,074 | ||||||||||||
Brazil | 82,793,340 | — | — | 82,793,340 | ||||||||||||
Portugal | 48,163,277 | 23,078,087 | — | 71,241,364 | ||||||||||||
Spain | 19,361,040 | 35,414,429 | — | 54,775,469 | ||||||||||||
United Kingdom | — | 34,320,380 | — | 34,320,380 | ||||||||||||
Russia | 20,925,542 | 2,822,598 | — | 23,748,140 | ||||||||||||
Canada | 21,928,070 | — | — | 21,928,070 | ||||||||||||
Italy | 11,229,935 | 8,382,919 | — | 19,612,854 | ||||||||||||
Israel | 4,763,483 | 12,944,040 | — | 17,707,523 | ||||||||||||
Other Countries | 44,266,405 | 87,896,264 | — | 132,162,669 | ||||||||||||
U.S. Corporate Bonds | — | 10,498,231 | — | 10,498,231 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 6,578 | — | 6,578 | ||||||||||||
Foreign Bonds | — | 2,048,835 | — | 2,048,835 | ||||||||||||
Mutual Funds | 60,284,230 | — | — | 60,284,230 | ||||||||||||
Total Investments | $1,212,789,396 | $217,412,361 | $— | $1,430,201,757 | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Forward Foreign Currency Exchange Contracts | $— | $2,584,328 | $— | $2,584,328 |
For further information regarding security characteristics, see the Portfolio of Investments.
Of the level 2 investments presented above, equity investments amounting to $26,293,217 would have been considered level 1 investments at the beginning of the period. Of the level 1 investments presented above, equity investments amounting to $116,489,859 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.
13
Table of Contents
MFS Utilities Series
Notes to Financial Statements (unaudited) – continued
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 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, 2013 as reported in the Statement of Assets and Liabilities:
Fair Value | ||||||||||
Risk | Derivative Contracts | Asset Derivatives | Liability Derivatives | |||||||
Foreign Exchange | Forward Foreign Currency Exchange | $3,322,268 | $(737,940 | ) |
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, 2013 as reported in the Statement of Operations:
Risk | Foreign Currency | |||
Foreign Exchange | $(661,151 | ) |
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, 2013 as reported in the Statement of Operations:
Risk | Translation of Assets and Liabilities in Foreign Currencies | |||
Foreign Exchange | $4,507,325 |
Derivative counterparty credit risk is managed through formal evaluation of the creditworthiness of all potential counterparties. On certain, but not all, 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. Upon an event of default or a termination of the ISDA Master Agreement, the non-defaulting party has the right to close out all transactions traded under such agreement and to net amounts owed under each 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.
Collateral and margin requirements differ by type of derivative. Margin requirements are set by the broker or clearing house for cleared derivatives (i.e., futures contracts, cleared swaps, and exchange-traded options) while collateral terms are contract specific for over-the-counter traded derivatives (i.e., forward foreign currency exchange contracts, uncleared 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 that has been segregated to cover the fund’s collateral or margin obligations under derivative contracts, if any, will be reported separately in the Statement of Assets and Liabilities as “Restricted cash”. Securities pledged as collateral or margin for the same purpose, if any, is noted in the Portfolio of Investments.
The fund’s accounting policy with respect to balance sheet offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the ISDA Master Agreement does not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty.
14
Table of Contents
MFS Utilities Series
Notes to Financial Statements (unaudited) – continued
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.
Security Loans – Under its Securities Lending Agency Agreement with the fund, State Street Bank and Trust Company (“State Street”), as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. 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. In the event of Borrower default, State Street will for the benefit of the fund either purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the fund the market value of the loaned securities. In return, State Street assumes the fund’s rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, State Street is responsible for the shortfall, but only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. On loans collateralized by cash, the cash collateral is invested in a money market fund or short-term securities. At period end, the fund had investment securities on loan with a fair value of $16,472,211 and a related liability of $17,143,534 for collateral received on securities loaned, both of which are presented gross on the Statement of Assets and Liabilities. The carrying value of the collateral for securities loaned approximates fair value which would have been considered level 2 under the fair value hierarchy if the collateral for securities loaned were carried at fair value. The collateral received on securities loaned exceeded the value of securities on loan at period end. 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 in the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income.
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, 2013, is shown as a reduction of total expenses in the Statement of Operations.
15
Table of Contents
MFS Utilities Series
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 in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests. Additionally, capital gains realized by the fund on securities issued in or by certain foreign countries may be subject to capital gains tax imposed by those countries.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to amortization and accretion of debt securities, wash sale loss deferrals, derivative transactions, and partnership adjustments.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/12 | ||||
Ordinary income (including any short-term capital gains) | $83,800,084 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/13 | ||||
Cost of investments | $1,336,233,464 | |||
Gross appreciation | 190,496,403 | |||
Gross depreciation | (96,528,110 | ) | ||
Net unrealized appreciation (depreciation) | $93,968,293 | |||
As of 12/31/12 | ||||
Undistributed ordinary income | 32,856,673 | |||
Undistributed long-term capital gain | 27,624,293 | |||
Other temporary differences | (946,231 | ) | ||
Net unrealized appreciation (depreciation) | 50,005,401 |
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and/or service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported in the Statements of Changes in Net Assets are presented by class as follows:
From net investment income | ||||||||
Six months ended 6/30/13 | Year ended 12/31/12 | |||||||
Initial Class | $— | $32,043,181 | ||||||
Service Class | — | 51,756,903 | ||||||
Total | $— | $83,800,084 |
(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% |
Effective April 1, 2013, MFS has agreed in writing to reduce its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund’s Board of Trustees. For the period April 1, 2013 through June 30, 2013, this management fee reduction amounted to $1,955, which is shown as a reduction of total expenses in the Statement of
16
Table of Contents
MFS Utilities Series
Notes to Financial Statements (unaudited) – continued
Operations. The management fee incurred for the six months ended June 30, 2013 was equivalent to an annual effective rate of 0.74% of the fund’s average daily net assets.
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, is the distributor of shares of the fund. The Trustees have adopted a distribution plan for the Service Class shares pursuant to Rule 12b-1 under the Investment Company Act of 1940.
The fund’s distribution plan provides that the fund will pay MFD distribution and/or service fees equal to 0.25% per annum of its average daily net assets attributable to Service Class shares as partial consideration for services performed and expenses incurred by MFD and financial intermediaries (including participating insurance companies that invest in the fund to fund variable annuity and variable life insurance contracts, sponsors of qualified retirement and pension plans that invest in the fund, and affiliates of these participating insurance companies and plan sponsors) in connection with the sale and distribution of the Service Class shares. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries.
Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent. For the six months ended June 30, 2013, the fee was $41,178, which equated to 0.0059% annually of the fund’s average daily net assets. MFSC also receives payment from the fund for out-of-pocket expenses paid by MFSC on behalf of the fund. For the six months ended June 30, 2013, these costs amounted to $1,172.
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, 2013 was equivalent to an annual effective rate of 0.0132% 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, 2013, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $5,060 and are included in “Miscellaneous” expense in 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 $2,651, 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 current income consistent with preservation of capital and liquidity. Income earned on this investment is included in “Dividends from underlying affiliated funds” in 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 short-term obligations, aggregated $425,222,862 and $447,717,059, 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 6/30/13 | Year ended 12/31/12 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 734,160 | $22,093,275 | 1,205,463 | $32,393,893 | ||||||||||||
Service Class | 2,636,411 | 78,187,773 | 5,668,595 | 150,451,311 | ||||||||||||
3,370,571 | $100,281,048 | 6,874,058 | $182,845,204 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 1,213,297 | $32,043,181 | ||||||||||||
Service Class | — | — | 1,982,264 | 51,756,903 | ||||||||||||
— | $— | 3,195,561 | $83,800,084 |
17
Table of Contents
MFS Utilities Series
Notes to Financial Statements (unaudited) – continued
Six months ended 6/30/13 | Year ended 12/31/12 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (1,371,049 | ) | $(40,952,391 | ) | (5,573,608 | ) | $(151,398,917 | ) | ||||||||
Service Class | (3,056,297 | ) | (90,446,549 | ) | (33,627,625 | ) | (899,790,600 | ) | ||||||||
(4,427,346 | ) | $(131,398,940 | ) | (39,201,233 | ) | $(1,051,189,517 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (636,889 | ) | $(18,859,116 | ) | (3,154,848 | ) | $(86,961,843 | ) | ||||||||
Service Class | (419,886 | ) | (12,258,776 | ) | (25,976,766 | ) | (697,582,386 | ) | ||||||||
(1,056,775 | ) | $(31,117,892 | ) | (29,131,614 | ) | $(784,544,229 | ) |
(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, 2013, the fund’s commitment fee and interest expense were $3,612 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations. The period-end carrying value of the outstanding borrowings under this agreement on the fund’s Statement of Assets and Liabilities approximates its fair value which would have been considered level 2 under the fair value hierarchy disclosure if the liability were carried at fair value.
(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 | 26,523,815 | 204,140,903 | (187,524,022 | ) | 43,140,696 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $33,308 | $43,140,696 |
18
Table of Contents
MFS Utilities Series
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board’s most recent review and renewal of the fund’s Investment Advisory Agreement with MFS will be available on or about November 1, 2013 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products” 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” section of mfs.com.
19
Table of Contents
Table of Contents
SEMIANNUAL REPORT
June 30, 2013
MFS® VALUE SERIES
MFS® Variable Insurance Trust
VLU-SEM
Table of Contents
MFS® VALUE SERIES
The report is prepared for the general information of contract owners. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED Ÿ MAY LOSE VALUE Ÿ NO BANK OR CREDIT UNION GUARANTEE Ÿ
NOT A DEPOSIT Ÿ NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
Table of Contents
MFS Value Series
LETTER FROM THE CHAIRMAN AND CEO
Dear Contract Owners:
As the year progresses, the global economy continues to grind ahead slowly, held back by broad austerity measures. The U.S. economy remains a steadying force, driven by resilient consumers, who have taken the payroll tax increase and the sequestration’s early impact in stride. With U.S. housing and jobs showing steady expansion, domestic consumer-driven growth has offset weaker exports and the U.S. government’s spending constraints. In response to these developments, the U.S. Federal Reserve has begun to brace investors for an eventual shift in its monetary policy, causing global market tremors.
Japan has been another bright spot, with government and central bank stimulus policies leading to increased exports, a resurgent stock market and improved economic sentiment. After a six-month rally, Japan’s stocks slipped late in the second quarter, then picked up momentum on fresh signs that the country could soon break free of its chronic deflation. The major deterrent to global growth remains the eurozone, still in the grip of persistent recession. China has seen its pace of economic growth decelerate, a troubling turn for the country’s trading partners, who have come to rely on it as an engine for global growth.
As always, managing risk in the face of uncertainty remains a top priority for investors. At MFS®, our uniquely collaborative investment process employs integrated, global research and active risk management. Our global team of investment professionals shares ideas and evaluates opportunities across continents, investment disciplines and asset classes — all with a goal of building better insights, and ultimately better results, for our clients.
We are mindful of the many economic challenges investors face, and believe it is more important than ever to maintain a long-term view and employ time-tested principles, such as asset allocation and diversification. We remain confident that our unique approach can serve investors well as they work with their financial advisors to identify and pursue the most suitable opportunities.
Respectfully,
Robert J. Manning
Chairman and Chief Executive Officer
MFS Investment Management®
August 16, 2013
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 Value Series
Portfolio structure
Top ten holdings | ||||
Philip Morris International, Inc. | 3.7% | |||
Johnson & Johnson | 3.6% | |||
JPMorgan Chase & Co. | 3.6% | |||
Lockheed Martin Corp. | 3.4% | |||
Pfizer, Inc. | 3.2% | |||
Wells Fargo & Co. | 2.6% | |||
Goldman Sachs Group, Inc. | 2.1% | |||
Exxon Mobil Corp. | 2.1% | |||
International Business Machines Corp. | 2.0% | |||
MetLife, Inc. | 2.0% |
Equity sectors | ||||
Financial Services | 21.5% | |||
Health Care | 14.1% | |||
Consumer Staples | 13.0% | |||
Industrial Goods & Services | 12.1% | |||
Leisure | 7.4% | |||
Energy | 6.5% | |||
Basic Materials | 4.3% | |||
Retailing | 4.3% | |||
Technology | 4.1% | |||
Utilities & Communications | 4.1% | |||
Special Products & Services | 2.8% | |||
Autos & Housing | 2.7% | |||
Transportation | 2.0% |
Percentages are based on net assets as of 6/30/13.
The portfolio is actively managed and current holdings may be different.
2
Table of Contents
MFS Value Series
Fund Expenses Borne by the Contract Holders During the Period,
January 1, 2013 through June 30, 2013
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, 2013 through June 30, 2013.
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 | Ending Account Value | Expenses Paid During Period (p) 1/01/13-6/30/13 | ||||||||||||||
Initial Class | Actual | 0.74% | $1,000.00 | $1,165.97 | $3.97 | |||||||||||||
Hypothetical (h) | 0.74% | $1,000.00 | $1,021.12 | $3.71 | ||||||||||||||
Service Class | Actual | 0.99% | $1,000.00 | $1,164.56 | $5.31 | |||||||||||||
Hypothetical (h) | 0.99% | $1,000.00 | $1,019.89 | $4.96 |
(h) | 5% class return per year before expenses. |
(p) | Expenses paid are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by the number of days in the period, divided by the number of days in the year. |
3
Table of Contents
MFS Value Series
PORTFOLIO OF INVESTMENTS – 6/30/13 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 98.7% | ||||||||
Aerospace – 8.1% | ||||||||
Honeywell International, Inc. | 529,690 | $ | 42,025,597 | |||||
Lockheed Martin Corp. | 690,420 | 74,882,953 | ||||||
Northrop Grumman Corp. | 259,360 | 21,475,008 | ||||||
United Technologies Corp. | 456,710 | 42,446,627 | ||||||
|
| |||||||
$ | 180,830,185 | |||||||
|
| |||||||
Alcoholic Beverages – 1.6% | ||||||||
Diageo PLC | 1,228,976 | $ | 35,251,009 | |||||
|
| |||||||
Automotive – 1.8% | ||||||||
Delphi Automotive PLC | 301,600 | $ | 15,288,104 | |||||
General Motors Co. (a) | 146,450 | 4,878,250 | ||||||
Johnson Controls, Inc. | 554,820 | 19,857,008 | ||||||
|
| |||||||
$ | 40,023,362 | |||||||
|
| |||||||
Broadcasting – 4.1% | ||||||||
Omnicom Group, Inc. | 426,710 | $ | 26,827,258 | |||||
Viacom, Inc., “B” | 416,150 | 28,319,008 | ||||||
Walt Disney Co. | 563,990 | 35,615,969 | ||||||
|
| |||||||
$ | 90,762,235 | |||||||
|
| |||||||
Brokerage & Asset Managers – 1.8% | ||||||||
BlackRock, Inc. | 76,904 | $ | 19,752,792 | |||||
Franklin Resources, Inc. | 120,612 | 16,405,644 | ||||||
NASDAQ OMX Group, Inc. | 147,700 | 4,843,083 | ||||||
|
| |||||||
$ | 41,001,519 | |||||||
|
| |||||||
Business Services – 2.8% | ||||||||
Accenture PLC, “A” | 571,000 | $ | 41,089,160 | |||||
Dun & Bradstreet Corp. | 62,830 | 6,122,784 | ||||||
Fidelity National Information Services, Inc. | 81,730 | 3,501,313 | ||||||
Fiserv, Inc. (a) | 123,390 | 10,785,520 | ||||||
|
| |||||||
$ | 61,498,777 | |||||||
|
| |||||||
Cable TV – 0.9% | ||||||||
Comcast Corp., “Special A” | 525,160 | $ | 20,833,097 | |||||
|
| |||||||
Chemicals – 3.4% | ||||||||
3M Co. | 380,811 | $ | 41,641,683 | |||||
PPG Industries, Inc. | 233,682 | 34,213,382 | ||||||
|
| |||||||
$ | 75,855,065 | |||||||
|
| |||||||
Computer Software – 1.2% | ||||||||
Oracle Corp. | 860,970 | $ | 26,448,998 | |||||
|
| |||||||
Computer Software – Systems – 2.2% | ||||||||
Hewlett-Packard Co. | 191,790 | $ | 4,756,392 | |||||
International Business Machines Corp. | 232,793 | 44,489,070 | ||||||
|
| |||||||
$ | 49,245,462 | |||||||
|
| |||||||
Construction – 0.9% | ||||||||
Stanley Black & Decker, Inc. | 265,493 | $ | 20,522,609 | |||||
|
| |||||||
Consumer Products – 0.6% | ||||||||
Procter & Gamble Co. | 169,254 | $ | 13,030,865 | |||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Electrical Equipment – 2.6% | ||||||||
Danaher Corp. | 425,690 | $ | 26,946,177 | |||||
Pentair Ltd. | 155,252 | 8,956,488 | ||||||
Tyco International Ltd. | 692,810 | 22,828,090 | ||||||
|
| |||||||
$ | 58,730,755 | |||||||
|
| |||||||
Electronics – 0.7% | ||||||||
Intel Corp. | 628,990 | $ | 15,234,138 | |||||
|
| |||||||
Energy – Independent – 2.7% | ||||||||
Apache Corp. | 141,760 | $ | 11,883,741 | |||||
EOG Resources, Inc. | 109,257 | 14,386,962 | ||||||
Occidental Petroleum Corp. | 373,230 | 33,303,313 | ||||||
|
| |||||||
$ | 59,574,016 | |||||||
|
| |||||||
Energy – Integrated – 3.8% | ||||||||
Chevron Corp. | 333,454 | $ | 39,460,946 | |||||
Exxon Mobil Corp. | �� | 510,588 | 46,131,626 | |||||
|
| |||||||
$ | 85,592,572 | |||||||
|
| |||||||
Engineering – Construction – 0.1% | ||||||||
Fluor Corp. | 50,420 | $ | 2,990,410 | |||||
|
| |||||||
Food & Beverages – 5.5% | ||||||||
Coca-Cola Enterprises, Inc. | 207,970 | $ | 7,312,225 | |||||
Dr Pepper Snapple Group, Inc. | 205,090 | 9,419,784 | ||||||
General Mills, Inc. | 711,460 | 34,527,154 | ||||||
Groupe Danone | 291,385 | 21,869,350 | ||||||
J.M. Smucker Co. | 60,550 | 6,245,733 | ||||||
Kellogg Co. | 124,370 | 7,988,285 | ||||||
Nestle S.A. | 410,625 | 26,857,513 | ||||||
PepsiCo, Inc. | 94,118 | 7,697,911 | ||||||
|
| |||||||
$ | 121,917,955 | |||||||
|
| |||||||
Food & Drug Stores – 1.6% | ||||||||
CVS Caremark Corp. | 638,171 | $ | 36,490,618 | |||||
|
| |||||||
General Merchandise – 1.9% | ||||||||
Kohl’s Corp. | 118,960 | $ | 6,008,670 | |||||
Target Corp. | 515,530 | 35,499,396 | ||||||
|
| |||||||
$ | 41,508,066 | |||||||
|
| |||||||
Insurance – 7.2% | ||||||||
ACE Ltd. | 276,370 | $ | 24,729,588 | |||||
Aon PLC | 322,480 | 20,751,588 | ||||||
Chubb Corp. | 176,620 | 14,950,883 | ||||||
MetLife, Inc. | 962,963 | 44,065,187 | ||||||
Prudential Financial, Inc. | 390,265 | 28,501,053 | ||||||
Travelers Cos., Inc. | 356,800 | 28,515,456 | ||||||
|
| |||||||
$ | 161,513,755 | |||||||
|
| |||||||
Leisure & Toys – 0.7% | ||||||||
Hasbro, Inc. | 352,400 | $ | 15,798,092 | |||||
|
| |||||||
Machinery & Tools – 1.2% | ||||||||
Eaton Corp. PLC | 310,270 | $ | 20,418,869 | |||||
Illinois Tool Works, Inc. | 102,220 | 7,070,557 | ||||||
|
| |||||||
$ | 27,489,426 | |||||||
|
|
4
Table of Contents
MFS Value Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Major Banks – 11.4% | ||||||||
Bank of New York Mellon Corp. | 1,092,350 | $ | 30,640,418 | |||||
Goldman Sachs Group, Inc. | 306,929 | 46,423,011 | ||||||
JPMorgan Chase & Co. | 1,530,140 | 80,776,091 | ||||||
PNC Financial Services Group, Inc. | 225,650 | 16,454,398 | ||||||
State Street Corp. | 340,500 | 22,204,005 | ||||||
Wells Fargo & Co. | 1,394,250 | 57,540,698 | ||||||
|
| |||||||
$ | 254,038,621 | |||||||
|
| |||||||
Medical & Health Technology & Services – 1.0% | ||||||||
Express Scripts Holding Co. (a) | 187,330 | $ | 11,556,388 | |||||
Quest Diagnostics, Inc. | 167,880 | 10,178,564 | ||||||
|
| |||||||
$ | 21,734,952 | |||||||
|
| |||||||
Medical Equipment – 4.4% | ||||||||
Abbott Laboratories | 479,810 | $ | 16,735,773 | |||||
Becton, Dickinson & Co. | 46,050 | 4,551,122 | ||||||
Covidien PLC | 106,217 | 6,674,676 | ||||||
Medtronic, Inc. | 505,210 | 26,003,159 | ||||||
St. Jude Medical, Inc. | 400,520 | 18,275,728 | ||||||
Thermo Fisher Scientific, Inc. | 310,240 | 26,255,611 | ||||||
|
| |||||||
$ | 98,496,069 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 1.1% | ||||||||
MasterCard, Inc., “A” | 15,730 | $ | 9,036,885 | |||||
Western Union Co. | 969,420 | 16,586,776 | ||||||
|
| |||||||
$ | 25,623,661 | |||||||
|
| |||||||
Pharmaceuticals – 8.7% | ||||||||
AbbVie, Inc. | 194,810 | $ | 8,053,445 | |||||
Johnson & Johnson | 942,310 | 80,906,737 | ||||||
Merck & Co., Inc. | 421,500 | 19,578,675 | ||||||
Pfizer, Inc. | 2,573,246 | 72,076,620 | ||||||
Roche Holding AG | 54,494 | 13,502,761 | ||||||
Zoetis, Inc. | 22,830 | 705,219 | ||||||
|
| |||||||
$ | 194,823,457 | |||||||
|
| |||||||
Printing & Publishing – 1.0% | ||||||||
McGraw-Hill Cos., Inc. | 172,640 | $ | 9,182,722 | |||||
Moody’s Corp. | 202,230 | 12,321,874 | ||||||
|
| |||||||
$ | 21,504,596 | |||||||
|
| |||||||
Railroad & Shipping – 0.4% | ||||||||
Canadian National Railway Co. | 100,740 | $ | 9,798,980 | |||||
|
| |||||||
Restaurants – 0.7% | ||||||||
McDonald’s Corp. | 157,355 | $ | 15,578,145 | |||||
|
| |||||||
Specialty Chemicals – 0.9% | ||||||||
Air Products & Chemicals, Inc. | 228,736 | $ | 20,945,356 | |||||
|
| |||||||
Specialty Stores – 0.8% | ||||||||
Advance Auto Parts, Inc. | 151,870 | $ | 12,327,288 | |||||
Staples, Inc. | 336,790 | 5,341,489 | ||||||
|
| |||||||
$ | 17,668,777 | |||||||
|
| |||||||
Telecommunications – Wireless – 1.2% | ||||||||
Vodafone Group PLC | 9,475,268 | $ | 27,191,352 | |||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Telephone Services – 2.4% | ||||||||
AT&T, Inc. | 1,002,760 | $ | 35,497,704 | |||||
Verizon Communications, Inc. | 366,920 | 18,470,753 | ||||||
|
| |||||||
$ | 53,968,457 | |||||||
|
| |||||||
Tobacco – 5.3% | ||||||||
Altria Group, Inc. | 313,181 | $ | 10,958,203 | |||||
Lorillard, Inc. | 580,220 | 25,344,010 | ||||||
Philip Morris International, Inc. | 942,901 | 81,674,085 | ||||||
|
| |||||||
$ | 117,976,298 | |||||||
|
| |||||||
Trucking – 1.6% | ||||||||
United Parcel Service, Inc., “B” | 410,980 | $ | 35,541,550 | |||||
|
| |||||||
Utilities – Electric Power – 0.4% | ||||||||
PPL Corp. | 124,510 | $ | 3,767,673 | |||||
Public Service Enterprise Group, Inc. | 123,200 | 4,023,712 | ||||||
|
| |||||||
$ | 7,791,385 | |||||||
|
| |||||||
Total Common Stocks (Identified Cost, $1,650,435,805) | $ | 2,204,824,642 | ||||||
|
| |||||||
CONVERTIBLE PREFERRED STOCKS – 0.2% | ||||||||
Aerospace – 0.1% | ||||||||
United Technologies Corp., 7.5% | 35,180 | $ | 2,088,285 | |||||
|
| |||||||
Utilities – Electric Power – 0.1% | ||||||||
PPL Corp., 9.5% | 34,450 | $ | 1,805,525 | |||||
|
| |||||||
Total Convertible Preferred Stocks (Identified Cost, $3,536,939) | $ | 3,893,810 | ||||||
|
| |||||||
MONEY MARKET FUNDS – 1.0% | ||||||||
MFS Institutional Money Market Portfolio, 0.11%, at Cost and Net Asset Value (v) | 21,815,543 | $ | 21,815,543 | |||||
|
| |||||||
Total Investments (Identified Cost, $1,675,788,287) | $ | 2,230,533,995 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – 0.1% | 2,220,848 | |||||||
|
| |||||||
Net Assets – 100.0% | $ | 2,232,754,843 | ||||||
|
|
(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 6/30/13 | ||||||||
Assets | ||||||||
Investments – | ||||||||
Non-affiliated issuers, at value (identified cost, $1,653,972,744) | $2,208,718,452 | |||||||
Underlying affiliated funds, at cost and value | 21,815,543 | |||||||
Total investments, at value (identified cost, $1,675,788,287) | $2,230,533,995 | |||||||
Receivables for | ||||||||
Investments sold | 1,571,072 | |||||||
Fund shares sold | 1,061,717 | |||||||
Interest and dividends | 4,057,842 | |||||||
Other assets | 6,125 | |||||||
Total assets | $2,237,230,751 | |||||||
Liabilities | ||||||||
Payable to custodian | $409 | |||||||
Payable for fund shares reacquired | 4,073,422 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 186,372 | |||||||
Shareholder servicing costs | 984 | |||||||
Distribution and/or service fees | 33,573 | |||||||
Payable for independent Trustees’ compensation | 2,741 | |||||||
Accrued expenses and other liabilities | 178,407 | |||||||
Total liabilities | $4,475,908 | |||||||
Net assets | $2,232,754,843 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $1,622,894,846 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 554,706,046 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | 11,443,807 | |||||||
Undistributed net investment income | 43,710,144 | |||||||
Net assets | $2,232,754,843 | |||||||
Shares of beneficial interest outstanding | 133,956,146 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $1,014,232,763 | 60,395,873 | $16.79 | |||||||||
Service Class | 1,218,522,080 | 73,560,273 | 16.56 |
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 6/30/13 |
| |||||||
Net investment income |
| |||||||
Income | ||||||||
Dividends | $28,532,062 | |||||||
Interest | 419,290 | |||||||
Dividends from underlying affiliated funds | 14,451 | |||||||
Foreign taxes withheld | (288,434 | ) | ||||||
Total investment income | $28,677,369 | |||||||
Expenses | ||||||||
Management fee | $7,614,416 | |||||||
Distribution and/or service fees | 1,440,145 | |||||||
Shareholder servicing costs | 46,514 | |||||||
Administrative services fee | 141,670 | |||||||
Independent Trustees’ compensation | 18,432 | |||||||
Custodian fee | 73,720 | |||||||
Shareholder communications | 99,104 | |||||||
Audit and tax fees | 25,435 | |||||||
Legal fees | 7,960 | |||||||
Miscellaneous | 34,825 | |||||||
Total expenses | $9,502,221 | |||||||
Fees paid indirectly | (36 | ) | ||||||
Reduction of expenses by investment adviser | (7,149 | ) | ||||||
Net expenses | $9,495,036 | |||||||
Net investment income | $19,182,333 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency |
| |||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $14,686,742 | |||||||
Foreign currency | (18,841 | ) | ||||||
Net realized gain (loss) on investments and foreign currency | $14,667,901 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $296,772,568 | |||||||
Translation of assets and liabilities in foreign currencies | (48,351 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $296,724,217 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $311,392,118 | |||||||
Change in net assets from operations | $330,574,451 |
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 6/30/13 (unaudited |
) |
| Year ended 12/31/12 |
| |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $19,182,333 | $24,559,013 | ||||||
Net realized gain (loss) on investments and foreign currency | 14,667,901 | 5,693,106 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 296,724,217 | 166,122,268 | ||||||
Change in net assets from operations | $330,574,451 | $196,374,387 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(19,135,390 | ) | |||||
From net realized gain on investments | — | (9,779,483 | ) | |||||
Total distributions declared to shareholders | $— | $(28,914,873 | ) | |||||
Change in net assets from fund share transactions | $(109,136,547 | ) | $659,624,750 | |||||
Total change in net assets | $221,437,904 | $827,084,264 | ||||||
Net assets | ||||||||
At beginning of period | 2,011,316,939 | 1,184,232,675 | ||||||
At end of period (including undistributed net investment income of $43,710,144 and | $2,232,754,843 | $2,011,316,939 |
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 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $14.40 | $12.68 | $12.98 | $11.80 | $9.76 | $15.25 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.15 | $0.28 | $0.24 | $0.19 | $0.20 | $0.22 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 2.24 | 1.77 | (0.30 | ) | 1.16 | 1.98 | (4.98 | ) | ||||||||||||||||
Total from investment operations | $2.39 | $2.05 | $(0.06 | ) | $1.35 | $2.18 | $(4.76 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.23 | ) | $(0.19 | ) | $(0.17 | ) | $(0.14 | ) | $(0.17 | ) | |||||||||||||
From net realized gain on investments | — | (0.10 | ) | (0.05 | ) | — | — | (0.56 | ) | |||||||||||||||
Total distributions declared to shareholders | $— | $(0.33 | ) | $(0.24 | ) | $(0.17 | ) | $(0.14 | ) | $(0.73 | ) | |||||||||||||
Net asset value, end of period (x) | $16.79 | $14.40 | $12.68 | $12.98 | $11.80 | $9.76 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 16.60 | (n) | 16.26 | (0.30 | ) | 11.53 | 22.71 | (32.58 | ) | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.74 | (a) | 0.78 | 0.79 | 0.83 | 0.84 | 0.84 | |||||||||||||||||
Expenses after expense reductions (f) | 0.74 | (a) | 0.78 | 0.79 | 0.83 | 0.84 | 0.84 | |||||||||||||||||
Net investment income | 1.88 | (a) | 2.02 | 1.81 | 1.60 | 1.99 | 1.77 | |||||||||||||||||
Portfolio turnover | 8 | (n) | 16 | 18 | 28 | 26 | 36 | |||||||||||||||||
Net assets at end of period (000 omitted) | $1,014,233 | $988,594 | $352,752 | $389,052 | $367,676 | $295,721 | ||||||||||||||||||
Service Class | Six months ended 6/30/13 | Years ended 12/31 | ||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $14.22 | $12.54 | $12.83 | $11.68 | $9.67 | $15.12 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.13 | $0.24 | $0.20 | $0.16 | $0.18 | $0.19 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 2.21 | 1.74 | (0.27 | ) | 1.15 | 1.95 | (4.94 | ) | ||||||||||||||||
Total from investment operations | $2.34 | $1.98 | $(0.07 | ) | $1.31 | $2.13 | $(4.75 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.20 | ) | $(0.17 | ) | $(0.16 | ) | $(0.12 | ) | $(0.14 | ) | |||||||||||||
From net realized gain on investments | — | (0.10 | ) | (0.05 | ) | — | — | (0.56 | ) | |||||||||||||||
Total distributions declared to shareholders | $— | $(0.30 | ) | $(0.22 | ) | $(0.16 | ) | $(0.12 | ) | $(0.70 | ) | |||||||||||||
Net asset value, end of period (x) | $16.56 | $14.22 | $12.54 | $12.83 | $11.68 | $9.67 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 16.46 | (n) | 15.88 | (0.47 | ) | 11.22 | 22.45 | (32.74 | ) | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.99 | (a) | 1.03 | 1.04 | 1.08 | 1.09 | 1.09 | |||||||||||||||||
Expenses after expense reductions (f) | 0.99 | (a) | 1.03 | 1.04 | 1.08 | 1.09 | 1.09 | |||||||||||||||||
Net investment income | 1.64 | (a) | 1.76 | 1.58 | 1.35 | 1.75 | 1.57 | |||||||||||||||||
Portfolio turnover | 8 | (n) | 16 | 18 | 28 | 26 | 36 | |||||||||||||||||
Net assets at end of period (000 omitted) | $1,218,522 | $1,022,722 | $831,481 | $750,049 | $617,739 | $218,528 |
See Notes to Financial Statements
9
Table of Contents
MFS Value 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 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 the disclosure provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Update 2011-11 (“ASU 2011-11”), Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities along with the related scope clarification provisions of FASB Accounting Standards Update 2013-01 (“ASU 2013-01”) entitled Balance Sheet (Topic 210) – Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 is intended to enhance disclosures on the offsetting of financial assets and liabilities by requiring entities to disclose both gross and net information about financial instruments and transactions that are either offset in the statement of financial position or subject to a Master Netting Agreement or similar arrangement. ASU 2013-01 limits the scope of ASU 2011-11’s disclosure requirements on offsetting to financial assets and financial liabilities related to derivatives, repurchase and reverse repurchase agreements, and securities lending and securities borrowing transactions. The disclosures required by ASU 2011-11, to the extent applicable to fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
In June 2013, FASB issued Accounting Standards Update 2013-08 Financial Services – Investment Companies (Topic 946) – Amendments to the Scope, Measurement, and Disclosure Requirements (“ASU 2013-08”) which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013. ASU 2013-08 sets forth a methodology for determining whether an entity should be characterized as an investment company and prescribes fair value accounting for an investment company’s non-controlling ownership interest in another investment company. FASB has determined that a fund registered under the Investment Company Act of 1940 automatically meets ASU 2013-08’s criteria for an investment company. Although still evaluating the potential impacts of ASU 2013-08 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
11
Table of Contents
MFS Value 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. The following is a summary of the levels used as of June 30, 2013 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $2,074,247,487 | $— | $— | $2,074,247,487 | ||||||||||||
United Kingdom | — | 62,442,361 | — | 62,442,361 | ||||||||||||
Switzerland | — | 40,360,274 | — | 40,360,274 | ||||||||||||
France | 21,869,350 | — | — | 21,869,350 | ||||||||||||
Canada | 9,798,980 | — | — | 9,798,980 | ||||||||||||
Mutual Funds | 21,815,543 | — | — | 21,815,543 | ||||||||||||
Total Investments | $2,127,731,360 | $102,802,635 | $— | $2,230,533,995 |
For further information regarding security characteristics, see the Portfolio of Investments.
Of the level 2 investments presented above, equity investments amounting to $26,857,513 would have been considered level 1 investments at the beginning of the period. Of the level 1 investments presented above, equity investments amounting to $21,869,350 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 – Under its Securities Lending Agency Agreement with the fund, State Street Bank and Trust Company (“State Street”), as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. 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. In the event of Borrower default, State Street will for the benefit of the fund either purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the fund the market value of the loaned securities. In return, State Street assumes the fund’s rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, State Street is responsible for the shortfall, but only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. 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
12
Table of Contents
MFS Value Series
Notes to Financial Statements (unaudited) – continued
the fund and the lending agent. Income from securities lending is included in “Interest” income in the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income. At June 30, 2013, there were no securities on loan or collateral outstanding.
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, 2013, is shown as a reduction of total expenses in the Statement of Operations.
Tax Matters and Distributions – The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Foreign taxes have been accrued by the fund in the accompanying financial statements in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests.
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:
12/31/12 | ||||
Ordinary income (including any short-term capital gains) | $28,557,964 | |||
Long-term capital gains | 356,909 | |||
Total distributions | $28,914,873 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/13 | ||||
Cost of investments | $1,685,956,718 | |||
Gross appreciation | 545,120,237 | |||
Gross depreciation | (542,960 | ) | ||
Net unrealized appreciation (depreciation) | $544,577,277 | |||
As of 12/31/12 | ||||
Undistributed ordinary income | 30,722,131 | |||
Undistributed long-term capital gain | 750,017 | |||
Other temporary differences | 8,689 | |||
Net unrealized appreciation (depreciation) | 247,804,709 |
The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.
13
Table of Contents
MFS Value Series
Notes to Financial Statements (unaudited) – continued
Multiple Classes of Shares of Beneficial Interest – The fund offers multiple classes of shares, which differ in their respective distribution and/or service fees. The fund’s income, realized and unrealized gain (loss), and common expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported in 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 6/30/13 | Year ended 12/31/12 | Six months ended 6/30/13 | Year ended 12/31/12 | |||||||||||||
Initial Class | $— | $5,784,014 | $— | $2,681,309 | ||||||||||||
Service Class | — | 13,351,376 | — | 7,098,174 | ||||||||||||
Total | $— | $19,135,390 | $— | $9,779,483 |
(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, 2015. For the six months ended June 30, 2013, the fund’s actual operating expenses did not exceed $2.5 billion and therefore, the management fee was not reduced. Effective April 1, 2013, MFS has agreed in writing to reduce its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund’s Board of Trustees. For the period April 1, 2013 through June 30, 2013, this management fee reduction amounted to $3,037, 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, 2013 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 fund 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, 2015. For the six months ended June 30, 2013, 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, 2013, the fee was $46,028, which equated to 0.0042% 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, 2013, these costs amounted to $486.
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, 2013 was equivalent to an annual effective rate of 0.0129% 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.
14
Table of Contents
MFS Value Series
Notes to Financial Statements (unaudited) – continued
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, 2013, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $8,067 and are included in “Miscellaneous” expense in 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 $4,112, 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 current income consistent with preservation of capital and liquidity. Income earned on this investment is included in “Dividends from underlying affiliated funds” in 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 short-term obligations, aggregated $159,099,640 and $248,140,682, 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 6/30/13 | Year ended 12/31/12 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 1,212,779 | $19,344,136 | 15,304,279 | $213,696,404 | ||||||||||||
Service Class | 7,227,516 | 114,382,309 | 14,322,476 | 195,888,177 | ||||||||||||
8,440,295 | $133,726,445 | 29,626,755 | $409,584,581 | |||||||||||||
Shares issued in connection with acquisition of the SC Lord Abbett Growth & Income Fund | ||||||||||||||||
Initial Class | 31,880,924 | $456,216,033 | ||||||||||||||
Service Class | 1,046,135 | 14,781,882 | ||||||||||||||
32,927,059 | $470,997,915 | |||||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 608,141 | $8,465,323 | ||||||||||||
Service Class | — | — | 1,486,159 | 20,449,550 | ||||||||||||
— | $— | 2,094,300 | $28,914,873 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (9,488,153 | ) | $(153,524,286 | ) | (6,931,699 | ) | $(96,080,507 | ) | ||||||||
Service Class | (5,597,324 | ) | (89,338,706 | ) | (11,240,576 | ) | (153,792,112 | ) | ||||||||
(15,085,477 | ) | $(242,862,992 | ) | (18,172,275 | ) | $(249,872,619 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (8,275,374 | ) | $(134,180,150 | ) | 40,861,645 | $582,297,253 | ||||||||||
Service Class | 1,630,192 | 25,043,603 | 5,614,194 | 77,327,497 | ||||||||||||
(6,645,182 | ) | $(109,136,547 | ) | 46,475,839 | $659,624,750 |
The fund is one of several mutual funds in which the MFS funds-of-funds may invest. The MFS funds-of-funds do not invest in the underlying MFS funds for the purpose of exercising management or control. At the end of the period, the MFS Moderate Allocation Portfolio, the MFS Growth Allocation Portfolio, and the MFS Conservative Allocation Portfolio were the owners of record of approximately 8%, 3%, and 2%, respectively, of the value of outstanding voting shares of the fund.
(6) | Line of Credit |
The fund and certain other funds managed by MFS participate in a $1.1 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
15
Table of Contents
MFS Value Series
Notes to Financial Statements (unaudited) – continued
agreed upon spread. For the six months ended June 30, 2013, the fund’s commitment fee and interest expense were $4,852 and $0, respectively, and are included in “Miscellaneous” expense in 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 | 25,547,731 | 164,594,325 | (168,326,513 | ) | 21,815,543 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $14,451 | $21,815,543 |
(8) | Acquisitions |
At close of business on December 7, 2012, the fund with net assets of approximately $1,531,914,221, acquired all of the assets and liabilities of SC Lord Abbett Growth & Income Fund, a series of Sun Capital Advisers Trust. The purpose of the transaction was to provide shareholders of SC Lord Abbett Growth & Income Fund the opportunity to participate in a larger combined portfolio with similar investment policies and strategies. The acquisition was accomplished by a tax-free exchange of approximately 32,927,059 shares of the fund (valued at approximately $470,997,915) for all of the assets and liabilities of SC Lord Abbett Growth & Income Fund. SC Lord Abbett Growth & Income Fund then distributed the shares of the fund that SC Lord Abbett Growth & Income Fund received from the fund to its shareholders. SC Lord Abbett Growth & Income Fund’s investments on that date were valued at approximately $463,315,950 with a cost basis of approximately $450,582,951. For financial reporting purposes, assets received and shares issued by the fund were recorded at fair value; however, the cost basis of the investments received from SC Lord Abbett Growth & Income Fund were carried forward to align ongoing reporting of the fund’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.
16
Table of Contents
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, 2013 by clicking on the fund’s name under “Variable Insurance Portfolios — VIT” in the “Products” 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” section of mfs.com.
17
Table of Contents
Table of Contents
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.
Table of Contents
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. |
Table of Contents
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.
Table of Contents
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, 2013
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, 2013
By (Signature and Title)* | DAVID L. DILORENZO | |
David L. DiLorenzo, Treasurer (Principal Financial Officer and Accounting Officer) |
Date: August 16, 2013
* | Print name and title of each signing officer under his or her signature. |