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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-8326
MFS VARIABLE INSURANCE TRUST
(Exact name of registrant as specified in charter)
111 Huntington Avenue, Boston, Massachusetts 02199
(Address of principal executive offices) (Zip code)
Kristin V. Collins
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, 2016
Table of Contents
ITEM 1. | REPORTS TO STOCKHOLDERS. |
Table of Contents
SEMIANNUAL REPORT
June 30, 2016
MFS® GLOBAL EQUITY SERIES
MFS® Variable Insurance Trust
VGE-SEM
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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 • MAY LOSE VALUE • NO BANK OR CREDIT UNION GUARANTEE • NOT A DEPOSIT • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
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MFS Global Equity Series
Dear Contract Owners:
Global headwinds continue to restrain growth and profits, though developed market equities have remained resilient, underpinned by record-low interest rates. Rates are likely to stay low over the medium term, as many central banks have implemented accommodative monetary policies in an effort to reinvigorate their economies. Markets will have to deal with an additional headwind in the coming months and years as investors grapple with the fallout from the United Kingdom’s decision to leave the European Union. That process will take a considerable period of time to play out against a highly uncertain backdrop. Weakness in the pound sterling in the wake of the referendum has been a welcome shock absorber for UK financial markets.
Emerging markets have been beneficiaries of firmer commodity prices and diminishing fears of sharply higher interest rates from the U.S. Federal Reserve. China remains a source of concern for investors, as overcapacity in its manufacturing sector inhibits the government’s attempt to change its domestic economy from one driven by exports to a consumer-driven model.
At MFS®, we believe it is best to view markets through a long lens and not react to short-term swings. That makes it possible to filter out market noise and focus on long-term fundamentals.
In our view, the professional guidance of a financial advisor, along with a patient, long-term approach, will help you reach your investment objectives.
Respectfully,
Robert J. Manning
Chairman
MFS Investment Management
August 15, 2016
The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.
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MFS Global Equity Series
Portfolio structure
Top ten holdings | ||||
Thermo Fisher Scientific, Inc. | 2.9% | |||
Nestle S.A. | 2.7% | |||
Honeywell International, Inc. | 2.6% | |||
Bayer AG | 2.6% | |||
Time Warner, Inc. | 2.6% | |||
Reckitt Benckiser Group PLC | 2.5% | |||
Accenture PLC, “A” | 2.3% | |||
Walt Disney Co. | 2.2% | |||
Medtronic PLC | 2.1% | |||
Stryker Corp. | 2.1% | |||
Equity sectors | ||||
Health Care | 19.4% | |||
Consumer Staples | 18.8% | |||
Financial Services | 13.0% | |||
Leisure | 9.8% | |||
Industrial Goods & Services | 8.4% | |||
Basic Materials | 6.5% | |||
Technology | 5.5% | |||
Special Products & Services | 5.5% | |||
Retailing | 5.3% | |||
Transportation | 4.5% | |||
Energy | 1.3% | |||
Autos & Housing | 1.0% |
Issuer country weightings (x) | ||||
United States | 57.3% | |||
United Kingdom | 9.6% | |||
Switzerland | 7.9% | |||
France | 7.4% | |||
Germany | 6.3% | |||
Netherlands | 2.2% | |||
Canada | 1.7% | |||
Sweden | 1.7% | |||
Japan | 1.1% | |||
Other Countries | 4.8% | |||
Currency exposure weightings (y) | ||||
United States Dollar | 59.7% | |||
Euro | 16.7% | |||
British Pound Sterling | 9.6% | |||
Swiss Franc | 7.9% | |||
Swedish Krona | 1.7% | |||
Japanese Yen | 1.1% | |||
Danish Krone | 0.9% | |||
Brazilian Real | 0.8% | |||
South Korean Won | 0.7% | |||
Other Currencies | 0.9% |
(x) | Represents the portfolio’s exposure to issuer countries as a percentage of the portfolio’s net assets. For purposes of this presentation, United States includes Cash & Cash Equivalents. |
(y) | Represents the portfolio’s exposure to a particular currency as a percentage of the portfolio’s net assets. For purposes of this presentation, United States Dollar includes Cash & Cash Equivalents. |
Cash & Cash Equivalents includes any cash, investments in money market funds, short-term securities, and other assets less liabilities. Please see the Statement of Assets and Liabilities for additional information related to the fund’s cash position and other assets and liabilities.
Percentages are based on net assets as of 6/30/16.
The portfolio is actively managed and current holdings may be different.
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MFS Global Equity Series
Fund Expenses Borne by the Contract Holders during the Period,
January 1, 2016 through June 30, 2016
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, 2016 through June 30, 2016.
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 1/01/16 | Ending Account Value 6/30/16 | Expenses Paid During Period (p) 1/01/16-6/30/16 | ||||||||||||||
Initial Class | Actual | 1.00% | $1,000.00 | $1,027.19 | $5.04 | |||||||||||||
Hypothetical (h) | 1.00% | $1,000.00 | $1,019.89 | $5.02 | ||||||||||||||
Service Class | Actual | 1.25% | $1,000.00 | $1,025.68 | $6.30 | |||||||||||||
Hypothetical (h) | 1.25% | $1,000.00 | $1,018.65 | $6.27 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
Notes to Expense Table
Changes to the fund’s fee arrangements will occur during the fund’s current fiscal year. Had these fee changes been in effect during the six-month period, the annualized expense ratios, the actual expenses paid during the period and the hypothetical expenses paid during the period would have been approximately 0.97%, $4.89 and $4.87 for Initial Class and 1.22%, $6.14 and $6.12 for Service Class, respectively. For further information about the fund’s fee arrangements and changes to those fee arrangements, please see Note 3 in the Notes to Financial Statements.
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MFS Global Equity Series
PORTFOLIO OF INVESTMENTS – 6/30/16 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 99.0% | ||||||||
Aerospace – 4.8% | ||||||||
Honeywell International, Inc. | 12,013 | $ | 1,397,352 | |||||
MTU Aero Engines Holding AG | 3,965 | 370,919 | ||||||
United Technologies Corp. | 8,072 | 827,784 | ||||||
|
| |||||||
$ | 2,596,055 | |||||||
|
| |||||||
Airlines – 0.4% | ||||||||
Aena S.A. | 1,788 | $ | 235,441 | |||||
|
| |||||||
Alcoholic Beverages – 6.2% | ||||||||
AmBev S.A. | 48,768 | $ | 289,210 | |||||
Carlsberg A.S., “B” | 5,247 | 497,942 | ||||||
Diageo PLC | 38,193 | 1,068,686 | ||||||
Heineken N.V. | 6,581 | 608,104 | ||||||
Pernod Ricard S.A. | 7,702 | 857,904 | ||||||
|
| |||||||
$ | 3,321,846 | |||||||
|
| |||||||
Apparel Manufacturers – 2.8% | ||||||||
Burberry Group PLC | 17,000 | $ | 265,741 | |||||
Compagnie Financiere Richemont S.A. | 6,728 | 394,698 | ||||||
LVMH Moet Hennessy Louis Vuitton S.A. | 5,628 | 852,175 | ||||||
|
| |||||||
$ | 1,512,614 | |||||||
|
| |||||||
Automotive – 1.0% | ||||||||
Delphi Automotive PLC | 4,830 | $ | 302,358 | |||||
Harley-Davidson, Inc. | 5,477 | 248,108 | ||||||
|
| |||||||
$ | 550,466 | |||||||
|
| |||||||
Broadcasting – 7.3% | ||||||||
Omnicom Group, Inc. | 7,025 | $ | 572,467 | |||||
Time Warner, Inc. | 18,873 | 1,387,920 | ||||||
Walt Disney Co. | 12,328 | 1,205,925 | ||||||
WPP PLC | 35,771 | 742,703 | ||||||
|
| |||||||
$ | 3,909,015 | |||||||
|
| |||||||
Brokerage & Asset Managers – 1.4% | ||||||||
Deutsche Boerse AG | 3,403 | $ | 278,627 | |||||
Franklin Resources, Inc. | 13,471 | 449,527 | ||||||
|
| |||||||
$ | 728,154 | |||||||
|
| |||||||
Business Services – 5.5% | ||||||||
Accenture PLC, “A” | 11,037 | $ | 1,250,382 | |||||
Adecco S.A. | 6,901 | 347,643 | ||||||
Brenntag AG | 3,618 | 174,839 | ||||||
Cognizant Technology Solutions Corp., “A” (a) | 3,604 | 206,293 | ||||||
Compass Group PLC | 33,378 | 636,238 | ||||||
NOW, Inc. (a) | 3,104 | 56,307 | ||||||
PayPal Holdings, Inc. (a) | 7,165 | 261,594 | ||||||
|
| |||||||
$ | 2,933,296 | |||||||
|
| |||||||
Cable TV – 1.4% | ||||||||
British Sky Broadcasting Group PLC | 36,406 | $ | 413,218 | |||||
Charter Communications, Inc., “A” (a) | 1,536 | 351,191 | ||||||
|
| |||||||
$ | 764,409 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Chemicals – 2.8% | ||||||||
3M Co. | 5,387 | $ | 943,371 | |||||
Monsanto Co. | 5,212 | 538,973 | ||||||
|
| |||||||
$ | 1,482,344 | |||||||
|
| |||||||
Computer Software – 2.3% | ||||||||
Check Point Software Technologies Ltd. (a) | 3,220 | $ | 256,570 | |||||
Oracle Corp. | 24,048 | 984,285 | ||||||
|
| |||||||
$ | 1,240,855 | |||||||
|
| |||||||
Consumer Products – 6.4% | ||||||||
Colgate-Palmolive Co. | 10,477 | $ | 766,916 | |||||
International Flavors & Fragrances, Inc. | 3,006 | 378,966 | ||||||
Reckitt Benckiser Group PLC | 13,453 | 1,353,447 | ||||||
Svenska Cellulosa Aktiebolaget | 28,967 | 923,723 | ||||||
|
| |||||||
$ | 3,423,052 | |||||||
|
| |||||||
Electrical Equipment – 3.3% | ||||||||
Amphenol Corp., “A” | 6,334 | $ | 363,128 | |||||
Legrand S.A. | 8,419 | 434,378 | ||||||
Schneider Electric S.A. | 9,359 | 553,876 | ||||||
W.W. Grainger, Inc. | 1,764 | 400,869 | ||||||
|
| |||||||
$ | 1,752,251 | |||||||
|
| |||||||
Electronics – 2.0% | ||||||||
Hoya Corp. | 8,100 | $ | 288,393 | |||||
Microchip Technology, Inc. | 7,973 | 404,709 | ||||||
Samsung Electronics Co. Ltd. | 287 | 357,274 | ||||||
|
| |||||||
$ | 1,050,376 | |||||||
|
| |||||||
Energy – Independent – 0.1% | ||||||||
INPEX Corp. | 6,200 | $ | 48,369 | |||||
|
| |||||||
Food & Beverages – 6.2% | ||||||||
Danone S.A. | 13,408 | $ | 945,434 | |||||
Kellogg Co. | 11,881 | 970,084 | ||||||
Nestle S.A. | 18,684 | 1,441,203 | ||||||
|
| |||||||
$ | 3,356,721 | |||||||
|
| |||||||
Food & Drug Stores – 0.1% | ||||||||
Lawson, Inc. | 800 | $ | 63,423 | |||||
|
| |||||||
Gaming & Lodging – 0.5% | ||||||||
Sands China Ltd. | 26,800 | $ | 90,733 | |||||
William Hill PLC | 29,438 | 101,964 | ||||||
Wynn Resorts Ltd. (l) | 1,118 | 101,336 | ||||||
|
| |||||||
$ | 294,033 | |||||||
|
| |||||||
Insurance – 0.4% | ||||||||
Swiss Re Ltd. | 2,298 | $ | 200,906 | |||||
|
| |||||||
Internet – 0.6% | ||||||||
eBay, Inc. (a) | 13,031 | $ | 305,056 | |||||
|
| |||||||
Machinery & Tools – 0.3% | ||||||||
Kubota Corp. | 13,000 | $ | 174,114 | |||||
|
|
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MFS Global Equity Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Major Banks – 4.8% | ||||||||
Bank of New York Mellon Corp. | 23,344 | $ | 906,914 | |||||
Goldman Sachs Group, Inc. | 3,719 | 552,569 | ||||||
Standard Chartered PLC | 33,354 | 253,705 | ||||||
State Street Corp. | 16,099 | 868,058 | ||||||
|
| |||||||
$ | 2,581,246 | |||||||
|
| |||||||
Medical Equipment – 14.0% | ||||||||
Cooper Cos., Inc. | 3,350 | $ | 574,760 | |||||
Dentsply Sirona, Inc. | 4,507 | 279,614 | ||||||
Medtronic PLC | 13,013 | 1,129,138 | ||||||
Sonova Holding AG | 2,348 | 311,962 | ||||||
St. Jude Medical, Inc. | 12,402 | 967,356 | ||||||
Stryker Corp. | 9,230 | 1,106,031 | ||||||
Thermo Fisher Scientific, Inc. | 10,402 | 1,537,000 | ||||||
Waters Corp. (a) | 4,188 | 589,042 | ||||||
Zimmer Biomet Holdings, Inc. | 8,692 | 1,046,343 | ||||||
|
| |||||||
$ | 7,541,246 | |||||||
|
| |||||||
Network & Telecom – 0.7% | ||||||||
Cisco Systems, Inc. | 13,213 | $ | 379,081 | |||||
|
| |||||||
Oil Services – 1.2% | ||||||||
National Oilwell Varco, Inc. | 5,227 | $ | 175,889 | |||||
Schlumberger Ltd. | 6,203 | 490,533 | ||||||
|
| |||||||
$ | 666,422 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 6.5% | ||||||||
American Express Co. | 10,640 | $ | 646,486 | |||||
Credicorp Ltd. | 778 | 120,069 | ||||||
Erste Group Bank AG | 7,906 | 180,797 | ||||||
Grupo Financiero Banorte S.A. de C.V. | 35,922 | 201,434 | ||||||
Itau Unibanco Holding S.A., ADR | 12,845 | 121,257 | ||||||
Julius Baer Group Ltd. | 6,745 | 271,058 | ||||||
Kasikornbank Co. Ltd. | 24,600 | 120,964 | ||||||
Komercni Banka A.S. | 2,451 | 91,836 | ||||||
UBS AG | 48,329 | 625,310 | ||||||
Visa, Inc., “A” | 14,670 | 1,088,074 | ||||||
|
| |||||||
$ | 3,467,285 | |||||||
|
| |||||||
Pharmaceuticals – 5.3% | ||||||||
Bayer AG | 13,824 | $ | 1,390,863 | |||||
Johnson & Johnson | 2,759 | 334,667 | ||||||
Merck KGaA | 4,693 | 477,786 | ||||||
Roche Holding AG | 2,493 | 658,228 | ||||||
|
| |||||||
$ | 2,861,544 | |||||||
|
| |||||||
Railroad & Shipping – 2.4% | ||||||||
Canadian National Railway Co. | 15,698 | $ | 927,124 | |||||
Union Pacific Corp. | 4,186 | 365,229 | ||||||
|
| |||||||
$ | 1,292,353 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Restaurants – 0.6% | ||||||||
Whitbread PLC | 6,315 | $ | 295,162 | |||||
|
| |||||||
Specialty Chemicals – 3.7% | ||||||||
Akzo Nobel N.V. | 9,359 | $ | 588,804 | |||||
L’Air Liquide S.A. | 2,118 | 221,969 | ||||||
Linde AG | 5,147 | 715,984 | ||||||
Praxair, Inc. | 4,308 | 484,176 | ||||||
|
| |||||||
$ | 2,010,933 | |||||||
|
| |||||||
Specialty Stores – 2.4% | ||||||||
AutoZone, Inc. (a) | 566 | $ | 449,313 | |||||
Hermes International | 274 | 103,262 | ||||||
Sally Beauty Holdings, Inc. (a) | 13,128 | 386,094 | ||||||
Urban Outfitters, Inc. (a) | 12,295 | 338,113 | ||||||
|
| |||||||
$ | 1,276,782 | |||||||
|
| |||||||
Trucking – 1.6% | ||||||||
United Parcel Service, Inc., “B” | 8,162 | $ | 879,211 | |||||
|
| |||||||
Total Common Stocks (Identified Cost, $35,955,595) | $ | 53,194,061 | ||||||
|
| |||||||
MONEY MARKET FUNDS – 0.9% | ||||||||
MFS Institutional Money Market Portfolio, 0.36%, at Cost and Net Asset Value (v) | 490,154 | $ | 490,154 | |||||
|
| |||||||
COLLATERAL FOR SECURITIES LOANED – 0.2% | ||||||||
Navigator Securities Lending Prime Portfolio, 0.53%, at Cost and Net Asset Value (j) | 91,665 | $ | 91,665 | |||||
|
| |||||||
Total Investments (Identified Cost, $36,537,414) | $ | 53,775,880 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – (0.1)% | (39,266 | ) | ||||||
|
| |||||||
NET ASSETS – 100.0% | $ | 53,736,614 | ||||||
|
|
(a) | Non-income producing security. |
(j) | The rate quoted is the annualized seven-day yield of the fund at period end. |
(l) | A portion of this security is on loan. |
(v) | Underlying affiliated fund that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end. |
The following abbreviations are used in this report and are defined:
ADR | American Depositary Receipt |
PLC | Public Limited Company |
See Notes to Financial Statements
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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 6/30/16 | ||||||||
Assets | ||||||||
Investments | ||||||||
Non-affiliated issuers, at value (identified cost, $36,047,260) | $53,285,726 | |||||||
Underlying affiliated funds, at cost and value | 490,154 | |||||||
Total investments, at value, including $89,099 of securities on loan (identified cost, $36,537,414) | $53,775,880 | |||||||
Foreign currency, at value (identified cost, $981) | 978 | |||||||
Receivables for | ||||||||
Investments sold | 58,410 | |||||||
Fund shares sold | 21,376 | |||||||
Interest and dividends | 137,894 | |||||||
Receivable from investment adviser | 5,895 | |||||||
Other assets | 277 | |||||||
Total assets | $54,000,710 | |||||||
Liabilities | ||||||||
Payable to custodian | $5,180 | |||||||
Payables for |
| |||||||
Investments purchased | 12,014 | |||||||
Fund shares reacquired | 94,889 | |||||||
Collateral for securities loaned, at value | 91,665 | |||||||
Payable to affiliates |
| |||||||
Shareholder servicing costs | 168 | |||||||
Distribution and/or service fees | 95 | |||||||
Payable for independent Trustees’ compensation | 15 | |||||||
Deferred country tax expense payable | 578 | |||||||
Accrued expenses and other liabilities | 59,492 | |||||||
Total liabilities | $264,096 | |||||||
Net assets | $53,736,614 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $32,327,362 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 17,232,373 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | 3,261,429 | |||||||
Undistributed net investment income | 915,450 | |||||||
Net assets | $53,736,614 | |||||||
Shares of beneficial interest outstanding | 2,847,737 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $46,639,001 | 2,469,539 | $18.89 | |||||||||
Service Class | 7,097,613 | 378,198 | 18.77 |
See Notes to Financial Statements
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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 6/30/16 | ||||||||
Net investment income |
| |||||||
Income | ||||||||
Dividends | $710,625 | |||||||
Interest | 1,775 | |||||||
Dividends from underlying affiliated funds | 820 | |||||||
Foreign taxes withheld | (44,345 | ) | ||||||
Total investment income | $668,875 | |||||||
Expenses | ||||||||
Management fee | $249,261 | |||||||
Distribution and/or service fees | 8,584 | |||||||
Shareholder servicing costs | 6,220 | |||||||
Administrative services fee | 8,878 | |||||||
Independent Trustees’ compensation | 1,552 | |||||||
Custodian fee | 13,496 | |||||||
Shareholder communications | 6,151 | |||||||
Audit and tax fees | 28,272 | |||||||
Legal fees | 265 | |||||||
Miscellaneous | 5,611 | |||||||
Total expenses | $328,290 | |||||||
Reduction of expenses by investment adviser | (61,042 | ) | ||||||
Net expenses | $267,248 | |||||||
Net investment income | $401,627 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments (net of $8 country tax) | $869,433 | |||||||
Foreign currency | (2,590 | ) | ||||||
Net realized gain (loss) on investments and foreign currency | $866,843 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments (net of $578 increase in deferred country tax) | $89,403 | |||||||
Translation of assets and liabilities in foreign currencies | (1,433 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $87,970 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $954,813 | |||||||
Change in net assets from operations | $1,356,440 |
See Notes to Financial Statements
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MFS Global Equity Series
FINANCIAL STATEMENTS | STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
| Six months ended 6/30/16 (unaudited | ) | | Year ended 12/31/15 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $401,627 | $503,857 | ||||||
Net realized gain (loss) on investments and foreign currency | 866,843 | 2,791,157 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 87,970 | (4,117,988 | ) | |||||
Change in net assets from operations | $1,356,440 | $(822,974 | ) | |||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(594,700 | ) | |||||
From net realized gain on investments | — | (1,953,509 | ) | |||||
Total distributions declared to shareholders | $— | $(2,548,209 | ) | |||||
Change in net assets from fund share transactions | $(458,428 | ) | $(1,958,038 | ) | ||||
Total change in net assets | $898,012 | $(5,329,221 | ) | |||||
Net assets | ||||||||
At beginning of period | 52,838,602 | 58,167,823 | ||||||
At end of period (including undistributed net investment income of $915,450 and | $53,736,614 | $52,838,602 |
See Notes to Financial Statements
8
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MFS Global Equity Series
FINANCIAL STATEMENTS | FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund’s financial performance for the semiannual period and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
Initial Class | Six months ended 6/30/16 | Years ended 12/31 | ||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $18.39 | $19.59 | $19.18 | $15.14 | $12.71 | $13.40 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.14 | $0.18 | $0.20 | $0.14 | $0.16 | $0.14 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.36 | (0.49 | ) | 0.54 | 4.05 | 2.76 | (0.72 | ) | ||||||||||||||||
Total from investment operations | $0.50 | $(0.31 | ) | $0.74 | $4.19 | $2.92 | $(0.58 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.21 | ) | $(0.14 | ) | $(0.15 | ) | $(0.16 | ) | $(0.11 | ) | |||||||||||||
From net realized gain on investments | — | (0.68 | ) | (0.19 | ) | — | (0.33 | ) | — | |||||||||||||||
Total distributions declared to shareholders | $— | $(0.89 | ) | $(0.33 | ) | $(0.15 | ) | $(0.49 | ) | $(0.11 | ) | |||||||||||||
Net asset value, end of period (x) | $18.89 | $18.39 | $19.59 | $19.18 | $15.14 | $12.71 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 2.72 | (n) | (1.41 | ) | 3.87 | 27.81 | 23.34 | (4.32 | ) | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.24 | (a) | 1.26 | 1.28 | 1.31 | 1.30 | 1.40 | |||||||||||||||||
Expenses after expense reductions (f) | 1.00 | (a) | 1.00 | 1.09 | 1.15 | 1.15 | 1.15 | |||||||||||||||||
Net investment income | 1.58 | (a) | 0.91 | 1.06 | 0.82 | 1.15 | 1.08 | |||||||||||||||||
Portfolio turnover | 6 | (n) | 12 | 15 | 25 | 21 | 15 | |||||||||||||||||
Net assets at end of period (000 omitted) | $46,639 | $45,946 | $51,635 | $54,075 | $41,297 | $35,426 | ||||||||||||||||||
Service Class | Six months ended 6/30/16 | Years ended 12/31 | ||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $18.30 | $19.50 | $19.10 | $15.09 | $12.68 | $13.37 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.12 | $0.13 | $0.15 | $0.09 | $0.12 | $0.11 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.35 | (0.48 | ) | 0.54 | 4.05 | 2.75 | (0.71 | ) | ||||||||||||||||
Total from investment operations | $0.47 | $(0.35 | ) | $0.69 | $4.14 | $2.87 | $(0.60 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.17 | ) | $(0.10 | ) | $(0.13 | ) | $(0.13 | ) | $(0.09 | ) | |||||||||||||
From net realized gain on investments | — | (0.68 | ) | (0.19 | ) | — | (0.33 | ) | — | |||||||||||||||
Total distributions declared to shareholders | $— | $(0.85 | ) | $(0.29 | ) | $(0.13 | ) | $(0.46 | ) | $(0.09 | ) | |||||||||||||
Net asset value, end of period (x) | $18.77 | $18.30 | $19.50 | $19.10 | $15.09 | $12.68 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 2.57 | (n) | (1.67 | ) | 3.63 | 27.52 | 22.98 | (4.53 | ) | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.49 | (a) | 1.51 | 1.53 | 1.56 | 1.54 | 1.65 | |||||||||||||||||
Expenses after expense reductions (f) | 1.25 | (a) | 1.25 | 1.34 | 1.40 | 1.40 | 1.40 | |||||||||||||||||
Net investment income | 1.34 | (a) | 0.67 | 0.80 | 0.54 | 0.87 | 0.83 | |||||||||||||||||
Portfolio turnover | 6 | (n) | 12 | 15 | 25 | 21 | 15 | |||||||||||||||||
Net assets at end of period (000 omitted) | $7,098 | $6,893 | $6,533 | $7,018 | $4,127 | $2,640 |
See Notes to Financial Statements
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MFS Global Equity Series
Financial Highlights – continued
(a) | Annualized. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(k) | The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown. |
(n) | Not annualized. |
(r) | Certain expenses have been reduced without which performance would have been lower. |
(s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
(x) | The net asset values and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
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MFS Global Equity Series
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) | Business and Organization |
MFS Global Equity Series (the fund) is a diversified 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.
The fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued. The fund invests 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.
Balance Sheet Offsetting – The fund’s accounting policy with respect to balance sheet offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the International Swaps and Derivatives Association (ISDA) Master Agreement does not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty. The fund’s right to setoff may be restricted or prohibited by the bankruptcy or insolvency laws of the particular jurisdiction to which a specific master netting agreement counterparty is subject. Balance sheet offsetting disclosures, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
Investment Valuations – Equity securities, including restricted equity securities, are generally valued at the last sale or official closing price on their primary market or exchange as provided by a third-party pricing service. Equity securities, for which there were no sales reported that day, are generally valued at the last quoted daily bid quotation on their primary market or exchange as provided by a third-party pricing service. Short-term instruments with a maturity at issuance of 60 days or less may be valued at amortized cost, which approximates market value. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. Values obtained from third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the 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
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MFS Global Equity Series
Notes to Financial Statements (unaudited) – continued
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, 2016 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $30,248,592 | $— | $— | $30,248,592 | ||||||||||||
United Kingdom | — | 5,130,864 | — | 5,130,864 | ||||||||||||
Switzerland | — | 4,251,008 | — | 4,251,008 | ||||||||||||
France | — | 3,968,999 | — | 3,968,999 | ||||||||||||
Germany | 715,984 | 2,693,033 | — | 3,409,017 | ||||||||||||
Netherlands | — | 1,196,907 | — | 1,196,907 | ||||||||||||
Canada | 927,124 | — | — | 927,124 | ||||||||||||
Sweden | — | 923,723 | — | 923,723 | ||||||||||||
Japan | — | 574,300 | — | 574,300 | ||||||||||||
Other Countries | 988,539 | 1,574,988 | — | 2,563,527 | ||||||||||||
Mutual Funds | 581,819 | — | — | 581,819 | ||||||||||||
Total Investments | $33,462,058 | $20,313,822 | $— | $53,775,880 |
For further information regarding security characteristics, see the Portfolio of Investments.
Of the level 2 investments presented above, equity investments amounting to $2,244,249 would have been considered level 1 investments at the beginning of the period. Of the level 1 investments presented above, equity investments amounting to $1,005,195 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. Security loans can be terminated at the discretion of either the lending agent or the fund and the related securities must be returned within the earlier of the standard trade settlement period for such securities or within three business days. The loans are collateralized by cash and/or U.S. Treasury and federal agency obligations in an amount typically at least equal to the market value of the securities loaned. On loans collateralized by cash, the cash collateral is invested in a money market fund. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. State Street provides the fund with indemnification against Borrower default. In the event of Borrower default, State Street will, for the benefit of the fund, either purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the fund the market value of the loaned securities. In return, State Street assumes the fund’s rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, State Street is responsible for the shortfall, but only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. At period end, the fund had investment securities on loan, all of which were classified as equity
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MFS Global Equity Series
Notes to Financial Statements (unaudited) – continued
securities in the fund’s Portfolio of Investments, with a fair value of $89,099. The fair value of the fund’s investment securities on loan and a related liability of $91,665 for cash collateral received on securities loaned are both presented gross in the Statement of Assets and Liabilities. The collateral received on securities loaned exceeded the value of securities on loan at period end. The liability for cash collateral for securities loaned is carried at fair value, which is categorized as level 2 within the fair value hierarchy. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the fund and the lending agent. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the Borrower, and is allocated between the fund and the lending agent. Income from securities lending is 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. 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 – Prior to October 1, 2015, the fund’s custody fee could be reduced by a credit earned under an arrangement that measured the value of U.S. dollars deposited with the custodian by the fund. For the six months ended June 30, 2016, 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. Management has analyzed the fund’s tax positions taken on federal and state tax returns for all open tax years and does not believe that there are any uncertain tax positions that require recognition of a tax liability. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests. Additionally, capital gains realized by the fund on securities issued in or by certain foreign countries may be subject to capital gains tax imposed by those countries.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to wash sale loss deferrals.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/15 | ||||
Ordinary income (including any short-term capital gains) | $825,655 | |||
Long-term capital gains | 1,722,554 | |||
Total distributions | $2,548,209 |
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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 6/30/16 | ||||
Cost of investments | $36,942,490 | |||
Gross appreciation | 18,334,869 | |||
Gross depreciation | (1,501,479 | ) | ||
Net unrealized appreciation (depreciation) | $16,833,390 | |||
As of 12/31/15 | ||||
Undistributed ordinary income | 513,823 | |||
Undistributed long-term capital gain | 2,799,662 | |||
Other temporary differences | (4,082 | ) | ||
Net unrealized appreciation (depreciation) | 16,743,409 |
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 6/30/16 | Year ended 12/31/15 | Six months ended 6/30/16 | Year ended 12/31/15 | |||||||||||||
Initial Class | $— | $532,654 | $— | $1,699,129 | ||||||||||||
Service Class | — | 62,046 | — | 254,380 | ||||||||||||
Total | $— | $594,700 | $— | $1,953,509 |
(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 terminated on April 28, 2016. For the period January 1, 2016 to April 28, 2016, this management fee reduction amounted to $16,607, which is included in the reduction of total expenses in the Statement of Operations. Effective April 29, 2016, the management fee is computed daily and paid monthly at an annual rate of 0.90% of average daily net assets up to $1 billion, 0.75% 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. MFS has also 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 six months ended June 30, 2016, this management fee reduction amounted to $1,850, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the six months ended June 30, 2016 was equivalent to an annual effective rate of 0.89% of the fund’s average daily net assets.
The investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, excluding interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses, such that total annual operating expenses do not exceed 1.00% of average daily net assets for the Initial Class shares and 1.25% of average daily net assets for the Service Class shares. This written agreement will terminate on July 31, 2016. For the six months ended June 30, 2016, this reduction amounted to $42,585, which is included in the reduction of total expenses in the Statement of Operations. Effective August 1, 2016, the investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, excluding interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses, such that total annual operating expenses do not exceed 0.97% of average daily net assets for the Initial Class shares and 1.22% 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, 2018.
Distributor – MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, is the distributor of shares of the fund. The Trustees have adopted a distribution plan for the Service Class shares pursuant to Rule 12b-1 under the Investment Company Act of 1940.
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MFS Global Equity Series
Notes to Financial Statements (unaudited) – continued
The fund’s distribution plan provides that the fund will pay MFD distribution and/or service fees equal to 0.25% per annum of its average daily net assets attributable to Service Class shares as partial consideration for services performed and expenses incurred by MFD and financial intermediaries (including participating insurance companies that invest in the fund to fund variable annuity and variable life insurance contracts, sponsors of qualified retirement and pension plans that invest in the fund, and affiliates of these participating insurance companies and plan sponsors) in connection with the sale and distribution of the Service Class shares. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries.
Shareholder Servicing Agent – MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent. For the six months ended June 30, 2016, the fee was $6,057, which equated to 0.0234% 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, 2016, these costs amounted to $163.
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the six months ended June 30, 2016 was equivalent to an annual effective rate of 0.0343% of the fund’s average daily net assets.
Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – This fund and certain other funds managed by MFS (the funds) have entered into a service agreement (the ISO Agreement) which provides for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino serves as the ISO and is an officer of the funds and the sole member of Tarantino LLC. The funds can terminate the ISO Agreement with Tarantino LLC at any time under the terms of the ISO Agreement. For the six months ended June 30, 2016, the fee paid by the fund under this agreement was $53 and is included in “Miscellaneous” expense in the Statement of Operations. MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.
The fund 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.
The fund is permitted to engage in purchase and sale transactions (“cross-trades”) with funds and accounts for which MFS serves as investment adviser or sub-adviser pursuant to a policy adopted by the Board of Trustees. This policy has been designed to ensure that cross-trades conducted by the fund comply with Rule 17a-7 under the Investment Company Act of 1940. Under this policy, cross-trades are effected at current market prices with no remuneration paid in connection with the transaction. During the six months ended June 30, 2016, the fund engaged in purchase and sale transactions pursuant to this policy, which amounted to $35,133 and $20,228, respectively. The sales transactions resulted in net realized gains (losses) of $4,154.
(4) | Portfolio Securities |
For the six months ended June 30, 2016, purchases and sales of investments, other than short-term obligations, aggregated $3,206,075 and $3,393,402, 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 6/30/16 | Year ended 12/31/15 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 205,176 | $3,817,209 | 294,841 | $5,861,870 | ||||||||||||
Service Class | 53,773 | 977,229 | 165,914 | 3,259,672 | ||||||||||||
258,949 | $4,794,438 | 460,755 | $9,121,542 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 126,018 | $2,231,783 | ||||||||||||
Service Class | — | — | 17,948 | 316,426 | ||||||||||||
— | $— | 143,966 | $2,548,209 |
15
Table of Contents
MFS Global Equity Series
Notes to Financial Statements (unaudited) – continued
Six months ended 6/30/16 | Year ended 12/31/15 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (233,891 | ) | $(4,299,717 | ) | (557,747 | ) | $(10,884,525 | ) | ||||||||
Service Class | (52,272 | ) | (953,149 | ) | (142,184 | ) | (2,743,264 | ) | ||||||||
(286,163 | ) | $(5,252,866 | ) | (699,931 | ) | $(13,627,789 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (28,715 | ) | $(482,508 | ) | (136,888 | ) | $(2,790,872 | ) | ||||||||
Service Class | 1,501 | 24,080 | 41,678 | 832,834 | ||||||||||||
(27,214 | ) | $(458,428 | ) | (95,210 | ) | $(1,958,038 | ) |
(6) | Line of Credit |
The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Overnight Federal Reserve funds rate or daily one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Overnight Federal Reserve funds rate plus an agreed upon spread. For the six months ended June 30, 2016, the fund’s commitment fee and interest expense were $141 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 | 284,710 | 4,569,701 | (4,364,257 | ) | 490,154 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $820 | $490,154 |
16
Table of Contents
MFS Global Equity Series
PROXY VOTING POLICIES AND INFORMATION
MFS votes proxies on behalf of the fund pursuant to proxy voting policies and procedures that are available without charge, upon request, by calling 1-800-225-2606, by visiting mfs.com (once you have selected “Individual Investor” as your role, click on “Individual Investor Home” in the top navigation and then select “Learn More About Proxy Voting” under the “I want to…” header on the left hand column of the page), or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available by August 31 of each year without charge by visiting mfs.com (once you have selected “Individual Investor” as your role, click on “Individual Investor Home” in the top navigation and then select “Learn More About Proxy Voting” under the “I want to…” header on the left hand column of the page), 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 on mfs.com by following these steps once you have selected “Individual Investor” as your role: (1) Click on the “Individual Investor Home” in the top navigation and then select the “Announcements” option within the “Market Outlooks” drop down, or (2) Click on “Products & Services” and “Variable Insurance Portfolios” and then select the fund’s name.
INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS
The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, 529 program manager (if applicable), and custodian who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.
Under the Trust’s By-Laws and Declaration of Trust, any claims asserted against or on behalf of the MFS Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of Massachusetts.
17
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Table of Contents
SEMIANNUAL REPORT
June 30, 2016
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 • MAY LOSE VALUE • NO BANK OR CREDIT UNION GUARANTEE • NOT A DEPOSIT • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
Table of Contents
MFS Growth Series
Dear Contract Owners:
Global headwinds continue to restrain growth and profits, though developed market equities have remained resilient, underpinned by record-low interest rates. Rates are likely to stay low over the medium term, as many central banks have implemented accommodative monetary policies in an effort to reinvigorate their economies. Markets will have to deal with an additional headwind in the coming months and years as investors grapple with the fallout from the United Kingdom��s decision to leave the European Union. That process will take a considerable period of time to play out against a highly uncertain backdrop. Weakness in the pound sterling in the wake of the referendum has been a welcome shock absorber for UK financial markets.
Emerging markets have been beneficiaries of firmer commodity prices and diminishing fears of sharply higher interest rates from the U.S. Federal Reserve. China remains a source of concern for investors, as overcapacity in its manufacturing sector inhibits the government’s attempt to change its domestic economy from one driven by exports to a consumer-driven model.
At MFS®, we believe it is best to view markets through a long lens and not react to short-term swings. That makes it possible to filter out market noise and focus on long-term fundamentals.
In our view, the professional guidance of a financial advisor, along with a patient, long-term approach, will help you reach your investment objectives.
Respectfully,
Robert J. Manning
Chairman
MFS Investment Management
August 15, 2016
The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.
1
Table of Contents
MFS Growth Series
Portfolio structure
Top ten holdings | ||||
Facebook, Inc., “A” | 3.9% | |||
Visa, Inc., “A” | 3.9% | |||
Amazon.com, Inc. | 3.5% | |||
Alphabet, Inc., “A” | 3.5% | |||
American Tower Corp., REIT | 2.7% | |||
Thermo Fisher Scientific, Inc. | 2.7% | |||
MasterCard, Inc., “A” | 2.7% | |||
Danaher Corp. | 2.7% | |||
Alphabet, Inc., “C” | 2.6% | |||
Adobe Systems, Inc. | 2.4% |
Equity sectors | ||||
Technology | 22.9% | |||
Retailing | 15.7% | |||
Health Care | 14.9% | |||
Financial Services | 9.7% | |||
Special Products & Services | 7.3% | |||
Consumer Staples | 7.1% | |||
Leisure | 6.5% | |||
Industrial Goods & Services | 5.3% | |||
Autos & Housing | 3.2% | |||
Utilities & Communications | 2.7% | |||
Basic Materials | 1.4% | |||
Transportation | 1.2% | |||
Energy | 0.9% |
Cash & Cash Equivalents includes any cash, investments in money market funds, short-term securities, and other assets less liabilities. Please see the Statement of Assets and Liabilities for additional information related to the fund’s cash position and other assets and liabilities.
Percentages are based on net assets as of 6/30/16.
The portfolio is actively managed and current holdings may be different.
2
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MFS Growth Series
Fund Expenses Borne by the Contract Holders during the Period,
January 1, 2016 through June 30, 2016
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, 2016 through June 30, 2016.
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 1/01/16 | Ending Account Value 6/30/16 | Expenses Paid During Period (p) 1/01/16-6/30/16 | ||||||||||||||
Initial Class | Actual | 0.76% | $1,000.00 | $1,000.75 | $3.78 | |||||||||||||
Hypothetical (h) | 0.76% | $1,000.00 | $1,021.08 | $3.82 | ||||||||||||||
Service Class | Actual | 1.01% | $1,000.00 | $999.49 | $5.02 | |||||||||||||
Hypothetical (h) | 1.01% | $1,000.00 | $1,019.84 | $5.07 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
3
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MFS Growth Series
PORTFOLIO OF INVESTMENTS – 6/30/16 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 98.8% | ||||||||
Aerospace – 0.7% | ||||||||
Honeywell International, Inc. | 80,745 | $ | 9,392,258 | |||||
Rockwell Collins, Inc. | 16,537 | 1,407,960 | ||||||
|
| |||||||
$ | 10,800,218 | |||||||
|
| |||||||
Alcoholic Beverages – 1.9% | ||||||||
Constellation Brands, Inc., “A” | 145,285 | $ | 24,030,139 | |||||
Pernod Ricard S.A. | 35,916 | 4,000,583 | ||||||
|
| |||||||
$ | 28,030,722 | |||||||
|
| |||||||
Apparel Manufacturers – 1.4% | ||||||||
NIKE, Inc., “B” | 293,667 | $ | 16,210,418 | |||||
VF Corp. | 70,307 | 4,323,177 | ||||||
|
| |||||||
$ | 20,533,595 | |||||||
|
| |||||||
Automotive – 0.3% | ||||||||
LKQ Corp. (a) | 144,300 | $ | 4,574,310 | |||||
|
| |||||||
Biotechnology – 2.5% | ||||||||
Alexion Pharmaceuticals, Inc. (a) | 102,011 | $ | 11,910,804 | |||||
Celgene Corp. (a) | 183,900 | 18,138,057 | ||||||
Regeneron Pharmaceuticals, Inc. (a) | 17,217 | 6,012,693 | ||||||
|
| |||||||
$ | 36,061,554 | |||||||
|
| |||||||
Broadcasting – 0.3% | ||||||||
Twenty-First Century Fox, Inc. | 162,072 | $ | 4,384,048 | |||||
|
| |||||||
Brokerage & Asset Managers – 2.6% | ||||||||
Blackstone Group LP | 51,499 | $ | 1,263,785 | |||||
Charles Schwab Corp. | 481,697 | 12,191,751 | ||||||
Intercontinental Exchange, Inc. | 95,307 | 24,394,780 | ||||||
|
| |||||||
$ | 37,850,316 | |||||||
|
| |||||||
Business Services – 5.9% | ||||||||
Cognizant Technology Solutions Corp., “A” (a) | 289,458 | $ | 16,568,576 | |||||
Equifax, Inc. | 109,297 | 14,033,735 | ||||||
Fidelity National Information Services, Inc. | 73,320 | 5,402,218 | ||||||
Fiserv, Inc. (a) | 214,737 | 23,348,354 | ||||||
FleetCor Technologies, Inc. (a) | 109,093 | 15,614,481 | ||||||
Verisk Analytics, Inc., “A” (a) | 138,423 | 11,223,337 | ||||||
|
| |||||||
$ | 86,190,701 | |||||||
|
| |||||||
Cable TV – 1.6% | ||||||||
Comcast Corp., “A” | 348,740 | $ | 22,734,361 | |||||
|
| |||||||
Chemicals – 1.0% | ||||||||
Monsanto Co. | 134,576 | $ | 13,916,504 | |||||
|
| |||||||
Computer Software – 8.5% | ||||||||
Adobe Systems, Inc. (a) | 370,364 | $ | 35,477,168 | |||||
Akamai Technologies, Inc. (a) | 27,751 | 1,552,113 | ||||||
Intuit, Inc. | 155,761 | 17,384,485 | ||||||
Microsoft Corp. | 665,254 | 34,041,047 | ||||||
Sabre Corp. | 232,182 | 6,220,156 | ||||||
Salesforce.com, Inc. (a) | 364,053 | 28,909,449 | ||||||
|
| |||||||
$ | 123,584,418 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Computer Software – Systems – 1.6% | ||||||||
Apple, Inc. | 245,090 | $ | 23,430,604 | |||||
|
| |||||||
Construction – 2.9% | ||||||||
Sherwin-Williams Co. | 76,911 | $ | 22,586,453 | |||||
Vulcan Materials Co. | 159,102 | 19,149,517 | ||||||
|
| |||||||
$ | 41,735,970 | |||||||
|
| |||||||
Consumer Products – 2.0% | ||||||||
Colgate-Palmolive Co. | 188,733 | $ | 13,815,256 | |||||
Estee Lauder Cos., Inc., “A” | 160,403 | 14,599,881 | ||||||
|
| |||||||
$ | 28,415,137 | |||||||
|
| |||||||
Consumer Services – 1.4% | ||||||||
Priceline Group, Inc. (a) | 16,016 | $ | 19,994,535 | |||||
|
| |||||||
Electrical Equipment – 3.2% | ||||||||
AMETEK, Inc. | 183,244 | $ | 8,471,370 | |||||
Danaher Corp. | 381,132 | 38,494,332 | ||||||
|
| |||||||
$ | 46,965,702 | |||||||
|
| |||||||
Electronics – 2.0% | ||||||||
Broadcom Corp. | 129,824 | $ | 20,174,650 | |||||
NVIDIA Corp. | 178,073 | 8,371,212 | ||||||
|
| |||||||
$ | 28,545,862 | |||||||
|
| |||||||
Energy – Independent – 0.9% | ||||||||
Concho Resources, Inc. (a) | 53,508 | $ | 6,381,899 | |||||
Pioneer Natural Resources Co. | 40,757 | 6,162,866 | ||||||
|
| |||||||
$ | 12,544,765 | |||||||
|
| |||||||
Entertainment – 0.8% | ||||||||
Netflix, Inc. (a) | 125,417 | $ | 11,473,147 | |||||
|
| |||||||
Food & Beverages – 2.6% | ||||||||
Danone S.A. | 135,168 | $ | 9,531,054 | |||||
Mead Johnson Nutrition Co., “A” | 104,051 | 9,442,628 | ||||||
Mondelez International, Inc. | 256,153 | 11,657,523 | ||||||
Monster Worldwide, Inc. (a) | 45,910 | 7,378,196 | ||||||
|
| |||||||
$ | 38,009,401 | |||||||
|
| |||||||
Food & Drug Stores – 0.7% | ||||||||
CVS Health Corp. | 90,904 | $ | 8,703,149 | |||||
Walgreens Boots Alliance, Inc. | 18,795 | 1,565,060 | ||||||
|
| |||||||
$ | 10,268,209 | |||||||
|
| |||||||
Gaming & Lodging – 0.5% | ||||||||
Marriott International, Inc., “A” (l) | 121,111 | $ | 8,049,037 | |||||
|
| |||||||
General Merchandise – 4.5% | ||||||||
Costco Wholesale Corp. | 152,454 | $ | 23,941,376 | |||||
Dollar General Corp. | 176,083 | 16,551,802 | ||||||
Dollar Tree, Inc. (a) | 263,696 | 24,850,711 | ||||||
|
| |||||||
$ | 65,343,889 | |||||||
|
| |||||||
Insurance – 0.5% | ||||||||
Aon PLC | 70,220 | $ | 7,670,131 | |||||
|
|
4
Table of Contents
MFS Growth Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Internet – 10.8% | ||||||||
Alphabet, Inc., “A” (a) | 71,739 | $ | 50,470,539 | |||||
Alphabet, Inc., “C” (a) | 54,152 | 37,478,599 | ||||||
Facebook, Inc., “A” (a) | 499,981 | 57,137,829 | ||||||
LinkedIn Corp., “A” (a) | 60,106 | 11,375,061 | ||||||
|
| |||||||
$ | 156,462,028 | |||||||
|
| |||||||
Leisure & Toys – 0.9% | ||||||||
Electronic Arts, Inc. (a) | 170,829 | $ | 12,942,005 | |||||
|
| |||||||
Machinery & Tools – 1.4% | ||||||||
Flowserve Corp. | 121,768 | $ | 5,500,261 | |||||
Roper Technologies, Inc. | 83,776 | 14,288,835 | ||||||
|
| |||||||
$ | 19,789,096 | |||||||
|
| |||||||
Medical & Health Technology & Services – 0.6% | ||||||||
McKesson Corp. | 44,174 | $ | 8,245,077 | |||||
|
| |||||||
Medical Equipment – 7.8% | ||||||||
Abbott Laboratories | 334,903 | $ | 13,165,037 | |||||
C.R. Bard, Inc. | 48,760 | 11,466,402 | ||||||
Cooper Cos., Inc. | 35,754 | 6,134,314 | ||||||
Edwards Lifesciences Corp. (a) | 14,216 | 1,417,762 | ||||||
Medtronic PLC | 301,974 | 26,202,284 | ||||||
Stryker Corp. | 86,836 | 10,405,558 | ||||||
Thermo Fisher Scientific, Inc. | 267,629 | 39,544,861 | ||||||
VWR Corp. (a) | 151,670 | 4,383,263 | ||||||
|
| |||||||
$ | 112,719,481 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 6.6% | ||||||||
MasterCard, Inc., “A” | 439,617 | $ | 38,712,673 | |||||
Visa, Inc., “A” | 767,476 | 56,923,695 | ||||||
|
| |||||||
$ | 95,636,368 | |||||||
|
| |||||||
Pharmaceuticals – 4.1% | ||||||||
Allergan PLC (a) | 51,071 | $ | 11,801,997 | |||||
Bristol-Myers Squibb Co. | 347,463 | 25,555,904 | ||||||
Eli Lilly & Co. | 159,563 | 12,565,586 | ||||||
Zoetis, Inc. | 204,795 | 9,719,571 | ||||||
|
| |||||||
$ | 59,643,058 | |||||||
|
| |||||||
Railroad & Shipping – 1.2% | ||||||||
Canadian Pacific Railway Ltd. | 77,716 | $ | 10,009,044 | |||||
Union Pacific Corp. | 86,106 | 7,512,749 | ||||||
|
| |||||||
$ | 17,521,793 | |||||||
|
| |||||||
Restaurants – 2.4% | ||||||||
Aramark | 547,098 | $ | 18,284,015 | |||||
Starbucks Corp. | 279,634 | 15,972,694 | ||||||
|
| |||||||
$ | 34,256,709 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Specialty Chemicals – 0.4% | ||||||||
Ecolab, Inc. | 52,513 | $ | 6,228,042 | |||||
|
| |||||||
Specialty Stores – 9.0% | ||||||||
Amazon.com, Inc. (a) | 70,605 | $ | 50,526,350 | |||||
AutoZone, Inc. (a) | 27,633 | 21,936,181 | ||||||
Lululemon Athletica, Inc. (a) | 75,102 | 5,547,034 | ||||||
Ross Stores, Inc. | 437,803 | 24,819,052 | ||||||
TJX Cos., Inc. | 250,933 | 19,379,551 | ||||||
Tractor Supply Co. | 96,294 | 8,780,087 | ||||||
|
| |||||||
$ | 130,988,255 | |||||||
|
| |||||||
Telecommunications – Wireless – 2.7% | ||||||||
American Tower Corp., REIT | 349,356 | $ | 39,690,335 | |||||
|
| |||||||
Tobacco – 0.6% | ||||||||
Reynolds American, Inc. | 159,446 | $ | 8,598,923 | |||||
|
| |||||||
Total Common Stocks (Identified Cost, $937,877,156) | $ | 1,433,828,306 | ||||||
|
| |||||||
MONEY MARKET FUNDS – 1.4% | ||||||||
MFS Institutional Money Market Portfolio, 0.36%, at Cost and Net Asset Value (v) | 19,729,160 | $ | 19,729,160 | |||||
|
| |||||||
COLLATERAL FOR SECURITIES LOANED – 0.1% | ||||||||
Navigator Securities Lending Prime Portfolio, 0.53%, at Cost and Net Asset Value (j) | 2,059,646 | $ | 2,059,646 | |||||
|
| |||||||
Total Investments (Identified Cost, $959,665,962) | $ | 1,455,617,112 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – (0.3)% | (4,008,489 | ) | ||||||
|
| |||||||
NET ASSETS – 100.0% | $ | 1,451,608,623 | ||||||
|
|
(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 |
REIT | Real Estate Investment Trust |
See Notes to Financial Statements
5
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 6/30/16 | ||||||||
Assets | ||||||||
Investments | ||||||||
Non-affiliated issuers, at value (identified cost, $939,936,802) | $1,435,887,952 | |||||||
Underlying affiliated funds, at cost and value | 19,729,160 | |||||||
Total investments, at value, including $7,083,107 of securities on loan (identified cost, $959,665,962) | $1,455,617,112 | |||||||
Receivables for | ||||||||
Investments sold | 3,177,628 | |||||||
Fund shares sold | 273,453 | |||||||
Interest and dividends | 749,028 | |||||||
Other assets | 3,594 | |||||||
Total assets | $1,459,820,815 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Investments purchased | $3,974,281 | |||||||
Fund shares reacquired | 1,877,705 | |||||||
Collateral for securities loaned, at value (c) | 2,059,646 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 57,029 | |||||||
Shareholder servicing costs | 204 | |||||||
Distribution and/or service fees | 3,038 | |||||||
Payable for independent Trustees’ compensation | 788 | |||||||
Accrued expenses and other liabilities | 239,501 | |||||||
Total liabilities | $8,212,192 | |||||||
Net assets | $1,451,608,623 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $840,719,963 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 495,950,949 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | 113,344,262 | |||||||
Undistributed net investment income | 1,593,449 | |||||||
Net assets | $1,451,608,623 | |||||||
Shares of beneficial interest outstanding | 36,271,555 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $1,225,477,242 | 30,483,493 | $40.20 | |||||||||
Service Class | 226,131,381 | 5,788,062 | 39.07 |
(c) | Non-cash collateral is not included. |
See Notes to Financial Statements
6
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 6/30/16 |
| |||||||
Net investment income |
| |||||||
Income | ||||||||
Dividends | $6,485,531 | |||||||
Interest | 19,354 | |||||||
Dividends from underlying affiliated funds | 30,175 | |||||||
Foreign taxes withheld | (44,379 | ) | ||||||
Total investment income | $6,490,681 | |||||||
Expenses | ||||||||
Management fee | $5,102,337 | |||||||
Distribution and/or service fees | 269,097 | |||||||
Shareholder servicing costs | 33,674 | |||||||
Administrative services fee | 117,964 | |||||||
Independent Trustees’ compensation | 15,277 | |||||||
Custodian fee | 60,194 | |||||||
Shareholder communications | 62,738 | |||||||
Audit and tax fees | 28,207 | |||||||
Legal fees | 6,583 | |||||||
Miscellaneous | 23,188 | |||||||
Total expenses | $5,719,259 | |||||||
Reduction of expenses by investment adviser | (50,718 | ) | ||||||
Net expenses | $5,668,541 | |||||||
Net investment income | $822,140 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $27,205,329 | |||||||
Foreign currency | (3,438 | ) | ||||||
Net realized gain (loss) on investments and foreign currency | $27,201,891 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $(28,958,201 | ) | ||||||
Translation of assets and liabilities in foreign currencies | (210 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $(28,958,411 | ) | ||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $(1,756,520 | ) | ||||||
Change in net assets from operations | $(934,380 | ) |
See Notes to Financial Statements
7
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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 6/30/16 (unaudited | ) | | Year ended 12/31/15 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $822,140 | $666,786 | ||||||
Net realized gain (loss) on investments and foreign currency | 27,201,891 | 88,419,457 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | (28,958,411 | ) | 22,003,421 | |||||
Change in net assets from operations | $(934,380 | ) | $111,089,664 | |||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(1,996,599 | ) | |||||
From net realized gain on investments | — | (84,334,297 | ) | |||||
Total distributions declared to shareholders | $— | $(86,330,896 | ) | |||||
Change in net assets from fund share transactions | $(45,354,481 | ) | $(69,859,094 | ) | ||||
Total change in net assets | $(46,288,861 | ) | $(45,100,326 | ) | ||||
Net assets | ||||||||
At beginning of period | 1,497,897,484 | 1,542,997,810 | ||||||
At end of period (including undistributed net investment income of $1,593,449 and | $1,451,608,623 | $1,497,897,484 |
See Notes to Financial Statements
8
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 6/30/16 | Years ended 12/31 | ||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $40.17 | $39.75 | $39.07 | $28.83 | $24.56 | $24.69 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (loss) (d) | $0.03 | $0.03 | $0.07 | $0.04 | $0.13 | $(0.00 | )(w) | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.00 | )(w) | 2.73 | 3.33 | 10.53 | 4.14 | (0.08 | ) | ||||||||||||||||
Total from investment operations | $0.03 | $2.76 | $3.40 | $10.57 | $4.27 | $(0.08 | ) | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.07 | ) | $(0.04 | ) | $(0.08 | ) | $— | $(0.05 | ) | ||||||||||||||
From net realized gain on investments | — | (2.27 | ) | (2.68 | ) | (0.25 | ) | — | — | |||||||||||||||
Total distributions declared to shareholders | $— | $(2.34 | ) | $(2.72 | ) | $(0.33 | ) | $— | $(0.05 | ) | ||||||||||||||
Net asset value, end of period (x) | $40.20 | $40.17 | $39.75 | $39.07 | $28.83 | $24.56 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 0.07 | (n) | 7.56 | 8.94 | 36.85 | 17.39 | (0.32 | ) | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.77 | (a) | 0.76 | 0.76 | 0.77 | 0.82 | 0.84 | |||||||||||||||||
Expenses after expense reductions (f) | 0.76 | (a) | 0.75 | 0.76 | 0.77 | 0.82 | 0.84 | |||||||||||||||||
Net investment income | 0.15 | (a) | 0.08 | 0.18 | 0.13 | 0.45 | (0.00 | )(w) | ||||||||||||||||
Portfolio turnover | 12 | (n) | 31 | 36 | 43 | 52 | 75 | |||||||||||||||||
Net assets at end of period (000 omitted) | $1,225,477 | $1,273,204 | $1,263,935 | $1,308,361 | $1,007,422 | $461,382 | ||||||||||||||||||
Service Class | Six months 6/30/16 | Years ended 12/31 | ||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $39.09 | $38.77 | $38.22 | $28.25 | $24.13 | $24.27 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (loss) (d) | $(0.02 | ) | $(0.07 | ) | $(0.02 | ) | $(0.04 | ) | $0.07 | $(0.06 | ) | |||||||||||||
Net realized and unrealized gain (loss) on investments | (0.00 | )(w) | 2.66 | 3.25 | 10.30 | 4.05 | (0.08 | ) | ||||||||||||||||
Total from investment operations | $(0.02 | ) | $2.59 | $3.23 | $10.26 | $4.12 | $(0.14 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $— | $— | $(0.04 | ) | $— | $(0.00 | )(w) | ||||||||||||||||
From net realized gain on investments | — | (2.27 | ) | (2.68 | ) | (0.25 | ) | — | — | |||||||||||||||
Total distributions declared to shareholders | $— | $(2.27 | ) | $(2.68 | ) | $(0.29 | ) | $— | $(0.00 | )(w) | ||||||||||||||
Net asset value, end of period (x) | $39.07 | $39.09 | $38.77 | $38.22 | $28.25 | $24.13 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | (0.05 | )(n) | 7.30 | 8.68 | 36.49 | 17.07 | (0.56 | ) | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.02 | (a) | 1.01 | 1.01 | 1.02 | 1.07 | 1.09 | |||||||||||||||||
Expenses after expense reductions (f) | 1.01 | (a) | 1.00 | 1.01 | 1.02 | 1.07 | 1.09 | |||||||||||||||||
Net investment income (loss) | (0.10 | )(a) | (0.16 | ) | (0.06 | ) | (0.12 | ) | 0.26 | (0.25 | ) | |||||||||||||
Portfolio turnover | 12 | (n) | 31 | 36 | 43 | 52 | 75 | |||||||||||||||||
Net assets at end of period (000 omitted) | $226,131 | $224,694 | $279,063 | $242,216 | $134,247 | $56,810 |
See Notes to Financial Statements
9
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 or ratio was less than 0.01%. |
(x) | The net asset values and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
10
Table of Contents
MFS Growth Series
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) | Business and Organization |
MFS Growth Series (the fund) is a diversified 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.
The fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued.
Balance Sheet Offsetting – The fund’s accounting policy with respect to balance sheet offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the International Swaps and Derivatives Association (ISDA) Master Agreement does not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty. The fund’s right to setoff may be restricted or prohibited by the bankruptcy or insolvency laws of the particular jurisdiction to which a specific master netting agreement counterparty is subject. Balance sheet offsetting disclosures, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
Investment Valuations – Equity securities, including restricted equity securities, are generally valued at the last sale or official closing price on their primary market or exchange as provided by a third-party pricing service. Equity securities, for which there were no sales reported that day, are generally valued at the last quoted daily bid quotation on their primary market or exchange as provided by a third-party pricing service. Short-term instruments with a maturity at issuance of 60 days or less may be valued at amortized cost, which approximates market value. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. Values obtained from third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the 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.
11
Table of Contents
MFS Growth Series
Notes to Financial Statements (unaudited) – continued
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. The following is a summary of the levels used as of June 30, 2016 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $1,410,287,625 | $— | $— | $1,410,287,625 | ||||||||||||
France | — | 13,531,637 | — | 13,531,637 | ||||||||||||
Canada | 10,009,044 | — | — | 10,009,044 | ||||||||||||
Mutual Funds | 21,788,806 | — | — | 21,788,806 | ||||||||||||
Total Investments | $1,442,085,475 | $13,531,637 | $— | $1,455,617,112 |
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. Security loans can be terminated at the discretion of either the lending agent or the fund and the related securities must be returned within the earlier of the standard trade settlement period for such securities or within three business days. The loans are collateralized by cash and/or U.S. Treasury and federal agency obligations in an amount typically at least equal to the market value of the securities loaned. On loans collateralized by cash, the cash collateral is invested in a money market fund. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. State Street provides the fund with indemnification against Borrower default. In the event of Borrower default, State Street will, for the benefit of the fund, either purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the fund the market value of the loaned securities. In return, State Street assumes the fund’s rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, State Street is responsible for the shortfall, but only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. At period end, the fund had investment securities on loan, all of which were classified as equity securities in the fund’s Portfolio of Investments, with a fair value of $7,083,107. The fair value of the fund’s investment securities on loan and a related liability of $2,059,646 for cash collateral received on securities loaned are both presented gross in the Statement of Assets and Liabilities. Additionally, these loans were collateralized by U.S. Treasury Obligations of $4,992,828. The value of the fund’s securities on loan net of the related collateral is $30,633 at period end. The liability for cash collateral for securities loaned is carried at fair value, which is categorized as level 2 within the fair value hierarchy. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the fund and the lending agent. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the Borrower, and is allocated between the fund and the lending agent. Income from securities lending is 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. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be
12
Table of Contents
MFS Growth Series
Notes to Financial Statements (unaudited) – continued
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 – Prior to October 1, 2015, the fund’s custody fee could be reduced by a credit earned under an arrangement that measured the value of U.S. dollars deposited with the custodian by the fund. For the six months ended June 30, 2016, 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. Management has analyzed the fund’s tax positions taken on federal and state tax returns for all open tax years and does not believe that there are any uncertain tax positions that require recognition of a tax liability. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests. Additionally, capital gains realized by the fund on securities issued in or by certain foreign countries may be subject to capital gains tax imposed by those countries.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to wash sale loss deferrals.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/15 | ||||
Ordinary income (including any short-term capital gains) | $3,791,361 | |||
Long-term capital gains | 82,539,535 | |||
Total distributions | $86,330,896 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/16 | ||||
Cost of investments | $960,915,481 | |||
Gross appreciation | 504,809,902 | |||
Gross depreciation | (10,108,271 | ) | ||
Net unrealized appreciation (depreciation) | $494,701,631 | |||
As of 12/31/15 | ||||
Undistributed ordinary income | 771,309 | |||
Undistributed long-term capital gain | 87,391,889 | |||
Other temporary differences | 9 | |||
Net unrealized appreciation (depreciation) | 523,659,833 |
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 Growth Series
Notes to Financial Statements (unaudited) – continued
dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported 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 6/30/16 | Year ended 12/31/15 | Six months ended 6/30/16 | Year ended 12/31/15 | |||||||||||||
Initial Class | $— | $1,996,599 | $— | $69,480,678 | ||||||||||||
Service Class | — | — | — | 14,853,619 | ||||||||||||
Total | $— | $1,996,599 | $— | $84,334,297 |
(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% |
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 six months ended June 30, 2016, this management fee reduction amounted to $50,718, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the six months ended June 30, 2016 was equivalent to an annual effective rate of 0.71% 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, 2016, the fee was $31,952, which equated to 0.0045% 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, 2016, these costs amounted to $1,722.
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the six months ended June 30, 2016 was equivalent to an annual effective rate of 0.0166% of the fund’s average daily net assets.
Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – This fund and certain other funds managed by MFS (the funds) have entered into a service agreement (the ISO Agreement) which provides for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino serves as the ISO and is an officer of the funds and the sole member of Tarantino LLC. The funds can terminate the ISO Agreement with Tarantino LLC at any time under the terms of the ISO Agreement. For the six months ended June 30, 2016, the fee paid by the fund under this agreement was $1,425 and is included in “Miscellaneous” expense in the Statement of Operations. MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.
The fund 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.
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MFS Growth Series
Notes to Financial Statements (unaudited) – continued
The fund is permitted to engage in purchase and sale transactions (“cross-trades”) with funds and accounts for which MFS serves as investment adviser or sub-adviser pursuant to a policy adopted by the Board of Trustees. This policy has been designed to ensure that cross-trades conducted by the fund comply with Rule 17a-7 under the Investment Company Act of 1940. Under this policy, cross-trades are effected at current market prices with no remuneration paid in connection with the transaction. During the six months ended June 30, 2016, the fund engaged in purchase and sale transactions pursuant to this policy, which amounted to $1,192,358 and $1,280,958, respectively. The sales transactions resulted in net realized gains of $363,000.
(4) | Portfolio Securities |
For the six months ended June 30, 2016, purchases and sales of investments, other than short-term obligations, aggregated $172,379,075 and $223,613,556, 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 6/30/16 | Year ended 12/31/15 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 1,121,337 | $43,670,216 | 3,388,519 | $136,302,423 | ||||||||||||
Service Class | 863,158 | 32,379,187 | 1,353,238 | 53,496,981 | ||||||||||||
1,984,495 | $76,049,403 | 4,741,757 | $189,799,404 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 1,948,915 | $70,687,159 | ||||||||||||
Service Class | — | — | 420,544 | 14,853,619 | ||||||||||||
— | $— | 2,369,459 | $85,540,778 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (2,332,232 | ) | $(90,739,613 | ) | (5,437,902 | ) | $(221,523,026 | ) | ||||||||
Service Class | (823,511 | ) | (30,664,271 | ) | (3,222,658 | ) | (123,676,250 | ) | ||||||||
(3,155,743 | ) | $(121,403,884 | ) | (8,660,560 | ) | $(345,199,276 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (1,210,895 | ) | $(47,069,397 | ) | (100,468 | ) | $(14,533,444 | ) | ||||||||
Service Class | 39,647 | 1,714,916 | (1,448,876 | ) | (55,325,650 | ) | ||||||||||
(1,171,248 | ) | $(45,354,481 | ) | (1,549,344 | ) | $(69,859,094 | ) |
The fund is one of several mutual funds in which certain MFS funds may invest. The MFS funds do not invest in the underlying funds for the purpose of exercising management or control. At the end of the period, the MFS Moderate Allocation Portfolio, the MFS Growth Allocation Portfolio, and the MFS Conservative Allocation Portfolio were the owners of record of approximately 11%, 3%, and 3%, respectively, of the value of outstanding voting shares of the fund.
(6) | Line of Credit |
The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Overnight Federal Reserve funds rate or daily one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Overnight Federal Reserve funds rate plus an agreed upon spread. For the six months ended June 30, 2016, the fund’s commitment fee and interest expense were $3,837 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.
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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 | 13,301,115 | 108,223,628 | (101,795,583 | ) | 19,729,160 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $30,175 | $19,729,160 |
16
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MFS Growth Series
PROXY VOTING POLICIES AND INFORMATION
MFS votes proxies on behalf of the fund pursuant to proxy voting policies and procedures that are available without charge, upon request, by calling 1-800-225-2606, by visiting mfs.com (once you have selected “Individual Investor” as your role, click on “Individual Investor Home” in the top navigation and then select “Learn More About Proxy Voting” under the “I want to…” header on the left hand column of the page), or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available by August 31 of each year without charge by visiting mfs.com (once you have selected “Individual Investor” as your role, click on “Individual Investor Home” in the top navigation and then select “Learn More About Proxy Voting” under the “I want to…” header on the left hand column of the page), 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 on mfs.com by following these steps once you have selected “Individual Investor” as your role: (1) Click on the “Individual Investor Home” in the top navigation and then select the “Announcements” option within the “Market Outlooks” drop down, or (2) Click on “Products & Services” and “Variable Insurance Portfolios” and then select the fund’s name.
INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS
The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, 529 program manager (if applicable), and custodian who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.
Under the Trust’s By-Laws and Declaration of Trust, any claims asserted against or on behalf of the MFS Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of Massachusetts.
17
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Table of Contents
SEMIANNUAL REPORT
June 30, 2016
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 • MAY LOSE VALUE • NO BANK OR CREDIT UNION GUARANTEE • NOT A DEPOSIT • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
Table of Contents
MFS Investors Trust Series
Dear Contract Owners:
Global headwinds continue to restrain growth and profits, though developed market equities have remained resilient, underpinned by record-low interest rates. Rates are likely to stay low over the medium term, as many central banks have implemented accommodative monetary policies in an effort to reinvigorate their economies. Markets will have to deal with an additional headwind in the coming months and years as investors grapple with the fallout from the United Kingdom’s decision to leave the European Union. That process will take a considerable period of time to play out against a highly uncertain backdrop. Weakness in the pound sterling in the wake of the referendum has been a welcome shock absorber for UK financial markets.
Emerging markets have been beneficiaries of firmer commodity prices and diminishing fears of sharply higher interest rates from the U.S. Federal Reserve. China remains a source of concern for investors, as overcapacity in its manufacturing sector inhibits the government’s attempt to change its domestic economy from one driven by exports to a consumer-driven model.
At MFS®, we believe it is best to view markets through a long lens and not react to short-term swings. That makes it possible to filter out market noise and focus on long-term fundamentals.
In our view, the professional guidance of a financial advisor, along with a patient, long-term approach, will help you reach your investment objectives.
Respectfully,
Robert J. Manning
Chairman
MFS Investment Management
August 15, 2016
The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.
1
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MFS Investors Trust Series
Portfolio structure
Top ten holdings | ||||
JPMorgan Chase & Co. | 3.2% | |||
Danaher Corp. | 3.1% | |||
Visa, Inc., “A” | 2.7% | |||
Thermo Fisher Scientific, Inc. | 2.5% | |||
American Tower Corp. | 2.5% | |||
Johnson & Johnson | 2.3% | |||
Alphabet, Inc., “A” | 2.3% | |||
Schlumberger Ltd. | 2.1% | |||
Newell Brands, Inc. | 2.1% | |||
Comcast Corp., “A” | 2.0% |
Equity sectors | ||||
Financial Services | 20.6% | |||
Health Care | 14.7% | |||
Consumer Staples | 11.1% | |||
Technology | 9.8% | |||
Industrial Goods & Services | 8.1% | |||
Retailing | 7.2% | |||
Leisure | 6.5% | |||
Special Products & Services | 6.4% | |||
Utilities & Communications | 4.8% | |||
Energy | 4.3% | |||
Basic Materials | 3.0% | |||
Transportation | 1.6% | |||
Autos & Housing | 1.1% |
Cash & Cash Equivalents includes any cash, investments in money market funds, short-term securities, and other assets less liabilities. Please see the Statement of Assets and Liabilities for additional information related to the fund’s cash position and other assets and liabilities.
Percentages are based on net assets as of 6/30/16.
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, 2016 through June 30, 2016
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, 2016 through June 30, 2016.
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 1/01/16 | Ending Account Value | Expenses Paid During Period (p) 1/01/16-6/30/16 | ||||||||||||||
Initial Class | Actual | 0.82% | $1,000.00 | $1,016.55 | $4.11 | |||||||||||||
Hypothetical (h) | 0.82% | $1,000.00 | $1,020.79 | $4.12 | ||||||||||||||
Service Class | Actual | 1.07% | $1,000.00 | $1,015.21 | $5.36 | |||||||||||||
Hypothetical (h) | 1.07% | $1,000.00 | $1,019.54 | $5.37 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
Notes to Expense Table
Changes to the fund’s fee arrangements will occur during the fund’s current fiscal year. Had these fee changes been in effect during the six-month period, the annualized expense ratios, the actual expenses paid during the period and the hypothetical expenses paid during the period would have been approximately 0.79%, $3.96 and $3.97 for Initial Class and 1.04%, $5.21 and $5.22 for Service Class, respectively. For further information about the fund’s fee arrangements and changes to those fee arrangements, please see Note 3 in the Notes to Financial Statements.
3
Table of Contents
MFS Investors Trust Series
PORTFOLIO OF INVESTMENTS – 6/30/16 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 98.9% | ||||||||
Aerospace – 3.0% | ||||||||
Honeywell International, Inc. | 70,110 | $ | 8,155,193 | |||||
United Technologies Corp. | 62,192 | 6,377,790 | ||||||
|
| |||||||
$ | 14,532,983 | |||||||
|
| |||||||
Alcoholic Beverages – 1.9% | ||||||||
Diageo PLC | 125,912 | $ | 3,523,170 | |||||
Pernod Ricard S.A. | 47,858 | 5,330,770 | ||||||
|
| |||||||
$ | 8,853,940 | |||||||
|
| |||||||
Apparel Manufacturers – 2.5% | ||||||||
LVMH Moet Hennessy Louis Vuitton S.A. | 34,663 | $ | 5,248,571 | |||||
NIKE, Inc., “B” | 42,719 | 2,358,089 | ||||||
VF Corp. | 66,184 | 4,069,654 | ||||||
|
| |||||||
$ | 11,676,314 | |||||||
|
| |||||||
Broadcasting – 4.0% | ||||||||
Time Warner, Inc. | 105,581 | $ | 7,764,427 | |||||
Twenty-First Century Fox, Inc. | 204,074 | 5,520,202 | ||||||
Walt Disney Co. | 58,158 | 5,689,016 | ||||||
|
| |||||||
$ | 18,973,645 | |||||||
|
| |||||||
Brokerage & Asset Managers – 3.3% | ||||||||
BlackRock, Inc. | 21,606 | $ | 7,400,703 | |||||
Blackstone Group LP | 80,781 | 1,982,366 | ||||||
NASDAQ, Inc. | 94,964 | 6,141,322 | ||||||
|
| |||||||
$ | 15,524,391 | |||||||
|
| |||||||
Business Services – 6.4% | ||||||||
Accenture PLC, “A” | 81,972 | $ | 9,286,608 | |||||
Cognizant Technology Solutions Corp., “A” (a) | 155,196 | 8,883,419 | ||||||
Fidelity National Information Services, Inc. | 123,317 | 9,085,997 | ||||||
Gartner, Inc. (a) | 35,230 | 3,431,754 | ||||||
|
| |||||||
$ | 30,687,778 | |||||||
|
| |||||||
Cable TV – 2.0% | ||||||||
Comcast Corp., “A” | 145,236 | $ | 9,467,935 | |||||
|
| |||||||
Chemicals – 1.6% | ||||||||
Monsanto Co. | 75,721 | $ | 7,830,309 | |||||
|
| |||||||
Computer Software – 0.7% | ||||||||
Adobe Systems, Inc. (a) | 33,109 | $ | 3,171,511 | |||||
|
| |||||||
Computer Software – Systems – 2.4% | ||||||||
Apple, Inc. | 46,086 | $ | 4,405,822 | |||||
EMC Corp. | 111,550 | 3,030,814 | ||||||
Hewlett Packard Enterprise | 206,603 | 3,774,637 | ||||||
|
| |||||||
$ | 11,211,273 | |||||||
|
| |||||||
Construction – 1.1% | ||||||||
Sherwin-Williams Co. | 17,517 | $ | 5,144,217 | |||||
|
| |||||||
Consumer Products – 4.9% | ||||||||
Colgate-Palmolive Co. | 72,444 | $ | 5,302,901 | |||||
Estee Lauder Cos., Inc., “A” | 23,467 | 2,135,966 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Consumer Products – continued | ||||||||
Kimberly-Clark Corp. | 21,214 | $ | 2,916,501 | |||||
Newell Brands, Inc. | 201,837 | 9,803,223 | ||||||
Procter & Gamble Co. | 36,593 | 3,098,329 | ||||||
|
| |||||||
$ | 23,256,920 | |||||||
|
| |||||||
Containers – 1.3% | ||||||||
Crown Holdings, Inc. (a) | 126,781 | $ | 6,423,993 | |||||
|
| |||||||
Electrical Equipment – 4.2% | ||||||||
Danaher Corp. | 148,368 | $ | 14,985,168 | |||||
W.W. Grainger, Inc. | 22,609 | 5,137,895 | ||||||
|
| |||||||
$ | 20,123,063 | |||||||
|
| |||||||
Electronics – 2.7% | ||||||||
Broadcom Corp. | 60,632 | $ | 9,422,213 | |||||
Texas Instruments, Inc. | 54,513 | 3,415,239 | ||||||
|
| |||||||
$ | 12,837,452 | |||||||
|
| |||||||
Energy – Independent – 2.0% | ||||||||
EOG Resources, Inc. | 91,837 | $ | 7,661,043 | |||||
Occidental Petroleum Corp. | 25,636 | 1,937,056 | ||||||
|
| |||||||
$ | 9,598,099 | |||||||
|
| |||||||
Engineering – Construction – 0.8% | ||||||||
Fluor Corp. | 76,932 | $ | 3,791,209 | |||||
|
| |||||||
Food & Beverages – 4.3% | ||||||||
Danone S.A. | 95,214 | $ | 6,713,791 | |||||
General Mills, Inc. | 38,047 | 2,713,512 | ||||||
Mead Johnson Nutrition Co., “A” | 33,350 | 3,026,513 | ||||||
Mondelez International, Inc. | 177,826 | 8,092,861 | ||||||
|
| |||||||
$ | 20,546,677 | |||||||
|
| |||||||
General Merchandise – 1.7% | ||||||||
Costco Wholesale Corp. | 28,925 | $ | 4,542,382 | |||||
Target Corp. | 54,133 | 3,779,566 | ||||||
|
| |||||||
$ | 8,321,948 | |||||||
|
| |||||||
Insurance – 1.2% | ||||||||
Chubb Ltd. | 43,358 | $ | 5,667,324 | |||||
|
| |||||||
Internet – 4.1% | ||||||||
Alphabet, Inc., “A” (a) | 15,359 | $ | 10,805,517 | |||||
Alphabet, Inc., “C” (a) | 12,331 | 8,534,285 | ||||||
|
| |||||||
$ | 19,339,802 | |||||||
|
| |||||||
Major Banks – 9.8% | ||||||||
Bank of America Corp. | 694,790 | $ | 9,219,863 | |||||
Goldman Sachs Group, Inc. | 49,317 | 7,327,520 | ||||||
JPMorgan Chase & Co. | 246,190 | 15,298,247 | ||||||
Morgan Stanley | 141,714 | 3,681,730 | ||||||
State Street Corp. | 39,732 | 2,142,349 | ||||||
Wells Fargo & Co. | 186,353 | 8,820,087 | ||||||
|
| |||||||
$ | 46,489,796 | |||||||
|
|
4
Table of Contents
MFS Investors Trust Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Medical & Health Technology & Services – 1.1% | ||||||||
McKesson Corp. | 27,911 | $ | 5,209,588 | |||||
|
| |||||||
Medical Equipment – 7.0% | ||||||||
Abbott Laboratories | 72,845 | $ | 2,863,537 | |||||
Medtronic PLC | 80,748 | 7,006,504 | ||||||
St. Jude Medical, Inc. | 55,907 | 4,360,746 | ||||||
Stryker Corp. | 58,228 | 6,977,461 | ||||||
Thermo Fisher Scientific, Inc. | 81,156 | 11,991,611 | ||||||
|
| |||||||
$ | 33,199,859 | |||||||
|
| |||||||
Natural Gas – Pipeline – 0.9% | ||||||||
Enterprise Products Partners LP | 153,009 | $ | 4,477,043 | |||||
|
| |||||||
Oil Services – 2.3% | ||||||||
National Oilwell Varco, Inc. | 27,988 | $ | 941,796 | |||||
Schlumberger Ltd. | 128,150 | 10,134,102 | ||||||
|
| |||||||
$ | 11,075,898 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 6.4% | ||||||||
American Express Co. | 116,896 | $ | 7,102,601 | |||||
BB&T Corp. | 87,547 | 3,117,549 | ||||||
MasterCard, Inc., “A” | 86,178 | 7,588,835 | ||||||
Visa, Inc., “A” | 172,396 | 12,786,611 | ||||||
|
| |||||||
$ | 30,595,596 | |||||||
|
| |||||||
Pharmaceuticals – 6.6% | ||||||||
Allergan PLC (a) | 23,746 | $ | 5,487,463 | |||||
Bristol-Myers Squibb Co. | 73,858 | 5,432,256 | ||||||
Eli Lilly & Co. | 89,285 | 7,031,194 | ||||||
Johnson & Johnson | 91,866 | 11,143,346 | ||||||
Zoetis, Inc. | 51,154 | 2,427,769 | ||||||
|
| |||||||
$ | 31,522,028 | |||||||
|
| |||||||
Railroad & Shipping – 1.6% | ||||||||
Canadian National Railway Co. | 130,100 | $ | 7,683,706 | |||||
|
| |||||||
Restaurants – 0.5% | ||||||||
Aramark | 71,913 | $ | 2,403,332 | |||||
|
| |||||||
Specialty Stores – 3.0% | ||||||||
AutoZone, Inc. (a) | 8,357 | $ | 6,634,121 | |||||
Ross Stores, Inc. | 135,141 | 7,661,143 | ||||||
|
| |||||||
$ | 14,295,264 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Telecommunications – Wireless – 2.5% | ||||||||
American Tower Corp., REIT | 102,970 | $ | 11,698,422 | |||||
|
| |||||||
Utilities – Electric Power – 1.1% | ||||||||
American Electric Power Co., Inc. | 46,369 | $ | 3,250,003 | |||||
CMS Energy Corp. | 44,103 | 2,022,564 | ||||||
|
| |||||||
$ | 5,272,567 | |||||||
|
| |||||||
Total Common Stocks (Identified Cost, $311,268,487) | $ | 470,903,882 | ||||||
|
| |||||||
CONVERTIBLE PREFERRED STOCKS – 0.3% | ||||||||
Utilities – Electric Power – 0.3% | ||||||||
Exelon Corp., 6.5% (Identified Cost, $1,672,245) | 33,054 | $ | 1,630,884 | |||||
|
| |||||||
MONEY MARKET FUNDS – 0.8% | ||||||||
MFS Institutional Money Market Portfolio, 0.36%, at Cost and Net Asset Value (v) | 3,634,158 | $ | 3,634,158 | |||||
|
| |||||||
Total Investments (Identified Cost, $316,574,890) | $ | 476,168,924 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – 0.0% |
| 169,769 | ||||||
|
| |||||||
NET ASSETS – 100.0% | $ | 476,338,693 | ||||||
|
|
(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
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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 6/30/16 | ||||||||
Assets | ||||||||
Investments | ||||||||
Non-affiliated issuers, at value (identified cost, $312,940,732) | $472,534,766 | |||||||
Underlying affiliated funds, at cost and value | 3,634,158 | |||||||
Total investments, at value (identified cost, $316,574,890) | $476,168,924 | |||||||
Foreign currency, at value (identified cost, $28) | 28 | |||||||
Receivables for | ||||||||
Fund shares sold | 469,023 | |||||||
Interest and dividends | 468,023 | |||||||
Other assets | 1,275 | |||||||
Total assets | $477,107,273 | |||||||
Liabilities | ||||||||
Payable to custodian | $42,933 | |||||||
Payable for fund shares reacquired | 556,445 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 19,409 | |||||||
Shareholder servicing costs | 551 | |||||||
Distribution and/or service fees | 2,727 | |||||||
Payable for independent Trustees’ compensation | 837 | |||||||
Accrued expenses and other liabilities | 145,678 | |||||||
Total liabilities | $768,580 | |||||||
Net assets | $476,338,693 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $258,981,000 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 159,593,734 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | 52,321,748 | |||||||
Undistributed net investment income | 5,442,211 | |||||||
Net assets | $476,338,693 | |||||||
Shares of beneficial interest outstanding | 17,720,666 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $272,271,192 | 10,078,224 | $27.02 | |||||||||
Service Class | 204,067,501 | 7,642,442 | 26.70 |
See Notes to Financial Statements
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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 6/30/16 |
| |||||||
Net investment income |
| |||||||
Income | ||||||||
Dividends | $4,028,969 | |||||||
Interest | 8,098 | |||||||
Dividends from underlying affiliated funds | 8,666 | |||||||
Foreign taxes withheld | (54,190 | ) | ||||||
Total investment income | $3,991,543 | |||||||
Expenses | ||||||||
Management fee | $1,741,756 | |||||||
Distribution and/or service fees | 240,016 | |||||||
Shareholder servicing costs | 23,550 | |||||||
Administrative services fee | 41,835 | |||||||
Independent Trustees’ compensation | 6,346 | |||||||
Custodian fee | 24,215 | |||||||
Shareholder communications | 42,572 | |||||||
Audit and tax fees | 26,556 | |||||||
Legal fees | 2,448 | |||||||
Miscellaneous | 10,806 | |||||||
Total expenses | $2,160,100 | |||||||
Reduction of expenses by investment adviser | (16,617 | ) | ||||||
Net expenses | $2,143,483 | |||||||
Net investment income | $1,848,060 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $746,745 | |||||||
Foreign currency | (1,909 | ) | ||||||
Net realized gain (loss) on investments and foreign currency | $744,836 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $4,573,677 | |||||||
Translation of assets and liabilities in foreign currencies | (300 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $4,573,377 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $5,318,213 | |||||||
Change in net assets from operations | $7,166,273 |
See Notes to Financial Statements
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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 6/30/16 (unaudited | ) | | Year ended 12/31/15 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $1,848,060 | $3,535,967 | ||||||
Net realized gain (loss) on investments and foreign currency | 744,836 | 53,230,039 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 4,573,377 | (58,301,338 | ) | |||||
Change in net assets from operations | $7,166,273 | $(1,535,332 | ) | |||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(4,730,839 | ) | |||||
From net realized gain on investments | — | (62,960,208 | ) | |||||
Total distributions declared to shareholders | $— | $(67,691,047 | ) | |||||
Change in net assets from fund share transactions | $(17,147,044 | ) | $(84,170,611 | ) | ||||
Total change in net assets | $(9,980,771 | ) | $(153,396,990 | ) | ||||
Net assets | ||||||||
At beginning of period | 486,319,464 | 639,716,454 | ||||||
At end of period (including undistributed net investment income of $5,442,211 and | $476,338,693 | $486,319,464 |
See Notes to Financial Statements
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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 6/30/16 | Years ended 12/31 | ||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $26.58 | $30.41 | $29.95 | $22.93 | $19.41 | $20.04 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.12 | $0.21 | $0.26 | $0.24 | $0.25 | $0.17 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 0.32 | (0.42 | ) | 2.92 | 7.07 | 3.46 | (0.61 | ) | ||||||||||||||||
Total from investment operations | $0.44 | $(0.21 | ) | $3.18 | $7.31 | $3.71 | $(0.44 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.28 | ) | $(0.30 | ) | $(0.29 | ) | $(0.19 | ) | $(0.19 | ) | |||||||||||||
From net realized gain on investments | — | (3.34 | ) | (2.42 | ) | — | — | — | ||||||||||||||||
Total distributions declared to shareholders | $— | $(3.62 | ) | $(2.72 | ) | $(0.29 | ) | $(0.19 | ) | $(0.19 | ) | |||||||||||||
Net asset value, end of period (x) | $27.02 | $26.58 | $30.41 | $29.95 | $22.93 | $19.41 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 1.66 | (n) | 0.22 | 11.01 | 32.05 | 19.18 | (2.18 | ) | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.83 | (a) | 0.82 | 0.81 | 0.81 | 0.82 | 0.82 | |||||||||||||||||
Expenses after expense reductions (f) | 0.82 | (a) | 0.81 | 0.81 | 0.81 | 0.82 | 0.82 | |||||||||||||||||
Net investment income | 0.90 | (a) | 0.73 | 0.87 | 0.93 | 1.15 | 0.84 | |||||||||||||||||
Portfolio turnover | 6 | (n) | 17 | 25 | 19 | 28 | 22 | |||||||||||||||||
Net assets at end of period (000 omitted) | $272,271 | $293,203 | $356,389 | $405,682 | $455,295 | $486,500 | ||||||||||||||||||
Service Class | Six months 6/30/16 | Years ended 12/31 | ||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $26.30 | $30.13 | $29.72 | $22.78 | $19.31 | $19.95 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.08 | $0.14 | $0.19 | $0.18 | $0.20 | $0.12 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 0.32 | (0.42 | ) | 2.88 | 7.02 | 3.43 | (0.61 | ) | ||||||||||||||||
Total from investment operations | $0.40 | $(0.28 | ) | $3.07 | $7.20 | $3.63 | $(0.49 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.21 | ) | $(0.24 | ) | $(0.26 | ) | $(0.16 | ) | $(0.15 | ) | |||||||||||||
From net realized gain on investments | — | (3.34 | ) | (2.42 | ) | — | — | — | ||||||||||||||||
Total distributions declared to shareholders | $— | $(3.55 | ) | $(2.66 | ) | $(0.26 | ) | $(0.16 | ) | $(0.15 | ) | |||||||||||||
Net asset value, end of period (x) | $26.70 | $26.30 | $30.13 | $29.72 | $22.78 | $19.31 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 1.52 | (n) | (0.05 | ) | 10.71 | 31.74 | 18.83 | (2.42 | ) | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.08 | (a) | 1.07 | 1.06 | 1.06 | 1.07 | 1.07 | |||||||||||||||||
Expenses after expense reductions (f) | 1.07 | (a) | 1.06 | 1.06 | 1.06 | 1.07 | 1.07 | |||||||||||||||||
Net investment income | 0.65 | (a) | 0.47 | 0.63 | 0.67 | 0.93 | 0.60 | |||||||||||||||||
Portfolio turnover | 6 | (n) | 17 | 25 | 19 | 28 | 22 | |||||||||||||||||
Net assets at end of period (000 omitted) | $204,068 | $193,116 | $283,328 | $234,723 | $141,806 | $78,392 |
See Notes to Financial Statements
9
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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 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 diversified 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.
The fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued.
Balance Sheet Offsetting – The fund’s accounting policy with respect to balance sheet offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the International Swaps and Derivatives Association (ISDA) Master Agreement does not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty. The fund’s right to setoff may be restricted or prohibited by the bankruptcy or insolvency laws of the particular jurisdiction to which a specific master netting agreement counterparty is subject. Balance sheet offsetting disclosures, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
Investment Valuations – Equity securities, including restricted equity securities, are generally valued at the last sale or official closing price on their primary market or exchange as provided by a third-party pricing service. Equity securities, for which there were no sales reported that day, are generally valued at the last quoted daily bid quotation on their primary market or exchange as provided by a third-party pricing service. Short-term instruments with a maturity at issuance of 60 days or less may be valued at amortized cost, which approximates market value. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. Values obtained from third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the 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.
11
Table of Contents
MFS Investors Trust Series
Notes to Financial Statements (unaudited) – continued
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. The following is a summary of the levels used as of June 30, 2016 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $444,034,758 | $— | $— | $444,034,758 | ||||||||||||
France | — | 17,293,132 | — | 17,293,132 | ||||||||||||
Canada | 7,683,706 | — | — | 7,683,706 | ||||||||||||
United Kingdom | — | 3,523,170 | — | 3,523,170 | ||||||||||||
Mutual Funds | 3,634,158 | — | — | 3,634,158 | ||||||||||||
Total Investments | $455,352,622 | $20,816,302 | $— | $476,168,924 |
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. Security loans can be terminated at the discretion of either the lending agent or the fund and the related securities must be returned within the earlier of the standard trade settlement period for such securities or within three business days. The loans are collateralized by cash and/or U.S. Treasury and federal agency obligations in an amount typically at least equal to the market value of the securities loaned. On loans collateralized by cash, the cash collateral is invested in a money market fund. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. State Street provides the fund with indemnification against Borrower default. In the event of Borrower default, State Street will, for the benefit of the fund, either purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the fund the market value of the loaned securities. In return, State Street assumes the fund’s rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, State Street is responsible for the shortfall, but only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. 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, 2016, 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 payments received in additional securities are recorded on the ex-dividend date in an amount equal to the value of the security on such date.
12
Table of Contents
MFS Investors Trust 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 – Prior to October 1, 2015, the fund’s custody fee could be reduced by a credit earned under an arrangement that measured the value of U.S. dollars deposited with the custodian by the fund. For the six months ended June 30, 2016, 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. Management has analyzed the fund’s tax positions taken on federal and state tax returns for all open tax years and does not believe that there are any uncertain tax positions that require recognition of a tax liability. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests. Additionally, capital gains realized by the fund on securities issued in or by certain foreign countries may be subject to capital gains tax imposed by those countries.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to wash sale loss deferrals.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/15 | ||||
Ordinary income (including any short-term capital gains) | $10,112,585 | |||
Long-term capital gains | 57,578,462 | |||
Total distributions | $67,691,047 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/16 | ||||
Cost of investments | $317,969,216 | |||
Gross appreciation | 162,856,497 | |||
Gross depreciation | (4,656,789 | ) | ||
Net unrealized appreciation (depreciation) | $158,199,708 | |||
As of 12/31/15 | ||||
Undistributed ordinary income | 4,860,138 | |||
Undistributed long-term capital gain | 51,670,834 | |||
Net unrealized appreciation (depreciation) | 153,660,448 |
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 6/30/16 | Year ended 12/31/15 | Six months ended 6/30/16 | Year ended 12/31/15 | |||||||||||||
Initial Class | $— | $2,881,791 | $— | $33,890,351 | ||||||||||||
Service Class | — | 1,849,048 | — | 29,069,857 | ||||||||||||
Total | $— | $4,730,839 | $— | $62,960,208 |
13
Table of Contents
MFS Investors Trust Series
Notes to Financial Statements (unaudited) – continued
(3) | Transactions with Affiliates |
Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates:
First $1 billion of average daily net assets | 0.75% | |||
Average daily net assets in excess of $1 billion | 0.65% |
The investment adviser has agreed in writing to reduce its management fee to 0.60% of average daily net assets in excess of $2.5 billion. This written agreement will terminate on April 27, 2017. For the six months ended June 30, 2016, fund’s average daily net assets did not exceed $2.5 billion and therefore, the management fee was not reduced in accordance with this agreement. 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 six months ended June 30, 2016, this management fee reduction amounted to $16,617, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the six months ended June 30, 2016 was equivalent to an annual effective rate of 0.74% of the fund’s average daily net assets.
Effective April 28, 2017, the management fee will be computed daily and paid monthly at the following annual rates:
First $1 billion of average daily net assets | 0.75% | |||
Next $1.5 billion of average daily net assets | 0.65% | |||
Average daily net assets in excess of $2.5 billion | 0.60% |
Effective August 1, 2016, the investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, excluding interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses, such that total annual operating expenses do not exceed 0.79% of average daily net assets for the Initial Class shares and 1.04% 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, 2018.
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, 2016, the fee was $22,696, which equated to 0.0098% 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, 2016, these costs amounted to $854.
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the six months ended June 30, 2016 was equivalent to an annual effective rate of 0.0180% of the fund’s average daily net assets.
Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – This fund and certain other funds managed by MFS (the funds) have entered into a service agreement (the ISO Agreement) which provides for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino serves as the ISO and is an officer of the funds and the sole member of Tarantino LLC. The funds can terminate the ISO Agreement with Tarantino LLC at any time under the terms of the ISO Agreement. For the six months ended June 30, 2016, the fee paid by the fund under this agreement was $465 and is included in “Miscellaneous” expense in the Statement of Operations. MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.
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MFS Investors Trust 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.
The fund is permitted to engage in purchase and sale transactions (“cross-trades”) with funds and accounts for which MFS serves as investment adviser or sub-adviser pursuant to a policy adopted by the Board of Trustees. This policy has been designed to ensure that cross-trades conducted by the fund comply with Rule 17a-7 under the Investment Company Act of 1940. Under this policy, cross-trades are effected at current market prices with no remuneration paid in connection with the transaction. During the six months ended June 30, 2016, the fund engaged in purchase and sale transactions pursuant to this policy, which amounted to $131,553 and $253,943, respectively. The sales transactions resulted in net realized gains (losses) of $98,962.
(4) | Portfolio Securities |
For the six months ended June 30, 2016, purchases and sales of investments, other than short-term obligations, aggregated $28,163,695 and $41,716,569, 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 6/30/16 | Year ended 12/31/15 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 121,236 | $3,161,101 | 299,869 | $8,738,742 | ||||||||||||
Service Class | 896,167 | 22,988,921 | 1,948,065 | 56,638,016 | ||||||||||||
1,017,403 | $26,150,022 | 2,247,934 | $65,376,758 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 1,486,344 | $36,772,142 | ||||||||||||
Service Class | — | — | 1,261,996 | 30,918,905 | ||||||||||||
— | $— | 2,748,340 | $67,691,047 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (1,075,118 | ) | $(27,987,696 | ) | (2,471,922 | ) | $(73,166,193 | ) | ||||||||
Service Class | (596,283 | ) | (15,309,370 | ) | (5,269,524 | ) | (144,072,223 | ) | ||||||||
(1,671,401 | ) | $(43,297,066 | ) | (7,741,446 | ) | $(217,238,416 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (953,882 | ) | $(24,826,595 | ) | (685,709 | ) | $(27,655,309 | ) | ||||||||
Service Class | 299,884 | 7,679,551 | (2,059,463 | ) | (56,515,302 | ) | ||||||||||
(653,998 | ) | $(17,147,044 | ) | (2,745,172 | ) | $(84,170,611 | ) |
(6) | Line of Credit |
The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Overnight Federal Reserve funds rate or daily one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Overnight Federal Reserve funds rate plus an agreed upon spread. For the six months ended June 30, 2016, the fund’s commitment fee and interest expense were $1,266 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.
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MFS Investors Trust 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 | 4,635,935 | 22,272,836 | (23,274,613 | ) | 3,634,158 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $8,666 | $3,634,158 |
16
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MFS Investors Trust Series
PROXY VOTING POLICIES AND INFORMATION
MFS votes proxies on behalf of the fund pursuant to proxy voting policies and procedures that are available without charge, upon request, by calling 1-800-225-2606, by visiting mfs.com (once you have selected “Individual Investor” as your role, click on “Individual Investor Home” in the top navigation and then select “Learn More About Proxy Voting” under the “I want to…” header on the left hand column of the page), or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available by August 31 of each year without charge by visiting mfs.com (once you have selected “Individual Investor” as your role, click on “Individual Investor Home” in the top navigation and then select “Learn More About Proxy Voting” under the “I want to…” header on the left hand column of the page), 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 on mfs.com by following these steps once you have selected “Individual Investor” as your role: (1) Click on the “Individual Investor Home” in the top navigation and then select the “Announcements” option within the “Market Outlooks” drop down, or (2) Click on “Products & Services” and “Variable Insurance Portfolios” and then select the fund’s name.
INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS
The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, 529 program manager (if applicable), and custodian who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.
Under the Trust’s By-Laws and Declaration of Trust, any claims asserted against or on behalf of the MFS Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of Massachusetts.
17
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Table of Contents
SEMIANNUAL REPORT
June 30, 2016
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 • MAY LOSE VALUE • NO BANK OR CREDIT UNION GUARANTEE • NOT A DEPOSIT • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
Table of Contents
MFS Mid Cap Growth Series
Dear Contract Owners:
Global headwinds continue to restrain growth and profits, though developed market equities have remained resilient, underpinned by record-low interest rates. Rates are likely to stay low over the medium term, as many central banks have implemented accommodative monetary policies in an effort to reinvigorate their economies. Markets will have to deal with an additional headwind in the coming months and years as investors grapple with the fallout from the United Kingdom’s decision to leave the European Union. That process will take a considerable period of time to play out against a highly uncertain backdrop. Weakness in the pound sterling in the wake of the referendum has been a welcome shock absorber for UK financial markets.
Emerging markets have been beneficiaries of firmer commodity prices and diminishing fears of sharply higher interest rates from the U.S. Federal Reserve. China remains a source of concern for investors, as overcapacity in its manufacturing sector inhibits the government’s attempt to change its domestic economy from one driven by exports to a consumer-driven model.
At MFS®, we believe it is best to view markets through a long lens and not react to short-term swings. That makes it possible to filter out market noise and focus on long-term fundamentals.
In our view, the professional guidance of a financial advisor, along with a patient, long-term approach, will help you reach your investment objectives.
Respectfully,
Robert J. Manning
Chairman
MFS Investment Management
August 15, 2016
The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.
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MFS Mid Cap Growth Series
Portfolio structure
Top ten holdings | ||||
Bright Horizons Family Solutions, Inc. | 2.5% | |||
Constellation Brands, Inc., “A” | 2.2% | |||
Roper Technologies, Inc. | 2.1% | |||
Ross Stores, Inc. | 2.1% | |||
Aramark | 2.0% | |||
Amphenol Corp., “A” | 2.0% | |||
FleetCor Technologies, Inc. | 1.9% | |||
O’Reilly Automotive, Inc. | 1.9% | |||
Henry Schein, Inc. | 1.9% | |||
C.R. Bard, Inc. | 1.8% |
Equity sectors | ||||
Special Products & Services | 16.2% | |||
Industrial Goods & Services | 12.7% | |||
Health Care | 12.4% | |||
Retailing | 10.5% | |||
Autos & Housing | 9.3% | |||
Technology | 9.2% | |||
Consumer Staples | 9.0% | |||
Financial Services | 7.9% | |||
Leisure | 6.5% | |||
Basic Materials | 2.0% | |||
Utilities & Communications | 1.7% | |||
Transportation | 1.0% | |||
Energy | 0.6% |
Cash & Cash Equivalents includes any cash, investments in money market funds, short-term securities, and other assets less liabilities. Please see the Statement of Assets and Liabilities for additional information related to the fund’s cash position and other assets and liabilities.
Percentages are based on net assets as of 6/30/16.
The portfolio is actively managed and current holdings may be different.
2
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MFS Mid Cap Growth Series
Fund Expenses Borne by the Contract Holders during the Period,
January 1, 2016 through June 30, 2016
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, 2016 through June 30, 2016.
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 1/01/16 | Ending Account Value | Expenses Paid During Period (p) 1/01/16-6/30/16 | ||||||||||||||
Initial Class | Actual | 0.81% | $1,000.00 | $1,014.62 | $4.06 | |||||||||||||
Hypothetical (h) | 0.81% | $1,000.00 | $1,020.84 | $4.07 | ||||||||||||||
Service Class | Actual | 1.06% | $1,000.00 | $1,012.74 | $5.30 | |||||||||||||
Hypothetical (h) | 1.06% | $1,000.00 | $1,019.59 | $5.32 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
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MFS Mid Cap Growth Series
PORTFOLIO OF INVESTMENTS – 6/30/16 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 99.0% | ||||||||
Aerospace – 2.2% | ||||||||
Orbital ATK, Inc. | 37,563 | $ | 3,198,114 | |||||
TransDigm Group, Inc. (a) | 20,107 | 5,302,015 | ||||||
|
| |||||||
$ | 8,500,129 | |||||||
|
| |||||||
Alcoholic Beverages – 2.2% | ||||||||
Constellation Brands, Inc., “A” | 51,696 | $ | 8,550,518 | |||||
|
| |||||||
Apparel Manufacturers – 1.5% | ||||||||
Hanesbrands, Inc. | 155,997 | $ | 3,920,205 | |||||
PVH Corp. | 18,308 | 1,725,163 | ||||||
|
| |||||||
$ | 5,645,368 | |||||||
|
| |||||||
Automotive – 2.0% | ||||||||
LKQ Corp. (a) | 202,441 | $ | 6,417,380 | |||||
Mobileye N.V. (a)(l) | 31,734 | 1,464,207 | ||||||
|
| |||||||
$ | 7,881,587 | |||||||
|
| |||||||
Biotechnology – 1.6% | ||||||||
Alexion Pharmaceuticals, Inc. (a) | 31,140 | $ | 3,635,906 | |||||
Regeneron Pharmaceuticals, Inc. (a) | 7,138 | 2,492,804 | ||||||
|
| |||||||
$ | 6,128,710 | |||||||
|
| |||||||
Brokerage & Asset Managers – 3.3% | ||||||||
Affiliated Managers Group, Inc. (a) | 20,645 | $ | 2,906,197 | |||||
Blackstone Group LP | 70,159 | 1,721,702 | ||||||
Intercontinental Exchange, Inc. | 12,750 | 3,263,490 | ||||||
NASDAQ, Inc. | 78,397 | 5,069,934 | ||||||
|
| |||||||
$ | 12,961,323 | |||||||
|
| |||||||
Business Services – 13.8% | ||||||||
Bright Horizons Family Solutions, Inc. (a) | 147,119 | $ | 9,755,461 | |||||
Cognizant Technology Solutions Corp., “A” (a) | 44,445 | 2,544,032 | ||||||
CoStar Group, Inc. (a) | 7,066 | 1,545,052 | ||||||
Equifax, Inc. | 51,405 | 6,600,402 | ||||||
Fidelity National Information Services, Inc. | 13,504 | 994,975 | ||||||
Fiserv, Inc. (a) | 62,488 | 6,794,320 | ||||||
FleetCor Technologies, Inc. (a) | 52,674 | 7,539,230 | ||||||
Gartner, Inc. (a) | 65,432 | 6,373,731 | ||||||
Global Payments, Inc. | 73,300 | 5,232,154 | ||||||
Tyler Technologies, Inc. (a) | 11,264 | 1,877,821 | ||||||
Univar, Inc. (a) | 83,674 | 1,582,275 | ||||||
Verisk Analytics, Inc., “A” (a) | 37,118 | 3,009,527 | ||||||
|
| |||||||
$ | 53,848,980 | |||||||
|
| |||||||
Cable TV – 1.0% | ||||||||
Charter Communications, Inc., “A” (a) | 17,705 | $ | 4,048,071 | |||||
|
| |||||||
Computer Software – 2.7% | ||||||||
Akamai Technologies, Inc. (a) | 18,743 | $ | 1,048,296 | |||||
Autodesk, Inc. (a) | 29,854 | 1,616,296 | ||||||
Cadence Design Systems, Inc. (a) | 127,675 | 3,102,503 | ||||||
Qlik Technologies, Inc. (a) | 26,043 | 770,352 | ||||||
Sabre Corp. | 141,948 | 3,802,787 | ||||||
|
| |||||||
$ | 10,340,234 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Computer Software – Systems – 3.5% | ||||||||
Guidewire Software, Inc. (a) | 35,154 | $ | 2,171,111 | |||||
NICE Systems Ltd., ADR | 24,288 | 1,550,789 | ||||||
ServiceNow, Inc. (a) | 22,955 | 1,524,212 | ||||||
SS&C Technologies Holdings, Inc. | 149,192 | 4,189,311 | ||||||
Vantiv, Inc., “A” (a) | 71,609 | 4,053,069 | ||||||
|
| |||||||
$ | 13,488,492 | |||||||
|
| |||||||
Construction – 7.2% | ||||||||
Armstrong Flooring, Inc. (a) | 17,309 | $ | 293,388 | |||||
Armstrong World Industries, Inc. (a) | 48,190 | 1,886,639 | ||||||
Fortune Brands Home & Security, Inc. | 88,987 | 5,158,576 | ||||||
Lennox International, Inc. | 31,375 | 4,474,075 | ||||||
Masco Corp. | 73,576 | 2,276,441 | ||||||
Pool Corp. | 62,390 | 5,866,532 | ||||||
Siteone Landscape Supply, Inc. (a) | 44,069 | 1,497,905 | ||||||
Vulcan Materials Co. | 56,467 | 6,796,368 | ||||||
|
| |||||||
$ | 28,249,924 | |||||||
|
| |||||||
Consumer Products – 1.6% | ||||||||
Newell Brands, Inc. | 126,659 | $ | 6,151,828 | |||||
|
| |||||||
Consumer Services – 2.4% | ||||||||
Nord Anglia Education, Inc. (a) | 128,762 | $ | 2,722,029 | |||||
Priceline Group, Inc. (a) | 1,748 | 2,182,221 | ||||||
ServiceMaster Global Holdings, Inc. (a) | 107,149 | 4,264,530 | ||||||
|
| |||||||
$ | 9,168,780 | |||||||
|
| |||||||
Containers – 1.0% | ||||||||
CCL Industries, Inc. | 10,579 | $ | 1,841,079 | |||||
Crown Holdings, Inc. (a) | 38,090 | 1,930,020 | ||||||
|
| |||||||
$ | 3,771,099 | |||||||
|
| |||||||
Electrical Equipment – 4.8% | ||||||||
Advanced Drainage Systems, Inc. | 71,345 | $ | 1,952,713 | |||||
AMETEK, Inc. | 108,387 | 5,010,731 | ||||||
Amphenol Corp., “A” | 133,073 | 7,629,075 | ||||||
Mettler-Toledo International, Inc. (a) | 11,249 | 4,104,985 | ||||||
|
| |||||||
$ | 18,697,504 | |||||||
|
| |||||||
Electronics – 2.8% | ||||||||
Analog Devices, Inc. | 61,853 | $ | 3,503,354 | |||||
Monolithic Power Systems, Inc. | 33,720 | 2,303,750 | ||||||
NVIDIA Corp. | 112,509 | 5,289,048 | ||||||
|
| |||||||
$ | 11,096,152 | |||||||
|
| |||||||
Energy – Independent – 0.4% | ||||||||
Pioneer Natural Resources Co. | 11,039 | $ | 1,669,207 | |||||
|
| |||||||
Entertainment – 0.9% | ||||||||
Netflix, Inc. (a) | 37,652 | $ | 3,444,405 | |||||
|
| |||||||
Food & Beverages – 5.2% | ||||||||
Blue Buffalo Pet Products, Inc. (a)(l) | 78,739 | $ | 1,837,768 | |||||
Chr. Hansen Holding A.S. | 60,695 | 3,985,528 | ||||||
Freshpet, Inc. (a)(l) | 100,153 | 934,427 | ||||||
J.M. Smucker Co. | 28,002 | 4,267,785 |
4
Table of Contents
MFS Mid Cap Growth Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Food & Beverages – continued | ||||||||
Mead Johnson Nutrition Co., “A” | 30,094 | $ | 2,731,031 | |||||
Monster Worldwide, Inc. (a) | 12,850 | 2,065,124 | ||||||
WhiteWave Foods Co., “A” (a) | 97,738 | 4,587,822 | ||||||
|
| |||||||
$ | 20,409,485 | |||||||
|
| |||||||
Gaming & Lodging – 0.3% | ||||||||
MGM Mirage (a) | 50,902 | $ | 1,151,912 | |||||
|
| |||||||
General Merchandise – 2.4% | ||||||||
Dollar Tree, Inc. (a) | 66,136 | $ | 6,232,657 | |||||
Five Below, Inc. (a) | 69,969 | 3,247,261 | ||||||
|
| |||||||
$ | 9,479,918 | |||||||
|
| |||||||
Insurance – 1.0% | ||||||||
Aon PLC | 36,630 | $ | 4,001,095 | |||||
|
| |||||||
Internet – 0.2% | ||||||||
LinkedIn Corp., “A” (a) | 4,996 | $ | 945,493 | |||||
|
| |||||||
Leisure & Toys – 0.8% | ||||||||
Electronic Arts, Inc. (a) | 40,630 | $ | 3,078,129 | |||||
|
| |||||||
Machinery & Tools – 5.2% | ||||||||
Colfax Corp. (a) | 61,269 | $ | 1,621,178 | |||||
Flowserve Corp. | 105,577 | 4,768,913 | ||||||
Roper Technologies, Inc. | 49,084 | 8,371,767 | ||||||
SPX FLOW, Inc. (a) | 32,793 | 854,914 | ||||||
WABCO Holdings, Inc. (a) | 51,248 | 4,692,779 | ||||||
|
| |||||||
$ | 20,309,551 | |||||||
|
| |||||||
Medical & Health Technology & Services – 2.5% | ||||||||
Adeptus Health, Inc., “A” (a)(l) | 11,712 | $ | 605,042 | |||||
Henry Schein, Inc. (a) | 41,008 | 7,250,214 | ||||||
VCA, Inc. (a) | 30,056 | 2,032,086 | ||||||
|
| |||||||
$ | 9,887,342 | |||||||
|
| |||||||
Medical Equipment – 7.9% | ||||||||
C.R. Bard, Inc. | 29,171 | $ | 6,859,852 | |||||
Cooper Cos., Inc. | 31,297 | 5,369,626 | ||||||
DexCom, Inc. (a) | 25,793 | 2,046,159 | ||||||
Edwards Lifesciences Corp. (a) | 7,591 | 757,050 | ||||||
Integra LifeSciences Holdings Corp. (a) | 21,476 | 1,713,355 | ||||||
PerkinElmer, Inc. | 119,118 | 6,244,166 | ||||||
Steris PLC | 50,405 | 3,465,344 | ||||||
VWR Corp. (a) | 144,834 | 4,185,703 | ||||||
|
| |||||||
$ | 30,641,255 | |||||||
|
| |||||||
Oil Services – 0.2% | ||||||||
FMC Technologies, Inc. (a) | 24,978 | $ | 666,163 | |||||
|
| |||||||
Other Banks & Diversified Financials – 2.2% | ||||||||
First Republic Bank | 43,863 | $ | 3,069,971 | |||||
MasterCard, Inc., “A” | 64,015 | 5,637,161 | ||||||
|
| |||||||
$ | 8,707,132 | |||||||
|
| |||||||
Pharmaceuticals – 0.5% | ||||||||
Allergan PLC (a) | 8,063 | $ | 1,863,279 | |||||
|
| |||||||
Pollution Control – 0.5% | ||||||||
Clean Harbors, Inc. (a) | 39,467 | $ | 2,056,625 | |||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Railroad & Shipping – 1.0% | ||||||||
Kansas City Southern Co. | 42,470 | $ | 3,826,122 | |||||
|
| |||||||
Real Estate – 1.3% | ||||||||
Extra Space Storage, Inc., REIT | 56,701 | $ | 5,247,111 | |||||
|
| |||||||
Restaurants – 3.5% | ||||||||
Aramark | 232,663 | $ | 7,775,597 | |||||
Domino’s Pizza, Inc. | 15,879 | 2,086,181 | ||||||
Dunkin Brands Group, Inc. | 82,526 | 3,599,784 | ||||||
|
| |||||||
$ | 13,461,562 | |||||||
|
| |||||||
Specialty Chemicals – 1.0% | ||||||||
Axalta Coating Systems Ltd. (a) | 113,457 | $ | 3,010,014 | |||||
PolyOne Corp. | 27,423 | 966,387 | ||||||
|
| |||||||
$ | 3,976,401 | |||||||
|
| |||||||
Specialty Stores – 6.7% | ||||||||
Burlington Stores, Inc. (a) | 14,690 | $ | 979,970 | |||||
Lululemon Athletica, Inc. (a) | 30,662 | 2,264,695 | ||||||
O’Reilly Automotive, Inc. (a) | 26,854 | 7,280,119 | ||||||
Ross Stores, Inc. | 142,525 | 8,079,742 | ||||||
Tiffany & Co. | 17,784 | 1,078,422 | ||||||
Tractor Supply Co. | 68,778 | 6,271,178 | ||||||
|
| |||||||
$ | 25,954,126 | |||||||
|
| |||||||
Telecommunications – Wireless – 1.7% | ||||||||
SBA Communications Corp. (a) | 62,740 | $ | 6,772,156 | |||||
|
| |||||||
Total Common Stocks (Identified Cost, $278,652,927) | $ | 386,077,168 | ||||||
|
| |||||||
MONEY MARKET FUNDS – 1.1% | ||||||||
MFS Institutional Money Market Portfolio, 0.36%, at Cost and Net Asset Value (v) | 4,471,007 | $ | 4,471,007 | |||||
|
| |||||||
COLLATERAL FOR SECURITIES LOANED – 0.7% | ||||||||
Navigator Securities Lending Prime Portfolio, 0.53%, at Cost and Net Asset Value (j) | 2,734,002 | $ | 2,734,002 | |||||
|
| |||||||
Total Investments (Identified Cost, $285,857,936) | $ | 393,282,177 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – (0.8)% | (3,137,820 | ) | ||||||
|
| |||||||
NET ASSETS – 100.0% | $ | 390,144,357 | ||||||
|
|
(a) | Non-income producing security. |
(j) | The rate quoted is the annualized seven-day yield of the fund at period end. |
(l) | A portion of this security is on loan. |
(v) | Underlying affiliated fund that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end. |
The following abbreviations are used in this report and are defined:
ADR | American Depositary Receipt |
PLC | Public Limited Company |
REIT | Real Estate Investment Trust |
See Notes to Financial Statements
5
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 6/30/16 | ||||||||
Assets | ||||||||
Investments | ||||||||
Non-affiliated issuers, at value (identified cost, $281,386,929) | $388,811,170 | |||||||
Underlying affiliated funds, at cost and value | 4,471,007 | |||||||
Total investments, at value, including $2,785,415 of securities on loan (identified cost, $285,857,936) | $393,282,177 | |||||||
Foreign currency, at value (identified cost, $3,465) | 3,482 | |||||||
Receivables for | ||||||||
Investments sold | 900,967 | |||||||
Fund shares sold | 28,392 | |||||||
Interest and dividends | 128,154 | |||||||
Other assets | 1,154 | |||||||
Total assets | $394,344,326 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Investments purchased | $1,096,102 | |||||||
Fund shares reacquired | 274,028 | |||||||
Collateral for securities loaned, at value (c) | 2,734,002 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 15,900 | |||||||
Shareholder servicing costs | 71 | |||||||
Distribution and/or service fees | 1,131 | |||||||
Payable for independent Trustees’ compensation | 20 | |||||||
Accrued expenses and other liabilities | 78,715 | |||||||
Total liabilities | $4,199,969 | |||||||
Net assets | $390,144,357 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $244,315,241 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 107,424,998 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | 38,810,647 | |||||||
Accumulated net investment loss | (406,529 | ) | ||||||
Net assets | $390,144,357 | |||||||
Shares of beneficial interest outstanding | 47,315,461 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $305,668,000 | 36,692,305 | $8.33 | |||||||||
Service Class | 84,476,357 | 10,623,156 | 7.95 |
(c) | Non-cash collateral is not included. |
See Notes to Financial Statements
6
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 6/30/16 | ||||||||
Net Investment loss | ||||||||
Income | ||||||||
Dividends | $1,184,736 | |||||||
Interest | 57,571 | |||||||
Dividends from underlying affiliated funds | 13,284 | |||||||
Foreign taxes withheld | (2,370 | ) | ||||||
Total investment income | $1,253,221 | |||||||
Expenses | ||||||||
Management fee | $1,447,856 | |||||||
Distribution and/or service fees | 102,461 | |||||||
Shareholder servicing costs | 10,126 | |||||||
Administrative services fee | 35,598 | |||||||
Independent Trustees’ compensation | 5,425 | |||||||
Custodian fee | 18,803 | |||||||
Shareholder communications | 14,663 | |||||||
Audit and tax fees | 27,276 | |||||||
Legal fees | 1,860 | |||||||
Miscellaneous | 9,510 | |||||||
Total expenses | $1,673,578 | |||||||
Reduction of expenses by investment adviser | �� | (13,828 | ) | |||||
Net expenses | $1,659,750 | |||||||
Net investment loss | $(406,529 | ) | ||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $9,581,177 | |||||||
Foreign currency | (868 | ) | ||||||
Net realized gain (loss) on investments and foreign currency | $9,580,309 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $(4,280,483 | ) | ||||||
Translation of assets and liabilities in foreign currencies | 618 | |||||||
Net unrealized gain (loss) on investments and foreign currency translation | $(4,279,865 | ) | ||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $5,300,444 | |||||||
Change in net assets from operations | $4,893,915 |
See Notes to Financial Statements
7
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 6/30/16 (unaudited | ) | | Year ended 12/31/15 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment loss | $(406,529 | ) | $(1,658,477 | ) | ||||
Net realized gain (loss) on investments and foreign currency | 9,580,309 | 32,059,153 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | (4,279,865 | ) | (8,819,546 | ) | ||||
Change in net assets from operations | $4,893,915 | $21,581,130 | ||||||
Distributions declared to shareholders | ||||||||
From net realized gain on investments | $— | $(42,235,087 | ) | |||||
Change in net assets from fund share transactions | $(26,511,481 | ) | $(20,270,732 | ) | ||||
Total change in net assets | $(21,617,566 | ) | $(40,924,689 | ) | ||||
Net assets | ||||||||
At beginning of period | 411,761,923 | 452,686,612 | ||||||
At end of period (including accumulated net investment loss of $406,529 and | $390,144,357 | $411,761,923 |
See Notes to Financial Statements
8
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 ended 6/30/16 | Years ended 12/31 | ||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $8.21 | $8.76 | $9.00 | $6.56 | $5.63 | $5.99 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment loss (d) | $(0.01 | ) | $(0.03 | ) | $(0.03 | ) | $(0.02 | ) | $(0.01 | ) | $(0.03 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | 0.13 | 0.39 | 0.80 | 2.49 | 0.94 | (0.33 | ) | |||||||||||||||||
Total from investment operations | $0.12 | $0.36 | $0.77 | $2.47 | $0.93 | $(0.36 | ) | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net realized gain on investments | $— | $(0.91 | ) | $(1.01 | ) | $(0.03 | ) | $— | $— | |||||||||||||||
Net asset value, end of period (x) | $8.33 | $8.21 | $8.76 | $9.00 | $6.56 | $5.63 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 1.46 | (n) | 4.61 | 8.86 | 37.72 | 16.52 | (6.01 | ) | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.81 | (a) | 0.81 | 0.81 | 0.81 | 0.89 | 0.88 | |||||||||||||||||
Expenses after expense reductions (f) | 0.81 | (a) | 0.80 | 0.80 | 0.81 | 0.89 | 0.88 | |||||||||||||||||
Net investment loss | (0.16 | )(a)(l) | (0.33 | ) | (0.34 | ) | (0.26 | ) | (0.10 | ) | (0.44 | ) | ||||||||||||
Portfolio turnover | 22 | (n) | 37 | 49 | 62 | 65 | 71 | |||||||||||||||||
Net assets at end of period (000 omitted) | $305,668 | $324,754 | $363,788 | $393,212 | $359,488 | $84,387 | ||||||||||||||||||
Service Class | Six months ended 6/30/16 | Years ended 12/31 | ||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $7.85 | $8.43 | $8.72 | $6.38 | $5.48 | $5.84 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment loss (d) | $(0.02 | ) | $(0.05 | ) | $(0.05 | ) | $(0.04 | ) | $(0.02 | ) | $(0.04 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | 0.12 | 0.38 | 0.77 | 2.41 | 0.92 | (0.32 | ) | |||||||||||||||||
Total from investment operations | $0.10 | $0.33 | $0.72 | $2.37 | $0.90 | $(0.36 | ) | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net realized gain on investments | $— | $(0.91 | ) | $(1.01 | ) | $(0.03 | ) | $— | $— | |||||||||||||||
Net asset value, end of period (x) | $7.95 | $7.85 | $8.43 | $8.72 | $6.38 | $5.48 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 1.27 | (n) | 4.43 | 8.56 | 37.22 | 16.42 | (6.16 | ) | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.06 | (a) | 1.06 | 1.06 | 1.06 | 1.14 | 1.13 | |||||||||||||||||
Expenses after expense reductions (f) | 1.06 | (a) | 1.05 | 1.05 | 1.06 | 1.14 | 1.13 | |||||||||||||||||
Net investment loss | (0.40 | )(a)(l) | (0.57 | ) | (0.59 | ) | (0.51 | ) | (0.35 | ) | (0.70 | ) | ||||||||||||
Portfolio turnover | 22 | (n) | 37 | 49 | 62 | 65 | 71 | |||||||||||||||||
Net assets at end of period (000 omitted) | $84,476 | $87,008 | $88,899 | $90,854 | $76,779 | $30,142 |
See Notes to Financial Statements
9
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. |
(l) | Recognition of net investment income by the fund may be affected by the timing of the declaration of dividends by companies in which the fund invests and the actual annual net investment income ratio may differ. |
(n) | Not annualized. |
(r) | Certain expenses have been reduced without which performance would have been lower. |
(s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
(x) | The net asset values and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
10
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 diversified 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.
The fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued.
Balance Sheet Offsetting – The fund’s accounting policy with respect to balance sheet offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the International Swaps and Derivatives Association (ISDA) Master Agreement does not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty. The fund’s right to setoff may be restricted or prohibited by the bankruptcy or insolvency laws of the particular jurisdiction to which a specific master netting agreement counterparty is subject. Balance sheet offsetting disclosures, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
Investment Valuations – Equity securities, including restricted equity securities, are generally valued at the last sale or official closing price on their primary market or exchange as provided by a third-party pricing service. Equity securities, for which there were no sales reported that day, are generally valued at the last quoted daily bid quotation on their primary market or exchange as provided by a third-party pricing service. Short-term instruments with a maturity at issuance of 60 days or less may be valued at amortized cost, which approximates market value. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. Values obtained from third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the 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.
11
Table of Contents
MFS Mid Cap Growth Series
Notes to Financial Statements (unaudited) – continued
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. The following is a summary of the levels used as of June 30, 2016 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $374,513,537 | $— | $— | $374,513,537 | ||||||||||||
Denmark | — | 3,985,528 | — | 3,985,528 | ||||||||||||
Israel | 3,014,995 | — | — | 3,014,995 | ||||||||||||
Hong Kong | 2,722,029 | — | — | 2,722,029 | ||||||||||||
Canada | 1,841,079 | — | — | 1,841,079 | ||||||||||||
Mutual Funds | 7,205,009 | — | — | 7,205,009 | ||||||||||||
Total Investments | $389,296,649 | $3,985,528 | $— | $393,282,177 |
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. Security loans can be terminated at the discretion of either the lending agent or the fund and the related securities must be returned within the earlier of the standard trade settlement period for such securities or within three business days. The loans are collateralized by cash and/or U.S. Treasury and federal agency obligations in an amount typically at least equal to the market value of the securities loaned. On loans collateralized by cash, the cash collateral is invested in a money market fund. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. State Street provides the fund with indemnification against Borrower default. In the event of Borrower default, State Street will, for the benefit of the fund, either purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the fund the market value of the loaned securities. In return, State Street assumes the fund’s rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, State Street is responsible for the shortfall, but only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. At period end, the fund had investment securities on loan, all of which were classified as equity securities in the fund’s Portfolio of Investments, with a fair value of $2,785,415. The fair value of the fund’s investment securities on loan and a related liability of $2,734,002 for cash collateral received on securities loaned are both presented gross in the Statement of Assets and Liabilities. Additionally, these loans were collateralized by U.S. Treasury obligations of $8,501. The value of the fund’s securities on loan net of the related collateral is $42,912 at period end. The liability for cash collateral for securities loaned is carried at fair value, which is categorized as level 2 within the fair value hierarchy. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the fund and the lending agent. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the Borrower, and is allocated between the fund and the lending agent. Income from securities lending is 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.
12
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 – Prior to October 1, 2015 the fund’s custody fee could be reduced by a credit earned under an arrangement that measured the value of U.S. dollars deposited with the custodian by the fund. For the six months ended June 30, 2016 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. Management has analyzed the fund’s tax positions taken on federal and state tax returns for all open tax years and does not believe that there are any uncertain tax positions that require recognition of a tax liability. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests. Additionally, capital gains realized by the fund on securities issued in or by certain foreign countries may be subject to capital gains tax imposed by those countries.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to net operating losses and wash sale loss deferrals.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/15 | ||||
Ordinary income (including any short-term capital gains) | $11,579,972 | |||
Long-term capital gains | 30,655,115 | |||
Total distributions | $42,235,087 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/16 | ||||
Cost of investments | $286,440,979 | |||
Gross appreciation | 112,385,821 | |||
Gross depreciation | (5,544,623 | ) | ||
Net unrealized appreciation (depreciation) | $106,841,198 | |||
As of 12/31/15 | ||||
Undistributed long-term capital gain | 30,751,706 | |||
Capital loss carryforwards | (938,323 | ) | ||
Other temporary differences | 139 | |||
Net unrealized appreciation (depreciation) | 111,121,679 |
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 10, 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.
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MFS Mid Cap Growth Series
Notes to Financial Statements (unaudited) – continued
As of December 31, 2015, the fund had capital loss carryforwards available to offset future realized gains. Such pre-enactment losses expire as follows:
12/31/16 | $(938,323 | ) |
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 realized gain on investments | ||||||||
Six months ended 6/30/16 | Year ended 12/31/15 | |||||||
Initial Class | $— | $33,110,175 | ||||||
Service Class | — | 9,124,912 | ||||||
Total | $— | $42,235,087 |
(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% |
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 six months ended June 30, 2016, this management fee reduction amounted to $13,828, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the six months ended June 30, 2016 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, 2016, the fee was $9,193, which equated to 0.0048% 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, 2016, these costs amounted to $933.
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the six months ended June 30, 2016 was equivalent to an annual effective rate of 0.0184% of the fund’s average daily net assets.
Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – This fund and certain other funds managed by MFS (the funds) have entered into a service agreement (the ISO Agreement) which provides for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino serves as the ISO and is an officer of the funds and the sole member of Tarantino LLC. The funds can terminate the ISO Agreement with Tarantino LLC at any time under the terms of the ISO Agreement.
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MFS Mid Cap Growth Series
Notes to Financial Statements (unaudited) – continued
For the six months ended June 30, 2016, the fee paid by the fund under this agreement was $389 and is included in “Miscellaneous” expense in the Statement of Operations. MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.
The fund 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.
The fund is permitted to engage in purchase and sale transactions (“cross-trades”) with funds and accounts for which MFS serves as investment adviser or sub-adviser pursuant to a policy adopted by the Board of Trustees. This policy has been designed to ensure that cross-trades conducted by the fund comply with Rule 17a-7 under the Investment Company Act of 1940. Under this policy, cross-trades are effected at current market prices with no remuneration paid in connection with the transaction. During the six months ended June 30, 2016, the fund engaged in sale transactions pursuant to this policy, which amounted to $560,183. The sales transactions resulted in net realized gains of $256,127.
(4) | Portfolio Securities |
For the six months ended June 30, 2016, purchases and sales of investments, other than short-term obligations, aggregated $84,147,650 and $107,492,198, 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 6/30/16 | Year ended 12/31/15 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 370,381 | $2,927,574 | 2,314,642 | $19,663,750 | ||||||||||||
Service Class | 925,354 | 7,067,467 | 1,902,483 | 16,016,393 | ||||||||||||
1,295,735 | $9,995,041 | 4,217,125 | $35,680,143 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | — | |||||||||||||||
Initial Class | — | $— | 4,234,038 | $33,110,175 | ||||||||||||
Service Class | — | — | 1,219,908 | 9,124,912 | ||||||||||||
— | $— | 5,453,946 | $42,235,087 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (3,220,909 | ) | $(25,983,622 | ) | (8,536,082 | ) | $(76,384,073 | ) | ||||||||
Service Class | (1,387,062 | ) | (10,522,900 | ) | (2,580,067 | ) | (21,801,889 | ) | ||||||||
(4,607,971 | ) | $(36,506,522 | ) | (11,116,149 | ) | $(98,185,962 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (2,850,528 | ) | $(23,056,048 | ) | (1,987,402 | ) | $(23,610,148 | ) | ||||||||
Service Class | (461,708 | ) | (3,455,433 | ) | 542,324 | 3,339,416 | ||||||||||
(3,312,236 | ) | $(26,511,481 | ) | (1,445,078 | ) | $(20,270,732 | ) |
The fund is one of several mutual funds in which certain MFS funds may invest. The MFS funds do not invest in the underlying funds for the purpose of exercising management or control. At the end of the period, the MFS Moderate Allocation Portfolio, the MFS Growth Allocation Portfolio, and the MFS Conservative Allocation Portfolio were the owners of record of approximately 32%, 10%, 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 $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Overnight Federal Reserve funds rate or daily one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Overnight Federal Reserve funds rate plus an agreed upon spread. For the six months ended June 30, 2016, the fund’s commitment fee and interest expense were $1,057 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.
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MFS Mid Cap 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 | 9,278,652 | 33,620,318 | (38,427,963 | ) | 4,471,007 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $13,284 | $4,471,007 |
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MFS Mid Cap Growth Series
PROXY VOTING POLICIES AND INFORMATION
MFS votes proxies on behalf of the fund pursuant to proxy voting policies and procedures that are available without charge, upon request, by calling 1-800-225-2606, by visiting mfs.com (once you have selected “Individual Investor” as your role, click on “Individual Investor Home” in the top navigation and then select “Learn More About Proxy Voting” under the “I want to…” header on the left hand column of the page), or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available by August 31 of each year without charge by visiting mfs.com (once you have selected “Individual Investor” as your role, click on “Individual Investor Home” in the top navigation and then select “Learn More About Proxy Voting” under the “I want to…” header on the left hand column of the page), 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 on mfs.com by following these steps once you have selected “Individual Investor” as your role: (1) Click on the “Individual Investor Home” in the top navigation and then select the “Announcements” option within the “Market Outlooks” drop down, or (2) Click on “Products & Services” and “Variable Insurance Portfolios” and then select the fund’s name.
INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS
The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, 529 program manager (if applicable), and custodian who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.
Under the Trust’s By-Laws and Declaration of Trust, any claims asserted against or on behalf of the MFS Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of Massachusetts.
17
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Table of Contents
SEMIANNUAL REPORT
June 30, 2016
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 • MAY LOSE VALUE • NO BANK OR CREDIT UNION GUARANTEE • NOT A DEPOSIT • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
Table of Contents
MFS New Discovery Series
Dear Contract Owners:
Global headwinds continue to restrain growth and profits, though developed market equities have remained resilient, underpinned by record-low interest rates. Rates are likely to stay low over the medium term, as many central banks have implemented accommodative monetary policies in an effort to reinvigorate their economies. Markets will have to deal with an additional headwind in the coming months and years as investors grapple with the fallout from the United Kingdom’s decision to leave the European Union. That process will take a considerable period of time to play out against a highly uncertain backdrop. Weakness in the pound sterling in the wake of the referendum has been a welcome shock absorber for UK financial markets.
Emerging markets have been beneficiaries of firmer commodity prices and diminishing fears of sharply higher interest rates from the U.S. Federal Reserve. China remains a source of concern for investors, as overcapacity in its manufacturing sector inhibits the government’s attempt to change its domestic economy from one driven by exports to a consumer-driven model.
At MFS®, we believe it is best to view markets through a long lens and not react to short-term swings. That makes it possible to filter out market noise and focus on long-term fundamentals.
In our view, the professional guidance of a financial advisor, along with a patient, long-term approach, will help you reach your investment objectives.
Respectfully,
Robert J. Manning
Chairman
MFS Investment Management
August 15, 2016
The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.
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MFS New Discovery Series
Portfolio structure
Top ten holdings | ||||
Bright Horizons Family Solutions, Inc. | 3.0% | |||
Healthcare Services Group, Inc. | 2.1% | |||
Masimo Corp. | 2.0% | |||
Steris PLC | 2.0% | |||
Sabre Corp. | 1.8% | |||
Gartner, Inc. | 1.7% | |||
SS&C Technologies Holdings, Inc. | 1.7% | |||
Berry Plastics Group, Inc. | 1.7% | |||
Live Nation, Inc. | 1.5% | |||
ServiceMaster Global Holdings, Inc. | 1.5% |
Equity sectors | ||||
Health Care | 25.3% | |||
Technology | 16.5% | |||
Special Products & Services | 14.7% | |||
Industrial Goods & Services | 6.5% | |||
Leisure | 6.4% | |||
Basic Materials | 6.3% | |||
Financial Services | 6.2% | |||
Autos & Housing | 5.4% | |||
Retailing | 4.3% | |||
Consumer Staples | 2.9% | |||
Energy | 1.0% | |||
Transportation | 1.0% |
Cash & Cash Equivalents includes any cash, investments in money market funds, short-term securities, and other assets less liabilities. Please see the Statement of Assets and Liabilities for additional information related to the fund’s cash position and other assets and liabilities.
Percentages are based on net assets as of 6/30/16.
The portfolio is actively managed and current holdings may be different.
2
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MFS New Discovery Series
Fund Expenses Borne by the Contract Holders during the Period,
January 1, 2016 through June 30, 2016
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, 2016 through June 30, 2016.
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 1/01/16 | Ending Account Value | Expenses Paid During Period (p) 1/01/16-6/30/16 | ||||||||||||||
Initial Class | Actual | 0.94% | $1,000.00 | $1,008.39 | $4.69 | |||||||||||||
Hypothetical (h) | 0.94% | $1,000.00 | $1,020.19 | $4.72 | ||||||||||||||
Service Class | Actual | 1.19% | $1,000.00 | $1,007.61 | $5.94 | |||||||||||||
Hypothetical (h) | 1.19% | $1,000.00 | $1,018.95 | $5.97 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
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MFS New Discovery Series
PORTFOLIO OF INVESTMENTS – 6/30/16 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 96.5% | ||||||||
Aerospace – 1.0% | ||||||||
HEICO Corp. | 45,593 | $ | 3,046,065 | |||||
Orbital ATK, Inc. | 39,176 | 3,335,445 | ||||||
|
| |||||||
$ | 6,381,510 | |||||||
|
| |||||||
Automotive – 0.9% | ||||||||
Fenix Parts, Inc. (a)(l) | 761,909 | $ | 2,994,302 | |||||
Mobileye N.V. (a)(l) | 67,173 | 3,099,362 | ||||||
|
| |||||||
$ | 6,093,664 | |||||||
|
| |||||||
Biotechnology – 4.6% | ||||||||
Acadia Pharmaceuticals, Inc. (a) | 86,506 | $ | 2,807,985 | |||||
Alder Biopharmaceuticals, Inc. (a) | 52,612 | 1,313,722 | ||||||
Alnylam Pharmaceuticals, Inc. (a) | 27,090 | 1,503,224 | ||||||
AMAG Pharmaceuticals, Inc. (a)(l) | 150,560 | 3,601,395 | ||||||
Amicus Therapeutics, Inc. (a) | 246,325 | 1,344,935 | ||||||
Exact Sciences Corp. (a)(l) | 163,681 | 2,005,092 | ||||||
MiMedx Group, Inc. (a)(l) | 359,469 | 2,868,563 | ||||||
Neurocrine Biosciences, Inc. (a) | 44,025 | 2,000,936 | ||||||
Novavax, Inc. (a)(l) | 298,445 | 2,169,695 | ||||||
Seres Therapeutics, Inc. (a)(l) | 68,740 | 1,996,897 | ||||||
Spark Therapeutics, Inc. (a)(l) | 40,752 | 2,083,650 | ||||||
Tesaro, Inc. (a) | 71,567 | 6,015,206 | ||||||
VTV Therapeutics, Inc. (a)(l) | 159,438 | 924,740 | ||||||
|
| |||||||
$ | 30,636,040 | |||||||
|
| |||||||
Broadcasting – 1.5% | ||||||||
Live Nation, Inc. (a) | 440,644 | $ | 10,355,134 | |||||
|
| |||||||
Brokerage & Asset Managers – 1.4% | ||||||||
NASDAQ, Inc. | 83,493 | $ | 5,399,492 | |||||
Raymond James Financial, Inc. | 83,708 | 4,126,804 | ||||||
|
| |||||||
$ | 9,526,296 | |||||||
|
| |||||||
Business Services – 10.4% | ||||||||
Bright Horizons Family Solutions, Inc. (a) | 298,765 | $ | 19,811,107 | |||||
CoStar Group, Inc. (a) | 29,757 | 6,506,666 | ||||||
Gartner, Inc. (a) | 118,372 | 11,530,617 | ||||||
Global Payments, Inc. | 108,699 | 7,758,935 | ||||||
Travelport Worldwide Ltd. | 348,956 | 4,498,043 | ||||||
Tyler Technologies, Inc. (a) | 19,148 | 3,192,163 | ||||||
Ultimate Software Group, Inc. (a) | 31,589 | 6,642,851 | ||||||
Univar, Inc. (a) | 233,790 | 4,420,969 | ||||||
WNS (Holdings) Ltd., ADR (a) | 206,197 | 5,567,319 | ||||||
|
| |||||||
$ | 69,928,670 | |||||||
|
| |||||||
Chemicals – 0.6% | ||||||||
Ingevity Corp. (a) | 121,475 | $ | 4,135,009 | |||||
|
| |||||||
Computer Software – 6.7% | ||||||||
2U, Inc. (a)(l) | 230,783 | $ | 6,787,328 | |||||
Aspen Technology, Inc. (a) | 160,926 | 6,475,662 | ||||||
Cadence Design Systems, Inc. (a) | 290,228 | 7,052,540 | ||||||
Enghouse Systems Ltd. | 82,986 | 3,519,334 | ||||||
Paylocity Holding Corp. (a) | 95,025 | 4,105,080 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Computer Software – continued | ||||||||
Sabre Corp. | 446,087 | $ | 11,950,671 | |||||
SecureWorks Corp. (a) | 352,703 | 4,973,112 | ||||||
|
| |||||||
$ | 44,863,727 | |||||||
|
| |||||||
Computer Software – Systems – 7.3% | ||||||||
Fleetmatics Group PLC (a) | 184,026 | $ | 7,973,847 | |||||
Kinaxis, Inc. (a) | 52,069 | 2,090,901 | ||||||
Model N, Inc. (a) | 281,433 | 3,757,131 | ||||||
NICE Systems Ltd., ADR | 132,741 | 8,475,513 | ||||||
Proofpoint, Inc. (a) | 84,560 | 5,334,890 | ||||||
Q2 Holdings, Inc. (a) | 106,937 | 2,996,375 | ||||||
Rapid7, Inc. (a) | 305,066 | 3,837,730 | ||||||
ServiceNow, Inc. (a) | 45,749 | 3,037,734 | ||||||
SS&C Technologies Holdings, Inc. | 405,010 | 11,372,681 | ||||||
|
| |||||||
$ | 48,876,802 | |||||||
|
| |||||||
Construction – 4.5% | ||||||||
Interface, Inc. | 269,398 | $ | 4,108,320 | |||||
Lennox International, Inc. | 39,783 | 5,673,056 | ||||||
Pool Corp. | 59,346 | 5,580,304 | ||||||
Siteone Landscape Supply, Inc. (a) | 197,521 | 6,713,739 | ||||||
Summit Materials, Inc., “A” (a) | 284,677 | 5,824,491 | ||||||
Techtronic Industries Co. Ltd. | 590,500 | 2,471,965 | ||||||
|
| |||||||
$ | 30,371,875 | |||||||
|
| |||||||
Consumer Services – 2.7% | ||||||||
Carriage Services, Inc. | 127,200 | $ | 3,012,096 | |||||
Nord Anglia Education, Inc. (a) | 232,660 | 4,918,432 | ||||||
ServiceMaster Global Holdings, Inc. (a) | 248,458 | 9,888,628 | ||||||
|
| |||||||
$ | 17,819,156 | |||||||
|
| |||||||
Containers – 1.7% | ||||||||
Berry Plastics Group, Inc. (a) | 289,648 | $ | 11,252,825 | |||||
|
| |||||||
Electrical Equipment – 0.8% | ||||||||
AMETEK, Inc. | 119,303 | $ | 5,515,378 | |||||
|
| |||||||
Electronics – 2.5% | ||||||||
Iriso Electronics Co. Ltd. | 34,331 | $ | 1,911,794 | |||||
Monolithic Power Systems, Inc. | 99,545 | 6,800,914 | ||||||
Silicon Laboratories, Inc. (a) | 134,325 | 6,547,001 | ||||||
Solaredge Technologies, Inc. (a)(l) | 70,197 | 1,375,861 | ||||||
|
| |||||||
$ | 16,635,570 | |||||||
|
| |||||||
Engineering – Construction – 1.4% | ||||||||
GMS, Inc. (a) | 219,420 | $ | 4,882,095 | |||||
Team, Inc. (a) | 180,154 | 4,473,224 | ||||||
|
| |||||||
$ | 9,355,319 | |||||||
|
| |||||||
Food & Beverages – 3.4% | ||||||||
Amplify Snack Brands, Inc. (a)(l) | 66,351 | $ | 978,677 | |||||
Blue Buffalo Pet Products, Inc. (a)(l) | 137,778 | 3,215,739 | ||||||
Flex Pharma, Inc. (a)(l) | 129,107 | 1,318,182 | ||||||
Freshpet, Inc. (a)(l) | 428,362 | 3,996,617 | ||||||
Performance Food Group Co. (a) | 133,616 | 3,595,607 |
4
Table of Contents
MFS New Discovery Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Food & Beverages – continued | ||||||||
Snyders-Lance, Inc. | 197,131 | $ | 6,680,770 | |||||
WhiteWave Foods Co., “A” (a) | 68,259 | 3,204,077 | ||||||
|
| |||||||
$ | 22,989,669 | |||||||
|
| |||||||
Gaming & Lodging – 0.5% | ||||||||
La Quinta Holdings, Inc. (a) | 293,787 | $ | 3,349,172 | |||||
|
| |||||||
General Merchandise – 1.7% | ||||||||
Five Below, Inc. (a) | 186,014 | $ | 8,632,910 | |||||
Ollie’s Bargain Outlet Holdings, Inc. (a) | 125,138 | 3,114,685 | ||||||
|
| |||||||
$ | 11,747,595 | |||||||
|
| |||||||
Machinery & Tools – 2.4% | ||||||||
Allison Transmission Holdings, Inc. | 251,206 | $ | 7,091,545 | |||||
SPX FLOW, Inc. (a) | 166,151 | 4,331,557 | ||||||
WABCO Holdings, Inc. (a) | 47,522 | 4,351,590 | ||||||
|
| |||||||
$ | 15,774,692 | |||||||
|
| |||||||
Medical & Health Technology & Services – 7.3% | ||||||||
Adeptus Health, Inc., “A” (a)(l) | 89,577 | $ | 4,627,548 | |||||
Brookdale Senior Living, Inc. (a) | 233,790 | 3,609,718 | ||||||
Capital Senior Living Corp. (a) | 243,197 | 4,297,291 | ||||||
Healthcare Services Group, Inc. | 340,265 | 14,080,166 | ||||||
INC Research Holdings, Inc., “A” (a) | 91,929 | 3,505,253 | ||||||
MEDNAX, Inc. (a) | 96,087 | 6,959,581 | ||||||
Premier, Inc., “A” (a) | 180,720 | 5,909,544 | ||||||
VCA, Inc. (a) | 87,503 | 5,916,078 | ||||||
|
| |||||||
$ | 48,905,179 | |||||||
|
| |||||||
Medical Equipment – 11.9% | ||||||||
AtriCure, Inc. (a) | 144,943 | $ | 2,048,045 | |||||
Cepheid, Inc. (a) | 165,406 | 5,086,235 | ||||||
DexCom, Inc. (a) | 71,690 | 5,687,168 | ||||||
Hologic, Inc. (a) | 227,929 | 7,886,343 | ||||||
Insulet Corp. (a) | 127,498 | 3,855,540 | ||||||
Integra LifeSciences Holdings Corp. (a) | 72,254 | 5,764,424 | ||||||
Masimo Corp. (a) | 261,186 | 13,716,183 | ||||||
NxStage Medical, Inc. (a) | 301,802 | 6,543,067 | ||||||
PerkinElmer, Inc. | 183,074 | 9,596,739 | ||||||
Steris PLC | 190,288 | 13,082,300 | ||||||
VWR Corp. (a) | 221,457 | 6,400,107 | ||||||
|
| |||||||
$ | 79,666,151 | |||||||
|
| |||||||
Oil Services – 1.0% | ||||||||
Forum Energy Technologies, Inc. (a) | 226,872 | $ | 3,927,154 | |||||
Patterson-UTI Energy, Inc. | 142,129 | 3,030,190 | ||||||
|
| |||||||
$ | 6,957,344 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 2.6% | ||||||||
Bank of The Ozarks, Inc. | 98,021 | $ | 3,677,748 | |||||
First Republic Bank | 60,809 | 4,256,022 | ||||||
Texas Capital Bancshares, Inc. (a) | 126,302 | 5,905,882 | ||||||
Webster Financial Corp. | 107,127 | 3,636,962 | ||||||
|
| |||||||
$ | 17,476,614 | |||||||
|
| |||||||
Pharmaceuticals – 1.6% | ||||||||
Aratana Therapeutics, Inc. (a)(l) | 352,125 | $ | 2,225,430 | |||||
Collegium Pharmaceutical, Inc. (a) | 181,325 | 2,148,701 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Pharmaceuticals – continued | ||||||||
MediWound Ltd. (a) | 171,982 | $ | 1,348,339 | |||||
TherapeuticsMD, Inc. (a)(l) | 589,339 | 5,009,382 | ||||||
|
| |||||||
$ | 10,731,852 | |||||||
|
| |||||||
Pollution Control – 0.9% | ||||||||
Clean Harbors, Inc. (a) | 121,302 | $ | 6,321,047 | |||||
|
| |||||||
Railroad & Shipping – 0.3% | ||||||||
StealthGas, Inc. (a) | 547,423 | $ | 2,069,259 | |||||
|
| |||||||
Real Estate – 2.2% | ||||||||
Big Yellow Group PLC, REIT | 265,227 | $ | 2,765,900 | |||||
Sovran Self Storage, Inc., REIT | 49,520 | 5,195,638 | ||||||
Tanger Factory Outlet Centers, Inc., REIT | 162,948 | 6,547,251 | ||||||
|
| |||||||
$ | 14,508,789 | |||||||
|
| |||||||
Restaurants – 3.8% | ||||||||
Chuy’s Holdings, Inc. (a) | 92,932 | $ | 3,216,377 | |||||
Dave & Buster’s, Inc. (a) | 58,977 | 2,759,534 | ||||||
Domino’s Pizza, Inc. | 23,438 | 3,079,284 | ||||||
Dunkin Brands Group, Inc. | 127,868 | 5,577,602 | ||||||
U.S. Foods Holding Corp. (a) | 244,687 | 5,931,213 | ||||||
Wingstop, Inc. (a) | 174,601 | 4,757,877 | ||||||
|
| |||||||
$ | 25,321,887 | |||||||
|
| |||||||
Special Products & Services – 1.6% | ||||||||
Boyd Group Income Fund, IEU | 109,042 | $ | 6,267,626 | |||||
Nexeo Solutions, Inc. (a) | 314,794 | 3,025,170 | ||||||
Nexeo Solutions, Inc. (a)(z) | 134,847 | 1,245,484 | ||||||
|
| |||||||
$ | 10,538,280 | |||||||
|
| |||||||
Specialty Chemicals – 4.0% | ||||||||
Albemarle Corp. | 42,710 | $ | 3,387,330 | |||||
Axalta Coating Systems Ltd. (a) | 323,466 | 8,581,553 | ||||||
Ferroglobe PLC | 515,235 | 4,436,173 | ||||||
PolyOne Corp. | 135,107 | 4,761,171 | ||||||
RPM International, Inc. | 112,354 | 5,612,082 | ||||||
|
| |||||||
$ | 26,778,309 | |||||||
|
| |||||||
Specialty Stores – 2.6% | ||||||||
Citi Trends, Inc. | 314,922 | $ | 4,890,739 | |||||
Monro Muffler Brake, Inc. | 94,707 | 6,019,577 | ||||||
Urban Outfitters, Inc. (a) | 229,757 | 6,318,318 | ||||||
|
| |||||||
$ | 17,228,634 | |||||||
|
| |||||||
Trucking – 0.7% | ||||||||
Swift Transportation Co. (a) | 311,110 | $ | 4,794,205 | |||||
|
| |||||||
Total Common Stocks (Identified Cost, $578,979,760) | $ | 646,905,653 | ||||||
|
| |||||||
MONEY MARKET FUNDS – 3.5% | ||||||||
MFS Institutional Money Market Portfolio, 0.36%, at Cost and Net Asset Value (v) | 23,597,991 | $ | 23,597,991 | |||||
|
|
5
Table of Contents
MFS New Discovery Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COLLATERAL FOR SECURITIES LOANED – 2.8% | ||||||||
Navigator Securities Lending Prime Portfolio, 0.53%, at Cost and Net Asset Value (j) | 18,925,846 | $ | 18,925,846 | |||||
|
| |||||||
Total Investments (Identified Cost, $621,503,597) | $ | 689,429,490 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – (2.8)% | (18,598,094 | ) | ||||||
|
| |||||||
NET ASSETS – 100.0% | $ | 670,831,396 | ||||||
|
|
(a) | Non-income producing security. |
(j) | The rate quoted is the annualized seven-day yield of the fund at period end. |
(l) | A portion of this security is on loan. |
(v) | Underlying affiliated fund that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end. |
(z) | Restricted securities are not registered under the Securities Act of 1933 and are subject to legal restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are subsequently registered. Disposal of these securities may involve time-consuming negotiations and prompt sale at an acceptable price may be difficult. The fund holds the following restricted securities: |
Restricted Securities | Acquisition Date | Cost | Value | |||||||
Nexeo Solutions, Inc. | 5/06/16 | $1,348,470 | $1,245,484 | |||||||
% of Net assets | 0.2% |
The following abbreviations are used in this report and are defined:
ADR | American Depositary Receipt |
IEU | International Equity Unit |
PLC | Public Limited Company |
REIT | Real Estate Investment Trust |
See Notes to Financial Statements
6
Table of Contents
MFS New Discovery Series
FINANCIAL STATEMENTS | STATEMENT OF ASSETS AND LIABILITIES (unaudited)
This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
At 6/30/16 | ||||||||
Assets | ||||||||
Investments | ||||||||
Non-affiliated issuers, at value (identified cost, $597,905,606) | $665,831,499 | |||||||
Underlying affiliated funds, at cost and value | 23,597,991 | |||||||
Total investments, at value, including $18,636,313 of securities on loan (identified cost, $621,503,597) | $689,429,490 | |||||||
Receivables for | ||||||||
Investments sold | 3,493,761 | |||||||
Fund shares sold | 57,419 | |||||||
Interest and dividends | 173,676 | |||||||
Other assets | 1,759 | |||||||
Total assets | $693,156,105 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Investments purchased | $1,751,516 | |||||||
Fund shares reacquired | 1,435,267 | |||||||
Collateral for securities loaned, at value (c) | 18,925,846 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 17,416 | |||||||
Shareholder servicing costs | 265 | |||||||
Distribution and/or service fees | 5,011 | |||||||
Payable for independent Trustees’ compensation | 27 | |||||||
Accrued expenses and other liabilities | 189,361 | |||||||
Total liabilities | $22,324,709 | |||||||
Net assets | $670,831,396 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $582,914,541 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 67,923,550 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | 21,674,030 | |||||||
Accumulated net investment loss | (1,680,725 | ) | ||||||
Net assets | $670,831,396 | |||||||
Shares of beneficial interest outstanding | 44,709,278 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $293,684,997 | 18,800,094 | $15.62 | |||||||||
Service Class | 377,146,399 | 25,909,184 | 14.56 |
(c) | Non-cash collateral is not included. |
See Notes to Financial Statements
7
Table of Contents
MFS New Discovery Series
FINANCIAL STATEMENTS | STATEMENT OF OPERATIONS (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
Six months ended 6/30/16 | ||||||||
Net investment loss | ||||||||
Income | ||||||||
Dividends | $1,537,091 | |||||||
Income on securities loaned | 234,722 | |||||||
Dividends from underlying affiliated funds | 38,603 | |||||||
Foreign taxes withheld | (16,119 | ) | ||||||
Total investment income | $1,794,297 | |||||||
Expenses | ||||||||
Management fee | $2,893,351 | |||||||
Distribution and/or service fees | 449,669 | |||||||
Shareholder servicing costs | 25,728 | |||||||
Administrative services fee | 56,091 | |||||||
Independent Trustees’ compensation | 9,121 | |||||||
Custodian fee | 32,610 | |||||||
Shareholder communications | 64,293 | |||||||
Audit and tax fees | 28,419 | |||||||
Legal fees | 3,447 | |||||||
Miscellaneous | 13,301 | |||||||
Total expenses | $3,576,030 | |||||||
Reduction of expenses by investment adviser | (101,008 | ) | ||||||
Net expenses | $3,475,022 | |||||||
Net investment loss | $(1,680,725 | ) | ||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $(2,523,802 | ) | ||||||
Foreign currency | (7,176 | ) | ||||||
Net realized gain (loss) on investments and foreign currency | $(2,530,978 | ) | ||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $8,142,900 | |||||||
Translation of assets and liabilities in foreign currencies | (2,353 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $8,140,547 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $5,609,569 | |||||||
Change in net assets from operations | $3,928,844 |
See Notes to Financial Statements
8
Table of Contents
MFS New Discovery Series
FINANCIAL STATEMENTS | STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
| Six months ended 6/30/16 (unaudited | ) | | Year ended 12/31/15 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment loss | $(1,680,725 | ) | $(5,088,364 | ) | ||||
Net realized gain (loss) on investments and foreign currency | (2,530,978 | ) | 42,740,504 | |||||
Net unrealized gain (loss) on investments and foreign currency translation | 8,140,547 | (47,368,882 | ) | |||||
Change in net assets from operations | $3,928,844 | $(9,716,742 | ) | |||||
Distributions declared to shareholders | ||||||||
From net realized gain on investments | $— | $(25,964,753 | ) | |||||
Change in net assets from fund share transactions | $(34,215,026 | ) | $(123,920,193 | ) | ||||
Total change in net assets | $(30,286,182 | ) | $(159,601,688 | ) | ||||
Net assets | ||||||||
At beginning of period | 701,117,578 | 860,719,266 | ||||||
At end of period (including accumulated net investment loss of $1,680,725 and | $670,831,396 | $701,117,578 |
See Notes to Financial Statements
9
Table of Contents
MFS New Discovery Series
FINANCIAL STATEMENTS | FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund’s financial performance for the semiannual period and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
Initial Class | Six months ended 6/30/16 | Years ended 12/31 | ||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $15.49 | $16.32 | $22.07 | $15.72 | $14.29 | $18.31 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment loss (d) | $(0.03 | ) | $(0.08 | ) | $(0.09 | ) | $(0.08 | ) | $(0.05 | ) | $(0.10 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 0.16 | (0.22 | ) | (1.42 | ) | 6.59 | 3.00 | (1.70 | ) | |||||||||||||||
Total from investment operations | $0.13 | $(0.30 | ) | $(1.51 | ) | $6.51 | $2.95 | $(1.80 | ) | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net realized gain on investments | $— | $(0.53 | ) | $(4.24 | ) | $(0.16 | ) | $(1.52 | ) | $(2.22 | ) | |||||||||||||
Net asset value, end of period (x) | $15.62 | $15.49 | $16.32 | $22.07 | $15.72 | $14.29 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 0.84 | (n) | (1.89 | ) | (7.26 | ) | 41.52 | 21.22 | (10.27 | ) | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.97 | (a) | 0.96 | 0.96 | 0.96 | 0.97 | 0.98 | |||||||||||||||||
Expenses after expense reductions (f) | 0.94 | (a) | 0.94 | 0.95 | 0.96 | 0.97 | 0.98 | |||||||||||||||||
Net investment loss | (0.38 | )(a) | (0.48 | ) | (0.46 | ) | (0.44 | ) | (0.29 | ) | (0.56 | ) | ||||||||||||
Portfolio turnover | 33 | (n) | 60 | 96 | 104 | 122 | 177 | |||||||||||||||||
Net assets at end of period (000 omitted) | $293,685 | $312,151 | $391,474 | $424,432 | $395,107 | $363,412 | ||||||||||||||||||
Service Class | Six months ended 6/30/16 | Years ended 12/31 | ||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $14.45 | $15.30 | $21.02 | $15.01 | $13.74 | $17.74 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment loss (d) | $(0.04 | ) | $(0.11 | ) | $(0.13 | ) | $(0.12 | ) | $(0.08 | ) | $(0.14 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 0.15 | (0.21 | ) | (1.35 | ) | 6.29 | 2.87 | (1.64 | ) | |||||||||||||||
Total from investment operations | $0.11 | $(0.32 | ) | $(1.48 | ) | $6.17 | $2.79 | $(1.78 | ) | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net realized gain on investments | $— | $(0.53 | ) | $(4.24 | ) | $(0.16 | ) | $(1.52 | ) | $(2.22 | ) | |||||||||||||
Net asset value, end of period (x) | $14.56 | $14.45 | $15.30 | $21.02 | $15.01 | $13.74 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 0.76 | (n) | (2.15 | ) | (7.49 | ) | 41.22 | 20.90 | (10.49 | ) | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.22 | (a) | 1.21 | 1.21 | 1.21 | 1.22 | 1.23 | |||||||||||||||||
Expenses after expense reductions (f) | 1.19 | (a) | 1.19 | 1.20 | 1.21 | 1.22 | 1.23 | |||||||||||||||||
Net investment loss | (0.63 | )(a) | (0.73 | ) | (0.72 | ) | (0.69 | ) | (0.53 | ) | (0.80 | ) | ||||||||||||
Portfolio turnover | 33 | (n) | 60 | 96 | 104 | 122 | 177 | |||||||||||||||||
Net assets at end of period (000 omitted) | $377,146 | $388,966 | $469,245 | $578,617 | $393,224 | $312,589 |
See Notes to Financial Statements
10
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 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 New Discovery Series
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) | Business and Organization |
MFS New Discovery Series (the fund) is a diversified 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.
The fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued.
Balance Sheet Offsetting – The fund’s accounting policy with respect to balance sheet offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the International Swaps and Derivatives Association (ISDA) Master Agreement does not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty. The fund’s right to setoff may be restricted or prohibited by the bankruptcy or insolvency laws of the particular jurisdiction to which a specific master netting agreement counterparty is subject. Balance sheet offsetting disclosures, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
Investment Valuations – Equity securities, including restricted equity securities, are generally valued at the last sale or official closing price on their primary market or exchange as provided by a third-party pricing service. Equity securities, for which there were no sales reported that day, are generally valued at the last quoted daily bid quotation on their primary market or exchange as provided by a third-party pricing service. Short-term instruments with a maturity at issuance of 60 days or less may be valued at amortized cost, which approximates market value. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. Values obtained from third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
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MFS New Discovery Series
Notes to Financial Statements (unaudited) – continued
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. The following is a summary of the levels used as of June 30, 2016 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $601,154,425 | $— | $1,245,484 | $602,399,909 | ||||||||||||
Israel | 12,923,215 | — | — | 12,923,215 | ||||||||||||
Canada | 11,877,860 | — | — | 11,877,860 | ||||||||||||
Hong Kong | 4,918,432 | 2,471,965 | — | 7,390,397 | ||||||||||||
India | 5,567,319 | — | — | 5,567,319 | ||||||||||||
United Kingdom | — | 2,765,900 | — | 2,765,900 | ||||||||||||
Greece | 2,069,259 | — | — | 2,069,259 | ||||||||||||
Japan | — | 1,911,794 | — | 1,911,794 | ||||||||||||
Mutual Funds | 42,523,837 | — | — | 42,523,837 | ||||||||||||
Total Investments | $681,034,347 | $7,149,659 | $1,245,484 | $689,429,490 |
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 12/31/15 | $— | |||
Purchases | 1,348,470 | |||
Change in unrealized appreciation (depreciation) | (102,986 | ) | ||
Balance as of 6/30/16 | $1,245,484 |
The net change in unrealized appreciation (depreciation) from investments held as level 3 at June 30, 2016 is $(102,986). At June 30, 2016, the fund held one level 3 security.
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. Security loans can be terminated at the discretion of either the lending agent or the fund and the related securities must be returned within the earlier of the standard trade settlement period for such securities or within three business days. The loans are collateralized by cash and/or U.S. Treasury and federal agency obligations in an amount typically at least equal to the market value of the securities loaned. On loans collateralized by cash, the cash collateral is invested in a money market fund. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. State Street provides the fund with indemnification against Borrower default. In the event of Borrower default, State Street will, for the benefit of the fund, either purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the fund the market value of the loaned securities. In return, State Street assumes the fund’s rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, State Street is responsible for the shortfall, but only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. At period end, the fund had investment securities on loan, all of which were classified as equity securities in the fund’s Portfolio of Investments, with a fair value of $18,636,313. The fair value of the fund’s investment securities
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Notes to Financial Statements (unaudited) – continued
on loan and a related liability of $18,925,846 for cash collateral received on securities loaned are both presented gross in the Statement of Assets and Liabilities. Additionally, these loans were collateralized by U.S. Treasury Obligations of $23,982. The collateral received on securities loaned exceeded the value of securities on loan at period end. The liability for cash collateral for securities loaned is carried at fair value, which is categorized as level 2 within the fair value hierarchy. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the fund and the lending agent. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the Borrower, and is allocated between the fund and the lending agent. Income from securities lending is separately reported in the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income.
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 – Prior to October 1, 2015, the fund’s custody fee could be reduced by a credit earned under an arrangement that measured the value of U.S. dollars deposited with the custodian by the fund. For the six months ended June 30, 2016, 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. Management has analyzed the fund’s tax positions taken on federal and state tax returns for all open tax years and does not believe that there are any uncertain tax positions that require recognition of a tax liability. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests. Additionally, capital gains realized by the fund on securities issued in or by certain foreign countries may be subject to capital gains tax imposed by those countries.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to wash sale loss deferrals.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/15 | ||||
Long-term capital gains | $25,964,753 |
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MFS New Discovery Series
Notes to Financial Statements (unaudited) – continued
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/16 | ||||
Cost of investments | $628,102,693 | |||
Gross appreciation | 107,503,965 | |||
Gross depreciation | (46,177,168 | ) | ||
Net unrealized appreciation (depreciation) | $61,326,797 | |||
As of 12/31/15 | ||||
Undistributed ordinary income | $13,236,547 | |||
Undistributed long-term capital gain | 17,449,126 | |||
Other temporary differences | 118,441 | |||
Net unrealized appreciation (depreciation) | 53,183,897 |
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 realized gain on investments | ||||||||
Six months ended 6/30/16 | Year ended 12/31/15 | |||||||
Initial Class | $— | $10,547,386 | ||||||
Service Class | — | 15,417,367 | ||||||
Total | $— | $25,964,753 |
(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% |
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 six months ended June 30, 2016, this management fee reduction amounted to $22,985, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the six months ended June 30, 2016 was equivalent to an annual effective rate of 0.89% of the fund’s average daily net assets.
The investment adviser agreed in writing to pay a portion of the fund’s total annual operating expenses, excluding interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment related expenses, such that total annual operating expenses do not exceed 0.94% of average daily net assets for the Initial Class shares and 1.19% 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, 2018. For the six months ended June 30, 2016, this reduction amounted to $78,023 and is included in the 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, 2016, the fee was $23,884, which equated to
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MFS New Discovery Series
Notes to Financial Statements (unaudited) – continued
0.0074% 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, 2016, these costs amounted to $1,844.
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the six months ended June 30, 2016 was equivalent to an annual effective rate of 0.0174% of the fund’s average daily net assets.
Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – This fund and certain other funds managed by MFS (the funds) have entered into a service agreement (the ISO Agreement) which provides for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino serves as the ISO and is an officer of the funds and the sole member of Tarantino LLC. The funds can terminate the ISO Agreement with Tarantino LLC at any time under the terms of the ISO Agreement. For the six months ended June 30, 2016, the fee paid by the fund under this agreement was $649 and is included in “Miscellaneous” expense in the Statement of Operations. MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.
The fund 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.
The fund is permitted to engage in purchase and sale transactions (“cross-trades”) with funds and accounts for which MFS serves as investment adviser or sub-adviser pursuant to a policy adopted by the Board of Trustees. This policy has been designed to ensure that cross-trades conducted by the fund comply with Rule 17a-7 under the Investment Company Act of 1940. Under this policy, cross-trades are effected at current market prices with no remuneration paid in connection with the transaction. During the six months ended June 30, 2016, the fund engaged in purchase and sale transactions pursuant to this policy, which amounted to $2,634,616 and $2,450,017, respectively. The sales transactions resulted in net realized gains (losses) of $(115,573).
(4) | Portfolio Securities |
For the six months ended June 30, 2016, purchases and sales of investments, other than short-term obligations, aggregated $213,061,784 and $250,547,691, 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 6/30/16 | Year ended 12/31/15 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 558,910 | $8,173,956 | 1,819,811 | $30,303,575 | ||||||||||||
Service Class | 1,728,603 | 22,870,629 | 7,789,496 | 120,920,972 | ||||||||||||
2,287,513 | $31,044,585 | 9,609,307 | $151,224,547 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 677,417 | $10,547,386 | ||||||||||||
Service Class | — | — | 1,060,342 | 15,417,367 | ||||||||||||
— | $— | 1,737,759 | $25,964,753 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (1,907,942 | ) | $(28,019,742 | ) | (6,328,466 | ) | $(106,724,000 | ) | ||||||||
Service Class | (2,730,241 | ) | (37,239,869 | ) | (12,599,958 | ) | (194,385,493 | ) | ||||||||
(4,638,183 | ) | $(65,259,611 | ) | (18,928,424 | ) | $(301,109,493 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (1,349,032 | ) | $(19,845,786 | ) | (3,831,238 | ) | $(65,873,039 | ) | ||||||||
Service Class | (1,001,638 | ) | (14,369,240 | ) | (3,750,120 | ) | (58,047,154 | ) | ||||||||
(2,350,670 | ) | $(34,215,026 | ) | (7,581,358 | ) | $(123,920,193 | ) |
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MFS New Discovery Series
Notes to Financial Statements (unaudited) – continued
The fund is one of several mutual funds in which certain MFS funds may invest. The MFS funds do not invest in the underlying funds for the purpose of exercising management or control. At the end of the period, the MFS Moderate Allocation Portfolio, the MFS Conservative Allocation Portfolio, and the MFS Growth Allocation Portfolio were the owners of record of approximately 4%, 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 $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Overnight Federal Reserve funds rate or daily one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Overnight Federal Reserve funds rate plus an agreed upon spread. For the six months ended June 30, 2016, the fund’s commitment fee and interest expense were $1,764 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 | $23,019,974 | $103,455,813 | $(102,877,796 | ) | $23,597,991 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $38,603 | $23,597,991 |
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MFS New Discovery Series
PROXY VOTING POLICIES AND INFORMATION
MFS votes proxies on behalf of the fund pursuant to proxy voting policies and procedures that are available without charge, upon request, by calling 1-800-225-2606, by visiting mfs.com (once you have selected “Individual Investor” as your role, click on “Individual Investor Home” in the top navigation and then select “Learn More About Proxy Voting” under the “I want to…” header on the left hand column of the page), or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available by August 31 of each year without charge by visiting mfs.com (once you have selected “Individual Investor” as your role, click on “Individual Investor Home” in the top navigation and then select “Learn More About Proxy Voting” under the “I want to…” header on the left hand column of the page), 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 on mfs.com by following these steps once you have selected “Individual Investor” as your role: (1) Click on the “Individual Investor Home” in the top navigation and then select the “Announcements” option within the “Market Outlooks” drop down, or (2) Click on “Products & Services” and “Variable Insurance Portfolios” and then select the fund’s name.
INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS
The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, 529 program manager (if applicable), and custodian who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.
Under the Trust’s By-Laws and Declaration of Trust, any claims asserted against or on behalf of the MFS Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of Massachusetts.
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SEMIANNUAL REPORT
June 30, 2016
MFS® TOTAL RETURN BOND SERIES
MFS® Variable Insurance Trust
VFB-SEM
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MFS® TOTAL RETURN 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 • MAY LOSE VALUE • NO BANK OR CREDIT UNION GUARANTEE • NOT A DEPOSIT • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
Table of Contents
MFS Total Return Bond Series
Dear Contract Owners:
Global headwinds continue to restrain growth and profits, though developed market equities have remained resilient, underpinned by record-low interest rates. Rates are likely to stay low over the medium term, as many central banks have implemented accommodative monetary policies in an effort to reinvigorate their economies. Markets will have to deal with an additional headwind in the coming months and years as investors grapple with the fallout from the United Kingdom’s decision to leave the European Union. That process will take a considerable period of time to play out against a highly uncertain backdrop. Weakness in the pound sterling in the wake of the referendum has been a welcome shock absorber for UK financial markets.
Emerging markets have been beneficiaries of firmer commodity prices and diminishing fears of sharply higher interest rates from the U.S. Federal Reserve. China remains a source of concern for investors, as overcapacity in its manufacturing sector inhibits the government’s attempt to change its domestic economy from one driven by exports to a consumer-driven model.
At MFS®, we believe it is best to view markets through a long lens and not react to short-term swings. That makes it possible to filter out market noise and focus on long-term fundamentals.
In our view, the professional guidance of a financial advisor, along with a patient, long-term approach, will help you reach your investment objectives.
Respectfully,
Robert J. Manning
Chairman
MFS Investment Management
August 15, 2016
The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.
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MFS Total Return Bond Series
Portfolio structure (i)
Fixed income sectors (i) | ||||
Investment Grade Corporates | 38.5% | |||
Mortgage-Backed Securities | 22.4% | |||
U.S. Treasury Securities | 10.9% | |||
Commercial Mortgage-Backed Securities | 10.3% | |||
High Yield Corporates | 7.5% | |||
Asset-Backed Securities | 3.5% | |||
U.S. Government Agencies | 2.4% | |||
Collateralized Debt Obligations | 2.3% | |||
Emerging Markets Bonds | 0.4% | |||
Residential Mortgage-Backed Securities | 0.1% |
Composition including fixed income credit quality (a)(i) | ||||
AAA | 10.9% | |||
AA | 1.6% | |||
A | 13.2% | |||
BBB | 26.6% | |||
BB | 7.2% | |||
B | 2.7% | |||
CCC | 0.4% | |||
C (o) | 0.0% | |||
U.S. Government | 11.4% | |||
Federal Agencies | 24.8% | |||
Not Rated | (0.5)% | |||
Non-Fixed Income (o) | 0.0% | |||
Cash & Cash Equivalents | 1.1% | |||
Other | 0.6% | |||
Portfolio facts (i) | ||||
Average Duration (d) | 5.4 | |||
Average Effective Maturity (m) | 8.1 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. Non-Fixed Income includes any equity securities (including convertible bonds and equity derivatives) and/or commodity-linked derivatives. 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 value of securities, and reflect the impact of the equivalent exposure of derivative positions, if any. These amounts may be negative from time to time. Equivalent exposure is a calculated amount that translates the derivative position into a reasonable approximation of the amount of the underlying asset that the portfolio would have to hold at a given point in time to have the same price sensitivity that results from the portfolio’s ownership of the derivative contract. When dealing with derivatives, equivalent exposure is a more representative measure of the potential impact of a position on portfolio performance than value. The bond component will include any accrued interest amounts. |
(m) | In determining an instrument’s effective maturity for purposes of calculating the fund’s dollar-weighted average effective maturity, MFS uses the instrument’s stated maturity or, if applicable, an earlier date on which MFS believes it is probable that a maturity-shortening device (such as a put, pre-refunding or prepayment) will cause the instrument to be repaid. Such an earlier date can be substantially shorter than the instrument’s stated maturity. |
(o) | Less than 0.1%. |
Where the fund holds convertible bonds, these are treated as part of the equity portion of the portfolio.
Cash & Cash Equivalents includes any cash, investments in money market funds, short-term securities, and other assets less liabilities. Please see the Statement of Assets and Liabilities for additional information related to the fund’s cash position and other assets and liabilities.
Other includes equivalent exposure from currency derivatives and/or any offsets to derivative positions.
Percentages are based on net assets as of 6/30/16.
The portfolio is actively managed and current holdings may be different.
2
Table of Contents
MFS Total Return Bond Series
Fund Expenses Borne by the Contract Holders during the Period,
January 1, 2016 through June 30, 2016
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, 2016 through June 30, 2016.
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 1/01/16 | Ending Account Value | Expenses Paid During Period (p) 1/01/16-6/30/16 | ||||||||||||||
Initial Class | Actual | 0.53% | $1,000.00 | $1,056.92 | $2.71 | |||||||||||||
Hypothetical (h) | 0.53% | $1,000.00 | $1,022.23 | $2.66 | ||||||||||||||
Service Class | Actual | 0.78% | $1,000.00 | $1,055.56 | $3.99 | |||||||||||||
Hypothetical (h) | 0.78% | $1,000.00 | $1,020.98 | $3.92 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
3
Table of Contents
MFS Total Return Bond Series
PORTFOLIO OF INVESTMENTS – 6/30/16 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
BONDS – 98.1% | ||||||||
Aerospace – 0.1% | ||||||||
TransDigm, Inc., 6.5%, 7/15/2024 | $ | 2,970,000 | $ | 3,012,709 | ||||
|
| |||||||
Asset-Backed & Securitized – 16.1% | ||||||||
Alm XIV Ltd., CLO, 2014-14A, “A1”, FRN, 2.064%, 7/28/2026 (n) | $ | 9,007,942 | $ | 8,967,519 | ||||
Ameriquest Mortgage Securities, Inc., “M1”, FRN, 0.923%, 10/25/2035 | 2,800,000 | 2,766,575 | ||||||
ARI Fleet Lease Trust, 2016-A, “A2”, 1.82%, 7/15/2024 (n) | 6,042,000 | 6,052,299 | ||||||
Babson Ltd., CLO, FRN, 1.734%, 4/20/2025 (n) | 9,870,445 | 9,766,115 | ||||||
Ballyrock Ltd., 1.816%, 5/20/2025 (z) | 3,269,000 | 3,226,930 | ||||||
Banc of America Commercial Mortgage, Inc., 5.337%, 12/15/2043 (n) | 2,801,036 | 2,839,037 | ||||||
Banc of America Commercial Mortgage, Inc., FRN, 5.784%, 4/24/2049 (n) | 637,169 | 640,644 | ||||||
Banc of America Large Loan, Inc., FRN, 5.325%, 2/24/2044 (n) | 8,700,365 | 8,815,352 | ||||||
Bayview Commercial Asset Trust, FRN, 0%, 4/25/2036 (i)(z) | 239,196 | 855 | ||||||
Bayview Commercial Asset Trust, FRN, 0%, 7/25/2036 (i)(z) | 168,549 | 0 | ||||||
Bayview Commercial Asset Trust, FRN, 0%, 10/25/2036 (i)(z) | 455,388 | 0 | ||||||
Bayview Commercial Asset Trust, FRN, 0%, 12/25/2036 (i)(z) | 226,892 | 0 | ||||||
Bayview Commercial Asset Trust, FRN, 0%, 3/25/2037 (i)(z) | 495,092 | 0 | ||||||
Bayview Financial Revolving Mortgage Loan Trust, FRN, 2.037%, 12/28/2040 (z) | 122,711 | 88,507 | ||||||
Bear Stearns Commercial Mortgage Securities, Inc., “A4”, FRN, 5.471%, 1/12/2045 | 4,792,304 | 4,875,933 | ||||||
Bear Stearns Cos., Inc., “A2”, FRN, 0.896%, 12/25/2042 | 967,818 | 949,803 | ||||||
Cent CLO LP, 2014-16AR, “A1AR”, FRN, 1.886%, 8/01/2024 (n) | 5,669,598 | 5,654,977 | ||||||
Chesapeake Funding II LLC, 2016-1A, “A1”, 2.11%, 3/15/2028 (n) | 8,705,000 | 8,768,733 | ||||||
Chesapeake Funding LLC, “A”, FRN, 0.914%, 1/07/2025 (n) | 4,307,800 | 4,305,193 | ||||||
Citigroup Commercial Mortgage Trust, 2014-GC25, “A4”, 3.635%, 10/10/2047 | 3,128,793 | 3,398,386 | ||||||
Citigroup Commercial Mortgage Trust, 2015-GC27, “A5”, 3.137%, 2/10/2048 | 7,821,982 | 8,208,369 | ||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust, 5.322%, 12/11/2049 | 12,794,632 | 12,929,125 | ||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust, FRN, 5.366%, 12/11/2049 | 10,410,000 | 10,588,829 | ||||||
CNH Wholesale Master Note Trust, “A”, FRN, 1.042%, 8/15/2019 (n) | 10,568,000 | 10,567,998 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Asset-Backed & Securitized – continued | ||||||||
Commercial Mortgage Acceptance Corp., FRN, 2.259%, 9/15/2030 (i) | $ | 22,777 | $ | 93 | ||||
Commercial Mortgage Asset Trust, FRN, 0.645%, 1/17/2032 (i)(z) | 481,928 | 879 | ||||||
Commercial Mortgage Pass-Through Certificates, “A4”, 5.306%, 12/10/2046 | 1,009,483 | 1,014,187 | ||||||
Commercial Mortgage Pass-Through Certificates, “A4”, 3.183%, 2/10/2048 | 7,671,000 | 8,112,667 | ||||||
Commercial Mortgage Trust, “A4”, 3.147%, 8/15/2045 | 3,950,000 | 4,204,723 | ||||||
Commercial Mortgage Trust, 2014-CR19, “A5”, 3.796%, 8/10/2047 | 8,605,908 | 9,470,385 | ||||||
Commercial Mortgage Trust, 2014-UBS4, “A5”, 3.694%, 8/10/2047 | 8,091,000 | 8,742,660 | ||||||
Commercial Mortgage Trust, 2015-LC21, “A4”, 3.708%, 7/10/2048 | 10,000,000 | 10,952,845 | ||||||
Commercial Mortgage Trust, 2015-PC1, “A5”, 3.902%, 7/10/2050 | 2,888,848 | 3,174,354 | ||||||
Credit Suisse Commercial Mortgage Trust, “A4”, FRN, 6.137%, 9/15/2039 | 8,253,105 | 8,518,503 | ||||||
Credit Suisse Commercial Mortgage Trust, “AM”, FRN, 5.889%, 6/15/2039 | 13,668,432 | 13,816,229 | ||||||
Credit Suisse Commercial Mortgage Trust, “C4”, FRN, 6.137%, 9/15/2039 | 6,667,307 | 6,893,151 | ||||||
Credit Suisse Mortgage Capital Certificate, 5.311%, 12/15/2039 | 1,575,013 | 1,577,611 | ||||||
Credit-Based Asset Servicing & Securitization LLC, 4.07%, 12/25/2035 | 19,846 | 19,637 | ||||||
CSAIL Commercial Mortgage Trust, 2015-C2, “A4”, 3.504%, 6/15/2057 | 2,695,346 | 2,902,120 | ||||||
CWCapital Cobalt Ltd., “A4”, FRN, 5.956%, 5/15/2046 | 1,881,053 | 1,938,854 | ||||||
CWCapital LLC, 5.223%, 8/15/2048 | 313,986 | 314,903 | ||||||
Dryden Senior Loan Fund, CLO, “A”, FRN, 2.008%, 1/15/2025 (n) | 7,548,370 | 7,520,483 | ||||||
Falcon Franchise Loan LLC, FRN, 99.9%, 1/05/2025 (i)(z) | 1,279 | 310 | ||||||
First Union National Bank Commercial Mortgage Trust, FRN, 1.734%, 1/12/2043 (i)(q)(z) | 80,451 | 283 | ||||||
Flatiron CLO Ltd. 2013-1A, “A1”, FRN, 2.032%, 1/17/2026 (n) | 8,321,193 | 8,248,135 | ||||||
Ford Credit Auto Owner Trust, 2014-1,“A”, 2.26%, 11/15/2025 (n) | 4,559,000 | 4,650,689 | ||||||
Ford Credit Auto Owner Trust, 2014-2,“A”, 2.31%, 4/15/2026 (n) | 10,726,000 | 10,956,837 | ||||||
Galaxy CLO Ltd., 3.226%, 11/16/2025 (z) | 5,290,000 | 5,002,640 | ||||||
GE Capital Commercial Mortgage Corp., “A”, 5.543%, 12/10/2049 | 974,966 | 993,715 | ||||||
Greenwich Capital Commercial Funding Corp., 5.475%, 3/10/2039 | 11,128,879 | 11,315,127 |
4
Table of Contents
MFS Total Return Bond Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Asset-Backed & Securitized – continued | ||||||||
GS Mortgage Securities Trust, 2015-GC30, “A4”, 3.382%, 5/10/2050 | $ | 7,904,407 | $ | 8,459,254 | ||||
Harley-Davidson Motorcycle Trust, “A2”, FRN, 0.742%, 1/15/2019 | 977,461 | 977,559 | ||||||
Hertz Fleet Lease Funding LP, 2013-3, “A”, FRN, 0.995%, 12/10/2027 (n) | 1,887,847 | 1,886,370 | ||||||
Hertz Fleet Lease Funding LP, 2014-1, FRN, 0.845%, 4/10/2028 (z) | 3,437,101 | 3,427,924 | ||||||
JPMBB Commercial Mortgage Securities Trust, 2014-C26, 3.494%, 1/15/2048 | 9,314,291 | 10,028,138 | ||||||
JPMBB Commercial Mortgage Securities Trust, 2015-C28, “A4”, 3.227%, 10/15/2048 | 3,308,428 | 3,493,423 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., 5.552%, 5/12/2045 | 100,563 | 100,466 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., “A3”, 4.171%, 8/15/2046 | 600,000 | 655,230 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., “A3”, FRN, 5.927%, 6/15/2049 | 557,241 | 563,897 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., “A3”, FRN, 6.131%, 2/15/2051 | 66,174 | 66,040 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., “A4”, FRN, 5.927%, 6/15/2049 | 9,677,430 | 9,851,459 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 5.791%, 7/15/2042 (n)(q) | 130,000 | 33,800 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 5.887%, 2/12/2049 | 741,135 | 757,727 | ||||||
JPMorgan Chase Commercial Mortgage Trust, 2007-LD11, “AM”, FRN, 5.927%, 6/15/2049 | 15,944,203 | 15,946,451 | ||||||
JPMorgan Mortgage Trust, “A1”, FRN, 2.492%, 10/25/2033 | 289,096 | 281,172 | ||||||
Kingsland III Ltd., “A1”, CDO, FRN, 0.876%, 8/24/2021 (n) | 936,223 | 932,854 | ||||||
LB-UBS Commercial Mortgage Trust, “A4”, 5.372%, 9/15/2039 | 925,828 | 926,529 | ||||||
Lehman Brothers Commercial Conduit Mortgage Trust, FRN, 1.184%, 2/18/2030 (i) | 17,637 | 106 | ||||||
Merrill Lynch Mortgage Investors Inc., “A”, FRN, 2.514%, 5/25/2036 | 710,337 | 682,826 | ||||||
Merrill Lynch Mortgage Investors Inc., “A5”, FRN, 2.394%, 4/25/2035 | 501,241 | 472,791 | ||||||
Merrill Lynch Mortgage Trust, “A3”, FRN, 6.021%, 6/12/2050 | 116,081 | 115,894 | ||||||
Morgan Stanley Bank of America/Merrill Lynch Trust, “A4”, 3.176%, 8/15/2045 | 5,000,000 | 5,326,340 | ||||||
Morgan Stanley Capital I Trust, “AM”, FRN, 5.865%, 4/15/2049 | 14,764,000 | 14,740,417 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Asset-Backed & Securitized – continued | ||||||||
Morgan Stanley Capital I, Inc., FRN, 1.135%, 11/15/2030 (i)(n) | $ | 66,295 | $ | 935 | ||||
Morgan Stanley Re-REMIC Trust, FRN, 5.988%, 8/15/2045 (n) | 11,500,000 | 11,725,178 | ||||||
Motor PLC, 2015-1A, “A1”, FRN, 1.053%, 6/25/2022 (n) | 3,861,192 | 3,851,114 | ||||||
Nextgear Floorplan Master Owner Trust, 2015-1A, “A”, 1.8%, 7/15/2019 (n) | 6,772,000 | 6,740,921 | ||||||
Nextgear Floorplan Master Owner Trust, 2015-2A, “A”, 2.38%, 10/15/2020 (n) | 7,586,000 | 7,561,469 | ||||||
Nissan Master Owner Trust Receivables 2015,“A-2”, 1.44%, 1/15/2020 | 9,277,000 | 9,309,217 | ||||||
Preferred Term Securities XIX Ltd., CDO, FRN, 1.002%, 12/22/2035 (z) | 321,198 | 226,589 | ||||||
Race Point CLO Ltd., “A”, FRN, 1.885%, 2/20/2025 (n) | 7,740,000 | 7,682,941 | ||||||
Residential Funding Mortgage Securities, Inc., 5.32%, 12/25/2035 | 81,482 | 67,792 | ||||||
Volkswagen Credit Auto Master Trust, 2014-1A, “A1”, FRN, 0.788%, 7/22/2019 (n) | 6,106,000 | 6,031,105 | ||||||
Wachovia Bank Commercial Mortgage Trust, “A4”, FRN, 6.147%, 2/15/2051 | 6,644,319 | 6,781,833 | ||||||
Wachovia Bank Commercial Mortgage Trust, FRN, 5.888%, 6/15/2049 | 13,489,441 | 13,902,265 | ||||||
Wells Fargo Commercial Mortgage Trust, 2015-C28, “A4”, 3.54%, 5/15/2048 | 10,682,988 | 11,534,158 | ||||||
|
| |||||||
$ | 408,895,383 | |||||||
|
| |||||||
Automotive – 0.9% | ||||||||
General Motors Co., 4.875%, 10/02/2023 | $ | 4,291,000 | $ | 4,567,945 | ||||
General Motors Co., 5.2%, 4/01/2045 | 4,005,000 | 3,967,862 | ||||||
General Motors Financial Co., Inc., 3.45%, 4/10/2022 | 2,500,000 | 2,498,235 | ||||||
Johnson Controls, Inc., 4.625%, 7/02/2044 | 2,272,000 | 2,399,789 | ||||||
Johnson Controls, Inc., 5.7%, 3/01/2041 | 2,075,000 | 2,385,866 | ||||||
Volkswagen Group America Finance LLC, 2.4%, 5/22/2020 (n) | 6,214,000 | 6,241,379 | ||||||
|
| |||||||
$ | 22,061,076 | |||||||
|
| |||||||
Biotechnology – 0.6% | ||||||||
Life Technologies Corp., 5%, 1/15/2021 | $ | 13,872,000 | $ | 15,308,931 | ||||
|
| |||||||
Broadcasting – 0.3% | ||||||||
Omnicom Group, Inc., 3.65%, 11/01/2024 | $ | 1,872,000 | $ | 1,973,565 | ||||
SES Global Americas Holdings GP, 5.3%, 3/25/2044 (n) | 2,857,000 | 2,678,846 | ||||||
SES S.A., 5.3%, 4/04/2043 (z) | 3,272,000 | 3,143,270 | ||||||
|
| |||||||
$ | 7,795,681 | |||||||
|
| |||||||
Brokerage & Asset Managers – 0.9% | ||||||||
CME Group, Inc., 3%, 3/15/2025 | $ | 2,197,000 | $ | 2,294,969 | ||||
Intercontinental Exchange, Inc., 2.75%, 12/01/2020 | 1,591,000 | 1,665,968 |
5
Table of Contents
MFS Total Return Bond Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Brokerage & Asset Managers – continued | ||||||||
Intercontinental Exchange, Inc., 3.75%, 12/01/2025 | $ | 9,058,000 | $ | 9,771,317 | ||||
NYSE Euronext, 2%, 10/05/2017 | 3,115,000 | 3,146,539 | ||||||
TD Ameritrade Holding Corp., 5.6%, 12/01/2019 | 3,959,000 | 4,458,404 | ||||||
TD Ameritrade Holding Corp., 2.95%, 4/01/2022 | 1,773,000 | 1,847,315 | ||||||
|
| |||||||
$ | 23,184,512 | |||||||
|
| |||||||
Building – 0.5% | ||||||||
Martin Marietta Materials, Inc., 4.25%, 7/02/2024 | $ | 8,330,000 | $ | 8,872,541 | ||||
Masco Corp., 4.375%, 4/01/2026 | 1,122,000 | 1,157,332 | ||||||
Mohawk Industries, Inc., 3.85%, 2/01/2023 | 2,668,000 | 2,811,450 | ||||||
|
| |||||||
$ | 12,841,323 | |||||||
|
| |||||||
Business Services – 0.2% | ||||||||
Equinix, Inc., 4.875%, 4/01/2020 | $ | 4,055,000 | $ | 4,207,063 | ||||
Fidelity National Information Services, Inc., 3.875%, 6/05/2024 | 258,000 | 272,777 | ||||||
|
| |||||||
$ | 4,479,840 | |||||||
|
| |||||||
Cable TV – 1.5% | ||||||||
CCO Holdings LLC/CCO Holdings Capital Corp., 5.75%, 1/15/2024 | $ | 3,865,000 | $ | 4,067,526 | ||||
Charter Operating/CCO Capital Corp., 4.908%, 7/23/2025 (n) | 7,676,000 | 8,392,186 | ||||||
Comcast Corp., 2.75%, 3/01/2023 | 3,297,000 | 3,452,806 | ||||||
Sirius XM Radio, Inc., 4.25%, 5/15/2020 (n) | 7,940,000 | 8,027,126 | ||||||
Time Warner Cable, Inc., 4.5%, 9/15/2042 | 3,721,000 | 3,465,911 | ||||||
Time Warner Entertainment Co. LP, 8.375%, 7/15/2033 | 290,000 | 392,926 | ||||||
Videotron Ltd., 5%, 7/15/2022 | 8,605,000 | 8,906,175 | ||||||
|
| |||||||
$ | 36,704,656 | |||||||
|
| |||||||
Chemicals – 0.9% | ||||||||
CF Industries Holdings, Inc., 7.125%, 5/01/2020 | $ | 3,767,000 | $ | 4,346,350 | ||||
CF Industries Holdings, Inc., 5.375%, 3/15/2044 | 3,102,000 | 2,925,357 | ||||||
LYB International Finance B.V., 4.875%, 3/15/2044 | 2,890,000 | 3,055,753 | ||||||
LyondellBasell Industries N.V., 5.75%, 4/15/2024 | 5,384,000 | 6,408,074 | ||||||
Tronox Finance LLC, 6.375%, 8/15/2020 | 7,078,000 | 5,255,415 | ||||||
|
| |||||||
$ | 21,990,949 | |||||||
|
| |||||||
Computer Software – 0.3% | ||||||||
VeriSign, Inc., 4.625%, 5/01/2023 | $ | 6,600,000 | $ | 6,682,500 | ||||
|
| |||||||
Computer Software – Systems – 0.2% | ||||||||
Apple, Inc., 4.375%, 5/13/2045 | $ | 4,792,000 | $ | 5,220,807 | ||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Conglomerates – 0.2% | ||||||||
General Electric Capital Corp., 7.5%, 8/21/2035 | $ | 4,000,000 | $ | 6,000,856 | ||||
|
| |||||||
Consumer Products – 0.8% | ||||||||
Mattel, Inc., 5.45%, 11/01/2041 | $ | 4,191,000 | $ | 4,465,330 | ||||
Newell Rubbermaid, Inc., 5.5%, 4/01/2046 | 1,514,000 | 1,801,247 | ||||||
Newell Rubbermaid, Inc., 4.2%, 4/01/2026 | 5,347,000 | 5,796,421 | ||||||
Reckitt Benckiser Treasury Services PLC, 3.625%, 9/21/2023 (n) | 6,765,000 | 7,295,707 | ||||||
|
| |||||||
$ | 19,358,705 | |||||||
|
| |||||||
Consumer Services – 1.0% | ||||||||
ADT Corp., 6.25%, 10/15/2021 | $ | 7,105,000 | $ | 7,549,063 | ||||
Priceline Group, Inc., 3.65%, 3/15/2025 | 3,610,000 | 3,824,203 | ||||||
Visa, Inc., 2.8%, 12/14/2022 | 13,000,000 | 13,714,844 | ||||||
|
| |||||||
$ | 25,088,110 | |||||||
|
| |||||||
Containers – 0.6% | ||||||||
Ball Corp., 4%, 11/15/2023 | $ | 4,870,000 | $ | 4,796,950 | ||||
Ball Corp., 5%, 3/15/2022 | 1,385,000 | 1,470,178 | ||||||
Berry Plastics Corp., 5.125%, 7/15/2023 | 2,905,000 | 2,905,000 | ||||||
Sealed Air Corp., 5.125%, 12/01/2024 (n) | 6,910,000 | 7,091,388 | ||||||
|
| |||||||
$ | 16,263,516 | |||||||
|
| |||||||
Defense Electronics – 0.0% | ||||||||
BAE Systems Holdings, Inc., 6.375%, 6/01/2019 (n) | $ | 500,000 | $ | 562,057 | ||||
|
| |||||||
Emerging Market Sovereign – 0.3% | ||||||||
Republic of Argentina, 7.5%, 4/22/2026 (n) | $ | 6,332,000 | $ | 6,844,892 | ||||
|
| |||||||
Energy – Independent – 0.3% | ||||||||
Anadarko Petroleum Corp., 5.55%, 3/15/2026 | $ | 3,511,000 | $ | 3,877,127 | ||||
EQT Corp., 4.875%, 11/15/2021 | 3,718,000 | 3,953,431 | ||||||
|
| |||||||
$ | 7,830,558 | |||||||
|
| |||||||
Energy – Integrated – 0.3% | ||||||||
BP Capital Markets PLC, 2.237%, 5/10/2019 | $ | 6,940,000 | $ | 7,126,658 | ||||
|
| |||||||
Entertainment – 0.6% | ||||||||
Carnival Corp., 3.95%, 10/15/2020 | $ | 9,416,000 | $ | 10,157,350 | ||||
Six Flags Entertainment Corp., 5.25%, 1/15/2021 (n) | 3,710,000 | 3,825,938 | ||||||
|
| |||||||
$ | 13,983,288 | |||||||
|
| |||||||
Financial Institutions – 0.9% | ||||||||
International Lease Finance Corp., 7.125%, 9/01/2018 (n) | $ | 1,190,000 | $ | 1,306,549 | ||||
Nationstar Mortgage LLC/Capital Corp., 6.5%, 7/01/2021 | 8,810,000 | 7,532,550 | ||||||
Navient Corp., 8%, 3/25/2020 | 5,448,000 | 5,567,202 | ||||||
Navient Corp., 4.625%, 9/25/2017 | 7,121,000 | 7,174,408 | ||||||
|
| |||||||
$ | 21,580,709 | |||||||
|
|
6
Table of Contents
MFS Total Return Bond Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Food & Beverages – 2.6% | ||||||||
Anheuser-Busch InBev Finance, Inc., 2.65%, 2/01/2021 | $ | 8,068,000 | $ | 8,366,637 | ||||
Anheuser-Busch InBev Finance, Inc., 4.9%, 2/01/2046 | 10,273,000 | 12,038,333 | ||||||
Anheuser-Busch InBev Worldwide, Inc., 3.7%, 2/01/2024 | 2,400,000 | 2,585,042 | ||||||
J.M. Smucker Co., 3%, 3/15/2022 | 1,105,000 | 1,160,294 | ||||||
J.M. Smucker Co., 4.25%, 3/15/2035 | 1,628,000 | 1,767,441 | ||||||
Kraft Foods Group, Inc., 5%, 6/04/2042 | 7,063,000 | 8,120,416 | ||||||
Kraft Heinz Foods Co., 5.2%, 7/15/2045 (n) | 3,178,000 | 3,763,254 | ||||||
Kraft Heinz Foods Co., 3%, 6/01/2026 (n) | 2,783,000 | 2,805,759 | ||||||
Pernod Ricard S.A., 3.25%, 6/08/2026 (z) | 3,500,000 | 3,582,190 | ||||||
SABMiller Holdings, Inc., 3.75%, 1/15/2022 (n) | 4,992,000 | 5,352,627 | ||||||
Tyson Foods, Inc., 4.5%, 6/15/2022 | 6,476,000 | 7,214,834 | ||||||
Tyson Foods, Inc., 3.95%, 8/15/2024 | 2,294,000 | 2,476,247 | ||||||
Wm. Wrigley Jr. Co., 3.375%, 10/21/2020 (n) | 7,334,000 | 7,822,510 | ||||||
|
| |||||||
$ | 67,055,584 | |||||||
|
| |||||||
Food & Drug Stores – 0.9% | ||||||||
CVS Health Corp., 3.5%, 7/20/2022 | $ | 5,913,000 | $ | 6,366,462 | ||||
CVS Health Corp., 5.125%, 7/20/2045 | 5,294,000 | 6,567,609 | ||||||
Walgreens Boots Alliance, Inc., 3.3%, 11/18/2021 | 3,548,000 | 3,720,575 | ||||||
Walgreens Boots Alliance, Inc., 3.8%, 11/18/2024 | 5,813,000 | 6,158,769 | ||||||
|
| |||||||
$ | 22,813,415 | |||||||
|
| |||||||
Forest & Paper Products – 0.5% | ||||||||
Georgia-Pacific LLC, 5.4%, 11/01/2020 (n) | $ | 3,608,000 | $ | 4,086,468 | ||||
Georgia-Pacific LLC, 3.734%, 7/15/2023 (n) | 5,299,000 | 5,676,517 | ||||||
Packaging Corp. of America, 3.65%, 9/15/2024 | 3,490,000 | 3,604,863 | ||||||
|
| |||||||
$ | 13,367,848 | |||||||
|
| |||||||
Gaming & Lodging – 0.5% | ||||||||
GLP Capital LP/GLP Financing II, Inc., 5.375%, 11/01/2023 | $ | 4,350,000 | $ | 4,540,313 | ||||
Wyndham Worldwide Corp., 5.625%, 3/01/2021 | 1,732,000 | 1,933,681 | ||||||
Wyndham Worldwide Corp., 5.1%, 10/01/2025 | 1,155,000 | 1,255,009 | ||||||
Wyndham Worldwide Corp., 4.25%, 3/01/2022 | 4,662,000 | 4,945,422 | ||||||
|
| |||||||
$ | 12,674,425 | |||||||
|
| |||||||
Insurance – 1.7% | ||||||||
American International Group, Inc., 3.75%, 7/10/2025 | $ | 12,804,000 | $ | 13,049,901 | ||||
American International Group, Inc., 3.9%, 4/01/2026 | 5,113,000 | 5,269,110 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Insurance – continued | ||||||||
Five Corners Funding Trust, 4.419%, 11/15/2023 (n) | $ | 4,734,000 | $ | 5,109,098 | ||||
Pacific Lifecorp, 5.125%, 1/30/2043 (n) | 1,342,000 | 1,469,321 | ||||||
Principal Financial Group, Inc., 3.4%, 5/15/2025 | 8,266,000 | 8,463,863 | ||||||
Unum Group, 7.125%, 9/30/2016 | 2,028,000 | 2,054,581 | ||||||
Unum Group, 4%, 3/15/2024 | 6,546,000 | 6,758,758 | ||||||
|
| |||||||
$ | 42,174,632 | |||||||
|
| |||||||
Insurance – Health – 0.8% | ||||||||
Aetna, Inc., 2.4%, 6/15/2021 | $ | 2,904,000 | $ | 2,962,899 | ||||
Aetna, Inc., 4.375%, 6/15/2046 | 2,178,000 | 2,261,849 | ||||||
Humana, Inc., 7.2%, 6/15/2018 | 6,739,000 | 7,462,384 | ||||||
UnitedHealth Group, Inc., 3.35%, 7/15/2022 | 7,989,000 | 8,546,808 | ||||||
|
| |||||||
$ | 21,233,940 | |||||||
|
| |||||||
Insurance – Property & Casualty – 1.9% | ||||||||
Allied World Assurance, 5.5%, 11/15/2020 | $ | 2,640,000 | $ | 2,939,416 | ||||
Allied World Assurance Co. Holdings Ltd., 4.35%, 10/29/2025 | 6,835,000 | 6,993,722 | ||||||
CNA Financial Corp., 5.875%, 8/15/2020 | 3,280,000 | 3,697,029 | ||||||
Liberty Mutual Group, Inc., 4.85%, 8/01/2044 (n) | 3,359,000 | 3,438,692 | ||||||
Liberty Mutual Group, Inc., 4.25%, 6/15/2023 (n) | 10,306,000 | 10,947,415 | ||||||
Marsh & McLennan Cos., Inc., 4.05%, 10/15/2023 | 4,129,000 | 4,454,117 | ||||||
Marsh & McLennan Cos., Inc., 4.8%, 7/15/2021 | 7,863,000 | 8,719,281 | ||||||
Swiss Re Ltd., 4.25%, 12/06/2042 (n) | 926,000 | 978,232 | ||||||
ZFS Finance USA Trust V, 6.5% to 5/09/2017, FRN to 5/09/2067 (n) | 4,852,000 | 4,852,000 | ||||||
|
| |||||||
$ | 47,019,904 | |||||||
|
| |||||||
Local Authorities – 0.7% | ||||||||
Florida Hurricane Catastrophe Fund Finance Corp. Rev., “A”, 1.298%, 7/01/2016 | $ | 1,750,000 | $ | 1,750,053 | ||||
State of California (Build America Bonds), 7.625%, 3/01/2040 | 860,000 | 1,356,667 | ||||||
State of California (Build America Bonds), 7.6%, 11/01/2040 | 7,175,000 | 11,606,280 | ||||||
University of California Limited Project Rev., “J”, 4.131%, 5/15/2045 | 2,260,000 | 2,445,749 | ||||||
|
| |||||||
$ | 17,158,749 | |||||||
|
| |||||||
Major Banks – 6.5% | ||||||||
ABN AMRO Bank N.V., 4.8%, 4/18/2026 (n) | $ | 5,000,000 | $ | 5,205,885 | ||||
ABN AMRO Bank N.V., 4.25%, 2/02/2017 (n) | 5,664,000 | 5,762,157 | ||||||
Bank of America Corp., 5.625%, 7/01/2020 | 8,555,000 | 9,624,717 |
7
Table of Contents
MFS Total Return Bond Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Major Banks – continued | ||||||||
Bank of America Corp., 5.875%, 1/05/2021 | $ | 1,670,000 | $ | 1,915,774 | ||||
Bank of America Corp., 6.1%, 6/15/2017 | 1,725,000 | 1,798,676 | ||||||
Bank of America Corp., 4.125%, 1/22/2024 | 6,960,000 | 7,486,030 | ||||||
Bank of America Corp., 3.875%, 8/01/2025 | 7,955,000 | 8,438,752 | ||||||
Bank of America Corp., 4.45%, 3/03/2026 | 3,614,000 | 3,780,013 | ||||||
Bank of America Corp., FRN, 6.5%, 10/29/2049 | 4,004,000 | 4,264,260 | ||||||
Bank of America Corp., FRN, 6.1%, 12/29/2049 | 5,000,000 | 5,075,000 | ||||||
Credit Suisse Group AG, 6.5%, 8/08/2023 (n) | 1,899,000 | 1,985,405 | ||||||
Credit Suisse Group Fund Guernsey Ltd., 3.75%, 3/26/2025 | 3,355,000 | 3,283,720 | ||||||
DBS Bank Ltd., 3.625% to 9/21/2017, FRN to 9/21/2022 (n) | 4,108,000 | 4,199,366 | ||||||
Goldman Sachs Group, Inc., 2.375%, 1/22/2018 | 5,005,000 | 5,072,267 | ||||||
Goldman Sachs Group, Inc., 3.625%, 1/22/2023 | 11,855,000 | 12,435,397 | ||||||
Goldman Sachs Group, Inc., 5.15%, 5/22/2045 | 4,868,000 | 5,078,594 | ||||||
Huntington National Bank, 2.4%, 4/01/2020 | 1,087,000 | 1,103,273 | ||||||
JPMorgan Chase & Co., 2%, 8/15/2017 | 3,637,000 | 3,670,886 | ||||||
JPMorgan Chase & Co., 3.125%, 1/23/2025 | 374,000 | 382,351 | ||||||
JPMorgan Chase & Co., 4.25%, 10/15/2020 | 1,385,000 | 1,509,581 | ||||||
JPMorgan Chase & Co., 4.5%, 1/24/2022 | 947,000 | 1,053,864 | ||||||
Morgan Stanley, 5.75%, 10/18/2016 | 944,000 | 956,643 | ||||||
Morgan Stanley, 5.5%, 7/24/2020 | 1,600,000 | 1,795,384 | ||||||
Morgan Stanley, 5.95%, 12/28/2017 | 400,000 | 425,376 | ||||||
Morgan Stanley, 3.75%, 2/25/2023 | 8,585,000 | 9,093,017 | ||||||
Morgan Stanley, 3.7%, 10/23/2024 | 2,879,000 | 3,012,511 | ||||||
Morgan Stanley, 4.3%, 1/27/2045 | 1,528,000 | 1,608,290 | ||||||
Morgan Stanley, 5.5%, 7/28/2021 | 14,214,000 | 16,230,611 | ||||||
PNC Bank N.A., 3.8%, 7/25/2023 | 13,950,000 | 15,041,155 | ||||||
PNC Funding Corp., 5.625%, 2/01/2017 | 6,173,000 | 6,325,479 | ||||||
Regions Financial Corp., 2%, 5/15/2018 | 2,524,000 | 2,528,412 | ||||||
Royal Bank of Scotland Group PLC, 6%, 12/19/2023 | 7,121,000 | 7,235,876 | ||||||
Royal Bank of Scotland Group PLC, 7.5% to 8/10/2020, FRN to 12/29/2049 | 5,177,000 | 4,736,955 | ||||||
Royal Bank of Scotland Group PLC, 8% to 8/10/2025, FRN to 12/29/2049 | 1,662,000 | 1,549,815 | ||||||
Wachovia Corp., 6.605%, 10/01/2025 | 1,764,000 | 2,224,316 | ||||||
|
| |||||||
$ | 165,889,808 | |||||||
|
| |||||||
Medical & Health Technology & Services – 0.9% | ||||||||
Becton, Dickinson and Co., 4.685%, 12/15/2044 | $ | 4,733,000 | $ | 5,332,094 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Medical & Health Technology & Services – continued | ||||||||
Catholic Health Initiatives, 2.95%, 11/01/2022 | $ | 6,666,000 | $ | 6,821,751 | ||||
HCA, Inc., 5.25%, 6/15/2026 | 5,271,000 | 5,471,957 | ||||||
Laboratory Corp. of America Holdings, 4.7%, 2/01/2045 | 2,518,000 | 2,687,580 | ||||||
McKesson Corp., 5.7%, 3/01/2017 | 1,210,000 | 1,247,066 | ||||||
Thermo Fisher Scientific, Inc., 3%, 4/15/2023 | 1,817,000 | 1,854,924 | ||||||
|
| |||||||
$ | 23,415,372 | |||||||
|
| |||||||
Medical Equipment – 0.6% | ||||||||
Medtronic, Inc., 4.625%, 3/15/2045 | $ | 7,021,000 | $ | 8,255,931 | ||||
Zimmer Holdings, Inc., 2.7%, 4/01/2020 | 7,783,000 | 7,877,486 | ||||||
|
| |||||||
$ | 16,133,417 | |||||||
|
| |||||||
Metals & Mining – 1.4% | ||||||||
Barrick North America Finance LLC, 5.75%, 5/01/2043 | $ | 8,000,000 | $ | 8,687,072 | ||||
Freeport-McMoRan Copper & Gold, Inc., 3.875%, 3/15/2023 | 4,000,000 | 3,500,000 | ||||||
Freeport-McMoRan Copper & Gold, Inc., 5.4%, 11/14/2034 | 4,000,000 | 3,180,000 | ||||||
Freeport-McMoRan Oil & Gas LLC, 6.875%, 2/15/2023 | 8,679,000 | 8,375,235 | ||||||
Kinross Gold Corp., 5.95%, 3/15/2024 | 6,437,000 | 6,356,537 | ||||||
Steel Dynamics, Inc., 5.125%, 10/01/2021 | 5,864,000 | 6,003,270 | ||||||
|
| |||||||
$ | 36,102,114 | |||||||
|
| |||||||
Midstream – 1.6% | ||||||||
Energy Transfer Partners LP, 5.15%, 2/01/2043 | $ | 3,573,000 | $ | 3,193,615 | ||||
Energy Transfer Partners LP, 5.15%, 3/15/2045 | 2,596,000 | 2,358,972 | ||||||
Kinder Morgan (Delaware), Inc., 7.75%, 1/15/2032 | 6,550,000 | 7,373,721 | ||||||
Kinder Morgan Energy Partners LP, 7.4%, 3/15/2031 | 103,000 | 112,349 | ||||||
Kinder Morgan Energy Partners LP, 4.3%, 5/01/2024 | 5,995,000 | 6,046,497 | ||||||
Kinder Morgan Energy Partners LP, 5.4%, 9/01/2044 | 6,378,000 | 6,293,326 | ||||||
Kinder Morgan Energy Partners LP, 6.375%, 3/01/2041 | 2,240,000 | 2,335,552 | ||||||
Kinder Morgan, Inc., 5.625%, 11/15/2023 (n) | 3,000,000 | 3,213,375 | ||||||
Sabine Pass Liquefaction LLC, 5.625%, 2/01/2021 | 8,270,000 | 8,352,700 | ||||||
Spectra Energy Capital LLC, 8%, 10/01/2019 | 613,000 | 703,733 | ||||||
Sunoco Logistics Partners LP, 4.25%, 4/01/2024 | 1,108,000 | 1,119,226 | ||||||
|
| |||||||
$ | 41,103,066 | |||||||
|
|
8
Table of Contents
MFS Total Return Bond Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Mortgage-Backed – 22.4% | ||||||||
Fannie Mae, 3%, 10/01/2030 | $ | 3,223,577 | $ | 3,381,323 | ||||
Fannie Mae, 4%, 9/01/2040 – 7/01/2043 | 12,038,601 | 12,940,968 | ||||||
Fannie Mae, 5.05%, 1/01/2017 | 235,064 | 235,665 | ||||||
Fannie Mae, 5.6%, 1/01/2017 | 413 | 413 | ||||||
Fannie Mae, 5.54%, 4/01/2017 | 97,280 | 98,595 | ||||||
Fannie Mae, 5.48%, 6/01/2017 | 263,186 | 266,359 | ||||||
Fannie Mae, 5.65%, 6/01/2017 | 146,334 | 150,720 | ||||||
Fannie Mae, 2.71%, 11/01/2017 | 355,705 | 361,565 | ||||||
Fannie Mae, 5.5%, 11/01/2017 – 4/01/2040 | 19,448,313 | 22,005,090 | ||||||
Fannie Mae, 3.22%, 12/01/2017 | 481,867 | 492,729 | ||||||
Fannie Mae, 3.311%, 12/01/2017 | 818,659 | 832,415 | ||||||
Fannie Mae, 3.99%, 4/01/2018 | 600,000 | 624,082 | ||||||
Fannie Mae, 3.741%, 6/01/2018 | 2,545,582 | 2,638,066 | ||||||
Fannie Mae, 5.323%, 6/01/2018 | 373,313 | 395,540 | ||||||
Fannie Mae, 2.578%, 9/25/2018 | 4,314,980 | 4,427,390 | ||||||
Fannie Mae, 5.18%, 3/01/2019 | 120,724 | 129,575 | ||||||
Fannie Mae, 5.51%, 3/01/2019 | 181,354 | 200,126 | ||||||
Fannie Mae, 4.6%, 9/01/2019 | 713,168 | 778,720 | ||||||
Fannie Mae, 1.99%, 10/01/2019 | 2,614,396 | 2,648,557 | ||||||
Fannie Mae, 4.45%, 10/01/2019 | 498,983 | 544,961 | ||||||
Fannie Mae, 1.97%, 11/01/2019 | 1,026,883 | 1,051,918 | ||||||
Fannie Mae, 2.03%, 11/01/2019 | 1,281,737 | 1,315,400 | ||||||
Fannie Mae, 4.88%, 3/01/2020 | 17,073 | 18,252 | ||||||
Fannie Mae, 5%, 6/01/2020 – 3/01/2042 | 13,534,356 | 15,048,670 | ||||||
Fannie Mae, 5.19%, 9/01/2020 | 160,465 | 176,048 | ||||||
Fannie Mae, 3.416%, 10/01/2020 | 1,387,148 | 1,501,506 | ||||||
Fannie Mae, 2.14%, 5/01/2021 | 943,889 | 963,967 | ||||||
Fannie Mae, 3.89%, 7/01/2021 | 1,161,231 | 1,279,469 | ||||||
Fannie Mae, 2.56%, 10/01/2021 | 826,550 | 853,972 | ||||||
Fannie Mae, 2.64%, 11/01/2021 | 1,239,482 | 1,300,890 | ||||||
Fannie Mae, 2.75%, 3/01/2022 | 1,168,901 | 1,235,201 | ||||||
Fannie Mae, 6%, 8/01/2022 – 3/01/2039 | 4,248,359 | 4,868,108 | ||||||
Fannie Mae, 2.525%, 10/01/2022 | 1,867,309 | 1,954,131 | ||||||
Fannie Mae, 2.68%, 3/01/2023 | 1,792,272 | 1,893,616 | ||||||
Fannie Mae, 2.41%, 5/01/2023 | 2,087,522 | 2,169,360 | ||||||
Fannie Mae, 2.55%, 5/01/2023 | 1,071,440 | 1,122,333 | ||||||
Fannie Mae, 4.5%, 5/01/2024 – 6/01/2044 | 52,802,527 | 57,849,745 | ||||||
Fannie Mae, 4%, 3/01/2025 – 2/01/2045 | 83,454,353 | 89,660,153 | ||||||
Fannie Mae, 4.5%, 5/01/2025 | 121,998 | 130,634 | ||||||
Fannie Mae, 3.5%, 9/01/2025 – 8/01/2043 | 11,225,302 | 11,904,432 | ||||||
Fannie Mae, 3%, 3/01/2027 – 12/01/2030 | 9,614,675 | 10,098,659 | ||||||
Fannie Mae, 6.5%, 7/01/2032 – 1/01/2033 | 8,417 | 9,956 | ||||||
Fannie Mae, 3.5%, 4/01/2043 – 9/01/2043 | 8,160,896 | 8,627,751 | ||||||
Federal Home Loan Bank, 5%, 7/01/2035 | 3,519,861 | 3,919,853 | ||||||
Freddie Mac, 3.5%, 7/01/2042 | 5,192,453 | 5,484,574 | ||||||
Freddie Mac, 3%, 10/01/2042 | 317,986 | 330,419 | ||||||
Freddie Mac, 4%, 4/01/2044 – 9/01/2044 | 35,335,968 | 37,819,638 | ||||||
Freddie Mac, 3.154%, 2/25/2018 | 878,651 | 903,721 | ||||||
Freddie Mac, 5%, 7/01/2018 – 7/01/2041 | 5,064,229 | 5,648,886 | ||||||
Freddie Mac, 2.412%, 8/25/2018 | 2,289,230 | 2,346,345 | ||||||
Freddie Mac, 2.303%, 9/25/2018 | 8,971,000 | 9,198,985 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Mortgage-Backed – continued | ||||||||
Freddie Mac, 2.323%, 10/25/2018 | $ | 1,194,000 | $ | 1,225,795 | ||||
Freddie Mac, 2.22%, 12/25/2018 | 1,200,000 | 1,230,574 | ||||||
Freddie Mac, 2.13%, 1/25/2019 | 6,184,000 | 6,332,789 | ||||||
Freddie Mac, 2.086%, 3/25/2019 | 7,200,000 | 7,373,832 | ||||||
Freddie Mac, 5.5%, 6/01/2019 – 1/01/2038 | 746,076 | 840,888 | ||||||
Freddie Mac, 4.186%, 8/25/2019 | 1,110,000 | 1,203,532 | ||||||
Freddie Mac, 1.869%, 11/25/2019 | 6,121,000 | 6,243,313 | ||||||
Freddie Mac, 4.251%, 1/25/2020 | 807,000 | 885,080 | ||||||
Freddie Mac, 3.034%, 10/25/2020 | 2,606,000 | 2,774,632 | ||||||
Freddie Mac, 2.856%, 1/25/2021 | 5,331,000 | 5,661,327 | ||||||
Freddie Mac, 2.791%, 1/25/2022 | 4,439,000 | 4,700,917 | ||||||
Freddie Mac, 2.716%, 6/25/2022 | 1,478,636 | 1,563,180 | ||||||
Freddie Mac, 2.682%, 10/25/2022 | 3,049,000 | 3,224,079 | ||||||
Freddie Mac, 3.32%, 2/25/2023 | 3,956,000 | 4,337,983 | ||||||
Freddie Mac, 3.3%, 4/25/2023 | 6,099,972 | 6,688,286 | ||||||
Freddie Mac, 3.06%, 7/25/2023 | 4,230,000 | 4,575,694 | ||||||
Freddie Mac, 3.531%, 7/25/2023 | 2,401,000 | 2,666,205 | ||||||
Freddie Mac, 3.458%, 8/25/2023 | 7,000,000 | 7,737,211 | ||||||
Freddie Mac, 2.67%, 12/25/2024 | 2,784,000 | 2,925,503 | ||||||
Freddie Mac, 2.811%, 1/25/2025 | 4,169,000 | 4,423,212 | ||||||
Freddie Mac, 3.329%, 5/25/2025 | 6,457,000 | 7,114,412 | ||||||
Freddie Mac, 4%, 7/01/2025 – 9/01/2045 | 17,591,555 | 18,842,156 | ||||||
Freddie Mac, 4.5%, 7/01/2025 – 5/01/2042 | 11,050,991 | 12,106,885 | ||||||
Freddie Mac, 2.745%, 1/25/2026 | 3,620,000 | 3,807,316 | ||||||
Freddie Mac, 2.673%, 3/25/2026 | 4,000,000 | 4,188,714 | ||||||
Freddie Mac, 3.5%, 8/01/2026 – 12/01/2045 | 26,270,927 | 27,753,412 | ||||||
Freddie Mac, 3%, 11/01/2030 – 5/01/2043 | 7,289,868 | 7,660,724 | ||||||
Freddie Mac, 6%, 8/01/2034 – 7/01/2038 | 194,977 | 222,799 | ||||||
Ginnie Mae, 5.5%, 5/15/2033 – 1/20/2042 | 3,515,427 | 3,987,645 | ||||||
Ginnie Mae, 6%, 1/20/2036 – 1/15/2039 | 475,381 | 549,947 | ||||||
Ginnie Mae, 4.5%, 4/15/2039 – 9/20/2041 | 18,814,737 | 20,639,206 | ||||||
Ginnie Mae, 4%, 10/20/2040 – 10/20/2042 | 4,887,463 | 5,261,151 | ||||||
Ginnie Mae, 3.5%, 11/15/2040 – 12/20/2045 | 41,247,617 | 43,875,625 | ||||||
|
| |||||||
$ | 566,463,475 | |||||||
|
| |||||||
Network & Telecom – 0.8% | ||||||||
AT&T, Inc., 4.5%, 5/15/2035 | $ | 8,154,000 | $ | 8,341,485 | ||||
Frontier Communications Corp., 11%, 9/15/2025 | 2,970,000 | 3,073,950 | ||||||
Verizon Communications, Inc., 6.55%, 9/15/2043 | 6,804,000 | 9,167,614 | ||||||
|
| |||||||
$ | 20,583,049 | |||||||
|
| |||||||
Oil Services – 0.2% | ||||||||
Odebrecht Offshore Drilling Finance Ltd., 6.75%, 10/01/2022 (n) | $ | 5,709,227 | $ | 1,013,388 | ||||
Schlumberger Norge A.S., 1.25%, 8/01/2017 (n) | 5,189,000 | 5,186,390 | ||||||
|
| |||||||
$ | 6,199,778 | |||||||
|
|
9
Table of Contents
MFS Total Return Bond Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Oils – 0.3% | ||||||||
Marathon Petroleum Corp., 4.75%, 9/15/2044 | $ | 4,710,000 | $ | 4,016,344 | ||||
Valero Energy Corp., 4.9%, 3/15/2045 | 2,642,000 | 2,447,118 | ||||||
|
| |||||||
$ | 6,463,462 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 2.3% | ||||||||
Bank of Tokyo-Mitsubishi UFJ Ltd., 2.7%, 9/09/2018 (n) | $ | 5,269,000 | $ | 5,395,182 | ||||
BBVA Bancomer S.A. de C.V., 6.75%, 9/30/2022 (n) | 2,570,000 | 2,869,071 | ||||||
BPCE S.A., 4.5%, 3/15/2025 (n) | 5,771,000 | 5,768,155 | ||||||
Capital One Financial Corp., 6.15%, 9/01/2016 | 1,203,000 | 1,212,357 | ||||||
Citigroup, Inc., 4.4%, 6/10/2025 | 4,533,000 | 4,739,746 | ||||||
Citizens Bank N.A., 2.55%, 5/13/2021 | 1,575,000 | 1,590,208 | ||||||
Citizens Financial Group, Inc., 4.3%, 12/03/2025 | 1,860,000 | 1,957,745 | ||||||
Discover Bank, 7%, 4/15/2020 | 7,009,000 | 7,982,564 | ||||||
Discover Financial Services, 3.75%, 3/04/2025 | 670,000 | 674,980 | ||||||
Groupe BPCE S.A., 12.5% to 9/30/2019, FRN to 8/29/2049 (n) | 7,880,000 | 9,723,526 | ||||||
Intesa Sanpaolo S.p.A., 5.71%, 1/15/2026 (n) | 1,777,000 | 1,684,802 | ||||||
Macquarie Group Ltd., 3%, 12/03/2018 (n) | 350,000 | 359,455 | ||||||
Rabobank Nederland N.V., 3.95%, 11/09/2022 | 4,408,000 | 4,558,670 | ||||||
Santander UK PLC, 3.05%, 8/23/2018 | 2,885,000 | 2,953,196 | ||||||
U.S. Bank NA Cincinnati, 2.8%, 1/27/2025 | 2,136,000 | 2,224,296 | ||||||
UBS Group Funding (Jersey) Ltd., 4.125%, 9/24/2025 (n) | 4,836,000 | 5,012,746 | ||||||
|
| |||||||
$ | 58,706,699 | |||||||
|
| |||||||
Pharmaceuticals – 2.8% | ||||||||
AbbVie, Inc., 4.5%, 5/14/2035 | $ | 850,000 | $ | 888,388 | ||||
Actavis Funding SCS, 4.55%, 3/15/2035 | 2,232,000 | 2,293,873 | ||||||
Actavis Funding SCS, 3%, 3/12/2020 | 4,494,000 | 4,634,792 | ||||||
Bayer U.S. Finance LLC, 3.375%, 10/08/2024 (n) | 2,779,000 | 2,888,759 | ||||||
Biogen, Inc., 5.2%, 9/15/2045 | 4,888,000 | 5,496,766 | ||||||
Celgene Corp., 1.9%, 8/15/2017 | 5,062,000 | 5,100,795 | ||||||
Celgene Corp., 2.875%, 8/15/2020 | 13,158,000 | 13,607,083 | ||||||
Endo Finance LLC/Endo Finco, Inc., 6%, 7/15/2023 (n) | 2,970,000 | 2,598,750 | ||||||
Forest Laboratories, Inc., 4.875%, 2/15/2021 (n) | 18,926,000 | 21,006,535 | ||||||
Gilead Sciences, Inc., 4.8%, 4/01/2044 | 6,643,000 | 7,473,568 | ||||||
Gilead Sciences, Inc., 2.35%, 2/01/2020 | 817,000 | 838,088 | ||||||
Gilead Sciences, Inc., 4.75%, 3/01/2046 | 3,545,000 | 4,031,030 | ||||||
|
| |||||||
$ | 70,858,427 | |||||||
|
| |||||||
Precious Metals & Minerals – 0.0% | ||||||||
Teck Resources Ltd., 6%, 8/15/2040 | $ | 826,000 | $ | 578,200 | ||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Real Estate – Apartment – 0.1% | ||||||||
Mid-America Apartment Communities, Inc., REIT, 4.3%, 10/15/2023 | $ | 2,417,000 | $ | 2,599,520 | ||||
|
| |||||||
Real Estate – Healthcare – 0.3% | ||||||||
HCP, Inc., REIT, 3.875%, 8/15/2024 | $ | 5,515,000 | $ | 5,545,592 | ||||
HCP, Inc., REIT, 5.375%, 2/01/2021 | 1,134,000 | 1,260,636 | ||||||
|
| |||||||
$ | 6,806,228 | |||||||
|
| |||||||
Real Estate – Office – 0.4% | ||||||||
Boston Properties LP, REIT, 3.8%, 2/01/2024 | $ | 3,803,000 | $ | 4,082,585 | ||||
Boston Properties LP, REIT, 3.7%, 11/15/2018 | 5,395,000 | 5,648,257 | ||||||
|
| |||||||
$ | 9,730,842 | |||||||
|
| |||||||
Real Estate – Other – 0.0% | ||||||||
Liberty Property LP, REIT, 5.5%, 12/15/2016 | $ | 1,013,000 | $ | 1,032,352 | ||||
|
| |||||||
Real Estate – Retail – 0.7% | ||||||||
Brixmor Operating Partnership LP, REIT, 3.875%, 8/15/2022 | $ | 4,811,000 | $ | 4,937,717 | ||||
DDR Corp., REIT, 3.375%, 5/15/2023 | 6,575,000 | 6,545,261 | ||||||
DDR Corp., REIT, 4.625%, 7/15/2022 | 2,365,000 | 2,557,400 | ||||||
Simon Property Group, Inc., REIT, 10.35%, 4/01/2019 | 3,213,000 | 3,913,640 | ||||||
|
| |||||||
$ | 17,954,018 | |||||||
|
| |||||||
Restaurants – 0.2% | ||||||||
McDonald’s Corp., 3.7%, 1/30/2026 | $ | 3,642,000 | $ | 3,934,977 | ||||
YUM! Brands, Inc., 5.35%, 11/01/2043 | 988,000 | 795,340 | ||||||
|
| |||||||
$ | 4,730,317 | |||||||
|
| |||||||
Retailers – 0.6% | ||||||||
Bed Bath & Beyond, Inc., 5.165%, 8/01/2044 | $ | 7,156,000 | $ | 6,305,059 | ||||
Gap, Inc., 5.95%, 4/12/2021 | 4,975,000 | 5,188,776 | ||||||
Home Depot, Inc., 2.625%, 6/01/2022 | 2,280,000 | 2,386,109 | ||||||
|
| |||||||
$ | 13,879,944 | |||||||
|
| |||||||
Supermarkets – 0.1% | ||||||||
Kroger Co., 3.85%, 8/01/2023 | $ | 2,248,000 | $ | 2,467,034 | ||||
|
| |||||||
Telecommunications – Wireless – 0.7% | ||||||||
American Tower Corp., REIT, 5%, 2/15/2024 | $ | 7,009,000 | $ | 7,927,193 | ||||
Crown Castle International Corp., 3.7%, 6/15/2026 | 2,419,000 | 2,495,660 | ||||||
Crown Castle Towers LLC, 4.883%, 8/15/2020 (n) | 952,000 | 1,037,807 | ||||||
Numericable Group S.A., 6%, 5/15/2022 (n) | 2,970,000 | 2,888,325 | ||||||
SBA Tower Trust, 2.898%, 10/15/2044 (n) | 4,229,000 | 4,287,720 | ||||||
|
| |||||||
$ | 18,636,705 | |||||||
|
| |||||||
Tobacco – 1.1% | ||||||||
Imperial Tobacco Finance PLC, 3.75%, 7/21/2022 (n) | $ | 7,775,000 | $ | 8,204,934 |
10
Table of Contents
MFS Total Return Bond Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Tobacco – continued | ||||||||
Reynolds American, Inc., 5.85%, 8/15/2045 | $ | 624,000 | $ | 797,304 | ||||
Reynolds American, Inc., 4%, 6/12/2022 | 8,396,000 | 9,124,664 | ||||||
Reynolds American, Inc., 4.45%, 6/12/2025 | 4,148,000 | 4,645,503 | ||||||
Reynolds American, Inc., 8.125%, 6/23/2019 | 3,344,000 | 3,964,653 | ||||||
|
| |||||||
$ | 26,737,058 | |||||||
|
| |||||||
Transportation – Services – 0.3% | ||||||||
ERAC USA Finance LLC, 7%, 10/15/2037 (n) | $ | 2,690,000 | $ | 3,664,786 | ||||
ERAC USA Finance LLC, 3.85%, 11/15/2024 (n) | 1,612,000 | 1,732,795 | ||||||
Navios Maritime Holding, Inc., 7.375%, 1/15/2022 (n) | 7,405,000 | 3,295,225 | ||||||
|
| |||||||
$ | 8,692,806 | |||||||
|
| |||||||
U.S. Government Agencies and Equivalents – 2.3% | ||||||||
National Credit Union Administration Guaranteed Note, 2.9%, 10/29/2020 | $ | 39,539 | $ | 39,557 | ||||
Small Business Administration, 4.99%, 9/01/2024 | 23,479 | 25,494 | ||||||
Small Business Administration, 4.86%, 1/01/2025 | 55,698 | 59,710 | ||||||
Small Business Administration, 4.625%, 2/01/2025 | 60,078 | 64,751 | ||||||
Small Business Administration, 5.11%, 4/01/2025 | 37,545 | 41,050 | ||||||
Small Business Administration, 4.43%, 5/01/2029 | 594,210 | 651,768 | ||||||
Small Business Administration, 3.21%, 9/01/2030 | 5,853,388 | 6,200,246 | ||||||
Small Business Administration, 4.93%, 1/01/2024 | 20,812 | 22,547 | ||||||
Small Business Administration, 4.34%, 3/01/2024 | 33,721 | 35,694 | ||||||
Small Business Administration, 2.37%, 8/01/2032 | 1,045,965 | 1,067,961 | ||||||
Small Business Administration, 2.13%, 1/01/2033 | 3,938,583 | 3,993,288 | ||||||
Small Business Administration, 2.21%, 2/01/2033 | 974,039 | 988,263 | ||||||
Small Business Administration, 2.22%, 3/01/2033 | 3,593,051 | 3,663,467 | ||||||
Small Business Administration, 2.08%, 4/01/2033 | 5,234,792 | 5,293,360 | ||||||
Small Business Administration, 2.45%, 6/01/2033 | 6,423,689 | 6,581,688 | ||||||
Small Business Administration, 3.15%, 7/01/2033 | 8,990,269 | 9,531,660 | ||||||
Small Business Administration, 3.16%, 8/01/2033 | 9,132,835 | 9,656,318 | ||||||
Small Business Administration, 3.62%, 9/01/2033 | 8,528,574 | 9,318,353 | ||||||
Small Business Administration, 3.25%, 11/01/2030 | 554,998 | 590,571 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
U.S. Government Agencies and Equivalents – continued | ||||||||
Small Business Administration, 2.85%, 9/01/2031 | $ | 1,234,273 | $ | 1,291,213 | ||||
|
| |||||||
$ | 59,116,959 | |||||||
|
| |||||||
U.S. Treasury Obligations – 11.4% | ||||||||
U.S. Treasury Bonds, 4.5%, 2/15/2036 | $ | 12,590,000 | $ | 18,134,523 | ||||
U.S. Treasury Bonds, 4.75%, 2/15/2037 | 1,576,000 | 2,344,423 | ||||||
U.S. Treasury Bonds, 4.375%, 2/15/2038 | 17,377,000 | 24,771,730 | ||||||
U.S. Treasury Bonds, 4.5%, 8/15/2039 | 4,597,600 | 6,646,406 | ||||||
U.S. Treasury Bonds, 3.125%, 11/15/2041 | 500,000 | 590,449 | ||||||
U.S. Treasury Bonds, 3.125%, 2/15/2042 | 1,300,000 | 1,536,133 | ||||||
U.S. Treasury Bonds, 2.875%, 5/15/2043 | 44,925,200 | 50,518,028 | ||||||
U.S. Treasury Notes, 0.75%, 6/30/2017 (f) | 61,517,000 | 61,658,797 | ||||||
U.S. Treasury Notes, 0.75%, 12/31/2017 | 3,000,000 | 3,007,851 | ||||||
U.S. Treasury Notes, 2.875%, 3/31/2018 | 2,000,000 | 2,078,984 | ||||||
U.S. Treasury Notes, 2.625%, 4/30/2018 | 1,600,000 | 1,659,125 | ||||||
U.S. Treasury Notes, 1.5%, 8/31/2018 | 13,955,000 | 14,218,289 | ||||||
U.S. Treasury Notes, 1.625%, 6/30/2019 | 78,562,000 | 80,658,034 | ||||||
U.S. Treasury Notes, 1%, 8/31/2019 | 5,600,000 | 5,643,092 | ||||||
U.S. Treasury Notes, 3.375%, 11/15/2019 | 1,800,000 | 1,955,884 | ||||||
U.S. Treasury Notes, 3.625%, 2/15/2020 | 4,200,000 | 4,621,642 | ||||||
U.S. Treasury Notes, 3%, 11/15/2045 | 7,735,000 | 8,894,043 | ||||||
|
| |||||||
$ | 288,937,433 | |||||||
|
| |||||||
Utilities – Electric Power – 3.0% | ||||||||
Berkshire Hathaway Energy Co., 5.15%, 11/15/2043 | $ | 6,436,000 | $ | 7,800,619 | ||||
CMS Energy Corp., 6.25%, 2/01/2020 | 1,925,000 | 2,216,022 | ||||||
CMS Energy Corp., 5.05%, 3/15/2022 | 5,272,000 | 6,027,156 | ||||||
Constellation Energy Group, Inc., 5.15%, 12/01/2020 | 2,487,000 | 2,767,849 | ||||||
Dominion Resources, Inc., 3.625%, 12/01/2024 | 6,901,000 | 7,258,451 | ||||||
Dominion Resources, Inc., 3.9%, 10/01/2025 | 2,048,000 | 2,193,906 | ||||||
EDP Finance B.V., 5.25%, 1/14/2021 (n) | 7,774,000 | 8,240,440 | ||||||
EDP Finance B.V., 4.9%, 10/01/2019 (n) | 2,743,000 | 2,913,560 | ||||||
Enel Finance International S.A., 6.25%, 9/15/2017 (n) | 3,623,000 | 3,827,312 | ||||||
Exelon Corp., 4.45%, 4/15/2046 | 2,510,000 | 2,679,686 | ||||||
Exelon Generation Co. LLC, 4.25%, 6/15/2022 | 6,123,000 | 6,530,547 | ||||||
PPL Capital Funding, Inc., 5%, 3/15/2044 | 3,429,000 | 3,836,801 | ||||||
PPL Corp., 3.5%, 12/01/2022 | 1,050,000 | 1,105,102 | ||||||
PPL WEM Holdings PLC, 5.375%, 5/01/2021 (n) | 8,842,000 | 9,845,381 | ||||||
Southern Co., 2.35%, 7/01/2021 | 7,039,000 | 7,178,752 | ||||||
Southern Co., 4.4%, 7/01/2046 | 2,328,000 | 2,502,421 | ||||||
Waterford 3 Funding Corp., 8.09%, 1/02/2017 | 31,771 | 31,772 | ||||||
|
| |||||||
$ | 76,955,777 | |||||||
|
| |||||||
Total Bonds (Identified Cost, $2,420,036,000) | $ | 2,487,090,073 | ||||||
|
|
11
Table of Contents
MFS Total Return Bond Series
Portfolio of Investments (unaudited) – continued
Strike Price | First Exercise | Shares/Par | Value ($) | |||||||||||||
WARRANTS – 0.0% | ||||||||||||||||
Medical & Health Technology & Services – 0.0% | ||||||||||||||||
HealthSouth Corp. (1share for 1 warrant) (Identified Cost, $0) | $ | 41.40 | 1/04/16 | 62 | $ | 105 | ||||||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||||||
MONEY MARKET FUNDS – 1.9% | ||||||||||||
MFS Institutional Money Market Portfolio, 0.36%, at Cost and Net Asset Value (v) | 47,260,863 | $ | 47,260,863 | |||||||||
|
| |||||||||||
Total Investments (Identified Cost, $2,467,296,863) | $ | 2,534,351,041 | ||||||||||
|
| |||||||||||
OTHER ASSETS, LESS LIABILITIES – 0.0% | 636,921 | |||||||||||
|
| |||||||||||
NET ASSETS – 100.0% | $ | 2,534,987,962 | ||||||||||
|
|
(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 $386,579,891 representing 15.2% 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. |
(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 | |||||||
Ballyrock Ltd., 1.816%, 5/20/2025 | 5/10/16 | $3,243,218 | $3,226,930 | |||||||
Bayview Commercial Asset Trust, FRN, 0%, 4/25/2036 | 2/28/06 | 20,922 | 855 | |||||||
Bayview Commercial Asset Trust, FRN, 0%, 7/25/2036 | 5/16/06 | 12,823 | 0 | |||||||
Bayview Commercial Asset Trust, FRN, 0%, 10/25/2036 | 9/11/06 | 43,210 | 0 | |||||||
Bayview Commercial Asset Trust, FRN, 0%, 12/25/2036 | 10/25/06 | 106,562 | 0 | |||||||
Bayview Commercial Asset Trust, FRN, 0%, 3/25/2037 | 1/26/07 | 9,544 | 0 | |||||||
Bayview Financial Revolving Mortgage Loan Trust, FRN, 2.037%, 12/28/2040 | 3/01/06 | 122,711 | 88,507 | |||||||
Commercial Mortgage Asset Trust, FRN, 0.645%, 1/17/2032 | 4/09/12 | 1,477 | 879 | |||||||
Falcon Franchise Loan LLC, FRN, 99.9%, 1/05/2025 | 1/29/03 | 120 | 310 | |||||||
First Union National Bank Commercial Mortgage Trust, FRN, 1.734%, 1/12/2043 | 4/09/12 | 3 | 283 | |||||||
Galaxy CLO Ltd., 3.226%, 11/16/2025 | 6/22/16 | 5,118,262 | 5,002,640 | |||||||
Hertz Fleet Lease Funding LP, 2014-1, FRN, 0.845%, 4/10/2028 | 3/25/14 | 3,437,101 | 3,427,924 | |||||||
Pernod Ricard S.A., 3.25%, 6/08/2026 | 6/01/16 | 3,480,575 | 3,582,190 | |||||||
Preferred Term Securities XIX Ltd., CDO, FRN, 1.002%, 12/22/2035 | 3/28/11 | 223,164 | 226,589 | |||||||
SES S.A., 5.3%, 4/04/2043 | 1/08/14 | 3,181,021 | 3,143,270 | |||||||
Total Restricted Securities | $18,700,377 | |||||||||
% of Net assets | 0.7% |
The following abbreviations are used in this report and are defined:
CDO | Collateralized Debt Obligation |
CLO | Collateralized Loan Obligation |
FRN | Floating Rate Note. Interest rate resets periodically and the current rate may not be the rate reported at period end. |
PLC | Public Limited Company |
REIT | Real Estate Investment Trust |
12
Table of Contents
MFS Total Return Bond Series
Portfolio of Investments (unaudited) – continued
Derivative Contracts at 3/31/16
Futures Contracts at 3/31/16
Description | Currency | Contracts | Value | Expiration Date | Unrealized Appreciation (Depreciation) | |||||||||||||
Asset Derivatives | ||||||||||||||||||
Interest Rate Futures | ||||||||||||||||||
U.S. Ultra Bond (Long) | USD | 85 | $15,841,875 | September - 2016 | $996,441 | |||||||||||||
Liability Derivatives | ||||||||||||||||||
Interest Rate Futures | ||||||||||||||||||
U.S. Treasury Note 10 yr (Short) | USD | 225 | $29,921,484 | September - 2016 | $(812,926 | ) |
At June 30, 2016, the fund had liquid securities with an aggregate value of $189,437 to cover any commitments for certain derivative contracts.
See Notes to Financial Statements
13
Table of Contents
MFS Total Return 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 6/30/16 | ||||||||
Assets | ||||||||
Investments | ||||||||
Non-affiliated issuers, at value (identified cost, $2,420,036,000) | $2,487,090,178 | |||||||
Underlying affiliated funds, at cost and value | 47,260,863 | |||||||
Total investments, at value (identified cost, $2,467,296,863) | $2,534,351,041 | |||||||
Cash | 94,212 | |||||||
Receivables for | ||||||||
Fund shares sold | 1,632,646 | |||||||
Interest | 19,050,397 | |||||||
Other assets | 5,999 | |||||||
Total assets | $2,555,134,295 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Daily variation margin on open futures contracts | $59,454 | |||||||
Investments purchased | 14,538,738 | |||||||
Fund shares reacquired | 5,157,086 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 70,531 | |||||||
Shareholder servicing costs | 218 | |||||||
Distribution and/or service fees | 20,837 | |||||||
Payable for independent Trustees’ compensation | 63 | |||||||
Accrued expenses and other liabilities | 299,406 | |||||||
Total liabilities | $20,146,333 | |||||||
Net assets | $2,534,987,962 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $2,374,403,096 | |||||||
Unrealized appreciation (depreciation) on investments | 67,237,692 | |||||||
Accumulated net realized gain (loss) on investments | (25,765,598 | ) | ||||||
Undistributed net investment income | 119,112,772 | |||||||
Net assets | $2,534,987,962 | |||||||
Shares of beneficial interest outstanding | 186,596,111 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $1,009,006,270 | 73,458,895 | $13.74 | |||||||||
Service Class | 1,525,981,692 | 113,137,216 | 13.49 |
See Notes to Financial Statements
14
Table of Contents
MFS Total Return 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 6/30/16 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Interest | $44,507,300 | |||||||
Dividends from underlying affiliated funds | 64,779 | |||||||
Total investment income | $44,572,079 | |||||||
Expenses | ||||||||
Management fee | $6,314,674 | |||||||
Distribution and/or service fees | 1,889,846 | |||||||
Shareholder servicing costs | 34,367 | |||||||
Administrative services fee | 206,454 | |||||||
Independent Trustees’ compensation | 24,618 | |||||||
Custodian fee | 71,281 | |||||||
Shareholder communications | 72,189 | |||||||
Audit and tax fees | 36,821 | |||||||
Legal fees | 11,830 | |||||||
Miscellaneous | 36,628 | |||||||
Total expenses | $8,698,708 | |||||||
Reduction of expenses by investment adviser | (100,362 | ) | ||||||
Net expenses | $8,598,346 | |||||||
Net investment income | $35,973,733 | |||||||
Realized and unrealized gain (loss) on investments | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $(5,949,961 | ) | ||||||
Futures contracts | 3,048,147 | |||||||
Net realized gain (loss) on investments | $(2,901,814 | ) | ||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $104,471,294 | |||||||
Futures contracts | (16,813 | ) | ||||||
Net unrealized gain (loss) on investments | $104,454,481 | |||||||
Net realized and unrealized gain (loss) on investments | $101,552,667 | |||||||
Change in net assets from operations | $137,526,400 |
See Notes to Financial Statements
15
Table of Contents
MFS Total Return 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 6/30/16 (unaudited | ) | | Year ended 12/31/15 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $35,973,733 | $75,603,283 | ||||||
Net realized gain (loss) on investments | (2,901,814 | ) | 12,384,525 | |||||
Net unrealized gain (loss) on investments | 104,454,481 | (97,154,043 | ) | |||||
Change in net assets from operations | $137,526,400 | $(9,166,235 | ) | |||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(91,851,876 | ) | |||||
Change in net assets from fund share transactions | $(172,295,496 | ) | $(353,129,539 | ) | ||||
Total change in net assets | $(34,769,096 | ) | $(454,147,650 | ) | ||||
Net assets | ||||||||
At beginning of period | 2,569,757,058 | 3,023,904,708 | ||||||
At end of period (including undistributed net investment income of $119,112,772 and | $2,534,987,962 | $2,569,757,058 |
See Notes to Financial Statements
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FINANCIAL STATEMENTS | FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund’s financial performance for the semiannual period and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
Initial Class | Six months ended 6/30/16 | Years ended 12/31 | ||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $13.00 | $13.50 | $13.13 | $13.49 | $13.01 | $12.66 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.20 | $0.38 | $0.37 | $0.35 | $0.37 | $0.44 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.54 | (0.42 | ) | 0.40 | (0.49 | ) | 0.57 | 0.41 | ||||||||||||||||
Total from investment operations | $0.74 | $(0.04 | ) | $0.77 | $(0.14 | ) | $0.94 | $0.85 | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.46 | ) | $(0.40 | ) | $(0.16 | ) | $(0.37 | ) | $(0.35 | ) | |||||||||||||
From net realized gain on investments | — | — | — | (0.06 | ) | (0.09 | ) | (0.15 | ) | |||||||||||||||
Total distributions declared to shareholders | $— | $(0.46 | ) | $(0.40 | ) | $(0.22 | ) | $(0.46 | ) | $(0.50 | ) | |||||||||||||
Net asset value, end of period (x) | $13.74 | $13.00 | $13.50 | $13.13 | $13.49 | $13.01 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 5.69 | (n) | (0.30 | ) | 5.85 | (1.03 | ) | 7.35 | 6.75 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.54 | (a) | 0.54 | 0.53 | 0.54 | 0.56 | 0.57 | |||||||||||||||||
Expenses after expense reductions (f) | 0.53 | (a) | 0.53 | 0.52 | 0.53 | 0.56 | 0.57 | |||||||||||||||||
Net investment income | 3.00 | (a) | 2.83 | 2.74 | 2.65 | 2.76 | 3.41 | |||||||||||||||||
Portfolio turnover | 15 | (n) | 62 | 58 | 68 | 114 | 60 | |||||||||||||||||
Net assets at end of period (000 omitted) | $1,009,006 | $1,030,563 | $1,172,957 | $1,208,132 | $850,417 | $367,398 | ||||||||||||||||||
Supplemental Ratios (%): | ||||||||||||||||||||||||
Service Class | Six months ended 6/30/16 | Years ended 12/31 | ||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $12.78 | $13.28 | $12.92 | $13.30 | $12.85 | $12.53 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.18 | $0.34 | $0.33 | $0.31 | $0.33 | $0.40 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.53 | (0.41 | ) | 0.39 | (0.48 | ) | 0.57 | 0.41 | ||||||||||||||||
Total from investment operations | $0.71 | $(0.07 | ) | $0.72 | $(0.17 | ) | $0.90 | $0.81 | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.43 | ) | $(0.36 | ) | $(0.15 | ) | $(0.36 | ) | $(0.34 | ) | |||||||||||||
From net realized gain on investments | — | — | — | (0.06 | ) | (0.09 | ) | (0.15 | ) | |||||||||||||||
Total distributions declared to shareholders | $— | $(0.43 | ) | $(0.36 | ) | $(0.21 | ) | $(0.45 | ) | $(0.49 | ) | |||||||||||||
Net asset value, end of period (x) | $13.49 | $12.78 | $13.28 | $12.92 | $13.30 | $12.85 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 5.56 | (n) | (0.58 | ) | 5.62 | (1.29 | ) | 7.06 | 6.48 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.79 | (a) | 0.79 | 0.78 | 0.79 | 0.81 | 0.82 | |||||||||||||||||
Expenses after expense reductions (f) | 0.78 | (a) | 0.78 | 0.77 | 0.78 | 0.81 | 0.82 | |||||||||||||||||
Net investment income | 2.75 | (a) | 2.58 | 2.48 | 2.39 | 2.48 | 3.13 | |||||||||||||||||
Portfolio turnover | 15 | (n) | 62 | 58 | 68 | 114 | 60 | |||||||||||||||||
Net assets at end of period (000 omitted) | $1,525,982 | $1,539,194 | $1,850,948 | $1,836,589 | $1,646,291 | $406,273 | ||||||||||||||||||
Supplemental Ratios (%): |
See Notes to Financial Statements
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MFS Total Return 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 and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
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NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) | Business and Organization |
MFS Total Return Bond Series (the fund) is a diversified 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.
The fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued. The fund invests 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.
Balance Sheet Offsetting – The fund’s accounting policy with respect to balance sheet offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the International Swaps and Derivatives Association (ISDA) Master Agreement does not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty. The fund’s right to setoff may be restricted or prohibited by the bankruptcy or insolvency laws of the particular jurisdiction to which a specific master netting agreement counterparty is subject. Balance sheet offsetting disclosures, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
Investment Valuations – Debt instruments and floating rate loans, including restricted debt instruments, are generally valued at an evaluated or composite bid as provided by a third-party pricing service. Short-term instruments with a maturity at issuance of 60 days or less may be valued at amortized cost, which approximates market value. Futures contracts are generally valued at last posted settlement price on their primary exchange as provided by a third-party pricing service. Futures contracts for which there were no trades that day for a particular position are generally valued at the closing bid quotation on their primary exchange as provided by a third-party pricing service. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. Values obtained from third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
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Notes to Financial Statements (unaudited) – continued
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. Other financial instruments are derivative instruments not reflected in total investments, such as futures contracts. The following is a summary of the levels used as of June 30, 2016 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities | $105 | $— | $— | $105 | ||||||||||||
U.S. Treasury Bonds & U.S. Government Agency & Equivalents | — | 348,054,392 | — | 348,054,392 | ||||||||||||
Non-U.S. Sovereign Debt | — | 6,844,892 | — | 6,844,892 | ||||||||||||
U.S. Corporate Bonds | — | 982,164,134 | — | 982,164,134 | ||||||||||||
Residential Mortgage-Backed Securities | — | 571,704,066 | — | 571,704,066 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 261,249,674 | — | 261,249,674 | ||||||||||||
Asset-Backed Securities (including CDOs) | — | 142,405,118 | — | 142,405,118 | ||||||||||||
Foreign Bonds | — | 174,667,797 | — | 174,667,797 | ||||||||||||
Mutual Funds | 47,260,863 | — | — | 47,260,863 | ||||||||||||
Total Investments | $47,260,968 | $2,487,090,073 | $— | $2,534,351,041 | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Futures Contracts | $183,515 | $— | $— | $183,515 |
For further information regarding security characteristics, see the Portfolio of Investments.
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. 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, 2016 as reported in the Statement of Assets and Liabilities:
Fair Value (a) | ||||||||||
Risk | Derivative Contracts | Asset Derivatives | Liability Derivatives | |||||||
Interest Rate | Interest Rate Futures | $996,441 | $(812,926 | ) |
(a) | The value of futures contracts includes cumulative appreciation (depreciation) as reported in the fund’s Portfolio of Investments. Only the current day net variation margin for futures contracts is separately reported within the fund’s Statement of Assets and Liabilities. |
The following table presents, by major type of derivative contract, the realized gain (loss) on derivatives held by the fund for the six months ended June 30, 2016 as reported in the Statement of Operations:
Risk | Futures Contracts | |||
Interest Rate | $3,048,147 |
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, 2016 as reported in the Statement of Operations:
Risk | Futures Contracts | |||
Interest Rate | $(16,813 | ) |
Derivative counterparty credit risk is managed through formal evaluation of the creditworthiness of all potential counterparties. On certain, but not all, uncleared derivatives, the fund attempts to reduce its exposure to counterparty credit risk whenever possible by entering into an ISDA Master Agreement on a bilateral basis. The ISDA Master Agreement gives each party to the agreement the
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Notes to Financial Statements (unaudited) – continued
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 clearing broker and the clearing house for cleared derivatives (e.g., futures contracts, cleared swaps, and exchange-traded options) while collateral terms are contract specific for uncleared derivatives (e.g., forward foreign currency exchange contracts, uncleared swap agreements, and uncleared options). For derivatives traded under an ISDA Master Agreement, which contains a collateral support annex, the collateral requirements are netted across all transactions traded under such 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” or “Deposits with brokers.” Securities pledged as collateral or margin for the same purpose, if any, are noted in the Portfolio of Investments.
Futures Contracts – The fund entered into futures contracts which may be used to hedge against or obtain broad market exposure, interest rate exposure, currency exposure, or to manage duration. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date.
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.
Dollar Roll Transactions – The fund enters into dollar roll transactions, with respect to mortgage-backed securities issued by Ginnie Mae, Fannie Mae, and Freddie Mac, in which the fund sells mortgage-backed securities to financial institutions and simultaneously agrees to purchase similar (same issuer, type and coupon) securities at a later date at an agreed-upon price. During the period between the sale and repurchase in a dollar roll transaction the fund will not be entitled to receive interest and principal payments on the securities sold but is compensated by interest earned on the proceeds of the initial sale and by a lower purchase price on the securities to be repurchased which enhances the fund’s total return. The fund accounts for dollar roll transactions as purchases and sales and realizes gains and losses on these transactions.
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. 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.
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 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 that value 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.
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Notes to Financial Statements (unaudited) – continued
The fund purchased or sold debt securities on a when-issued or delayed delivery basis, or in a “To Be Announced” (TBA) or “forward commitment” transaction with delivery or payment to occur at a later date beyond the normal settlement period. At the time a fund enters into a commitment to purchase or sell a security, the transaction is recorded and the value of the security acquired is reflected in the fund’s net asset value. The price of such security and the date that the security will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the security may vary with market fluctuations. No interest accrues to the fund until payment takes place. At the time that a fund enters into this type of transaction, the fund is required to have sufficient cash and/or liquid securities to cover its commitments. Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract’s terms, or if the issuer does not issue the securities due to political, economic or other factors. Additionally, losses may arise due to declines in the value of the securities prior to settlement date.
To mitigate this risk of loss on TBA securities and other types of forward settling mortgage-backed securities, the fund whenever possible enters into a Master Securities Forward Transaction Agreement (“MSFTA”) on a bilateral basis with each of the counterparties with whom it undertakes a significant volume of transactions. The MSFTA gives each party to the agreement the right to terminate all transactions traded under such agreement if there is a certain deterioration in the credit quality of the other party. Upon an event of default or a termination of the MSFTA, the non-defaulting party has the right to close out all transactions traded under such agreement and to net amounts owed under each transaction to one net amount payable by one party to the other. This right to close out and net payments across all transactions traded under the MSFTA could result in a reduction of the fund’s credit risk to such counterparty equal to any amounts payable by the fund under the applicable transactions, if any.
For mortgage-backed securities traded under a MSFTA, the collateral and margining requirements are contract specific. Collateral amounts across all transactions traded under such agreement are netted and one amount is posted from one party to the other to collateralize such obligations. Cash that has been pledged to cover the fund’s collateral or margin obligations under a MSFTA, if any, will be reported separately on the Statement of Assets and Liabilities as restricted cash. Securities pledged as collateral or margin for the same purpose, if any, are noted in the Portfolio of Investments.
Fees Paid Indirectly – Prior to October 1, 2015, the fund’s custody fee could be reduced by a credit earned under an arrangement that measured the value of U.S. dollars deposited with the custodian by the fund. For the six months ended June 30, 2016, 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. Management has analyzed the fund’s tax positions taken on federal and state tax returns for all open tax years and does not believe that there are any uncertain tax positions that require recognition of a tax liability. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests. Additionally, capital gains realized by the fund on securities issued in or by certain foreign countries may be subject to capital gains tax imposed by those countries.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to amortization and accretion of debt securities and straddle loss deferrals.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/15 | ||||
Ordinary income (including any short-term capital gains) | $91,851,876 |
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Notes to Financial Statements (unaudited) – continued
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/16 | ||||
Cost of investments | $2,483,355,196 | |||
Gross appreciation | 87,969,545 | |||
Gross depreciation | (36,973,700 | ) | ||
Net unrealized appreciation (depreciation) | $50,995,845 | |||
As of 12/31/15 | ||||
Undistributed ordinary income | 83,142,553 | |||
Capital loss carryforwards | (4,698,182 | ) | ||
Other temporary differences | (1,903,063 | ) | ||
Net unrealized appreciation (depreciation) | (53,482,842 | ) |
The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.
As of December 31, 2015, the fund had capital loss carryforwards available to offset future realized gains. These net capital losses may be carried forward indefinitely and their character is retained as short-term and/or long-term losses. Such losses are characterized as follows:
Long-Term | $(4,698,182 | ) |
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 6/30/16 | Year ended 12/31/15 | |||||||
Initial Class | $— | $36,954,369 | ||||||
Service Class | — | 54,897,507 | ||||||
Total | $— | $91,851,876 |
(3) | Transactions with Affiliates |
Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at an annual rate of 0.50% of the fund’s average daily net assets.
The investment adviser has agreed in writing to reduce its management fee to 0.45% of average daily net assets in excess of $2.5 billion to $5 billion and 0.40% of average daily net assets in excess of $5 billion. This written agreement will terminate on April 27, 2017. For the six months ended June 30, 2016, this management fee reduction amounted to $9,883, which is included in the reduction of total expenses in the Statement of Operations. MFS has also 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 six months ended June 30, 2016, this management fee reduction amounted to $90,479, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the six months ended June 30, 2016 was equivalent to an annual effective rate of 0.49% of the fund’s average daily net assets.
Effective April 28, 2017, the management fee will be computed daily and paid monthly at the following annual rates:
First $2.5 billion of average daily net assets | 0.50% | |||
Next $2.5 billion of average daily net assets | 0.45% | |||
Average daily net assets in excess of $5 billion | 0.40% |
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
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MFS Total Return Bond Series
Notes to Financial Statements (unaudited) – continued
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, 2016, the fee was $33,460, which equated to 0.0026% 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, 2016, these costs amounted to $907.
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the six months ended June 30, 2016 was equivalent to an annual effective rate of 0.0163% of the fund’s average daily net assets.
Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – This fund and certain other funds managed by MFS (the funds) have entered into a service agreement (the ISO Agreement) which provides for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino serves as the ISO and is an officer of the funds and the sole member of Tarantino LLC. The funds can terminate the ISO Agreement with Tarantino LLC at any time under the terms of the ISO Agreement. For the six months ended June 30, 2016, the fee paid by the fund under this agreement was $2,520 and is included in “Miscellaneous” expense in the Statement of Operations. MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.
The fund 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 |
For the six months ended June 30, 2016, purchases and sales of investments, other than short-term obligations, were as follows:
Purchases | Sales | |||||||
U.S. Government securities | $211,254,501 | $275,711,206 | ||||||
Investments (non-U.S. Government securities) | $160,909,574 | $219,917,706 |
(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 6/30/16 | Year ended 12/31/15 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 1,520,808 | $20,248,954 | 5,588,697 | $74,620,310 | ||||||||||||
Service Class | 3,567,665 | 47,189,876 | 7,064,169 | 93,720,716 | ||||||||||||
5,088,473 | $67,438,830 | 12,652,866 | $168,341,026 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 2,774,684 | $36,237,371 | ||||||||||||
Service Class | — | — | 4,272,180 | 54,897,507 | ||||||||||||
— | $— | 7,046,864 | $91,134,878 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (7,324,351 | ) | $(97,799,288 | ) | (15,970,027 | ) | $(214,101,491 | ) | ||||||||
Service Class | (10,837,638 | ) | (141,935,038 | ) | (30,309,856 | ) | (398,503,952 | ) | ||||||||
(18,161,989 | ) | $(239,734,326 | ) | (46,279,883 | ) | $(612,605,443 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (5,803,543 | ) | $(77,550,334 | ) | (7,606,646 | ) | $(103,243,810 | ) | ||||||||
Service Class | (7,269,973 | ) | (94,745,162 | ) | (18,973,507 | ) | (249,885,729 | ) | ||||||||
(13,073,516 | ) | $(172,295,496 | ) | (26,580,153 | ) | $(353,129,539 | ) |
24
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MFS Total Return Bond Series
Notes to Financial Statements (unaudited) – continued
The fund is one of several mutual funds in which certain MFS funds may invest. The MFS funds do not invest in the underlying funds for the purpose of exercising management or control. At the end of the period, the MFS Moderate Allocation Portfolio, the MFS Conservative Allocation Portfolio, and the MFS Growth Allocation Portfolio were the owners of record of approximately 9%, 5%, and 1%, respectively, of the value of outstanding voting shares of the fund.
(6) | Line of Credit |
The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Overnight Federal Reserve funds rate or daily one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Overnight Federal Reserve funds rate plus an agreed upon spread. For the six months ended June 30, 2016, the fund’s commitment fee and interest expense were $6,762 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 | 86,235,675 | 316,366,769 | (355,341,581 | ) | 47,260,863 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $64,779 | $47,260,863 |
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MFS Total Return Bond Series
PROXY VOTING POLICIES AND INFORMATION
MFS votes proxies on behalf of the fund pursuant to proxy voting policies and procedures that are available without charge, upon request, by calling 1-800-225-2606, by visiting mfs.com (once you have selected “Individual Investor” as your role, click on “Individual Investor Home” in the top navigation and then select “Learn More About Proxy Voting” under the “I want to…” header on the left hand column of the page), or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available by August 31 of each year without charge by visiting mfs.com (once you have selected “Individual Investor” as your role, click on “Individual Investor Home” in the top navigation and then select “Learn More About Proxy Voting” under the “I want to…” header on the left hand column of the page), 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 on mfs.com by following these steps once you have selected “Individual Investor” as your role: (1) Click on the “Individual Investor Home” in the top navigation and then select the “Announcements” option within the “Market Outlooks” drop down, or (2) Click on “Products & Services” and “Variable Insurance Portfolios” and then select the fund’s name.
INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS
The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, 529 program manager (if applicable), and custodian who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.
Under the Trust’s By-Laws and Declaration of Trust, any claims asserted against or on behalf of the MFS Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of Massachusetts.
26
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SEMIANNUAL REPORT
June 30, 2016
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 • MAY LOSE VALUE • NO BANK OR CREDIT UNION GUARANTEE • NOT A DEPOSIT • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
Table of Contents
MFS Research Series
Dear Contract Owners:
Global headwinds continue to restrain growth and profits, though developed market equities have remained resilient, underpinned by record-low interest rates. Rates are likely to stay low over the medium term, as many central banks have implemented accommodative monetary policies in an effort to reinvigorate their economies. Markets will have to deal with an additional headwind in the coming months and years as investors grapple with the fallout from the United Kingdom’s decision to leave the European Union. That process will take a considerable period of time to play out against a highly uncertain backdrop. Weakness in the pound sterling in the wake of the referendum has been a welcome shock absorber for UK financial markets.
Emerging markets have been beneficiaries of firmer commodity prices and diminishing fears of sharply higher interest rates from the U.S. Federal Reserve. China remains a source of concern for investors, as overcapacity in its manufacturing sector inhibits the government’s attempt to change its domestic economy from one driven by exports to a consumer-driven model.
At MFS®, we believe it is best to view markets through a long lens and not react to short-term swings. That makes it possible to filter out market noise and focus on long-term fundamentals.
In our view, the professional guidance of a financial advisor, along with a patient, long-term approach, will help you reach your investment objectives.
Respectfully,
Robert J. Manning
Chairman
MFS Investment Management
August 15, 2016
The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.
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MFS Research Series
Portfolio structure
Top ten holdings | ||||
Danaher Corp. | 2.5% | |||
Visa, Inc., “A” | 2.3% | |||
Alphabet, Inc., “A” | 2.1% | |||
JPMorgan Chase & Co. | 2.0% | |||
Procter & Gamble Co. | 1.8% | |||
Amazon.com, Inc. | 1.8% | |||
Medtronic PLC | 1.7% | |||
Facebook, Inc., “A” | 1.6% | |||
Apple, Inc. | 1.5% | |||
Store Capital Corp., REIT | 1.5% |
Global equity sectors | ||||
Technology | 18.3% | |||
Financial Services | 15.7% | |||
Health Care | 14.1% | |||
Capital Goods | 13.7% | |||
Consumer Cyclicals | 13.7% | |||
Energy | 10.8% | |||
Consumer Staples | 8.7% | |||
Telecommunications/Cable Television (s) | 4.2% |
(s) | Includes securities sold short. |
Cash & Cash Equivalents includes any cash, investments in money market funds, short-term securities, and other assets less liabilities. Please see the Statement of Assets and Liabilities for additional information related to the fund’s cash position and other assets and liabilities.
Percentages are based on net assets as of 6/30/16.
The portfolio is actively managed and current holdings may be different.
2
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MFS Research Series
Fund Expenses Borne by the Contract Holders during the Period,
January 1, 2016 through June 30, 2016
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, 2016 through June 30, 2016.
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 1/01/16 | Ending Account Value | Expenses Paid During Period (p) 1/01/16-6/30/16 | ||||||||||||||
Initial Class | Actual | 0.81% | $1,000.00 | $1,037.11 | $4.10 | |||||||||||||
Hypothetical (h) | 0.81% | $1,000.00 | $1,020.84 | $4.07 | ||||||||||||||
Service Class | Actual | 1.06% | $1,000.00 | $1,035.96 | $5.37 | |||||||||||||
Hypothetical (h) | 1.06% | $1,000.00 | $1,019.59 | $5.32 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
Notes to Expense Table
Expense ratios include 0.01% of investment related expenses from short sales (as described in Note 2 of the Notes to Financial Statements).
Changes to the fund’s fee arrangements will occur during the fund’s current fiscal year. Had these fee changes been in effect during the six-month period, the annualized expense ratios, the actual expenses paid during the period and the hypothetical expenses paid during the period would have been approximately 0.80%, $4.05 and $4.02 for Initial Class and 1.05%, $5.32 and $5.27 for Service Class, respectively. For further information about the fund’s fee arrangements and changes to those fee arrangements, please see Note 3 in the Notes to Financial Statements.
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MFS Research Series
PORTFOLIO OF INVESTMENTS – 6/30/16 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 99.1% | ||||||||
Aerospace – 3.8% | ||||||||
Honeywell International, Inc. | 57,919 | $ | 6,737,137 | |||||
Northrop Grumman Corp. | 25,032 | 5,564,113 | ||||||
Orbital ATK, Inc. | 31,963 | 2,721,330 | ||||||
Rockwell Collins, Inc. | 28,781 | 2,450,414 | ||||||
United Technologies Corp. | 56,517 | 5,795,818 | ||||||
|
| |||||||
$ | 23,268,812 | |||||||
|
| |||||||
Alcoholic Beverages – 1.1% | ||||||||
Constellation Brands, Inc., “A” | 27,655 | $ | 4,574,137 | |||||
Molson Coors Brewing Co. | 24,551 | 2,482,843 | ||||||
|
| |||||||
$ | 7,056,980 | |||||||
|
| |||||||
Apparel Manufacturers – 1.9% | ||||||||
Hanesbrands, Inc. | 117,784 | $ | 2,959,912 | |||||
NIKE, Inc., “B” | 107,835 | 5,952,492 | ||||||
PVH Corp. | 29,362 | 2,766,781 | ||||||
|
| |||||||
$ | 11,679,185 | |||||||
|
| |||||||
Automotive – 0.3% | ||||||||
Harley-Davidson, Inc. | 40,706 | $ | 1,843,982 | |||||
|
| |||||||
Biotechnology – 1.7% | ||||||||
Alexion Pharmaceuticals, Inc. (a) | 34,065 | $ | 3,977,429 | |||||
Celgene Corp. (a) | 66,603 | 6,569,054 | ||||||
|
| |||||||
$ | 10,546,483 | |||||||
|
| |||||||
Broadcasting – 1.9% | ||||||||
Nielsen Holdings PLC | 63,680 | $ | 3,309,450 | |||||
Time Warner, Inc. | 68,506 | 5,037,931 | ||||||
Twenty-First Century Fox, Inc. | 135,231 | 3,657,999 | ||||||
|
| |||||||
$ | 12,005,380 | |||||||
|
| |||||||
Brokerage & Asset Managers – 1.9% | ||||||||
Blackstone Group LP | 59,871 | $ | 1,469,234 | |||||
Charles Schwab Corp. | 164,294 | 4,158,281 | ||||||
NASDAQ, Inc. | 91,344 | 5,907,216 | ||||||
|
| |||||||
$ | 11,534,731 | |||||||
|
| |||||||
Business Services – 4.2% | ||||||||
Accenture PLC, “A” | 42,536 | $ | 4,818,903 | |||||
Cognizant Technology Solutions Corp., “A” (a) | 81,782 | 4,681,202 | ||||||
Equifax, Inc. | 24,737 | 3,176,231 | ||||||
Fidelity National Information Services, Inc. | 62,802 | 4,627,251 | ||||||
Fiserv, Inc. (a) | 28,980 | 3,150,995 | ||||||
Gartner, Inc. (a) | 26,731 | 2,603,867 | ||||||
Global Payments, Inc. | 45,947 | 3,279,697 | ||||||
|
| |||||||
$ | 26,338,146 | |||||||
|
| |||||||
Cable TV – 1.6% | ||||||||
Charter Communications, Inc., “A” (a) | 32,097 | $ | 7,338,658 | |||||
Comcast Corp., “A” | 38,887 | 2,535,044 | ||||||
|
| |||||||
$ | 9,873,702 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Chemicals – 1.9% | ||||||||
E.I. du Pont de Nemours & Co. | 64,466 | $ | 4,177,397 | |||||
Monsanto Co. | 38,706 | 4,002,587 | ||||||
PPG Industries, Inc. | 37,136 | 3,867,714 | ||||||
|
| |||||||
$ | 12,047,698 | |||||||
|
| |||||||
Computer Software – 3.1% | ||||||||
Adobe Systems, Inc. (a) | 50,973 | $ | 4,882,704 | |||||
Akamai Technologies, Inc. (a) | 51,619 | 2,887,051 | ||||||
Microsoft Corp. | 48,007 | 2,456,518 | ||||||
Sabre Corp. | 104,430 | 2,797,680 | ||||||
Salesforce.com, Inc. (a) | 81,639 | 6,482,953 | ||||||
|
| |||||||
$ | 19,506,906 | |||||||
|
| |||||||
Computer Software – Systems – 2.8% | ||||||||
Apple, Inc. (s) | 98,961 | $ | 9,460,672 | |||||
Constellation Software, Inc. | 6,194 | 2,397,200 | ||||||
Hewlett Packard Enterprise | 307,012 | 5,609,109 | ||||||
|
| |||||||
$ | 17,466,981 | |||||||
|
| |||||||
Construction – 0.7% | ||||||||
Sherwin-Williams Co. | 15,417 | $ | 4,527,510 | |||||
|
| |||||||
Consumer Products – 3.0% | ||||||||
Estee Lauder Cos., Inc., “A” | 35,565 | $ | 3,237,126 | |||||
Newell Brands, Inc. | 77,682 | 3,773,015 | ||||||
Procter & Gamble Co. | 135,058 | 11,435,361 | ||||||
|
| |||||||
$ | 18,445,502 | |||||||
|
| |||||||
Consumer Services – 0.9% | ||||||||
Priceline Group, Inc. (a) | 4,247 | $ | 5,301,997 | |||||
|
| |||||||
Containers – 0.5% | ||||||||
Berry Plastics Group, Inc. (a) | 77,033 | $ | 2,992,732 | |||||
|
| |||||||
Electrical Equipment – 3.6% | ||||||||
Danaher Corp. | 152,257 | $ | 15,377,957 | |||||
Tyco International PLC | 96,225 | 4,099,185 | ||||||
W.W. Grainger, Inc. | 12,760 | 2,899,710 | ||||||
|
| |||||||
$ | 22,376,852 | |||||||
|
| |||||||
Electronics – 1.1% | ||||||||
Broadcom Corp. | 44,576 | $ | 6,927,110 | |||||
|
| |||||||
Energy – Independent – 4.0% | ||||||||
EOG Resources, Inc. | 100,518 | $ | 8,385,212 | |||||
EQT Corp. | 36,234 | 2,805,599 | ||||||
Memorial Resource Development Corp. (a) | 255,437 | 4,056,340 | ||||||
Noble Energy, Inc. | 74,719 | 2,680,171 | ||||||
Pioneer Natural Resources Co. | 21,342 | 3,227,124 | ||||||
Valero Energy Corp. | 75,850 | 3,868,350 | ||||||
|
| |||||||
$ | 25,022,796 | |||||||
|
| |||||||
Energy – Integrated – 1.3% | ||||||||
Exxon Mobil Corp. (s) | 87,653 | $ | 8,216,592 | |||||
|
|
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MFS Research Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Food & Beverages – 2.6% | ||||||||
Archer Daniels Midland Co. | 58,784 | $ | 2,521,246 | |||||
J.M. Smucker Co. | 31,166 | 4,750,010 | ||||||
Mead Johnson Nutrition Co., “A” | 40,404 | 3,666,663 | ||||||
Mondelez International, Inc. | 115,336 | 5,248,941 | ||||||
|
| |||||||
$ | 16,186,860 | |||||||
|
| |||||||
Food & Drug Stores – 1.1% | ||||||||
CVS Health Corp. | 69,833 | $ | 6,685,811 | |||||
|
| |||||||
General Merchandise – 2.5% | ||||||||
Costco Wholesale Corp. | 39,221 | $ | 6,159,266 | |||||
Dollar Tree, Inc. (a) | 52,364 | 4,934,783 | ||||||
Target Corp. | 65,161 | 4,549,541 | ||||||
|
| |||||||
$ | 15,643,590 | |||||||
|
| |||||||
Health Maintenance Organizations – 1.5% | ||||||||
Cigna Corp. | 14,600 | $ | 1,868,654 | |||||
UnitedHealth Group, Inc. | 52,586 | 7,425,143 | ||||||
|
| |||||||
$ | 9,293,797 | |||||||
|
| |||||||
Insurance – 2.9% | ||||||||
American International Group, Inc. | 86,353 | $ | 4,567,210 | |||||
Aon PLC | 78,391 | 8,562,649 | ||||||
Chubb Ltd. | 38,000 | 4,966,980 | ||||||
|
| |||||||
$ | 18,096,839 | |||||||
|
| |||||||
Internet – 5.7% | ||||||||
Alibaba Group Holding Ltd., ADR (a) | 31,889 | $ | 2,536,132 | |||||
Alphabet, Inc., “A” (a) | 18,963 | 13,341,039 | ||||||
Alphabet, Inc., “C” (a) | 8,304 | 5,747,198 | ||||||
Facebook, Inc., “A” (a) | 86,889 | 9,929,675 | ||||||
LinkedIn Corp., “A” (a) | 18,511 | 3,503,207 | ||||||
|
| |||||||
$ | 35,057,251 | |||||||
|
| |||||||
Machinery & Tools – 1.0% | ||||||||
Roper Technologies, Inc. | 37,643 | $ | 6,420,390 | |||||
|
| |||||||
Major Banks – 3.9% | ||||||||
Goldman Sachs Group, Inc. | 36,917 | $ | 5,485,128 | |||||
JPMorgan Chase & Co. (s) | 198,779 | 12,352,127 | ||||||
PNC Financial Services Group, Inc. | 77,844 | 6,335,723 | ||||||
|
| |||||||
$ | 24,172,978 | |||||||
|
| |||||||
Medical & Health Technology & Services – 1.1% | ||||||||
McKesson Corp. | 21,470 | $ | 4,007,376 | |||||
VCA, Inc. (a) | 45,013 | 3,043,329 | ||||||
|
| |||||||
$ | 7,050,705 | |||||||
|
| |||||||
Medical Equipment – 5.0% | ||||||||
Cooper Cos., Inc. | 5,537 | $ | 949,983 | |||||
Medtronic PLC | 118,322 | 10,266,800 | ||||||
PerkinElmer, Inc. | 52,792 | 2,767,357 | ||||||
Steris PLC | 30,509 | 2,097,494 | ||||||
Stryker Corp. | 56,510 | 6,771,593 | ||||||
VWR Corp. (a) | 125,255 | 3,619,870 | ||||||
Zimmer Biomet Holdings, Inc. | 35,777 | 4,306,835 | ||||||
|
| |||||||
$ | 30,779,932 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Natural Gas – Distribution – 0.7% | ||||||||
Sempra Energy | 38,842 | $ | 4,428,765 | |||||
|
| |||||||
Natural Gas – Pipeline – 0.5% | ||||||||
Enterprise Products Partners LP | 115,129 | $ | 3,368,675 | |||||
|
| |||||||
Network & Telecom – 1.4% | ||||||||
Cisco Systems, Inc. | 301,869 | $ | 8,660,622 | |||||
|
| |||||||
Oil Services – 1.2% | ||||||||
Halliburton Co. | 108,892 | $ | 4,931,719 | |||||
Schlumberger Ltd. | 33,697 | 2,664,759 | ||||||
|
| |||||||
$ | 7,596,478 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 4.8% | ||||||||
Discover Financial Services | 69,075 | $ | 3,701,729 | |||||
U.S. Bancorp | 219,643 | 8,858,202 | ||||||
Visa, Inc., “A” | 188,532 | 13,983,418 | ||||||
Wintrust Financial Corp. | 63,433 | 3,235,083 | ||||||
|
| |||||||
$ | 29,778,432 | |||||||
|
| |||||||
Pharmaceuticals – 4.8% | ||||||||
Allergan PLC (a) | 27,232 | $ | 6,293,043 | |||||
Bristol-Myers Squibb Co. | 44,305 | 3,258,633 | ||||||
Eli Lilly & Co. | 105,550 | 8,312,063 | ||||||
Merck & Co., Inc. | 148,937 | 8,580,261 | ||||||
Zoetis, Inc. | 70,062 | 3,325,143 | ||||||
|
| |||||||
$ | 29,769,143 | |||||||
|
| |||||||
Railroad & Shipping – 1.5% | ||||||||
Canadian Pacific Railway Ltd. | 17,009 | $ | 2,190,589 | |||||
Union Pacific Corp. | 78,586 | 6,856,629 | ||||||
|
| |||||||
$ | 9,047,218 | |||||||
|
| |||||||
Real Estate – 2.3% | ||||||||
Store Capital Corp., REIT | 305,884 | $ | 9,008,284 | |||||
Tanger Factory Outlet Centers, Inc., REIT | 124,176 | 4,989,392 | ||||||
|
| |||||||
$ | 13,997,676 | |||||||
|
| |||||||
Restaurants – 1.4% | ||||||||
Aramark | 122,541 | $ | 4,095,320 | |||||
YUM! Brands, Inc. | 54,741 | 4,539,124 | ||||||
|
| |||||||
$ | 8,634,444 | |||||||
|
| |||||||
Specialty Chemicals – 0.5% | ||||||||
Albemarle Corp. | 36,817 | $ | 2,919,956 | |||||
|
| |||||||
Specialty Stores – 4.0% | ||||||||
Amazon.com, Inc. (a) | 15,966 | $ | 11,425,589 | |||||
AutoZone, Inc. (a) | 5,210 | 4,135,906 | ||||||
Lululemon Athletica, Inc. (a) | 37,471 | 2,767,608 | ||||||
Ross Stores, Inc. | 71,541 | 4,055,659 | ||||||
Urban Outfitters, Inc. (a) | 97,605 | 2,684,138 | ||||||
|
| |||||||
$ | 25,068,900 | |||||||
|
| |||||||
Telecommunications – Wireless – 1.2% | ||||||||
SBA Communications Corp. (a) | 68,512 | $ | 7,395,185 | |||||
|
| |||||||
Telephone Services – 1.3% | ||||||||
Verizon Communications, Inc. | 143,251 | $ | 7,999,136 | |||||
|
|
5
Table of Contents
MFS Research Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Tobacco – 2.0% | ||||||||
Philip Morris International, Inc. | 73,782 | $ | 7,505,105 | |||||
Reynolds American, Inc. | 85,538 | 4,613,064 | ||||||
|
| |||||||
$ | 12,118,169 | |||||||
|
| |||||||
Utilities – Electric Power – 2.9% | ||||||||
American Electric Power Co., Inc. | 48,389 | $ | 3,391,585 | |||||
CMS Energy Corp. | 123,464 | 5,662,059 | ||||||
NextEra Energy, Inc. | 45,888 | 5,983,795 | ||||||
Xcel Energy, Inc. | 70,144 | 3,141,048 | ||||||
|
| |||||||
$ | 18,178,487 | |||||||
|
| |||||||
Total Common Stocks (Identified Cost, $485,856,394) | $ | 615,329,516 | ||||||
|
| |||||||
CONVERTIBLE PREFERRED STOCKS – 0.3% | ||||||||
Telephone Services – 0.3% | ||||||||
Frontier Communications Corp., 11.13% (Identified Cost, $2,350,824) | 23,254 | $ | 2,204,944 | |||||
|
| |||||||
MONEY MARKET FUNDS – 0.9% | ||||||||
MFS Institutional Money Market Portfolio, 0.36%, at Cost and Net Asset Value (v) | 5,659,545 | $ | 5,659,545 | |||||
|
| |||||||
Total Investments (Identified Cost, $493,866,763) | $ | 623,194,005 | ||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
SECURITIES SOLD SHORT – (0.2)% | ||||||||
Telecommunications – Wireless – (0.2)% | ||||||||
Crown Castle International Corp., REIT (Proceeds Received, $1,070,031) | (13,028 | ) | $ | (1,321,430 | ) | |||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – (0.1)% | (737,815 | ) | ||||||
|
| |||||||
NET ASSETS – 100.0% | $ | 621,134,760 | ||||||
|
|
(a) | Non-income producing security. |
(s) | Security or a portion of the security was pledged to cover collateral requirements for securities sold short. |
(v) | Underlying affiliated fund that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end. |
At June 30, 2016, the fund had cash collateral of $19,894 and other liquid securities with an aggregate value of $2,562,079 to cover any commitments for securities sold short. 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:
ADR | American Depositary Receipt |
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 6/30/16 | ||||||||
Assets | ||||||||
Investments | ||||||||
Non-affiliated issuers, at value (identified cost, $488,207,218) | $617,534,460 | |||||||
Underlying affiliated funds, at cost and value | 5,659,545 | |||||||
Total investments, at value (identified cost, $493,866,763) | $623,194,005 | |||||||
Deposits with brokers | 19,894 | |||||||
Receivables for | ||||||||
Investments sold | 2,371,894 | |||||||
Fund shares sold | 126,770 | |||||||
Interest and dividends | 596,759 | |||||||
Other assets | 1,691 | |||||||
Total assets | $626,311,013 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Securities sold short, at value (proceeds received, $1,070,031) | $1,321,430 | |||||||
Investments purchased | 2,464,678 | |||||||
Fund shares reacquired | 1,219,567 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 25,362 | |||||||
Shareholder servicing costs | 163 | |||||||
Distribution and/or service fees | 2,973 | |||||||
Payable for independent Trustees’ compensation | 25 | |||||||
Accrued expenses and other liabilities | 142,055 | |||||||
Total liabilities | $5,176,253 | |||||||
Net assets | $621,134,760 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $406,679,569 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 129,075,805 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | 78,563,528 | |||||||
Undistributed net investment income | 6,815,858 | |||||||
Net assets | $621,134,760 | |||||||
Shares of beneficial interest outstanding | 22,533,648 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $399,657,427 | 14,442,524 | $27.67 | |||||||||
Service Class | 221,477,333 | 8,091,124 | 27.37 |
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 6/30/16 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $5,163,747 | |||||||
Interest | 27,592 | |||||||
Dividends from underlying affiliated funds | 6,037 | |||||||
Foreign taxes withheld | (6,825 | ) | ||||||
Total investment income | $5,190,551 | |||||||
Expenses | ||||||||
Management fee | $2,286,482 | |||||||
Distribution and/or service fees | 271,494 | |||||||
Shareholder servicing costs | 20,608 | |||||||
Administrative services fee | 53,440 | |||||||
Independent Trustees’ compensation | 9,080 | |||||||
Custodian fee | 28,706 | |||||||
Shareholder communications | 31,488 | |||||||
Audit and tax fees | 27,768 | |||||||
Legal fees | 2,901 | |||||||
Dividend and interest expense on securities sold short | 28,813 | |||||||
Miscellaneous | 14,870 | |||||||
Total expenses | $2,775,650 | |||||||
Reduction of expenses by investment adviser | (21,818 | ) | ||||||
Net expenses | $2,753,832 | |||||||
Net investment income | $2,436,719 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $17,740,149 | |||||||
Foreign currency | (290 | ) | ||||||
Net realized gain (loss) on investments and foreign currency | $17,739,859 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $2,084,102 | |||||||
Securities sold short | (195,159 | ) | ||||||
Translation of assets and liabilities in foreign currencies | (43 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $1,888,900 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $19,628,759 | |||||||
Change in net assets from operations | $22,065,478 |
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 6/30/16 (unaudited |
) |
| Year ended 12/31/15 |
| |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $2,436,719 | $4,379,370 | ||||||
Net realized gain (loss) on investments and foreign currency | 17,739,859 | 61,605,974 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 1,888,900 | (59,348,655 | ) | |||||
Change in net assets from operations | $22,065,478 | $6,636,689 | ||||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(4,312,083 | ) | |||||
From net realized gain on investments | — | (51,371,520 | ) | |||||
Total distributions declared to shareholders | $— | $(55,683,603 | ) | |||||
Change in net assets from fund share transactions | $(37,813,276 | ) | $(42,383,780 | ) | ||||
Total change in net assets | $(15,747,798 | ) | $(91,430,694 | ) | ||||
Net assets | ||||||||
At beginning of period | 636,882,558 | 728,313,252 | ||||||
At end of period (including undistributed net investment income of $6,815,858 and | $621,134,760 | $636,882,558 |
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 ended 6/30/16 | Years ended 12/31 | ||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $26.68 | $29.11 | $28.74 | $21.84 | $18.78 | $19.04 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.12 | $0.21 | $0.19 | $0.20 | $0.22 | $0.15 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 0.87 | (0.17 | )(g) | 2.68 | 6.84 | 3.01 | (0.24 | ) | ||||||||||||||||
Total from investment operations | $0.99 | $0.04 | $2.87 | $7.04 | $3.23 | $(0.09 | ) | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.22 | ) | $(0.25 | ) | $(0.08 | ) | $(0.17 | ) | $(0.17 | ) | |||||||||||||
From net realized gain on investments | — | (2.25 | ) | (2.25 | ) | (0.06 | ) | — | — | |||||||||||||||
Total distributions declared to shareholders | $— | $(2.47 | ) | $(2.50 | ) | $(0.14 | ) | $(0.17 | ) | $(0.17 | ) | |||||||||||||
Net asset value, end of period (x) | $27.67 | $26.68 | $29.11 | $28.74 | $21.84 | $18.78 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 3.71 | (n) | 0.80 | 10.20 | 32.35 | 17.22 | (0.45 | ) | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.82 | (a) | 0.82 | 0.80 | 0.81 | 0.88 | 0.88 | |||||||||||||||||
Expenses after expense reductions (f) | 0.81 | (a) | 0.81 | 0.80 | 0.81 | 0.88 | 0.88 | |||||||||||||||||
Net investment income | 0.89 | (a) | 0.72 | 0.67 | 0.80 | 1.06 | 0.79 | |||||||||||||||||
Portfolio turnover | 26 | (n) | 43 | 34 | 43 | 83 | 70 | |||||||||||||||||
Net assets at end of period (000 omitted) | $399,657 | $410,178 | $468,286 | $496,857 | $460,834 | $160,892 | ||||||||||||||||||
Supplemental Ratios (%): | ||||||||||||||||||||||||
Ratio of expenses to average net assets after expense reductions excluding short sale dividend and interest expense (f) | 0.80 | (a) | 0.80 | N/A | 0.80 | 0.87 | 0.86 |
See Notes to Financial Statements
10
Table of Contents
MFS Research Series
Financial Highlights – continued
Service Class | Six months ended 6/30/16 | Years ended 12/31 | ||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $26.42 | $28.84 | $28.49 | $21.70 | $18.67 | $18.93 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.08 | $0.13 | $0.12 | $0.14 | $0.18 | $0.10 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.87 | (0.16 | )(g) | 2.65 | 6.78 | 2.97 | (0.24 | ) | ||||||||||||||||
Total from investment operations | $0.95 | $(0.03 | ) | $2.77 | $6.92 | $3.15 | $(0.14 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.14 | ) | $(0.17 | ) | $(0.07 | ) | $(0.12 | ) | $(0.12 | ) | |||||||||||||
From net realized gain on investments | — | (2.25 | ) | (2.25 | ) | (0.06 | ) | — | — | |||||||||||||||
Total distributions declared to shareholders | $— | $(2.39 | ) | $(2.42 | ) | $(0.13 | ) | $(0.12 | ) | $(0.12 | ) | |||||||||||||
Net asset value, end of period (x) | $27.37 | $26.42 | $28.84 | $28.49 | $21.70 | $18.67 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 3.60 | (n) | 0.53 | 9.94 | 32.00 | 16.90 | (0.69 | ) | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.07 | (a) | 1.07 | 1.05 | 1.06 | 1.11 | 1.13 | |||||||||||||||||
Expenses after expense reductions (f) | 1.06 | (a) | 1.06 | 1.05 | 1.05 | 1.11 | 1.13 | |||||||||||||||||
Net investment income | 0.64 | (a) | 0.47 | 0.42 | 0.56 | 0.82 | 0.55 | |||||||||||||||||
Portfolio turnover | 26 | (n) | 43 | 34 | 43 | 83 | 70 | |||||||||||||||||
Net assets at end of period (000 omitted) | $221,477 | $226,704 | $260,028 | $279,054 | $266,040 | $20,015 | ||||||||||||||||||
Supplemental Ratios (%): | ||||||||||||||||||||||||
Ratio of expenses to average net assets after expense reductions excluding short sale dividend and interest expense (f) | 1.05 | (a) | 1.05 | N/A | 1.05 | 1.11 | 1.11 |
(a) | Annualized. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(g) | The per share amount varies from the net realized and unrealized gain/loss for the period because of the timing of sales of fund shares and the per share amount of realized and unrealized gains and losses at such time. |
(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 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 diversified 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.
The fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued.
Balance Sheet Offsetting – The fund’s accounting policy with respect to balance sheet offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the International Swaps and Derivatives Association (ISDA) Master Agreement does not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty. The fund’s right to setoff may be restricted or prohibited by the bankruptcy or insolvency laws of the particular jurisdiction to which a specific master netting agreement counterparty is subject. Balance sheet offsetting disclosures, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
Investment Valuations – Equity securities, including restricted equity securities, are generally valued at the last sale or official closing price on their primary market or exchange as provided by a third-party pricing service. Equity securities, for which there were no sales reported that day, are generally valued at the last quoted daily bid quotation on their primary market or exchange as provided by a third-party pricing service. Equity securities held short, for which there were no sales reported for that day, are generally valued at the last quoted daily ask quotation on their primary market or exchange as provided by a third-party pricing service. Short-term instruments with a maturity at issuance of 60 days or less may be valued at amortized cost, which approximates market value. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. Values obtained from third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the 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
12
Table of Contents
MFS Research Series
Notes to Financial Statements (unaudited) – continued
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, 2016 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities | $617,534,460 | $— | $— | $617,534,460 | ||||||||||||
Mutual Funds | 5,659,545 | — | — | 5,659,545 | ||||||||||||
Total Investments | $623,194,005 | $— | $— | $623,194,005 | ||||||||||||
Short Sales | $(1,321,430 | ) | $— | $— | $(1,321,430 | ) |
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.
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, 2016, this expense amounted to $28,813. 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. Security loans can be terminated at the discretion of either the lending agent or the fund and the related securities must be returned within the earlier of the standard trade settlement period for such securities or within three business days. The loans are collateralized by cash and/or U.S. Treasury and federal agency obligations in an amount typically at least equal to the market value of the securities loaned. On loans collateralized by cash, the cash collateral is invested in a money market fund. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. State Street provides the fund with indemnification against Borrower default. In the event of Borrower default, State Street will, for the benefit of the fund, either purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the fund the market value of the loaned securities. In return, State Street assumes the fund’s rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, State Street is responsible for the shortfall, but only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. 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, 2016, 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
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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 – Prior to October 1, 2015, the fund’s custody fee could be reduced by a credit earned under an arrangement that measured the value of U.S. dollars deposited with the custodian by the fund. For the six months ended June 30, 2016, 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. Management has analyzed the fund’s tax positions taken on federal and state tax returns for all open tax years and does not believe that there are any uncertain tax positions that require recognition of a tax liability. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests. Additionally, capital gains realized by the fund on securities issued in or by certain foreign countries may be subject to capital gains tax imposed by those countries.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to wash sale loss deferrals.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/15 | ||||
Ordinary income (including any short-term capital gains) | $10,616,411 | |||
Long-term capital gains | 45,067,192 | |||
Total distributions | $55,683,603 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/16 | ||||
Cost of investments | $495,119,699 | |||
Gross appreciation | 139,339,964 | |||
Gross depreciation | (11,265,658 | ) | ||
Net unrealized appreciation (depreciation) | $128,074,306 | |||
As of 12/31/15 | ||||
Undistributed ordinary income | 10,346,073 | |||
Undistributed long-term capital gain | 56,109,672 | |||
Other temporary differences | (56,235 | ) | ||
Net unrealized appreciation (depreciation) | 125,990,203 |
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
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Notes to Financial Statements (unaudited) – continued
dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported 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 6/30/16 | Year ended 12/31/15 | Six months ended 6/30/16 | Year ended 12/31/15 | |||||||||||||
Initial Class | $— | $3,188,529 | $— | $32,895,928 | ||||||||||||
Service Class | — | 1,123,554 | — | 18,475,592 | ||||||||||||
Total | $— | $4,312,083 | $— | $51,371,520 |
(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% |
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 six months ended June 30, 2016, this management fee reduction amounted to $21,818, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the six months ended June 30, 2016 was equivalent to an annual effective rate of 0.74% of the fund’s average daily net assets.
Effective August 1, 2016, the investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, excluding interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses (such as short sale dividend and interest expenses incurred in connection with the fund’s investment activity), such that total annual operating expenses do not exceed 0.79% of average daily net assets for the Initial Class shares and 1.04% 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, 2018.
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, 2016, the fee was $19,550, 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, 2016, these costs amounted to $1,058.
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the six months ended June 30, 2016 was equivalent to an annual effective rate of 0.0175% of the fund’s average daily net assets.
Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – This fund and certain other funds managed by MFS (the funds) have entered into a service agreement (the ISO Agreement) which provides for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino serves as the ISO and is an officer of the funds and the sole member of Tarantino LLC. The funds can terminate the ISO Agreement with Tarantino LLC at any time under the terms of the ISO Agreement.
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Notes to Financial Statements (unaudited) – continued
For the six months ended June 30, 2016, the fee paid by the fund under this agreement was $612 and is included in “Miscellaneous” expense in the Statement of Operations. MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.
The fund 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.
The fund is permitted to engage in purchase and sale transactions (“cross-trades”) with funds and accounts for which MFS serves as investment adviser or sub-adviser pursuant to a policy adopted by the Board of Trustees. This policy has been designed to ensure that cross-trades conducted by the fund comply with Rule 17a-7 under the Investment Company Act of 1940. Under this policy, cross-trades are effected at current market prices with no remuneration paid in connection with the transaction. During the six months ended June 30, 2016, the fund engaged in sale transactions pursuant to this policy, which amounted to $199,168. The sales transactions resulted in net realized gains (losses) of $(5,359).
(4) | Portfolio Securities |
For the six months ended June 30, 2016, purchases and sales of investments, other than short sales and short-term obligations, aggregated $157,656,567 and $190,594,789, 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 6/30/16 | Year ended 12/31/15 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 126,728 | $3,307,749 | 440,653 | $12,346,887 | ||||||||||||
Service Class | 266,799 | 6,928,708 | 437,031 | 12,245,344 | ||||||||||||
393,527 | $10,236,457 | 877,684 | $24,592,231 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 1,461,501 | $36,084,457 | ||||||||||||
Service Class | — | — | 800,619 | 19,599,146 | ||||||||||||
— | $— | 2,262,120 | $55,683,603 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (1,058,543 | ) | $(28,288,577 | ) | (2,615,436 | ) | $(75,387,067 | ) | ||||||||
Service Class | (755,270 | ) | (19,761,156 | ) | (1,675,253 | ) | (47,272,547 | ) | ||||||||
(1,813,813 | ) | $(48,049,733 | ) | (4,290,689 | ) | $(122,659,614 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (931,815 | ) | $(24,980,828 | ) | (713,282 | ) | $(26,955,723 | ) | ||||||||
Service Class | (488,471 | ) | (12,832,448 | ) | (437,603 | ) | (15,428,057 | ) | ||||||||
(1,420,286 | ) | $(37,813,276 | ) | (1,150,885 | ) | $(42,383,780 | ) |
The fund is one of several mutual funds in which certain MFS funds may invest. The MFS funds do not invest in the underlying funds for the purpose of exercising management or control. At the end of the period, the MFS Moderate Allocation Portfolio, the MFS Growth Allocation Portfolio, and the MFS Conservative Allocation Portfolio were the owners of record of approximately 23%, 7%, 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 $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Overnight Federal Reserve funds rate or daily one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Overnight Federal Reserve funds rate plus an agreed upon spread. For the six months ended June 30, 2016, the fund’s commitment fee and interest expense were $1,665 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.
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Notes to Financial Statements (unaudited) – continued
(7) | Transactions in Underlying Affiliated Funds – Affiliated Issuers |
An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the fund assumes the following to be 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 | 378,735 | 61,394,177 | (56,113,367 | ) | 5,659,545 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $6,037 | $5,659,545 |
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PROXY VOTING POLICIES AND INFORMATION
MFS votes proxies on behalf of the fund pursuant to proxy voting policies and procedures that are available without charge, upon request, by calling 1-800-225-2606, by visiting mfs.com (once you have selected “Individual Investor” as your role, click on “Individual Investor Home” in the top navigation and then select “Learn More About Proxy Voting” under the “I want to. .. .” header on the left hand column of the page), or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available by August 31 of each year without charge by visiting mfs.com (once you have selected “Individual Investor” as your role, click on “Individual Investor Home” in the top navigation and then select “Learn More About Proxy Voting” under the “I want to…” header on the left hand column of the page), 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 on mfs.com by following these steps once you have selected “Individual Investor” as your role: (1) Click on the “Individual Investor Home” in the top navigation and then select the “Announcements” option within the “Market Outlooks” drop down, or (2) Click on “Products & Services” and “Variable Insurance Portfolios” and then select the fund’s name.
INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS
The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, 529 program manager (if applicable), and custodian who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.
Under the Trust’s By-Laws and Declaration of Trust, any claims asserted against or on behalf of the MFS Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of Massachusetts.
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SEMIANNUAL REPORT
June 30, 2016
MFS® TOTAL RETURN SERIES
MFS® Variable Insurance Trust
VTR-SEM
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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 • MAY LOSE VALUE • NO BANK OR CREDIT UNION GUARANTEE • NOT A DEPOSIT • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
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MFS Total Return Series
Dear Contract Owners:
Global headwinds continue to restrain growth and profits, though developed market equities have remained resilient, underpinned by record-low interest rates. Rates are likely to stay low over the medium term, as many central banks have implemented accommodative monetary policies in an effort to reinvigorate their economies. Markets will have to deal with an additional headwind in the coming months and years as investors grapple with the fallout from the United Kingdom’s decision to leave the European Union. That process will take a considerable period of time to play out against a highly uncertain backdrop. Weakness in the pound sterling in the wake of the referendum has been a welcome shock absorber for UK financial markets.
Emerging markets have been beneficiaries of firmer commodity prices and diminishing fears of sharply higher interest rates from the U.S. Federal Reserve. China remains a source of concern for investors, as overcapacity in its manufacturing sector inhibits the government’s attempt to change its domestic economy from one driven by exports to a consumer-driven model.
At MFS®, we believe it is best to view markets through a long lens and not react to short-term swings. That makes it possible to filter out market noise and focus on long-term fundamentals.
In our view, the professional guidance of a financial advisor, along with a patient, long-term approach, will help you reach your investment objectives.
Respectfully,
Robert J. Manning
Chairman
MFS Investment Management
August 15, 2016
The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.
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MFS Total Return Series
Portfolio structure (i)
Top ten holdings (i) | ||||
JPMorgan Chase & Co. | 2.3% | |||
U.S. Treasury Notes, 2.75%, 2/15/2019 | 2.1% | |||
U.S. Treasury Bonds, 2.875%, 5/15/2043 | 1.7% | |||
Philip Morris International, Inc. | 1.7% | |||
Fannie Mae, 4%, 30 Years | 1.5% | |||
U.S. Treasury Notes, 3.125%, 5/15/2019 | 1.4% | |||
U.S. Treasury Notes, 2.5%, 8/15/2023 | 1.3% | |||
Johnson & Johnson | 1.3% | |||
Fannie Mae, 3.5%, 30 Years | 1.2% | |||
Verizon Communications, Inc. | 1.2% | |||
Composition including fixed income credit quality (a)(i) | ||||
AAA | 2.5% | |||
AA | 0.9% | |||
A | 4.3% | |||
BBB | 7.3% | |||
BB | 0.3% | |||
B | 0.1% | |||
CCC (o) | 0.0% | |||
C (o) | 0.0% | |||
U.S. Government | 12.0% | |||
Federal Agencies | 12.2% | |||
Not Rated (o) | 0.0% | |||
Non-Fixed Income | 59.4% | |||
Cash & Cash Equivalents | 1.0% | |||
Other (o) | (0.0)% |
Equity sectors | ||||
Financial Services | 13.0% | |||
Health Care | 8.1% | |||
Consumer Staples | 6.4% | |||
Industrial Goods & Services | 6.0% | |||
Technology | 4.1% | |||
Utilities & Communications | 4.0% | |||
Energy | 3.8% | |||
Leisure | 3.3% | |||
Basic Materials | 3.0% | |||
Retailing | 2.9% | |||
Autos & Housing | 2.1% | |||
Special Products & Services | 1.6% | |||
Transportation | 1.1% | |||
Fixed income sectors (i) | ||||
Mortgage-Backed Securities | 12.0% | |||
U.S. Treasury Securities | 12.0% | |||
Investment Grade Corporates | 11.1% | |||
Commercial Mortgage-Backed Securities | 1.7% | |||
Emerging Markets Bonds | 1.0% | |||
Non-U.S. Government Bonds | 0.5% | |||
Collateralized Debt Obligations | 0.4% | |||
Asset-Backed Securities | 0.4% | |||
High Yield Corporates | 0.3% | |||
U.S. Government Agencies | 0.2% | |||
Residential Mortgage-Backed Securities (o) | 0.0% |
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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 any equity securities (including convertible bonds and equity derivatives) and/or commodity-linked derivatives. 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 value of securities, and reflect the impact of the equivalent exposure of derivative positions, if any. These amounts may be negative from time to time. Equivalent exposure is a calculated amount that translates the derivative position into a reasonable approximation of the amount of the underlying asset that the portfolio would have to hold at a given point in time to have the same price sensitivity that results from the portfolio’s ownership of the derivative contract. When dealing with derivatives, equivalent exposure is a more representative measure of the potential impact of a position on portfolio performance than value. The bond component will include any accrued interest amounts. |
(o) | Less than 0.1%. |
Where the fund holds convertible bonds, these are treated as part of the equity portion of the portfolio.
Cash & Cash Equivalents includes any cash, investments in money market funds, short-term securities, and other assets less liabilities. Please see the Statement of Assets and Liabilities for additional information related to the fund’s cash position and other assets and liabilities.
Other includes equivalent exposure from currency derivatives and/or any offsets to derivative positions and may be negative.
Percentages are based on net assets as of 6/30/16.
The portfolio is actively managed and current holdings may be different.
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MFS Total Return Series
Fund Expenses Borne by the Contract Holders during the Period,
January 1, 2016 through June 30, 2016
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, 2016 through June 30, 2016.
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 1/01/16 | Ending Account Value 6/30/16 | Expenses Paid During Period (p) 1/01/16-6/30/16 | ||||||||||||||
Initial Class | Actual | 0.65% | $1,000.00 | $1,055.31 | $3.32 | |||||||||||||
Hypothetical (h) | 0.65% | $1,000.00 | $1,021.63 | $3.27 | ||||||||||||||
Service Class | Actual | 0.90% | $1,000.00 | $1,053.46 | $4.60 | |||||||||||||
Hypothetical (h) | 0.90% | $1,000.00 | $1,020.39 | $4.52 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
Notes to Expense Table
Changes to the fund’s fee arrangements will occur during the fund’s current fiscal year. Had these fee changes been in effect during the six-month period, the annualized expense ratios, the actual expenses paid during the period and the hypothetical expenses paid during the period would have been approximately 0.626%, $3.20 and $3.15 for Initial Class and 0.876%, $4.47 and $4.40 for Service Class, respectively. Expense ratios include 0.001% of investment-related expenses for fees assessed on the unused portion of the committed line of credit (as described in Note 6 of the Notes to Financial Statements) that are outside of the expense limitation arrangement (See Note 3 of the Notes to Financial Statements). For further information about the fund’s fee arrangements and changes to those fee arrangements, please see Note 3 in the Notes to Financial Statements.
4
Table of Contents
MFS Total Return Series
PORTFOLIO OF INVESTMENTS – 6/30/16 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 58.7% | ||||||||
Aerospace – 2.9% | ||||||||
Boeing Co. | 10,223 | $ | 1,327,662 | |||||
Honeywell International, Inc. | 192,025 | 22,336,348 | ||||||
Lockheed Martin Corp. | 61,602 | 15,287,768 | ||||||
Northrop Grumman Corp. | 82,927 | 18,433,014 | ||||||
Orbital ATK, Inc. | 12,859 | 1,094,815 | ||||||
United Technologies Corp. | 186,037 | 19,078,094 | ||||||
|
| |||||||
$ | 77,557,701 | |||||||
|
| |||||||
Airlines – 0.2% | ||||||||
Delta Air Lines, Inc. | 175,638 | $ | 6,398,492 | |||||
|
| |||||||
Alcoholic Beverages – 0.4% | ||||||||
Diageo PLC | 341,266 | $ | 9,549,034 | |||||
|
| |||||||
Automotive – 1.5% | ||||||||
Delphi Automotive PLC | 91,192 | $ | 5,708,619 | |||||
General Motors Co. | 128,558 | 3,638,191 | ||||||
Harley-Davidson, Inc. | 48,646 | 2,203,664 | ||||||
Hyundai Motor Co. Ltd. | 27,391 | 3,244,614 | ||||||
Johnson Controls, Inc. | 223,733 | 9,902,423 | ||||||
Kia Motors Corp. | 134,798 | 5,076,872 | ||||||
LKQ Corp. (a) | 106,047 | 3,361,690 | ||||||
Magna International, Inc. | 145,262 | 5,098,983 | ||||||
|
| |||||||
$ | 38,235,056 | |||||||
|
| |||||||
Biotechnology – 0.2% | ||||||||
Celgene Corp. (a) | 21,127 | $ | 2,083,756 | |||||
Gilead Sciences, Inc. | 36,290 | 3,027,312 | ||||||
|
| |||||||
$ | 5,111,068 | |||||||
|
| |||||||
Broadcasting – 1.2% | ||||||||
Omnicom Group, Inc. | 136,769 | $ | 11,145,306 | |||||
Time Warner, Inc. | 154,490 | 11,361,195 | ||||||
Twenty-First Century Fox, Inc. | 114,212 | 3,089,435 | ||||||
Viacom, Inc., “B” | 28,099 | 1,165,266 | ||||||
Walt Disney Co. | 36,499 | 3,570,332 | ||||||
|
| |||||||
$ | 30,331,534 | |||||||
|
| |||||||
Brokerage & Asset Managers – 0.9% | ||||||||
BlackRock, Inc. | 25,731 | $ | 8,813,639 | |||||
Blackstone Group LP | 69,425 | 1,703,690 | ||||||
Charles Schwab Corp. | 103,118 | 2,609,917 | ||||||
Franklin Resources, Inc. | 200,237 | 6,681,909 | ||||||
NASDAQ, Inc. | 79,042 | 5,111,646 | ||||||
|
| |||||||
$ | 24,920,801 | |||||||
|
| |||||||
Business Services – 1.7% | ||||||||
Accenture PLC, “A” | 200,847 | $ | 22,753,957 | |||||
Cognizant Technology Solutions Corp., “A” (a) | 29,865 | 1,709,473 | ||||||
Equifax, Inc. | 9,792 | 1,257,293 | ||||||
Fidelity National Information Services, Inc. | 66,352 | 4,888,815 | ||||||
Fiserv, Inc. (a) | 23,724 | 2,579,511 | ||||||
Global Payments, Inc. | 142,737 | 10,188,567 | ||||||
|
| |||||||
$ | 43,377,616 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Cable TV – 1.6% | ||||||||
Charter Communications, Inc., “A” (a) | 55,061 | $ | 12,589,147 | |||||
Comcast Corp., “A” | 435,481 | 28,389,006 | ||||||
|
| |||||||
$ | 40,978,153 | |||||||
|
| |||||||
Chemicals – 2.4% | ||||||||
3M Co. | 112,515 | $ | 19,703,627 | |||||
Celanese Corp. | 52,440 | 3,432,198 | ||||||
E.I. du Pont de Nemours & Co. | 99,695 | 6,460,236 | ||||||
LyondellBasell Industries N.V., “A” | 111,244 | 8,278,778 | ||||||
Monsanto Co. | 55,772 | 5,767,383 | ||||||
PPG Industries, Inc. | 184,505 | 19,216,196 | ||||||
|
| |||||||
$ | 62,858,418 | |||||||
|
| |||||||
Computer Software – 1.0% | ||||||||
CA, Inc. | 103,057 | $ | 3,383,361 | |||||
Microsoft Corp. | 179,853 | 9,203,078 | ||||||
Oracle Corp. | 202,797 | 8,300,481 | ||||||
Sabre Corp. | 151,336 | 4,054,291 | ||||||
|
| |||||||
$ | 24,941,211 | |||||||
|
| |||||||
Computer Software – Systems – 0.8% | ||||||||
Apple, Inc. | 27,161 | $ | 2,596,592 | |||||
Hewlett Packard Enterprise | 134,162 | 2,451,140 | ||||||
International Business Machines Corp. | 100,166 | 15,203,195 | ||||||
|
| |||||||
$ | 20,250,927 | |||||||
|
| |||||||
Construction – 0.7% | ||||||||
Bellway PLC | 50,684 | $ | 1,280,638 | |||||
Owens Corning | 215,992 | 11,127,908 | ||||||
Stanley Black & Decker, Inc. | 47,589 | 5,292,849 | ||||||
|
| |||||||
$ | 17,701,395 | |||||||
|
| |||||||
Consumer Products – 0.6% | ||||||||
Kimberly-Clark Corp. | 31,578 | $ | 4,341,343 | |||||
Newell Brands, Inc. | 37,715 | 1,831,818 | ||||||
Procter & Gamble Co. | 75,117 | 6,360,156 | ||||||
Reckitt Benckiser Group PLC | 33,992 | 3,419,785 | ||||||
|
| |||||||
$ | 15,953,102 | |||||||
|
| |||||||
Containers – 0.1% | ||||||||
Crown Holdings, Inc. (a) | 49,638 | $ | 2,515,157 | |||||
|
| |||||||
Electrical Equipment – 1.6% | ||||||||
Danaher Corp. | 236,793 | $ | 23,916,093 | |||||
MSC Industrial Direct Co., Inc., “A” | 32,781 | 2,313,027 | ||||||
Pentair PLC | 79,126 | 4,612,255 | ||||||
Tyco International PLC | 276,281 | 11,769,571 | ||||||
|
| |||||||
$ | 42,610,946 | |||||||
|
| |||||||
Electronics – 1.1% | ||||||||
Analog Devices, Inc. | 27,750 | $ | 1,571,760 | |||||
Intel Corp. | 98,664 | 3,236,179 | ||||||
Maxim Integrated Products, Inc. | 86,865 | 3,100,212 | ||||||
Microchip Technology, Inc. | 38,722 | 1,965,529 |
5
Table of Contents
MFS Total Return Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Electronics – continued | ||||||||
Taiwan Semiconductor Manufacturing Co. Ltd., ADR | 305,288 | $ | 8,007,704 | |||||
Texas Instruments, Inc. | 183,461 | 11,493,832 | ||||||
|
| |||||||
$ | 29,375,216 | |||||||
|
| |||||||
Energy – Independent – 2.1% | ||||||||
Anadarko Petroleum Corp. | 83,264 | $ | 4,433,808 | |||||
Canadian Natural Resources Ltd. | 64,538 | 1,989,707 | ||||||
EOG Resources, Inc. | 107,957 | 9,005,773 | ||||||
EQT Corp. | 58,804 | 4,553,194 | ||||||
Hess Corp. | 72,368 | 4,349,317 | ||||||
Marathon Petroleum Corp. | 59,738 | 2,267,654 | ||||||
Noble Energy, Inc. | 110,264 | 3,955,170 | ||||||
Occidental Petroleum Corp. | 138,505 | 10,465,438 | ||||||
Rice Energy, Inc. (a) | 130,153 | 2,868,572 | ||||||
Valero Energy Corp. | 206,890 | 10,551,390 | ||||||
|
| |||||||
$ | 54,440,023 | |||||||
|
| |||||||
Energy – Integrated – 1.3% | ||||||||
BP PLC | 1,462,956 | $ | 8,533,232 | |||||
Chevron Corp. | 106,908 | 11,207,166 | ||||||
Exxon Mobil Corp. | 161,037 | 15,095,608 | ||||||
|
| |||||||
$ | 34,836,006 | |||||||
|
| |||||||
Food & Beverages – 2.5% | ||||||||
Archer Daniels Midland Co. | 305,311 | $ | 13,094,789 | |||||
Coca-Cola Co. | 73,662 | 3,339,098 | ||||||
Danone S.A. | 94,965 | 6,696,234 | ||||||
Dean Foods Co. | 54,883 | 992,833 | ||||||
General Mills, Inc. | 196,841 | 14,038,700 | ||||||
J.M. Smucker Co. | 19,406 | 2,957,668 | ||||||
Kellogg Co. | 55,460 | 4,528,309 | ||||||
Marine Harvest | 231,331 | 3,891,156 | ||||||
Mondelez International, Inc. | 81,187 | 3,694,820 | ||||||
Nestle S.A. | 168,605 | 13,005,462 | ||||||
|
| |||||||
$ | 66,239,069 | |||||||
|
| |||||||
Food & Drug Stores – 1.1% | ||||||||
CVS Health Corp. | 259,265 | $ | 24,822,031 | |||||
Kroger Co. | 90,938 | 3,345,609 | ||||||
Lawson, Inc. | 24,000 | 1,902,681 | ||||||
|
| |||||||
$ | 30,070,321 | |||||||
|
| |||||||
Gaming & Lodging – 0.1% | ||||||||
Hilton Worldwide Holdings, Inc. | 79,672 | $ | 1,795,010 | |||||
|
| |||||||
General Merchandise – 0.8% | ||||||||
Kohl’s Corp. | 69,032 | $ | 2,617,693 | |||||
Target Corp. | 281,874 | 19,680,443 | ||||||
|
| |||||||
$ | 22,298,136 | |||||||
|
| |||||||
Health Maintenance Organizations – 0.2% | ||||||||
Cigna Corp. | 39,643 | $ | 5,073,908 | |||||
|
| |||||||
Insurance – 3.8% | ||||||||
Aon PLC | 120,963 | $ | 13,212,788 | |||||
Chubb Ltd. | 160,369 | 20,961,832 | ||||||
MetLife, Inc. | 516,222 | 20,561,122 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Insurance – continued | ||||||||
Prudential Financial, Inc. | 174,158 | $ | 12,424,432 | |||||
Sony Financial Holdings, Inc. | 132,600 | 1,488,368 | ||||||
Travelers Cos., Inc. | 134,946 | 16,063,972 | ||||||
Validus Holdings Ltd. | 163,551 | 7,946,943 | ||||||
Zurich Insurance Group AG | 27,135 | 6,713,774 | ||||||
|
| |||||||
$ | 99,373,231 | |||||||
|
| |||||||
Internet – 0.5% | ||||||||
Alphabet, Inc., “A” (a) | 4,546 | $ | 3,198,247 | |||||
Facebook, Inc., “A” (a) | 90,549 | 10,347,940 | ||||||
|
| |||||||
$ | 13,546,187 | |||||||
|
| |||||||
Leisure & Toys – 0.2% | ||||||||
Activision Blizzard, Inc. | 115,648 | $ | 4,583,130 | |||||
|
| |||||||
Machinery & Tools – 1.4% | ||||||||
Allison Transmission Holdings, Inc. | 225,845 | $ | 6,375,604 | |||||
Caterpillar, Inc. | 21,380 | 1,620,818 | ||||||
Cummins, Inc. | 39,952 | 4,492,203 | ||||||
Deere & Co. | 64,474 | 5,224,973 | ||||||
Eaton Corp. PLC | 134,970 | 8,061,758 | ||||||
Illinois Tool Works, Inc. | 97,518 | 10,157,475 | ||||||
Ingersoll-Rand Co. Ltd., “A” | 30,669 | 1,953,002 | ||||||
|
| |||||||
$ | 37,885,833 | |||||||
|
| |||||||
Major Banks – 5.5% | ||||||||
Bank of America Corp. | 398,082 | $ | 5,282,548 | |||||
Bank of New York Mellon Corp. | 334,281 | 12,986,817 | ||||||
BNP Paribas | 37,142 | 1,669,829 | ||||||
BOC Hong Kong Holdings Ltd. | 508,000 | 1,532,338 | ||||||
Goldman Sachs Group, Inc. | 100,337 | 14,908,071 | ||||||
HSBC Holdings PLC | 433,844 | 2,710,247 | ||||||
JPMorgan Chase & Co. | 971,740 | 60,383,924 | ||||||
Morgan Stanley | 147,053 | 3,820,437 | ||||||
PNC Financial Services Group, Inc. | 109,488 | 8,911,228 | ||||||
State Street Corp. | 142,422 | 7,679,394 | ||||||
Sumitomo Mitsui Financial Group, Inc. | 135,900 | 3,896,289 | ||||||
Wells Fargo & Co. | 454,007 | 21,488,151 | ||||||
|
| |||||||
$ | 145,269,273 | |||||||
|
| |||||||
Medical & Health Technology & Services – 0.4% | ||||||||
Express Scripts Holding Co. (a) | 47,267 | $ | 3,582,839 | |||||
HCA Holdings, Inc. (a) | 18,124 | 1,395,729 | ||||||
McKesson Corp. | 30,318 | 5,658,855 | ||||||
|
| |||||||
$ | 10,637,423 | |||||||
|
| |||||||
Medical Equipment – 2.6% | ||||||||
Abbott Laboratories | 398,779 | $ | 15,676,002 | |||||
Cooper Cos., Inc. | 23,986 | 4,115,278 | ||||||
Medtronic PLC | 231,490 | 20,086,387 | ||||||
St. Jude Medical, Inc. | 94,509 | 7,371,702 | ||||||
Thermo Fisher Scientific, Inc. | 114,039 | 16,850,403 | ||||||
Zimmer Biomet Holdings, Inc. | 43,997 | 5,296,359 | ||||||
|
| |||||||
$ | 69,396,131 | |||||||
|
| |||||||
Metals & Mining – 0.2% | ||||||||
Rio Tinto Ltd. | 208,119 | $ | 6,432,984 | |||||
|
|
6
Table of Contents
MFS Total Return Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Natural Gas – Distribution – 0.1% | ||||||||
Engie | 219,710 | $ | 3,537,874 | |||||
|
| |||||||
Natural Gas – Pipeline – 0.2% | ||||||||
Enterprise Products Partners LP | 65,445 | $ | 1,914,921 | |||||
Plains All American Pipeline LP | 62,756 | 1,725,162 | ||||||
Williams Partners LP | 78,037 | 2,703,202 | ||||||
|
| |||||||
$ | 6,343,285 | |||||||
|
| |||||||
Network & Telecom – 0.8% | ||||||||
Cisco Systems, Inc. | 523,594 | $ | 15,021,912 | |||||
Motorola Solutions, Inc. | 72,227 | 4,764,815 | ||||||
|
| |||||||
$ | 19,786,727 | |||||||
|
| |||||||
Oil Services – 0.4% | ||||||||
National Oilwell Varco, Inc. | 58,631 | $ | 1,972,933 | |||||
Schlumberger Ltd. | 101,047 | 7,990,797 | ||||||
|
| |||||||
$ | 9,963,730 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 2.2% | ||||||||
American Express Co. | 135,225 | $ | 8,216,271 | |||||
BB&T Corp. | 188,786 | 6,722,669 | ||||||
Citigroup, Inc. | 177,458 | 7,522,445 | ||||||
Discover Financial Services | 106,568 | 5,710,979 | ||||||
SunTrust Banks, Inc. | 56,991 | 2,341,190 | ||||||
U.S. Bancorp | 387,186 | 15,615,211 | ||||||
UBS AG | 299,176 | 3,870,920 | ||||||
Visa, Inc., “A” | 96,873 | 7,185,070 | ||||||
|
| |||||||
$ | 57,184,755 | |||||||
|
| |||||||
Pharmaceuticals – 4.6% | ||||||||
Allergan PLC (a) | 15,281 | $ | 3,531,286 | |||||
Bayer AG | 88,146 | 8,868,561 | ||||||
Bristol-Myers Squibb Co. | 103,276 | 7,595,950 | ||||||
Eli Lilly & Co. | 218,813 | 17,231,524 | ||||||
Johnson & Johnson | 280,137 | 33,980,618 | ||||||
Merck & Co., Inc. | 504,461 | 29,061,998 | ||||||
Novartis AG | 17,401 | 1,431,472 | ||||||
Pfizer, Inc. | 519,935 | 18,306,911 | ||||||
Roche Holding AG | 4,994 | 1,318,569 | ||||||
|
| |||||||
$ | 121,326,889 | |||||||
|
| |||||||
Printing & Publishing – 0.2% | ||||||||
Moody’s Corp. | 24,608 | $ | 2,306,016 | |||||
S&P Global, Inc. | 9,900 | 1,061,874 | ||||||
Time, Inc. | 5,412 | 89,082 | ||||||
Transcontinental, Inc., “A” | 121,431 | 1,645,773 | ||||||
|
| |||||||
$ | 5,102,745 | |||||||
|
| |||||||
Railroad & Shipping – 0.4% | ||||||||
Canadian National Railway Co. | 44,838 | $ | 2,648,132 | |||||
Union Pacific Corp. | 88,007 | 7,678,611 | ||||||
|
| |||||||
$ | 10,326,743 | |||||||
|
| |||||||
Real Estate – 0.6% | ||||||||
Hospitality Properties Trust, REIT | 83,743 | $ | 2,411,798 | |||||
Medical Properties Trust, Inc., REIT | 163,780 | 2,491,094 | ||||||
Mid-America Apartment Communities, Inc., REIT | 58,073 | 6,178,967 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Real Estate – continued | ||||||||
Starwood Property Trust, Inc., REIT | 111,314 | $ | 2,306,426 | |||||
Store Capital Corp., REIT | 119,340 | 3,514,563 | ||||||
|
| |||||||
$ | 16,902,848 | |||||||
|
| |||||||
Restaurants – 0.2% | ||||||||
Aramark | 108,753 | $ | 3,634,525 | |||||
YUM! Brands, Inc. | 24,077 | 1,996,465 | ||||||
|
| |||||||
$ | 5,630,990 | |||||||
|
| |||||||
Specialty Chemicals – 0.2% | ||||||||
Axalta Coating Systems Ltd. (a) | 159,036 | $ | 4,219,225 | |||||
Praxair, Inc. | 18,655 | 2,096,635 | ||||||
|
| |||||||
$ | 6,315,860 | |||||||
|
| |||||||
Specialty Stores – 0.9% | ||||||||
Abercrombie & Fitch Co., “A” | 126,540 | $ | 2,253,677 | |||||
Advance Auto Parts, Inc. | 10,415 | 1,683,376 | ||||||
Amazon.com, Inc. (a) | 18,140 | 12,981,347 | ||||||
American Eagle Outfitters, Inc. | 244,809 | 3,899,807 | ||||||
Best Buy Co., Inc. | 70,256 | 2,149,834 | ||||||
|
| |||||||
$ | 22,968,041 | |||||||
|
| |||||||
Telecommunications – Wireless – 0.0% | ||||||||
Vodafone Group PLC | 376,438 | $ | 1,145,949 | |||||
|
| |||||||
Telephone Services – 1.6% | ||||||||
AT&T, Inc. | 74,728 | $ | 3,228,997 | |||||
Frontier Communications Corp. | 487,218 | 2,406,857 | ||||||
TDC A.S. | 418,106 | 2,046,518 | ||||||
Telefonica Brasil S.A., ADR | 284,685 | 3,871,716 | ||||||
Verizon Communications, Inc. | 552,682 | 30,861,763 | ||||||
|
| |||||||
$ | 42,415,851 | |||||||
|
| |||||||
Tobacco – 2.6% | ||||||||
Altria Group, Inc. | 276,074 | $ | 19,038,063 | |||||
Japan Tobacco, Inc. | 69,500 | 2,784,212 | ||||||
Philip Morris International, Inc. | 430,499 | 43,790,358 | ||||||
Reynolds American, Inc. | 54,807 | 2,955,742 | ||||||
|
| |||||||
$ | 68,568,375 | |||||||
|
| |||||||
Trucking – 0.4% | ||||||||
United Parcel Service, Inc., “B” | 106,219 | $ | 11,441,911 | |||||
|
| |||||||
Utilities – Electric Power – 1.7% | ||||||||
American Electric Power Co., Inc. | 107,363 | $ | 7,525,073 | |||||
Duke Energy Corp. | 80,967 | 6,946,159 | ||||||
Exelon Corp. | 307,696 | 11,187,827 | ||||||
PPL Corp. | 294,956 | 11,134,589 | ||||||
Public Service Enterprise Group, Inc. | 72,324 | 3,371,022 | ||||||
SSE PLC | 124,346 | 2,600,063 | ||||||
Xcel Energy, Inc. | 28,452 | 1,274,081 | ||||||
|
| |||||||
$ | 44,038,814 | |||||||
|
| |||||||
Total Common Stocks (Identified Cost, $1,179,185,321) | $ | 1,547,543,879 | ||||||
|
|
7
Table of Contents
MFS Total Return Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – 39.3% | ||||||||
Agency – Other – 0.1% | ||||||||
Financing Corp., 9.65%, 11/02/2018 | $ | 1,275,000 | $ | 1,536,590 | ||||
|
| |||||||
Asset-Backed & Securitized – 2.5% | ||||||||
Atrium CDO Corp., FRN, 1.42%, 11/16/2022 (z) | $ | 994,505 | $ | 988,115 | ||||
Bayview Financial Revolving Mortgage Loan Trust, FRN, 2.037%, 12/28/2040 (z) | 2,507,712 | 1,808,729 | ||||||
BlackRock Capital Finance LP, 7.75%, 9/25/2026 (z) | 47,825 | 9,363 | ||||||
Cent LP, 2013-17A, “A1”, CLO, FRN, 1.936%, 1/30/2025 (n) | 2,547,000 | 2,530,982 | ||||||
Chesapeake Funding II LLC, 2016-2A, “A2”, FRN, 1.448%, 6/15/2028 (z) | 3,425,000 | 3,424,658 | ||||||
Citigroup Commercial Mortgage Trust, FRN, 5.9%, 12/10/2049 | 3,050,000 | 3,139,455 | ||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust, 5.322%, 12/11/2049 | 3,247,852 | 3,281,993 | ||||||
Commercial Mortgage Trust, 2015-LC21, “A4”, 3.708%, 7/10/2048 | 3,980,975 | 4,360,300 | ||||||
Credit Suisse Mortgage Capital Certificate, 5.695%, 9/15/2040 | 4,315,405 | 4,462,595 | ||||||
CSAIL Commercial Mortgage Trust, 2015-C2, “A4”, 3.504%, 6/15/2057 | 2,316,427 | 2,494,133 | ||||||
Dryden Senior Loan Fund, 2013-26A, “A”, CLO, FRN, 1.728%, 7/15/2025 (n) | 3,273,000 | 3,234,438 | ||||||
Ford Credit Auto Owner Trust, 2014-1,“A”, 2.26%, 11/15/2025 (n) | 1,735,000 | 1,769,894 | ||||||
Ford Credit Auto Owner Trust, 2014-2,“A”, 2.31%, 4/15/2026 (n) | 1,465,000 | 1,496,529 | ||||||
Fortress Credit BSL Ltd., 2013-1A, “A”, FRN, 1.813%, 1/19/2025 (n) | 2,158,179 | 2,131,521 | ||||||
GMAC Mortgage Corp. Loan Trust, 5.805%, 10/25/2036 | 845,707 | 810,422 | ||||||
Greenwich Capital Commercial Funding Corp., 5.475%, 3/10/2039 | 5,978,000 | 6,078,045 | ||||||
GS Mortgage Securities Trust, 2015-GC30, “A4”, 3.382%, 5/10/2050 | 4,243,101 | 4,540,944 | ||||||
ING Investment Management Ltd., 2013-2A, “A1”, CLO, FRN, 1.788%, 4/25/2025 (n) | 2,971,000 | 2,938,063 | ||||||
JPMBB Commercial Mortgage Securities Trust, 2014-C26, 3.494%, 1/15/2048 | 4,880,000 | 5,254,003 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., 5.552%, 5/12/2045 | 156,999 | 156,848 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., “A3”, FRN, 6.131%, 2/15/2051 | 113,466 | 113,235 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., “A4”, FRN, 5.927%, 6/15/2049 | 777,548 | 791,531 | ||||||
Merrill Lynch Mortgage Trust, “A3”, FRN, 6.021%, 6/12/2050 | 27,185 | 27,141 | ||||||
Morgan Stanley Capital I, Inc., FRN, 1.135%, 11/15/2030 (i)(n) | 3,062,136 | 43,197 | ||||||
Residential Funding Mortgage Securities, Inc., 5.32%, 12/25/2035 | 1,731,734 | 1,440,777 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Asset-Backed & Securitized – continued | ||||||||
Wachovia Bank Commercial Mortgage Trust, “A4”, FRN, 6.147%, 2/15/2051 | $ | 721,304 | $ | 736,232 | ||||
Wachovia Bank Commercial Mortgage Trust, FRN, 5.888%, 6/15/2049 | 4,011,472 | 4,134,237 | ||||||
Wells Fargo Commercial Mortgage Trust, 2015-C28, “A4”, 3.54%, 5/15/2048 | 4,315,766 | 4,659,626 | ||||||
|
| |||||||
$ | 66,857,006 | |||||||
|
| |||||||
Automotive – 0.4% | ||||||||
General Motors Financial Co., Inc., 3.2%, 7/06/2021 | $ | 2,353,000 | $ | 2,356,744 | ||||
General Motors Financial Co., Inc., 5.25%, 3/01/2026 | 1,168,000 | 1,269,715 | ||||||
Toyota Motor Credit Corp., 3.4%, 9/15/2021 | 3,170,000 | 3,450,428 | ||||||
Volkswagen International Finance N.V., 2.375%, 3/22/2017 (n) | 3,032,000 | 3,051,799 | ||||||
|
| |||||||
$ | 10,128,686 | |||||||
|
| |||||||
Broadcasting – 0.2% | ||||||||
21st Century Fox America, Inc., 8.5%, 2/23/2025 | $ | 2,839,000 | $ | 3,852,943 | ||||
Grupo Televisa S.A.B., 5%, 5/13/2045 | 1,122,000 | 1,076,942 | ||||||
|
| |||||||
$ | 4,929,885 | |||||||
|
| |||||||
Brokerage & Asset Managers – 0.1% | ||||||||
Intercontinental Exchange, Inc., 2.75%, 12/01/2020 | $ | 903,000 | $ | 945,549 | ||||
Intercontinental Exchange, Inc., 4%, 10/15/2023 | 2,519,000 | 2,724,953 | ||||||
|
| |||||||
$ | 3,670,502 | |||||||
|
| |||||||
Cable TV – 0.1% | ||||||||
Time Warner Entertainment Co. LP, 8.375%, 7/15/2033 | $ | 2,855,000 | $ | 3,868,288 | ||||
|
| |||||||
Computer Software – Systems – 0.2% | ||||||||
Apple, Inc., 2.85%, 2/23/2023 | $ | 3,502,000 | $ | 3,679,958 | ||||
Apple, Inc., 3.85%, 5/04/2043 | 1,303,000 | 1,308,238 | ||||||
|
| |||||||
$ | 4,988,196 | |||||||
|
| |||||||
Conglomerates – 0.1% | ||||||||
General Electric Capital Corp., 3.1%, 1/09/2023 | $ | 484,000 | $ | 517,014 | ||||
General Electric Capital Corp., FRN, 1.248%, 1/09/2020 | 1,939,000 | 1,948,711 | ||||||
|
| |||||||
$ | 2,465,725 | |||||||
|
| |||||||
Consumer Products – 0.3% | ||||||||
Newell Rubbermaid, Inc., 3.85%, 4/01/2023 | $ | 2,769,000 | $ | 2,936,992 | ||||
Reckitt Benckiser Treasury Services PLC, 3.625%, 9/21/2023 (n) | 3,463,000 | 3,734,669 | ||||||
|
| |||||||
$ | 6,671,661 | |||||||
|
| |||||||
Consumer Services – 0.1% | ||||||||
Visa, Inc., 3.15%, 12/14/2025 | $ | 3,594,000 | $ | 3,842,385 | ||||
|
|
8
Table of Contents
MFS Total Return Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Emerging Market Quasi-Sovereign – 0.4% | ||||||||
CNOOC Finance (2012) Ltd., 3.875%, 5/02/2022 (n) | $ | 3,630,000 | $ | 3,812,879 | ||||
Petroleos Mexicanos, 3.125%, 1/23/2019 | 1,277,000 | 1,273,808 | ||||||
Petroleos Mexicanos, 8%, 5/03/2019 | 2,671,000 | 2,975,654 | ||||||
Ras Laffan Liquefied Natural Gas Co. Ltd., 5.832%, 9/30/2016 (n) | 412,953 | 417,487 | ||||||
State Grid Overseas Investment (2014) Ltd., 2.75%, 5/07/2019 (z) | 2,591,000 | 2,668,435 | ||||||
|
| |||||||
$ | 11,148,263 | |||||||
|
| |||||||
Emerging Market Sovereign – 0.1% | ||||||||
Republic of Peru, 7.35%, 7/21/2025 | $ | 287,000 | $ | 390,320 | ||||
United Mexican States, 4.75%, 3/08/2044 | 2,089,000 | 2,250,898 | ||||||
|
| |||||||
$ | 2,641,218 | |||||||
|
| |||||||
Energy – Independent – 0.0% | ||||||||
Anadarko Petroleum Corp., 6.375%, 9/15/2017 | $ | 207,000 | $ | 217,877 | ||||
|
| |||||||
Energy – Integrated – 0.7% | ||||||||
BP Capital Markets PLC, 4.5%, 10/01/2020 | $ | 1,054,000 | $ | 1,167,838 | ||||
BP Capital Markets PLC, 4.742%, 3/11/2021 | 3,027,000 | 3,400,150 | ||||||
Chevron Corp., 0.796%, 11/15/2017 | 5,248,000 | 5,235,615 | ||||||
Petro-Canada, 6.05%, 5/15/2018 | 1,942,000 | 2,088,567 | ||||||
Total Capital International S.A., 1.55%, 6/28/2017 | 1,746,000 | 1,755,076 | ||||||
Total Capital International S.A., 3.75%, 4/10/2024 | 3,360,000 | 3,698,298 | ||||||
|
| |||||||
$ | 17,345,544 | |||||||
|
| |||||||
Financial Institutions – 0.1% | ||||||||
GE Capital International Funding Co., 3.373%, 11/15/2025 (n) | $ | 1,258,000 | $ | 1,365,219 | ||||
|
| |||||||
Food & Beverages – 0.5% | ||||||||
Anheuser-Busch InBev Finance, Inc., 3.65%, 2/01/2026 | $ | 2,789,000 | $ | 2,987,705 | ||||
Anheuser-Busch InBev S.A., 8%, 11/15/2039 | 3,600,000 | 5,625,770 | ||||||
Diageo Capital PLC, 2.625%, 4/29/2023 | 1,270,000 | 1,318,439 | ||||||
J.M. Smucker Co., 3.5%, 3/15/2025 | 1,794,000 | 1,937,272 | ||||||
Kraft Foods Group, Inc., 3.5%, 6/06/2022 | 1,463,000 | 1,555,927 | ||||||
Wm. Wrigley Jr. Co., 2.4%, 10/21/2018 (n) | 756,000 | 771,004 | ||||||
|
| |||||||
$ | 14,196,117 | |||||||
|
| |||||||
Food & Drug Stores – 0.3% | ||||||||
CVS Health Corp., 3.875%, 7/20/2025 | $ | 3,328,000 | $ | 3,660,723 | ||||
Walgreens Boots Alliance, Inc., 3.3%, 11/18/2021 | 2,550,000 | 2,674,032 | ||||||
Walgreens Boots Alliance, Inc., 4.5%, 11/18/2034 | 1,318,000 | 1,383,303 | ||||||
|
| |||||||
$ | 7,718,058 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Insurance – 0.3% | ||||||||
American International Group, Inc., 4.875%, 6/01/2022 | $ | 5,088,000 | $ | 5,668,164 | ||||
American International Group, Inc., 4.125%, 2/15/2024 | 2,620,000 | 2,763,919 | ||||||
|
| |||||||
$ | 8,432,083 | |||||||
|
| |||||||
Insurance – Health – 0.4% | ||||||||
Aetna, Inc., 3.2%, 6/15/2026 | $ | 3,416,000 | $ | 3,514,463 | ||||
Anthem, Inc., 3.3%, 1/15/2023 | 2,122,000 | 2,191,867 | ||||||
UnitedHealth Group, Inc., 3.75%, 7/15/2025 | 3,987,000 | 4,374,205 | ||||||
|
| |||||||
$ | 10,080,535 | |||||||
|
| |||||||
Insurance – Property & Casualty – 0.3% | ||||||||
Berkshire Hathaway, Inc., 3.125%, 3/15/2026 | $ | 1,162,000 | $ | 1,218,408 | ||||
Liberty Mutual Group, Inc., 4.25%, 6/15/2023 (n) | 1,699,000 | 1,804,741 | ||||||
Marsh & McLennan Cos., Inc., 4.8%, 7/15/2021 | 3,270,000 | 3,626,103 | ||||||
ZFS Finance USA Trust V, 6.5% to 5/09/2017, FRN to 5/09/2067 (n) | 1,514,000 | 1,514,000 | ||||||
|
| |||||||
$ | 8,163,252 | |||||||
|
| |||||||
International Market Quasi-Sovereign – 0.4% | ||||||||
KFW International Finance, Inc., 4.875%, 6/17/2019 | $ | 4,560,000 | $ | 5,076,794 | ||||
Temasek Financial I Ltd., 2.375%, 1/23/2023 (n) | 6,400,000 | 6,601,901 | ||||||
|
| |||||||
$ | 11,678,695 | |||||||
|
| |||||||
Internet – 0.2% | ||||||||
Baidu, Inc., 3.5%, 11/28/2022 | $ | 3,950,000 | $ | 4,039,768 | ||||
|
| |||||||
Local Authorities – 0.2% | ||||||||
New Jersey Turnpike Authority Rev. (Build America Bonds), “F”, 7.414%, 1/01/2040 | $ | 3,685,000 | $ | 5,768,278 | ||||
|
| |||||||
Major Banks – 1.6% | ||||||||
ABN AMRO Bank N.V., 4.8%, 4/18/2026 (n) | $ | 2,400,000 | $ | 2,498,825 | ||||
Bank of America Corp., 5.49%, 3/15/2019 | 2,989,000 | 3,231,719 | ||||||
Bank of America Corp., 4.1%, 7/24/2023 | 3,870,000 | 4,146,066 | ||||||
Bank of America Corp., 4.125%, 1/22/2024 | 5,102,000 | 5,487,604 | ||||||
BNP Paribas, 7.195% to 6/25/37, FRN to 6/29/2049 (n) | 1,842,000 | 1,989,360 | ||||||
Credit Suisse Group AG, 6.5%, 8/08/2023 (n) | 1,300,000 | 1,359,150 | ||||||
ING Bank N.V., 5.8%, 9/25/2023 (n) | 3,438,000 | 3,772,920 | ||||||
JPMorgan Chase & Co., 6.3%, 4/23/2019 | 3,410,000 | 3,833,232 | ||||||
Mitsubishi UFJ Financial Group, Inc., 3.85%, 3/01/2026 | 2,336,000 | 2,548,543 | ||||||
Morgan Stanley, 3.875%, 4/29/2024 | 3,188,000 | 3,412,489 | ||||||
Morgan Stanley, 6.625%, 4/01/2018 | 4,287,000 | 4,646,135 |
9
Table of Contents
MFS Total Return Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Major Banks – continued | ||||||||
Morgan Stanley, 4%, 7/23/2025 | $ | 1,206,000 | $ | 1,291,372 | ||||
PNC Funding Corp., 5.625%, 2/01/2017 | 3,348,000 | 3,430,699 | ||||||
Wells Fargo & Co., 5.9% to 6/15/2024, FRN to 12/29/2049 | 1,743,000 | 1,793,111 | ||||||
|
| |||||||
$ | 43,441,225 | |||||||
|
| |||||||
Medical & Health Technology & Services – 0.5% | ||||||||
Becton, Dickinson and Co., 6.375%, 8/01/2019 | $ | 3,950,000 | $ | 4,498,928 | ||||
Becton, Dickinson and Co., 2.675%, 12/15/2019 | 1,842,000 | 1,894,556 | ||||||
Express Scripts Holding Co., 2.65%, 2/15/2017 | 3,087,000 | 3,119,818 | ||||||
Laboratory Corp. of America Holdings, 3.2%, 2/01/2022 | 2,640,000 | 2,730,763 | ||||||
|
| |||||||
$ | 12,244,065 | |||||||
|
| |||||||
Medical Equipment – 0.3% | ||||||||
Medtronic, Inc., 4.375%, 3/15/2035 | $ | 2,886,000 | $ | 3,264,470 | ||||
Zimmer Holdings, Inc., 3.55%, 4/01/2025 | 3,762,000 | 3,877,501 | ||||||
|
| |||||||
$ | 7,141,971 | |||||||
|
| |||||||
Metals & Mining – 0.1% | ||||||||
Freeport-McMoRan Copper & Gold, Inc., 3.875%, 3/15/2023 | $ | 3,570,000 | $ | 3,123,750 | ||||
|
| |||||||
Midstream – 0.7% | ||||||||
APT Pipelines Ltd., 4.2%, 3/23/2025 (n) | $ | 3,780,000 | $ | 3,877,138 | ||||
Energy Transfer Partners LP, 3.6%, 2/01/2023 | 1,975,000 | 1,892,528 | ||||||
Energy Transfer Partners LP, 4.9%, 2/01/2024 | 1,270,000 | 1,298,415 | ||||||
Enterprise Products Operating LP, 6.5%, 1/31/2019 | 2,995,000 | 3,353,924 | ||||||
Kinder Morgan Energy Partners LP, 4.15%, 2/01/2024 | 1,369,000 | 1,376,027 | ||||||
Kinder Morgan Energy Partners LP, 7.4%, 3/15/2031 | 1,023,000 | 1,115,855 | ||||||
Kinder Morgan Energy Partners LP, 7.75%, 3/15/2032 | 1,661,000 | 1,863,037 | ||||||
Spectra Energy Capital LLC, 8%, 10/01/2019 | 2,734,000 | 3,138,670 | ||||||
|
| |||||||
$ | 17,915,594 | |||||||
|
| |||||||
Mortgage-Backed – 12.0% | ||||||||
Fannie Mae, 3%, 10/01/2030 | $ | 1,970,609 | $ | 2,067,041 | ||||
Fannie Mae, 4%, 9/01/2040 – 7/01/2043 | 6,913,428 | 7,431,775 | ||||||
Fannie Mae, 3.5%, 7/01/2043 | 1,982,340 | 2,096,138 | ||||||
Fannie Mae, 3.5%, 6/01/2045 – 9/01/2045 | 7,075,858 | 7,470,870 | ||||||
Fannie Mae, 5.27%, 12/01/2016 | 1,540,689 | 1,540,203 | ||||||
Fannie Mae, 5.05%, 1/01/2017 | 451,143 | 452,296 | ||||||
Fannie Mae, 5.599%, 1/01/2017 | 218 | 218 | ||||||
Fannie Mae, 6%, 1/01/2017 – 7/01/2037 | 10,191,762 | 11,704,865 | ||||||
Fannie Mae, 5.5%, 11/01/2017 – 4/01/2040 | 19,761,620 | 22,278,850 | ||||||
Fannie Mae, 3.8%, 2/01/2018 | 309,349 | 319,301 |
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Mortgage-Backed – continued | ||||||||
Fannie Mae, 3.91%, 2/01/2018 | $ | 451,711 | $ | 466,591 | ||||
Fannie Mae, 5%, 2/01/2018 – 3/01/2041 | 8,492,280 | 9,392,017 | ||||||
Fannie Mae, 4.5%, 4/01/2018 – 6/01/2044 | 19,414,992 | 21,268,366 | ||||||
Fannie Mae, 2.578%, 9/25/2018 | 2,289,816 | 2,349,468 | ||||||
Fannie Mae, 4.6%, 9/01/2019 | 477,347 | 521,223 | ||||||
Fannie Mae, 2.59%, 5/01/2023 | 476,850 | 500,667 | ||||||
Fannie Mae, 2.7%, 7/01/2025 | 367,000 | 381,253 | ||||||
Fannie Mae, 3%, 3/01/2027 – 12/01/2030 | 8,681,163 | 9,111,191 | ||||||
Fannie Mae, 6.5%, 6/01/2031 – 7/01/2037 | 3,017,256 | 3,554,937 | ||||||
Fannie Mae, 4%, 9/01/2040 - 2/01/2045 | 29,778,120 | 32,019,807 | ||||||
Fannie Mae, 3.5%, 11/01/2041 – 10/01/2045 | 11,434,062 | 12,127,740 | ||||||
Fannie Mae, 3.5%, 4/01/2043 – 9/01/2043 | 9,070,993 | 9,589,860 | ||||||
Fannie Mae, TBA, 3.5%, 7/01/2031 | 6,164,000 | 6,531,526 | ||||||
Fannie Mae, TBA, 3%, 7/01/2031 | 1,783,000 | 1,869,225 | ||||||
Freddie Mac, 4%, 4/01/2044 – 9/01/2044 | 9,024,536 | 9,660,193 | ||||||
Freddie Mac, 6%, 4/01/2017 – 6/01/2037 | 4,553,876 | 5,191,609 | ||||||
Freddie Mac, 5%, 12/01/2017 – 7/01/2039 | 4,915,557 | 5,413,229 | ||||||
Freddie Mac, 3.154%, 2/25/2018 | 404,086 | 415,615 | ||||||
Freddie Mac, 4.5%, 5/01/2018 – 5/01/2042 | 5,046,996 | 5,457,111 | ||||||
Freddie Mac, 2.412%, 8/25/2018 | 1,811,478 | 1,856,673 | ||||||
Freddie Mac, 5.5%, 1/01/2019 – 2/01/2037 | 4,170,211 | 4,665,096 | ||||||
Freddie Mac, 5.085%, 3/25/2019 | 4,316,000 | 4,711,226 | ||||||
Freddie Mac, 2.456%, 8/25/2019 | 500,000 | 518,294 | ||||||
Freddie Mac, 1.869%, 11/25/2019 | 1,266,000 | 1,291,298 | ||||||
Freddie Mac, 2.791%, 1/25/2022 | 1,485,000 | 1,572,620 | ||||||
Freddie Mac, 2.716%, 6/25/2022 | 1,059,508 | 1,120,088 | ||||||
Freddie Mac, 2.51%, 11/25/2022 | 1,272,000 | 1,332,464 | ||||||
Freddie Mac, 3.111%, 2/25/2023 | 2,136,000 | 2,315,339 | ||||||
Freddie Mac, 3.32%, 2/25/2023 | 618,000 | 677,673 | ||||||
Freddie Mac, 3.25%, 4/25/2023 | 2,474,000 | 2,701,968 | ||||||
Freddie Mac, 3.458%, 8/25/2023 | 2,553,000 | 2,821,871 | ||||||
Freddie Mac, 3.171%, 10/25/2024 | 1,304,000 | 1,420,486 | ||||||
Freddie Mac, 2.67%, 12/25/2024 | 1,561,000 | 1,640,342 | ||||||
Freddie Mac, 2.673%, 3/25/2026 | 1,450,000 | 1,518,409 | ||||||
Freddie Mac, 3%, 11/01/2030 – 5/01/2043 | 13,668,894 | 14,336,828 | ||||||
Freddie Mac, 6.5%, 5/01/2034 – 9/01/2037 | 1,946,290 | 2,282,628 | ||||||
Freddie Mac, 4%, 11/01/2040 – 9/01/2045 | 13,970,695 | 15,001,060 | ||||||
Freddie Mac, 3.5%, 2/01/2042 – 12/01/2045 | 22,791,497 | 24,205,583 | ||||||
Ginnie Mae, 4%, 2/20/2042 | 139,911 | 150,522 | ||||||
Ginnie Mae, 3%, 2/15/2043 – 6/20/2043 | 4,671,674 | 4,901,562 | ||||||
Ginnie Mae, 6%, 9/15/2032 – 1/15/2038 | 3,547,060 | 4,138,683 | ||||||
Ginnie Mae, 5.5%, 5/15/2033 – 10/15/2035 | 2,317,638 | 2,645,618 |
10
Table of Contents
MFS Total Return Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Mortgage-Backed – continued | ||||||||
Ginnie Mae, 4.5%, 7/20/2033 – 1/20/2041 | $ | 6,107,966 | $ | 6,759,196 | ||||
Ginnie Mae, 5%, 7/20/2033 – 12/15/2034 | 769,143 | 869,277 | ||||||
Ginnie Mae, 4%, 1/20/2041 – 4/20/2041 | 6,528,383 | 7,034,614 | ||||||
Ginnie Mae, 3.5%, 12/15/2041 – 12/20/2045 | 10,985,884 | 11,706,847 | ||||||
Ginnie Mae, 3%, 7/20/2043 | 664,122 | 696,699 | ||||||
|
| |||||||
$ | 316,076,149 | |||||||
|
| |||||||
Network & Telecom – 0.4% | ||||||||
AT&T, Inc., 3%, 6/30/2022 | $ | 2,565,000 | $ | 2,626,750 | ||||
AT&T, Inc., 3.4%, 5/15/2025 | 2,565,000 | 2,623,756 | ||||||
Verizon Communications, Inc., 6.4%, 9/15/2033 | 1,031,000 | 1,315,971 | ||||||
Verizon Communications, Inc., 5.05%, 3/15/2034 | 3,101,000 | 3,441,784 | ||||||
|
| |||||||
$ | 10,008,261 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 0.9% | ||||||||
Banco de Credito del Peru, 5.375%, 9/16/2020 | $ | 2,967,000 | $ | 3,293,370 | ||||
BBVA Bancomer S.A. de C.V., 6.75%, 9/30/2022 (n) | 2,890,000 | 3,226,309 | ||||||
Capital One Financial Corp., 6.15%, 9/01/2016 | 4,542,000 | 4,577,328 | ||||||
Citigroup, Inc., 2.5%, 9/26/2018 | 2,450,000 | 2,498,559 | ||||||
Discover Bank, 4.2%, 8/08/2023 | 1,540,000 | 1,627,800 | ||||||
Groupe BPCE S.A., 12.5% to 9/30/2019, FRN to 8/29/2049 (n) | 3,106,000 | 3,832,649 | ||||||
Swedbank AB, 2.125%, 9/29/2017 (n) | 821,000 | 829,568 | ||||||
UBS Group Funding (Jersey) Ltd., 4.125%, 4/15/2026 (z) | 2,536,000 | 2,635,612 | ||||||
|
| |||||||
$ | 22,521,195 | |||||||
|
| |||||||
Pharmaceuticals – 0.6% | ||||||||
AbbVie, Inc., 3.6%, 5/14/2025 | $ | 1,783,000 | $ | 1,868,281 | ||||
Actavis Funding SCS, 3.8%, 3/15/2025 | 1,429,000 | 1,488,772 | ||||||
Actavis Funding SCS, 4.85%, 6/15/2044 | 1,653,000 | 1,740,827 | ||||||
Celgene Corp., 2.875%, 8/15/2020 | 1,545,000 | 1,597,731 | ||||||
Gilead Sciences, Inc., 3.7%, 4/01/2024 | 915,000 | 990,822 | ||||||
Gilead Sciences, Inc., 3.5%, 2/01/2025 | 5,767,000 | 6,148,083 | ||||||
Roche Holdings, Inc., 6%, 3/01/2019 (n) | 383,000 | 430,932 | ||||||
Teva Pharmaceutical Finance IV LLC, 3.65%, 11/10/2021 | 1,416,000 | 1,500,572 | ||||||
|
| |||||||
$ | 15,766,020 | |||||||
|
| |||||||
Real Estate – Healthcare – 0.1% | ||||||||
HCP, Inc., REIT, 5.375%, 2/01/2021 | $ | 2,622,000 | $ | 2,914,804 | ||||
|
| |||||||
Retailers – 0.1% | ||||||||
Home Depot, Inc., 5.95%, 4/01/2041 | $ | 989,000 | $ | 1,364,736 | ||||
|
| |||||||
Supranational – 0.1% | ||||||||
Asian Development Bank, 1.125%, 3/15/2017 | $ | 2,069,000 | $ | 2,074,872 | ||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
Telecommunications – Wireless – 0.5% | ||||||||
American Tower Trust I, REIT, 3.07%, 3/15/2023 (n) | $ | 3,560,000 | $ | 3,656,251 | ||||
Crown Castle Towers LLC, 6.113%, 1/15/2020 (n) | 2,493,000 | 2,773,113 | ||||||
Crown Castle Towers LLC, 4.883%, 8/15/2020 (n) | 1,270,000 | 1,384,469 | ||||||
Rogers Communications, Inc., 6.8%, 8/15/2018 | 5,026,000 | 5,565,978 | ||||||
|
| |||||||
$ | 13,379,811 | |||||||
|
| |||||||
Tobacco – 0.3% | ||||||||
Imperial Tobacco Finance PLC, 2.95%, 7/21/2020 (z) | $ | 2,518,000 | $ | 2,592,991 | ||||
Reynolds American, Inc., 4.45%, 6/12/2025 | 5,591,000 | 6,261,573 | ||||||
|
| |||||||
$ | 8,854,564 | |||||||
|
| |||||||
Transportation – Services – 0.1% | ||||||||
ERAC USA Finance LLC, 7%, 10/15/2037 (n) | $ | 2,696,000 | $ | 3,672,960 | ||||
|
| |||||||
U.S. Government Agencies and Equivalents – 0.1% | ||||||||
Small Business Administration, 4.35%, 7/01/2023 | $ | 5,698 | $ | 6,037 | ||||
Small Business Administration, 4.77%, 4/01/2024 | 319,704 | 344,649 | ||||||
Small Business Administration, 5.18%, 5/01/2024 | 526,678 | 573,729 | ||||||
Small Business Administration, 5.52%, 6/01/2024 | 26,171 | 28,835 | ||||||
Small Business Administration, 4.99%, 9/01/2024 | 497,898 | 540,622 | ||||||
Small Business Administration, 4.95%, 3/01/2025 | 16,576 | 18,039 | ||||||
Small Business Administration, 5.11%, 8/01/2025 | 1,735,381 | 1,889,738 | ||||||
|
| |||||||
$ | 3,401,649 | |||||||
|
| |||||||
U.S. Treasury Obligations – 11.9% | ||||||||
U.S. Treasury Bonds, 8%, 11/15/2021 | $ | 723,000 | $ | 984,325 | ||||
U.S. Treasury Bonds, 6%, 2/15/2026 | 777,000 | 1,094,265 | ||||||
U.S. Treasury Bonds, 6.75%, 8/15/2026 | 2,569,000 | 3,847,478 | ||||||
U.S. Treasury Bonds, 5.375%, 2/15/2031 | 574,000 | 851,336 | ||||||
U.S. Treasury Bonds, 4.5%, 2/15/2036 | 1,203,000 | 1,732,790 | ||||||
U.S. Treasury Bonds, 5%, 5/15/2037 | 1,609,000 | 2,473,335 | ||||||
U.S. Treasury Bonds, 4.5%, 8/15/2039 | 19,973,600 | 28,874,336 | ||||||
U.S. Treasury Bonds, 2.875%, 5/15/2043 | 40,040,500 | 45,025,222 | ||||||
U.S. Treasury Bonds, 2.5%, 2/15/2045 | 19,673,000 | 20,482,210 | ||||||
U.S. Treasury Notes, 1.375%, 2/29/2020 | 2,412,000 | 2,457,507 | ||||||
U.S. Treasury Notes, 0.75%, 6/30/2017 | 8,509,000 | 8,528,613 | ||||||
U.S. Treasury Notes, 4.75%, 8/15/2017 | 1,507,000 | 1,577,347 | ||||||
U.S. Treasury Notes, 3.75%, 11/15/2018 | 17,568,000 | 18,858,159 | ||||||
U.S. Treasury Notes, 2.75%, 2/15/2019 | 51,407,000 | 54,186,165 | ||||||
U.S. Treasury Notes, 3.125%, 5/15/2019 | 33,754,000 | 36,077,220 | ||||||
U.S. Treasury Notes, 1%, 6/30/2019 | 5,900,000 | 5,950,014 | ||||||
U.S. Treasury Notes, 3.5%, 5/15/2020 | 25,260,000 | 27,764,302 |
11
Table of Contents
MFS Total Return Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
BONDS – continued | ||||||||
U.S. Treasury Obligations – continued | ||||||||
U.S. Treasury Notes, 3.125%, 5/15/2021 | $ | 17,180,000 | $ | 18,901,350 | ||||
U.S. Treasury Notes, 2.5%, 8/15/2023 | 31,120,000 | 33,712,918 | ||||||
|
| |||||||
$ | 313,378,892 | |||||||
|
| |||||||
Utilities – Electric Power – 1.0% | ||||||||
Berkshire Hathaway Energy Co., 3.75%, 11/15/2023 | $ | 1,930,000 | $ | 2,108,980 | ||||
Exelon Corp., 3.4%, 4/15/2026 | 3,438,000 | 3,593,147 | ||||||
MidAmerican Funding LLC, 6.927%, 3/01/2029 | 903,000 | 1,265,656 | ||||||
Oncor Electric Delivery Co., 7%, 9/01/2022 | 2,810,000 | 3,578,364 | ||||||
Pacific Gas & Electric Co., 4.6%, 6/15/2043 | 2,940,000 | 3,364,407 | ||||||
PPL Capital Funding, Inc., 5%, 3/15/2044 | 870,000 | 973,466 | ||||||
PPL Corp., 3.4%, 6/01/2023 | 2,940,000 | 3,067,902 | ||||||
Progress Energy, Inc., 3.15%, 4/01/2022 | 3,893,000 | 4,051,204 | ||||||
Southern Co., 3.25%, 7/01/2026 | 3,913,000 | 4,064,523 | ||||||
Waterford 3 Funding Corp., 8.09%, 1/02/2017 | 891,821 | 891,846 | ||||||
|
| |||||||
$ | 26,959,495 | |||||||
|
| |||||||
Total Bonds (Identified Cost, $974,139,665) | $ | 1,035,993,844 | ||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
CONVERTIBLE PREFERRED STOCKS – 0.7% | ||||||||
Food & Beverages – 0.3% | ||||||||
Tyson Foods, Inc., 4.75% | 120,700 | $ | 8,917,316 | |||||
|
| |||||||
Pharmaceuticals – 0.1% | ||||||||
Allergan PLC, 5.5% | 3,200 | $ | 2,667,584 | |||||
|
| |||||||
Telephone Services – 0.1% | ||||||||
Frontier Communications Corp., 11.125% | 17,033 | $ | 1,615,069 | |||||
|
| |||||||
Utilities – Electric Power – 0.2% | ||||||||
Exelon Corp., 6.5% | 113,626 | $ | 5,606,307 | |||||
|
| |||||||
Total Convertible Preferred Stocks (Identified Cost, $16,475,792) | $ | 18,806,276 | ||||||
|
|
Strike Price | First Exercise | |||||||||||||||
WARRANTS – 0.0% | ||||||||||||||||
Medical & Health Technology & Services – 0.0% | ||||||||||||||||
HealthSouth Corp. (1 share for 1 warrant) (Identified Cost, $0) (a) | $ | 41.40 | 1/04/16 | 1,156 | $ | 1,954 | ||||||||||
|
| |||||||||||||||
MONEY MARKET FUNDS – 1.2% | ||||||||||||||||
MFS Institutional Money Market Portfolio, 0.36%, at Cost and Net Asset Value (v) | 30,383,751 | $ | 30,383,751 | |||||||||||||
|
| |||||||||||||||
Total Investments (Identified Cost, $2,200,184,529) | $ | 2,632,729,704 | ||||||||||||||
|
| |||||||||||||||
OTHER ASSETS, LESS LIABILITIES – 0.1% | 2,277,003 | |||||||||||||||
|
| |||||||||||||||
NET ASSETS – 100.0% | $ | 2,635,006,707 | ||||||||||||||
|
|
(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. |
(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 $70,521,967, representing 2.7% of net assets. |
(v) | Underlying affiliated fund that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end. |
(z) | Restricted securities are not registered under the Securities Act of 1933 and are subject to legal restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are subsequently registered. Disposal of these securities may involve time-consuming negotiations and prompt sale at an acceptable price may be difficult. The fund holds the following restricted securities: |
Restricted Securities | Acquisition Date | Cost | Value | |||||||
Atrium CDO Corp., FRN, 1.42%, 11/16/2022 | 2/03/16-2/04/16 | $991,178 | $988,115 | |||||||
Bayview Financial Revolving Mortgage Loan Trust, FRN, 2.037%, 12/28/2040 | 3/01/06 | 2,507,712 | 1,808,729 | |||||||
BlackRock Capital Finance LP, 7.75%, 9/25/2026 | 8/16/13 | 45,829 | 9,363 | |||||||
Chesapeake Funding II LLC, 2016-2A, “A2”, FRN, 1.448%, 6/15/2028 | 6/14/16 | 3,425,000 | 3,424,658 | |||||||
Imperial Tobacco Finance PLC, 2.95%, 7/21/2020 | 7/15/2015 | 2,495,562 | 2,592,991 | |||||||
State Grid Overseas Investment (2014) Ltd., 2.75%, 5/07/2019 | 4/28/14 | 2,576,942 | 2,668,435 | |||||||
UBS Group Funding (Jersey) Ltd., 4.125%, 4/15/2026 | 3/29/16 | 2,530,504 | 2,635,612 | |||||||
Total Restricted Securities | $14,127,903 | |||||||||
% of Net assets | 0.5% |
12
Table of Contents
MFS Total Return Series
Portfolio of Investments (unaudited) – continued
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 the current rate may not be the rate reported at period end. |
PLC | Public Limited Company |
REIT | Real Estate Investment Trust |
TBA | To Be Announced |
See Notes to Financial Statements
13
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 6/30/16 | ||||||||
Assets | ||||||||
Investments | ||||||||
Non-affiliated issuers, at value (identified cost, $2,169,800,778) | $2,602,345,953 | |||||||
Underlying affiliated funds, at cost and value | 30,383,751 | |||||||
Total investments, at value (identified cost, $2,200,184,529) | $2,632,729,704 | |||||||
Cash | 78,110 | |||||||
Foreign currency, at value (identified cost, $92,223) | 91,839 | |||||||
Receivables for | ||||||||
Investments sold | 14,670,003 | |||||||
Fund shares sold | 1,121,855 | |||||||
Interest and dividends | 10,128,353 | |||||||
Receivable from investment adviser | 29,947 | |||||||
Other assets | 6,196 | |||||||
Total assets | $2,658,856,007 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Investments purchased | $13,345,928 | |||||||
TBA purchase commitments | 8,403,946 | |||||||
Fund shares reacquired | 1,730,694 | |||||||
Payable to affiliates | ||||||||
Shareholder servicing costs | 427 | |||||||
Distribution and/or service fees | 16,628 | |||||||
Payable for independent Trustees’ compensation | 66 | |||||||
Accrued expenses and other liabilities | 351,611 | |||||||
Total liabilities | $23,849,300 | |||||||
Net assets | $2,635,006,707 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $2,009,883,410 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 432,512,146 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | 90,543,654 | |||||||
Undistributed net investment income | 102,067,497 | |||||||
Net assets | $2,635,006,707 | |||||||
Shares of beneficial interest outstanding | 111,375,287 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $1,399,714,553 | 58,699,955 | $23.85 | |||||||||
Service Class | 1,235,292,154 | 52,675,332 | 23.45 |
See Notes to Financial Statements
14
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 6/30/16 | ||||||||
Net investment income |
| |||||||
Income | ||||||||
Dividends | $22,004,185 | |||||||
Interest | 16,634,622 | |||||||
Dividends from underlying affiliated funds | 68,244 | |||||||
Foreign taxes withheld | (295,715 | ) | ||||||
Total investment income | $38,411,336 | |||||||
Expenses | ||||||||
Management fee | $9,256,419 | |||||||
Distribution and/or service fees | 1,483,389 | |||||||
Shareholder servicing costs | 45,199 | |||||||
Administrative services fee | 209,760 | |||||||
Independent Trustees’ compensation | 24,660 | |||||||
Custodian fee | 84,437 | |||||||
Shareholder communications | 88,308 | |||||||
Audit and tax fees | 36,002 | |||||||
Legal fees | 11,938 | |||||||
Miscellaneous | 34,455 | |||||||
Total expenses | $11,274,567 | |||||||
Reduction of expenses by investment adviser | (1,439,328 | ) | ||||||
Net expenses | $9,835,239 | |||||||
Net investment income | $28,576,097 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $24,369,919 | |||||||
Foreign currency | 17,770 | |||||||
Net realized gain (loss) on investments and foreign currency | $24,387,689 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $83,501,757 | |||||||
Translation of assets and liabilities in foreign currencies | (2,306 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $83,499,451 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $107,887,140 | |||||||
Change in net assets from operations | $136,463,237 |
See Notes to Financial Statements
15
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 6/30/16 (unaudited | ) | | Year ended 12/31/15 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $28,576,097 | $70,198,536 | ||||||
Net realized gain (loss) on investments and foreign currency | 24,387,689 | 85,865,410 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 83,499,451 | (165,414,115 | ) | |||||
Change in net assets from operations | $136,463,237 | $(9,350,169 | ) | |||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(70,334,733 | ) | |||||
From net realized gain on investments | — | (104,926,629 | ) | |||||
Total distributions declared to shareholders | $— | $(175,261,362 | ) | |||||
Change in net assets from fund share transactions | $(116,323,935 | ) | $(233,477,805 | ) | ||||
Total change in net assets | $20,139,302 | $(418,089,336 | ) | |||||
Net assets | ||||||||
At beginning of period | 2,614,867,405 | 3,032,956,741 | ||||||
At end of period (including undistributed net investment income of $102,067,497 and $73,491,400, respectively) | $2,635,006,707 | $2,614,867,405 |
See Notes to Financial Statements
16
Table of Contents
MFS Total Return Series
FINANCIAL STATEMENTS | FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund’s financial performance for the semiannual period and the past 5 fiscal years.
Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
Initial Class | Six months ended 6/30/16 | Years ended 12/31 | ||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $22.60 | $24.31 | $23.44 | $20.05 | $18.53 | $18.71 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.27 | $0.62 | $0.54 | $0.45 | $0.44 | $0.44 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 0.98 | (0.77 | ) | 1.43 | 3.34 | 1.63 | (0.12 | ) | ||||||||||||||||
Total from investment operations | $1.25 | $(0.15 | ) | $1.97 | $3.79 | $2.07 | $0.32 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.64 | ) | $(0.46 | ) | $(0.40 | ) | $(0.55 | ) | $(0.50 | ) | |||||||||||||
From net realized gain on investments | — | (0.92 | ) | (0.64 | ) | — | — | — | ||||||||||||||||
Total distributions declared to shareholders | $— | $(1.56 | ) | $(1.10 | ) | $(0.40 | ) | $(0.55 | ) | $(0.50 | ) | |||||||||||||
Net asset value, end of period (x) | $23.85 | $22.60 | $24.31 | $23.44 | $20.05 | $18.53 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 5.53 | (n) | (0.37 | ) | 8.50 | 19.05 | 11.26 | 1.77 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.76 | (a) | 0.79 | 0.78 | 0.79 | 0.80 | 0.81 | |||||||||||||||||
Expenses after expense reductions (f) | 0.65 | (a) | 0.65 | 0.67 | 0.73 | 0.77 | 0.78 | |||||||||||||||||
Net investment income | 2.34 | (a) | 2.57 | 2.24 | 2.05 | 2.26 | 2.36 | |||||||||||||||||
Portfolio turnover | 17 | (n) | 41 | 32 | 53 | 22 | 19 | |||||||||||||||||
Net assets at end of period (000 omitted) | $1,399,715 | $1,423,284 | $1,662,709 | $1,826,378 | $1,440,525 | $1,574,503 | ||||||||||||||||||
Service Class | Six months (unaudited) | Years ended 12/31 | ||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value, beginning of period | $22.26 | $23.95 | $23.12 | $19.80 | $18.31 | $18.48 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.23 | $0.55 | $0.47 | $0.39 | $0.39 | $0.39 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 0.96 | (0.74 | ) | 1.41 | 3.29 | 1.60 | (0.11 | ) | ||||||||||||||||
Total from investment operations | $1.19 | $(0.19 | ) | $1.88 | $3.68 | $1.99 | $0.28 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.58 | ) | $(0.41 | ) | $(0.36 | ) | $(0.50 | ) | $(0.45 | ) | |||||||||||||
From net realized gain on investments | — | (0.92 | ) | (0.64 | ) | — | — | — | ||||||||||||||||
Total distributions declared to shareholders | $— | $(1.50 | ) | $(1.05 | ) | $(0.36 | ) | $(0.50 | ) | $(0.45 | ) | |||||||||||||
Net asset value, end of period (x) | $23.45 | $22.26 | $23.95 | $23.12 | $19.80 | $18.31 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 5.35 | (n) | (0.58 | ) | 8.24 | 18.74 | 10.93 | 1.58 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.01 | (a) | 1.04 | 1.03 | 1.04 | 1.05 | 1.06 | |||||||||||||||||
Expenses after expense reductions (f) | 0.90 | (a) | 0.90 | 0.92 | 0.98 | 1.02 | 1.03 | |||||||||||||||||
Net investment income | 2.09 | (a) | 2.32 | 1.98 | 1.80 | 2.02 | 2.11 | |||||||||||||||||
Portfolio turnover | 17 | (n) | 41 | 32 | 53 | 22 | 19 | |||||||||||||||||
Net assets at end of period (000 omitted) | $1,235,292 | $1,191,583 | $1,370,248 | $1,392,627 | $872,739 | $859,243 |
See Notes to Financial Statements
17
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 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
18
Table of Contents
MFS Total Return Series
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) | Business and Organization |
MFS Total Return Series (the fund) is a diversified 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.
The fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued.
Balance Sheet Offsetting – The fund’s accounting policy with respect to balance sheet offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the International Swaps and Derivatives Association (ISDA) Master Agreement does not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty. The fund’s right to setoff may be restricted or prohibited by the bankruptcy or insolvency laws of the particular jurisdiction to which a specific master netting agreement counterparty is subject. Balance sheet offsetting disclosures, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
Investment Valuations – Equity securities, including restricted equity securities, are generally valued at the last sale or official closing price on their primary market or exchange as provided by a third-party pricing service. Equity securities, for which there were no sales reported that day, are generally valued at the last quoted daily bid quotation on their primary market or exchange as provided by a third-party pricing service. Debt instruments and floating rate loans, including restricted debt instruments, are generally valued at an evaluated or composite bid as provided by a third-party pricing service. Short-term instruments with a maturity at issuance of 60 days or less may be valued at amortized cost, which approximates market value. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. Values obtained from third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
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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, 2016 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $1,434,442,419 | $— | $— | $1,434,442,419 | ||||||||||||
United Kingdom | 9,813,870 | 25,858,062 | — | 35,671,932 | ||||||||||||
Switzerland | — | 26,340,196 | — | 26,340,196 | ||||||||||||
France | 3,537,874 | 8,366,063 | — | 11,903,937 | ||||||||||||
Canada | 11,382,596 | — | — | 11,382,596 | ||||||||||||
Japan | — | 10,071,550 | — | 10,071,550 | ||||||||||||
Germany | — | 8,868,561 | — | 8,868,561 | ||||||||||||
South Korea | — | 8,321,486 | — | 8,321,486 | ||||||||||||
Taiwan | 8,007,704 | — | — | 8,007,704 | ||||||||||||
Other Countries | 3,871,716 | 7,470,012 | — | 11,341,728 | ||||||||||||
U.S. Treasury Bonds & U.S. Government Agency & Equivalents | — | 318,317,131 | — | 318,317,131 | ||||||||||||
Non-U.S. Soverign Debt | — | 27,543,048 | — | 27,543,048 | ||||||||||||
U.S. Corporate Bonds | — | 236,950,620 | — | 236,950,620 | ||||||||||||
Residential Mortgage-Backed Securities | — | 318,336,713 | — | 318,336,713 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 44,273,515 | — | 44,273,515 | ||||||||||||
Asset-Backed Securities (including CDOs) | — | 20,322,927 | — | 20,322,927 | ||||||||||||
Foreign Bonds | — | 70,249,890 | — | 70,249,890 | ||||||||||||
Mutual Funds | 30,383,751 | — | — | 30,383,751 | ||||||||||||
Total Investments | $1,501,439,930 | $1,131,289,774 | $— | $2,632,729,704 |
For further information regarding security characteristics, see the Portfolio of Investments.
Of the level 2 investments presented above, equity investments amounting to $6,432,984 would have been considered level 1 investments at the beginning of the period. Of the level 1 investments presented above, equity investments amounting to $3,537,874 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. Security loans can be terminated at the discretion of either the lending agent or the fund and the related securities must be returned within the earlier of the standard trade settlement period for such securities or within three business days. The loans are collateralized by cash and/or U.S. Treasury and federal agency obligations in an amount typically at least equal to the market value of the securities loaned. On loans collateralized by cash, the cash collateral is invested in a money market fund. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. State Street provides the fund with indemnification against Borrower default. In the event of Borrower default, State Street will, for the benefit of the fund, either purchase securities identical to those loaned or, when such purchase is
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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. 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, 2016, there were no securities on loan or collateral outstanding.
Dollar Roll Transactions – The fund enters into dollar roll transactions, with respect to mortgage-backed securities issued by Ginnie Mae, Fannie Mae, and Freddie Mac, in which the fund sells mortgage-backed securities to financial institutions and simultaneously agrees to purchase similar (same issuer, type and coupon) securities at a later date at an agreed-upon price. During the period between the sale and repurchase in a dollar roll transaction the fund will not be entitled to receive interest and principal payments on the securities sold but is compensated by interest earned on the proceeds of the initial sale and by a lower purchase price on the securities to be repurchased which enhances the fund’s total return. The fund accounts for dollar roll transactions as purchases and sales and realizes gains and losses on these transactions.
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 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 that value 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 purchased or sold debt securities on a when-issued or delayed delivery basis, or in a “To Be Announced” (TBA) or “forward commitment” transaction with delivery or payment to occur at a later date beyond the normal settlement period. At the time a fund enters into a commitment to purchase or sell a security, the transaction is recorded and the value of the security acquired is reflected in the fund’s net asset value. The price of such security and the date that the security will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the security may vary with market fluctuations. TBA securities resulting from these transactions are included in the Portfolio of Investments. TBA purchase commitments are held at carrying amount, which approximates fair value and are categorized as level 2 within the fair value hierarchy. No interest accrues to the fund until payment takes place. At the time that a fund enters into this type of transaction, the fund is required to have sufficient cash and/or liquid securities to cover its commitments. Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract’s terms, or if the issuer does not issue the securities due to political, economic or other factors. Additionally, losses may arise due to declines in the value of the securities prior to settlement date.
To mitigate this risk of loss on TBA securities and other types of forward settling mortgage-backed securities, the fund whenever possible enters into a Master Securities Forward Transaction Agreement (“MSFTA”) on a bilateral basis with each of the counterparties with whom it undertakes a significant volume of transactions. The MSFTA gives each party to the agreement the right to terminate all transactions traded under such agreement if there is a certain deterioration in the credit quality of the other party. Upon an event of default or a termination of the MSFTA, the non-defaulting party has the right to close out all transactions traded under such agreement and to net amounts owed under each transaction to one net amount payable by one party to the other. This
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right to close out and net payments across all transactions traded under the MSFTA could result in a reduction of the fund’s credit risk to such counterparty equal to any amounts payable by the fund under the applicable transactions, if any.
For mortgage-backed securities traded under a MSFTA, the collateral and margining requirements are contract specific. Collateral amounts across all transactions traded under such agreement are netted and one amount is posted from one party to the other to collateralize such obligations. Cash that has been pledged to cover the fund’s collateral or margin obligations under a MSFTA, if any, will be reported separately on the Statement of Assets and Liabilities as restricted cash. Securities pledged as collateral or margin for the same purpose, if any, are noted in the Portfolio of Investments.
Fees Paid Indirectly – Prior to October 1, 2015, the fund’s custody fee could be reduced by a credit earned under an arrangement that measured the value of U.S. dollars deposited with the custodian by the fund. For the six months ended June 30, 2016, 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. Management has analyzed the fund’s tax positions taken on federal and state tax returns for all open tax years and does not believe that there are any uncertain tax positions that require recognition of a tax liability. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests. Additionally, capital gains realized by the fund on securities issued in or by certain foreign countries may be subject to capital gains tax imposed by those countries.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to 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:
12/31/15 | ||||
Ordinary income (including any short-term capital gains) | $91,290,015 | |||
Long-term capital gains | 83,971,347 | |||
Total distributions | $175,261,362 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/16 | ||||
Cost of investments | $2,219,345,882 | |||
Gross appreciation | 462,639,710 | |||
Gross depreciation | (49,255,888 | ) | ||
Net unrealized appreciation (depreciation) | $413,383,822 | |||
As of 12/31/15 | ||||
Undistributed ordinary income | $73,491,400 | |||
Undistributed long-term capital gain | 85,562,085 | |||
Other temporary differences | (30,723 | ) | ||
Net unrealized appreciation (depreciation) | 329,637,298 |
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
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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 6/30/16 | Year ended 12/31/15 | Six months ended 6/30/16 | Year ended 12/31/15 | |||||||||||||
Initial Class | $— | $39,788,464 | $— | $56,600,918 | ||||||||||||
Service Class | — | 30,546,269 | — | 48,325,711 | ||||||||||||
Total | $— | $70,334,733 | $— | $104,926,629 |
(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. For the period January 1, 2016 through April 28, 2016, the management fee was 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 had 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 terminated on April 28, 2016. For the period January 1, 2016 through April 28, 2016, this management fee reduction amounted to $679,992 which is included in the reduction of total expenses in the Statement of Operations.
Effective April 29, 2016, the management fee is computed daily and paid monthly at the following annual rates:
First $1 billion of average daily net assets | 0.70% | |||
Next $1.5 billion of average daily net assets | 0.65% | |||
Next $2.5 billion of average daily net assets | 0.60% | |||
Average daily net assets in excess of $5 billion | 0.50% |
MFS has also 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 six months ended June 30, 2016, this management fee reduction amounted to $91,848, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the six months ended June 30, 2016 was equivalent to an annual effective rate of 0.66% of the fund’s average daily net assets.
The investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, excluding interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses, such that total annual operating expenses do not exceed 0.65% of average daily net assets for the Initial Class shares and 0.90% of average daily net assets for the Service Class shares. This written agreement will terminate on July 31, 2016. For the six months ended June 30, 2016, this reduction amounted to $667,488 and is included in the reduction of total expenses in the Statement of Operations. Effective August 1, 2016, the investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, excluding interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses, such that total fund operating expenses do not exceed 0.625% of average daily net assets for the Initial Class shares and 0.875% 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, 2018.
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, 2016, the fee was $43,711, which equated to
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0.0034% 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, 2016, these costs amounted to $1,488.
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the six months ended June 30, 2016 was equivalent to an annual effective rate of 0.0163% of the fund’s average daily net assets.
Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – This fund and certain other funds managed by MFS (the funds) have entered into a service agreement (the ISO Agreement) which provides for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino serves as the ISO and is an officer of the funds and the sole member of Tarantino LLC. The funds can terminate the ISO Agreement with Tarantino LLC at any time under the terms of the ISO Agreement. For the six months ended June 30, 2016, the fee paid by the fund under this agreement was $2,561 and is included in “Miscellaneous” expense in the Statement of Operations. MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.
The fund 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.
The fund is permitted to engage in purchase and sale transactions (“cross-trades”) with funds and accounts for which MFS serves as investment adviser or sub-adviser pursuant to a policy adopted by the Board of Trustees. This policy has been designed to ensure that cross-trades conducted by the fund comply with Rule 17a-7 under the Investment Company Act of 1940. Under this policy, cross-trades are effected at current market prices with no remuneration paid in connection with the transaction. During the six months ended June 30, 2016, the fund engaged in purchase and sale transactions pursuant to this policy, which amounted to $145,416 and $16,535, respectively. The sales transactions resulted in net realized gains (losses) of $(6,361).
(4) | Portfolio Securities |
For the six months ended June 30, 2016, purchases and sales of investments, other than short-term obligations, were as follows:
Purchases | Sales | |||||||
U.S. Government securities | $168,063,373 | $200,962,288 | ||||||
Investments (non-U.S. Government securities) | $277,336,717 | $312,943,668 |
(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 6/30/16 | Year ended 12/31/15 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 1,020,062 | $23,530,178 | 1,367,391 | $32,496,281 | ||||||||||||
Service Class | 3,796,611 | 85,901,404 | 4,224,400 | 99,533,229 | ||||||||||||
4,816,673 | $109,431,582 | 5,591,791 | $132,029,510 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 4,433,734 | $96,389,382 | ||||||||||||
Service Class | — | — | 3,680,447 | 78,871,980 | ||||||||||||
— | $— | 8,114,181 | $175,261,362 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (5,284,281 | ) | $(120,975,564 | ) | (11,241,013 | ) | $(269,093,072 | ) | ||||||||
Service Class | (4,654,891 | ) | (104,779,953 | ) | (11,583,364 | ) | (271,675,605 | ) | ||||||||
(9,939,172 | ) | $(225,755,517 | ) | (22,824,377 | ) | $(540,768,677 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (4,264,219 | ) | $(97,445,386 | ) | (5,439,888 | ) | $(140,207,409 | ) | ||||||||
Service Class | (858,280 | ) | (18,878,549 | ) | (3,678,517 | ) | (93,270,396 | ) | ||||||||
(5,122,499 | ) | $(116,323,935 | ) | (9,118,405 | ) | $(233,477,805 | ) |
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(6) | Line of Credit |
The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Overnight Federal Reserve funds rate or daily one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Overnight Federal Reserve funds rate plus an agreed upon spread. For the six months ended June 30, 2016, the fund’s commitment fee and interest expense were $6,950 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 | 42,384,515 | 245,278,576 | (257,279,340 | ) | 30,383,751 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $68,244 | $30,383,751 |
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PROXY VOTING POLICIES AND INFORMATION
MFS votes proxies on behalf of the fund pursuant to proxy voting policies and procedures that are available without charge, upon request, by calling 1-800-225-2606, by visiting mfs.com (once you have selected “Individual Investor” as your role, click on “Individual Investor Home” in the top navigation and then select “Learn More About Proxy Voting” under the “I want to…” header on the left hand column of the page), or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available by August 31 of each year without charge by visiting mfs.com (once you have selected “Individual Investor” as your role, click on “Individual Investor Home” in the top navigation and then select “Learn More About Proxy Voting” under the “I want to…” header on the left hand column of the page), 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 on mfs.com by following these steps once you have selected “Individual Investor” as your role: (1) Click on the “Individual Investor Home” in the top navigation and then select the “Announcements” option within the “Market Outlooks” drop down, or (2) Click on “Products & Services” and “Variable Insurance Portfolios” and then select the fund’s name.
INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS
The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, 529 program manager (if applicable), and custodian who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.
Under the Trust’s By-Laws and Declaration of Trust, any claims asserted against or on behalf of the MFS Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of Massachusetts.
26
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SEMIANNUAL REPORT
June 30, 2016
MFS® UTILITIES SERIES
MFS® Variable Insurance Trust
VUF-SEM
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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 • MAY LOSE VALUE • NO BANK OR CREDIT UNION GUARANTEE • NOT A DEPOSIT • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
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MFS Utilities Series
Dear Contract Owners:
Global headwinds continue to restrain growth and profits, though developed market equities have remained resilient, underpinned by record-low interest rates. Rates are likely to stay low over the medium term, as many central banks have implemented accommodative monetary policies in an effort to reinvigorate their economies. Markets will have to deal with an additional headwind in the coming months and years as investors grapple with the fallout from the United Kingdom’s decision to leave the European Union. That process will take a considerable period of time to play out against a highly uncertain backdrop. Weakness in the pound sterling in the wake of the referendum has been a welcome shock absorber for UK financial markets.
Emerging markets have been beneficiaries of firmer commodity prices and diminishing fears of sharply higher interest rates from the U.S. Federal Reserve. China remains a source of concern for investors, as overcapacity in its manufacturing sector inhibits the government’s attempt to change its domestic economy from one driven by exports to a consumer-driven model.
At MFS®, we believe it is best to view markets through a long lens and not react to short-term swings. That makes it possible to filter out market noise and focus on long-term fundamentals.
In our view, the professional guidance of a financial advisor, along with a patient, long-term approach, will help you reach your investment objectives.
Respectfully,
Robert J. Manning
Chairman
MFS Investment Management
August 15, 2016
The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.
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MFS Utilities Series
Portfolio structure
Top ten holdings | ||||
NextEra Energy, Inc. | 5.0% | |||
Exelon Corp. | 4.6% | |||
PPL Corp. | 4.0% | |||
Sempra Energy | 3.6% | |||
Charter Communications, Inc., “A” | 2.9% | |||
EDP Renovaveis S.A. | 2.8% | |||
American Electric Power Co., Inc. | 2.6% | |||
Calpine Corp. | 2.6% | |||
Enel S.p.A. | 2.4% | |||
AES Corp. | 2.4% |
Top five industries | ||||
Utilities-Electric Power | 53.2% | |||
Natural Gas-Pipeline | 14.2% | |||
Telephone Services | 6.9% | |||
Natural Gas-Distribution | 6.4% | |||
Telecommunications–Wireless | 6.4% | |||
Issuer country weightings (x) | ||||
United States | 74.8% | |||
Portugal | 4.8% | |||
United Kingdom | 3.3% | |||
Italy | 2.6% | |||
Canada | 2.6% | |||
China | 1.7% | |||
France | 1.6% | |||
Sweden | 1.5% | |||
Brazil | 1.2% | |||
Other Countries | 5.9% |
(x) | Represents the portfolio’s exposure to issuer countries as a percentage of the portfolio’s net assets. For purposes of this presentation, United States includes Cash & Cash Equivalents and Other. |
Where the fund holds convertible bonds, these are treated as part of the equity portion of the portfolio.
Cash & Cash Equivalents includes any cash, investments in money market funds, short-term securities, and other assets less liabilities. Please see the Statement of Assets and Liabilities for additional information related to the fund’s cash position and other assets and liabilities.
Other includes equivalent exposure from currency derivatives and/or any offsets to derivative positions.
Percentages are based on net assets as of 6/30/16.
The portfolio is actively managed and current holdings may be different.
2
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MFS Utilities Series
Fund Expenses Borne by the Contract Holders during the Period,
January 1, 2016 through June 30, 2016
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, 2016 through June 30, 2016.
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 1/01/16 | Ending Account Value 6/30/16 | Expenses Paid During Period (p) 1/01/16-6/30/16 | ||||||||||||||
Initial Class | Actual | 0.78% | $1,000.00 | $1,152.19 | $4.17 | |||||||||||||
Hypothetical (h) | 0.78% | $1,000.00 | $1,020.98 | $3.92 | ||||||||||||||
Service Class | Actual | 1.03% | $1,000.00 | $1,151.09 | $5.51 | |||||||||||||
Hypothetical (h) | 1.03% | $1,000.00 | $1,019.74 | $5.17 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
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PORTFOLIO OF INVESTMENTS – 6/30/16 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 85.3% | ||||||||
Cable TV – 5.7% | ||||||||
Charter Communications, Inc., “A” (a) | 220,076 | $ | 50,318,209 | |||||
Comcast Corp., “A” | 573,999 | 37,418,995 | ||||||
Liberty Global PLC LiLAC, “C” (a) | 36,019 | 1,170,254 | ||||||
Liberty Global PLC, “C” (a) | 294,992 | 8,451,521 | ||||||
|
| |||||||
$ | 97,358,979 | |||||||
|
| |||||||
Energy – Independent – 0.6% | ||||||||
Enable Midstream Partners LP | 167,058 | $ | 2,256,954 | |||||
Western Gas Equity Partners LP | 192,107 | 7,348,093 | ||||||
|
| |||||||
$ | 9,605,047 | |||||||
|
| |||||||
Natural Gas – Distribution – 6.4% | ||||||||
China Gas Holdings Ltd. | 594,000 | $ | 905,000 | |||||
China Resources Gas Group Ltd. | 6,088,000 | 18,493,560 | ||||||
Engie | 1,113,889 | 17,936,364 | ||||||
NorthWestern Corp. | 101,726 | 6,415,859 | ||||||
Sempra Energy | 543,655 | 61,987,543 | ||||||
Snam Rete Gas S.p.A. | 672,283 | 4,022,035 | ||||||
|
| |||||||
$ | 109,760,361 | |||||||
|
| |||||||
Natural Gas – Pipeline – 13.2% | ||||||||
Cheniere Energy, Inc. (a) | 23,624 | $ | 887,081 | |||||
Columbia Pipeline Partners LP | 304,937 | 4,574,055 | ||||||
Enbridge, Inc. | 767,546 | 32,515,030 | ||||||
Energy Transfer Partners LP | 736,858 | 28,052,184 | ||||||
Enterprise Products Partners LP | 1,167,705 | 34,167,048 | ||||||
EQT GP Holdings LP | 153,580 | 3,914,754 | ||||||
EQT Midstream Partners LP | 230,051 | 18,473,095 | ||||||
JP Energy Partners LP | 183,374 | 1,547,677 | ||||||
Kinder Morgan, Inc. | 311,922 | 5,839,180 | ||||||
Plains All American Pipeline LP | 143,571 | 3,946,767 | ||||||
Plains GP Holdings LP | 1,011,001 | 10,544,740 | ||||||
SemGroup Corp., “A” | 206,616 | 6,727,417 | ||||||
Shell Midstream Partners, L.P. | 156,239 | 5,279,316 | ||||||
Sunoco Logistics Partners LP | 656,166 | 18,864,773 | ||||||
Tallgrass Energy GP LP | 319,877 | 7,219,624 | ||||||
TransCanada Corp. | 111,620 | 5,038,646 | ||||||
TransCanada Corp. (l) | 43,382 | 1,963,011 | ||||||
Williams Cos., Inc. | 773,049 | 16,721,050 | ||||||
Williams Partners LP | 533,327 | 18,474,412 | ||||||
|
| |||||||
$ | 224,749,860 | |||||||
|
| |||||||
Telecommunications – Wireless – 5.8% | ||||||||
Advanced Info Service PLC | 1,298,900 | $ | 5,840,245 | |||||
American Tower Corp., REIT | 239,440 | 27,202,778 | ||||||
Bharti Infratel Ltd. | 474,906 | 2,427,829 | ||||||
Cellnex Telecom S.A.U. | 49,291 | 773,164 | ||||||
Globe Telecom, Inc. | 6,990 | 352,416 | ||||||
KDDI Corp. | 401,100 | 12,210,014 | ||||||
Mobile TeleSystems PJSC, ADR | 1,201,032 | 9,944,545 | ||||||
SBA Communications Corp. (a) | 195,016 | 21,050,027 | ||||||
T-Mobile U.S., Inc. (a) | 19,870 | 859,775 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Telecommunications – Wireless – continued | ||||||||
Vodafone Group PLC | 6,239,962 | $ | 18,995,635 | |||||
|
| |||||||
$ | 99,656,428 | |||||||
|
| |||||||
Telephone Services – 6.1% | ||||||||
Altice N.V. (a) | 605,696 | $ | 9,108,362 | |||||
Bezeq – The Israel Telecommunication Corp. Ltd. | 2,596,564 | 5,157,711 | ||||||
BT Group PLC | 2,118,547 | 11,698,293 | ||||||
Com Hem Holding AB | 2,946,863 | 24,976,217 | ||||||
Hellenic Telecommunications Organization S.A. | 1,203,342 | 10,776,747 | ||||||
Numericable-SFR | 251,697 | 6,370,916 | ||||||
PT XL Axiata Tbk (a) | 30,198,500 | 8,388,155 | ||||||
Singapore Telecommunications Ltd. | 111,500 | 344,806 | ||||||
TDC A.S. | 2,753,441 | 13,477,365 | ||||||
Telus Corp. | 155,195 | 4,997,184 | ||||||
Verizon Communications, Inc. | 154,908 | 8,650,063 | ||||||
|
| |||||||
$ | 103,945,819 | |||||||
|
| |||||||
Utilities – Electric Power – 47.3% | ||||||||
AES Corp. | 3,227,037 | $ | 40,273,422 | |||||
Ameren Corp. | 479,846 | 25,710,149 | ||||||
American Electric Power Co., Inc. | 627,713 | 43,996,404 | ||||||
Atlantica Yield PLC (l) | 320,990 | 5,963,994 | ||||||
Avangrid, Inc. | 161,657 | 7,445,921 | ||||||
Calpine Corp. (a) | 2,973,019 | 43,852,030 | ||||||
China Longyuan Power Group | 11,725,000 | 9,768,540 | ||||||
Covanta Holding Corp. | 312,237 | 5,136,299 | ||||||
CPFL Energia S.A. | 685,090 | 4,391,244 | ||||||
DTE Energy Co. | 219,213 | 21,728,393 | ||||||
Dynegy, Inc. (a) | 57,622 | 6,207,042 | ||||||
Dynegy, Inc. (a) | 1,900,008 | 32,756,138 | ||||||
E.ON AG | 162,298 | 1,625,674 | ||||||
Edison International | 187,892 | 14,593,572 | ||||||
EDP Energias do Brasil S.A. (a) | 187,451 | 805,287 | ||||||
EDP Renovaveis S.A. | 6,361,474 | 48,160,528 | ||||||
Enel S.p.A. | 9,217,784 | 40,996,063 | ||||||
Energias de Portugal S.A. | 10,869,583 | 33,382,161 | ||||||
Energias do Brasil S.A. | 671,821 | 2,848,489 | ||||||
Exelon Corp. | 2,156,053 | 78,394,087 | ||||||
FirstEnergy Corp. | 572,960 | 20,002,034 | ||||||
Iberdrola S.A. | 2,300,203 | 15,537,980 | ||||||
NextEra Energy Partners LP | 534,204 | 16,229,118 | ||||||
NextEra Energy, Inc. | 658,932 | 85,924,733 | ||||||
NRG Energy, Inc. | 1,784,557 | 26,750,509 | ||||||
NRG Yield, Inc., “A” | 651,369 | 9,913,836 | ||||||
NRG Yield, Inc., “C” | 588,307 | 9,171,706 | ||||||
NTPC Ltd. | 165,271 | 383,656 | ||||||
PG&E Corp. | 573,975 | 36,688,482 | ||||||
PPL Corp. | 1,795,669 | 67,786,505 | ||||||
Public Service Enterprise Group, Inc. | 287,929 | 13,420,371 | ||||||
RWE AG (a) | 299,760 | 4,736,933 |
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MFS Utilities Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Utilities – Electric Power – continued | ||||||||
SSE PLC | 893,929 | $ | 18,691,970 | |||||
Tractebel Energia S.A. | 575,000 | 6,857,470 | ||||||
Xcel Energy, Inc. | 151,548 | 6,786,319 | ||||||
|
| |||||||
$ | 806,917,059 | |||||||
|
| |||||||
Utilities – Water – 0.2% | ||||||||
SUEZ Environnement | 218,618 | $ | 3,443,247 | |||||
|
| |||||||
Total Common Stocks (Identified Cost, $1,336,356,883) | $ | 1,455,436,800 | ||||||
|
| |||||||
CONVERTIBLE PREFERRED STOCKS – 8.6% | ||||||||
Energy – Independent – 0.6% | ||||||||
Anadarko Petroleum Corp., 7.5% | 286,425 | $ | 10,500,341 | |||||
|
| |||||||
Natural Gas – Pipeline – 1.1% | ||||||||
Kinder Morgan, Inc., 9.75% | 373,244 | $ | 18,232,969 | |||||
|
| |||||||
Telecommunications – Wireless – 0.5% | ||||||||
American Tower Corp., 5.5% | 78,385 | $ | 8,804,203 | |||||
|
| |||||||
Telephone Services – 0.8% | ||||||||
Frontier Communications Corp., 11.125% | 144,317 | $ | 13,684,138 | |||||
|
| |||||||
Utilities – Electric Power – 5.6% | ||||||||
Dominion Resources, Inc., 6.375% | 231,828 | $ | 12,017,964 | |||||
Dominion Resources, Inc., “B”, 6% | 271,910 | 16,341,791 | ||||||
Dynegy, Inc., 5.375% (l) | 189,547 | 11,742,437 | ||||||
Exelon Corp., 6.5% | 796,277 | 39,288,307 |
Issuer | Shares/Par | Value ($) | ||||||
CONVERTIBLE PREFERRED STOCKS – continued | ||||||||
Utilities – Electric Power – continued | ||||||||
NextEra Energy, Inc., 5.799% | 92,949 | $ | 6,200,628 | |||||
NextEra Energy, Inc., 6.371% | 151,093 | 9,787,805 | ||||||
|
| |||||||
$ | 95,378,932 | |||||||
|
| |||||||
Total Convertible Preferred Stocks (Identified Cost, $146,945,511) | $ | 146,600,583 | ||||||
|
| |||||||
PREFERRED STOCKS – 0.3% | ||||||||
Utilities – Electric Power – 0.3% | ||||||||
Companhia Paranaense de Energia (Identified Cost, $7,599,507) | 635,200 | $ | 5,777,961 | |||||
|
| |||||||
MONEY MARKET FUNDS – 5.4% | ||||||||
MFS Institutional Money Market Portfolio, 0.36%, at Cost and Net Asset Value (v) | 91,615,273 | $ | 91,615,273 | |||||
|
| |||||||
COLLATERAL FOR SECURITIES LOANED – 0.2% | ||||||||
Navigator Securities Lending Prime Portfolio, 0.53%, at Cost and Net Asset Value (j) | 4,020,431 | $ | 4,020,431 | |||||
|
| |||||||
Total Investments (Identified Cost, $1,586,537,605) | $ | 1,703,451,048 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – 0.2% | 3,040,824 | |||||||
|
| |||||||
NET ASSETS – 100.0% | $ | 1,706,491,872 | ||||||
|
|
(a) | Non-income producing security. |
(j) | The rate quoted is the annualized seven-day yield of the fund at period end. |
(l) | A portion of this security is on loan. |
(v) | Underlying affiliated fund that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end. |
The following abbreviations are used in this report and are defined:
ADR | American Depositary Receipt |
PLC | Public Limited Company |
REIT | Real Estate Investment Trust |
Abbreviations indicate amounts shown in currencies other than the U.S. dollar. All amounts are stated in U.S. dollars unless otherwise indicated. A list of abbreviations is shown below:
CAD | Canadian Dollar |
EUR | Euro |
GBP | British Pound |
Derivative Contracts at 6/30/16
Forward Foreign Currency Exchange Contracts at 6/30/16
Type | Currency | Counterparty | Contracts to Deliver/Receive | Settlement Date Range | In Exchange For | Contracts at Value | Net Unrealized Appreciation (Depreciation) | |||||||||||||||||
Asset Derivatives | ||||||||||||||||||||||||
BUY | CAD | Citibank N.A. | 443,764 | 7/15/16 | $ | 338,950 | $ | 343,499 | $ | 4,549 | ||||||||||||||
BUY | CAD | Goldman Sachs International | 1,090,193 | 7/15/16 | 837,190 | 843,871 | 6,681 | |||||||||||||||||
BUY | CAD | HSBC Bank | 1,628,806 | 7/15/16 | 1,249,590 | 1,260,788 | 11,198 | |||||||||||||||||
BUY | CAD | JPMorgan Chase Bank N.A. | 1,414,596 | 7/15/16 | 1,081,396 | 1,094,977 | 13,581 | |||||||||||||||||
BUY | CAD | Merrill Lynch International | 881,050 | 7/15/16 | 670,255 | 681,983 | 11,728 | |||||||||||||||||
BUY | CAD | Morgan Stanley Capital Services, Inc. | 2,162,922 | 7/15/16 | 1,661,833 | 1,674,224 | 12,391 | |||||||||||||||||
SELL | EUR | Barclays Bank PLC | 2,537,672 | 7/15/16 | 2,884,653 | 2,817,158 | 67,495 |
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MFS Utilities Series
Portfolio of Investments (unaudited) – continued
Forward Foreign Currency Exchange Contracts at 6/30/16 – continued
Type | Currency | Counterparty | Contracts to Deliver/Receive | Settlement Date Range | In Exchange For | Contracts at Value | Net Unrealized Appreciation (Depreciation) | |||||||||||||||||
Asset Derivatives – continued | ||||||||||||||||||||||||
SELL | EUR | BNP Paribas S.A. | 4,533,372 | 7/15/16 | $ | 5,135,469 | $ | 5,032,654 | $ | 102,815 | ||||||||||||||
SELL | EUR | Citibank N.A. | 10,026,823 | 7/15/16 | 11,477,986 | 11,131,124 | 346,862 | |||||||||||||||||
SELL | EUR | Credit Suisse Group | 2,774,901 | 7/15/16 | 3,179,138 | 3,080,514 | 98,624 | |||||||||||||||||
SELL | EUR | Deutsche Bank AG | 69,155,145 | 7/15/16-9/15/16 | 78,357,462 | 76,904,439 | 1,453,023 | |||||||||||||||||
SELL | EUR | Goldman Sachs International | 608,779 | 7/15/16 | 691,737 | 675,827 | 15,910 | |||||||||||||||||
SELL | EUR | HSBC Bank | 661,307 | 7/15/16 | 745,258 | 734,140 | 11,118 | |||||||||||||||||
SELL | EUR | JPMorgan Chase Bank N.A. | 25,004,110 | 7/15/16 | 28,618,060 | 27,757,930 | 860,130 | |||||||||||||||||
SELL | EUR | Merrill Lynch International | 5,668,406 | 7/15/16 | 6,486,765 | 6,292,695 | 194,072 | |||||||||||||||||
SELL | EUR | Morgan Stanley Capital Services, Inc. | 2,562,628 | 7/15/16 | 2,924,508 | 2,844,862 | 79,646 | |||||||||||||||||
SELL | EUR | Royal Bank of Scotland Group PLC | 1,031,000 | 7/15/16 | 1,176,854 | 1,144,549 | 32,305 | |||||||||||||||||
SELL | GBP | Barclays Bank PLC | 533,548 | 7/15/16 | 770,166 | 710,328 | 59,838 | |||||||||||||||||
SELL | GBP | BNP Paribas S.A. | 15,824,143 | 7/15/16 | 22,508,815 | 21,067,148 | 1,441,667 | |||||||||||||||||
SELL | GBP | Deutsche Bank AG | 1,646,475 | 7/15/16 | 2,196,795 | 2,192,001 | 4,794 | |||||||||||||||||
SELL | GBP | Goldman Sachs International | 1,674,166 | 7/15/16 | 2,413,264 | 2,228,867 | 184,397 | |||||||||||||||||
SELL | GBP | HSBC Bank | 1,243,705 | 7/15/16 | 1,814,910 | 1,655,780 | 159,130 | |||||||||||||||||
SELL | GBP | JPMorgan Chase Bank N.A. | 1,663,331 | 7/15/16 | 2,409,046 | 2,214,442 | 194,604 | |||||||||||||||||
SELL | GBP | Morgan Stanley Capital Services, Inc. | 1,034,307 | 7/15/16 | 1,512,815 | 1,377,004 | 135,811 | |||||||||||||||||
|
| |||||||||||||||||||||||
$ | 5,502,369 | |||||||||||||||||||||||
|
| |||||||||||||||||||||||
Liability Derivatives | ||||||||||||||||||||||||
BUY | CAD | BNP Paribas S.A. | 1,260,738 | 7/15/16 | $ | 984,751 | $ | 975,882 | $ | (8,869 | ) | |||||||||||||
BUY | CAD | Citibank N.A. | 75,870 | 7/15/16 | 58,966 | 58,728 | (238 | ) | ||||||||||||||||
BUY | CAD | Deutsche Bank AG | 31,694 | 7/15/16 | 24,737 | 24,533 | (204 | ) | ||||||||||||||||
BUY | CAD | Goldman Sachs International | 2,027,541 | 7/15/16 | 1,583,963 | 1,569,432 | (14,531 | ) | ||||||||||||||||
BUY | CAD | Merrill Lynch International | 510 | 7/15/16 | 396 | 395 | (1 | ) | ||||||||||||||||
BUY | CAD | Morgan Stanley Capital Services, Inc. | 697,196 | 7/15/16 | 549,121 | 539,669 | (9,452 | ) | ||||||||||||||||
SELL | CAD | Merrill Lynch International | 44,865,992 | 7/15/16 | 34,692,409 | 34,728,823 | (36,414 | ) | ||||||||||||||||
BUY | EUR | Barclays Bank PLC | 412,910 | 7/15/16 | 460,857 | 458,386 | (2,471 | ) | ||||||||||||||||
BUY | EUR | BNP Paribas S.A. | 1,752,055 | 7/15/16 | 1,985,600 | 1,945,017 | (40,583 | ) | ||||||||||||||||
BUY | EUR | Citibank N.A. | 3,291,550 | 7/15/16 | 3,694,649 | 3,654,064 | (40,585 | ) | ||||||||||||||||
BUY | EUR | JPMorgan Chase Bank N.A. | 795,250 | 7/15/16 | 897,049 | 882,834 | (14,215 | ) | ||||||||||||||||
BUY | EUR | Merrill Lynch International | 1,449,733 | 7/15/16 | 1,663,730 | 1,609,399 | (54,331 | ) | ||||||||||||||||
BUY | EUR | Morgan Stanley Capital Services, Inc. | 2,452,644 | 7/15/16 | 2,782,136 | 2,722,765 | (59,371 | ) | ||||||||||||||||
SELL | EUR | Deutsche Bank AG | 1,660,774 | 7/15/16 | 1,838,983 | 1,843,683 | (4,700 | ) | ||||||||||||||||
SELL | EUR | Morgan Stanley Capital Services, Inc. | 2,645,570 | 7/15/16 | 2,926,368 | 2,936,939 | (10,571 | ) | ||||||||||||||||
SELL | EUR | UBS AG | 820,752 | 7/15/16 | 905,471 | 911,146 | (5,675 | ) | ||||||||||||||||
BUY | GBP | Goldman Sachs International | 168,339 | 7/15/16 | 242,337 | 224,115 | (18,222 | ) | ||||||||||||||||
SELL | GBP | BNP Paribas S.A. | 365,556 | 7/15/16 | 483,703 | 486,675 | (2,972 | ) | ||||||||||||||||
|
| |||||||||||||||||||||||
$ | (323,405 | ) | ||||||||||||||||||||||
|
|
See Notes to Financial Statements
6
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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 6/30/16 | ||||||||
Assets | ||||||||
Investments | ||||||||
Non-affiliated issuers, at value (identified cost, $1,494,922,332) | $1,611,835,775 | |||||||
Underlying affiliated funds, at cost and value | 91,615,273 | |||||||
Total investments, at value, including $5,703,365 of securities on loan (identified cost, $1,586,537,605) | $1,703,451,048 | |||||||
Foreign currency, at value (identified cost, $451) | 476 | |||||||
Receivables for | ||||||||
Forward foreign currency exchange contracts | 5,502,369 | |||||||
Investments sold | 10,010,884 | |||||||
Fund shares sold | 463,218 | |||||||
Interest and dividends | 4,216,673 | |||||||
Other assets | 3,750 | |||||||
Total assets | $1,723,648,418 | |||||||
Liabilities | ||||||||
Payables for | ||||||||
Forward foreign currency exchange contracts | $323,405 | |||||||
Investments purchased | 9,535,447 | |||||||
Fund shares reacquired | 2,763,481 | |||||||
Collateral for securities loaned, at value (c) | 4,020,431 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 67,450 | |||||||
Shareholder servicing costs | 630 | |||||||
Distribution and/or service fees | 14,551 | |||||||
Payable for independent Trustees’ compensation | 633 | |||||||
Deferred country tax expense payable | 11,891 | |||||||
Accrued expenses and other liabilities | 418,627 | |||||||
Total liabilities | $17,156,546 | |||||||
Net assets | $1,706,491,872 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $1,499,566,180 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 122,023,743 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | 856,837 | |||||||
Undistributed net investment income | 84,045,112 | |||||||
Net assets | $1,706,491,872 | |||||||
Shares of beneficial interest outstanding | 58,582,579 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $617,580,271 | 20,967,894 | $29.45 | |||||||||
Service Class | 1,088,911,601 | 37,614,685 | 28.95 |
(c) | Non-cash collateral is not included. |
See Notes to Financial Statements
7
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MFS Utilities Series
FINANCIAL STATEMENTS | STATEMENT OF OPERATIONS (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
Six months ended 6/30/16 | ||||||||
Net investment income |
| |||||||
Income | ||||||||
Dividends | $33,590,861 | |||||||
Interest | 288,618 | |||||||
Dividends from underlying affiliated funds | 73,471 | |||||||
Foreign taxes withheld | (1,168,870 | ) | ||||||
Total investment income | $32,784,080 | |||||||
Expenses | ||||||||
Management fee | $5,720,834 | |||||||
Distribution and/or service fees | 1,244,669 | |||||||
Shareholder servicing costs | 40,787 | |||||||
Administrative services fee | 129,590 | |||||||
Independent Trustees’ compensation | 19,674 | |||||||
Custodian fee | 130,767 | |||||||
Shareholder communications | 86,842 | |||||||
Audit and tax fees | 30,333 | |||||||
Legal fees | 7,568 | |||||||
Miscellaneous | 22,793 | |||||||
Total expenses | $7,433,857 | |||||||
Reduction of expenses by investment adviser | (55,826 | ) | ||||||
Net expenses | $7,378,031 | |||||||
Net investment income | $25,406,049 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency |
| |||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $(22,473,113 | ) | ||||||
Foreign currency | (256,612 | ) | ||||||
Net realized gain (loss) on investments and foreign currency | $(22,729,725 | ) | ||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments (net of $11,891 increase in deferred country tax) | $223,855,787 | |||||||
Translation of assets and liabilities in foreign currencies | (499,524 | ) | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | $223,356,263 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $200,626,538 | |||||||
Change in net assets from operations | $226,032,587 |
See Notes to Financial Statements
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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 6/30/16 (unaudited | ) | | Year ended 12/31/15 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $25,406,049 | $44,335,843 | ||||||
Net realized gain (loss) on investments and foreign currency | (22,729,725 | ) | 55,525,687 | |||||
Net unrealized gain (loss) on investments and foreign currency translation | 223,356,263 | (368,257,019 | ) | |||||
Change in net assets from operations | $226,032,587 | $(268,395,489 | ) | |||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(73,039,306 | ) | |||||
From net realized gain on investments | — | (125,288,396 | ) | |||||
Total distributions declared to shareholders | $— | $(198,327,702 | ) | |||||
Change in net assets from fund share transactions | $(48,882,324 | ) | $(11,189,054 | ) | ||||
Total change in net assets | $177,150,263 | $(477,912,245 | ) | |||||
Net assets | ||||||||
At beginning of period | 1,529,341,609 | 2,007,253,854 | ||||||
At end of period (including undistributed net investment income of $84,045,112 and | $1,706,491,872 | $1,529,341,609 |
See Notes to Financial Statements
9
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MFS Utilities Series
FINANCIAL STATEMENTS | FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund’s financial performance for the semiannual period and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
Initial Class | Six months ended 6/30/16 | Years ended 12/31 | ||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $25.56 | $33.97 | $31.88 | $27.61 | $26.08 | $25.27 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.45 | $0.81 | $0.99 | $0.94 | $0.84 | $0.97 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 3.44 | (5.56 | ) | 3.13 | 4.64 | 2.57 | 0.70 | |||||||||||||||||
Total from investment operations | $3.89 | $(4.75 | ) | $4.12 | $5.58 | $3.41 | $1.67 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(1.38 | ) | $(0.74 | ) | $(0.73 | ) | $(1.88 | ) | $(0.86 | ) | |||||||||||||
From net realized gain on investments | — | (2.28 | ) | (1.29 | ) | (0.58 | ) | — | — | |||||||||||||||
Total distributions declared to shareholders | $— | $(3.66 | ) | $(2.03 | ) | $(1.31 | ) | $(1.88 | ) | $(0.86 | ) | |||||||||||||
Net asset value, end of period (x) | $29.45 | $25.56 | $33.97 | $31.88 | $27.61 | $26.08 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 15.22 | (n) | (14.54 | ) | 12.77 | 20.60 | 13.40 | 6.78 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.79 | (a) | 0.79 | 0.79 | 0.80 | 0.82 | 0.80 | |||||||||||||||||
Expenses after expense reductions (f) | 0.78 | (a) | 0.78 | 0.78 | 0.80 | 0.82 | 0.80 | |||||||||||||||||
Net investment income | 3.40 | (a) | 2.59 | 2.87 | 3.07 | 3.11 | 3.71 | |||||||||||||||||
Portfolio turnover | 14 | (n) | 42 | 53 | 50 | 51 | 53 | |||||||||||||||||
Net assets at end of period (000 omitted) | $617,580 | $561,517 | $754,927 | $525,386 | $476,685 | $532,447 | ||||||||||||||||||
Service Class | Six months ended 6/30/16 | Years ended 12/31 | ||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $25.15 | $33.48 | $31.47 | $27.27 | $25.73 | $24.95 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.41 | $0.72 | $0.92 | $0.85 | $0.71 | $0.89 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 3.39 | (5.47 | ) | 3.05 | 4.58 | 2.59 | 0.70 | |||||||||||||||||
Total from investment operations | $3.80 | $(4.75 | ) | $3.97 | $5.43 | $3.30 | $1.59 | |||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(1.30 | ) | $(0.67 | ) | $(0.65 | ) | $(1.76 | ) | $(0.81 | ) | |||||||||||||
From net realized gain on investments | — | (2.28 | ) | (1.29 | ) | (0.58 | ) | — | — | |||||||||||||||
Total distributions declared to shareholders | $— | $(3.58 | ) | $(1.96 | ) | $(1.23 | ) | $(1.76 | ) | $(0.81 | ) | |||||||||||||
Net asset value, end of period (x) | $28.95 | $25.15 | $33.48 | $31.47 | $27.27 | $25.73 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 15.11 | (n) | (14.76 | ) | 12.47 | 20.30 | 13.13 | 6.51 | ||||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.04 | (a) | 1.04 | 1.04 | 1.05 | 1.07 | 1.05 | |||||||||||||||||
Expenses after expense reductions (f) | 1.03 | (a) | 1.03 | 1.03 | 1.05 | 1.07 | 1.05 | |||||||||||||||||
Net investment income | 3.16 | (a) | 2.34 | 2.71 | 2.82 | 2.66 | 3.45 | |||||||||||||||||
Portfolio turnover | 14 | (n) | 42 | 53 | 50 | 51 | 53 | |||||||||||||||||
Net assets at end of period (000 omitted) | $1,088,912 | $967,824 | $1,252,327 | $978,732 | $837,196 | $1,458,257 |
See Notes to Financial Statements
10
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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 and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
11
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MFS Utilities Series
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) | Business and Organization |
MFS Utilities Series (the fund) is a diversified 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.
The fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued. The fund invests 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. 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.
Balance Sheet Offsetting – The fund’s accounting policy with respect to balance sheet offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the International Swaps and Derivatives Association (ISDA) Master Agreement does not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty. The fund’s right to setoff may be restricted or prohibited by the bankruptcy or insolvency laws of the particular jurisdiction to which a specific master netting agreement counterparty is subject. Balance sheet offsetting disclosures, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
Investment Valuations – Equity securities, including restricted equity securities, are generally valued at the last sale or official closing price on their primary market or exchange as provided by a third-party pricing service. Equity securities, for which there were no sales reported that day, are generally valued at the last quoted daily bid quotation on their primary market or exchange as provided by a third-party pricing service. Debt instruments and floating rate loans, including restricted debt instruments, are generally valued at an evaluated or composite bid as provided by a third-party pricing service. Short-term instruments with a maturity at issuance of 60 days or less may be valued at amortized cost, which approximates market value. Forward foreign currency exchange contracts are generally valued at the mean of bid and asked prices for the time period interpolated from rates provided by a third-party pricing service for proximate time periods. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. Values obtained from third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and
12
Table of Contents
MFS Utilities Series
Notes to Financial Statements (unaudited) – continued
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, 2016 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $1,177,730,895 | $— | $— | $1,177,730,895 | ||||||||||||
Portugal | — | 81,542,690 | — | 81,542,690 | ||||||||||||
United Kingdom | 5,963,994 | 49,385,898 | — | 55,349,892 | ||||||||||||
Italy | — | 45,018,099 | — | 45,018,099 | ||||||||||||
Canada | 44,513,870 | — | — | 44,513,870 | ||||||||||||
China | 905,000 | 28,262,100 | — | 29,167,100 | ||||||||||||
France | 17,936,364 | 9,814,163 | — | 27,750,527 | ||||||||||||
Sweden | — | 24,976,217 | — | 24,976,217 | ||||||||||||
Brazil | 20,680,451 | — | — | 20,680,451 | ||||||||||||
Other Countries | 49,053,346 | 52,032,257 | — | 101,085,603 | ||||||||||||
Mutual Funds | 95,635,704 | — | — | 95,635,704 | ||||||||||||
Total Investments | $1,412,419,624 | $291,031,424 | $— | $1,703,451,048 | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Forward Foreign Currency Exchange Contracts | $— | $5,178,964 | $— | $5,178,964 |
For further information regarding security characteristics, see the Portfolio of Investments.
Of the level 2 investments presented above, equity investments amounting to $5,157,711 would have been considered level 1 investments at the beginning of the period. Of the level 1 investments presented above, equity investments amounting to $74,942,239 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. 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.
13
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MFS Utilities Series
Notes to Financial Statements (unaudited) – continued
The following table presents, by major type of derivative contract, the fair value, on a gross basis, of the asset and liability components of derivatives held by the fund at June 30, 2016 as reported in the Statement of Assets and Liabilities:
Fair Value | ||||||||||
Risk | Derivative Contracts | Asset Derivatives | Liability Derivatives | |||||||
Foreign Exchange | Forward Foreign Currency Exchange | $5,502,369 | $(323,405 | ) |
There is no realized gain (loss) from derivative transactions during the period.
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, 2016 as reported in the Statement of Operations:
Risk | Translation of Assets and Liabilities in Foreign Currencies | |||
Foreign Exchange | $(503,026 | ) |
Derivative counterparty credit risk is managed through formal evaluation of the creditworthiness of all potential counterparties. On certain, but not all, uncleared derivatives, the fund attempts to reduce its exposure to counterparty credit risk whenever possible by entering into an ISDA Master Agreement on a bilateral basis. The ISDA Master Agreement gives each party to the agreement the right to terminate all transactions traded under such agreement if there is a 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 clearing broker and the clearing house for cleared derivatives (e.g., futures contracts, cleared swaps, and exchange-traded options) while collateral terms are contract specific for uncleared derivatives (e.g., forward foreign currency exchange contracts, uncleared swap agreements, and uncleared options). For derivatives traded under an ISDA Master Agreement, which contains a collateral support annex, the collateral requirements are netted across all transactions traded under such 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” or “Deposits with brokers.” Securities pledged as collateral or margin for the same purpose, if any, are noted in the Portfolio of Investments.
Forward Foreign Currency Exchange Contracts – The fund entered into forward foreign currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. These contracts may be used to hedge the fund’s currency risk or for non-hedging purposes. For hedging purposes, the fund may enter into contracts to deliver or receive foreign currency that the fund will receive from or use in its normal investment activities. The fund may also use contracts to hedge against declines in the value of foreign currency denominated securities due to unfavorable exchange rate movements. For non-hedging purposes, the fund may enter into contracts with the intent of changing the relative exposure of the fund’s portfolio of securities to different currencies to take advantage of anticipated exchange rate changes.
Forward foreign currency exchange contracts are adjusted by the daily exchange rate of the underlying currency and any unrealized gains or losses are recorded as a receivable or payable for forward foreign currency exchange contracts until the contract settlement date. On contract settlement date, any gain or loss on the contract is recorded as realized gains or losses on foreign currency.
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 international payment system for the centralized settlement of foreign transactions. This risk is mitigated in cases where there is an ISDA Master Agreement between the fund and the counterparty providing for netting as described above and, where applicable, by the posting of collateral by the counterparty to the fund to cover the fund’s exposure to the counterparty under such ISDA Master Agreement.
Security Loans – Under its Securities Lending Agency Agreement with the fund, State Street Bank and Trust Company (“State Street”), as lending agent, loans the securities of the fund to certain qualified institutions (the “Borrowers”) approved by the fund. Security loans can be terminated at the discretion of either the lending agent or the fund and the related securities must be returned within the earlier of the standard trade settlement period for such securities or within three business days. The loans are collateralized by cash and/or U.S. Treasury and federal agency obligations in an amount typically at least equal to the market value of the securities loaned. On loans collateralized by cash, the cash collateral is invested in a money market fund. The market value of the
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MFS Utilities Series
Notes to Financial Statements (unaudited) – continued
loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. State Street provides the fund with indemnification against Borrower default. In the event of Borrower default, State Street will, for the benefit of the fund, either purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the fund the market value of the loaned securities. In return, State Street assumes the fund’s rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, State Street is responsible for the shortfall, but only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. At period end, the fund had investment securities on loan, all of which were classified as equity securities in the fund’s Portfolio of Investments, with a fair value of $5,703,365. The fair value of the fund’s investment securities on loan and a related liability of $4,020,431 for cash collateral received on securities loaned are both presented gross in the Statement of Assets and Liabilities. Additionally, these loans were collateralized by U.S. Treasury Obligations of $1,798,446. The collateral received on securities loaned exceeded the value of securities on loan at period end. The liability for cash collateral for securities loaned is carried at fair value, which is categorized as level 2 within the fair value hierarchy. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the fund and the lending agent. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the Borrower, and is allocated between the fund and the lending agent. Income from securities lending is 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 – Prior to October 1, 2015, the fund’s custody fee could be reduced by a credit earned under an arrangement that measured the value of U.S. dollars deposited with the custodian by the fund. For six months ended June 30, 2016, 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. Management has analyzed the fund’s tax positions taken on federal and state tax returns for all open tax years and does not believe that there are any uncertain tax positions that require recognition of a tax liability. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests. Additionally, capital gains realized by the fund on securities issued in or by certain foreign countries may be subject to capital gains tax imposed by those countries.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to wash sale loss deferrals, derivative transactions, and partnership adjustments.
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Notes to Financial Statements (unaudited) – continued
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/15 | ||||
Ordinary income (including any short-term capital gains) | $102,302,415 | |||
Long-term capital gains | 96,025,287 | |||
Total distributions | $198,327,702 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/16 | ||||
Cost of investments | $1,602,197,677 | |||
Gross appreciation | 244,622,640 | |||
Gross depreciation | (143,369,269 | ) | ||
Net unrealized appreciation (depreciation) | $101,253,371 | |||
As of 12/31/15 | ||||
Undistributed ordinary income | 64,805,580 | |||
Undistributed long-term capital gain | 37,406,828 | |||
Other temporary differences | (544,802 | ) | ||
Net unrealized appreciation (depreciation) | (120,774,501 | ) |
The aggregate cost above includes prior fiscal year end tax adjustment, 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 6/30/16 | Year ended 12/31/15 | Six months ended 6/30/16 | Year ended 12/31/15 | |||||||||||||
Initial Class | $— | $28,015,638 | $— | $46,266,869 | ||||||||||||
Service Class | — | 45,023,668 | — | 79,021,527 | ||||||||||||
Total | $— | $73,039,306 | $— | $125,288,396 |
(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% |
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 six months ended June 30, 2016, this management fee reduction amounted to $55,826, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the six months ended June 30, 2016 was equivalent to an annual effective rate of 0.72% of the fund’s average daily net assets.
Effective August 1, 2016, the management fee will be computed daily and paid monthly at the following annual rates:
First $1 billion of average daily net assets | 0.75% | |||
Next $2 billion of average daily net assets | 0.70% | |||
Average daily net assets in excess of $3 billion | 0.65% |
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.
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MFS Utilities 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, 2016, the fee was $38,901, which equated to 0.0050% 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, 2016, these costs amounted to $1,886.
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the six months ended June 30, 2016 was equivalent to an annual effective rate of 0.0166% of the fund’s average daily net assets.
Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – This fund and certain other funds managed by MFS (the funds) have entered into a service agreement (the ISO Agreement) which provides for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino serves as the ISO and is an officer of the funds and the sole member of Tarantino LLC. The funds can terminate the ISO Agreement with Tarantino LLC at any time under the terms of the ISO Agreement. For the six months ended June 30, 2016, the fee paid by the fund under this agreement was $1,519 and is included in “Miscellaneous” expense in the Statement of Operations. MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.
The fund 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.
The fund is permitted to engage in purchase and sale transactions (“cross-trades”) with funds and accounts for which MFS serves as investment adviser or sub-adviser pursuant to a policy adopted by the Board of Trustees. This policy has been designed to ensure that cross-trades conducted by the fund comply with Rule 17a-7 under the Investment Company Act of 1940. Under this policy, cross-trades are effected at current market prices with no remuneration paid in connection with the transaction. During the six months ended June 30, 2016, the fund engaged in purchase and sale transactions pursuant to this policy, which amounted to $1,065,209 and $230,871, respectively. The sales transactions resulted in net realized gains (losses) of $(104,353).
(4) | Portfolio Securities |
For the six months ended June 30, 2016, purchases and sales of investments, other than short-term obligations, aggregated $216,060,406 and $283,577,416, 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 6/30/16 | Year ended 12/31/15 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 522,759 | $14,183,612 | 661,936 | $20,487,219 | ||||||||||||
Service Class | 2,679,972 | 70,197,722 | 5,092,320 | 157,180,531 | ||||||||||||
3,202,731 | $84,381,334 | 5,754,256 | $177,667,750 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 2,750,185 | $74,282,507 | ||||||||||||
Service Class | — | — | 4,663,353 | 124,045,195 | ||||||||||||
— | $— | 7,413,538 | $198,327,702 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (1,523,049 | ) | $(40,273,486 | ) | (3,669,815 | ) | $(115,152,159 | ) | ||||||||
Service Class | (3,541,629 | ) | (92,990,172 | ) | (8,683,815 | ) | (272,032,347 | ) | ||||||||
(5,064,678 | ) | $(133,263,658 | ) | (12,353,630 | ) | $(387,184,506 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (1,000,290 | ) | $(26,089,874 | ) | (257,694 | ) | $(20,382,433 | ) | ||||||||
Service Class | (861,657 | ) | (22,792,450 | ) | 1,071,858 | 9,193,379 | ||||||||||
(1,861,947 | ) | $(48,882,324 | ) | 814,164 | $(11,189,054 | ) |
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MFS Utilities Series
Notes to Financial Statements (unaudited) – continued
(6) | Line of Credit |
The fund and certain other funds managed by MFS participate in a $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Overnight Federal Reserve funds rate or daily one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Overnight Federal Reserve funds rate plus an agreed upon spread. For the six months ended June 30, 2016, the fund’s commitment fee and interest expense were $4,197 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 | 31,228,978 | 170,097,870 | (109,711,575 | ) | 91,615,273 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $73,471 | $91,615,273 |
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MFS Utilities Series
PROXY VOTING POLICIES AND INFORMATION
MFS votes proxies on behalf of the fund pursuant to proxy voting policies and procedures that are available without charge, upon request, by calling 1-800-225-2606, by visiting mfs.com (once you have selected “Individual Investor” as your role, click on “Individual Investor Home” in the top navigation and then select “Learn More About Proxy Voting” under the “I want to…” header on the left hand column of the page), or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available by August 31 of each year without charge by visiting mfs.com (once you have selected “Individual Investor” as your role, click on “Individual Investor Home” in the top navigation and then select “Learn More About Proxy Voting” under the “I want to…” header on the left hand column of the page), 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 on mfs.com by following these steps once you have selected “Individual Investor” as your role: (1) Click on the “Individual Investor Home” in the top navigation and then select the “Announcements” option within the “Market Outlooks” drop down, or (2) Click on “Products & Services” and “Variable Insurance Portfolios” and then select the fund’s name.
INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS
The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, 529 program manager (if applicable), and custodian who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.
Under the Trust’s By-Laws and Declaration of Trust, any claims asserted against or on behalf of the MFS Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of Massachusetts.
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SEMIANNUAL REPORT
June 30, 2016
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 • MAY LOSE VALUE • NO BANK OR CREDIT UNION GUARANTEE • NOT A DEPOSIT • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
Table of Contents
MFS Value Series
Dear Contract Owners:
Global headwinds continue to restrain growth and profits, though developed market equities have remained resilient, underpinned by record-low interest rates. Rates are likely to stay low over the medium term, as many central banks have implemented accommodative monetary policies in an effort to reinvigorate their economies. Markets will have to deal with an additional headwind in the coming months and years as investors grapple with the fallout from the United Kingdom’s decision to leave the European Union. That process will take a considerable period of time to play out against a highly uncertain backdrop. Weakness in the pound sterling in the wake of the referendum has been a welcome shock absorber for UK financial markets.
Emerging markets have been beneficiaries of firmer commodity prices and diminishing fears of sharply higher interest rates from the U.S. Federal Reserve. China remains a source of concern for investors, as overcapacity in its manufacturing sector inhibits the government’s attempt to change its domestic economy from one driven by exports to a consumer-driven model.
At MFS®, we believe it is best to view markets through a long lens and not react to short-term swings. That makes it possible to filter out market noise and focus on long-term fundamentals.
In our view, the professional guidance of a financial advisor, along with a patient, long-term approach, will help you reach your investment objectives.
Respectfully,
Robert J. Manning
Chairman
MFS Investment Management
August 15, 2016
The opinions expressed in this letter are subject to change and may not be relied upon for investment advice. No forecasts can be guaranteed.
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MFS Value Series
Portfolio structure
Top ten holdings | ||||
JPMorgan Chase & Co. | 4.2% | |||
Johnson & Johnson | 3.8% | |||
Philip Morris International, Inc. | 3.5% | |||
Wells Fargo & Co. | 2.7% | |||
Accenture PLC, “A” | 2.6% | |||
Pfizer, Inc. | 2.4% | |||
Medtronic PLC | 2.3% | |||
Honeywell International, Inc. | 2.1% | |||
3M Co. | 2.1% | |||
Travelers Cos., Inc. | 2.1% |
Equity sectors | ||||
Financial Services | 25.3% | |||
Health Care | 15.3% | |||
Industrial Goods & Services | 12.8% | |||
Consumer Staples | 11.3% | |||
Basic Materials | 5.7% | |||
Energy | 5.6% | |||
Leisure | 4.7% | |||
Special Products & Services | 4.6% | |||
Technology | 3.3% | |||
Utilities & Communications | 3.0% | |||
Retailing | 2.7% | |||
Transportation | 2.6% | |||
Autos & Housing | 2.3% |
Cash & Cash Equivalents includes any cash, investments in money market funds, short-term securities, and other assets less liabilities. Please see the Statement of Assets and Liabilities for additional information related to the fund’s cash position and other assets and liabilities.
Percentages are based on net assets as of 6/30/16.
The portfolio is actively managed and current holdings may be different.
2
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MFS Value Series
Fund Expenses Borne by the Contract Holders during the Period,
January 1, 2016 through June 30, 2016
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, 2016 through June 30, 2016.
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 1/01/16 | Ending Account Value | Expenses Paid During Period (p) 1/01/16-6/30/16 | ||||||||||||||
Initial Class | Actual | 0.73% | $1,000.00 | $1,067.43 | $3.75 | |||||||||||||
Hypothetical (h) | 0.73% | $1,000.00 | $1,021.23 | $3.67 | ||||||||||||||
Service Class | Actual | 0.98% | $1,000.00 | $1,065.67 | $5.03 | |||||||||||||
Hypothetical (h) | 0.98% | $1,000.00 | $1,019.99 | $4.92 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
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PORTFOLIO OF INVESTMENTS – 6/30/16 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 99.2% | ||||||||
Aerospace – 6.6% | ||||||||
Honeywell International, Inc. | 402,103 | $ | 46,772,619 | |||||
Lockheed Martin Corp. | 144,033 | 35,744,670 | ||||||
Northrop Grumman Corp. | 101,765 | 22,620,324 | ||||||
United Technologies Corp. | 402,424 | 41,268,581 | ||||||
|
| |||||||
$ | 146,406,194 | |||||||
|
| |||||||
Alcoholic Beverages – 1.1% | ||||||||
Diageo PLC | 887,947 | $ | 24,845,827 | |||||
|
| |||||||
Automotive – 1.8% | ||||||||
Delphi Automotive PLC | 180,698 | $ | 11,311,695 | |||||
Harley-Davidson, Inc. | 203,780 | 9,231,234 | ||||||
Johnson Controls, Inc. | 423,560 | 18,746,766 | ||||||
|
| |||||||
$ | 39,289,695 | |||||||
|
| |||||||
Broadcasting – 2.8% | ||||||||
Omnicom Group, Inc. | 404,473 | $ | 32,960,505 | |||||
Time Warner, Inc. | 246,581 | 18,133,567 | ||||||
Viacom, Inc., “B” | 117,998 | 4,893,377 | ||||||
Walt Disney Co. | 55,502 | 5,429,206 | ||||||
|
| |||||||
$ | 61,416,655 | |||||||
|
| |||||||
Brokerage & Asset Managers – 2.7% | ||||||||
BlackRock, Inc. | 58,667 | $ | 20,095,208 | |||||
Franklin Resources, Inc. | 525,646 | 17,540,807 | ||||||
NASDAQ, Inc. | 332,431 | 21,498,313 | ||||||
|
| |||||||
$ | 59,134,328 | |||||||
|
| |||||||
Business Services – 4.6% | ||||||||
Accenture PLC, “A” | 520,341 | $ | 58,949,432 | |||||
Cognizant Technology Solutions Corp., “A” (a) | 125,837 | 7,202,910 | ||||||
Equifax, Inc. | 40,006 | 5,136,770 | ||||||
Fidelity National Information Services, Inc. | 278,028 | 20,485,103 | ||||||
Fiserv, Inc. (a) | 100,080 | 10,881,698 | ||||||
|
| |||||||
$ | 102,655,913 | |||||||
|
| |||||||
Cable TV – 1.3% | ||||||||
Comcast Corp., “A” | 432,214 | $ | 28,176,031 | |||||
|
| |||||||
Chemicals – 5.3% | ||||||||
3M Co. | 266,561 | $ | 46,680,162 | |||||
E.I. du Pont de Nemours & Co. | 267,616 | 17,341,517 | ||||||
Monsanto Co. | 84,771 | 8,766,169 | ||||||
PPG Industries, Inc. | 428,762 | 44,655,562 | ||||||
|
| |||||||
$ | 117,443,410 | |||||||
|
| |||||||
Computer Software – 0.7% | ||||||||
Oracle Corp. | 370,777 | $ | 15,175,903 | |||||
|
| |||||||
Computer Software – Systems – 0.9% | ||||||||
International Business Machines Corp. | 132,451 | $ | 20,103,413 | |||||
|
| |||||||
Construction – 0.5% | ||||||||
Stanley Black & Decker, Inc. | 102,729 | $ | 11,425,519 | |||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Consumer Products – 0.8% | ||||||||
Newell Brands, Inc. | 159,183 | $ | 7,731,518 | |||||
Procter & Gamble Co. | 129,185 | 10,938,094 | ||||||
|
| |||||||
$ | 18,669,612 | |||||||
|
| |||||||
Containers – 0.5% | ||||||||
Crown Holdings, Inc. (a) | 209,458 | $ | 10,613,237 | |||||
|
| |||||||
Electrical Equipment – 3.3% | ||||||||
Danaher Corp. | 325,463 | $ | 32,871,763 | |||||
Pentair PLC | 167,452 | 9,760,777 | ||||||
Tyco International PLC | 724,047 | 30,844,402 | ||||||
|
| |||||||
$ | 73,476,942 | |||||||
|
| |||||||
Electronics – 1.7% | ||||||||
Analog Devices, Inc. | 118,071 | $ | 6,687,541 | |||||
Texas Instruments, Inc. | 497,633 | 31,176,707 | ||||||
|
| |||||||
$ | 37,864,248 | |||||||
|
| |||||||
Energy – Independent – 1.9% | ||||||||
EOG Resources, Inc. | 242,128 | $ | 20,198,318 | |||||
Occidental Petroleum Corp. | 284,778 | 21,517,826 | ||||||
|
| |||||||
$ | 41,716,144 | |||||||
|
| |||||||
Energy – Integrated – 2.3% | ||||||||
Chevron Corp. | 222,375 | $ | 23,311,571 | |||||
Exxon Mobil Corp. | 287,235 | 26,925,409 | ||||||
|
| |||||||
$ | 50,236,980 | |||||||
|
| |||||||
Food & Beverages – 5.2% | ||||||||
Archer Daniels Midland Co. | 432,448 | $ | 18,547,695 | |||||
Danone S.A. | 233,073 | 16,434,595 | ||||||
General Mills, Inc. | 478,351 | 34,115,993 | ||||||
J.M. Smucker Co. | 77,670 | 11,837,685 | ||||||
Nestle S.A. | 457,003 | 35,251,239 | ||||||
|
| |||||||
$ | 116,187,207 | |||||||
|
| |||||||
Food & Drug Stores – 1.6% | ||||||||
CVS Health Corp. | 372,482 | $ | 35,661,427 | |||||
|
| |||||||
General Merchandise – 0.7% | ||||||||
Target Corp. | 236,929 | $ | 16,542,383 | |||||
|
| |||||||
Health Maintenance Organizations – 0.4% | ||||||||
Cigna Corp. | 71,322 | $ | 9,128,503 | |||||
|
| |||||||
Insurance – 7.6% | ||||||||
Aon PLC | 324,726 | $ | 35,469,821 | |||||
Chubb Ltd. | 324,687 | 42,439,838 | ||||||
MetLife, Inc. | 735,021 | 29,275,886 | ||||||
Prudential Financial, Inc. | 231,926 | 16,545,601 | ||||||
Travelers Cos., Inc. | 391,676 | 46,625,111 | ||||||
|
| |||||||
$ | 170,356,257 | |||||||
|
| |||||||
Machinery & Tools – 2.9% | ||||||||
Caterpillar, Inc. | 90,143 | $ | 6,833,741 | |||||
Cummins, Inc. | 46,980 | 5,282,431 |
4
Table of Contents
MFS Value Series
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Machinery & Tools – continued | ||||||||
Deere & Co. | 70,694 | $ | 5,729,042 | |||||
Eaton Corp. PLC | 341,294 | 20,385,491 | ||||||
Illinois Tool Works, Inc. | 175,145 | 18,243,103 | ||||||
Ingersoll-Rand Co. Ltd., “A” | 129,225 | 8,229,048 | ||||||
|
| |||||||
$ | 64,702,856 | |||||||
|
| |||||||
Major Banks – 10.9% | ||||||||
Bank of New York Mellon Corp. | 568,767 | $ | 22,096,598 | |||||
Goldman Sachs Group, Inc. | 242,200 | 35,986,076 | ||||||
JPMorgan Chase & Co. | 1,499,516 | 93,179,924 | ||||||
PNC Financial Services Group, Inc. | 216,751 | 17,641,364 | ||||||
State Street Corp. | 259,989 | 14,018,607 | ||||||
Wells Fargo & Co. | 1,285,212 | 60,829,084 | ||||||
|
| |||||||
$ | 243,751,653 | |||||||
|
| |||||||
Medical & Health Technology & Services – 1.2% | ||||||||
Express Scripts Holding Co. (a) | 197,315 | $ | 14,956,477 | |||||
McKesson Corp. | 65,181 | 12,166,034 | ||||||
|
| |||||||
$ | 27,122,511 | |||||||
|
| |||||||
Medical Equipment – 5.4% | ||||||||
Abbott Laboratories | 645,204 | $ | 25,362,969 | |||||
Medtronic PLC | 599,231 | 51,995,274 | ||||||
St. Jude Medical, Inc. | 221,469 | 17,274,582 | ||||||
Thermo Fisher Scientific, Inc. | 180,999 | 26,744,412 | ||||||
|
| |||||||
$ | 121,377,237 | |||||||
|
| |||||||
Oil Services – 1.5% | ||||||||
National Oilwell Varco, Inc. | 247,046 | $ | 8,313,098 | |||||
Schlumberger Ltd. | 317,572 | 25,113,594 | ||||||
|
| |||||||
$ | 33,426,692 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 4.1% | ||||||||
American Express Co. | 296,311 | $ | 18,003,856 | |||||
BB&T Corp. | 321,610 | 11,452,532 | ||||||
Citigroup, Inc. | 527,319 | 22,353,052 | ||||||
U.S. Bancorp | 983,342 | 39,658,183 | ||||||
|
| |||||||
$ | 91,467,623 | |||||||
|
| |||||||
Pharmaceuticals – 8.2% | ||||||||
Johnson & Johnson | 695,296 | $ | 84,339,405 | |||||
Merck & Co., Inc. | 564,866 | 32,541,930 | ||||||
Novartis AG | 76,766 | 6,315,061 | ||||||
Pfizer, Inc. | 1,545,465 | 54,415,823 | ||||||
Roche Holding AG | 21,822 | 5,761,675 | ||||||
|
| |||||||
$ | 183,373,894 | |||||||
|
| |||||||
Printing & Publishing – 0.6% | ||||||||
Moody’s Corp. | 103,547 | $ | 9,703,389 | |||||
S&P Global, Inc. | 40,196 | 4,311,423 | ||||||
Time, Inc. | 22,900 | 376,934 | ||||||
|
| |||||||
$ | 14,391,746 | |||||||
|
| |||||||
Railroad & Shipping – 1.2% | ||||||||
Canadian National Railway Co. | 185,994 | $ | 10,984,806 | |||||
Union Pacific Corp. | 171,423 | 14,956,657 | ||||||
|
| |||||||
$ | 25,941,463 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Specialty Stores – 0.3% | ||||||||
Advance Auto Parts, Inc. | 42,083 | $ | 6,801,875 | |||||
|
| |||||||
Telecommunications – Wireless – 0.2% | ||||||||
Vodafone Group PLC | 1,567,569 | $ | 4,771,979 | |||||
|
| |||||||
Telephone Services – 1.7% | ||||||||
Verizon Communications, Inc. | 668,502 | $ | 37,329,152 | |||||
|
| |||||||
Tobacco – 4.2% | ||||||||
Altria Group, Inc. | 229,628 | $ | 15,835,147 | |||||
Philip Morris International, Inc. | 760,244 | 77,332,020 | ||||||
|
| |||||||
$ | 93,167,167 | |||||||
|
| |||||||
Trucking – 1.4% | ||||||||
United Parcel Service, Inc., “B” | 292,096 | $ | 31,464,581 | |||||
|
| |||||||
Utilities – Electric Power – 1.1% | ||||||||
Duke Energy Corp. | 219,917 | $ | 18,866,679 | |||||
Xcel Energy, Inc. | 119,982 | 5,372,794 | ||||||
|
| |||||||
$ | 24,239,473 | |||||||
|
| |||||||
Total Common Stocks (Identified Cost, $1,423,343,154) | $ | 2,209,855,730 | ||||||
|
| |||||||
MONEY MARKET FUNDS – 0.7% | ||||||||
MFS Institutional Money Market Portfolio, 0.36%, at Cost and Net Asset Value (v) | 16,096,087 | $ | 16,096,087 | |||||
|
| |||||||
Total Investments (Identified Cost, $1,439,439,241) | $ | 2,225,951,817 | ||||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – 0.1% | 2,648,852 | |||||||
|
| |||||||
NET ASSETS – 100.0% | $ | 2,228,600,669 | ||||||
|
|
(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 6/30/16 | ||||||||
Assets | ||||||||
Investments | ||||||||
Non-affiliated issuers, at value (identified cost, $1,423,343,154) | $2,209,855,730 | |||||||
Underlying affiliated funds, at cost and value | 16,096,087 | |||||||
Total investments, at value (identified cost, $1,439,439,241) | $2,225,951,817 | |||||||
Foreign currency, at value (identified cost, $31) | 30 | |||||||
Receivables for | ||||||||
Investments sold | 1,331,381 | |||||||
Fund shares sold | 153,431 | |||||||
Interest and dividends | 4,163,263 | |||||||
Other assets | 5,050 | |||||||
Total assets | $2,231,604,972 | |||||||
Liabilities | ||||||||
Payable to custodian | $29,939 | |||||||
Payable for fund shares reacquired | 2,579,173 | |||||||
Payable to affiliates | ||||||||
Investment adviser | 83,802 | |||||||
Shareholder servicing costs | 216 | |||||||
Distribution and/or service fees | 16,694 | |||||||
Payable for independent Trustees’ compensation | 59 | |||||||
Accrued expenses and other liabilities | 294,420 | |||||||
Total liabilities | $3,004,303 | |||||||
Net assets | $2,228,600,669 | |||||||
Net assets consist of | ||||||||
Paid-in capital | $1,179,778,172 | |||||||
Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 786,450,162 | |||||||
Accumulated net realized gain (loss) on investments and foreign currency | 199,685,826 | |||||||
Undistributed net investment income | 62,686,509 | |||||||
Net assets | $2,228,600,669 | |||||||
Shares of beneficial interest outstanding | 114,588,888 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $974,876,323 | 49,662,017 | $19.63 | |||||||||
Service Class | 1,253,724,346 | 64,926,871 | 19.31 |
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 6/30/16 | ||||||||
Net investment income | ||||||||
Income | ||||||||
Dividends | $28,014,833 | |||||||
Interest | 4,550 | |||||||
Dividends from underlying affiliated funds | 38,670 | |||||||
Foreign taxes withheld | (337,132 | ) | ||||||
Total investment income | $27,720,921 | |||||||
Expenses | ||||||||
Management fee | $7,388,724 | |||||||
Distribution and/or service fees | 1,472,498 | |||||||
Shareholder servicing costs | 33,075 | |||||||
Administrative services fee | 174,225 | |||||||
Independent Trustees’ compensation | 24,061 | |||||||
Custodian fee | 69,823 | |||||||
Shareholder communications | 92,760 | |||||||
Audit and tax fees | 27,375 | |||||||
Legal fees | 9,936 | |||||||
Miscellaneous | 25,244 | |||||||
Total expenses | $9,317,721 | |||||||
Reduction of expenses by investment adviser | (75,833 | ) | ||||||
Net expenses | $9,241,888 | |||||||
Net investment income | $18,479,033 | |||||||
Realized and unrealized gain (loss) on investments and foreign currency | ||||||||
Realized gain (loss) (identified cost basis) | ||||||||
Investments | $28,100,971 | |||||||
Foreign currency | (23,736 | ) | ||||||
Net realized gain (loss) on investments and foreign currency | $28,077,235 | |||||||
Change in unrealized appreciation (depreciation) | ||||||||
Investments | $94,337,685 | |||||||
Translation of assets and liabilities in foreign currencies | 20,414 | |||||||
Net unrealized gain (loss) on investments and foreign currency translation | $94,358,099 | |||||||
Net realized and unrealized gain (loss) on investments and foreign currency | $122,435,334 | |||||||
Change in net assets from operations | $140,914,367 |
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 6/30/16 (unaudited | ) | | Year ended 12/31/15 | | |||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income | $18,479,033 | $44,302,262 | ||||||
Net realized gain (loss) on investments and foreign currency | 28,077,235 | 180,180,190 | ||||||
Net unrealized gain (loss) on investments and foreign currency translation | 94,358,099 | (248,421,434 | ) | |||||
Change in net assets from operations | $140,914,367 | $(23,938,982 | ) | |||||
Distributions declared to shareholders | ||||||||
From net investment income | $— | $(51,498,261 | ) | |||||
From net realized gain on investments | — | (137,834,650 | ) | |||||
Total distributions declared to shareholders | $— | $(189,332,911 | ) | |||||
Change in net assets from fund share transactions | $(44,878,529 | ) | $(254,692,255 | ) | ||||
Total change in net assets | $96,035,838 | $(467,964,148 | ) | |||||
Net assets | ||||||||
At beginning of period | 2,132,564,831 | 2,600,528,979 | ||||||
At end of period (including undistributed net investment income of $62,686,509 and | $2,228,600,669 | $2,132,564,831 |
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 6/30/16 | Years ended 12/31 | ||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $18.39 | $20.34 | $19.28 | $14.40 | $12.68 | $12.98 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.17 | $0.40 | $0.44 | $0.30 | $0.28 | $0.24 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.07 | (0.67 | ) | 1.55 | 4.83 | 1.77 | (0.30 | ) | ||||||||||||||||
Total from investment operations | $1.24 | $(0.27 | ) | $1.99 | $5.13 | $2.05 | $(0.06 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.48 | ) | $(0.31 | ) | $(0.20 | ) | $(0.23 | ) | $(0.19 | ) | |||||||||||||
From net realized gain on investments | — | (1.20 | ) | (0.62 | ) | (0.05 | ) | (0.10 | ) | (0.05 | ) | |||||||||||||
Total distributions declared to shareholders | $— | $(1.68 | ) | $(0.93 | ) | $(0.25 | ) | $(0.33 | ) | $(0.24 | ) | |||||||||||||
Net asset value, end of period (x) | $19.63 | $18.39 | $20.34 | $19.28 | $14.40 | $12.68 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 6.74 | (n) | (0.74 | ) | 10.51 | 35.89 | 16.26 | (0.30 | ) | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.74 | (a) | 0.73 | 0.73 | 0.73 | 0.78 | 0.79 | |||||||||||||||||
Expenses after expense reductions (f) | 0.73 | (a) | 0.73 | 0.72 | 0.73 | 0.78 | 0.79 | |||||||||||||||||
Net investment income | 1.88 | (a) | 2.00 | 2.23 | 1.74 | 2.02 | 1.81 | |||||||||||||||||
Portfolio turnover | 7 | (n) | 13 | 13 | 15 | 16 | 18 | |||||||||||||||||
Net assets at end of period (000 omitted) | $974,876 | $964,811 | $1,118,647 | $1,090,381 | $988,594 | $352,752 | ||||||||||||||||||
Service Class | Six months ended 6/30/16 | Years ended 12/31 | ||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $18.12 | $20.05 | $19.03 | $14.22 | $12.54 | $12.83 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (d) | $0.15 | $0.34 | $0.38 | $0.25 | $0.24 | $0.20 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.04 | (0.65 | ) | 1.52 | 4.78 | 1.74 | (0.27 | ) | ||||||||||||||||
Total from investment operations | $1.19 | $(0.31 | ) | $1.90 | $5.03 | $1.98 | $(0.07 | ) | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.42 | ) | $(0.26 | ) | $(0.17 | ) | $(0.20 | ) | $(0.17 | ) | |||||||||||||
From net realized gain on investments | — | (1.20 | ) | (0.62 | ) | (0.05 | ) | (0.10 | ) | (0.05 | ) | |||||||||||||
Total distributions declared to shareholders | $— | $(1.62 | ) | $(0.88 | ) | $(0.22 | ) | $(0.30 | ) | $(0.22 | ) | |||||||||||||
Net asset value, end of period (x) | $19.31 | $18.12 | $20.05 | $19.03 | $14.22 | $12.54 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | 6.57 | (n) | (0.93 | ) | 10.20 | 35.59 | 15.88 | (0.47 | ) | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 0.99 | (a) | 0.98 | 0.98 | 0.98 | 1.03 | 1.04 | |||||||||||||||||
Expenses after expense reductions (f) | 0.98 | (a) | 0.98 | 0.97 | 0.98 | 1.03 | 1.04 | |||||||||||||||||
Net investment income | 1.63 | (a) | 1.76 | 1.99 | 1.49 | 1.76 | 1.58 | |||||||||||||||||
Portfolio turnover | 7 | (n) | 13 | 13 | 15 | 16 | 18 | |||||||||||||||||
Net assets at end of period (000 omitted) | $1,253,724 | $1,167,754 | $1,481,882 | $1,404,019 | $1,022,722 | $831,481 |
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 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 diversified 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.
The fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
(2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued.
Balance Sheet Offsetting – The fund’s accounting policy with respect to balance sheet offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the International Swaps and Derivatives Association (ISDA) Master Agreement does not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty. The fund’s right to setoff may be restricted or prohibited by the bankruptcy or insolvency laws of the particular jurisdiction to which a specific master netting agreement counterparty is subject. Balance sheet offsetting disclosures, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
Investment Valuations – Equity securities, including restricted equity securities, are generally valued at the last sale or official closing price on their primary market or exchange as provided by a third-party pricing service. Equity securities, for which there were no sales reported that day, are generally valued at the last quoted daily bid quotation on their primary market or exchange as provided by a third-party pricing service. Short-term instruments with a maturity at issuance of 60 days or less may be valued at amortized cost, which approximates market value. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. Values obtained from third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.
The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
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MFS Value Series
Notes to Financial Statements (unaudited) – continued
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. The following is a summary of the levels used as of June 30, 2016 in valuing the fund’s assets or liabilities:
Investments at Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $2,105,490,547 | $— | $— | $2,105,490,547 | ||||||||||||
Switzerland | — | 47,327,975 | — | 47,327,975 | ||||||||||||
United Kingdom | — | 29,617,807 | — | 29,617,807 | ||||||||||||
France | — | 16,434,595 | — | 16,434,595 | ||||||||||||
Canada | 10,984,806 | — | — | 10,984,806 | ||||||||||||
Mutual Funds | 16,096,087 | — | — | 16,096,087 | ||||||||||||
Total Investments | $2,132,571,440 | $93,380,377 | $— | $2,225,951,817 |
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. Security loans can be terminated at the discretion of either the lending agent or the fund and the related securities must be returned within the earlier of the standard trade settlement period for such securities or within three business days. The loans are collateralized by cash and/or U.S. Treasury and federal agency obligations in an amount typically at least equal to the market value of the securities loaned. On loans collateralized by cash, the cash collateral is invested in a money market fund. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. State Street provides the fund with indemnification against Borrower default. In the event of Borrower default, State Street will, for the benefit of the fund, either purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the fund the market value of the loaned securities. In return, State Street assumes the fund’s rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, State Street is responsible for the shortfall, but only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. 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, 2016, 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 payments received in additional securities are recorded on the ex-dividend date in an amount equal to the value of the security on such date.
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MFS Value Series
Notes to Financial Statements (unaudited) – continued
The fund may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
Fees Paid Indirectly – Prior to October 1, 2015, the fund’s custody fee could be reduced by a credit earned under an arrangement that measured the value of U.S. dollars deposited with the custodian by the fund. For the six months ended June 30, 2016, 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. Management has analyzed the fund’s tax positions taken on federal and state tax returns for all open tax years and does not believe that there are any uncertain tax positions that require recognition of a tax liability. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests. Additionally, capital gains realized by the fund on securities issued in or by certain foreign countries may be subject to capital gains tax imposed by those countries.
Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Book/tax differences primarily relate to wash sale loss deferrals.
The tax character of distributions declared to shareholders for the last fiscal year is as follows:
12/31/15 | ||||
Ordinary income (including any short-term capital gains) | $57,140,588 | |||
Long-term capital gains | 132,192,323 | |||
Total distributions | $189,332,911 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/16 | ||||
Cost of investments | $1,449,666,062 | |||
Gross appreciation | 794,223,131 | |||
Gross depreciation | (17,937,376 | ) | ||
Net unrealized appreciation (depreciation) | $776,285,755 | |||
As of 12/31/15 | ||||
Undistributed ordinary income | 46,253,835 | |||
Undistributed long-term capital gain | 179,167,999 | |||
Other temporary differences | (82,828 | ) | ||
Net unrealized appreciation (depreciation) | 682,569,124 |
The aggregate cost above includes prior fiscal year end tax adjustment, 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 6/30/16 | Year ended 12/31/15 | Six months ended 6/30/16 | Year ended 12/31/15 | |||||||||||||
Initial Class | $— | $23,725,000 | $— | $59,539,845 | ||||||||||||
Service Class | — | 27,773,261 | — | 78,294,805 | ||||||||||||
Total | $— | $51,498,261 | $— | $137,834,650 |
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MFS Value Series
Notes to Financial Statements (unaudited) – continued
(3) | Transactions with Affiliates |
Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates:
First $1 billion of average daily net assets | 0.75% | |||
Average daily net assets in excess of $1 billion | 0.65% |
The investment adviser has agreed in writing to reduce its management fee to 0.60% of average daily net assets in excess of $2.5 billion. This written agreement will terminate on April 27, 2017. For the six months ended June 30, 2016, the fund’s average daily net assets did not exceed $2.5 billion and therefore, the management fee was not reduced in accordance with this agreement. 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 six months ended June 30, 2016, this management fee reduction amounted to $75,833, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the six months ended June 30, 2016 was equivalent to an annual effective rate of 0.69% of the fund’s average daily net assets.
Effective April 28, 2017, the management fee will be computed daily and paid monthly at the following annual rates:
First $1 billion of average daily net assets | 0.75% | |||
Next S1.5 billion of average daily net assets | 0.65% | |||
Average daily net assets in excess of $2.5 billion | 0.60% |
The investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, excluding interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses, such that total annual operating expenses do not exceed 0.90% 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, 2018. For the six months ended June 30, 2016, 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, 2016, the fee was $31,390, which equated to 0.0030% 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, 2016, these costs amounted to $1,685.
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the six months ended June 30, 2016 was equivalent to an annual effective rate of 0.0164% of the fund’s average daily net assets.
Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – This fund and certain other funds managed by MFS (the funds) have entered into a service agreement (the ISO Agreement) which provides for payment of fees solely by the funds to Tarantino LLC in return for the provision of services of an Independent Senior Officer (ISO) for the funds. Frank L. Tarantino serves as the ISO and is an officer of the funds and the sole member of Tarantino LLC. The funds can terminate the ISO Agreement with Tarantino LLC at any time under the terms of the ISO Agreement. For the six months ended June 30, 2016, the fee paid by the fund under this agreement was $2,094 and is included in “Miscellaneous” expense in the Statement of Operations. MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ISO.
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MFS Value Series
Notes to Financial Statements (unaudited) – continued
The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks 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.
The fund is permitted to engage in purchase and sale transactions (“cross-trades”) with funds and accounts for which MFS serves as investment adviser or sub-adviser pursuant to a policy adopted by the Board of Trustees. This policy has been designed to ensure that cross-trades conducted by the fund comply with Rule 17a-7 under the Investment Company Act of 1940. Under this policy, cross-trades are effected at current market prices with no remuneration paid in connection with the transaction. During the six months ended June 30, 2016, the fund engaged in purchase and sale transactions pursuant to this policy, which amounted to $1,994,607 and $744,596, respectively. The sales transactions resulted in net realized gains (losses) of $188,705.
(4) | Portfolio Securities |
For the six months ended June 30, 2016, purchases and sales of investments, other than short-term obligations, aggregated $144,642,700 and $160,877,810, 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 6/30/16 | Year ended 12/31/15 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 2,272,484 | $42,189,426 | 2,231,454 | $42,370,134 | ||||||||||||
Service Class | 6,013,821 | 108,671,767 | 7,197,931 | 136,498,386 | ||||||||||||
8,286,305 | $150,861,193 | 9,429,385 | $178,868,520 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 4,874,991 | $83,264,845 | ||||||||||||
Service Class | — | — | 6,298,579 | 106,068,066 | ||||||||||||
— | $— | 11,173,570 | $189,332,911 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (5,063,883 | ) | $(94,591,382 | ) | (9,654,481 | ) | $(191,553,797 | ) | ||||||||
Service Class | (5,547,128 | ) | (101,148,340 | ) | (22,944,915 | ) | (431,339,889 | ) | ||||||||
(10,611,011 | ) | $(195,739,722 | ) | (32,599,396 | ) | $(622,893,686 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (2,791,399 | ) | $(52,401,956 | ) | (2,548,036 | ) | $(65,918,818 | ) | ||||||||
Service Class | 466,693 | 7,523,427 | (9,448,405 | ) | (188,773,437 | ) | ||||||||||
(2,324,706 | ) | $(44,878,529 | ) | (11,996,441 | ) | $(254,692,255 | ) |
The fund is one of several mutual funds in which certain MFS funds may invest. The MFS funds do not invest in the underlying funds for the purpose of exercising management or control. At the end of the period, the MFS Moderate Allocation Portfolio, the MFS Growth Allocation Portfolio, and the MFS Conservative Allocation Portfolio were the owners of record of approximately 7%, 2%, 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 $1.25 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Overnight Federal Reserve funds rate or daily one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at a rate equal to the Overnight Federal Reserve funds rate plus an agreed upon spread. For the six months ended June 30, 2016, the fund’s commitment fee and interest expense were $5,721 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.
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MFS Value 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 | 16,597,492 | 166,181,132 | (166,682,537 | ) | 16,096,087 | |||||||||||
Underlying Affiliated Fund | Realized Gain (Loss) | Capital Gain Distributions | Dividend Income | Ending Value | ||||||||||||
MFS Institutional Money Market Portfolio | $— | $— | $38,670 | $16,096,087 |
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MFS Value Series
PROXY VOTING POLICIES AND INFORMATION
MFS votes proxies on behalf of the fund pursuant to proxy voting policies and procedures that are available without charge, upon request, by calling 1-800-225-2606, by visiting mfs.com (once you have selected “Individual Investor” as your role, click on “Individual Investor Home” in the top navigation and then select “Learn More About Proxy Voting” under the “I want to…” header on the left hand column of the page), or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available by August 31 of each year without charge by visiting mfs.com (once you have selected “Individual Investor” as your role, click on “Individual Investor Home” in the top navigation and then select “Learn More About Proxy Voting” under the “I want to…” header on the left hand column of the page), 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 on mfs.com by following these steps once you have selected “Individual Investor” as your role: (1) Click on the “Individual Investor Home” in the top navigation and then select the “Announcements” option within the “Market Outlooks” drop down, or (2) Click on “Products & Services” and “Variable Insurance Portfolios” and then select the fund’s name.
INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS
The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, 529 program manager (if applicable), and custodian who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.
Under the Trust’s By-Laws and Declaration of Trust, any claims asserted against or on behalf of the MFS Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of Massachusetts.
17
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ITEM 2. | CODE OF ETHICS. |
During the period covered by this report, the Registrant has not amended any provision in its Code of Ethics (the “Code”) that relates to an element of the Code’s definitions enumerated in paragraph (b) of Item 2 of this Form N-CSR. During the period covered by this report, the Registrant did not grant a waiver, including an implicit waiver, from any provision of the Code.
ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. |
Not applicable for semi-annual reports.
ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
Not applicable for semi-annual reports.
ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. |
Not applicable to the Registrant.
ITEM 6. | INVESTMENTS |
A schedule of investments for each series of the Registrant is included as part of the report to shareholders of such series under Item 1 of this Form N-CSR.
ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable to the Registrant.
ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable to the Registrant.
ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. |
Not applicable to the Registrant.
ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
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.
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ITEM 11. | CONTROLS AND PROCEDURES. |
(a) | Based upon their evaluation of the effectiveness of the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as conducted within 90 days of the filing date of this report on Form N-CSR, the registrant’s principal financial officer and principal executive officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. |
(b) | There were no changes in the registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by the report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
ITEM 12. | EXHIBITS. |
(a) | File the exhibits listed below as part of this form. Letter or number the exhibits in the sequence indicated. |
(1) | Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit. |
(2) | A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2): Attached hereto. |
(b) | If the report is filed under Section 13(a) or 15(d) of the Exchange Act, provide the certifications required by Rule 30a-2(b) under the Act (17 CFR 270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR 240.13a-14(b) or 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished pursuant to this paragraph will not be deemed “filed” for the purposes of Section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference: Attached hereto. |
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Notice
A copy of the Amended and Restated Declaration of Trust, as amended, of the Registrant is on file with the Secretary of State of The Commonwealth of Massachusetts and notice is hereby given that this instrument is executed on behalf of the Registrant by an officer of the Registrant as an officer and not individually and the obligations of or arising out of this instrument are not binding upon any of the Trustees or shareholders individually, but are binding only upon the assets and property of the respective constituent series of the Registrant.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) MFS VARIABLE INSURANCE TRUST
By (Signature and Title)* | ROBIN A. STELMACH | |
Robin A. Stelmach, President |
Date: August 15, 2016
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)* | ROBIN A. STELMACH | |
Robin A. Stelmach, President (Principal Executive Officer) |
Date: August 15, 2016
By (Signature and Title)* | DAVID L. DILORENZO | |
David L. DiLorenzo, Treasurer (Principal Financial Officer and Accounting Officer) |
Date: August 15, 2016
* | Print name and title of each signing officer under his or her signature. |