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500 Boylston Street, Boston, Massachusetts 02116-3741
Phone 617-954-5843 / Fax 617-350-7723
October 23, 2009
VIA EDGAR (as Correspondence)
United States Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
RE: MFS Variable Insurance Trust II
Registration Statements on Form N-14
-File Nos. 333-161866; 333-161867
Ladies and Gentlemen:
On behalf of MFS Variable Insurance Trust II (File Nos. 2-83616;
811-3732) (the "Registrant"), this letter sets forth our responses to your
comments on the above-referenced registration statements on Form N-14 filed on
September 11, 2009 (the "Registration Statements") in connection with the
following proposed reorganizations: MFS Capital Appreciation Portfolio into MFS
Massachusetts Investors Growth Stock Portfolio and MFS Mid Cap Value Portfolio
into MFS Value Portfolio, each a series of the Trust. The series of the Trust
are hereinafter collectively referred to as the "Funds."
General Comments
1. Comment: Please file a "Tandy" representation letter in connection with
the comment process for the above-referenced Registration
Statements.
Response: A "Tandy" representation letter will be filed on or before the
date hereof.
Comments Applicable to Both Registration Statements
2. Comment: In each Prospectus/Proxy Statement, the estimated costs
associated with the reorganization are currently disclosed in the
sub-section entitled "Reorganization Fees and Expenses" under the
caption "Information About the Reorganization." Please also
disclose the estimated reorganization costs in the "Synopsis"
section of the Prospectus/Proxy Statement.
Response: The requested change will be made.
3. Comment: In Question 5 under the caption "Synopsis", each Prospectus/Proxy
Statement currently states that the pro forma combined fund will
pay management fees pursuant to the respective acquiring fund's
lower management fee schedule. Please clarify this statement by
noting that
Securities and Exchange Commission
October 23, 2009
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the effective management fee rate of the pro forma combined fund
upon consummation of the reorganization is expected to be the
same as the effective management fee incurred by each of the
acquired fund and the acquiring fund during each fund's most
recent fiscal year ended December 31, 2008.
Response: The requested change will be made.
4. Comment: In the sub-section "Capitalization" under the caption
"Information About the Reorganization," the "Pro Forma
Adjustments" column in the capitalization table currently
discloses the total number of shares to be issued to the acquired
fund assuming that the reorganization occurred on the date
specified in the table. Please revise the "Pro Forma Adjustments"
column so that the share amount adjustments reflect the
difference between (i) the sum of the acquired fund and acquiring
fund shares outstanding prior to the reorganization and (ii) the
"Pro Forma Combined Portfolio" shares outstanding assuming
completion of the reorganization. This comment also applies to
the Pro Forma Statement of Assets and Liabilities included in the
registration statement for the proposed reorganization of the MFS
Capital Appreciation Portfolio into the MFS Massachusetts
Investors Growth Stock Portfolio.
Response: The capitalization tables and the Pro Forma Statement of
Assets and Liabilities will be updated accordingly.
Registration Statement relating to the proposed reorganization of the MFS
Capital Appreciation Portfolio (the "Capital Appreciation Portfolio") into the
MFS Massachusetts Investors Growth Stock Portfolio (the "Massachusetts Investors
Growth Stock Portfolio").
5. Comment: In the sub-section "Reorganization Fees and Expenses" under the
caption "Information About the Reorganization", please include
disclosure stating that minimal, if any, costs associated with
portfolio repositioning are anticipated in connection with the
reorganization, consistent with the disclosure included earlier
in the Prospectus/Proxy Statement.
Response: The requested change will be made.
6. Comment: In light of the fact that the Capital Appreciation Portfolio has
a larger asset base than the Massachusetts Investors Growth Stock
Portfolio, please support the position that the Massachusetts
Investors Growth Stock Portfolio should be the accounting
survivor in the reorganization.
Response: We believe that the Massachusetts Investors Growth Stock
Portfolio should be the accounting survivor in the
reorganization. Based on the factors outlined in the North
American Securities Trust No-Action Letter (August 5, 1994)
(the "NAST Letter"), we believe that the post-merger combined
fund will most closely resemble the Massachusetts Investors
Growth Stock Portfolio, and that therefore, the Massachusetts
Investors
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October 23, 2009
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Growth Stock Portfolio should be the accounting survivor in the
reorganization.(1) As noted in the Prospectus/Proxy Statement,
the investment adviser, portfolio manager, investment objective,
and investment restrictions of the Funds are the same, and the
portfolio composition of the Funds is substantially similar.
However, the management fee schedule and net expense ratios of
the post-reorganization combined fund will more closely resemble
those of the Massachusetts Investors Growth Stock Portfolio. In
addition, the investment policies of the combined fund will more
closely resemble the Massachusetts Investors Growth Stock
Portfolio, as the combined fund will continue to be subject to
Rule 35d-1 under the Investment Company Act of 1940, as amended,
and as a result will continue to have a policy of investing at
least 80% of its assets in equity securities. The Capital
Appreciation Portfolio is not subject to Rule 35d-1 and therefore
does not have such an investment policy.
While the Capital Appreciation Portfolio has a larger asset base,
we note that each Fund has substantial assets and that the sizes
of the Funds are somewhat similar. For example, assuming the
reorganization occurred on June 30, 2009, the assets of the
Massachusetts Investors Growth Stock Portfolio would represent
approximately 45% of the approximate $462.5 million in assets of
the surviving fund.
We have discussed our position with the Funds' auditor, Deloitte
& Touche LLP ("D&T"), and D&T did not object to our position that
Massachusetts Investors Growth Stock Portfolio should be the
accounting survivor in the transaction. The outcome of that
conclusion, consistent with the NAST Letter, is that the
historical performance record of Massachusetts Investors Growth
Stock Portfolio would be used for the surviving fund following
the reorganization.
__________________
(1) In North American Security Trust, the SEC staff stated:
"In determining whether a surviving fund, or a new fund resulting from
a reorganization, may use the historical performance of one of several
predecessor funds, funds should compare the attributes of the surviving
or new fund and the predecessor funds to determine which predecessor
fund, if any, the surviving or new fund most closely resembles. Among
other factors, funds should compare the various funds' investment
advisers; investment objectives, policies, and restrictions; expense
structures and expense ratios; asset size; and portfolio composition.
These factors are substantially similar to the factors the staff
considers in determining the accounting survivor of a business
combination involving investment companies. We believe that, generally,
the accounting survivor of a business combination for accounting
purposes, i.e., the fund whose financial statements are carried
forward, will be the fund whose historical performance may be used by a
new or surviving fund."
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October 23, 2009
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7. Comment: In the Pro Forma Statement of Operations, please consider
changing footnote reference "(d)" to footnote reference "(c") for
clarification purposes.
Response: The requested change will be made.
Registration Statement relating to the proposed reorganization of the MFS Mid
Cap Value Portfolio (the "Mid Cap Value Portfolio") into the MFS Value Portfolio
(the "Value Portfolio").
8. Comment: The Prospectus/Proxy Statement currently discusses potential tax
consequences of the portfolio repositioning that is expected to
occur in connection with the reorganization. Please confirm that
this disclosure is applicable given the fact that the Funds serve
as investment options supporting tax-deferred variable insurance
contracts. If not applicable, please remove.
Response: We do not believe that the portfolio repositioning will have
tax implications for Contract Holders with investments
allocated to the Funds given the tax-deferred status of the
variable insurance products through which investments in the
Funds are made. As a result, all disclosure discussing the
potential tax implications resulting from the portfolio
repositioning will be removed from the Prospectus/Proxy
Statement.
9. Comment: Under the caption "Background and Reasons for the Proposed
Reorganization", the Prospectus/Proxy Statement currently states
that the reorganization presents an opportunity for the Value
Portfolio to acquire investment assets without the need to pay
brokerage commissions or other transaction costs that are
typically associated with the purchase and sale of securities.
Please modify this disclosure to note that the Value Portfolio
will incur brokerage commissions or other transaction costs with
respect to the portion of portfolio securities received from the
Mid Cap Value Portfolio that will be repositioned by the Value
Portfolio following the reorganization, as previously disclosed
in the Prospectus/Proxy Statement.
Response: The first sentence in the fourth paragraph in the section
entitled "Background and Reasons for the Proposed
Reorganization" will be revised as follows:
"The Board of Trustees considered that the reorganization
presents an opportunity for the Value Portfolio to acquire
investment assets without the need to pay brokerage commissions
or other transaction costs normally associated with the purchase
of securities other than brokerage commissions and other
transaction costs associated with any post-reorganization
portfolio repositioning as described in the response to Question
4, " How do the investment objectives, principal investment
strategies, policies and restrictions of the two Portfolios
compare?" in the Synopsis.
Securities and Exchange Commission
October 23, 2009
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If you have any questions concerning the foregoing, please call the undersigned
at 617-954-5843 with any questions.
Sincerely,
/S/Brian E. Langenfeld
Brian E. Langenfeld
Assistant Secretary