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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 811-8879
MFS VARIABLE INSURANCE TRUST III
(Exact name of registrant as specified in charter)
111 Huntington Avenue, Boston, Massachusetts 02199
(Address of principal executive offices) (Zip code)
Christopher R. Bohane
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, 2020
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ITEM 1. | REPORTS TO STOCKHOLDERS. |
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Small Cap Equity Portfolio
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Five9, Inc. | 1.8% |
Brunswick Corp. | 1.8% |
Industrial Logistics Properties Trust, REIT | 1.5% |
Lexington Realty Trust, REIT | 1.5% |
Cable One, Inc. | 1.5% |
CNO Financial Group, Inc. | 1.5% |
Prestige Brands Holdings, Inc. | 1.5% |
Regal Beloit Corp. | 1.5% |
Paylocity Holding Corp. | 1.4% |
Skechers USA, Inc., “A” | 1.4% |
Health Care | 22.8% |
Industrials | 16.0% |
Information Technology | 14.9% |
Financials | 13.3% |
Consumer Discretionary | 9.9% |
Real Estate | 8.6% |
Materials | 3.6% |
Consumer Staples | 3.5% |
Communication Services | 2.7% |
Energy | 2.2% |
Utilities | 2.0% |
(g) | The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and S&P Global Market Intelligence Inc. (“S&P Global Market Intelligence”). GICS is a service mark of MSCI and S&P Global Market Intelligence and has been licensed for use by MFS. |
Table of Contents
January 1, 2020 through June 30, 2020
Share Class | Annualized Expense Ratio | Beginning Account Value 1/01/20 | Ending Account Value 6/30/20 | Expenses Paid During Period (p) 1/01/20-6/30/20 | |
Initial Class | Actual | 0.55% | $1,000.00 | $809.61 | $2.47 |
Hypothetical (h) | 0.55% | $1,000.00 | $1,022.13 | $2.77 | |
Service Class | Actual | 0.80% | $1,000.00 | $809.61 | $3.60 |
Hypothetical (h) | 0.80% | $1,000.00 | $1,020.89 | $4.02 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class's annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
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Issuer | Shares/Par | Value ($) | ||
Common Stocks – 99.5% | ||||
Aerospace – 2.2% | ||||
CACI International, Inc., “A” (a) | 5,241 | $ 1,136,668 | ||
Curtiss-Wright Corp. | 7,866 | 702,277 | ||
$1,838,945 | ||||
Apparel Manufacturers – 1.8% | ||||
Levi Strauss & Co., “A” (l) | 21,130 | $ 283,142 | ||
Skechers USA, Inc., “A” (a) | 38,120 | 1,196,206 | ||
$1,479,348 | ||||
Automotive – 0.9% | ||||
Stoneridge, Inc. (a) | 37,200 | $ 768,552 | ||
Biotechnology – 8.1% | ||||
Adaptive Biotechnologies Corp. (a) | 5,631 | $ 272,428 | ||
Akebia Therapeutics, Inc. (a) | 56,576 | 768,302 | ||
Coherus BioSciences, Inc. (a) | 31,114 | 555,696 | ||
Concert Pharmaceuticals, Inc. (a) | 19,600 | 195,020 | ||
CytomX Therapeutics, Inc. (a) | 48,851 | 406,929 | ||
Emergent BioSolutions, Inc. (a) | 5,751 | 454,789 | ||
Enanta Pharmaceuticals, Inc. (a) | 9,149 | 459,371 | ||
Esperion Therapeutics, Inc. (a)(l) | 13,341 | 684,527 | ||
Exelixis, Inc. (a) | 12,335 | 292,833 | ||
Jounce Therapeutics, Inc. (a) | 37,601 | 259,447 | ||
Macrogenics, Inc. (a) | 36,005 | 1,005,259 | ||
Radius Health, Inc. (a) | 13,913 | 189,634 | ||
Retrophin, Inc. (a) | 27,868 | 568,786 | ||
Varex Imaging Corp. (a) | 18,653 | 282,593 | ||
Voyager Therapeutics, Inc. (a) | 28,368 | 358,004 | ||
$6,753,618 | ||||
Brokerage & Asset Managers – 0.1% | ||||
Virtu Financial, Inc., “A” | 3,157 | $ 74,505 | ||
Business Services – 2.4% | ||||
BrightView Holdings, Inc. (a) | 46,514 | $ 520,957 | ||
Forrester Research, Inc. (a) | 22,843 | 731,890 | ||
Stamps.com, Inc. (a) | 4,153 | 762,864 | ||
$2,015,711 | ||||
Cable TV – 1.5% | ||||
Cable One, Inc. | 705 | $ 1,251,269 | ||
Chemicals – 0.9% | ||||
Element Solutions, Inc. (a) | 70,464 | $ 764,534 | ||
Computer Software – 3.6% | ||||
Cornerstone OnDemand, Inc. (a) | 23,375 | $ 901,340 | ||
Everbridge, Inc. (a) | 561 | 77,620 | ||
Pagerduty, Inc. (a) | 28,835 | 825,258 | ||
Paylocity Holding Corp. (a) | 8,254 | 1,204,176 | ||
$3,008,394 | ||||
Computer Software - Systems – 4.1% | ||||
Box, Inc., “A” (a) | 51,497 | $ 1,069,078 | ||
Five9, Inc. (a) | 13,394 | 1,482,314 | ||
Verint Systems, Inc. (a) | 19,827 | 895,784 | ||
$3,447,176 |
Issuer | Shares/Par | Value ($) | ||
Common Stocks – continued | ||||
Construction – 2.7% | ||||
AZEK Co. LLC (a) | 17,338 | $ 552,389 | ||
Eagle Materials, Inc. | 15,172 | 1,065,378 | ||
Toll Brothers, Inc. | 1,167 | 38,032 | ||
Trex Co., Inc. (a) | 4,732 | 615,491 | ||
$2,271,290 | ||||
Consumer Products – 1.6% | ||||
Edgewell Personal Care Co. (a) | 3,510 | $ 109,372 | ||
Prestige Brands Holdings, Inc. (a) | 32,767 | 1,230,728 | ||
$1,340,100 | ||||
Consumer Services – 1.1% | ||||
Grand Canyon Education, Inc. (a) | 10,501 | $ 950,656 | ||
Electrical Equipment – 1.3% | ||||
TriMas Corp. (a) | 46,125 | $ 1,104,694 | ||
Electronics – 4.5% | ||||
Amkor Technology, Inc. (a) | 68,244 | $ 840,084 | ||
Jabil Circuit, Inc. | 21,669 | 695,142 | ||
Plexus Corp. (a) | 14,390 | 1,015,358 | ||
Sanmina Corp. (a) | 14,802 | 370,642 | ||
Silicon Laboratories, Inc. (a) | 8,471 | 849,387 | ||
$3,770,613 | ||||
Energy - Independent – 0.1% | ||||
WPX Energy, Inc. (a) | 17,095 | $ 109,066 | ||
Engineering - Construction – 3.3% | ||||
Great Lakes Dredge & Dock Corp. (a) | 43,123 | $ 399,319 | ||
KBR, Inc. | 47,812 | 1,078,161 | ||
Quanta Services, Inc. | 29,524 | 1,158,226 | ||
Tutor Perini Corp. (a) | 7,874 | 95,905 | ||
$2,731,611 | ||||
Food & Beverages – 2.9% | ||||
Hostess Brands, Inc. (a) | 95,546 | $ 1,167,572 | ||
Ingredion, Inc. | 10,312 | 855,896 | ||
Pilgrim's Pride Corp. (a) | 22,128 | 373,742 | ||
$2,397,210 | ||||
Food & Drug Stores – 0.5% | ||||
Grocery Outlet Holding Corp. (a) | 10,229 | $ 417,343 | ||
Forest & Paper Products – 0.4% | ||||
Verso Corp., “A” | 30,414 | $ 363,751 | ||
Gaming & Lodging – 0.9% | ||||
Wyndham Hotels & Resorts, Inc. | 17,755 | $ 756,718 | ||
Insurance – 5.5% | ||||
American Equity Investment Life Holding Co. | 27,845 | $ 688,050 | ||
Brighthouse Financial, Inc. (a) | 12,407 | 345,163 | ||
CNO Financial Group, Inc. | 79,748 | 1,241,676 | ||
Essent Group Ltd. | 16,766 | 608,103 | ||
HCI Group, Inc. | 8,889 | 410,494 | ||
Heritage Insurance Holdings, Inc. | 14,615 | 191,310 | ||
MGIC Investment Corp. | 16,139 | 132,179 |
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Issuer | Shares/Par | Value ($) | ||
Common Stocks – continued | ||||
Insurance – continued | ||||
National General Holdings Corp. | 5,606 | $ 121,146 | ||
Radian Group, Inc. | 36,205 | 561,540 | ||
Third Point Reinsurance Ltd. (a) | 13,334 | 100,138 | ||
Universal Insurance Holdings, Inc. | 13,347 | 236,909 | ||
$4,636,708 | ||||
Leisure & Toys – 2.7% | ||||
Brunswick Corp. | 22,912 | $ 1,466,597 | ||
Malibu Boats, Inc., “A” (a) | 15,121 | 785,536 | ||
$2,252,133 | ||||
Machinery & Tools – 4.4% | ||||
ACCO Brands Corp. | 25,838 | $ 183,450 | ||
AGCO Corp. | 16,594 | 920,303 | ||
Allison Transmission Holdings, Inc. | 7,216 | 265,405 | ||
Enerpac Tool Group Corp. | 35,728 | 628,813 | ||
ITT, Inc. | 7,145 | 419,697 | ||
Regal Beloit Corp. | 13,995 | 1,222,043 | ||
$3,639,711 | ||||
Medical & Health Technology & Services – 6.0% | ||||
Allscripts Healthcare Solutions, Inc. (a) | 8,889 | $ 60,179 | ||
HealthEquity, Inc. (a) | 9,298 | 545,514 | ||
HMS Holdings Corp. (a) | 31,362 | 1,015,815 | ||
Medpace Holdings, Inc. (a) | 2,561 | 238,224 | ||
Owens & Minor, Inc. | 57,136 | 435,376 | ||
Premier, Inc., “A” (a) | 34,859 | 1,194,966 | ||
Syneos Health, Inc. (a) | 14,967 | 871,828 | ||
Tenet Healthcare Corp. (a) | 36,547 | 661,866 | ||
$5,023,768 | ||||
Medical Equipment – 4.1% | ||||
AngioDynamics, Inc. (a) | 26,532 | $ 269,830 | ||
Avanos Medical, Inc. (a) | 14,444 | 424,509 | ||
Bio-Techne Corp. | 4,069 | 1,074,501 | ||
CONMED Corp. | 8,946 | 644,023 | ||
Integer Holdings Corp. (a) | 10,723 | 783,315 | ||
LivaNova PLC (a) | 1,708 | 82,206 | ||
Orthofix Medical, Inc. (a) | 5,798 | 185,536 | ||
$3,463,920 | ||||
Network & Telecom – 0.2% | ||||
QTS Realty Trust, Inc., REIT, “A” | 2,720 | $ 174,325 | ||
Oil Services – 1.4% | ||||
Cactus, Inc., “A” | 56,648 | $ 1,168,648 | ||
Other Banks & Diversified Financials – 8.3% | ||||
Bank OZK | 45,843 | $ 1,075,935 | ||
Cathay General Bancorp, Inc. | 39,666 | 1,043,216 | ||
East West Bancorp, Inc. | 15,024 | 544,470 | ||
Enova International, Inc. (a) | 23,054 | 342,813 | ||
First Hawaiian, Inc. | 46,906 | 808,659 | ||
Hanmi Financial Corp. | 60,145 | 584,008 | ||
OneMain Holdings, Inc. | 12,363 | 303,388 | ||
Popular, Inc. | 11,595 | 430,986 | ||
SLM Corp. | 78,471 | 551,651 | ||
Triton International Ltd. of Bermuda | 17,902 | 541,357 |
Issuer | Shares/Par | Value ($) | ||
Common Stocks – continued | ||||
Other Banks & Diversified Financials – continued | ||||
Wintrust Financial Corp. | 15,969 | $ 696,568 | ||
$6,923,051 | ||||
Pharmaceuticals – 3.1% | ||||
Akcea Therapeutics, Inc. (a)(l) | 16,975 | $ 232,557 | ||
Catalent, Inc. (a) | 5,589 | 409,674 | ||
Collegium Pharmaceutical, Inc. (a) | 19,800 | 346,500 | ||
Lannett Co., Inc. (a) | 41,509 | 301,355 | ||
Phathom Pharmaceuticals, Inc. (a) | 4,175 | 137,399 | ||
Phibro Animal Health Corp., “A” | 17,269 | 453,657 | ||
United Therapeutics Corp. (a) | 5,643 | 682,803 | ||
$2,563,945 | ||||
Pollution Control – 0.4% | ||||
Casella Waste Systems, Inc., “A” (a) | 5,620 | $ 292,914 | ||
Railroad & Shipping – 0.7% | ||||
Diamond S Shipping, Inc. (a) | 39,067 | $ 312,145 | ||
Teekay Tankers LTD., “A” (a) | 20,898 | 267,913 | ||
$580,058 | ||||
Real Estate – 8.4% | ||||
Brixmor Property Group, Inc., REIT | 9,545 | $ 122,367 | ||
Easterly Government Properties, REIT | 49,517 | 1,144,833 | ||
Industrial Logistics Properties Trust, REIT | 61,679 | 1,267,503 | ||
Lexington Realty Trust, REIT | 119,653 | 1,262,339 | ||
Life Storage, Inc., REIT | 11,841 | 1,124,303 | ||
Spirit Realty Capital, Inc., REIT | 25,236 | 879,727 | ||
STAG Industrial, Inc., REIT | 10,837 | 317,741 | ||
STORE Capital Corp., REIT | 39,374 | 937,495 | ||
$7,056,308 | ||||
Restaurants – 1.2% | ||||
Texas Roadhouse, Inc. | 19,537 | $ 1,027,060 | ||
Specialty Chemicals – 2.4% | ||||
Axalta Coating Systems Ltd. (a) | 37,405 | $ 843,483 | ||
Univar Solutions, Inc. (a) | 68,916 | 1,161,924 | ||
$2,005,407 | ||||
Specialty Stores – 0.3% | �� | |||
Hudson Ltd., “A” (a) | 32,475 | $ 158,153 | ||
Murphy USA, Inc. (a) | 485 | 54,606 | ||
$212,759 | ||||
Telecommunications - Wireless – 0.4% | ||||
Telephone and Data Systems, Inc. | 16,653 | $ 331,062 | ||
Telephone Services – 0.9% | ||||
ATN International, Inc. | 8,975 | $ 543,616 | ||
Cogent Communications Holdings, Inc. | 2,189 | 169,341 | ||
$712,957 | ||||
Trucking – 2.2% | ||||
Forward Air Corp. | 16,184 | $ 806,287 | ||
Schneider National, Inc. | 42,228 | 1,041,765 | ||
$1,848,052 |
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Issuer | Shares/Par | Value ($) | ||
Common Stocks – continued | ||||
Utilities - Electric Power – 2.0% | ||||
Clearway Energy, Inc., “A” | 43,241 | $ 906,764 | ||
NRG Energy, Inc. | 15,003 | 488,497 | ||
Spark Energy, Inc., “A” | 43,170 | 305,212 | ||
$1,700,473 | ||||
Total Common Stocks (Identified Cost, $77,030,059) | $83,228,363 | |||
Investment Companies (h) – 0.5% | ||||
Money Market Funds – 0.5% | ||||
MFS Institutional Money Market Portfolio, 0.17% (v) (Identified Cost, $453,666) | 453,620 | $ 453,666 |
Issuer | Shares/Par | Value ($) | ||
Collateral for Securities Loaned – 0.4% | ||||
State Street Navigator Securities Lending Government Money Market Portfolio, 0.13% (j) (Identified Cost, $343,710) | 343,710 | $ 343,710 | ||
Other Assets, Less Liabilities – (0.4)% | (371,345) | |||
Net Assets – 100.0% | $83,654,394 |
(a) | Non-income producing security. | |||
(h) | An affiliated issuer, which 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. At period end, the aggregate values of the fund's investments in affiliated issuers and in unaffiliated issuers were $453,666 and $83,572,073, respectively. | |||
(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. See Note 2 for additional information. | |||
(v) | Affiliated issuer 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: | |
REIT | Real Estate Investment Trust |
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Financial Statements | Statement of Assets and Liabilities (unaudited) |
At 6/30/20Assets | |
Investments in unaffiliated issuers, at value, including $454,887 of securities on loan (identified cost, $77,373,769) | $83,572,073 |
Investments in affiliated issuers, at value (identified cost, $453,666) | 453,666 |
Receivables for | |
Fund shares sold | 12,148 |
Interest and dividends | 76,682 |
Other assets | 486 |
Total assets | $84,115,055 |
Liabilities | |
Payables for | |
Fund shares reacquired | $58,903 |
Collateral for securities loaned, at value (c) | 343,710 |
Payable to affiliates | |
Investment adviser | 1,729 |
Administrative services fee | 120 |
Shareholder servicing costs | 50 |
Distribution and/or service fees | 724 |
Accrued expenses and other liabilities | 55,425 |
Total liabilities | $460,661 |
Net assets | $83,654,394 |
Net assets consist of | |
Paid-in capital | $77,549,309 |
Total distributable earnings (loss) | 6,105,085 |
Net assets | $83,654,394 |
Shares of beneficial interest outstanding | 9,074,457 |
Net assets | Shares outstanding | Net asset value per share | |
Initial Class | $29,212,422 | 3,092,945 | $9.44 |
Service Class | 54,441,972 | 5,981,512 | 9.10 |
(c) | Non-cash collateral is not included. |
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Financial Statements | Statement of Operations (unaudited) |
Six months ended 6/30/20 | |
Net investment income (loss) | |
Income | |
Dividends | $686,240 |
Other | 8,320 |
Dividends from affiliated issuers | 4,430 |
Income on securities loaned | 670 |
Foreign taxes withheld | (966) |
Total investment income | $698,694 |
Expenses | |
Management fee | $167,279 |
Distribution and/or service fees | 66,884 |
Shareholder servicing costs | 4,122 |
Administrative services fee | 11,022 |
Independent Trustees' compensation | 1,346 |
Custodian fee | 2,554 |
Shareholder communications | 8,739 |
Audit and tax fees | 27,729 |
Legal fees | 504 |
Miscellaneous | 12,061 |
Total expenses | $302,240 |
Reduction of expenses by investment adviser | (4,523) |
Net expenses | $297,717 |
Net investment income (loss) | $400,977 |
Realized and unrealized gain (loss) | |
Realized gain (loss) (identified cost basis) | |
Unaffiliated issuers | $(7,213,259) |
Affiliated issuers | 234 |
Foreign currency | 1 |
Net realized gain (loss) | $(7,213,024) |
Change in unrealized appreciation or depreciation | |
Unaffiliated issuers | $(8,736,059) |
Net realized and unrealized gain (loss) | $(15,949,083) |
Change in net assets from operations | $(15,548,106) |
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Financial Statements | Statements of Changes in Net Assets |
Six months ended | Year ended | |
6/30/20 (unaudited) | 12/31/19 | |
Change in net assets | ||
From operations | ||
Net investment income (loss) | $400,977 | $606,214 |
Net realized gain (loss) | (7,213,024) | 6,772,706 |
Net unrealized gain (loss) | (8,736,059) | 14,566,646 |
Change in net assets from operations | $(15,548,106) | $21,945,566 |
Total distributions to shareholders | $— | $(15,999,143) |
Change in net assets from fund share transactions | $2,663,191 | $5,008,803 |
Total change in net assets | $(12,884,915) | $10,955,226 |
Net assets | ||
At beginning of period | 96,539,309 | 85,584,083 |
At end of period | $83,654,394 | $96,539,309 |
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Financial Statements | Financial Highlights |
Initial Class | Six months ended | Year ended | ||||
6/30/20 (unaudited) | 12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | |
Net asset value, beginning of period | $11.66 | $11.25 | $13.47 | $13.23 | $12.29 | $16.04 |
Income (loss) from investment operations | ||||||
Net investment income (loss) (d) | $0.05 | $0.10 | $0.09 | $0.11 | $0.11(c) | $0.15 |
Net realized and unrealized gain (loss) | (2.27) | 2.56 | (0.40) | 1.70 | 2.35 | (0.94) |
Total from investment operations | $(2.22) | $2.66 | $(0.31) | $1.81 | $2.46 | $(0.79) |
Less distributions declared to shareholders | ||||||
From net investment income | $— | $(0.10) | $(0.13) | $(0.12) | $(0.16) | $(0.10) |
From net realized gain | — | (2.15) | (1.78) | (1.45) | (1.36) | (2.86) |
Total distributions declared to shareholders | $— | $(2.25) | $(1.91) | $(1.57) | $(1.52) | $(2.96) |
Net asset value, end of period (x) | $9.44 | $11.66 | $11.25 | $13.47 | $13.23 | $12.29 |
Total return (%) (k)(r)(s)(x) | (19.04)(n) | 26.78 | (5.11) | 14.97 | 20.90(c) | (4.15) |
Ratios (%) (to average net assets) and Supplemental data: | ||||||
Expenses before expense reductions (f) | 0.56(a) | 0.54 | 0.54 | 0.53 | 0.42(c) | 0.54 |
Expenses after expense reductions (f) | 0.55(a) | 0.53 | 0.53 | 0.52 | 0.41(c) | 0.53 |
Net investment income (loss) | 1.12(a) | 0.81 | 0.69 | 0.82 | 0.92(c) | 1.03 |
Portfolio turnover | 44(n) | 59 | 72 | 81 | 72 | 78 |
Net assets at end of period (000 omitted) | $29,212 | $35,441 | $29,936 | $36,195 | $28,715 | $27,795 |
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Service Class | Six months ended | Year ended | ||||
6/30/20 (unaudited) | 12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | |
Net asset value, beginning of period | $11.24 | $10.92 | $13.12 | $12.92 | $12.03 | $15.75 |
Income (loss) from investment operations | ||||||
Net investment income (loss) (d) | $0.04 | $0.07 | $0.06 | $0.07 | $0.08(c) | $0.12 |
Net realized and unrealized gain (loss) | (2.18) | 2.46 | (0.39) | 1.67 | 2.29 | (0.93) |
Total from investment operations | $(2.14) | $2.53 | $(0.33) | $1.74 | $2.37 | $(0.81) |
Less distributions declared to shareholders | ||||||
From net investment income | $— | $(0.06) | $(0.09) | $(0.09) | $(0.12) | $(0.05) |
From net realized gain | — | (2.15) | (1.78) | (1.45) | (1.36) | (2.86) |
Total distributions declared to shareholders | $— | $(2.21) | $(1.87) | $(1.54) | $(1.48) | $(2.91) |
Net asset value, end of period (x) | $9.10 | $11.24 | $10.92 | $13.12 | $12.92 | $12.03 |
Total return (%) (k)(r)(s)(x) | (19.04)(n) | 26.36 | (5.35) | 14.70 | 20.58(c) | (4.38) |
Ratios (%) (to average net assets) and Supplemental data: | ||||||
Expenses before expense reductions (f) | 0.81(a) | 0.79 | 0.79 | 0.78 | 0.67(c) | 0.79 |
Expenses after expense reductions (f) | 0.80(a) | 0.78 | 0.78 | 0.77 | 0.66(c) | 0.78 |
Net investment income (loss) | 0.87(a) | 0.56 | 0.43 | 0.55 | 0.66(c) | 0.79 |
Portfolio turnover | 44(n) | 59 | 72 | 81 | 72 | 78 |
Net assets at end of period (000 omitted) | $54,442 | $61,099 | $55,648 | $71,366 | $74,453 | $82,794 |
(a) | Annualized. |
(c) | Amount reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher. |
(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. |
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Financial Instruments | Level 1 | Level 2 | Level 3 | Total |
Equity Securities | $83,228,363 | $— | $— | $83,228,363 |
Mutual Funds | 797,376 | — | — | 797,376 |
Total | $84,025,739 | $— | $— | $84,025,739 |
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Year ended 12/31/19 | |
Ordinary income (including any short-term capital gains) | $4,407,046 |
Long-term capital gains | 11,592,097 |
Total distributions | $15,999,143 |
As of 6/30/20 | |
Cost of investments | $78,684,071 |
Gross appreciation | 11,315,757 |
Gross depreciation | (5,974,089) |
Net unrealized appreciation (depreciation) | $5,341,668 |
As of 12/31/19 | |
Undistributed ordinary income | 1,856,313 |
Undistributed long-term capital gain | 5,657,472 |
Net unrealized appreciation (depreciation) | 14,139,406 |
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Six months ended 6/30/20 | Year ended 12/31/19 | ||
Initial Class | $— | $5,626,679 | |
Service Class | — | 10,372,464 | |
Total | $— | $15,999,143 |
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Six months ended 6/30/20 | Year ended 12/31/19 | ||||
Shares | Amount | Shares | Amount | ||
Shares sold | |||||
Initial Class | 708,138 | $5,296,975 | 340,890 | $4,063,323 | |
Service Class | 1,268,042 | 10,086,861 | 563,636 | 6,702,429 | |
1,976,180 | $15,383,836 | 904,526 | $10,765,752 | ||
Shares issued to shareholders in reinvestment of distributions | |||||
Initial Class | — | $— | 558,757 | $5,626,679 | |
Service Class | — | — | 1,067,126 | 10,372,463 | |
— | $— | 1,625,883 | $15,999,142 | ||
Shares reacquired | |||||
Initial Class | (655,919) | $(6,098,019) | (520,733) | $(6,389,300) | |
Service Class | (720,215) | (6,622,626) | (1,294,674) | (15,366,791) | |
(1,376,134) | $(12,720,645) | (1,815,407) | $(21,756,091) | ||
Net change | |||||
Initial Class | 52,219 | $(801,044) | 378,914 | $3,300,702 | |
Service Class | 547,827 | 3,464,235 | 336,088 | 1,708,101 | |
600,046 | $2,663,191 | 715,002 | $5,008,803 |
Affiliated Issuers | Beginning Value | Purchases | Sales Proceeds | Realized Gain (Loss) | Change in Unrealized Appreciation or Depreciation | Ending Value |
MFS Institutional Money Market Portfolio | $757,875 | $19,246,454 | $19,550,897 | $234 | $— | $453,666 |
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Affiliated Issuers | Dividend Income | Capital Gain Distributions |
MFS Institutional Money Market Portfolio | $4,430 | $— |
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Allocation Portfolio
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MFS Total Return Bond Series | 16.9% |
MFS Limited Maturity Portfolio | 11.9% |
MFS Government Securities Portfolio | 10.0% |
MFS Inflation-Adjusted Bond Portfolio | 9.9% |
MFS Global Governments Portfolio | 8.0% |
MFS Value Series | 6.0% |
MFS Research Series | 6.0% |
MFS Growth Series | 6.0% |
MFS High Yield Portfolio | 4.9% |
MFS Mid Cap Growth Series | 4.1% |
MFS Mid Cap Value Portfolio | 4.0% |
MFS Research International Portfolio | 3.9% |
MFS Global Real Estate Portfolio | 2.0% |
MFS International Intrinsic Value Portfolio | 2.0% |
MFS International Growth Portfolio | 2.0% |
MFS New Discovery Value Portfolio | 1.0% |
MFS New Discovery Series | 1.0% |
Cash & Cash Equivalents | 0.4% |
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January 1, 2020 through June 30, 2020
Share Class | Annualized Expense Ratio | Beginning Account Value 1/01/20 | Ending Account Value 6/30/20 | Expenses Paid During Period (p) 1/01/20-6/30/20 | |
Initial Class | Actual | 0.03% | $1,000.00 | $1,013.11 | $0.15 |
Hypothetical (h) | 0.03% | $1,000.00 | $1,024.71 | $0.15 | |
Service Class | Actual | 0.28% | $1,000.00 | $1,012.21 | $1.40 |
Hypothetical (h) | 0.28% | $1,000.00 | $1,023.47 | $1.41 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying funds in which the fund invests. If these indirect costs were included, your costs would have been higher. |
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Issuer | Shares/Par | Value ($) | ||
Investment Companies (h) – 100.0% | ||||
Bond Funds – 61.6% | ||||
MFS Global Governments Portfolio - Initial Class | 2,903,692 | $ 32,724,609 | ||
MFS Government Securities Portfolio - Initial Class | 3,105,054 | 40,955,654 | ||
MFS High Yield Portfolio - Initial Class | 3,682,107 | 20,288,411 | ||
MFS Inflation-Adjusted Bond Portfolio - Initial Class | 3,617,731 | 40,952,717 | ||
MFS Limited Maturity Portfolio - Initial Class | 4,661,571 | 49,132,959 | ||
MFS Total Return Bond Series - Initial Class | 4,957,191 | 69,598,960 | ||
$ 253,653,310 | ||||
International Stock Funds – 7.9% | ||||
MFS International Growth Portfolio - Initial Class | 602,271 | $ 8,184,863 | ||
MFS International Intrinsic Value Portfolio - Initial Class | 272,770 | 8,229,481 | ||
MFS Research International Portfolio - Initial Class | 1,031,152 | 16,343,761 | ||
$32,758,105 | ||||
Specialty Funds – 2.0% | ||||
MFS Global Real Estate Portfolio - Initial Class | 595,655 | $ 8,243,859 |
Issuer | Shares/Par | Value ($) | ||
Investment Companies (h) – continued | ||||
U.S. Stock Funds – 28.1% | ||||
MFS Growth Series - Initial Class | 378,178 | $ 24,713,961 | ||
MFS Mid Cap Growth Series - Initial Class | 1,573,302 | 16,629,801 | ||
MFS Mid Cap Value Portfolio - Initial Class | 2,297,142 | 16,608,338 | ||
MFS New Discovery Series - Initial Class | 194,464 | 4,147,909 | ||
MFS New Discovery Value Portfolio - Initial Class | 558,824 | 4,168,832 | ||
MFS Research Series - Initial Class | 860,600 | 24,716,433 | ||
MFS Value Series - Initial Class | 1,362,418 | 24,755,129 | ||
$ 115,740,403 | ||||
Money Market Funds – 0.4% | ||||
MFS Institutional Money Market Portfolio, 0.17% (v) | 1,664,871 | $ 1,665,037 | ||
Total Investment Companies (Identified Cost, $358,024,661) | $ 412,060,714 | |||
Other Assets, Less Liabilities – (0.0)% | (53,111) | |||
Net Assets – 100.0% | $ 412,007,603 |
(h) | An affiliated issuer, which 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. At period end, the aggregate value of the fund’s investments in affiliated issuers was $412,060,714. | |||
(v) | Affiliated issuer 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. |
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Financial Statements | Statement of Assets and Liabilities (unaudited) |
At 6/30/20Assets | |
Investments in affiliated issuers, at value (identified cost, $358,024,661) | $412,060,714 |
Receivables for | |
Investments sold | 161,975 |
Other assets | 1,466 |
Total assets | $412,224,155 |
Liabilities | |
Payables for | |
Fund shares reacquired | $161,972 |
Payable to affiliates | |
Administrative services fee | 95 |
Shareholder servicing costs | 44 |
Distribution and/or service fees | 5,556 |
Accrued expenses and other liabilities | 48,885 |
Total liabilities | $216,552 |
Net assets | $412,007,603 |
Net assets consist of | |
Paid-in capital | $329,463,741 |
Total distributable earnings (loss) | 82,543,862 |
Net assets | $412,007,603 |
Shares of beneficial interest outstanding | 35,493,832 |
Net assets | Shares outstanding | Net asset value per share | |
Initial Class | $2,730,089 | 235,618 | $11.59 |
Service Class | 409,277,514 | 35,258,214 | 11.61 |
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Financial Statements | Statement of Operations (unaudited) |
Six months ended 6/30/20 | |
Net investment income (loss) | |
Income | |
Dividends from affiliated issuers | $8,102 |
Expenses | |
Distribution and/or service fees | $508,641 |
Shareholder servicing costs | 3,339 |
Administrative services fee | 8,701 |
Independent Trustees' compensation | 4,539 |
Custodian fee | 3,772 |
Shareholder communications | 6,846 |
Audit and tax fees | 20,078 |
Legal fees | 2,441 |
Miscellaneous | 13,812 |
Total expenses | $572,169 |
Net investment income (loss) | $(564,067) |
Realized and unrealized gain (loss) | |
Realized gain (loss) (identified cost basis) | |
Investments in affiliated issuers | $3,578,259 |
Change in unrealized appreciation or depreciation | |
Affiliated issuers | $1,010,074 |
Net realized and unrealized gain (loss) | $4,588,333 |
Change in net assets from operations | $4,024,266 |
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Financial Statements | Statements of Changes in Net Assets |
Six months ended | Year ended | |
6/30/20 (unaudited) | 12/31/19 | |
Change in net assets | ||
From operations | ||
Net investment income (loss) | $(564,067) | $9,782,036 |
Net realized gain (loss) | 3,578,259 | 18,663,699 |
Net unrealized gain (loss) | 1,010,074 | 40,261,900 |
Change in net assets from operations | $4,024,266 | $68,707,635 |
Total distributions to shareholders | $— | $(32,355,395) |
Change in net assets from fund share transactions | $(27,249,279) | $(46,169,562) |
Total change in net assets | $(23,225,013) | $(9,817,322) |
Net assets | ||
At beginning of period | 435,232,616 | 445,049,938 |
At end of period | $412,007,603 | $435,232,616 |
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Financial Statements | Financial Highlights |
Initial Class | Six months ended | Year ended | ||||
6/30/20 (unaudited) | 12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | |
Net asset value, beginning of period | $11.44 | $10.58 | $11.61 | $10.95 | $11.09 | $11.79 |
Income (loss) from investment operations | ||||||
Net investment income (loss) (d)(l) | $(0.00)(w) | $0.28 | $0.27 | $0.22 | $0.22(c) | $0.24 |
Net realized and unrealized gain (loss) | 0.15 | 1.47 | (0.55) | 1.02 | 0.36 | (0.27) |
Total from investment operations | $0.15 | $1.75 | $(0.28) | $1.24 | $0.58 | $(0.03) |
Less distributions declared to shareholders | ||||||
From net investment income | $— | $(0.31) | $(0.26) | $(0.26) | $(0.32) | $(0.41) |
From net realized gain | — | (0.58) | (0.49) | (0.32) | (0.40) | (0.26) |
Total distributions declared to shareholders | $— | $(0.89) | $(0.75) | $(0.58) | $(0.72) | $(0.67) |
Net asset value, end of period (x) | $11.59 | $11.44 | $10.58 | $11.61 | $10.95 | $11.09 |
Total return (%) (k)(r)(s)(x) | 1.31(n) | 16.87 | (2.73) | 11.48 | 5.03(c) | (0.19) |
Ratios (%) (to average net assets) and Supplemental data: | ||||||
Expenses before expense reductions (f)(h) | 0.03(a) | 0.03 | 0.03 | 0.02 | 0.02(c) | 0.01 |
Expenses after expense reductions (f)(h) | N/A | N/A | N/A | N/A | N/A | N/A |
Net investment income (loss) (l) | (0.03)(a) | 2.47 | 2.34 | 1.94 | 1.92(c) | 2.06 |
Portfolio turnover | 6(n) | 2 | 1 | 0(b) | 1 | 2 |
Net assets at end of period (000 omitted) | $2,730 | $2,029 | $2,062 | $2,338 | $2,266 | $2,419 |
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Service Class | Six months ended | Year ended | ||||
6/30/20 (unaudited) | 12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | |
Net asset value, beginning of period | $11.47 | $10.61 | $11.63 | $10.96 | $11.10 | $11.80 |
Income (loss) from investment operations | ||||||
Net investment income (loss) (d)(l) | $(0.02) | $0.25 | $0.23 | $0.19 | $0.19(c) | $0.21 |
Net realized and unrealized gain (loss) | 0.16 | 1.47 | (0.53) | 1.02 | 0.35 | (0.28) |
Total from investment operations | $0.14 | $1.72 | $(0.30) | $1.21 | $0.54 | $(0.07) |
Less distributions declared to shareholders | ||||||
From net investment income | $— | $(0.28) | $(0.23) | $(0.22) | $(0.28) | $(0.37) |
From net realized gain | — | (0.58) | (0.49) | (0.32) | (0.40) | (0.26) |
Total distributions declared to shareholders | $— | $(0.86) | $(0.72) | $(0.54) | $(0.68) | $(0.63) |
Net asset value, end of period (x) | $11.61 | $11.47 | $10.61 | $11.63 | $10.96 | $11.10 |
Total return (%) (k)(r)(s)(x) | 1.22(n) | 16.48 | (2.92) | 11.24 | 4.73(c) | (0.49) |
Ratios (%) (to average net assets) and Supplemental data: | ||||||
Expenses before expense reductions (f)(h) | 0.28(a) | 0.28 | 0.28 | 0.27 | 0.27(c) | 0.26 |
Expenses after expense reductions (f)(h) | N/A | N/A | N/A | N/A | N/A | N/A |
Net investment income (loss) (l) | (0.28)(a) | 2.18 | 2.05 | 1.63 | 1.66(c) | 1.80 |
Portfolio turnover | 6(n) | 2 | 1 | 0(b) | 1 | 2 |
Net assets at end of period (000 omitted) | $409,278 | $433,204 | $442,988 | $552,579 | $612,965 | $691,195 |
(a) | Annualized. |
(b) | Less than 0.5%. |
(c) | Amount reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(h) | In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying affiliated funds in which the fund invests. Accordingly, the expense ratio for the fund reflects only those fees and expenses borne directly by the fund. Because the underlying affiliated funds have varied expense and fee levels and the fund may own different proportions of the underlying affiliated funds at different times, the amount of fees and expenses incurred indirectly by the fund will vary. |
(k) | The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown. |
(l) | Recognition of net investment income by the fund may be affected by the timing of the declaration of dividends by the underlying affiliated funds in which the fund invests and for interim net investment income ratios, the actual annual net investment income ratio may differ. The ratios and per share amounts do not include net investment income of the underlying affiliated funds in which the fund invests. |
(n) | Not annualized. |
(r) | Certain expenses have been reduced without which performance would have been lower. |
(s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
(w) | Per share amount was less than $0.01. |
(x) | The net asset values 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. |
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Financial Instruments | Level 1 | Level 2 | Level 3 | Total |
Mutual Funds | $412,060,714 | $— | $— | $412,060,714 |
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Year ended 12/31/19 | |
Ordinary income (including any short-term capital gains) | $10,554,250 |
Long-term capital gains | 21,801,145 |
Total distributions | $32,355,395 |
As of 6/30/20 | |
Cost of investments | $361,262,909 |
Gross appreciation | 52,177,705 |
Gross depreciation | (1,379,900) |
Net unrealized appreciation (depreciation) | $50,797,805 |
As of 12/31/19 | |
Undistributed ordinary income | 10,460,697 |
Undistributed long-term capital gain | 18,271,168 |
Net unrealized appreciation (depreciation) | 49,787,731 |
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Six months ended 6/30/20 | Year ended 12/31/19 | ||
Initial Class | $— | $147,454 | |
Service Class | — | 32,207,941 | |
Total | $— | $32,355,395 |
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Six months ended 6/30/20 | Year ended 12/31/19 | ||||
Shares | Amount | Shares | Amount | ||
Shares sold | |||||
Initial Class | 107,127 | $1,214,461 | 2,446 | $28,344 | |
Service Class | 304,853 | 3,409,566 | 478,870 | 5,577,424 | |
411,980 | $4,624,027 | 481,316 | $5,605,768 | ||
Shares issued to shareholders in reinvestment of distributions | |||||
Initial Class | — | $— | 13,344 | $147,454 | |
Service Class | — | — | 2,901,616 | 32,207,941 | |
— | $— | 2,914,960 | $32,355,395 | ||
Shares reacquired | |||||
Initial Class | (48,947) | $(534,181) | (33,251) | $(360,901) | |
Service Class | (2,809,733) | (31,339,125) | (7,379,617) | (83,769,824) | |
(2,858,680) | $(31,873,306) | (7,412,868) | $(84,130,725) | ||
Net change | |||||
Initial Class | 58,180 | $680,280 | (17,461) | $(185,103) | |
Service Class | (2,504,880) | (27,929,559) | (3,999,131) | (45,984,459) | |
(2,446,700) | $(27,249,279) | (4,016,592) | $(46,169,562) |
Affiliated Issuers | Beginning Value | Purchases | Sales Proceeds | Realized Gain (Loss) | Change in Unrealized Appreciation or Depreciation | Ending Value |
MFS Global Governments Portfolio | $34,684,158 | $2,141,719 | $5,728,842 | $(118,453) | $1,746,027 | $32,724,609 |
MFS Global Real Estate Portfolio | 8,712,875 | 1,271,766 | 865,624 | 112,013 | (987,171) | 8,243,859 |
MFS Government Securities Portfolio | 43,272,484 | 3,373,051 | 8,053,739 | (417,262) | 2,781,120 | 40,955,654 |
MFS Growth Series | 26,039,297 | 1,088,193 | 5,063,594 | 2,445,365 | 204,700 | 24,713,961 |
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Affiliated Issuers − continued | Beginning Value | Purchases | Sales Proceeds | Realized Gain (Loss) | Change in Unrealized Appreciation or Depreciation | Ending Value |
MFS High Yield Portfolio | $21,684,412 | $730,372 | $1,377,309 | $(190,637) | $(558,427) | $20,288,411 |
MFS Inflation-Adjusted Bond Portfolio | 43,317,842 | 466,112 | 4,599,628 | 54,630 | 1,713,761 | 40,952,717 |
MFS Institutional Money Market Portfolio | 1,669,745 | 541,991 | 546,848 | (20) | 169 | 1,665,037 |
MFS International Growth Portfolio | 8,680,310 | 763,217 | 953,769 | 89,824 | (394,719) | 8,184,863 |
MFS International Intrinsic Value Portfolio | 8,673,639 | 414,443 | 964,122 | 263,894 | (158,373) | 8,229,481 |
MFS Limited Maturity Portfolio | 52,041,281 | 1,292,250 | 4,966,152 | (111,619) | 877,199 | 49,132,959 |
MFS Mid Cap Growth Series | 17,368,614 | 1,586,735 | 3,640,011 | 675,875 | 638,588 | 16,629,801 |
MFS Mid Cap Value Portfolio | 17,383,710 | 3,239,133 | 1,500,780 | (174,834) | (2,338,891) | 16,608,338 |
MFS New Discovery Series | 4,328,209 | 667,149 | 1,226,955 | 155,435 | 224,071 | 4,147,909 |
MFS New Discovery Value Portfolio | 4,342,216 | 1,050,701 | 528,855 | (132,984) | (562,246) | 4,168,832 |
MFS Research International Portfolio | 17,357,618 | 1,694,903 | 1,837,563 | 221,193 | (1,092,390) | 16,343,761 |
MFS Research Series | 26,045,148 | 2,286,689 | 3,379,061 | 520,498 | (756,841) | 24,716,433 |
MFS Total Return Bond Series | 73,626,602 | 560,771 | 7,447,043 | 30,979 | 2,827,651 | 69,598,960 |
MFS Value Series | 26,055,991 | 3,453,737 | 1,754,807 | 154,362 | (3,154,154) | 24,755,129 |
$435,284,151 | $26,622,932 | $54,434,702 | $3,578,259 | $1,010,074 | $412,060,714 |
Affiliated Issuers | Dividend Income | Capital Gain Distributions |
MFS Global Governments Portfolio | $— | $— |
MFS Global Real Estate Portfolio | — | — |
MFS Government Securities Portfolio | — | — |
MFS Growth Series | — | — |
MFS High Yield Portfolio | — | — |
MFS Inflation-Adjusted Bond Portfolio | — | — |
MFS Institutional Money Market Portfolio | 8,102 | — |
MFS International Growth Portfolio | — | — |
MFS International Intrinsic Value Portfolio | — | — |
MFS Limited Maturity Portfolio | — | — |
MFS Mid Cap Growth Series | — | — |
MFS Mid Cap Value Portfolio | — | — |
MFS New Discovery Series | — | — |
MFS New Discovery Value Portfolio | — | — |
MFS Research International Portfolio | — | — |
MFS Research Series | — | — |
MFS Total Return Bond Series | — | — |
MFS Value Series | — | — |
$8,102 | $— |
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Prologis, Inc., REIT | 5.4% |
Public Storage, Inc., REIT | 3.6% |
Link REIT | 3.4% |
Goodman Group, REIT | 3.2% |
National Storage, REIT | 2.9% |
Deutsche Wohnen SE | 2.6% |
American Homes 4 Rent, “A”, REIT | 2.5% |
Equinix, Inc., REIT | 2.4% |
Mapletree Logistics Trust, REIT | 2.4% |
Japan Logistics Fund, Inc., REIT | 2.4% |
Real Estate | 97.5% |
Communication Services | 1.8% |
United States | 48.2% |
Japan | 9.5% |
Hong Kong | 8.2% |
United Kingdom | 6.2% |
Australia | 6.1% |
Germany | 4.4% |
Singapore | 4.2% |
Belgium | 3.9% |
Canada | 2.8% |
Other Countries | 6.5% |
United States Dollar | 48.2% |
Hong Kong Dollar | 9.6% |
Japanese Yen | 9.5% |
Euro | 8.5% |
British Pound Sterling | 8.0% |
Australian Dollar | 6.1% |
Singapore Dollar | 4.2% |
Canadian Dollar | 2.8% |
Norwegian Krone | 1.3% |
Other Currencies | 1.8% |
(g) | The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and S&P Global Market Intelligence Inc. (“S&P Global Market Intelligence”). GICS is a service mark of MSCI and S&P Global Market Intelligence and has been licensed for use by MFS. |
(x) | Represents the portfolio’s exposure to issuer countries as a percentage of a 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 a portfolio's net assets. For purposes of this presentation, United States Dollar includes Cash & Cash Equivalents. |
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January 1, 2020 through June 30, 2020
Share Class | Annualized Expense Ratio | Beginning Account Value 1/01/20 | Ending Account Value 6/30/20 | Expenses Paid During Period (p) 1/01/20-6/30/20 | |
Initial Class | Actual | 0.92% | $1,000.00 | $869.89 | $4.28 |
Hypothetical (h) | 0.92% | $1,000.00 | $1,020.29 | $4.62 | |
Service Class | Actual | 1.17% | $1,000.00 | $868.53 | $5.44 |
Hypothetical (h) | 1.17% | $1,000.00 | $1,019.05 | $5.87 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class's annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
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Issuer | Shares/Par | Value ($) | ||
Common Stocks – 99.3% | ||||
Construction – 8.3% | ||||
American Homes 4 Rent, “A”, REIT | 154,599 | $ 4,158,713 | ||
AvalonBay Communities, Inc., REIT | 20,194 | 3,122,800 | ||
Katitas Co. Ltd. | 138,800 | 3,207,280 | ||
Mid-America Apartment Communities, Inc., REIT | 28,351 | 3,251,009 | ||
$13,739,802 | ||||
Network & Telecom – 5.0% | ||||
CoreSite Realty Corp. | 18,911 | $ 2,289,366 | ||
Equinix, Inc., REIT | 5,755 | 4,041,736 | ||
QTS Realty Trust, Inc., REIT, “A” | 30,688 | 1,966,794 | ||
$8,297,896 | ||||
Real Estate – 82.4% | ||||
Advance Residence Investment Corp., REIT | 990 | $ 2,947,766 | ||
Alexandria Real Estate Equities, Inc., REIT | 20,660 | 3,352,085 | ||
Ascendas India Trust, REIT | 3,033,900 | 2,942,892 | ||
Atrium European Real Estate Ltd. | 133,390 | 412,125 | ||
Big Yellow Group PLC, REIT | 197,270 | 2,454,151 | ||
Boardwalk REIT | 114,441 | 2,504,451 | ||
Brixmor Property Group, Inc., REIT | 186,287 | 2,388,199 | ||
Corporacion Inmobiliaria Vesta S.A.B. de C.V. | 842,966 | 1,250,632 | ||
Corporate Office Properties Trust, REIT | 72,424 | 1,835,224 | ||
Deutsche Wohnen SE | 97,614 | 4,381,288 | ||
Embassy Office Parks, REIT | 412,000 | 1,859,875 | ||
Empire State Realty Trust, REIT, “A” | 193,120 | 1,351,840 | ||
Entra ASA | 170,615 | 2,176,725 | ||
EPR Properties, REIT | 29,147 | 965,640 | ||
Equity Lifestyle Properties, Inc., REIT | 52,423 | 3,275,389 | ||
ESR Cayman Ltd. (a) | 1,006,000 | 2,386,554 | ||
Farmland Partners, Inc., REIT | 75,071 | 514,236 | ||
Goodman Group, REIT | 510,316 | 5,252,059 | ||
Grainger PLC | 628,586 | 2,227,600 | ||
Granite REIT | 40,763 | 2,103,606 | ||
Hang Lung Properties Ltd. | 1,072,944 | 2,541,675 | ||
Host Hotels & Resorts, Inc., REIT | 125,885 | 1,358,299 | ||
Hysan Development Co. Ltd. | 578,000 | 1,863,602 | ||
Industrial Logistics Properties Trust, REIT | 76,920 | 1,580,706 | ||
Japan Logistics Fund, Inc., REIT | 1,439 | 3,902,192 | ||
Kenedix Office Investment Corp., REIT | 532 | 2,989,591 | ||
Kenedix, Inc. | 545,600 | 2,683,155 |
Issuer | Shares/Par | Value ($) | ||
Common Stocks – continued | ||||
Real Estate – continued | ||||
LEG Immobilien AG (a) | 22,974 | $ 2,916,675 | ||
Link REIT | 689,364 | 5,634,631 | ||
LondonMetric Property PLC, REIT | 351,396 | 916,984 | ||
Mapletree Logistics Trust, REIT | 2,896,523 | 4,032,186 | ||
Medical Properties Trust, Inc., REIT | 105,254 | 1,978,775 | ||
National Storage, REIT | 3,765,414 | 4,794,256 | ||
Prologis, Inc., REIT | 96,238 | 8,981,893 | ||
Public Storage, Inc., REIT | 31,424 | 6,029,951 | ||
Rayonier, Inc., REIT | 64,988 | 1,611,053 | ||
Shaftesbury PLC, REIT | 280,685 | 1,834,629 | ||
Shurgard Self Storage S.A. | 85,398 | 3,209,347 | ||
Sino Land Co. Ltd. | 1,441,399 | 1,813,256 | ||
STAG Industrial, Inc., REIT | 105,374 | 3,089,566 | ||
STORE Capital Corp., REIT | 134,592 | 3,204,636 | ||
Sun Communities, Inc., REIT | 20,766 | 2,817,531 | ||
Swire Properties Ltd. | 684,800 | 1,738,838 | ||
Unite Group PLC, REIT | 239,797 | 2,793,046 | ||
Urban Edge Properties, REIT | 241,220 | 2,863,281 | ||
VICI Properties, Inc., REIT | 159,070 | 3,211,623 | ||
W.P. Carey, Inc., REIT | 38,011 | 2,571,444 | ||
Warehouses De Pauw, REIT | 117,900 | 3,218,793 | ||
Welltower, Inc., REIT | 74,915 | 3,876,851 | ||
$ 136,640,802 | ||||
Telecommunications - Wireless – 1.8% | ||||
American Tower Corp., REIT | 11,717 | $ 3,029,313 | ||
Telephone Services – 1.8% | ||||
Helios Tower PLC (a) | 1,624,073 | $ 2,990,411 | ||
Total Common Stocks (Identified Cost, $133,862,327) | $164,698,224 | |||
Investment Companies (h) – 0.3% | ||||
Money Market Funds – 0.3% | ||||
MFS Institutional Money Market Portfolio, 0.17% (v) (Identified Cost, $539,160) | 539,106 | $ 539,160 | ||
Other Assets, Less Liabilities – 0.4% | 704,912 | |||
Net Assets – 100.0% | $165,942,296 |
(a) | Non-income producing security. | |||
(h) | An affiliated issuer, which 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. At period end, the aggregate values of the fund's investments in affiliated issuers and in unaffiliated issuers were $539,160 and $164,698,224, respectively. | |||
(v) | Affiliated issuer 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: | |
REIT | Real Estate Investment Trust |
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Financial Statements | Statement of Assets and Liabilities (unaudited) |
At 6/30/20Assets | |
Investments in unaffiliated issuers, at value (identified cost, $133,862,327) | $164,698,224 |
Investments in affiliated issuers, at value (identified cost, $539,160) | 539,160 |
Receivables for | |
Investments sold | 606,757 |
Fund shares sold | 6,754 |
Dividends | 763,861 |
Receivable from investment adviser | 6,090 |
Other assets | 785 |
Total assets | $166,621,631 |
Liabilities | |
Payables for | |
Investments purchased | $488,260 |
Fund shares reacquired | 114,470 |
Payable to affiliates | |
Administrative services fee | 182 |
Shareholder servicing costs | 52 |
Distribution and/or service fees | 679 |
Accrued expenses and other liabilities | 75,692 |
Total liabilities | $679,335 |
Net assets | $165,942,296 |
Net assets consist of | |
Paid-in capital | $136,288,514 |
Total distributable earnings (loss) | 29,653,782 |
Net assets | $165,942,296 |
Shares of beneficial interest outstanding | 11,478,603 |
Net assets | Shares outstanding | Net asset value per share | |
Initial Class | $115,698,888 | 8,361,067 | $13.84 |
Service Class | 50,243,408 | 3,117,536 | 16.12 |
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Financial Statements | Statement of Operations (unaudited) |
Six months ended 6/30/20 | |
Net investment income (loss) | |
Income | |
Dividends | $3,090,508 |
Dividends from affiliated issuers | 15,431 |
Other | 8,931 |
Foreign taxes withheld | (97,643) |
Total investment income | $3,017,227 |
Expenses | |
Management fee | $755,222 |
Distribution and/or service fees | 62,948 |
Shareholder servicing costs | 4,224 |
Administrative services fee | 16,727 |
Independent Trustees' compensation | 2,248 |
Custodian fee | 17,071 |
Shareholder communications | 11,706 |
Audit and tax fees | 30,566 |
Legal fees | 908 |
Miscellaneous | 13,936 |
Total expenses | $915,556 |
Reduction of expenses by investment adviser | (79,817) |
Net expenses | $835,739 |
Net investment income (loss) | $2,181,488 |
Realized and unrealized gain (loss) | |
Realized gain (loss) (identified cost basis) | |
Unaffiliated issuers | $(7,600,420) |
Affiliated issuers | (45) |
Foreign currency | 10,269 |
Net realized gain (loss) | $(7,590,196) |
Change in unrealized appreciation or depreciation | |
Unaffiliated issuers (net of $8,967 decrease in deferred country tax) | $(16,684,729) |
Translation of assets and liabilities in foreign currencies | (2,494) |
Net unrealized gain (loss) | $(16,687,223) |
Net realized and unrealized gain (loss) | $(24,277,419) |
Change in net assets from operations | $(22,095,931) |
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Financial Statements | Statements of Changes in Net Assets |
Six months ended | Year ended | |
6/30/20 (unaudited) | 12/31/19 | |
Change in net assets | ||
From operations | ||
Net investment income (loss) | $2,181,488 | $3,811,530 |
Net realized gain (loss) | (7,590,196) | 5,127,159 |
Net unrealized gain (loss) | (16,687,223) | 30,649,985 |
Change in net assets from operations | $(22,095,931) | $39,588,674 |
Total distributions to shareholders | $— | $(6,971,115) |
Change in net assets from fund share transactions | $(3,000,170) | $5,017,570 |
Total change in net assets | $(25,096,101) | $37,635,129 |
Net assets | ||
At beginning of period | 191,038,397 | 153,403,268 |
At end of period | $165,942,296 | $191,038,397 |
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Financial Statements | Financial Highlights |
Initial Class | Six months ended | Year ended | ||||
6/30/20 (unaudited) | 12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | |
Net asset value, beginning of period | $15.91 | $13.10 | $14.27 | $14.01 | $13.55 | $14.06 |
Income (loss) from investment operations | ||||||
Net investment income (loss) (d) | $0.19 | $0.35 | $0.42 | $0.37 | $0.37(c) | $0.29 |
Net realized and unrealized gain (loss) | (2.26) | 3.14 | (0.79) | 1.42 | 0.74 | (0.23) |
Total from investment operations | $(2.07) | $3.49 | $(0.37) | $1.79 | $1.11 | $0.06 |
Less distributions declared to shareholders | ||||||
From net investment income | $— | $(0.58) | $(0.58) | $(0.63) | $(0.39) | $(0.57) |
From net realized gain | — | (0.10) | (0.22) | (0.90) | (0.26) | — |
Total distributions declared to shareholders | $— | $(0.68) | $(0.80) | $(1.53) | $(0.65) | $(0.57) |
Net asset value, end of period (x) | $13.84 | $15.91 | $13.10 | $14.27 | $14.01 | $13.55 |
Total return (%) (k)(r)(s)(x) | (13.01)(n) | 26.87 | (3.03) | 13.33 | 7.94(c) | 0.74 |
Ratios (%) (to average net assets) and Supplemental data: | ||||||
Expenses before expense reductions (f) | 1.02(a) | 1.01 | 1.01 | 1.00 | 0.97(c) | 1.00 |
Expenses after expense reductions (f) | 0.92(a) | 0.92 | 0.92 | 0.92 | 0.91(c) | 0.94 |
Net investment income (loss) | 2.68(a) | 2.31 | 3.00 | 2.56 | 2.63(c) | 2.11 |
Portfolio turnover | 24(n) | 36 | 24 | 24 | 30 | 40 |
Net assets at end of period (000 omitted) | $115,699 | $132,530 | $99,826 | $114,198 | $115,023 | $124,563 |
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Service Class | Six months ended | Year ended | ||||
6/30/20 (unaudited) | 12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | |
Net asset value, beginning of period | $18.56 | $15.17 | $16.41 | $15.89 | $15.28 | $15.77 |
Income (loss) from investment operations | ||||||
Net investment income (loss) (d) | $0.20 | $0.36 | $0.44 | $0.38 | $0.38(c) | $0.29 |
Net realized and unrealized gain (loss) | (2.64) | 3.66 | (0.93) | 1.62 | 0.83 | (0.25) |
Total from investment operations | $(2.44) | $4.02 | $(0.49) | $2.00 | $1.21 | $0.04 |
Less distributions declared to shareholders | ||||||
From net investment income | $— | $(0.53) | $(0.53) | $(0.58) | $(0.34) | $(0.53) |
From net realized gain | — | (0.10) | (0.22) | (0.90) | (0.26) | — |
Total distributions declared to shareholders | $— | $(0.63) | $(0.75) | $(1.48) | $(0.60) | $(0.53) |
Net asset value, end of period (x) | $16.12 | $18.56 | $15.17 | $16.41 | $15.89 | $15.28 |
Total return (%) (k)(r)(s)(x) | (13.15)(n) | 26.68 | (3.33) | 13.07 | 7.70(c) | 0.47 |
Ratios (%) (to average net assets) and Supplemental data: | ||||||
Expenses before expense reductions (f) | 1.27(a) | 1.26 | 1.26 | 1.25 | 1.22(c) | 1.25 |
Expenses after expense reductions (f) | 1.17(a) | 1.17 | 1.17 | 1.17 | 1.16(c) | 1.19 |
Net investment income (loss) | 2.42(a) | 2.07 | 2.74 | 2.31 | 2.37(c) | 1.84 |
Portfolio turnover | 24(n) | 36 | 24 | 24 | 30 | 40 |
Net assets at end of period (000 omitted) | $50,243 | $58,508 | $53,577 | $70,167 | $75,253 | $83,135 |
(a) | Annualized. |
(c) | Amount reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher. |
(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. |
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Financial Instruments | Level 1 | Level 2 | Level 3 | Total |
Equity Securities: | ||||
United States | $78,717,953 | $— | $— | $78,717,953 |
Japan | 12,740,393 | 2,989,591 | — | 15,729,984 |
Hong Kong | 11,728,400 | 1,863,602 | — | 13,592,002 |
United Kingdom | 10,226,410 | — | — | 10,226,410 |
Australia | 4,794,256 | 5,252,059 | — | 10,046,315 |
Germany | 7,297,963 | — | — | 7,297,963 |
Singapore | 4,032,186 | 2,942,892 | — | 6,975,078 |
Belgium | 6,428,140 | — | — | 6,428,140 |
Canada | 4,608,057 | — | — | 4,608,057 |
Other Countries | 6,829,893 | 4,246,429 | — | 11,076,322 |
Mutual Funds | 539,160 | — | — | 539,160 |
Total | $147,942,811 | $17,294,573 | $— | $165,237,384 |
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Year ended 12/31/19 | |
Ordinary income (including any short-term capital gains) | $5,904,085 |
Long-term capital gains | 1,067,030 |
Total distributions | $6,971,115 |
As of 6/30/20 | |
Cost of investments | $142,144,613 |
Gross appreciation | 28,921,250 |
Gross depreciation | (5,828,479) |
Net unrealized appreciation (depreciation) | $23,092,771 |
As of 12/31/19 | |
Undistributed ordinary income | 8,776,928 |
Undistributed long-term capital gain | 3,196,400 |
Other temporary differences | (10,082) |
Net unrealized appreciation (depreciation) | 39,786,467 |
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Six months ended 6/30/20 | Year ended 12/31/19 | ||
Initial Class | $— | $4,992,128 | |
Service Class | — | 1,978,987 | |
Total | $— | $6,971,115 |
Up to $1 billion | 0.90% |
In excess of $1 billion and up to $2.5 billion | 0.75% |
In excess of $2.5 billion | 0.65% |
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Six months ended 6/30/20 | Year ended 12/31/19 | ||||
Shares | Amount | Shares | Amount | ||
Shares sold | |||||
Initial Class | 1,066,338 | $13,066,842 | 1,801,254 | $28,192,886 | |
Service Class | 338,050 | 5,005,995 | 218,233 | 3,885,205 | |
1,404,388 | $18,072,837 | 2,019,487 | $32,078,091 | ||
Shares issued to shareholders in reinvestment of distributions | |||||
Initial Class | — | $— | 328,646 | $4,992,128 | |
Service Class | — | — | 111,618 | 1,978,987 | |
— | $— | 440,264 | $6,971,115 | ||
Shares reacquired | |||||
Initial Class | (1,032,822) | $(14,920,201) | (1,424,762) | $(21,540,563) | |
Service Class | (373,250) | (6,152,806) | (708,013) | (12,491,073) | |
(1,406,072) | $(21,073,007) | (2,132,775) | $(34,031,636) | ||
Net change | |||||
Initial Class | 33,516 | $(1,853,359) | 705,138 | $11,644,451 | |
Service Class | (35,200) | (1,146,811) | (378,162) | (6,626,881) | |
(1,684) | $(3,000,170) | 326,976 | $5,017,570 |
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Affiliated Issuers | Beginning Value | Purchases | Sales Proceeds | Realized Gain (Loss) | Change in Unrealized Appreciation or Depreciation | Ending Value |
MFS Institutional Money Market Portfolio | $3,254,887 | $33,111,893 | $35,827,575 | $(45) | $— | $539,160 |
Affiliated Issuers | Dividend Income | Capital Gain Distributions |
MFS Institutional Money Market Portfolio | $15,431 | $— |
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MFS Value Series | 11.0% |
MFS Growth Series | 11.0% |
MFS Research Series | 10.0% |
MFS Mid Cap Growth Series | 9.1% |
MFS Mid Cap Value Portfolio | 9.1% |
MFS Research International Portfolio | 8.9% |
MFS Global Real Estate Portfolio | 5.0% |
MFS International Intrinsic Value Portfolio | 5.0% |
MFS International Growth Portfolio | 5.0% |
MFS Inflation-Adjusted Bond Portfolio | 5.0% |
MFS Total Return Bond Series | 4.9% |
MFS High Yield Portfolio | 4.9% |
MFS Global Governments Portfolio | 4.0% |
MFS New Discovery Value Portfolio | 2.0% |
MFS New Discovery Series | 2.0% |
MFS Limited Maturity Portfolio | 2.0% |
MFS Emerging Markets Equity Portfolio | 1.0% |
Cash & Cash Equivalents | 0.1% |
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January 1, 2020 through June 30, 2020
Share Class | Annualized Expense Ratio | Beginning Account Value 1/01/20 | Ending Account Value 6/30/20 | Expenses Paid During Period (p) 1/01/20-6/30/20 | |
Initial Class | Actual | 0.04% | $1,000.00 | $974.02 | $0.20 |
Hypothetical (h) | 0.04% | $1,000.00 | $1,024.66 | $0.20 | |
Service Class | Actual | 0.29% | $1,000.00 | $972.39 | $1.42 |
Hypothetical (h) | 0.29% | $1,000.00 | $1,023.42 | $1.46 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class's annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying funds in which the fund invests. If these indirect costs were included, your costs would have been higher. |
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Issuer | Shares/Par | Value ($) | ||
Investment Companies (h) – 100.0% | ||||
Bond Funds – 20.8% | ||||
MFS Global Governments Portfolio - Initial Class | 1,133,873 | $ 12,778,751 | ||
MFS High Yield Portfolio - Initial Class | 2,874,972 | 15,841,095 | ||
MFS Inflation-Adjusted Bond Portfolio - Initial Class | 1,412,645 | 15,991,140 | ||
MFS Limited Maturity Portfolio - Initial Class | 606,772 | 6,395,375 | ||
MFS Total Return Bond Series - Initial Class | 1,138,624 | 15,986,285 | ||
$66,992,646 | ||||
International Stock Funds – 19.9% | ||||
MFS Emerging Markets Equity Portfolio - Initial Class | 217,399 | $ 3,182,723 | ||
MFS International Growth Portfolio - Initial Class | 1,178,849 | 16,020,560 | ||
MFS International Intrinsic Value Portfolio - Initial Class | 534,127 | 16,114,616 | ||
MFS Research International Portfolio - Initial Class | 1,816,706 | 28,794,792 | ||
$64,112,691 | ||||
Specialty Funds – 5.0% | ||||
MFS Global Real Estate Portfolio - Initial Class | 1,166,001 | $ 16,137,455 |
Issuer | Shares/Par | Value ($) | ||
Investment Companies (h) – continued | ||||
U.S. Stock Funds – 54.2% | ||||
MFS Growth Series - Initial Class | 543,285 | $ 35,503,706 | ||
MFS Mid Cap Growth Series - Initial Class | 2,769,966 | 29,278,545 | ||
MFS Mid Cap Value Portfolio - Initial Class | 4,046,021 | 29,252,730 | ||
MFS New Discovery Series - Initial Class | 304,565 | 6,496,364 | ||
MFS New Discovery Value Portfolio - Initial Class | 874,681 | 6,525,121 | ||
MFS Research Series - Initial Class | 1,123,838 | 32,276,632 | ||
MFS Value Series - Initial Class | 1,957,001 | 35,558,700 | ||
$ 174,891,798 | ||||
Money Market Funds – 0.1% | ||||
MFS Institutional Money Market Portfolio, 0.17% (v) | 256,327 | $ 256,352 | ||
Total Investment Companies (Identified Cost, $250,769,338) | $ 322,390,942 | |||
Other Assets, Less Liabilities – (0.0)% | (46,840) | |||
Net Assets – 100.0% | $ 322,344,102 |
(h) | An affiliated issuer, which 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. At period end, the aggregate value of the fund’s investments in affiliated issuers was $322,390,942. | |||
(v) | Affiliated issuer 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. |
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Financial Statements | Statement of Assets and Liabilities (unaudited) |
At 6/30/20Assets | |
Investments in affiliated issuers, at value (identified cost, $250,769,338) | $322,390,942 |
Receivables for | |
Investments sold | 255,251 |
Other assets | 1,319 |
Total assets | $322,647,512 |
Liabilities | |
Payables for | |
Fund shares reacquired | $255,245 |
Payable to affiliates | |
Administrative services fee | 96 |
Shareholder servicing costs | 36 |
Distribution and/or service fees | 4,298 |
Accrued expenses and other liabilities | 43,735 |
Total liabilities | $303,410 |
Net assets | $322,344,102 |
Net assets consist of | |
Paid-in capital | $211,909,084 |
Total distributable earnings (loss) | 110,435,018 |
Net assets | $322,344,102 |
Shares of beneficial interest outstanding | 27,733,115 |
Net assets | Shares outstanding | Net asset value per share | |
Initial Class | $3,797,904 | 326,872 | $11.62 |
Service Class | 318,546,198 | 27,406,243 | 11.62 |
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Financial Statements | Statement of Operations (unaudited) |
Six months ended 6/30/20 | |
Net investment income (loss) | |
Income | |
Dividends from affiliated issuers | $1,266 |
Expenses | |
Distribution and/or service fees | $396,266 |
Shareholder servicing costs | 2,769 |
Administrative services fee | 8,701 |
Independent Trustees' compensation | 4,496 |
Custodian fee | 3,043 |
Shareholder communications | 5,234 |
Audit and tax fees | 20,064 |
Legal fees | 1,931 |
Miscellaneous | 13,305 |
Total expenses | $455,809 |
Net investment income (loss) | $(454,543) |
Realized and unrealized gain (loss) | |
Realized gain (loss) (identified cost basis) | |
Investments in affiliated issuers | $6,282,835 |
Change in unrealized appreciation or depreciation | |
Affiliated issuers | $(15,101,178) |
Net realized and unrealized gain (loss) | $(8,818,343) |
Change in net assets from operations | $(9,272,886) |
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Financial Statements | Statements of Changes in Net Assets |
Six months ended | Year ended | |
6/30/20 (unaudited) | 12/31/19 | |
Change in net assets | ||
From operations | ||
Net investment income (loss) | $(454,543) | $6,027,033 |
Net realized gain (loss) | 6,282,835 | 28,618,497 |
Net unrealized gain (loss) | (15,101,178) | 48,715,269 |
Change in net assets from operations | $(9,272,886) | $83,360,799 |
Total distributions to shareholders | $— | $(39,693,390) |
Change in net assets from fund share transactions | $(23,517,266) | $(22,623,140) |
Total change in net assets | $(32,790,152) | $21,044,269 |
Net assets | ||
At beginning of period | 355,134,254 | 334,089,985 |
At end of period | $322,344,102 | $355,134,254 |
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Financial Statements | Financial Highlights |
Initial Class | Six months ended | Year ended | ||||
6/30/20 (unaudited) | 12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | |
Net asset value, beginning of period | $11.93 | $10.64 | $12.21 | $10.97 | $11.27 | $12.42 |
Income (loss) from investment operations | ||||||
Net investment income (loss) (d)(l) | $(0.00)(w) | $0.22 | $0.26 | $0.21 | $0.20(c) | $0.21 |
Net realized and unrealized gain (loss) | (0.31) | 2.53 | (0.78) | 1.91 | 0.62 | (0.19) |
Total from investment operations | $(0.31) | $2.75 | $(0.52) | $2.12 | $0.82 | $0.02 |
Less distributions declared to shareholders | ||||||
From net investment income | $— | $(0.29) | $(0.23) | $(0.23) | $(0.32) | $(0.58) |
From net realized gain | — | (1.17) | (0.82) | (0.65) | (0.80) | (0.59) |
Total distributions declared to shareholders | $— | $(1.46) | $(1.05) | $(0.88) | $(1.12) | $(1.17) |
Net asset value, end of period (x) | $11.62 | $11.93 | $10.64 | $12.21 | $10.97 | $11.27 |
Total return (%) (k)(r)(s)(x) | (2.60)(n) | 26.96 | (5.20) | 19.86 | 7.15(c) | 0.53 |
Ratios (%) (to average net assets) and Supplemental data: | ||||||
Expenses before expense reductions (f)(h) | 0.04(a) | 0.03 | 0.03 | 0.03 | 0.03(c) | 0.02 |
Expenses after expense reductions (f)(h) | N/A | N/A | N/A | N/A | N/A | N/A |
Net investment income (loss) (l) | (0.04)(a) | 1.88 | 2.13 | 1.75 | 1.81(c) | 1.75 |
Portfolio turnover | 5(n) | 0(b) | 2 | 2 | 1 | 1 |
Net assets at end of period (000 omitted) | $3,798 | $3,905 | $3,770 | $4,116 | $3,140 | $2,908 |
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Service Class | Six months ended | Year ended | ||||
6/30/20 (unaudited) | 12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | |
Net asset value, beginning of period | $11.95 | $10.65 | $12.22 | $10.98 | $11.27 | $12.41 |
Income (loss) from investment operations | ||||||
Net investment income (loss) (d)(l) | $(0.02) | $0.20 | $0.22 | $0.17 | $0.17(c) | $0.17 |
Net realized and unrealized gain (loss) | (0.31) | 2.52 | (0.77) | 1.92 | 0.63 | (0.18) |
Total from investment operations | $(0.33) | $2.72 | $(0.55) | $2.09 | $0.80 | $(0.01) |
Less distributions declared to shareholders | ||||||
From net investment income | $— | $(0.25) | $(0.20) | $(0.20) | $(0.29) | $(0.54) |
From net realized gain | — | (1.17) | (0.82) | (0.65) | (0.80) | (0.59) |
Total distributions declared to shareholders | $— | $(1.42) | $(1.02) | $(0.85) | $(1.09) | $(1.13) |
Net asset value, end of period (x) | $11.62 | $11.95 | $10.65 | $12.22 | $10.98 | $11.27 |
Total return (%) (k)(r)(s)(x) | (2.76)(n) | 26.66 | (5.46) | 19.51 | 6.94(c) | 0.30 |
Ratios (%) (to average net assets) and Supplemental data: | ||||||
Expenses before expense reductions (f)(h) | 0.29(a) | 0.28 | 0.28 | 0.28 | 0.28(c) | 0.27 |
Expenses after expense reductions (f)(h) | N/A | N/A | N/A | N/A | N/A | N/A |
Net investment income (loss) (l) | (0.29)(a) | 1.70 | 1.80 | 1.40 | 1.50(c) | 1.40 |
Portfolio turnover | 5(n) | 0(b) | 2 | 2 | 1 | 1 |
Net assets at end of period (000 omitted) | $318,546 | $351,229 | $330,320 | $415,923 | $420,657 | $468,237 |
(a) | Annualized. |
(b) | Less than 0.5%. |
(c) | Amount reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(h) | In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying affiliated funds in which the fund invests. Accordingly, the expense ratio for the fund reflects only those fees and expenses borne directly by the fund. Because the underlying affiliated funds have varied expense and fee levels and the fund may own different proportions of the underlying affiliated funds at different times, the amount of fees and expenses incurred indirectly by the fund will vary. |
(k) | The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown. |
(l) | Recognition of net investment income by the fund may be affected by the timing of the declaration of dividends by the underlying affiliated funds in which the fund invests and for interim net investment income ratios, the actual annual net investment income ratio may differ. The ratios and per share amounts do not include net investment income of the underlying affiliated funds in which the fund invests. |
(n) | Not annualized. |
(r) | Certain expenses have been reduced without which performance would have been lower. |
(s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
(w) | Per share amount was less than $0.01. |
(x) | The net asset values 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. |
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Financial Instruments | Level 1 | Level 2 | Level 3 | Total |
Mutual Funds | $322,390,942 | $— | $— | $322,390,942 |
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Year ended 12/31/19 | |
Ordinary income (including any short-term capital gains) | $7,018,206 |
Long-term capital gains | 32,675,184 |
Total distributions | $39,693,390 |
As of 6/30/20 | |
Cost of investments | $252,532,588 |
Gross appreciation | 71,998,381 |
Gross depreciation | (2,140,027) |
Net unrealized appreciation (depreciation) | $69,858,354 |
As of 12/31/19 | |
Undistributed ordinary income | 6,587,471 |
Undistributed long-term capital gain | 28,160,901 |
Net unrealized appreciation (depreciation) | 84,959,532 |
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Six months ended 6/30/20 | Year ended 12/31/19 | ||
Initial Class | $— | $439,473 | |
Service Class | — | 39,253,917 | |
Total | $— | $39,693,390 |
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Six months ended 6/30/20 | Year ended 12/31/19 | ||||
Shares | Amount | Shares | Amount | ||
Shares sold | |||||
Initial Class | 4,192 | $46,483 | 12,218 | $144,020 | |
Service Class | 562,855 | 5,487,686 | 152,356 | 1,789,932 | |
567,047 | $5,534,169 | 164,574 | $1,933,952 | ||
Shares issued to shareholders in reinvestment of distributions | |||||
Initial Class | — | $— | 39,843 | $439,473 | |
Service Class | — | — | 3,549,179 | 39,253,917 | |
— | $— | 3,589,022 | $39,693,390 | ||
Shares reacquired | |||||
Initial Class | (4,532) | $(49,583) | (79,249) | $(957,183) | |
Service Class | (2,541,182) | (29,001,852) | (5,335,070) | (63,293,299) | |
(2,545,714) | $(29,051,435) | (5,414,319) | $(64,250,482) | ||
Net change | |||||
Initial Class | (340) | $(3,100) | (27,188) | $(373,690) | |
Service Class | (1,978,327) | (23,514,166) | (1,633,535) | (22,249,450) | |
(1,978,667) | $(23,517,266) | (1,660,723) | $(22,623,140) |
Affiliated Issuers | Beginning Value | Purchases | Sales Proceeds | Realized Gain (Loss) | Change in Unrealized Appreciation or Depreciation | Ending Value |
MFS Emerging Markets Equity Portfolio | $3,600,110 | $280,810 | $245,991 | $13,196 | $(465,402) | $3,182,723 |
MFS Global Governments Portfolio | 13,638,361 | 1,720,685 | 3,181,008 | (81,960) | 682,673 | 12,778,751 |
MFS Global Real Estate Portfolio | 17,444,547 | 1,755,358 | 1,305,245 | 270,459 | (2,027,664) | 16,137,455 |
MFS Growth Series | 39,381,667 | 12,492 | 7,359,104 | 3,711,233 | (242,582) | 35,503,706 |
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Affiliated Issuers − continued | Beginning Value | Purchases | Sales Proceeds | Realized Gain (Loss) | Change in Unrealized Appreciation or Depreciation | Ending Value |
MFS High Yield Portfolio | $17,696,214 | $278,156 | $1,414,268 | $(224,026) | $(494,981) | $15,841,095 |
MFS Inflation-Adjusted Bond Portfolio | 17,197,803 | 1,397,119 | 3,189,996 | 11,208 | 575,006 | 15,991,140 |
MFS Institutional Money Market Portfolio | 263,585 | 429,202 | 436,446 | (18) | 29 | 256,352 |
MFS International Growth Portfolio | 17,885,547 | 82,229 | 1,097,245 | 56,712 | (906,683) | 16,020,560 |
MFS International Intrinsic Value Portfolio | 17,839,754 | 4,097 | 1,697,941 | 651,959 | (683,253) | 16,114,616 |
MFS Limited Maturity Portfolio | 6,961,289 | 620,683 | 1,254,511 | (32,201) | 100,115 | 6,395,375 |
MFS Mid Cap Growth Series | 32,099,606 | 727,670 | 5,592,956 | 1,002,224 | 1,042,001 | 29,278,545 |
MFS Mid Cap Value Portfolio | 32,216,646 | 4,035,718 | 2,619,704 | (423,227) | (3,956,703) | 29,252,730 |
MFS New Discovery Series | 7,150,811 | 440,445 | 1,597,573 | 254,317 | 248,364 | 6,496,364 |
MFS New Discovery Value Portfolio | 7,142,586 | 1,028,506 | 471,142 | (119,740) | (1,055,089) | 6,525,121 |
MFS Research International Portfolio | 32,198,485 | 401,201 | 1,806,327 | 293,486 | (2,292,053) | 28,794,792 |
MFS Research Series | 35,788,600 | 997,950 | 3,879,694 | 639,573 | (1,269,797) | 32,276,632 |
MFS Total Return Bond Series | 17,351,149 | 959,846 | 2,835,439 | (150,944) | 661,673 | 15,986,285 |
MFS Value Series | 39,323,802 | 2,840,383 | 1,999,237 | 410,584 | (5,016,832) | 35,558,700 |
$355,180,562 | $18,012,550 | $41,983,827 | $6,282,835 | $(15,101,178) | $322,390,942 |
Affiliated Issuers | Dividend Income | Capital Gain Distributions |
MFS Emerging Markets Equity Portfolio | $— | $— |
MFS Global Governments Portfolio | — | — |
MFS Global Real Estate Portfolio | — | — |
MFS Growth Series | — | — |
MFS High Yield Portfolio | — | — |
MFS Inflation-Adjusted Bond Portfolio | — | — |
MFS Institutional Money Market Portfolio | 1,266 | — |
MFS International Growth Portfolio | — | — |
MFS International Intrinsic Value Portfolio | — | — |
MFS Limited Maturity Portfolio | — | — |
MFS Mid Cap Growth Series | — | — |
MFS Mid Cap Value Portfolio | — | — |
MFS New Discovery Series | — | — |
MFS New Discovery Value Portfolio | — | — |
MFS Research International Portfolio | — | — |
MFS Research Series | — | — |
MFS Total Return Bond Series | — | — |
MFS Value Series | — | — |
$1,266 | $— |
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Bond Portfolio
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1 | |
2 | |
4 | |
5 | |
10 | |
11 | |
12 | |
13 | |
15 | |
23 | |
24 | |
24 | |
24 | |
24 |
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Non-U.S. Government Bonds | 45.0% |
U.S. Treasury Securities | 39.4% |
Emerging Markets Bonds | 2.7% |
Collateralized Debt Obligations | 1.5% |
Investment Grade Corporates | 1.1% |
Municipal Bonds | 0.9% |
Commercial Mortgage-Backed Securities | 0.5% |
Mortgage-Backed Securities | 0.5% |
U.S. Government Agencies | 0.2% |
AAA | 4.9% |
AA | 29.8% |
A | 3.7% |
BBB | 10.1% |
BB | 2.7% |
U.S. Government | 42.4% |
Federal Agencies | 0.6% |
Not Rated | (2.4)% |
Cash & Cash Equivalents | 4.5% |
Other | 3.7% |
Average Duration (d) | 7.1 |
Average Effective Maturity (m) | 14.7 yrs. |
United States | 52.1% |
United Kingdom | 24.8% |
Italy | 6.9% |
Spain | 3.4% |
Japan | 3.1% |
Greece | 2.7% |
Canada | 2.6% |
France | 2.5% |
Australia | 1.3% |
Other Countries | 0.6% |
United States Dollar | 46.9% |
British Pound Sterling | 27.1% |
Euro | 17.9% |
Japanese Yen | 3.4% |
New Zealand Dollar | 2.0% |
Norwegian Krone | 1.5% |
Canadian Dollar | 1.4% |
Danish Krone | 0.2% |
Australian Dollar | (0.5)% |
Other Currencies | 0.1% |
(a) | For all securities other than those specifically described below, ratings are assigned to underlying securities utilizing ratings from Moody’s, Fitch, and Standard & Poor’s rating agencies and applying the following hierarchy: If all three agencies provide a rating, the middle rating (after dropping the highest and lowest ratings) is assigned; if two of the three agencies rate a security, the lower of the two is assigned. Ratings are shown in the S&P and Fitch scale (e.g., AAA). Securities rated BBB or higher are considered investment grade. All ratings are subject to change.U.S. Government includes securities issued by the U.S. Department of the Treasury. Federal Agencies includes rated and unrated U.S. Agency fixed-income securities, U.S. Agency mortgage-backed securities, and collateralized mortgage obligations of U.S. Agency mortgage-backed securities.Not Rated includes fixed income securities and fixed income derivatives, which have not been rated by any rating agency.The fund may or may not have held all of these instruments on this date. 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. |
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(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 each instrument’s effective maturity for purposes of calculating the fund’s dollar-weighted average effective maturity, MFS uses the instrument’s stated maturity or, if applicable, an earlier date on which MFS believes it is probable that a maturity-shortening device (such as a put, pre-refunding or prepayment) will cause the instrument to be repaid. Such an earlier date can be substantially shorter than the instrument’s stated maturity. |
(x) | Represents the portfolio’s exposure to issuer countries as a percentage of a portfolio’s net assets. For purposes of this presentation, United States includes Cash & Cash Equivalents and Other. |
(y) | Represents the portfolio’s exposure to a particular currency as a percentage of a portfolio's net assets. For purposes of this presentation, United States Dollar includes Cash & Cash Equivalents. |
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January 1, 2020 through June 30, 2020
Share Class | Annualized Expense Ratio | Beginning Account Value 1/01/20 | Ending Account Value 6/30/20 | Expenses Paid During Period (p) 1/01/20-6/30/20 | |
Initial Class | Actual | 0.56% | $1,000.00 | $1,047.18 | $2.85 |
Hypothetical (h) | 0.56% | $1,000.00 | $1,022.08 | $2.82 | |
Service Class | Actual | 0.81% | $1,000.00 | $1,044.90 | $4.12 |
Hypothetical (h) | 0.81% | $1,000.00 | $1,020.84 | $4.07 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class's annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
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Issuer | Shares/Par | Value ($) | ||
Bonds – 95.0% | ||||
Asset-Backed & Securitized – 1.9% | ||||
Benchmark Mortgage Trust, 2019-B12, “A5”, 3.115%, 8/15/2052 | $ | 710,554 | $ 787,311 | |
Dryden Senior Loan Fund, 2018-55A, “A1”, CLO, FLR, 2.238% (LIBOR - 3mo. + 1.02%), 4/15/2031 (n) | 725,000 | 707,828 | ||
Galaxy CLO Ltd., 2018-29A, “A”, FLR, 1.182% (LIBOR - 3mo. + 0.79%), 11/15/2026 (n) | 374,614 | 368,352 | ||
Loomis, Sayles & Co., CLO, 2015-2A, “A2R”, FLR, 2.618% (LIBOR - 3mo. + 1.4%), 4/15/2028 (n) | 854,664 | 826,558 | ||
Madison Park Funding Ltd., 2014-13A, “BR2”, FLR, 2.635% (LIBOR - 3mo. + 1.5%), 4/19/2030 (n) | 901,666 | 867,691 | ||
Symphony CLO Ltd., 2016-17A, “BR”, FLR, 2.418% (LIBOR - 3mo. + 1.2%), 4/15/2028 (n) | 764,124 | 747,193 | ||
Wells Fargo Commercial Mortgage Trust, 2019-C54, “A4”, 3.146%, 12/15/2052 | 392,680 | 436,841 | ||
$4,741,774 | ||||
Automotive – 0.5% | ||||
Hyundai Capital America, 2.85%, 11/01/2022 (n) | $ | 444,000 | $ 453,066 | |
Hyundai Capital America, 2.375%, 2/10/2023 (n) | 225,000 | 226,683 | ||
Volkswagen Group of America Co., 2.7%, 9/26/2022 (n) | 441,000 | 455,552 | ||
$1,135,301 | ||||
Conglomerates – 0.1% | ||||
Roper Technologies, Inc., 2%, 6/30/2030 | $ | 143,000 | $ 143,107 | |
Consumer Services – 0.1% | ||||
Conservation Fund, 3.474%, 12/15/2029 | $ | 312,000 | $ 334,856 | |
Emerging Market Sovereign – 2.7% | ||||
Hellenic Republic (Republic of Greece), 3.875%, 3/12/2029 | EUR | 4,700,000 | $ 6,458,949 | |
Industrial – 0.1% | ||||
Howard University, Washington D.C., 2.638%, 10/01/2021 | $ | 52,000 | $ 52,587 | |
Howard University, Washington D.C., 2.738%, 10/01/2022 | 55,000 | 55,888 | ||
Howard University, Washington D.C., 2.801%, 10/01/2023 | 60,000 | 61,545 | ||
Howard University, Washington D.C., AGM, 2.416%, 10/01/2024 | 66,000 | 67,530 |
Issuer | Shares/Par | Value ($) | ||
Bonds – continued | ||||
Industrial – continued | ||||
Howard University, Washington D.C., AGM, 2.516%, 10/01/2025 | $ | 82,000 | $ 82,209 | |
$319,759 | ||||
International Market Sovereign – 45.5% | ||||
Commonwealth of Australia, Inflation Linked Bond, 3%, 9/20/2025 | AUD | 799,910 | $ 639,792 | |
Commonwealth of Australia, Inflation Linked Bond, 0.75%, 11/21/2027 | 211,200 | 154,908 | ||
Commonwealth of Australia, Inflation Linked Bond, 2.5%, 9/20/2030 | 344,092 | 299,171 | ||
Commonwealth of Australia, Inflation Linked Bond, 1.25%, 8/21/2040 | 2,584,708 | 2,140,808 | ||
Government of Canada, Inflation Linked Bond, 4.25%, 12/01/2026 | CAD | 641,221 | 612,792 | |
Government of Canada, Inflation Linked Bond, 4%, 12/01/2031 | 589,533 | 651,774 | ||
Government of Canada, Inflation Linked Bond, 3%, 12/01/2036 | 4,608,895 | 5,103,767 | ||
Government of France, Inflation Linked Bond, 1.8%, 7/25/2040 | EUR | 420,315 | 727,594 | |
Government of Japan, Inflation Linked Bond, 0.1%, 3/10/2026 | JPY | 822,943,800 | 7,578,171 | |
Government of New Zealand, Inflation Linked Bond, 3%, 9/20/2030 | NZD | 932,110 | 771,017 | |
Government of New Zealand, Inflation Linked Bond, 2.5%, 9/20/2035 | 323,910 | 273,482 | ||
Government of New Zealand, Inflation Linked Bond, 2.5%, 9/20/2040 | 849,440 | 759,680 | ||
Kingdom of Spain, Inflation Linked Bond, 1.8%, 11/30/2024 | EUR | 1,364,987 | 1,698,083 | |
Kingdom of Spain, Inflation Linked Bond, 0.65%, 11/30/2027 | 879,843 | 1,072,323 | ||
Kingdom of Spain, Inflation Linked Bond, 1%, 11/30/2030 | 2,141,340 | 2,750,011 | ||
Kingdom of Spain, Inflation Linked Bond, 0.7%, 11/30/2033 (n) | 2,059,480 | 2,601,100 | ||
Republic of Cyprus, 2.75%, 2/26/2034 | 370,000 | 489,392 | ||
Republic of France, Inflation Linked Bond, 0.7%, 7/25/2030 | 1,629,825 | 2,144,264 | ||
Republic of France, Inflation Linked Bond, 3.15%, 7/25/2032 | 452,451 | 768,978 | ||
Republic of France, Inflation Linked Bond, 0.1%, 7/25/2036 (n) | 1,232,451 | 1,593,548 | ||
Republic of France, Inflation Linked Bond, 0.1%, 7/25/2047 | 640,476 | 884,392 | ||
Republic of Italy, Inflation Linked Bond, 0.1%, 5/15/2022 | 2,114,100 | 2,355,262 |
Table of Contents
Issuer | Shares/Par | Value ($) | ||
Bonds – continued | ||||
International Market Sovereign – continued | ||||
Republic of Italy, Inflation Linked Bond, 2.35%, 9/15/2024 | EUR | 2,423,671 | $ 2,941,720 | |
Republic of Italy, Inflation Linked Bond, 3.1%, 9/15/2026 | 1,890,434 | 2,453,106 | ||
Republic of Italy, Inflation Linked Bond, 1.3%, 5/15/2028 | 4,136,361 | 4,832,623 | ||
Republic of Italy, Inflation Linked Bond, 0.4%, 5/15/2030 | 1,217,796 | 1,315,704 | ||
Republic of Italy, Inflation Linked Bond, 2.35%, 9/15/2035 | 1,466,607 | 1,967,992 | ||
Republic of Italy, Inflation Linked Bond, 2.55%, 9/15/2041 | 672,163 | 945,638 | ||
United Kingdom Treasury, 4.5%, 12/07/2042 | GBP | 2,265,000 | 5,093,894 | |
United Kingdom Treasury, Inflation Linked Bond, 0.75%, 3/22/2034 | 1,442,654 | 2,834,659 | ||
United Kingdom Treasury, Inflation Linked Bond, 2%, 1/26/2035 | 2,261,285 | 5,114,334 | ||
United Kingdom Treasury, Inflation Linked Bond, 0.125%, 11/22/2036 | 2,025,540 | 3,946,627 | ||
United Kingdom Treasury, Inflation Linked Bond, 1.125%, 11/22/2037 | 1,027,214 | 2,345,756 | ||
United Kingdom Treasury, Inflation Linked Bond, 0.625%, 3/22/2040 | 1,139,196 | 2,554,160 | ||
United Kingdom Treasury, Inflation Linked Bond, 0.625%, 11/22/2042 | 1,363,398 | 3,262,701 | ||
United Kingdom Treasury, Inflation Linked Bond, 0.125%, 3/22/2044 | 1,768,226 | 3,974,623 | ||
United Kingdom Treasury, Inflation Linked Bond, 0.125%, 3/22/2046 | 913,699 | 2,133,667 | ||
United Kingdom Treasury, Inflation Linked Bond, 0.75%, 11/22/2047 | 1,011,167 | 2,760,239 | ||
United Kingdom Treasury, Inflation Linked Bond, 0.125%, 8/10/2048 | 239,580 | 587,998 | ||
United Kingdom Treasury, Inflation Linked Bond, 0.5%, 3/22/2050 | 1,435,573 | 3,920,608 | ||
United Kingdom Treasury, Inflation Linked Bond, 0.25%, 3/22/2052 | 1,263,238 | 3,423,059 | ||
United Kingdom Treasury, Inflation Linked Bond, 1.25%, 11/22/2055 | 1,071,748 | 3,885,767 | ||
United Kingdom Treasury, Inflation Linked Bond, 0.125%, 11/22/2056 | 579,936 | 1,693,682 | ||
United Kingdom Treasury, Inflation Linked Bond, 0.125%, 3/22/2058 | 943,363 | 2,818,847 | ||
United Kingdom Treasury, Inflation Linked Bond, 0.375%, 3/22/2062 | 1,233,286 | 4,239,634 | ||
United Kingdom Treasury, Inflation Linked Bond, 0.125%, 11/22/2065 | 432,551 | 1,521,836 | ||
United Kingdom Treasury, Inflation Linked Bond, 0.125%, 3/22/2068 | 1,066,347 | 3,997,786 | ||
$ 110,636,969 | ||||
Medical & Health Technology & Services – 0.3% | ||||
ProMedica Toledo Hospital, “B”, AGM, 5.75%, 11/15/2038 | $ | 144,000 | $ 168,201 | |
Toledo Hospital, AGM, 5.325%, 11/15/2028 | 487,000 | 575,695 | ||
$743,896 |
Issuer | Shares/Par | Value ($) | ||
Bonds – continued | ||||
Mortgage-Backed – 0.5% | ||||
Freddie Mac, 3.85%, 5/25/2028 | $ | 390,000 | $ 465,021 | |
Freddie Mac, 3.854%, 6/25/2028 | 555,000 | 661,818 | ||
$1,126,839 | ||||
Municipals – 0.9% | ||||
Chicago, IL, Board of Education, “E”, BAM, 6.138%, 12/01/2039 | $ | 550,000 | $ 679,712 | |
Illinois Sales Tax Securitization Corp., Second Lien, “B”, BAM, 3.411%, 1/01/2043 | 480,000 | 482,981 | ||
Texas Transportation Commission, Central Texas Turnpike System First Tier Refunding Rev., Taxable, “B”, 1.98%, 8/15/2042 | 380,000 | 381,505 | ||
University of Missouri Curators Facilities Rev, “A”, 2.012%, 11/01/2027 | 585,000 | 610,558 | ||
$2,154,756 | ||||
U.S. Government Agencies and Equivalents – 0.2% | ||||
Tennessee Valley Authority, 0.75%, 5/15/2025 | $ | 394,000 | $ 399,159 | |
U.S. Treasury Inflation Protected Securities – 42.2% | ||||
U.S. Treasury Bonds, 0.375%, 7/15/2023 | $ | 1,739,616 | $ 1,811,536 | |
U.S. Treasury Bonds, 0.625%, 1/15/2024 | 931,799 | 981,328 | ||
U.S. Treasury Bonds, 0.25%, 1/15/2025 | 1,912,742 | 2,012,258 | ||
U.S. Treasury Bonds, 2.375%, 1/15/2025 | 3,635,761 | 4,183,309 | ||
U.S. Treasury Bonds, 0.625%, 1/15/2026 | 2,050,157 | 2,219,658 | ||
U.S. Treasury Bonds, 2%, 1/15/2026 | 2,039,721 | 2,370,400 | ||
U.S. Treasury Bonds, 0.375%, 1/15/2027 | 5,417,335 | 5,837,145 | ||
U.S. Treasury Bonds, 2.375%, 1/15/2027 | 4,771,414 | 5,793,033 | ||
U.S. Treasury Bonds, 1.75%, 1/15/2028 | 2,873,553 | 3,427,684 | ||
U.S. Treasury Bonds, 3.625%, 4/15/2028 | 7,639,031 | 10,279,073 | ||
U.S. Treasury Bonds, 2.5%, 1/15/2029 | 652,017 | 835,679 | ||
U.S. Treasury Bonds, 3.875%, 4/15/2029 | 3,573,067 | 5,050,113 | ||
U.S. Treasury Bonds, 2.125%, 2/15/2040 | 3,970,278 | 5,849,173 | ||
U.S. Treasury Bonds, 2.125%, 2/15/2041 | 1,459,950 | 2,178,302 | ||
U.S. Treasury Bonds, 0.75%, 2/15/2042 (f) | 7,183,532 | 8,595,364 | ||
U.S. Treasury Bonds, 0.625%, 2/15/2043 | 2,994,231 | 3,521,153 | ||
U.S. Treasury Bonds, 1.375%, 2/15/2044 | 1,634,749 | 2,228,631 | ||
U.S. Treasury Bonds, 1%, 2/15/2046 | 541,030 | 699,921 | ||
U.S. Treasury Bonds, 1%, 2/15/2048 | 2,610,712 | 3,447,844 | ||
U.S. Treasury Bonds, 1%, 2/15/2049 | 356,612 | 475,237 |
Table of Contents
Issuer | Shares/Par | Value ($) | ||
Bonds – continued | ||||
U.S. Treasury Inflation Protected Securities – continued | ||||
U.S. Treasury Notes, 0.125%, 1/15/2022 (f) | $ | 6,282,453 | $ 6,367,131 | |
U.S. Treasury Notes, 0.125%, 1/15/2023 | 2,235,960 | 2,290,397 | ||
U.S. Treasury Notes, 0.125%, 7/15/2024 | 4,131,238 | 4,314,921 | ||
U.S. Treasury Notes, 0.375%, 7/15/2025 | 2,906,131 | 3,103,524 | ||
U.S. Treasury Notes, 0.125%, 7/15/2026 | 3,514,771 | 3,731,888 | ||
U.S. Treasury Notes, 0.375%, 7/15/2027 | 3,144,360 | 3,417,236 | ||
U.S. Treasury Notes, 0.5%, 1/15/2028 | 4,859,288 | 5,326,746 | ||
U.S. Treasury Notes, 0.25%, 7/15/2029 | 2,143,984 | 2,345,414 | ||
$ 102,694,098 | ||||
Total Bonds (Identified Cost, $201,789,737) | $230,889,463 |
Issuer | Shares/Par | Value ($) | ||
Investment Companies (h) – 4.7% | ||||
Money Market Funds – 4.7% | ||||
MFS Institutional Money Market Portfolio, 0.17% (v) (Identified Cost, $11,299,125) | 11,297,995 | $ 11,299,125 | ||
Other Assets, Less Liabilities – 0.3% | 849,567 | |||
Net Assets – 100.0% | $243,038,155 |
(f) | All or a portion of the security has been segregated as collateral for open futures contracts. | |||
(h) | An affiliated issuer, which 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. At period end, the aggregate values of the fund's investments in affiliated issuers and in unaffiliated issuers were $11,299,125 and $230,889,463, respectively. | |||
(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 $8,847,571, representing 3.6% of net assets. | |||
(v) | Affiliated issuer 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: | |
AGM | Assured Guaranty Municipal |
BAM | Build America Mutual |
CLO | Collateralized Loan Obligation |
FLR | Floating Rate. Interest rate resets periodically based on the parenthetically disclosed reference rate plus a spread (if any). The period-end rate reported may not be the current rate. All reference rates are USD unless otherwise noted. |
LIBOR | London Interbank Offered Rate |
Abbreviations indicate amounts shown in currencies other than the U.S. dollar. All amounts are stated in U.S. dollars unless otherwise indicated. A list of abbreviations is shown below: | |
AUD | Australian Dollar |
CAD | Canadian Dollar |
CHF | Swiss Franc |
DKK | Danish Krone |
EUR | Euro |
GBP | British Pound |
JPY | Japanese Yen |
NOK | Norwegian Krone |
NZD | New Zealand Dollar |
SEK | Swedish Krona |
Table of Contents
Derivative Contracts at 6/30/20 | ||||||
Forward Foreign Currency Exchange Contracts | ||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||
Asset Derivatives | ||||||
AUD | 890,000 | USD | 591,774 | JPMorgan Chase Bank N.A. | 7/17/2020 | $ 22,469 |
AUD | 870,000 | USD | 596,704 | Merrill Lynch International | 7/17/2020 | 3,736 |
CAD | 1,628,000 | USD | 1,178,088 | BNP Paribas S.A. | 7/17/2020 | 21,138 |
CAD | 1,626,000 | USD | 1,164,460 | State Street Bank Corp. | 7/17/2020 | 33,293 |
CAD | 2,787,485 | USD | 2,017,126 | UBS AG | 7/17/2020 | 36,206 |
CHF | 1,129,000 | USD | 1,162,722 | UBS AG | 7/17/2020 | 29,410 |
DKK | 3,519,185 | USD | 516,949 | Citibank N.A. | 7/17/2020 | 13,800 |
EUR | 10,752,587 | USD | 11,709,836 | Citibank N.A. | 7/17/2020 | 374,544 |
EUR | 1,380,000 | USD | 1,517,145 | Merrill Lynch International | 7/17/2020 | 33,779 |
EUR | 370,000 | USD | 410,828 | State Street Bank Corp. | 7/17/2020 | 4,999 |
GBP | 4,153,948 | USD | 5,105,233 | Barclays Bank PLC | 7/17/2020 | 42,413 |
GBP | 700,000 | USD | 863,709 | Merrill Lynch International | 7/17/2020 | 3,743 |
NOK | 10,487,000 | USD | 1,076,850 | Citibank N.A. | 7/17/2020 | 12,742 |
NOK | 23,823,000 | USD | 2,386,451 | JPMorgan Chase Bank N.A. | 7/17/2020 | 88,741 |
NOK | 11,814,000 | USD | 1,178,364 | Morgan Stanley Capital Services, Inc. | 7/17/2020 | 49,102 |
NZD | 1,690,000 | USD | 1,051,623 | Citibank N.A. | 7/17/2020 | 38,995 |
NZD | 4,767,354 | USD | 2,897,995 | State Street Bank Corp. | 7/17/2020 | 178,552 |
NZD | 1,950,000 | USD | 1,239,338 | UBS AG | 7/17/2020 | 19,068 |
SEK | 24,706,617 | USD | 2,567,667 | Merrill Lynch International | 7/17/2020 | 84,233 |
USD | 1,173,329 | AUD | 1,684,000 | Citibank N.A. | 7/17/2020 | 11,098 |
USD | 1,156,872 | CAD | 1,570,000 | Brown Brothers Harriman | 7/17/2020 | 370 |
USD | 1,929,010 | EUR | 1,694,946 | JPMorgan Chase Bank N.A. | 7/17/2020 | 24,132 |
USD | 1,336,153 | EUR | 1,185,460 | State Street Bank Corp. | 7/17/2020 | 3,864 |
USD | 490,327 | GBP | 395,000 | Brown Brothers Harriman | 7/17/2020 | 835 |
USD | 1,188,037 | GBP | 948,000 | Merrill Lynch International | 7/17/2020 | 13,259 |
USD | 1,188,983 | GBP | 948,000 | State Street Bank Corp. | 7/17/2020 | 14,205 |
USD | 1,366,863 | NOK | 12,796,000 | Morgan Stanley Capital Services, Inc. | 7/17/2020 | 37,368 |
USD | 1,171,547 | SEK | 10,900,000 | Morgan Stanley Capital Services, Inc. | 7/17/2020 | 1,589 |
$1,197,683 | ||||||
Liability Derivatives | ||||||
CAD | 1,209,028 | USD | 896,554 | UBS AG | 7/17/2020 | $ (5,953) |
EUR | 544,000 | USD | 612,434 | HSBC Bank | 7/17/2020 | (1,055) |
EUR | 1,050,000 | USD | 1,192,979 | Merrill Lynch International | 7/17/2020 | (12,929) |
GBP | 300,000 | USD | 376,786 | Merrill Lynch International | 7/17/2020 | (5,020) |
GBP | 1,694,422 | USD | 2,128,287 | State Street Bank Corp. | 7/17/2020 | (28,530) |
JPY | 203,823,014 | USD | 1,891,641 | UBS AG | 7/17/2020 | (3,621) |
NOK | 10,875,000 | USD | 1,139,375 | Brown Brothers Harriman | 7/17/2020 | (9,471) |
USD | 2,461,937 | AUD | 3,777,974 | Citibank N.A. | 7/17/2020 | (145,473) |
USD | 642,761 | AUD | 968,768 | HSBC Bank | 7/17/2020 | (25,844) |
USD | 1,181,073 | AUD | 1,730,000 | Morgan Stanley Capital Services, Inc. | 7/17/2020 | (12,905) |
USD | 6,229,968 | CAD | 8,698,405 | Goldman Sachs International | 7/17/2020 | (177,498) |
USD | 831,068 | CAD | 1,144,183 | State Street Bank Corp. | 7/17/2020 | (11,766) |
USD | 1,170,577 | CHF | 1,129,000 | State Street Bank Corp. | 7/17/2020 | (21,555) |
USD | 2,268,097 | EUR | 2,074,194 | Citibank N.A. | 7/17/2020 | (63,002) |
USD | 3,434,577 | EUR | 3,096,217 | Goldman Sachs International | 7/17/2020 | (45,131) |
USD | 1,499,535 | EUR | 1,335,000 | Merrill Lynch International | 7/17/2020 | (816) |
USD | 1,105,345 | JPY | 119,746,000 | Merrill Lynch International | 7/17/2020 | (3,867) |
USD | 883,462 | NOK | 8,569,000 | Merrill Lynch International | 7/17/2020 | (6,851) |
USD | 1,154,328 | NZD | 1,800,000 | Goldman Sachs International | 7/17/2020 | (7,277) |
USD | 1,174,240 | NZD | 1,960,693 | JPMorgan Chase Bank N.A. | 7/31/2020 | (91,088) |
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Forward Foreign Currency Exchange Contracts - continued | ||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||
Liability Derivatives - continued | ||||||
USD | 1,166,314 | SEK | 11,225,000 | Morgan Stanley Capital Services, Inc. | 7/17/2020 | $ (38,529) |
$ (718,181) |
Futures Contracts | ||||||
Description | Long/ Short | Currency | Contracts | Notional Amount | Expiration Date | Value/Unrealized Appreciation (Depreciation) |
Liability Derivatives | ||||||
Interest Rate Futures | ||||||
Euro-Bund 10 yr | Short | EUR | 7 | $1,388,241 | September – 2020 | $(29,429) |
U.S. Treasury Note 10 yr | Short | USD | 52 | 7,236,938 | September – 2020 | (50,822) |
$(80,251) |
Table of Contents
Financial Statements | Statement of Assets and Liabilities (unaudited) |
At 6/30/20Assets | |
Investments in unaffiliated issuers, at value (identified cost, $201,789,737) | $230,889,463 |
Investments in affiliated issuers, at value (identified cost, $11,299,125) | 11,299,125 |
Receivables for | |
Forward foreign currency exchange contracts | 1,197,683 |
Net daily variation margin on open futures contracts | 9,276 |
Fund shares sold | 1,005 |
Interest | 710,592 |
Other assets | 1,102 |
Total assets | $244,108,246 |
Liabilities | |
Payables for | |
Forward foreign currency exchange contracts | $718,181 |
Fund shares reacquired | 274,646 |
Payable to affiliates | |
Investment adviser | 6,489 |
Administrative services fee | 242 |
Shareholder servicing costs | 29 |
Distribution and/or service fees | 1,630 |
Accrued expenses and other liabilities | 68,874 |
Total liabilities | $1,070,091 |
Net assets | $243,038,155 |
Net assets consist of | |
Paid-in capital | $210,267,635 |
Total distributable earnings (loss) | 32,770,520 |
Net assets | $243,038,155 |
Shares of beneficial interest outstanding | 21,614,440 |
Net assets | Shares outstanding | Net asset value per share | |
Initial Class | $123,782,184 | 10,938,820 | $11.32 |
Service Class | 119,255,971 | 10,675,620 | 11.17 |
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Financial Statements | Statement of Operations (unaudited) |
Six months ended 6/30/20 | |
Net investment income (loss) | |
Income | |
Interest | $607,281 |
Dividends from affiliated issuers | 39,581 |
Total investment income | $646,862 |
Expenses | |
Management fee | $605,289 |
Distribution and/or service fees | 148,220 |
Shareholder servicing costs | 2,243 |
Administrative services fee | 21,810 |
Independent Trustees' compensation | 4,430 |
Custodian fee | 15,204 |
Shareholder communications | 8,750 |
Audit and tax fees | 22,183 |
Legal fees | 1,447 |
Miscellaneous | 16,083 |
Total expenses | $845,659 |
Reduction of expenses by investment adviser | (13,050) |
Net expenses | $832,609 |
Net investment income (loss) | $(185,747) |
Realized and unrealized gain (loss) | |
Realized gain (loss) (identified cost basis) | |
Unaffiliated issuers | $992,256 |
Affiliated issuers | 708 |
Futures contracts | (371,183) |
Forward foreign currency exchange contracts | (532,566) |
Foreign currency | 21,906 |
Net realized gain (loss) | $111,121 |
Change in unrealized appreciation or depreciation | |
Unaffiliated issuers | $9,091,370 |
Affiliated issuers | (288) |
Futures contracts | (80,251) |
Forward foreign currency exchange contracts | 473,677 |
Translation of assets and liabilities in foreign currencies | (1,677) |
Net unrealized gain (loss) | $9,482,831 |
Net realized and unrealized gain (loss) | $9,593,952 |
Change in net assets from operations | $9,408,205 |
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Financial Statements | Statements of Changes in Net Assets |
Six months ended | Year ended | |
6/30/20 (unaudited) | 12/31/19 | |
Change in net assets | ||
From operations | ||
Net investment income (loss) | $(185,747) | $2,592,693 |
Net realized gain (loss) | 111,121 | 2,354,598 |
Net unrealized gain (loss) | 9,482,831 | 15,976,261 |
Change in net assets from operations | $9,408,205 | $20,923,552 |
Total distributions to shareholders | $— | $(4,025,008) |
Change in net assets from fund share transactions | $(23,516,724) | $(26,028,674) |
Total change in net assets | $(14,108,519) | $(9,130,130) |
Net assets | ||
At beginning of period | 257,146,674 | 266,276,804 |
At end of period | $243,038,155 | $257,146,674 |
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Financial Statements | Financial Highlights |
Initial Class | Six months ended | Year ended | ||||
6/30/20 (unaudited) | 12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | |
Net asset value, beginning of period | $10.81 | $10.15 | $10.81 | $9.98 | $9.73 | $10.32 |
Income (loss) from investment operations | ||||||
Net investment income (loss) (d) | $(0.00)(w) | $0.12 | $0.19 | $0.13 | $0.07(c) | $(0.01) |
Net realized and unrealized gain (loss) | 0.51 | 0.72 | (0.67) | 0.70 | 0.18 | (0.51) |
Total from investment operations | $0.51 | $0.84 | $(0.48) | $0.83 | $0.25 | $(0.52) |
Less distributions declared to shareholders | ||||||
From net investment income | $— | $(0.18) | $(0.18) | $— | $— | $(0.07) |
Net asset value, end of period (x) | $11.32 | $10.81 | $10.15 | $10.81 | $9.98 | $9.73 |
Total return (%) (k)(r)(s)(x) | 4.72(n) | 8.26 | (4.47) | 8.32 | 2.57(c) | (5.04) |
Ratios (%) (to average net assets) and Supplemental data: | ||||||
Expenses before expense reductions (f) | 0.58(a) | 0.57 | 0.57 | 0.56 | 0.55(c) | 0.56 |
Expenses after expense reductions (f) | 0.56(a) | 0.56 | 0.56 | 0.55 | 0.54(c) | 0.55 |
Net investment income (loss) | (0.03)(a)(l) | 1.11 | 1.78 | 1.28 | 0.65(c) | (0.11) |
Portfolio turnover | 28(n) | 62 | 63 | 40 | 47 | 44 |
Net assets at end of period (000 omitted) | $123,782 | $131,221 | $134,599 | $162,429 | $168,857 | $184,691 |
Service Class | Six months ended | Year ended | ||||
6/30/20 (unaudited) | 12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | |
Net asset value, beginning of period | $10.69 | $10.03 | $10.68 | $9.89 | $9.66 | $10.24 |
Income (loss) from investment operations | ||||||
Net investment income (loss) (d) | $(0.02) | $0.09 | $0.16 | $0.11 | $0.04(c) | $(0.04) |
Net realized and unrealized gain (loss) | 0.50 | 0.72 | (0.66) | 0.68 | 0.19 | (0.50) |
Total from investment operations | $0.48 | $0.81 | $(0.50) | $0.79 | $0.23 | $(0.54) |
Less distributions declared to shareholders | ||||||
From net investment income | $— | $(0.15) | $(0.15) | $— | $— | $(0.04) |
Net asset value, end of period (x) | $11.17 | $10.69 | $10.03 | $10.68 | $9.89 | $9.66 |
Total return (%) (k)(r)(s)(x) | 4.49(n) | 8.05 | (4.70) | 7.99 | 2.38(c) | (5.27) |
Ratios (%) (to average net assets) and Supplemental data: | ||||||
Expenses before expense reductions (f) | 0.83(a) | 0.82 | 0.82 | 0.81 | 0.80(c) | 0.81 |
Expenses after expense reductions (f) | 0.81(a) | 0.81 | 0.81 | 0.80 | 0.79(c) | 0.80 |
Net investment income (loss) | (0.28)(a)(l) | 0.86 | 1.54 | 1.03 | 0.40(c) | (0.37) |
Portfolio turnover | 28(n) | 62 | 63 | 40 | 47 | 44 |
Net assets at end of period (000 omitted) | $119,256 | $125,926 | $131,678 | $165,418 | $169,077 | $176,909 |
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(a) | Annualized. |
(c) | Amount reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher. |
(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 inflation/deflation adjustments through period end 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. |
(w) | Per share amount 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. |
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Financial Instruments | Level 1 | Level 2 | Level 3 | Total |
U.S. Treasury Bonds & U.S. Government Agencies & Equivalents | $— | $103,093,257 | $— | $103,093,257 |
Non - U.S. Sovereign Debt | — | 117,095,918 | — | 117,095,918 |
Municipal Bonds | — | 2,154,756 | — | 2,154,756 |
U.S. Corporate Bonds | — | 2,221,367 | — | 2,221,367 |
Residential Mortgage-Backed Securities | — | 1,126,839 | — | 1,126,839 |
Commercial Mortgage-Backed Securities | — | 1,224,152 | — | 1,224,152 |
Asset-Backed Securities (including CDOs) | — | 3,517,622 | — | 3,517,622 |
Foreign Bonds | — | 455,552 | — | 455,552 |
Mutual Funds | 11,299,125 | — | — | 11,299,125 |
Total | $11,299,125 | $230,889,463 | $— | $242,188,588 |
Other Financial Instruments | ||||
Futures Contracts – Liabilities | $(80,251) | $— | $— | $(80,251) |
Forward Foreign Currency Exchange Contracts – Assets | — | 1,197,683 | — | 1,197,683 |
Forward Foreign Currency Exchange Contracts – Liabilities | — | (718,181) | — | (718,181) |
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Fair Value (a) | |||
Risk | Derivative Contracts | Asset Derivatives | Liability Derivatives |
Interest Rate | Interest Rate Futures | $— | $(80,251) |
Foreign Exchange | Forward Foreign Currency Exchange Contracts | 1,197,683 | (718,181) |
Total | $1,197,683 | $(798,432) |
Risk | Futures Contracts | Forward Foreign Currency Exchange Contracts |
Interest Rate | $(371,183) | $— |
Foreign Exchange | — | (532,566) |
Total | $(371,183) | $(532,566) |
Risk | Futures Contracts | Forward Foreign Currency Exchange Contracts |
Interest Rate | $(80,251) | $— |
Foreign Exchange | — | 473,677 |
Total | $(80,251) | $473,677 |
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Year ended 12/31/19 | |
Ordinary income (including any short-term capital gains) | $4,025,008 |
As of 6/30/20 | |
Cost of investments | $213,682,181 |
Gross appreciation | 28,626,409 |
Gross depreciation | (120,002) |
Net unrealized appreciation (depreciation) | $28,506,407 |
As of 12/31/19 | |
Undistributed ordinary income | 1,152,545 |
Undistributed long-term capital gain | 2,905,932 |
Other temporary differences | 4,939 |
Net unrealized appreciation (depreciation) | 19,298,899 |
Six months ended 6/30/20 | Year ended 12/31/19 | ||
Initial Class | $— | $2,224,301 | |
Service Class | — | 1,800,707 | |
Total | $— | $4,025,008 |
Table of Contents
Purchases | Sales | |
U.S. Government securities | $22,259,309 | $39,092,658 |
Non-U.S. Government securities | 42,144,635 | 47,530,742 |
Six months ended 6/30/20 | Year ended 12/31/19 | ||||
Shares | Amount | Shares | Amount | ||
Shares sold | |||||
Initial Class | 299,911 | $3,306,838 | 93,016 | $988,416 | |
Service Class | 384,371 | 4,234,571 | 818,315 | 8,634,490 | |
684,282 | $7,541,409 | 911,331 | $9,622,906 |
Table of Contents
Six months ended 6/30/20 | Year ended 12/31/19 | ||||
Shares | Amount | Shares | Amount | ||
Shares issued to shareholders in reinvestment of distributions | |||||
Initial Class | — | $— | 201,112 | $2,224,301 | |
Service Class | — | — | 164,598 | 1,800,707 | |
— | $— | 365,710 | $4,025,008 | ||
Shares reacquired | |||||
Initial Class | (1,497,187) | $(15,855,678) | (1,416,512) | $(15,199,661) | |
Service Class | (1,491,435) | (15,202,455) | (2,325,801) | (24,476,927) | |
(2,988,622) | $(31,058,133) | (3,742,313) | $(39,676,588) | ||
Net change | |||||
Initial Class | (1,197,276) | $(12,548,840) | (1,122,384) | $(11,986,944) | |
Service Class | (1,107,064) | (10,967,884) | (1,342,888) | (14,041,730) | |
(2,304,340) | $(23,516,724) | (2,465,272) | $(26,028,674) |
Affiliated Issuers | Beginning Value | Purchases | Sales Proceeds | Realized Gain (Loss) | Change in Unrealized Appreciation or Depreciation | Ending Value |
MFS Institutional Money Market Portfolio | $6,004,405 | $60,110,645 | $54,816,345 | $708 | $(288) | $11,299,125 |
Affiliated Issuers | Dividend Income | Capital Gain Distributions |
MFS Institutional Money Market Portfolio | $39,581 | $— |
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2 | |
4 | |
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16 | |
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19 | |
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29 | |
29 | |
29 | |
29 |
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Investment Grade Corporates | 45.1% |
U.S. Treasury Securities | 35.4% |
Collateralized Debt Obligations | 12.3% |
Asset-Backed Securities | 10.3% |
Commercial Mortgage-Backed Securities | 8.1% |
Emerging Markets Bonds | 2.3% |
Residential Mortgage-Backed Securities | 1.8% |
Municipal Bonds | 1.8% |
Mortgage-Backed Securities | 1.7% |
High Yield Corporates | 1.2% |
U.S. Government Agencies | 0.1% |
AAA | 12.2% |
AA | 10.2% |
A | 22.4% |
BBB | 30.7% |
BB | 2.5% |
B | 0.1% |
U.S. Government | 12.4% |
Federal Agencies | 1.8% |
Not Rated | 27.8% |
Cash & Cash Equivalents | 0.5% |
Other | (20.6)% |
Average Duration (d) | 1.9 |
Average Effective Maturity (m) | 2.3 yrs. |
(a) | For all securities other than those specifically described below, ratings are assigned to underlying securities utilizing ratings from Moody’s, Fitch, and Standard & Poor’s rating agencies and applying the following hierarchy: If all three agencies provide a rating, the middle rating (after dropping the highest and lowest ratings) is assigned; if two of the three agencies rate a security, the lower of the two is assigned. Ratings are shown in the S&P and Fitch scale (e.g., AAA). 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 and fixed income derivatives, which have not been rated by any rating agency.The fund may or may not have held all of these instruments on this date. The fund is not rated by these agencies. |
Table of Contents
(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 each 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. |
(v) | For purposes of this presentation, market value of fixed income and/or equity derivatives, if any, is included in Cash & Cash Equivalents. |
Table of Contents
January 1, 2020 through June 30, 2020
Share Class | Annualized Expense Ratio | Beginning Account Value 1/01/20 | Ending Account Value 6/30/20 | Expenses Paid During Period (p) 1/01/20-6/30/20 | |
Initial Class | Actual | 0.45% | $1,000.00 | $1,019.34 | $2.26 |
Hypothetical (h) | 0.45% | $1,000.00 | $1.022.63 | $2.26 | |
Service Class | Actual | 0.70% | $1,000.00 | $1.018.39 | $3.51 |
Hypothetical (h) | 0.70% | $1,000.00 | $1.021.38 | $3.52 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class's annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
Table of Contents
Issuer | Shares/Par | Value ($) | ||
Bonds – 98.9% | ||||
Aerospace – 1.2% | ||||
Boeing Co., 4.508%, 5/01/2023 | $ | 1,375,000 | $ 1,452,589 | |
Boeing Co., 4.875%, 5/01/2025 | 2,130,000 | 2,321,282 | ||
Huntington Ingalls Industries, Inc., 3.844%, 5/01/2025 (n) | 1,049,000 | 1,139,030 | ||
Raytheon Technologies Corp., 3.65%, 8/16/2023 | 114,000 | 123,460 | ||
$5,036,361 | ||||
Asset-Backed & Securitized – 32.4% | ||||
ALM Loan Funding, CLO, 2015-16A, “BR2”, FLR, 3.118% (LIBOR - 3mo. + 1.9%), 7/15/2027 (n) | $ | 1,900,315 | $ 1,787,374 | |
American Credit Acceptance Receivables Trust, 2020-2, “C”, 3.88%, 4/13/2026 (n) | 453,000 | 473,670 | ||
AmeriCredit Automobile Receivables Trust, 2017-2, “C”, 2.97%, 3/20/2023 | 1,837,000 | 1,869,515 | ||
AmeriCredit Automobile Receivables Trust, 2020-1, “C”, 1.59%, 10/20/2025 | 659,000 | 650,591 | ||
Arbor Realty Trust, Inc., CLO, 2019-FL1, “A”, FLR, 1.334% (LIBOR - 1mo. + 1.15%), 5/15/2037 (n) | 2,210,000 | 2,151,298 | ||
AREIT CRE Trust, 2019-CRE3, “AS”, FLR, 1.495% (LIBOR - 1mo. + 1.3%), 9/14/2036 (n) | 647,000 | 605,512 | ||
AREIT CRE Trust, 2019-CRE3, “B”, FLR, 1.745% (LIBOR - 1mo. + 1.55%), 9/14/2036 (n) | 319,500 | 290,065 | ||
AREIT CRE Trust, 2019-CRE3, “C”, FLR, 2.095% (LIBOR - 1mo. + 1.9%), 9/14/2036 (n) | 264,000 | 233,664 | ||
Avery Point CLO Ltd., 2014-1A, “CR”, FLR, 3.341% (LIBOR - 3mo. + 2.35%), 4/25/2026 (n) | 1,720,000 | 1,704,257 | ||
Ballyrock Ltd., CLO, 2018-1A, “A2”, FLR, 2.735% (LIBOR - 3mo. + 1.6%), 4/20/2031 (n) | 1,748,737 | 1,671,808 | ||
Ballyrock Ltd., CLO, 2018-1A, “B”, FLR, 3.035% (LIBOR - 3mo. + 1.9%), 4/20/2031 (n) | 741,069 | 695,239 | ||
Bancorp Commercial Mortgage Trust, 2018-CRE3, “B”, FLR, 1.734% (LIBOR - 1mo. + 1.55%), 1/15/2033 (n) | 1,605,087 | 1,498,395 | ||
Bancorp Commercial Mortgage Trust, 2018-CRE4, “AS”, FLR, 1.284% (LIBOR - 1mo. + 1.1%), 9/15/2035 (n) | 1,736,000 | 1,632,852 | ||
Bancorp Commercial Mortgage Trust, 2019-CRE5, “A”, FLR, 1.184% (LIBOR - 1mo. + 1%), 3/15/2036 (n) | 1,548,948 | 1,492,798 | ||
Bancorp Commercial Mortgage Trust, 2019-CRE5, “AS”, FLR, 1.534% (LIBOR - 1mo. + 1.35%), 3/15/2036 (n) | 1,247,481 | 1,131,535 | ||
Bancorp Commercial Mortgage Trust, 2019-CRE5, “B”, FLR, 1.684% (LIBOR - 1mo. + 1.5%), 3/15/2036 (n) | 1,727,281 | 1,618,442 |
Issuer | Shares/Par | Value ($) | ||
Bonds – continued | ||||
Asset-Backed & Securitized – continued | ||||
Bancorp Commercial Mortgage Trust, 2019-CRE6, “AS”, FLR, 1.485% (LIBOR - 1mo. + 1.3%), 9/15/2036 (n) | $ | 1,410,155 | $ 1,348,464 | |
Bancorp Commercial Mortgage Trust, 2019-CRE6, “B”, FLR, 1.734% (LIBOR - 1mo. + 1.55%), 9/15/2036 (n) | 1,776,462 | 1,661,870 | ||
Barclays Commercial Mortgage Securities LLC, 2018-C2, “XA”, 0.935%, 12/15/2051 (i)(n) | 22,113,058 | 1,134,800 | ||
BSPRT Ltd., 2018-FL4, “A”, FLR, 2.284% (LIBOR - 1mo. + 2.1%), 9/15/2035 (n) | 2,076,000 | 1,771,251 | ||
Business Jet Securities LLC, 2018-1, “A”, 4.335%, 2/15/2033 (n) | 1,126,433 | 1,132,130 | ||
BXMT Ltd., 2020-FL2, “B”, FLR, 1.593% (LIBOR - 1mo. + 1.4%), 2/16/2037 (n) | 1,445,000 | 1,361,614 | ||
Capital Automotive, 2020-1A, “A4”, REIT, 3.19%, 2/15/2050 (n) | 557,261 | 542,169 | ||
Caravana Auto Receivables Trust, 2019-1A, “B”, 3.29%, 8/15/2023 (n) | 2,927,000 | 2,982,108 | ||
CarMax Auto Owner Trust, 2020-2, “B”, 2.9%, 8/15/2025 (n) | 337,000 | 349,723 | ||
CD Commercial Mortgage Trust, 2017-CD4, “XA”, 1.456%, 5/10/2050 (i) | 17,400,539 | 1,008,361 | ||
Chesapeake Funding II LLC, 2017-2A, “B”, 2.81%, 5/15/2029 (n) | 1,200,000 | 1,210,561 | ||
Chesapeake Funding II LLC, 2017-2A, “C”, 3.01%, 5/15/2029 (n) | 536,000 | 541,491 | ||
Chesapeake Funding II LLC, 2017-3A, “B”, 2.57%, 8/15/2029 (n) | 869,000 | 874,334 | ||
Chesapeake Funding II LLC, 2017-4A, “B”, 2.59%, 11/15/2029 (n) | 741,000 | 734,540 | ||
Chesapeake Funding II LLC, 2017-4A, “C”, 2.76%, 11/15/2029 (n) | 994,000 | 979,684 | ||
Commercial Mortgage Pass-Through Certificates, 2019-BN24 ,“XA”, 0.767%, 11/15/2062 (i) | 8,922,988 | 436,113 | ||
CPS Auto Trust, 2017-C, “C”, 2.86%, 6/15/2023 (n) | 375,315 | 376,174 | ||
Credit Acceptance Auto Loan Trust, 2017-2A, “B”, 3.02%, 4/15/2026 (n) | 2,607,000 | 2,613,870 | ||
Cutwater CLO Ltd., 2015-1A, “AR”, FLR, 2.438% (LIBOR - 3mo. + 1.22%), 1/15/2029 (n) | 2,556,891 | 2,514,646 | ||
Dell Equipment Finance Trust, 2017-2, “B”, 2.47%, 10/24/2022 (n) | 373,886 | 374,484 | ||
Dell Equipment Finance Trust, 2018-2, “B”, 3.55%, 10/22/2023 (n) | 1,843,000 | 1,877,825 | ||
Dell Equipment Finance Trust, 2020-1, “A2”, 2.26%, 6/22/2022 (n) | 754,000 | 766,901 | ||
DLL Securitization Trust, 2017-A, “A3”, 2.14%, 12/15/2021 (n) | 272,450 | 272,945 | ||
DT Auto Owner Trust, 2017-1A, “D”, 3.55%, 11/15/2022 (n) | 368,502 | 370,528 | ||
DT Auto Owner Trust, 2017-3A, “D”, 3.58%, 5/15/2023 (n) | 1,158,117 | 1,168,389 | ||
DT Auto Owner Trust, 2018-2A, “C”, 3.67%, 3/15/2024 (n) | 596,756 | 601,691 |
Table of Contents
Issuer | Shares/Par | Value ($) | ||
Bonds – continued | ||||
Asset-Backed & Securitized – continued | ||||
DT Auto Owner Trust, 2020-2A, “C”, 3.28%, 3/16/2026 (n) | $ | 238,000 | $ 245,634 | |
Exantas Capital Corp. CLO Ltd., 2019-RS07, “B”, FLR, 1.893% (LIBOR - 1mo. + 1.7%), 4/15/2036 (n) | 1,927,000 | 1,727,247 | ||
Exeter Automobile Receivables Trust, 2019-3A, “C”, 2.79%, 5/15/2024 (n) | 2,150,000 | 2,183,346 | ||
Exeter Automobile Receivables Trust, 2020-1, 2.26%, 4/15/2024 (n) | 365,000 | 368,687 | ||
Exeter Automobile Receivables Trust, 2020-1A, 2.49%, 1/15/2025 (n) | 500,000 | 504,655 | ||
Figueroa CLO Ltd., 2014-1A, “BR”, FLR, 2.719% (LIBOR - 3mo. + 1.5%), 1/15/2027 (n) | 2,520,000 | 2,468,055 | ||
Fort CRE LLC, 2018-1A, “A1”, FLR, 1.54% (LIBOR - 1mo. + 1.35%), 11/16/2035 (n) | 2,596,500 | 2,571,254 | ||
Freedom Financial, 2019-1, “A”, 3.42%, 6/18/2026 (n) | 139,257 | 139,290 | ||
General Motors, 2019-1, “B”, 2.86%, 4/15/2024 (n) | 1,228,000 | 1,226,842 | ||
General Motors, 2019-1, “C”, 3.06%, 4/15/2024 (n) | 945,000 | 937,083 | ||
GLS Auto Receivables Trust, 2020-1A, “A”, 2.17%, 2/15/2024 (n) | 808,653 | 817,777 | ||
GM Financial Automobile Leasing Trust, 2020-1, “B”, 1.84%, 12/20/2023 | 622,000 | 620,764 | ||
GM Financial Automobile Leasing Trust, 2020-1, “C”, 2.04%, 12/20/2023 | 456,000 | 452,571 | ||
Grand Avenue CRE Ltd., 2019-FL1, “A”, FLR, 1.304% (LIBOR - 1mo. + 1.12%), 6/15/2037 (n) | 1,512,500 | 1,486,031 | ||
Granite Point Mortgage Trust, Inc., 2018-FL1, “A” FLR, 1.093% (LIBOR - 1mo. + 0.9%), 11/21/2035 (n) | 745,206 | 738,747 | ||
GS Mortgage Securities Trust, 2017-GS6, “XA”, 1.184%, 5/10/2050 (i) | 15,752,086 | 883,996 | ||
GS Mortgage Securities Trust, 2017-GS7, “XA”, 1.273%, 8/10/2050 (i) | 15,718,520 | 914,972 | ||
GS Mortgage Securities Trust, 2020-GC47, “A5”, 1.247%, 5/12/2053 (i) | 8,355,183 | 735,351 | ||
Hertz Fleet Lease Funding LP, 2018-1, “B”, 3.64%, 5/10/2032 (n) | 1,106,000 | 1,064,758 | ||
Hertz Fleet Lease Funding LP, 2018-1, “C”, 3.77%, 5/10/2032 (n) | 635,000 | 605,658 | ||
Invitation Homes Trust, 2018-SFR1, “B”, FLR, 1.143% (LIBOR - 1mo. + 0.95%), 3/17/2037 (n) | 1,366,000 | 1,334,662 | ||
Invitation Homes Trust, 2018-SFR2, “A”, FLR, 1.043% (LIBOR - 1mo. + 0.85%), 12/17/2036 (n) | 2,563,132 | 2,531,526 | ||
Invitation Homes Trust, 2018-SFR2, “A”, FLR, 1.084% (LIBOR - 1mo. + 0.9%), 6/17/2037 (n) | 1,859,002 | 1,835,431 | ||
JPMorgan Chase Commercial Mortgage Securities Corp., 1.21%, 9/15/2050 (i) | 14,974,165 | 780,082 | ||
KKR Real Estate Financial Trust, Inc., 2018-FL1, “C”, FLR, 2.193% (LIBOR - 1mo. + 2%), 6/15/2036 (n) | 1,355,500 | 1,287,725 |
Issuer | Shares/Par | Value ($) | ||
Bonds – continued | ||||
Asset-Backed & Securitized – continued | ||||
LoanCore Ltd., 2018-CRE1, “AS”, FLR, 1.684% (LIBOR - 1mo. + 1.5%), 5/15/2028 (n) | $ | 2,225,000 | $ 2,179,495 | |
LoanCore Ltd., 2018-CRE1, “C”, FLR, 2.734% (LIBOR - 1mo. + 2.55%), 5/15/2028 (n) | 741,500 | 694,980 | ||
LoanCore Ltd., 2019-CRE3, “A”, FLR, 1.234% (LIBOR - 1mo. + 1.05%), 4/15/2034 (n) | 1,253,500 | 1,192,234 | ||
LoanCore Ltd., 2019-CRE3, “AS”, FLR, 1.554% (LIBOR - 1mo. + 1.37%), 4/15/2034 (n) | 2,200,500 | 2,095,721 | ||
Loomis, Sayles & Co., CLO, 2015-2A, “A1R”, FLR, 2.118% (LIBOR - 3mo. + 0.9%), 4/15/2028 (n) | 1,635,194 | 1,581,751 | ||
Loomis, Sayles & Co., CLO, 2015-2A, “A2R”, FLR, 2.618% (LIBOR - 3mo. + 1.4%), 4/15/2028 (n) | 1,854,111 | 1,793,137 | ||
Madison Park Funding Ltd., 2014-13A, “BR2”, FLR, 2.635% (LIBOR - 3mo. + 1.5%), 4/19/2030 (n) | 2,779,008 | 2,674,295 | ||
Magnetite CLO Ltd., 2015-16A, “BR”, FLR, 2.335% (LIBOR - 3mo. + 1.2%), 1/18/2028 (n) | 3,559,000 | 3,417,430 | ||
Man GLG U.S. CLO Ltd., 2018-2A, “BR”, FLR, 3.668% (LIBOR - 3mo. + 2.45%), 10/15/2028 | 2,309,265 | 2,188,530 | ||
MF1 CLO Ltd., 2019-FL2, “A”, FLR, 1.314% (LIBOR - 1mo. + 1.13%), 12/25/2034 (n) | 1,307,000 | 1,284,128 | ||
MF1 CLO Ltd., 2019-FL2, “AS”, FLR, 1.614% (LIBOR - 1mo. + 1.43%), 12/25/2034 (n) | 1,307,000 | 1,261,289 | ||
MF1 Ltd., 2020-FL3, “B”, FLR, 3.935% (LIBOR - 1mo. + 3.75%), 7/15/2035 (z) | 192,000 | 192,600 | ||
MF1 Ltd., 2020-FL3, “C”, FLR, 4.685% (LIBOR - 1mo. + 4.5%), 7/15/2035 (z) | 274,500 | 275,529 | ||
Morgan Stanley Bank of America Merrill Lynch Trust, 2017-C33, “XA”, 1.567%, 5/15/2050 (i) | 17,029,112 | 1,019,330 | ||
Morgan Stanley Capital I Trust, 2017-H1, “XA”, 1.585%, 6/15/2050 (i) | 7,732,515 | 493,801 | ||
Morgan Stanley Capital I Trust, 2018-H4, “XA”, 1.031%, 12/15/2051 (i) | 18,001,891 | 1,017,845 | ||
Mountain Hawk CLO Ltd., 2014-3A, “BR”, FLR, 2.935% (LIBOR - 3mo. + 1.8%), 4/18/2025 (n) | 3,468,000 | 3,419,136 | ||
Nationstar HECM Loan Trust, 2019-1A, “A”, 2.651%, 6/25/2029 (n) | 440,795 | 442,482 | ||
Navistar Financial Dealer Note Master Owner Trust, 2018-1, “B”, FLR, 0.984% (LIBOR - 1mo. + 0.8%), 9/25/2023 (n) | 347,000 | 345,040 | ||
Navistar Financial Dealer Note Master Owner Trust, 2018-1, “C”, FLR, 1.234% (LIBOR - 1mo. + 1.05%), 9/25/2023 (n) | 391,000 | 388,091 | ||
Navistar Financial Dealer Note Master Owner Trust, 2019-1, “C”, FLR, 1.134% (LIBOR - 1mo. + 0.95%), 5/25/2024 (n) | 432,000 | 429,869 |
Table of Contents
Issuer | Shares/Par | Value ($) | ||
Bonds – continued | ||||
Asset-Backed & Securitized – continued | ||||
Neuberger Berman CLO Ltd., 2016-21A, “CR”, FLR, 2.735% (LIBOR - 3mo. + 1.6%), 4/20/2027 (n) | $ | 2,056,577 | $ 1,987,046 | |
NextGear Floorplan Master Owner Trust, 2017-2A, “B”, 3.02%, 10/17/2022 (n) | 1,038,000 | 1,036,990 | ||
NextGear Floorplan Master Owner Trust, 2019-2A, “A2”, 2.07%, 10/15/2024 (n) | 1,050,000 | 1,034,274 | ||
OneMain Financial Issuance Trust, 2020-1A, “A”, 3.84%, 5/14/2032 (n) | 1,723,824 | 1,786,316 | ||
Santander Drive Auto Receivables Trust, 2017-2, “C”, 2.79%, 8/15/2022 | 145,672 | 145,890 | ||
Santander Drive Auto Receivables Trust, 2019-2, “B”, 2.79%, 1/16/2024 | 1,474,000 | 1,495,507 | ||
Santander Retail Auto Lease Trust, 2017-A, “B”, 2.68%, 1/20/2022 (n) | 1,092,701 | 1,093,774 | ||
Securitized Term Auto Receivable Trust, 2019-CRTA, “B”, 2.453%, 3/25/2026 (n) | 331,951 | 336,185 | ||
Securitized Term Auto Receivable Trust, 2019-CRTA, “C”, 2.849%, 3/25/2026 (n) | 425,616 | 431,858 | ||
Shackelton CLO Ltd., 2013-4RA, “B”, FLR, 3.211% (LIBOR - 3mo. + 1.9%), 4/13/2031 (n) | 927,055 | 863,187 | ||
Shackleton CLO Ltd., 2015-8A, “CR”, FLR, 2.785% (LIBOR - 3mo. + 1.65%), 10/20/2027 (n) | 709,957 | 669,852 | ||
Shelter Growth CRE, 2019-FL2, “A”, FLR, 1.284% (LIBOR - 1mo. + 1.1%), 5/15/2036 (n) | 2,803,307 | 2,633,615 | ||
SPS Servicer Advance Receivables Trust, 2.24%, 10/15/2051 (n) | 1,208,000 | 1,200,519 | ||
SPS Servicer Advance Receivables Trust, 2.34%, 10/15/2051 (n) | 219,000 | 217,621 | ||
SPS Servicer Advance Receivables Trust, 2.39%, 10/15/2051 (n) | 262,000 | 260,352 | ||
Starwood Waypoint Homes Trust, 2017-1, “B”, FLR, 1.354% (LIBOR - 1mo. + 1.17%), 1/17/2035 (n) | 2,055,201 | 2,038,053 | ||
Student Loan Consolidation Center, “A”, FLR, 1.404% (LIBOR - 1mo. + 1.22%), 10/25/2027 (n) | 233,921 | 234,800 | ||
Thacher Park CLO Ltd., 2014-1A, “CR”, FLR, 3.335% (LIBOR - 3mo. + 2.2%), 10/20/2026 (n) | 1,743,000 | 1,735,976 | ||
TICP CLO Ltd., 2018-3R, “B”, FLR, 2.485% (LIBOR - 3mo. + 1.35%), 4/20/2028 (n) | 870,756 | 846,970 | ||
TICP CLO Ltd., 2018-3R, “C”, FLR, 2.935% (LIBOR - 3mo. + 1.8%), 4/20/2028 (n) | 1,528,084 | 1,491,726 | ||
TPG Real Estate Finance, 2018-FL2, “AS”, FLR, 1.643% (LIBOR - 1mo. + 1.45%), 11/15/2037 (n) | 2,192,500 | 2,142,841 | ||
UBS Commercial Mortgage Trust, 2017-C1, “XA”, 1.156%, 11/15/2050 (i) | 11,978,332 | 595,215 | ||
UBS Commercial Mortgage Trust, 2018-C14, “XA”, 1.174%, 12/15/2051 (i) | 9,070,625 | 562,007 |
Issuer | Shares/Par | Value ($) | ||
Bonds – continued | ||||
Asset-Backed & Securitized – continued | ||||
Verizon Owner Trust, 2017-3A, “B”, 2.38%, 4/20/2022 (n) | $ | 1,230,000 | $ 1,240,170 | |
Veros Auto Receivables Trust, 2018-1, “A”, 3.63%, 5/15/2023 (n) | 13,206 | 13,213 | ||
Veros Auto Receivables Trust, 2020-1, “A”, 1.67%, 9/15/2023 (n) | 1,087,663 | 1,086,283 | ||
West CLO Ltd., 2014-2A, “A1BR”, 2.724%, 1/16/2027 (n) | 616,008 | 614,468 | ||
Wind River CLO Ltd., 2012-1A, “BR2”, FLR, 2.668% (LIBOR - 3mo. + 1.45%), 1/15/2026 (n) | 2,251,428 | 2,245,423 | ||
Wind River CLO Ltd., 2015-2A, “CR”, FLR, 2.918% (LIBOR - 3mo. + 1.7%), 10/15/2027 (n) | 864,053 | 812,628 | ||
$ 136,215,297 | ||||
Automotive – 4.0% | ||||
Ford Motor Credit Co. LLC, 5.085%, 1/07/2021 | $ | 1,088,000 | $ 1,086,966 | |
Ford Motor Credit Co. LLC, 5.75%, 2/01/2021 | 1,192,000 | 1,196,530 | ||
Ford Motor Credit Co. LLC, 3.087%, 1/09/2023 | 857,000 | 816,293 | ||
Harley-Davidson Financial Services, 4.05%, 2/04/2022 (n) | 1,203,000 | 1,239,951 | ||
Harley-Davidson Financial Services, FLR, 1.284% (LIBOR - 3mo. + 0.94%), 3/02/2021 (n) | 1,672,000 | 1,662,304 | ||
Hyundai Capital America, 2.85%, 11/01/2022 (n) | 355,000 | 362,249 | ||
Hyundai Capital America, 2.375%, 2/10/2023 (n) | 534,000 | 537,995 | ||
Hyundai Capital America, 5.75%, 4/06/2023 (n) | 1,129,000 | 1,232,793 | ||
Hyundai Capital America, 5.875%, 4/07/2025 (n) | 1,872,000 | 2,101,917 | ||
Toyota Motor Credit Corp., 3%, 4/01/2025 | 1,520,000 | 1,651,985 | ||
Volkswagen Group of America Co., 3.875%, 11/13/2020 (n) | 1,356,000 | 1,368,862 | ||
Volkswagen Group of America Co., 4%, 11/12/2021 (n) | 1,356,000 | 1,411,600 | ||
Volkswagen Group of America Co., 3.125%, 5/12/2023 (n) | 234,000 | 246,106 | ||
Volkswagen Group of America Co., 2.85%, 9/26/2024 (n) | 1,120,000 | 1,178,445 | ||
Volkswagen Group of America Finance LLC, 2.9%, 5/13/2022 (n) | 560,000 | 578,132 | ||
Volkswagen Group of America Finance LLC, 3.35%, 5/13/2025 (n) | 215,000 | 229,456 | ||
$16,901,584 | ||||
Broadcasting – 0.7% | ||||
Fox Corp., 3.666%, 1/25/2022 | $ | 734,000 | $ 768,291 | |
Fox Corp., 3.05%, 4/07/2025 | 564,000 | 610,375 | ||
Interpublic Group of Companies, Inc., 3.5%, 10/01/2020 | 1,635,000 | 1,645,833 | ||
$3,024,499 |
Table of Contents
Issuer | Shares/Par | Value ($) | ||
Bonds – continued | ||||
Brokerage & Asset Managers – 0.7% | ||||
E*TRADE Financial Corp., 2.95%, 8/24/2022 | $ | 2,157,000 | $ 2,245,904 | |
National Securities Clearing Corp., 1.2%, 4/23/2023 (n) | 600,000 | 608,681 | ||
National Securities Clearing Corp., 1.5%, 4/23/2025 (n) | 250,000 | 255,691 | ||
$3,110,276 | ||||
Business Services – 0.4% | ||||
Equinix, Inc., 1.25%, 7/15/2025 | $ | 375,000 | $ 374,906 | |
Tencent Holdings Ltd., 1.81%, 1/26/2026 (n) | 1,481,000 | 1,497,617 | ||
$1,872,523 | ||||
Cable TV – 0.7% | ||||
Comcast Corp., 3.1%, 4/01/2025 | $ | 258,000 | $ 284,293 | |
SES S.A., 3.6%, 4/04/2023 (n) | 2,469,000 | 2,536,188 | ||
$2,820,481 | ||||
Chemicals – 0.5% | ||||
DuPont de Nemours, Inc., 2.169%, 5/01/2023 | $ | 1,950,000 | $ 1,988,097 | |
Computer Software – 1.2% | ||||
Dell International LLC/EMC Corp., 5.85%, 7/15/2025 (n) | $ | 340,000 | $ 390,728 | |
Dell Investments LLC/EMC Corp., 4.42%, 6/15/2021 | 2,908,000 | 2,989,277 | ||
Dell Investments LLC/EMC Corp., 4%, 7/15/2024 (n) | 1,415,000 | 1,525,304 | ||
$4,905,309 | ||||
Computer Software - Systems – 0.3% | ||||
Apple, Inc., 1.7%, 9/11/2022 | $ | 1,292,000 | $ 1,330,582 | |
Conglomerates – 1.2% | ||||
Roper Technologies, Inc., 2.8%, 12/15/2021 | $ | 1,606,000 | $ 1,651,746 | |
Westinghouse Air Brake Technologies Corp., 4.4%, 3/15/2024 | 2,237,000 | 2,371,540 | ||
Westinghouse Air Brake Technologies Corp., FLR, 1.613% (LIBOR - 3mo. + 1.05%), 9/15/2021 | 871,000 | 871,000 | ||
$4,894,286 | ||||
Consumer Products – 0.1% | ||||
Reckitt Benckiser Treasury Services PLC, 2.375%, 6/24/2022 (n) | $ | 550,000 | $ 566,659 | |
Consumer Services – 0.8% | ||||
Alibaba Group Holding Ltd., 2.8%, 6/06/2023 | $ | 1,223,000 | $ 1,284,991 | |
Booking Holdings, Inc., 4.1%, 4/13/2025 | 171,000 | 191,927 | ||
QVC, Inc., 5.125%, 7/02/2022 | 1,805,000 | 1,822,689 | ||
$3,299,607 |
Issuer | Shares/Par | Value ($) | ||
Bonds – continued | ||||
Electronics – 0.8% | ||||
Broadcom, Inc., 2.25%, 11/15/2023 (n) | $ | 600,000 | $ 619,927 | |
Broadcom, Inc., 4.7%, 4/15/2025 (n) | 493,000 | 555,500 | ||
Broadcom, Inc., 3.15%, 11/15/2025 (n) | 600,000 | 638,594 | ||
Microchip Technology, Inc., 3.922%, 6/01/2021 | 1,514,000 | 1,543,506 | ||
$3,357,527 | ||||
Emerging Market Quasi-Sovereign – 0.7% | ||||
Bharat Petroleum Corp. Ltd., 4.625%, 10/25/2022 | $ | 1,865,000 | $ 1,929,622 | |
Indian Oil Corp. Ltd., 5.75%, 8/01/2023 | 933,000 | 1,007,716 | ||
$2,937,338 | ||||
Energy - Integrated – 1.0% | ||||
Cenovus Energy, Inc., 3%, 8/15/2022 | $ | 1,574,000 | $ 1,530,628 | |
Cenovus Energy, Inc., 3.8%, 9/15/2023 | 738,000 | 693,973 | ||
Eni S.p.A., 4%, 9/12/2023 (n) | 860,000 | 930,294 | ||
Exxon Mobil Corp., 1.571%, 4/15/2023 | 683,000 | 700,974 | ||
Suncor Energy, Inc., 2.8%, 5/15/2023 | 188,000 | 196,352 | ||
Suncor Energy, Inc., 3.1%, 5/15/2025 | 188,000 | 200,800 | ||
$4,253,021 | ||||
Entertainment – 0.3% | ||||
Royal Caribbean Cruises Ltd., 2.65%, 11/28/2020 | $ | 1,207,000 | $ 1,171,022 | |
Financial Institutions – 2.0% | ||||
AerCap Ireland Capital DAC, 4.45%, 12/16/2021 | $ | 1,873,000 | $ 1,891,605 | |
AerCap Ireland Capital DAC, 4.875%, 1/16/2024 | 1,585,000 | 1,575,127 | ||
AerCap Ireland Capital DAC, 6.5%, 7/15/2025 | 1,212,000 | 1,270,788 | ||
Avolon Holdings Funding Ltd., 3.625%, 5/01/2022 (n) | 1,955,000 | 1,842,869 | ||
Avolon Holdings Funding Ltd., 3.95%, 7/01/2024 (n) | 1,214,000 | 1,054,745 | ||
Century Housing Corp., 3.995%, 11/01/2021 | 748,000 | 770,989 | ||
$8,406,123 | ||||
Food & Beverages – 1.1% | ||||
Conagra Brands, Inc., 3.8%, 10/22/2021 | $ | 1,121,000 | $ 1,164,983 | |
Constellation Brands, Inc., FLR, 1.092% (LIBOR - 3mo. + 0.7%), 11/15/2021 | 852,000 | 851,932 | ||
Diageo Capital PLC, 1.375%, 9/29/2025 | 660,000 | 671,749 | ||
Mondelez International, Inc., 0.625%, 7/01/2022 (w) | 1,800,000 | 1,799,748 | ||
$4,488,412 |
Table of Contents
Issuer | Shares/Par | Value ($) | ||
Bonds – continued | ||||
Gaming & Lodging – 0.8% | ||||
GLP Capital LP/GLP Financing II, Inc., 5.375%, 11/01/2023 | $ | 1,459,000 | $ 1,552,959 | |
Marriott International, Inc., 2.3%, 1/15/2022 | 1,564,000 | 1,551,865 | ||
Marriott International, Inc., 3.75%, 10/01/2025 | 370,000 | 367,266 | ||
$3,472,090 | ||||
Industrial – 0.1% | ||||
Howard University, Washington D.C., 2.638%, 10/01/2021 | $ | 91,000 | $ 92,027 | |
Howard University, Washington D.C., 2.738%, 10/01/2022 | 96,000 | 97,551 | ||
Howard University, Washington D.C., 2.801%, 10/01/2023 | 106,000 | 108,729 | ||
Howard University, Washington D.C., AGM, 2.416%, 10/01/2024 | 117,000 | 119,711 | ||
Howard University, Washington D.C., AGM, 2.516%, 10/01/2025 | 144,000 | 144,367 | ||
$562,385 | ||||
Insurance – 0.4% | ||||
AIG Global Funding, 0.8%, 7/07/2023 (n)(w) | $ | 913,000 | $ 913,065 | |
Equitable Financial Life Insurance Co., 1.4%, 7/07/2025 (n)(w) | 882,000 | 882,517 | ||
$1,795,582 | ||||
Insurance - Health – 0.6% | ||||
UnitedHealth Group, Inc., 1.95%, 10/15/2020 | $ | 2,475,000 | $ 2,486,598 | |
Insurance - Property & Casualty – 0.4% | ||||
Aon PLC, 2.2%, 11/15/2022 | $ | 821,000 | $ 851,264 | |
Marsh & McLennan Cos., Inc., 2.75%, 1/30/2022 | 807,000 | 833,328 | ||
$1,684,592 | ||||
Internet – 0.3% | ||||
Baidu, Inc., 3.875%, 9/29/2023 | $ | 1,263,000 | $ 1,344,101 | |
Machinery & Tools – 0.6% | ||||
CNH Industrial Capital LLC, 4.2%, 1/15/2024 | $ | 2,262,000 | $ 2,410,169 | |
Deere & Co., 2.75%, 4/15/2025 | 287,000 | 313,407 | ||
$2,723,576 | ||||
Major Banks – 11.5% | ||||
ABN AMRO Bank N.V., 2.65%, 1/19/2021 (n) | $ | 1,855,000 | $ 1,871,064 | |
Bank of America Corp., 2.369%, 7/21/2021 | 2,408,000 | 2,410,224 | ||
Bank of America Corp., 2.738% to 1/23/2021, FLR (LIBOR - 3mo. + 2.738%) to 1/23/2022 | 1,345,000 | 1,359,921 | ||
Bank of America Corp., 2.881%, 4/24/2023 | 2,896,000 | 3,001,944 | ||
Bank of America Corp., 4.2%, 8/26/2024 | 692,000 | 768,257 | ||
Bank of Montreal, 2.05%, 11/01/2022 | 1,168,000 | 1,206,024 |
Issuer | Shares/Par | Value ($) | ||
Bonds – continued | ||||
Major Banks – continued | ||||
Barclays PLC, 4.61%, 2/15/2023 | $ | 2,947,000 | $ 3,102,926 | |
Barclays PLC, 2.852% to 5/07/2025, FLR (LIBOR - 3mo. + 2.452%) to 5/07/2026 | 550,000 | 574,675 | ||
Citibank N.A., 2.125%, 10/20/2020 | 2,107,000 | 2,115,124 | ||
Credit Agricole, “A”, FLR, 2.741% (LIBOR - 3mo. + 1.43%), 1/10/2022 (n) | 1,270,000 | 1,279,286 | ||
Credit Suisse Group AG, 3.574%, 1/09/2023 (n) | 872,000 | 904,536 | ||
Goldman Sachs Group, Inc., 3%, 4/26/2022 | 2,302,000 | 2,346,575 | ||
Goldman Sachs Group, Inc., 3.5%, 4/01/2025 | 750,000 | 822,381 | ||
HSBC Holdings PLC, 3.262% to 3/13/2022, FLR (LIBOR - 3mo. + 1.055%) to 3/13/2023 | 1,521,000 | 1,575,693 | ||
HSBC Holdings PLC, 3.033% to 11/22/2022, FLR (LIBOR - 3mo. + 0.923%) to 11/22/2023 | 491,000 | 512,794 | ||
HSBC Holdings PLC, 2.099% to 6/04/2025, FLR (SOFR + 1.929%) to 6/04/2026 | 910,000 | 919,394 | ||
JPMorgan Chase & Co., 3.207% to 4/01/2022, FLR (LIBOR - 3mo. + 0.695%) to 4/01/2023 | 2,827,000 | 2,943,349 | ||
JPMorgan Chase & Co., 2.776% to 4/25/2022, FLR (LIBOR - 3mo. + 0.935%) to 4/25/2023 | 2,701,000 | 2,796,339 | ||
JPMorgan Chase & Co., 2.005% to 3/13/2025, FLR (SOFR + 1.585%) to 3/13/2026 | 1,642,000 | 1,699,381 | ||
Mitsubishi UFJ Financial Group, Inc., 2.95%, 3/01/2021 | 448,000 | 455,199 | ||
Mitsubishi UFJ Financial Group, Inc., 3.535%, 7/26/2021 | 1,623,000 | 1,674,639 | ||
Mitsubishi UFJ Financial Group, Inc., 2.623%, 7/18/2022 | 1,921,000 | 1,995,302 | ||
NatWest Markets PLC, 3.625%, 9/29/2022 (n) | 895,000 | 937,979 | ||
Royal Bank of Scotland Group PLC, 4.269% to 3/22/2024, FLR (LIBOR - 3mo. + 1.762%) to 3/22/2025 | 1,367,000 | 1,486,890 | ||
State Street Corp., 2.825% to 3/30/2022, FLR (SOFR + 2.69%) to 3/30/2023 (n) | 383,000 | 397,398 | ||
State Street Corp., 2.901% to 3/30/2025, FLR (SOFR + 2.7%) to 3/30/2026 (n) | 157,000 | 169,947 | ||
Sumitomo Mitsui Financial Group, Inc., 1.474%, 7/08/2025 (w) | 1,613,000 | 1,614,975 | ||
UBS Group AG, 3.491%, 5/23/2023 (n) | 278,000 | 290,771 | ||
UBS Group Funding Ltd., 3%, 4/15/2021 (n) | 1,590,000 | 1,621,408 | ||
UniCredito Italiano S.p.A., 6.572%, 1/14/2022 (n) | 1,373,000 | 1,450,664 | ||
UniCredito Italiano S.p.A., 3.75%, 4/12/2022 (n) | 1,687,000 | 1,730,932 |
Table of Contents
Issuer | Shares/Par | Value ($) | ||
Bonds – continued | ||||
Major Banks – continued | ||||
Wells Fargo & Co., 2.164% to 2/11/2025, FLR (LIBOR - 3mo. + 0.75%) to 2/11/2026 | $ | 2,242,000 | $ 2,310,705 | |
$48,346,696 | ||||
Medical & Health Technology & Services – 1.0% | ||||
Becton, Dickinson and Co., 2.894%, 6/06/2022 | $ | 560,000 | $ 579,923 | |
Cigna Corp., FLR, 0.949% (LIBOR - 3mo. + 0.65%), 9/17/2021 | 1,734,000 | 1,734,078 | ||
HCA, Inc., 5%, 3/15/2024 | 1,692,000 | 1,880,660 | ||
$4,194,661 | ||||
Medical Equipment – 0.1% | ||||
Zimmer Biomet Holdings, Inc., FLR, 1.066% (LIBOR - 3mo. + 0.75%), 3/19/2021 | $ | 511,000 | $ 510,911 | |
Metals & Mining – 1.7% | ||||
Anglo American Capital PLC, 3.625%, 9/11/2024 (n) | $ | 533,000 | $ 559,268 | |
Anglo American Capital PLC, 5.375%, 4/01/2025 (n) | 900,000 | 1,016,500 | ||
Glencore Finance (Canada) Ltd., 4.95%, 11/15/2021 (n) | 899,000 | 938,268 | ||
Glencore Funding LLC, 3%, 10/27/2022 (n) | 848,000 | 872,261 | ||
Glencore Funding LLC, 4.125%, 3/12/2024 (n) | 1,354,000 | 1,451,153 | ||
Steel Dynamics, Inc., 4.125%, 9/15/2025 | 2,420,000 | 2,475,048 | ||
$7,312,498 | ||||
Midstream – 2.1% | ||||
El Paso LLC, 6.5%, 9/15/2020 | $ | 2,401,000 | $ 2,427,500 | |
Energy Transfer Operating Co., 2.9%, 5/15/2025 | 569,000 | 581,310 | ||
MPLX LP, 3.5%, 12/01/2022 | 2,340,000 | 2,437,949 | ||
MPLX LP, 3.375%, 3/15/2023 | 642,000 | 669,496 | ||
MPLX LP, FLR, 1.212% (LIBOR - 3mo. + 0.9%), 9/09/2021 | 961,000 | 953,382 | ||
Western Midstream Operating LP, 3.1%, 2/01/2025 | 796,000 | 754,210 | ||
Western Midstream Operating LP, FLR, 2.161% (LIBOR - 3mo. + 0.85%), 1/13/2023 | 1,222,000 | 1,121,492 | ||
$8,945,339 | ||||
Mortgage-Backed – 1.7% | ||||
Fannie Mae, 5.5%, 5/01/2025 | $ | 9,380 | $ 9,625 | |
Fannie Mae, 5%, 7/01/2039 - 3/01/2042 | 880,819 | 1,008,124 | ||
Fannie Mae, 2%, 5/25/2044 | 1,622,176 | 1,664,594 | ||
Freddie Mac, 1.022%, 4/25/2024 (i) | 580,640 | 15,375 | ||
Freddie Mac, 1.7%, 4/25/2030 (i) | 6,155,682 | 788,769 | ||
Freddie Mac, 3%, 4/15/2033 - 6/15/2045 | 2,943,665 | 3,187,347 | ||
Freddie Mac, 2%, 7/15/2042 | 589,511 | 609,010 | ||
$7,282,844 |
Issuer | Shares/Par | Value ($) | ||
Bonds – continued | ||||
Municipals – 1.8% | ||||
California Municipal Finance Authority Rev. (Century Housing Corp.), 1.486%, 11/01/2022 | $ | 235,000 | $ 235,078 | |
California Municipal Finance Authority Rev. (Century Housing Corp.), 1.605%, 11/01/2023 | 280,000 | 280,118 | ||
Illinois Sales Tax Securitization Corp., Second Lien, “B”, 2.128%, 1/01/2023 | 300,000 | 300,966 | ||
Illinois Sales Tax Securitization Corp., Second Lien, “B”, 2.225%, 1/01/2024 | 730,000 | 734,088 | ||
New Jersey Economic Development Authority State Pension Funding Rev., Capital Appreciation, “B”, 0%, 2/15/2023 | 4,091,000 | 3,950,474 | ||
New Jersey Transportation Trust Fund Authority, Transportation System, “B”, 2.384%, 6/15/2022 | 455,000 | 442,365 | ||
New Jersey Transportation Trust Fund Authority, Transportation System, “B”, 2.551%, 6/15/2023 | 465,000 | 446,925 | ||
New Jersey Transportation Trust Fund Authority, Transportation System, “B”, 2.631%, 6/15/2024 | 440,000 | 417,410 | ||
Texas Transportation Commission, Central Texas Turnpike System First Tier Refunding Rev., Taxable, “B”, 1.98%, 8/15/2042 | 680,000 | 682,693 | ||
$7,490,117 | ||||
Network & Telecom – 0.3% | ||||
AT&T, Inc., 3.2%, 3/01/2022 | $ | 1,179,000 | $ 1,230,191 | |
Oil Services – 0.0% | ||||
Halliburton Co., 3.8%, 11/15/2025 | $ | 111,000 | $ 119,894 | |
Oils – 0.8% | ||||
Marathon Petroleum Corp., 4.75%, 12/15/2023 | $ | 1,919,000 | $ 2,105,860 | |
Phillips 66, FLR, 0.959% (LIBOR - 3mo. + 0.6%), 2/26/2021 | 1,196,000 | 1,194,213 | ||
Valero Energy Corp., 2.85%, 4/15/2025 | 171,000 | 180,452 | ||
$3,480,525 | ||||
Other Banks & Diversified Financials – 3.7% | ||||
American Express Co., 3.7%, 11/05/2021 | $ | 497,000 | $ 516,855 | |
Banque Federative du Credit Mutuel S.A., 2.2%, 7/20/2020 (n) | 2,390,000 | 2,392,056 | ||
BBVA USA, 3.5%, 6/11/2021 | 1,920,000 | 1,961,733 | ||
BBVA USA, 2.875%, 6/29/2022 | 2,443,000 | 2,499,222 | ||
BBVA USA Bancshares, Inc., 2.5%, 8/27/2024 | 1,183,000 | 1,200,985 | ||
Groupe BPCE S.A., 4%, 9/12/2023 (n) | 1,385,000 | 1,495,429 | ||
Groupe BPCE S.A., FLR, 1.558% (LIBOR - 3mo. + 1.24%), 9/12/2023 (n) | 1,385,000 | 1,387,343 | ||
National Bank of Canada, 2.15%, 10/07/2022 (n) | 1,348,000 | 1,385,454 | ||
SunTrust Banks, Inc., 2.8%, 5/17/2022 | 2,056,000 | 2,139,638 |
Table of Contents
Issuer | Shares/Par | Value ($) | ||
Bonds – continued | ||||
Other Banks & Diversified Financials – continued | ||||
UBS AG, 1.75%, 4/21/2022 (n) | $ | 390,000 | $ 397,457 | |
$15,376,172 | ||||
Personal Computers & Peripherals – 0.0% | ||||
Equifax, Inc., 2.6%, 12/15/2025 | $ | 164,000 | $ 174,697 | |
Pharmaceuticals – 1.9% | ||||
AbbVie, Inc., 2.15%, 11/19/2021 (n) | $ | 834,000 | $ 849,858 | |
AbbVie, Inc., 3.45%, 3/15/2022 (n) | 886,000 | 921,493 | ||
Bayer U.S. Finance II LLC, 3.5%, 6/25/2021 (n) | 2,962,000 | 3,036,457 | ||
Bristol-Myers Squibb Co., 2.875%, 8/15/2020 (n) | 1,041,000 | 1,044,017 | ||
Bristol-Myers Squibb Co., 2.75%, 2/15/2023 (n) | 1,724,000 | 1,817,696 | ||
Bristol-Myers Squibb Co., FLR, 0.765% (LIBOR - 3mo. + 0.38%), 5/16/2022 (n) | 444,000 | 445,104 | ||
$8,114,625 | ||||
Restaurants – 0.1% | ||||
McDonald's Corp., 3.3%, 7/01/2025 | $ | 238,000 | $ 264,403 | |
Retailers – 0.2% | ||||
Alimentation Couche-Tard, Inc., 2.7%, 7/26/2022 (n) | $ | 399,000 | $ 408,441 | |
Macy's Retail Holdings, Inc., 3.875%, 1/15/2022 | 352,000 | 310,746 | ||
$719,187 | ||||
Specialty Stores – 0.4% | ||||
Ross Stores, Inc., 4.6%, 4/15/2025 | $ | 356,000 | $ 408,633 | |
TJX Cos., Inc., 3.5%, 4/15/2025 | 960,000 | 1,068,625 | ||
$1,477,258 | ||||
Telecommunications - Wireless – 1.3% | ||||
American Tower Corp., REIT, 2.25%, 1/15/2022 | $ | 500,000 | $ 512,463 | |
Crown Castle International Corp., 3.4%, 2/15/2021 | 950,000 | 964,891 | ||
Crown Castle International Corp., 3.15%, 7/15/2023 | 1,037,000 | 1,106,640 | ||
Crown Castle International Corp., 1.35%, 7/15/2025 | 257,000 | 258,832 | ||
SBA Tower Trust, 2.877%, 7/09/2021 (n) | 629,000 | 630,037 | ||
T-Mobile USA, Inc., 3.5%, 4/15/2025 (n) | 1,901,000 | 2,069,029 | ||
$5,541,892 | ||||
Tobacco – 1.2% | ||||
B.A.T Capital Corp., 2.764%, 8/15/2022 | $ | 692,000 | $ 716,538 | |
Imperial Tobacco Finance PLC, 2.95%, 7/21/2020 (n) | 1,343,000 | 1,344,304 | ||
Imperial Tobacco Finance PLC, 3.75%, 7/21/2022 (n) | 2,045,000 | 2,134,307 | ||
Philip Morris International, Inc., 1.125%, 5/01/2023 | 796,000 | 809,456 | ||
$5,004,605 |
Issuer | Shares/Par | Value ($) | ||
Bonds – continued | ||||
Transportation - Services – 1.1% | ||||
Adani Ports & Special Economic Zone Ltd., 3.95%, 1/19/2022 | $ | 2,656,000 | $ 2,683,691 | |
ERAC USA Finance LLC, 2.7%, 11/01/2023 (n) | 572,000 | 578,292 | ||
ERAC USA Finance LLC, 3.85%, 11/15/2024 (n) | 551,000 | 580,183 | ||
ERAC USA Finance LLC, 3.8%, 11/01/2025 (n) | 551,000 | 582,959 | ||
$4,425,125 | ||||
U.S. Government Agencies and Equivalents – 0.1% | ||||
National Credit Union Administration, FLR, 0.623% (LIBOR - 1mo. + 0.45%), 10/07/2020 | $ | 134,718 | $ 134,529 | |
National Credit Union Administration, FLR, 0.53% (LIBOR - 1mo. + 0.35%), 12/07/2020 | 328,104 | 327,700 | ||
$462,229 | ||||
U.S. Treasury Obligations – 12.4% | ||||
U.S. Treasury Notes, 1.875%, 2/28/2022 (f) | $ | 14,563,000 | $ 14,973,722 | |
U.S. Treasury Notes, 0.125%, 6/30/2022 | 18,900,000 | 18,888,187 | ||
U.S. Treasury Notes, 2.375%, 1/31/2023 | 17,178,000 | 18,150,302 | ||
$52,012,211 | ||||
Utilities - Electric Power – 2.2% | ||||
Dominion Energy, Inc., 2.579%, 7/01/2020 | $ | 1,691,000 | $ 1,691,000 | |
Emera U.S. Finance LP, 2.7%, 6/15/2021 | 491,000 | 499,976 | ||
Enel Finance International N.V., 2.875%, 5/25/2022 (n) | 2,470,000 | 2,554,839 | ||
NextEra Energy, Inc., 2.9%, 4/01/2022 | 1,458,000 | 1,517,617 | ||
Pacific Gas and Electric Co., 1.75%, 6/16/2022 | 536,000 | 536,858 | ||
WEC Energy Group, Inc., 3.375%, 6/15/2021 | 1,635,000 | 1,680,781 | ||
WEC Energy Group, Inc., 3.1%, 3/08/2022 | 847,000 | 881,855 | ||
$9,362,926 | ||||
Total Bonds (Identified Cost, $411,945,021) | $416,496,934 | |||
Investment Companies (h) – 6.4% | ||||
Money Market Funds – 6.4% | ||||
MFS Institutional Money Market Portfolio, 0.17% (v) (Identified Cost, $26,685,157) | 26,682,488 | $ 26,685,157 |
Table of Contents
Underlying/ Expiration Date/Exercise Price | Put/ Call | Counterparty | Notional Amount | Par Amount/ Number of Contracts | Value ($) |
Purchased Options – 0.0% | |||||
Market Index Securities – 0.0% | |||||
Markit CDX North America Investment Grade Index – September 2020 @ $100 (Premiums Paid, $110,370) | Put | Merrill Lynch International | $28,630,768 | $28,300,000 | $79,725 |
Other Assets, Less Liabilities – (5.3)% | (22,158,291) | |||
Net Assets – 100.0% | $421,103,525 |
(f) | All or a portion of the security has been segregated as collateral for open futures contracts and cleared swap agreements. |
(h) | An affiliated issuer, which 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. At period end, the aggregate values of the fund's investments in affiliated issuers and in unaffiliated issuers were $26,685,157 and $416,576,659, respectively. |
(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 $189,530,136, representing 45.0% of net assets. |
(v) | Affiliated issuer 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. |
(w) | When-issued security. |
(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 |
MF1 Ltd., 2020-FL3, “B”, FLR, 3.935% (LIBOR - 1mo. + 3.75%), 7/15/2035 | 6/12/20 | $192,000 | $192,600 |
MF1 Ltd., 2020-FL3, “C”, FLR, 4.685% (LIBOR - 1mo. + 4.5%), 7/15/2035 | 6/12/20 | 274,500 | 275,529 |
Total Restricted Securities | $468,129 | ||
% of Net assets | 0.1% |
The following abbreviations are used in this report and are defined: | |
AGM | Assured Guaranty Municipal |
CLO | Collateralized Loan Obligation |
FLR | Floating Rate. Interest rate resets periodically based on the parenthetically disclosed reference rate plus a spread (if any). The period-end rate reported may not be the current rate. All reference rates are USD unless otherwise noted. |
LIBOR | London Interbank Offered Rate |
REIT | Real Estate Investment Trust |
SOFR | Secured Overnight Financing Rate |
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Derivative Contracts at 6/30/20 | ||||||
Futures Contracts | ||||||
Description | Long/ Short | Currency | Contracts | Notional Amount | Expiration Date | Value/Unrealized Appreciation (Depreciation) |
Asset Derivatives | ||||||
Interest Rate Futures | ||||||
U.S. Treasury Note 2 yr | Long | USD | 153 | $33,786,703 | September – 2020 | $10,218 |
Cleared Swap Agreements | ||||||||||
Maturity Date | Notional Amount | Counterparty | Cash Flows to Receive/ Frequency | Cash Flows to Pay/ Frequency | Unrealized Appreciation (Depreciation) | Net Unamortized Upfront Payments (Receipts) | Value | |||
Asset Derivatives | ||||||||||
Interest Rate Swaps | ||||||||||
7/15/21 | USD | 38,000,000 | centrally cleared | 1.88%/Semi-annually | 1.22% FLR (3-Month LIBOR)/Quarterly | $863,755 | $— | $863,755 | ||
9/19/21 | USD | 23,300,000 | centrally cleared | 1.57%/Semi-annually | 0.17% FLR (1-Month LIBOR)/Monthly | 509,953 | — | 509,953 | ||
$1,373,708 | $— | $1,373,708 |
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Financial Statements | Statement of Assets and Liabilities (unaudited) |
At 6/30/20Assets | |
Investments in unaffiliated issuers, at value (identified cost, $412,055,391) | $416,576,659 |
Investments in affiliated issuers, at value (identified cost, $26,685,157) | 26,685,157 |
Receivables for | |
Net daily variation margin on open cleared swap agreements | 8,411 |
Net daily variation margin on open futures contracts | 2,373 |
Interest | 2,490,801 |
Other assets | 1,502 |
Total assets | $445,764,903 |
Liabilities | |
Payable to custodian | $110,370 |
Payables for | |
Investments purchased | 18,892,006 |
Fund shares reacquired | 351,573 |
When-issued investments purchased | 5,205,431 |
Payable to affiliates | |
Investment adviser | 8,946 |
Administrative services fee | 378 |
Shareholder servicing costs | 36 |
Distribution and/or service fees | 1,490 |
Accrued expenses and other liabilities | 91,148 |
Total liabilities | $24,661,378 |
Net assets | $421,103,525 |
Net assets consist of | |
Paid-in capital | $398,319,673 |
Total distributable earnings (loss) | 22,783,852 |
Net assets | $421,103,525 |
Shares of beneficial interest outstanding | 39,965,679 |
Net assets | Shares outstanding | Net asset value per share | |
Initial Class | $312,084,594 | 29,604,884 | $10.54 |
Service Class | 109,018,931 | 10,360,795 | 10.52 |
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Financial Statements | Statement of Operations (unaudited) |
Six months ended 6/30/20 | |
Net investment income (loss) | |
Income | |
Interest | $5,639,303 |
Dividends from affiliated issuers | 36,446 |
Other | 886 |
Total investment income | $5,676,635 |
Expenses | |
Management fee | $838,855 |
Distribution and/or service fees | 132,237 |
Shareholder servicing costs | 2,751 |
Administrative services fee | 33,878 |
Independent Trustees' compensation | 4,554 |
Custodian fee | 12,692 |
Shareholder communications | 17,075 |
Audit and tax fees | 33,403 |
Legal fees | 2,577 |
Miscellaneous | 19,768 |
Total expenses | $1,097,790 |
Reduction of expenses by investment adviser | (22,586) |
Net expenses | $1,075,204 |
Net investment income (loss) | $4,601,431 |
Realized and unrealized gain (loss) | |
Realized gain (loss) (identified cost basis) | |
Unaffiliated issuers | $1,183,265 |
Affiliated issuers | 3,403 |
Futures contracts | 665,973 |
Swap agreements | 213,780 |
Net realized gain (loss) | $2,066,421 |
Change in unrealized appreciation or depreciation | |
Unaffiliated issuers | $(769,119) |
Affiliated issuers | 9 |
Futures contracts | 37,222 |
Swap agreements | 1,021,824 |
Net unrealized gain (loss) | $289,936 |
Net realized and unrealized gain (loss) | $2,356,357 |
Change in net assets from operations | $6,957,788 |
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Financial Statements | Statements of Changes in Net Assets |
Six months ended | Year ended | |
6/30/20 (unaudited) | 12/31/19 | |
Change in net assets | ||
From operations | ||
Net investment income (loss) | $4,601,431 | $12,947,816 |
Net realized gain (loss) | 2,066,421 | 450,580 |
Net unrealized gain (loss) | 289,936 | 10,243,310 |
Change in net assets from operations | $6,957,788 | $23,641,706 |
Total distributions to shareholders | $— | $(12,198,184) |
Change in net assets from fund share transactions | $(46,723,002) | $(28,281,631) |
Total change in net assets | $(39,765,214) | $(16,838,109) |
Net assets | ||
At beginning of period | 460,868,739 | 477,706,848 |
At end of period | $421,103,525 | $460,868,739 |
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Financial Statements | Financial Highlights |
Initial Class | Six months ended | Year ended | ||||
6/30/20 (unaudited) | 12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | |
Net asset value, beginning of period | $10.34 | $10.10 | $10.18 | $10.17 | $10.14 | $10.23 |
Income (loss) from investment operations | ||||||
Net investment income (loss) (d) | $0.12 | $0.29 | $0.23 | $0.18 | $0.15(c) | $0.12 |
Net realized and unrealized gain (loss) | 0.08 | 0.23 | (0.10) | (0.00)(w) | 0.02 | (0.07) |
Total from investment operations | $0.20 | $0.52 | $0.13 | $0.18 | $0.17 | $0.05 |
Less distributions declared to shareholders | ||||||
From net investment income | $— | $(0.28) | $(0.21) | $(0.17) | $(0.14) | $(0.14) |
Net asset value, end of period (x) | $10.54 | $10.34 | $10.10 | $10.18 | $10.17 | $10.14 |
Total return (%) (k)(r)(s)(x) | 1.93(n) | 5.19 | 1.28 | 1.73 | 1.68(c) | 0.48 |
Ratios (%) (to average net assets) and Supplemental data: | ||||||
Expenses before expense reductions (f) | 0.46(a) | 0.45 | 0.45 | 0.45 | 0.42(c) | 0.45 |
Expenses after expense reductions (f) | 0.45(a) | 0.44 | 0.44 | 0.45 | 0.42(c) | 0.44 |
Net investment income (loss) | 2.25(a) | 2.81 | 2.31 | 1.77 | 1.43(c) | 1.13 |
Portfolio turnover | 27(n) | 39 | 62 | 54 | 30 | 26 |
Net assets at end of period (000 omitted) | $312,085 | $343,507 | $359,909 | $434,320 | $473,730 | $520,750 |
Service Class | Six months ended | Year ended | ||||
6/30/20 (unaudited) | 12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | |
Net asset value, beginning of period | $10.33 | $10.09 | $10.17 | $10.16 | $10.12 | $10.20 |
Income (loss) from investment operations | ||||||
Net investment income (loss) (d) | $0.10 | $0.26 | $0.21 | $0.16 | $0.12(c) | $0.09 |
Net realized and unrealized gain (loss) | 0.09 | 0.23 | (0.11) | (0.01) | 0.03 | (0.06) |
Total from investment operations | $0.19 | $0.49 | $0.10 | $0.15 | $0.15 | $0.03 |
Less distributions declared to shareholders | ||||||
From net investment income | $— | $(0.25) | $(0.18) | $(0.14) | $(0.11) | $(0.11) |
Net asset value, end of period (x) | $10.52 | $10.33 | $10.09 | $10.17 | $10.16 | $10.12 |
Total return (%) (k)(r)(s)(x) | 1.84(n) | 4.90 | 0.99 | 1.45 | 1.48(c) | 0.28 |
Ratios (%) (to average net assets) and Supplemental data: | ||||||
Expenses before expense reductions (f) | 0.71(a) | 0.70 | 0.70 | 0.70 | 0.68(c) | 0.70 |
Expenses after expense reductions (f) | 0.70(a) | 0.69 | 0.69 | 0.70 | 0.67(c) | 0.69 |
Net investment income (loss) | 2.01(a) | 2.56 | 2.06 | 1.52 | 1.18(c) | 0.88 |
Portfolio turnover | 27(n) | 39 | 62 | 54 | 30 | 26 |
Net assets at end of period (000 omitted) | $109,019 | $117,362 | $117,798 | $142,696 | $153,979 | $172,581 |
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(a) | Annualized. |
(c) | Amount reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(k) | The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown. |
(n) | Not annualized. |
(r) | Certain expenses have been reduced without which performance would have been lower. |
(s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
(w) | Per share amount was less than $0.01. |
(x) | The net asset values 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. |
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Financial Instruments | Level 1 | Level 2 | Level 3 | Total |
U.S. Treasury Bonds & U.S. Government Agencies & Equivalents | $— | $52,474,440 | $— | $52,474,440 |
Non - U.S. Sovereign Debt | — | 2,937,338 | — | 2,937,338 |
Municipal Bonds | — | 7,490,117 | — | 7,490,117 |
U.S. Corporate Bonds | — | 135,596,643 | — | 135,596,643 |
Residential Mortgage-Backed Securities | — | 15,022,516 | — | 15,022,516 |
Commercial Mortgage-Backed Securities | — | 33,858,194 | — | 33,858,194 |
Asset-Backed Securities (including CDOs) | — | 94,617,431 | — | 94,617,431 |
Foreign Bonds | — | 74,579,980 | — | 74,579,980 |
Mutual Funds | 26,685,157 | — | — | 26,685,157 |
Total | $26,685,157 | $416,576,659 | $— | $443,261,816 |
Other Financial Instruments | ||||
Futures Contracts – Assets | $10,218 | $— | $— | $10,218 |
Swap Agreements – Assets | — | 1,373,708 | — | 1,373,708 |
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Fair Value (a) | |||
Risk | Derivative Contracts | Asset Derivatives | |
Interest Rate | Interest Rate Futures | $10,218 | |
Interest Rate | Purchased Interest Rate Options | 79,725 | |
Interest Rate | Interest Rate Swaps | 1,373,708 | |
Total | $1,383,926 |
Risk | Futures Contracts | Swap Agreements |
Interest Rate | $665,973 | $213,780 |
Risk | Futures Contracts | Swap Agreements | Unaffiliated Issuers (Purchased Options) |
Interest Rate | $37,222 | $1,021,824 | $(30,645) |
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Year ended 12/31/19 | |
Ordinary income (including any short-term capital gains) | $12,198,184 |
As of 6/30/20 | |
Cost of investments | $438,772,229 |
Gross appreciation | 8,827,935 |
Gross depreciation | (4,338,348) |
Net unrealized appreciation (depreciation) | $4,489,587 |
As of 12/31/19 | |
Undistributed ordinary income | 12,888,030 |
Capital loss carryforwards | (2,418,832) |
Net unrealized appreciation (depreciation) | 5,356,866 |
Short-Term | $(646,654) |
Long-Term | (1,772,178) |
Total | $(2,418,832) |
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Six months ended 6/30/20 | Year ended 12/31/19 | ||
Initial Class | $— | $9,355,557 | |
Service Class | — | 2,842,627 | |
Total | $— | $12,198,184 |
Purchases | Sales | |
U.S. Government securities | $34,310,243 | $38,413,369 |
Non-U.S. Government securities | 80,800,746 | 112,327,695 |
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Six months ended 6/30/20 | Year ended 12/31/19 | ||||
Shares | Amount | Shares | Amount | ||
Shares sold | |||||
Initial Class | 1,464,708 | $15,349,961 | 1,861,837 | $19,155,293 | |
Service Class | 1,072,061 | 11,258,924 | 1,130,805 | 11,633,874 | |
2,536,769 | $26,608,885 | 2,992,642 | $30,789,167 | ||
Shares issued to shareholders in reinvestment of distributions | |||||
Initial Class | — | $— | 910,960 | $9,355,557 | |
Service Class | — | — | 276,789 | 2,842,627 | |
— | $— | 1,187,749 | $12,198,184 | ||
Shares reacquired | |||||
Initial Class | (5,084,396) | $(52,214,110) | (5,185,694) | $(53,476,536) | |
Service Class | (2,069,329) | (21,117,777) | (1,724,145) | (17,792,446) | |
(7,153,725) | $(73,331,887) | (6,909,839) | $(71,268,982) | ||
Net change | |||||
Initial Class | (3,619,688) | $(36,864,149) | (2,412,897) | $(24,965,686) | |
Service Class | (997,268) | (9,858,853) | (316,551) | (3,315,945) | |
(4,616,956) | $(46,723,002) | (2,729,448) | $(28,281,631) |
Affiliated Issuers | Beginning Value | Purchases | Sales Proceeds | Realized Gain (Loss) | Change in Unrealized Appreciation or Depreciation | Ending Value |
MFS Institutional Money Market Portfolio | $5,138,857 | $119,594,372 | $98,051,484 | $3,403 | $9 | $26,685,157 |
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Affiliated Issuers | Dividend Income | Capital Gain Distributions |
MFS Institutional Money Market Portfolio | $36,446 | $— |
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Semiannual Report
June 30, 2020
MFS® Mid Cap Value Portfolio
MFS® Variable Insurance Trust III
Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, the insurance company that offers your contract may determine that it will no longer send you paper copies of the fund’s annual and semiannual shareholder reports unless you specifically request paper copies from the insurance company or from your financial intermediary. Instead, the shareholder reports will be made available on a Web site (insurancefunds.mfs.com or other Web site of which you will be notified), and the insurance company will notify you by mail each time a report is posted and provide you with a Web site link to access the report. Instructions for requesting paper copies will be provided by your insurance company or financial intermediary.
If you already elected to receive shareholder reports by email, you will not be affected by this change and you need not take any action. If your insurance company or financial intermediary offers electronic delivery, you may elect to receive shareholder reports and other communications from the insurance company or financial intermediary by email by following the instructions provided by the insurance company or financial intermediary.
Beginning on January 1, 2019, you may elect to receive all future reports in paper free of charge from the insurance company or financial intermediary. You can inform the insurance company or financial intermediary that you wish to continue receiving paper copies of your shareholder reports by contacting your insurance company or financial intermediary. Your election to receive reports in paper will apply to all funds held in your account with your insurance company or financial intermediary.
VMC-SEM
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MFS® Mid Cap Value Portfolio
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 Mid Cap Value Portfolio
LETTER FROM THE EXECUTIVE CHAIR
Dear Contract Owners:
Markets experienced dramatic swings in early 2020, as the coronavirus pandemic brought the global economy to a standstill for several months. Optimism over the development of vaccines and therapeutics, along with a decline in cases in countries that had been affected by the outbreak early on, brightened the economic and market outlook during the second quarter, as did the phased reopening of US states. However, a great deal of uncertainty remains, including the possibility of a second wave of cases later this year, as many countries continue to experience COVID-19 flare-ups.
Global central banks have taken aggressive steps to cushion the economic and market fallout related to the virus, and governments are deploying unprecedented levels of fiscal support. As uncertainty recedes, these measures can help build a supportive environment and encourage economic recovery; however, if markets disconnect from fundamentals, they can also sow the seeds of instability. In the aftermath of the crisis, societal changes may be likely, as households, businesses, and governments adjust to a new reality, and these alterations could affect the investment landscape. For investors, events, such as the COVID-19 outbreak, demonstrate the importance of having a deep understanding of company fundamentals, and we have built our global research platform to do just that.
Here at MFS®, we aim to help our clients navigate the growing complexity of the markets and world economies. Our long-term investment philosophy and commitment to the responsible allocation of capital allow us to tune out the noise and uncover what we believe are the best, most durable investment opportunities in the market. Through our unique global investment platform, we combine collective expertise, thoughtful risk management, and long-term discipline to create sustainable value for investors.
Respectfully,
Robert J. Manning
Executive Chair
MFS Investment Management
August 17, 2020
The opinions expressed in this letter are subject to change, may not be relied upon for investment advice, and no forecasts can be guaranteed.
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MFS Mid Cap Value Portfolio
Portfolio structure
Top ten holdings | ||||
NASDAQ, Inc. | 1.5% | |||
Stanley Black & Decker, Inc. | 1.2% | |||
L3Harris Technologies, Inc. | 1.2% | |||
Marvell Technology Group Ltd. | 1.2% | |||
Eversource Energy | 1.2% | |||
Kansas City Southern Co. | 1.2% | |||
Arthur J. Gallagher & Co. | 1.2% | |||
CMS Energy Corp. | 1.1% | |||
Eastman Chemical Co. | 1.1% | |||
Apollo Global Management, Inc. | 1.1% |
GICS equity sectors (g) | ||||
Financials | 19.5% | |||
Industrials | 14.5% | |||
Information Technology | 10.7% | |||
Utilities | 9.5% | |||
Consumer Discretionary | 8.1% | |||
Materials | 7.9% | |||
Consumer Staples | 7.7% | |||
Health Care | 7.6% | |||
Real Estate | 6.9% | |||
Energy | 4.3% | |||
Communication Services | 1.3% |
(g) | The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and S&P Global Market Intelligence Inc. (“S&P Global Market Intelligence”). GICS is a service mark of MSCI and S&P Global Market Intelligence and has been licensed for use by MFS. |
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 June 30, 2020.
The portfolio is actively managed and current holdings may be different.
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MFS Mid Cap Value Portfolio
Fund Expenses Borne by the Contract Holders during the Period,
January 1, 2020 through June 30, 2020
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, 2020 through June 30, 2020.
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 1/01/20 | Ending Account Value 6/30/20 | Expenses Paid During Period (p) 1/01/20-6/30/20 | ||||||||||||||
Initial Class | Actual | 0.81% | $1,000.00 | $827.23 | $3.68 | |||||||||||||
Hypothetical (h) | 0.81% | $1,000.00 | $1,020.84 | $4.07 | ||||||||||||||
Service Class | Actual | 1.06% | $1,000.00 | $826.59 | $4.81 | |||||||||||||
Hypothetical (h) | 1.06% | $1,000.00 | $1,019.59 | $5.32 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
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MFS Mid Cap Value Portfolio
PORTFOLIO OF INVESTMENTS – 6/30/20 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 98.0% | ||||||||
Aerospace – 2.6% |
| |||||||
Huntington Ingalls Industries, Inc. | 7,620 | $ | 1,329,614 | |||||
L3Harris Technologies, Inc. | 21,083 | 3,577,153 | ||||||
Leidos Holdings, Inc. | 31,884 | 2,986,574 | ||||||
|
| |||||||
$ | 7,893,341 | |||||||
|
| |||||||
Airlines – 0.6% |
| |||||||
Alaska Air Group, Inc. | 29,246 | $ | 1,060,460 | |||||
Delta Air Lines, Inc. | 27,550 | 772,777 | ||||||
|
| |||||||
$ | 1,833,237 | |||||||
|
| |||||||
Alcoholic Beverages – 0.2% |
| |||||||
Molson Coors Beverage Co. | 20,932 | $ | 719,224 | |||||
|
| |||||||
Apparel Manufacturers – 0.9% |
| |||||||
PVH Corp. | 19,842 | $ | 953,408 | |||||
Skechers USA, Inc., “A” (a) | 53,950 | 1,692,951 | ||||||
|
| |||||||
$ | 2,646,359 | |||||||
|
| |||||||
Automotive – 1.4% |
| |||||||
Lear Corp. | 17,164 | $ | 1,871,219 | |||||
LKQ Corp. (a) | 84,796 | 2,221,655 | ||||||
|
| |||||||
$ | 4,092,874 | |||||||
|
| |||||||
Brokerage & Asset Managers – 3.7% |
| |||||||
Apollo Global Management, Inc. | 64,016 | $ | 3,195,679 | |||||
E*TRADE Financial Corp. | 27,191 | 1,352,208 | ||||||
NASDAQ, Inc. | 36,426 | 4,351,814 | ||||||
Raymond James Financial, Inc. | 29,642 | 2,040,259 | ||||||
|
| |||||||
$ | 10,939,960 | |||||||
|
| |||||||
Business Services – 1.7% |
| |||||||
Amdocs Ltd. | 48,804 | $ | 2,971,187 | |||||
Global Payments, Inc. | 12,614 | 2,139,587 | ||||||
|
| |||||||
$ | 5,110,774 | |||||||
|
| |||||||
Cable TV – 0.6% |
| |||||||
Liberty Broadband Corp. (a) | 13,244 | $ | 1,641,726 | |||||
|
| |||||||
Chemicals – 3.1% |
| |||||||
Celanese Corp. | 18,720 | $ | 1,616,285 | |||||
Eastman Chemical Co. | 46,102 | 3,210,543 | ||||||
FMC Corp. | 29,422 | 2,931,020 | ||||||
PPG Industries, Inc. | 13,004 | 1,379,204 | ||||||
|
| |||||||
$ | 9,137,052 | |||||||
|
| |||||||
Computer Software – 0.4% |
| |||||||
Change Healthcare, Inc. (a) | 113,948 | $ | 1,276,218 | |||||
|
| |||||||
Computer Software – Systems – 1.4% |
| |||||||
Verint Systems, Inc. (a) | 31,690 | $ | 1,431,754 | |||||
Zebra Technologies Corp., “A” (a) | 11,197 | 2,865,872 | ||||||
|
| |||||||
$ | 4,297,626 | |||||||
|
| |||||||
Construction – 5.8% | ||||||||
Fortune Brands Home & Security, Inc. | 26,804 | $ | 1,713,580 | |||||
Masco Corp. | 57,774 | 2,900,833 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued |
| |||||||
Construction – continued |
| |||||||
Mid-America Apartment Communities, Inc., REIT | 24,755 | $ | 2,838,656 | |||||
Stanley Black & Decker, Inc. | 25,672 | 3,578,163 | ||||||
Toll Brothers, Inc. | 76,890 | 2,505,845 | ||||||
Vulcan Materials Co. | 15,361 | 1,779,572 | ||||||
Whirlpool Corp. | 16,459 | 2,131,934 | ||||||
|
| |||||||
$ | 17,448,583 | |||||||
|
| |||||||
Consumer Products – 1.8% |
| |||||||
Energizer Holdings, Inc. | 42,383 | $ | 2,012,769 | |||||
Newell Brands, Inc. | 96,075 | 1,525,671 | ||||||
Reynolds Consumer Products, Inc. | 55,433 | 1,925,742 | ||||||
|
| |||||||
$ | 5,464,182 | |||||||
|
| |||||||
Consumer Services – 0.5% |
| |||||||
Grand Canyon Education, Inc. (a) | 16,725 | $ | 1,514,114 | |||||
|
| |||||||
Containers – 2.8% |
| |||||||
Berry Global Group, Inc. (a) | 40,066 | $ | 1,775,725 | |||||
Graphic Packaging Holding Co. | 168,116 | 2,351,943 | ||||||
Owens Corning | 41,371 | 2,306,847 | ||||||
WestRock Co. | 63,539 | 1,795,612 | ||||||
|
| |||||||
$ | 8,230,127 | |||||||
|
| |||||||
Electrical Equipment – 2.0% |
| |||||||
HD Supply Holdings, Inc. (a) | 83,437 | $ | 2,891,092 | |||||
Sensata Technologies Holding PLC (a) | 41,008 | 1,526,728 | ||||||
TE Connectivity Ltd. | 20,290 | 1,654,649 | ||||||
|
| |||||||
$ | 6,072,469 | |||||||
|
| |||||||
Electronics – 4.2% |
| |||||||
Analog Devices, Inc. | 20,255 | $ | 2,484,073 | |||||
Corning, Inc. | 59,212 | 1,533,591 | ||||||
Marvell Technology Group Ltd. | 101,371 | 3,554,067 | ||||||
Maxim Integrated Products, Inc. | 42,742 | 2,590,593 | ||||||
NXP Semiconductors N.V. | 20,281 | 2,312,845 | ||||||
|
| |||||||
$ | 12,475,169 | |||||||
|
| |||||||
Energy – Independent – 3.0% |
| |||||||
Cabot Oil & Gas Corp. | 91,844 | $ | 1,577,880 | |||||
Diamondback Energy, Inc. | 10,704 | 447,641 | ||||||
Hess Corp. | 37,205 | 1,927,591 | ||||||
Pioneer Natural Resources Co. | 21,588 | 2,109,148 | ||||||
Valero Energy Corp. | 28,259 | 1,662,194 | ||||||
WPX Energy, Inc. (a) | 171,170 | 1,092,065 | ||||||
|
| |||||||
$ | 8,816,519 | |||||||
|
| |||||||
Engineering – Construction – 1.7% |
| |||||||
KBR, Inc. | 128,303 | $ | 2,893,233 | |||||
Quanta Services, Inc. | 52,013 | 2,040,470 | ||||||
|
| |||||||
$ | 4,933,703 | |||||||
|
| |||||||
Entertainment – 0.1% |
| |||||||
Six Flags Entertainment Corp. | 22,967 | $ | 441,196 | |||||
|
|
4
Table of Contents
MFS Mid Cap Value Portfolio
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued |
| |||||||
Food & Beverages – 4.2% |
| |||||||
Archer Daniels Midland Co. | 65,477 | $ | 2,612,532 | |||||
Coca-Cola European Partners PLC | 49,740 | 1,878,182 | ||||||
Ingredion, Inc. | 22,745 | 1,887,835 | ||||||
J.M. Smucker Co. | 19,690 | 2,083,399 | ||||||
Kellogg Co. | 32,204 | 2,127,396 | ||||||
Lamb Weston Holdings, Inc. | 8,651 | 553,059 | ||||||
Sanderson Farms, Inc. | 11,335 | 1,313,613 | ||||||
|
| |||||||
$ | 12,456,016 | |||||||
|
| |||||||
Food & Drug Stores – 1.4% |
| |||||||
Albertsons Cos., Inc., “A” (a) | 94,591 | $ | 1,491,700 | |||||
Kroger Co. | 81,912 | 2,772,721 | ||||||
|
| |||||||
$ | 4,264,421 | |||||||
|
| |||||||
Gaming & Lodging – 0.4% |
| |||||||
Wyndham Hotels & Resorts, Inc. | 29,292 | $ | 1,248,425 | |||||
|
| |||||||
General Merchandise – 0.5% |
| |||||||
Dollar Tree, Inc. (a) | 16,043 | $ | 1,486,865 | |||||
|
| |||||||
Insurance – 7.9% |
| |||||||
Arthur J. Gallagher & Co. | 35,637 | $ | 3,474,251 | |||||
Assurant, Inc. | 24,453 | 2,525,751 | ||||||
Athene Holding Ltd. (a) | 52,359 | 1,633,077 | ||||||
Cincinnati Financial Corp. | 34,770 | 2,226,323 | ||||||
Equitable Holdings, Inc. | 129,442 | 2,496,936 | ||||||
Everest Re Group Ltd. | 12,016 | 2,477,699 | ||||||
Hanover Insurance Group, Inc. | 11,557 | 1,171,071 | ||||||
Hartford Financial Services Group, Inc. | 74,914 | 2,887,935 | ||||||
Reinsurance Group of America, Inc. | 21,307 | 1,671,321 | ||||||
Willis Towers Watson PLC | 15,241 | 3,001,715 | ||||||
|
| |||||||
$ | 23,566,079 | |||||||
|
| |||||||
Leisure & Toys – 1.6% |
| |||||||
Brunswick Corp. | 37,931 | $ | 2,427,963 | |||||
Electronic Arts, Inc. (a) | 16,448 | 2,171,959 | ||||||
Mattel, Inc. (a) | 31,582 | 305,398 | ||||||
|
| |||||||
$ | 4,905,320 | |||||||
|
| |||||||
Machinery & Tools – 3.5% |
| |||||||
AGCO Corp. | 38,858 | $ | 2,155,065 | |||||
Eaton Corp. PLC | 35,408 | 3,097,492 | ||||||
Ingersoll Rand, Inc. (a) | 48,200 | 1,355,384 | ||||||
ITT, Inc. | 32,491 | 1,908,521 | ||||||
Regal Beloit Corp. | 21,642 | 1,889,779 | ||||||
|
| |||||||
$ | 10,406,241 | |||||||
|
| |||||||
Major Banks – 1.8% |
| |||||||
Comerica, Inc. | 36,106 | $ | 1,375,639 | |||||
KeyCorp | 163,170 | 1,987,411 | ||||||
State Street Corp. | 30,088 | 1,912,092 | ||||||
|
| |||||||
$ | 5,275,142 | |||||||
|
| |||||||
Medical & Health Technology & Services – 4.3% |
| |||||||
AmerisourceBergen Corp. | 19,228 | $ | 1,937,606 | |||||
Laboratory Corp. of America Holdings (a) | 12,386 | 2,057,439 | ||||||
PRA Health Sciences, Inc. (a) | 24,246 | 2,358,893 | ||||||
Premier, Inc., “A” (a) | 56,061 | 1,921,771 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued |
| |||||||
Medical & Health Technology & Services – continued |
| |||||||
Quest Diagnostics, Inc. | 21,620 | $ | 2,463,815 | |||||
Universal Health Services, Inc. | 21,989 | 2,042,558 | ||||||
|
| |||||||
$ | 12,782,082 | |||||||
|
| |||||||
Medical Equipment – 2.2% |
| |||||||
Boston Scientific Corp. (a) | 41,578 | $ | 1,459,804 | |||||
PerkinElmer, Inc. | 18,342 | 1,799,167 | ||||||
Zimmer Biomet Holdings, Inc. | 26,495 | 3,162,443 | ||||||
|
| |||||||
$ | 6,421,414 | |||||||
|
| |||||||
Natural Gas – Distribution – 1.8% |
| |||||||
Atmos Energy Corp. | 15,499 | $ | 1,543,390 | |||||
NiSource, Inc. | 67,831 | 1,542,477 | ||||||
Sempra Energy | 19,448 | 2,279,889 | ||||||
|
| |||||||
$ | 5,365,756 | |||||||
|
| |||||||
Natural Gas – Pipeline – 0.9% |
| |||||||
Equitrans Midstream Corp. | 61,070 | $ | 507,492 | |||||
Plains GP Holdings LP | 153,571 | 1,366,782 | ||||||
Targa Resources Corp. | 44,216 | 887,415 | ||||||
|
| |||||||
$ | 2,761,689 | |||||||
|
| |||||||
Network & Telecom – 0.8% |
| |||||||
Motorola Solutions, Inc. | 17,695 | $ | 2,479,600 | |||||
|
| |||||||
Oil Services – 0.7% |
| |||||||
Halliburton Co. | 70,431 | $ | 914,195 | |||||
NOW, Inc. (a) | 77,802 | 671,431 | ||||||
Patterson-UTI Energy, Inc. | 112,226 | 389,424 | ||||||
|
| |||||||
$ | 1,975,050 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 5.9% |
| |||||||
Discover Financial Services | 35,859 | $ | 1,796,177 | |||||
Element Fleet Management Corp. | 182,610 | 1,362,581 | ||||||
M&T Bank Corp. | 15,238 | 1,584,295 | ||||||
Northern Trust Corp. | 29,919 | 2,373,774 | ||||||
Prosperity Bancshares, Inc. | 24,380 | 1,447,684 | ||||||
Signature Bank | 22,656 | 2,422,380 | ||||||
SLM Corp. | 107,612 | 756,512 | ||||||
SVB Financial Group (a) | 8,812 | 1,899,250 | ||||||
Truist Financial Corp. | 69,049 | 2,592,790 | ||||||
Wintrust Financial Corp. | 30,244 | 1,319,243 | ||||||
|
| |||||||
$ | 17,554,686 | |||||||
|
| |||||||
Pharmaceuticals – 0.8% |
| |||||||
Elanco Animal Health, Inc. (a) | 66,506 | $ | 1,426,553 | |||||
Mylan N.V. (a) | 51,959 | 835,501 | ||||||
|
| |||||||
$ | 2,262,054 | |||||||
|
| |||||||
Pollution Control – 0.6% |
| |||||||
Republic Services, Inc. | 22,535 | $ | 1,848,997 | |||||
|
| |||||||
Railroad & Shipping – 1.2% |
| |||||||
Kansas City Southern Co. | 23,295 | $ | 3,477,711 | |||||
|
| |||||||
Real Estate – 6.2% |
| |||||||
Annaly Mortgage Management, Inc., REIT | 109,836 | $ | 720,524 | |||||
Brixmor Property Group, Inc., REIT | 121,475 | 1,557,309 | ||||||
EPR Properties, REIT | 27,450 | 909,419 |
5
Table of Contents
MFS Mid Cap Value Portfolio
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued |
| |||||||
Real Estate – continued |
| |||||||
Host Hotels & Resorts, Inc., REIT | 61,472 | $ | 663,283 | |||||
Life Storage, Inc., REIT | 32,854 | 3,119,487 | ||||||
Medical Properties Trust, Inc., REIT | 124,919 | 2,348,477 | ||||||
Spirit Realty Capital, Inc., REIT | 36,752 | 1,281,175 | ||||||
Sun Communities, Inc., REIT | 22,133 | 3,003,005 | ||||||
VICI Properties, Inc., REIT | 122,338 | 2,470,004 | ||||||
W.P. Carey, Inc., REIT | 37,724 | 2,552,029 | ||||||
|
| |||||||
$ | 18,624,712 | |||||||
|
| |||||||
Restaurants – 0.5% |
| |||||||
Wendy’s Co. | 72,310 | $ | 1,574,912 | |||||
|
| |||||||
Specialty Chemicals – 2.8% |
| |||||||
Axalta Coating Systems Ltd. (a) | 95,905 | $ | 2,162,658 | |||||
Corteva, Inc. | 78,998 | 2,116,356 | ||||||
DuPont de Nemours, Inc. | 45,719 | 2,429,051 | ||||||
Univar Solutions, Inc. (a) | 100,683 | 1,697,515 | ||||||
|
| |||||||
$ | 8,405,580 | |||||||
|
| |||||||
Specialty Stores – 1.3% |
| |||||||
BJ’s Wholesale Club Holdings, Inc. (a) | 43,585 | $ | 1,624,413 | |||||
Tractor Supply Co. | 11,391 | 1,501,220 | ||||||
Urban Outfitters, Inc. (a) | 47,999 | 730,545 | ||||||
|
| |||||||
$ | 3,856,178 | |||||||
|
| |||||||
Trucking – 0.5% |
| |||||||
Knight-Swift Transportation Holdings, Inc. | 36,618 | $ | 1,527,337 | |||||
|
| |||||||
Utilities – Electric Power – 7.7% |
| |||||||
AES Corp. | 152,078 | $ | 2,203,610 | |||||
CenterPoint Energy, Inc. | 86,217 | 1,609,671 | ||||||
CenterPoint Energy, Inc. (a)(n) | 52,704 | 983,984 | ||||||
CMS Energy Corp. | 56,626 | 3,308,091 | ||||||
Edison International | 21,801 | 1,184,012 | ||||||
Eversource Energy | 42,200 | 3,513,994 | ||||||
FirstEnergy Corp. | 51,877 | 2,011,790 | ||||||
PG&E Corp. (a) | 216,965 | 1,924,480 | ||||||
Pinnacle West Capital Corp. | 42,824 | 3,138,571 | ||||||
Public Service Enterprise Group, Inc. | 63,823 | 3,137,539 | ||||||
|
| |||||||
$ | 23,015,742 | |||||||
|
| |||||||
Total Common Stocks (Identified Cost, $249,978,036) |
| $ | 292,526,462 | |||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
INVESTMENT COMPANIES (h) – 2.7% |
| |||||||
Money Market Funds – 2.7% | ||||||||
MFS Institutional Money Market Portfolio, 0.17% (v) (Identified Cost, $7,997,750) | 7,996,950 | $ | 7,997,750 | |||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – (0.7)% | (2,098,838 | ) | ||||||
|
| |||||||
NET ASSETS – 100.0% | $ | 298,425,374 | ||||||
|
|
(a) | Non-income producing security. |
(h) | An affiliated issuer, which 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. At period end, the aggregate values of the fund’s investments in affiliated issuers and in unaffiliated issuers were $7,997,750 and $292,526,462, respectively. |
(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 $983,984, representing 0.3% of net assets. |
(v) | Affiliated issuer 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:
REIT | Real Estate Investment Trust |
See Notes to Financial Statements
6
Table of Contents
MFS Mid Cap Value Portfolio
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 6/30/20 | ||||
Assets | ||||
Investments in unaffiliated issuers, at value (identified cost, $249,978,036) | $292,526,462 | |||
Investments in affiliated issuers, at value (identified cost, $7,997,750) | 7,997,750 | |||
Cash | 25,215 | |||
Receivables for | ||||
Fund shares sold | 128,175 | |||
Interest and dividends | 498,030 | |||
Other assets | 1,262 | |||
Total assets | $301,176,894 | |||
Liabilities | ||||
Payables for | ||||
Investments purchased | $1,972,890 | |||
Fund shares reacquired | 701,338 | |||
Payable to affiliates | ||||
Investment adviser | 11,783 | |||
Administrative services fee | 280 | |||
Shareholder servicing costs | 88 | |||
Distribution and/or service fees | 875 | |||
Accrued expenses and other liabilities | 64,266 | |||
Total liabilities | $2,751,520 | |||
Net assets | $298,425,374 | |||
Net assets consist of | ||||
Paid-in capital | $241,309,092 | |||
Total distributable earnings (loss) | 57,116,282 | |||
Net assets | $298,425,374 | |||
Shares of beneficial interest outstanding | 41,390,891 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $232,791,247 | 32,206,551 | $7.23 | |||||||||
Service Class | 65,634,127 | 9,184,340 | 7.15 |
See Notes to Financial Statements
7
Table of Contents
MFS Mid Cap Value Portfolio
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 6/30/20 | ||||
Net investment income (loss) | ||||
Income | ||||
Dividends | $3,425,659 | |||
Dividends from affiliated issuers | 19,532 | |||
Other | 13,553 | |||
Income on securities loaned | 11,703 | |||
Foreign taxes withheld | (3,916 | ) | ||
Total investment income | $3,466,531 | |||
Expenses | ||||
Management fee | $1,115,472 | |||
Distribution and/or service fees | 80,877 | |||
Shareholder servicing costs | 7,144 | |||
Administrative services fee | 25,584 | |||
Independent Trustees’ compensation | 4,459 | |||
Custodian fee | 8,212 | |||
Shareholder communications | 8,687 | |||
Audit and tax fees | 28,463 | |||
Legal fees | 1,602 | |||
Miscellaneous | 14,420 | |||
Total expenses | $1,294,920 | |||
Reduction of expenses by investment adviser | (16,048 | ) | ||
Net expenses | $1,278,872 | |||
Net investment income (loss) | $2,187,659 | |||
Realized and unrealized gain (loss) | ||||
Realized gain (loss) (identified cost basis) | ||||
Unaffiliated issuers | $(3,027,912 | ) | ||
Affiliated issuers | 352 | |||
Foreign currency | (752 | ) | ||
Net realized gain (loss) | $(3,028,312 | ) | ||
Change in unrealized appreciation or depreciation | ||||
Unaffiliated issuers | $(50,094,351 | ) | ||
Translation of assets and liabilities in foreign currencies | 28 | |||
Net unrealized gain (loss) | $(50,094,323 | ) | ||
Net realized and unrealized gain (loss) | $(53,122,635 | ) | ||
Change in net assets from operations | $(50,934,976 | ) |
See Notes to Financial Statements
8
Table of Contents
MFS Mid Cap Value Portfolio
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 6/30/20 | Year ended 12/31/19 | |||||||
(unaudited) | ||||||||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income (loss) | $2,187,659 | $3,791,934 | ||||||
Net realized gain (loss) | (3,028,312 | ) | 13,250,692 | |||||
Net unrealized gain (loss) | (50,094,323 | ) | 64,174,385 | |||||
Change in net assets from operations | $(50,934,976 | ) | $81,217,011 | |||||
Total distributions to shareholders | $— | $(28,645,592 | ) | |||||
Change in net assets from fund share transactions | $13,511,152 | $17,222,164 | ||||||
Total change in net assets | $(37,423,824 | ) | $69,793,583 | |||||
Net assets | ||||||||
At beginning of period | 335,849,198 | 266,055,615 | ||||||
At end of period | $298,425,374 | $335,849,198 |
See Notes to Financial Statements
9
Table of Contents
MFS Mid Cap Value Portfolio
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 that 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 6/30/20 | Year ended | ||||||||||||||||||||||
12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $8.74 | $7.42 | $9.01 | $8.29 | $7.84 | $9.80 | ||||||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||||||
Net investment income (loss) (d) | $0.06 | $0.11 | $0.10 | $0.07 | $0.10 | (c) | $0.08 | |||||||||||||||||
Net realized and unrealized gain (loss) | (1.57 | ) | 2.09 | (1.03 | ) | 1.03 | 1.12 | (0.37 | ) | |||||||||||||||
Total from investment operations | $(1.51 | ) | $2.20 | $(0.93 | ) | $1.10 | $1.22 | $(0.29 | ) | |||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||||||
From net investment income | $— | $(0.12 | ) | $(0.08 | ) | $(0.11 | ) | $(0.07 | ) | $(0.10 | ) | |||||||||||||
From net realized gain | — | (0.76 | ) | (0.58 | ) | (0.27 | ) | (0.70 | ) | (1.57 | ) | |||||||||||||
Total distributions declared to shareholders | $— | $(0.88 | ) | $(0.66 | ) | $(0.38 | ) | $(0.77 | ) | $(1.67 | ) | |||||||||||||
Net asset value, end of period (x) | $7.23 | $8.74 | $7.42 | $9.01 | $8.29 | $7.84 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | (17.28 | )(n) | 31.12 | (11.45 | ) | 13.67 | 15.98 | (c) | (2.33 | ) | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||||||
Expenses before expense reductions (f) | 0.82 | (a) | 0.81 | 0.81 | 0.81 | 0.77 | (c) | 0.82 | ||||||||||||||||
Expenses after expense reductions (f) | 0.81 | (a) | 0.80 | 0.80 | 0.81 | 0.76 | (c) | 0.81 | ||||||||||||||||
Net investment income (loss) | 1.53 | (a) | 1.31 | 1.13 | 0.82 | 1.31 | (c) | 0.82 | ||||||||||||||||
Portfolio turnover | 20 | (n) | 30 | 32 | 36 | 32 | 51 | |||||||||||||||||
Net assets at end of period (000 omitted) | $232,791 | $261,832 | $210,218 | $268,291 | $271,001 | $274,753 | ||||||||||||||||||
Service Class | Six months 6/30/20 | Year ended | ||||||||||||||||||||||
12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $8.65 | $7.35 | $8.93 | $8.22 | $7.78 | $9.74 | ||||||||||||||||||
Income (loss) from investment operations |
| |||||||||||||||||||||||
Net investment income (loss) (d) | $0.05 | $0.09 | $0.08 | $0.05 | $0.08 | (c) | $0.06 | |||||||||||||||||
Net realized and unrealized gain (loss) | (1.55 | ) | 2.06 | (1.02 | ) | 1.02 | 1.12 | (0.38 | ) | |||||||||||||||
Total from investment operations | $(1.50 | ) | $2.15 | $(0.94 | ) | $1.07 | $1.20 | $(0.32 | ) | |||||||||||||||
Less distributions declared to shareholders |
| |||||||||||||||||||||||
From net investment income | $— | $(0.09 | ) | $(0.06 | ) | $(0.09 | ) | $(0.06 | ) | $(0.07 | ) | |||||||||||||
From net realized gain | — | (0.76 | ) | (0.58 | ) | (0.27 | ) | (0.70 | ) | (1.57 | ) | |||||||||||||
Total distributions declared to shareholders | $— | $(0.85 | ) | $(0.64 | ) | $(0.36 | ) | $(0.76 | ) | $(1.64 | ) | |||||||||||||
Net asset value, end of period (x) | $7.15 | $8.65 | $7.35 | $8.93 | $8.22 | $7.78 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | (17.34 | )(n) | 30.71 | (11.61 | ) | 13.41 | 15.76 | (c) | (2.66 | ) | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: |
| |||||||||||||||||||||||
Expenses before expense reductions (f) | 1.07 | (a) | 1.06 | 1.06 | 1.06 | 1.02 | (c) | 1.07 | ||||||||||||||||
Expenses after expense reductions (f) | 1.06 | (a) | 1.05 | 1.05 | 1.05 | 1.01 | (c) | 1.06 | ||||||||||||||||
Net investment income (loss) | 1.28 | (a) | 1.06 | 0.86 | 0.59 | 1.06 | (c) | 0.62 | ||||||||||||||||
Portfolio turnover | 20 | (n) | 30 | 32 | 36 | 32 | 51 | |||||||||||||||||
Net assets at end of period (000 omitted) | $65,634 | $74,018 | $55,837 | $85,643 | $59,545 | $55,100 |
See Notes to Financial Statements
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Financial Highlights – continued
(a) | Annualized. |
(c) | Amount reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher. |
(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 Mid Cap Value Portfolio (the fund) is a diversified series of MFS Variable Insurance Trust III (the trust). The trust is organized as a Delaware statutory 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.
In March 2020, the FASB issued Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional, temporary relief with respect to the financial reporting of contracts subject to certain types of modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other IBOR-based reference rates as of the end of 2021. The temporary relief provided by ASU 2020-04 is effective for certain reference rate-related contract modifications that occur during the period from March 12, 2020 through December 31, 2022. Management is evaluating the impact of ASU 2020-04 on the fund’s investments, derivatives, debt and other contracts that will undergo reference rate-related modifications as a result of the reference rate reform.
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, or similar 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. In determining values, 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 halt 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 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
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Notes to Financial Statements (unaudited) – continued
issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. The following is a summary of the levels used as of June 30, 2020 in valuing the fund’s assets or liabilities:
Financial Instruments | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities: | ||||||||||||||||
United States | $285,988,870 | $983,984 | $— | $286,972,854 | ||||||||||||
Netherlands | 2,312,845 | — | — | 2,312,845 | ||||||||||||
United Kingdom | 1,878,182 | — | — | 1,878,182 | ||||||||||||
Canada | 1,362,581 | — | — | 1,362,581 | ||||||||||||
Mutual Funds | 7,997,750 | — | — | 7,997,750 | ||||||||||||
Total | $299,540,228 | $983,984 | $— | $300,524,212 |
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, 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. The lending agent provides the fund with indemnification against Borrower default. In the event of Borrower default, the lending agent 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, the lending agent assumes the fund’s rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, the lending agent 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 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. At June 30, 2020, 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.
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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.
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.
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.
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:
Year ended | ||||
12/31/19 | ||||
Ordinary income (including any short-term capital gains) | $5,670,312 | |||
Long-term capital gains | 22,975,280 | |||
Total distributions | $28,645,592 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/20 | ||||
Cost of investments | $260,315,838 | |||
Gross appreciation | 59,395,989 | |||
Gross depreciation | (19,187,615 | ) | ||
Net unrealized appreciation (depreciation) | $40,208,374 | |||
As of 12/31/19 | ||||
Undistributed ordinary income | 6,024,139 | |||
Undistributed long-term capital gain | 11,044,012 | |||
Other temporary differences | (85 | ) | ||
Net unrealized appreciation (depreciation) | 90,983,192 |
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:
Six months ended 6/30/20 | Year ended 12/31/19 | |||||||
Initial Class | $— | $22,502,110 | ||||||
Service Class | — | 6,143,482 | ||||||
Total | $— | $28,645,592 |
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Notes to Financial Statements (unaudited) – continued
(3) | Transactions with Affiliates |
Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates based on the fund’s average daily net assets:
Up to $1 billion | 0.75% | |||
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, 2020, this management fee reduction amounted to $16,048, 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, 2020 was equivalent to an annual effective rate of 0.74% of the fund’s average daily net assets.
Effective August 1, 2020, 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 0.92% of average daily net assets for the Initial Class shares and 1.17% 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, 2023.
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, 2020, the fee was $6,674, 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, 2020, these costs amounted to $470.
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, 2020 was equivalent to an annual effective rate of 0.0172% of the fund’s average daily net assets.
Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration from MFS for their services to the fund. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – 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. This money market fund does not pay a management fee to MFS but does incur investment and operating costs.
The fund is permitted to engage in purchase and sale transactions with funds and accounts for which MFS serves as investment adviser or sub-adviser (“cross-trades”) 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. During the six months ended June 30, 2020, the fund engaged in sale transactions pursuant to this policy, which amounted to $451,560. The sales transactions resulted in net realized gains (losses) of $65,247.
The adviser has voluntarily undertaken to reimburse the fund from its own resources on a quarterly basis for the cost of investment research embedded in the cost of the fund’s securities trades. This agreement may be rescinded at any time. For the six months ended June 30, 2020, this reimbursement amounted to $13,553, which is included in “Other” income in the Statement of Operations.
(4) | Portfolio Securities |
For the six months ended June 30, 2020, purchases and sales of investments, other than short-term obligations, aggregated $71,084,936 and $59,772,939, respectively.
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Notes to Financial Statements (unaudited) – continued
(5) | Shares of Beneficial Interest |
The fund’s Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
Six months ended 6/30/20 | Year ended 12/31/19 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 5,954,712 | $37,234,817 | 5,000,384 | $40,867,519 | ||||||||||||
Service Class | 1,550,990 | 9,759,263 | 1,262,425 | 10,332,654 | ||||||||||||
7,505,702 | $46,994,080 | 6,262,809 | $51,200,173 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 2,918,562 | $22,502,110 | ||||||||||||
Service Class | — | — | 804,121 | 6,143,482 | ||||||||||||
— | $— | 3,722,683 | $28,645,592 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (3,710,115 | ) | $(26,788,438 | ) | (6,280,151 | ) | $(53,313,116 | ) | ||||||||
Service Class | (923,911 | ) | (6,694,490 | ) | (1,108,297 | ) | (9,310,485 | ) | ||||||||
(4,634,026 | ) | $(33,482,928 | ) | (7,388,448 | ) | $(62,623,601 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | 2,244,597 | $10,446,379 | 1,638,795 | $10,056,513 | ||||||||||||
Service Class | 627,079 | 3,064,773 | 958,249 | 7,165,651 | ||||||||||||
2,871,676 | $13,511,152 | 2,597,044 | $17,222,164 |
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 31%, 10%, and 6%, 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 syndicate 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 highest of one month LIBOR, the Federal Funds Effective Rate and the Overnight Bank Funding Rate, 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. 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 rates equal to customary reference rates plus an agreed upon spread. For the six months ended June 30, 2020, the fund’s commitment fee and interest expense were $807 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.
(7) | Investments in 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 following were affiliated issuers:
Affiliated Issuers | Beginning Value | Purchases | Sales Proceeds | Realized Gain (Loss) | Change in Unrealized Appreciation or Depreciation | Ending Value | ||||||||||||||||||
MFS Institutional Money Market Portfolio | $1,410,369 | $62,062,573 | $55,475,544 | $352 | $— | $7,997,750 | ||||||||||||||||||
Affiliated Issuers | Dividend Income | Capital Gain Distributions | ||||||||||||||||||||||
MFS Institutional Money Market Portfolio |
| $19,532 | $— |
(8) | Impacts of COVID-19 |
The pandemic related to the global spread of novel coronavirus disease (COVID-19), which was first detected in December 2019, has resulted in significant disruptions to global business activity and the global economy, as well as the economies of individual countries, the financial performance of individual companies and sectors, and the securities and commodities markets in general. This pandemic, the full effects of which are still unknown, has resulted in substantial market volatility and may have adversely impacted the prices and liquidity of the fund’s investments and the fund’s performance.
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STATEMENT REGARDING LIQUIDITY RISK MANAGEMENT PROGRAM
The fund has adopted and implemented a liquidity risk management program (the “Program”) as required by Rule 22e-4 under the Investment Company Act of 1940, as amended. The fund’s Board of Trustees (the “Board”) has designated MFS as the administrator of the Program. The Program is reasonably designed to assess and manage the liquidity risk of the fund. Liquidity risk is the risk that the fund could not meet requests to redeem shares issued by the fund without significant dilution of remaining investors’ interests.
MFS provided a written report to the Board for consideration at its April 2020 meeting that addressed the operation of the Program and provided an assessment of the adequacy and effectiveness of the Program during the period from the adoption of the Program on December 1, 2018 to December 31, 2019 (the “Covered Period”). The report concluded that during the Covered Period the Program had operated effectively and had adequately and effectively been implemented to assess and manage the fund’s liquidity risk. MFS also reported that there were no liquidity events that impacted the fund or its ability to timely meet redemptions without dilution to existing shareholders during the Covered Period.
There can be no assurance that the Program will achieve its objectives in the future. Further information on liquidity risk, and other principal risks to which an investment in the fund may be subject, can be found in the prospectus.
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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/proxyvoting, 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/proxyvoting, or by visiting the SEC’s Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at http://www.sec.gov. A shareholder can obtain the portfolio holdings report for the first and third quarters of the fund’s fiscal year at mfs.com/vit3 by choosing the fund’s name and then selecting the “Resources” tab and clicking on “Prospectus and Reports”.
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 at https://www.mfs.com/announcements or at mfs.com/vit3 by choosing the fund’s name and then selecting the “Resources” tab and clicking on the “Announcements” tab, if any.
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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Table of Contents
Semiannual Report
June 30, 2020
MFS® Moderate Allocation Portfolio
MFS® Variable Insurance Trust III
Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, the insurance company that offers your contract may determine that it will no longer send you paper copies of the fund’s annual and semiannual shareholder reports unless you specifically request paper copies from the insurance company or from your financial intermediary. Instead, the shareholder reports will be made available on a Web site (insurancefunds.mfs.com or other Web site of which you will be notified), and the insurance company will notify you by mail each time a report is posted and provide you with a Web site link to access the report. Instructions for requesting paper copies will be provided by your insurance company or financial intermediary.
If you already elected to receive shareholder reports by email, you will not be affected by this change and you need not take any action. If your insurance company or financial intermediary offers electronic delivery, you may elect to receive shareholder reports and other communications from the insurance company or financial intermediary by email by following the instructions provided by the insurance company or financial intermediary.
Beginning on January 1, 2019, you may elect to receive all future reports in paper free of charge from the insurance company or financial intermediary. You can inform the insurance company or financial intermediary that you wish to continue receiving paper copies of your shareholder reports by contacting your insurance company or financial intermediary. Your election to receive reports in paper will apply to all funds held in your account with your insurance company or financial intermediary.
VMA-SEM
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MFS® Moderate Allocation Portfolio
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 Moderate Allocation Portfolio
LETTER FROM THE EXECUTIVE CHAIR
Dear Contract Owners:
Markets experienced dramatic swings in early 2020, as the coronavirus pandemic brought the global economy to a standstill for several months. Optimism over the development of vaccines and therapeutics, along with a decline in cases in countries that had been affected by the outbreak early on, brightened the economic and market outlook during the second quarter, as did the phased reopening of US states. However, a great deal of uncertainty remains, including the possibility of a second wave of cases later this year, as many countries continue to experience COVID-19 flare-ups.
Global central banks have taken aggressive steps to cushion the economic and market fallout related to the virus, and governments are deploying unprecedented levels of fiscal support. As uncertainty recedes, these measures can help build a supportive environment and encourage economic recovery; however, if markets disconnect from fundamentals, they can also sow the seeds of instability. In the aftermath of the crisis, societal changes may be likely, as households, businesses, and governments adjust to a new reality, and these alterations could affect the investment landscape. For investors, events, such as the COVID-19 outbreak, demonstrate the importance of having a deep understanding of company fundamentals, and we have built our global research platform to do just that.
Here at MFS®, we aim to help our clients navigate the growing complexity of the markets and world economies. Our long-term investment philosophy and commitment to the responsible allocation of capital allow us to tune out the noise and uncover what we believe are the best, most durable investment opportunities in the market. Through our unique global investment platform, we combine collective expertise, thoughtful risk management, and long-term discipline to create sustainable value for investors.
Respectfully,
Robert J. Manning
Executive Chair
MFS Investment Management
August 17, 2020
The opinions expressed in this letter are subject to change, may not be relied upon for investment advice, and no forecasts can be guaranteed.
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Portfolio target allocation
Portfolio holdings | ||||
MFS Total Return Bond Series | 11.9% | |||
MFS Government Securities Portfolio | 9.9% | |||
MFS Value Series | 9.1% | |||
MFS Growth Series | 9.0% | |||
MFS Research Series | 8.0% | |||
MFS Mid Cap Growth Series | 7.1% | |||
MFS Mid Cap Value Portfolio | 7.1% | |||
MFS Research International Portfolio | 6.9% | |||
MFS Inflation-Adjusted Bond Portfolio | 5.0% | |||
MFS Global Governments Portfolio | 5.0% | |||
MFS High Yield Portfolio | 4.9% | |||
MFS Limited Maturity Portfolio | 4.0% | |||
MFS Global Real Estate Portfolio | 3.0% | |||
MFS International Intrinsic Value Portfolio | 3.0% | |||
MFS International Growth Portfolio | 3.0% | |||
MFS New Discovery Value Portfolio | 1.5% | |||
MFS New Discovery Series | 1.5% | |||
Cash & Cash Equivalents | 0.1% |
Portfolio actual allocation
Cash & Cash Equivalents includes any cash, investments in money market funds, short-term securities, and other assets less liabilities. MFS endeavors to fully invest all MFS funds-of-funds in underlying funds on a daily basis. Any divergence from 0.0% in Cash & Cash Equivalents is typically due to the timing of fund subscriptions/redemptions and the settlement of subsequent investment in/divestment from the underlying funds. While the MFS funds-of-funds’ subscriptions/redemptions are processed at the same day NAV of the underlying funds, a positive/negative cash balance will be reflected on the MFS funds-of-funds’ Statements of Assets and Liabilities until the trades with the underlying funds settle, which is typically two business days. Please see the fund’s 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 June 30, 2020.
The portfolio is actively managed and current holdings may be different.
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Fund Expenses Borne by the Contract Holders during the Period,
January 1, 2020 through June 30, 2020
As a contract holder of the fund, you incur ongoing costs, including distribution and/or service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds.
In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying funds in which the fund invests. Because the underlying funds have varied expenses and fee levels and the fund may own different proportions of the underlying funds at different times, the amount of fees and expenses incurred indirectly by the fund will vary. If these indirect costs were included, your costs would have been higher.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2020 through June 30, 2020.
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 1/01/20 | Ending Account Value 6/30/20 | Expenses Paid During Period (p) 1/01/20-6/30/20 | ||||||||||||||
Initial Class | Actual | 0.02% | $1,000.00 | $996.22 | $0.10 | |||||||||||||
Hypothetical (h) | 0.02% | $1,000.00 | $1,024.76 | $0.10 | ||||||||||||||
Service Class | Actual | 0.27% | $1,000.00 | $995.46 | $1.34 | |||||||||||||
Hypothetical (h) | 0.27% | $1,000.00 | $1,023.52 | $1.36 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying funds in which the fund invests. If these indirect costs were included, your costs would have been higher. |
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PORTFOLIO OF INVESTMENTS – 6/30/20 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
INVESTMENT COMPANIES (h) – 100.0% |
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Bond Funds – 40.7% |
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MFS Global Governments Portfolio – Initial Class | 5,836,637 | $ | 65,778,900 | |||||
MFS Government Securities Portfolio – Initial Class | 9,983,928 | 131,688,014 | ||||||
MFS High Yield Portfolio – Initial Class | 11,847,301 | 65,278,626 | ||||||
MFS Inflation-Adjusted Bond Portfolio – Initial Class | 5,818,603 | 65,866,583 | ||||||
MFS Limited Maturity Portfolio – Initial Class | 4,997,329 | 52,671,845 | ||||||
MFS Total Return Bond Series – Initial Class | 11,255,070 | 158,021,187 | ||||||
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$ | 539,305,155 | |||||||
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International Stock Funds – 12.9% |
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MFS International Growth Portfolio – Initial Class | 2,912,646 | $ | 39,582,853 | |||||
MFS International Intrinsic Value Portfolio – Initial Class | 1,318,795 | 39,788,060 | ||||||
MFS Research International Portfolio – Initial Class | 5,817,818 | 92,212,420 | ||||||
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$ | 171,583,333 | |||||||
|
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Specialty Funds – 3.0% |
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MFS Global Real Estate Portfolio – Initial Class | 2,882,017 | $ | 39,887,121 | |||||
|
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U.S. Stock Funds – 43.3% |
| |||||||
MFS Growth Series – Initial Class | 1,833,444 | $ | 119,815,580 | |||||
MFS Mid Cap Growth Series – Initial Class | 8,896,890 | 94,040,127 | ||||||
MFS Mid Cap Value Portfolio – Initial Class | 12,980,874 | 93,851,718 |
Issuer | Shares/Par | Value ($) | ||||||
INVESTMENT COMPANIES (h) – continued |
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U.S. Stock Funds – continued |
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MFS New Discovery Series – Initial Class | 943,638 | $ | 20,127,785 | |||||
MFS New Discovery Value Portfolio – Initial Class | 2,705,415 | 20,182,394 | ||||||
MFS Research Series – Initial Class | 3,707,596 | 106,482,166 | ||||||
MFS Value Series – Initial Class | 6,606,113 | 120,033,080 | ||||||
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$ | 574,532,850 | |||||||
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Money Market Funds – 0.1% |
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MFS Institutional Money Market Portfolio, 0.17% (v) | 1,550,666 | $ | 1,550,821 | |||||
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Total Investment Companies (Identified Cost, $1,097,788,943) | $ | 1,326,859,280 | ||||||
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OTHER ASSETS, LESS LIABILITIES – (0.0)% | (97,488 | ) | ||||||
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NET ASSETS – 100.0% | $ | 1,326,761,792 | ||||||
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(h) | An affiliated issuer, which 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. At period end, the aggregate value of the fund’s investments in affiliated issuers was $1,326,859,280. |
(v) | Affiliated issuer 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. |
See Notes to Financial Statements
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FINANCIAL STATEMENTS | STATEMENT OF ASSETS AND LIABILITIES (unaudited)
This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
At 6/30/20 | ||||
Assets | ||||
Investments in affiliated issuers, at value (identified cost, $1,097,788,943) | $1,326,859,280 | |||
Receivables for | ||||
Investments sold | 700,104 | |||
Fund shares sold | 1,639 | |||
Other assets | 4,046 | |||
Total assets | $1,327,565,069 | |||
Liabilities | ||||
Payables for | ||||
Investments purchased | $5,925 | |||
Fund shares reacquired | 700,104 | |||
Payable to affiliates | ||||
Administrative services fee | 96 | |||
Shareholder servicing costs | 120 | |||
Distribution and/or service fees | 17,861 | |||
Accrued expenses and other liabilities | 79,171 | |||
Total liabilities | $803,277 | |||
Net assets | $1,326,761,792 | |||
Net assets consist of | ||||
Paid-in capital | $977,585,697 | |||
Total distributable earnings (loss) | 349,176,095 | |||
Net assets | $1,326,761,792 | |||
Shares of beneficial interest outstanding | 100,845,816 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $6,309,416 | 478,704 | $13.18 | |||||||||
Service Class | 1,320,452,376 | 100,367,112 | 13.16 |
See Notes to Financial Statements
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FINANCIAL STATEMENTS | STATEMENT OF OPERATIONS (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
Six months ended 6/30/20 | ||||
Net investment income (loss) | ||||
Income | ||||
Dividends from affiliated issuers | $7,582 | |||
Expenses | ||||
Distribution and/or service fees | $1,639,173 | |||
Shareholder servicing costs | 9,032 | |||
Administrative services fee | 8,701 | |||
Independent Trustees’ compensation | 11,872 | |||
Custodian fee | 11,615 | |||
Shareholder communications | 13,477 | |||
Audit and tax fees | 20,213 | |||
Legal fees | 7,793 | |||
Miscellaneous | 18,887 | |||
Total expenses | $1,740,763 | |||
Net investment income (loss) | $(1,733,181 | ) | ||
Realized and unrealized gain (loss) | ||||
Realized gain (loss) (identified cost basis) | ||||
Investments in affiliated issuers | $15,163,829 | |||
Change in unrealized appreciation or depreciation | ||||
Affiliated issuers | $(22,780,522 | ) | ||
Net realized and unrealized gain (loss) | $(7,616,693 | ) | ||
Change in net assets from operations | $(9,349,874 | ) |
See Notes to Financial Statements
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FINANCIAL STATEMENTS | STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
Six months ended 6/30/20 | Year ended 12/31/19 | |||||||
(unaudited) | ||||||||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income (loss) | $(1,733,181 | ) | $28,284,114 | |||||
Net realized gain (loss) | 15,163,829 | 83,496,068 | ||||||
Net unrealized gain (loss) | (22,780,522 | ) | 170,337,950 | |||||
Change in net assets from operations | $(9,349,874 | ) | $282,118,132 | |||||
Total distributions to shareholders | $— | $(129,684,645 | ) | |||||
Change in net assets from fund share transactions | $(85,325,201 | ) | $(101,203,589 | ) | ||||
Total change in net assets | $(94,675,075 | ) | $51,229,898 | |||||
Net assets | ||||||||
At beginning of period | 1,421,436,867 | 1,370,206,969 | ||||||
At end of period | $1,326,761,792 | $1,421,436,867 |
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 that 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 | Year ended | ||||||||||||||||||||||
12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $13.23 | $11.95 | $13.33 | $12.25 | $12.48 | $13.34 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (loss) (d)(l) | $(0.00 | )(w) | $0.30 | $0.30 | $0.26 | $0.24 | (c) | $0.29 | ||||||||||||||||
Net realized and unrealized gain (loss) | (0.05 | ) | 2.28 | (0.74 | ) | 1.60 | 0.55 | (0.27 | ) | |||||||||||||||
Total from investment operations | $(0.05 | ) | $2.58 | $(0.44 | ) | $1.86 | $0.79 | $0.02 | ||||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.35 | ) | $(0.29 | ) | $(0.28 | ) | $(0.37 | ) | $(0.55 | ) | |||||||||||||
From net realized gain | — | (0.95 | ) | (0.65 | ) | (0.50 | ) | (0.65 | ) | (0.33 | ) | |||||||||||||
Total distributions declared to shareholders | $— | $(1.30 | ) | $(0.94 | ) | $(0.78 | ) | $(1.02 | ) | $(0.88 | ) | |||||||||||||
Net asset value, end of period (x) | $13.18 | $13.23 | $11.95 | $13.33 | $12.25 | $12.48 | ||||||||||||||||||
Total return (%) (k)(s)(x) | (0.38 | )(n) | 22.23 | (3.85 | ) | 15.52 | 6.16 | (c) | 0.35 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.02 | (a) | 0.01 | 0.01 | 0.01 | 0.02 | (c) | 0.01 | ||||||||||||||||
Expenses after expense reductions (f)(h) | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||
Net investment income (loss) (l) | (0.01 | )(a) | 2.28 | 2.29 | 1.98 | 1.95 | (c) | 2.16 | ||||||||||||||||
Portfolio turnover | 7 | (n) | 1 | 1 | 0 | (b) | 0 | (b) | 1 | |||||||||||||||
Net assets at end of period (000 omitted) | $6,309 | $6,448 | $5,333 | $6,053 | $5,460 | $5,509 | ||||||||||||||||||
Service Class | Six months ended 6/30/20 | Year ended | ||||||||||||||||||||||
12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $13.22 | $11.94 | $13.32 | $12.24 | $12.47 | $13.32 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (loss) (d)(l) | $(0.02 | ) | $0.26 | $0.27 | $0.22 | $0.21 | (c) | $0.22 | ||||||||||||||||
Net realized and unrealized gain (loss) | (0.04 | ) | 2.28 | (0.75 | ) | 1.60 | 0.54 | (0.23 | ) | |||||||||||||||
Total from investment operations | $(0.06 | ) | $2.54 | $(0.48 | ) | $1.82 | $0.75 | $(0.01 | ) | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.31 | ) | $(0.25 | ) | $(0.24 | ) | $(0.33 | ) | $(0.51 | ) | |||||||||||||
From net realized gain | — | (0.95 | ) | (0.65 | ) | (0.50 | ) | (0.65 | ) | (0.33 | ) | |||||||||||||
Total distributions declared to shareholders | $— | $(1.26 | ) | $(0.90 | ) | $(0.74 | ) | $(0.98 | ) | $(0.84 | ) | |||||||||||||
Net asset value, end of period (x) | $13.16 | $13.22 | $11.94 | $13.32 | $12.24 | $12.47 | ||||||||||||||||||
Total return (%) (k)(s)(x) | (0.45 | )(n) | 21.90 | (4.13 | ) | 15.23 | 5.87 | (c) | 0.13 | |||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f)(h) | 0.27 | (a) | 0.26 | 0.26 | 0.26 | 0.27 | (c) | 0.26 | ||||||||||||||||
Expenses after expense reductions (f)(h) | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||
Net investment income (loss) (l) | (0.26 | )(a) | 1.98 | 2.02 | 1.66 | 1.71 | (c) | 1.69 | ||||||||||||||||
Portfolio turnover | 7 | (n) | 1 | 1 | 0 | (b) | 0 | (b) | 1 | |||||||||||||||
Net assets at end of period (000 omitted) | $1,320,452 | $1,414,989 | $1,364,874 | $1,686,004 | $1,721,397 | $1,837,130 |
See Notes to Financial Statements
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Financial Highlights – continued
(a) | Annualized. |
(b) | Less than 0.5%. |
(c) | Amount reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher. |
(d) | Per share data is based on average shares outstanding. |
(f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
(h) | In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying affiliated funds in which the fund invests. Accordingly, the expense ratio for the fund reflects only those fees and expenses borne directly by the fund. Because the underlying affiliated funds have varied expense and fee levels and the fund may own different proportions of the underlying affiliated funds at different times, the amount of fees and expenses incurred indirectly by the fund will vary. |
(k) | The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown. |
(l) | Recognition of net investment income by the fund may be affected by the timing of the declaration of dividends by the underlying affiliated funds in which the fund invests and for interim net investment income ratios, the actual annual net investment income ratio may differ. The ratios and per share amounts do not include net investment income of the underlying affiliated funds in which the fund invests. |
(n) | Not annualized. |
(s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
(w) | Per share amount was less than $0.01. |
(x) | The net asset values 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 Moderate Allocation Portfolio (the fund) is a diversified series of MFS Variable Insurance Trust III (the trust). The trust is organized as a Delaware statutory 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 is a “fund of funds”, which invests the majority of its assets in other MFS mutual funds (hereafter referred to as “underlying affiliated funds” or “underlying funds”), which may have different fiscal year ends than the funds. The underlying funds, in turn, may engage in a number of investment techniques and practices, which involve certain risks. Certain underlying funds invest their portfolio in high-yield securities rated below investment grade. Investments in below investment grade quality securities can involve a substantially greater risk of default or can already be in default, and their values can decline significantly. Below investment grade quality securities tend to be more sensitive to adverse news about the issuer, or the market or economy in general, than higher quality debt instruments. Certain underlying funds invest a significant portion of their assets in asset-backed and/or mortgage-backed securities. For these securities, the value of the debt instrument also depends on the credit quality and adequacy of the underlying assets or collateral as well as whether there is a security interest in the underlying assets or collateral. Enforcing rights, if any, against the underlying assets or collateral may be difficult. 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. Certain underlying funds invest in foreign securities, including securities of emerging market issuers. Investments in foreign securities are vulnerable to the effects of changes in the relative values of the local currency and the U.S. dollar and to the effects of changes in each country’s market, economic, industrial, political, regulatory, geopolitical, environmental, public health, and other conditions. Investments in emerging markets can involve additional and greater risks than the risks associated with investments in developed foreign markets. Emerging markets can have less developed markets, greater custody and operational risk, less developed legal, regulatory, and accounting, and auditing systems, and greater political, social, and economic instability than developed markets.
The accounting policies of the underlying funds in which the fund invests are outlined in the underlying funds’ shareholder reports, which are available without charge by calling 1-800-225-2606, at mfs.com and on the Securities and Exchange Commission (SEC) web site at http://www.sec.gov. The underlying funds’ shareholder reports are not covered by this report.
In March 2020, the FASB issued Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional, temporary relief with respect to the financial reporting of contracts subject to certain types of modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other IBOR-based reference rates as of the end of 2021. The temporary relief provided by ASU 2020-04 is effective for certain reference rate-related contract modifications that occur during the period from March 12, 2020 through December 31, 2022. Management is evaluating the impact of ASU 2020-04 on the fund’s investments, derivatives, debt and other contracts that will undergo reference rate-related modifications as a result of the reference rate reform.
Investment Valuations – Open-end investment companies (underlying funds) are generally valued at their net asset value per share. The investments of underlying funds managed by the adviser are valued as described below. For purposes of this policy disclosure, “fund” also refers to the underlying funds in which the fund-of-funds invests.
Equity securities, including restricted equity securities and equity securities sold short, 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 sold 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. Debt instruments and floating rate loans, including restricted debt instruments, are generally valued at an evaluated or
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Notes to Financial Statements (unaudited) – continued
composite bid as provided by a third-party pricing service. Debt instruments sold short are generally valued at an evaluated or composite mean 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. Exchange-traded options are generally valued at the last sale or official closing price on their primary exchange as provided by a third-party pricing service. Exchange-traded options for which there were no sales reported that day are generally valued at the last daily bid quotation on their primary exchange as provided by a third-party pricing service. For put options, the position may be valued at the last daily ask quotation if there are no trades reported during the day. Options not traded on an exchange are generally valued at a broker/dealer bid quotation. Foreign currency options are generally valued at valuations provided by a third-party pricing service. Futures contracts are generally valued at last posted settlement price 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. Forward foreign currency exchange contracts are generally valued at the mean of bid and asked prices for the time period interpolated from rates provided by a third-party pricing service for proximate time periods. Swap agreements are generally valued using valuations provided by a third-party pricing service, which for cleared swaps includes an evaluation of any trading activity at the clearinghouses. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. In determining values, 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 halt 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 after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. The following is a summary of the levels used as of June 30, 2020 in valuing the fund’s assets or liabilities:
Financial Instruments | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $1,326,859,280 | $— | $— | $1,326,859,280 |
For further information regarding security characteristics, see the Portfolio of Investments. Please refer to the underlying funds’ shareholder reports for further information regarding the levels used in valuing the underlying funds’ assets or liabilities.
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Notes to Financial Statements (unaudited) – continued
Derivatives – The fund does not invest in derivatives directly. The fund does invest in underlying funds that may use derivatives 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 underlying funds use 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.
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. Distributions of income and capital gains from the underlying funds are recorded on the ex-dividend date. Recognition of net investment income by the fund is affected by the timing of the declaration of distributions by the underlying funds in which the fund invests. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.
The fund and/or the underlying funds 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.
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.
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.
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:
Year ended 12/31/19 | ||||
Ordinary income (including any short-term capital gains) | $31,668,625 | |||
Long-term capital gains | 98,016,020 | |||
Total distributions | $129,684,645 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/20 | ||||
Cost of investments | $1,103,851,098 | |||
Gross appreciation | 231,570,846 | |||
Gross depreciation | (8,562,664 | ) | ||
Net unrealized appreciation (depreciation) | $223,008,182 | |||
As of 12/31/19 | ||||
Undistributed ordinary income | 31,751,073 | |||
Undistributed long-term capital gain | 80,986,192 | |||
Net unrealized appreciation (depreciation) | 245,788,704 |
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
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Notes to Financial Statements (unaudited) – continued
shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in separate class expenses. The fund’s distributions declared to shareholders as reported in the Statements of Changes in Net Assets are presented by class as follows:
Six months ended 6/30/20 | Year ended 12/31/19 | |||||||
Initial Class | $— | $563,100 | ||||||
Service Class | — | 129,121,545 | ||||||
Total | $— | $129,684,645 |
(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. MFS receives no compensation under this agreement; however MFS receives management fees from the underlying MFS funds.
The investment adviser has agreed in writing to pay a portion of the fund’s operating expenses, excluding distribution and/or service fees, interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses such as fees and expenses associated with investments in investment companies and other similar investment vehicles such that fund operating expenses do not exceed 0.20% annually of the fund’s average daily net assets. This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until April 30, 2022. For the six months ended June 30, 2020, 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.
In addition to the fees and expenses which the fund bears directly, the fund indirectly bears a pro rata share of the fees and expenses of the underlying funds in which the fund invests. Accordingly, the expense ratio for the fund reflects only those fees and expenses borne directly by the fund.
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, 2020, the fee was $8,970, which equated to 0.0014% 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, 2020, these costs amounted to $62.
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 pays an annual fixed amount of $17,500. The administrative services fee incurred for the six months ended June 30, 2020 was equivalent to an annual effective rate of 0.0013% 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 from MFS for their services to the fund. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – 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. This money market fund does not pay a management fee to MFS but does incur investment and operating costs.
(4) | Portfolio Securities |
For the six months ended June 30, 2020, purchases and sales of shares of underlying funds, excluding the MFS Institutional Money Market Portfolio, aggregated $86,528,853 and $173,556,241, respectively.
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Notes to Financial Statements (unaudited) – continued
(5) | Shares of Beneficial Interest |
The fund’s Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
Six months ended 6/30/20 | Year ended 12/31/19 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 9,992 | $129,846 | 27,059 | $351,818 | ||||||||||||
Service Class | 493,074 | 5,424,180 | 133,868 | 1,765,070 | ||||||||||||
503,066 | $5,554,026 | 160,927 | $2,116,888 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 45,048 | $563,100 | ||||||||||||
Service Class | — | — | 10,329,723 | 129,121,545 | ||||||||||||
— | $— | 10,374,771 | $129,684,645 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (18,602 | ) | $(243,294 | ) | (30,872 | ) | $(397,056 | ) | ||||||||
Service Class | (7,122,624 | ) | (90,635,933 | ) | (17,736,864 | ) | (232,608,066 | ) | ||||||||
(7,141,226 | ) | $(90,879,227 | ) | (17,767,736 | ) | $(233,005,122 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | (8,610 | ) | $(113,448 | ) | 41,235 | $517,862 | ||||||||||
Service Class | (6,629,550 | ) | (85,211,753 | ) | (7,273,273 | ) | (101,721,451 | ) | ||||||||
(6,638,160 | ) | $(85,325,201 | ) | (7,232,038 | ) | $(101,203,589 | ) |
(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 syndicate 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 highest of one month LIBOR, the Federal Funds Effective Rate and the Overnight Bank Funding Rate, 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. 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 rates equal to customary reference rates plus an agreed upon spread. For the six months ended June 30, 2020, the fund’s commitment fee and interest expense were $3,488 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.
(7) | Investments in 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 following were affiliated issuers:
Affiliated Issuers | Beginning Value | Purchases | Sales Proceeds | Realized (Loss) | Change in Unrealized Appreciation or Depreciation | Ending Value | ||||||||||||||||||
MFS Global Governments Portfolio | $69,188,179 | $5,778,640 | $12,403,707 | $(234,717 | ) | $3,450,505 | $65,778,900 | |||||||||||||||||
MFS Global Real Estate Portfolio | 42,213,211 | 3,697,305 | 1,353,064 | 280,063 | (4,950,394 | ) | 39,887,121 | |||||||||||||||||
MFS Government Securities Portfolio | 139,648,867 | 13,990,847 | 29,559,414 | (1,449,004 | ) | 9,056,718 | 131,688,014 | |||||||||||||||||
MFS Growth Series | 129,207,879 | 639,062 | 22,167,695 | 10,698,651 | 1,437,683 | 119,815,580 | ||||||||||||||||||
MFS High Yield Portfolio | 71,116,166 | 1,209,424 | 4,524,777 | (605,289 | ) | (1,916,898 | ) | 65,278,626 | ||||||||||||||||
MFS Inflation-Adjusted Bond Portfolio | 69,697,879 | 1,387,552 | 8,003,893 | (80,708 | ) | 2,865,753 | 65,866,583 | |||||||||||||||||
MFS Institutional Money Market Portfolio | 1,570,637 | 1,658,059 | 1,677,975 | (55 | ) | 155 | 1,550,821 | |||||||||||||||||
MFS International Growth Portfolio | 43,028,167 | 1,855,001 | 3,571,487 | 289,232 | (2,018,060 | ) | 39,582,853 | |||||||||||||||||
MFS International Intrinsic Value Portfolio | 42,910,215 | 799,832 | 4,163,219 | 1,432,122 | (1,190,890 | ) | 39,788,060 | |||||||||||||||||
MFS Limited Maturity Portfolio | 56,322,769 | 1,248,482 | 5,707,982 | (126,722 | ) | 935,298 | 52,671,845 | |||||||||||||||||
MFS Mid Cap Growth Series | 100,114,910 | 4,650,752 | 17,612,923 | 2,940,211 | 3,947,177 | 94,040,127 | ||||||||||||||||||
MFS Mid Cap Value Portfolio | 100,501,786 | 16,391,410 | 8,520,740 | (1,623,406 | ) | (12,897,332 | ) | 93,851,718 | ||||||||||||||||
MFS New Discovery Series | 21,505,233 | 2,147,927 | 5,184,848 | 797,470 | 862,003 | 20,127,785 | ||||||||||||||||||
MFS New Discovery Value Portfolio | 21,487,891 | 4,138,146 | 1,933,218 | (533,201 | ) | (2,977,224 | ) | 20,182,394 | ||||||||||||||||
MFS Research International Portfolio | 100,432,483 | 5,800,692 | 8,363,138 | 1,157,606 | (6,815,223 | ) | 92,212,420 | |||||||||||||||||
MFS Research Series | 114,795,342 | 6,388,220 | 13,009,472 | 1,684,551 | (3,376,475 | ) | 106,482,166 | |||||||||||||||||
MFS Total Return Bond Series | 168,792,734 | 3,678,757 | 20,805,673 | (201,878 | ) | 6,557,247 | 158,021,187 | |||||||||||||||||
MFS Value Series | 128,988,929 | 12,726,803 | 6,670,990 | 738,903 | (15,750,565 | ) | 120,033,080 | |||||||||||||||||
$1,421,523,277 | $88,186,911 | $175,234,215 | $15,163,829 | $(22,780,522 | ) | $1,326,859,280 |
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Notes to Financial Statements (unaudited) – continued
Affiliated Issuers | Dividend Income | Capital Gain Distributions | ||||||||||||||||||||||
MFS Global Governments Portfolio | $— | $— | ||||||||||||||||||||||
MFS Global Real Estate Portfolio | — | — | ||||||||||||||||||||||
MFS Government Securities Portfolio | — | — | ||||||||||||||||||||||
MFS Growth Series | — | — | ||||||||||||||||||||||
MFS High Yield Portfolio | — | — | ||||||||||||||||||||||
MFS Inflation-Adjusted Bond Portfolio | — | — | ||||||||||||||||||||||
MFS Institutional Money Market Portfolio | 7,582 | — | ||||||||||||||||||||||
MFS International Growth Portfolio | — | — | ||||||||||||||||||||||
MFS International Intrinsic Value Portfolio | — | — | ||||||||||||||||||||||
MFS Limited Maturity Portfolio | — | — | ||||||||||||||||||||||
MFS Mid Cap Growth Series | — | — | ||||||||||||||||||||||
MFS Mid Cap Value Portfolio | — | — | ||||||||||||||||||||||
MFS New Discovery Series | — | — | ||||||||||||||||||||||
MFS New Discovery Value Portfolio | — | — | ||||||||||||||||||||||
MFS Research International Portfolio | — | — | ||||||||||||||||||||||
MFS Research Series | — | — | ||||||||||||||||||||||
MFS Total Return Bond Series | — | — | ||||||||||||||||||||||
MFS Value Series | — | — | ||||||||||||||||||||||
$7,582 | $— |
(8) | Impacts of COVID-19 |
The pandemic related to the global spread of novel coronavirus disease (COVID-19), which was first detected in December 2019, has resulted in significant disruptions to global business activity and the global economy, as well as the economies of individual countries, the financial performance of individual companies and sectors, and the securities and commodities markets in general. This pandemic, the full effects of which are still unknown, has resulted in substantial market volatility and may have adversely impacted the prices and liquidity of the fund’s investments and the fund’s performance.
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STATEMENT REGARDING LIQUIDITY RISK MANAGEMENT PROGRAM
The fund has adopted and implemented a liquidity risk management program (the “Program”) as required by Rule 22e-4 under the Investment Company Act of 1940, as amended. The fund’s Board of Trustees (the “Board”) has designated MFS as the administrator of the Program. The Program is reasonably designed to assess and manage the liquidity risk of the fund. Liquidity risk is the risk that the fund could not meet requests to redeem shares issued by the fund without significant dilution of remaining investors’ interests.
MFS provided a written report to the Board for consideration at its April 2020 meeting that addressed the operation of the Program and provided an assessment of the adequacy and effectiveness of the Program during the period from the adoption of the Program on December 1, 2018 to December 31, 2019 (the “Covered Period”). The report concluded that during the Covered Period the Program had operated effectively and had adequately and effectively been implemented to assess and manage the fund’s liquidity risk. MFS also reported that there were no liquidity events that impacted the fund or its ability to timely meet redemptions without dilution to existing shareholders during the Covered Period.
There can be no assurance that the Program will achieve its objectives in the future. Further information on liquidity risk, and other principal risks to which an investment in the fund may be subject, can be found in the prospectus.
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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/proxyvoting, 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/proxyvoting, or by visiting the SEC’s Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at http://www.sec.gov. A shareholder can obtain the portfolio holdings report for the first and third quarters of the fund’s fiscal year at mfs.com/vit3 by choosing the fund’s name and then selecting the “Resources” tab and clicking on “Prospectus and Reports”.
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 at https://www.mfs.com/announcements or at mfs.com/vit3 by choosing the fund’s name and then selecting the “Resources” tab and clicking on the “Announcements” tab, if any.
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, 2020
MFS® New Discovery Value Portfolio
MFS® Variable Insurance Trust III
Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, the insurance company that offers your contract may determine that it will no longer send you paper copies of the fund’s annual and semiannual shareholder reports unless you specifically request paper copies from the insurance company or from your financial intermediary. Instead, the shareholder reports will be made available on a Web site (insurancefunds.mfs.com or other Web site of which you will be notified), and the insurance company will notify you by mail each time a report is posted and provide you with a Web site link to access the report. Instructions for requesting paper copies will be provided by your insurance company or financial intermediary.
If you already elected to receive shareholder reports by email, you will not be affected by this change and you need not take any action. If your insurance company or financial intermediary offers electronic delivery, you may elect to receive shareholder reports and other communications from the insurance company or financial intermediary by email by following the instructions provided by the insurance company or financial intermediary.
Beginning on January 1, 2019, you may elect to receive all future reports in paper free of charge from the insurance company or financial intermediary. You can inform the insurance company or financial intermediary that you wish to continue receiving paper copies of your shareholder reports by contacting your insurance company or financial intermediary. Your election to receive reports in paper will apply to all funds held in your account with your insurance company or financial intermediary.
VDV-SEM
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MFS® New Discovery Value Portfolio
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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LETTER FROM THE EXECUTIVE CHAIR
Dear Contract Owners:
Markets experienced dramatic swings in early 2020, as the coronavirus pandemic brought the global economy to a standstill for several months. Optimism over the development of vaccines and therapeutics, along with a decline in cases in countries that had been affected by the outbreak early on, brightened the economic and market outlook during the second quarter, as did the phased reopening of US states. However, a great deal of uncertainty remains, including the possibility of a second wave of cases later this year, as many countries continue to experience COVID-19 flare-ups.
Global central banks have taken aggressive steps to cushion the economic and market fallout related to the virus, and governments are deploying unprecedented levels of fiscal support. As uncertainty recedes, these measures can help build a supportive environment and encourage economic recovery; however, if markets disconnect from fundamentals, they can also sow the seeds of instability. In the aftermath of the crisis, societal changes may be likely, as households, businesses, and governments adjust to a new reality, and these alterations could affect the investment landscape. For investors, events, such as the COVID-19 outbreak, demonstrate the importance of having a deep understanding of company fundamentals, and we have built our global research platform to do just that.
Here at MFS®, we aim to help our clients navigate the growing complexity of the markets and world economies. Our long-term investment philosophy and commitment to the responsible allocation of capital allow us to tune out the noise and uncover what we believe are the best, most durable investment opportunities in the market. Through our unique global investment platform, we combine collective expertise, thoughtful risk management, and long-term discipline to create sustainable value for investors.
Respectfully,
Robert J. Manning
Executive Chair
MFS Investment Management
August 17, 2020
The opinions expressed in this letter are subject to change, may not be relied upon for investment advice, and no forecasts can be guaranteed.
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Portfolio structure
Top ten holdings | ||||
KBR, Inc. | 2.2% | |||
Graphic Packaging Holding Co. | 2.0% | |||
Quanta Services, Inc. | 1.7% | |||
Schneider National, Inc. | 1.6% | |||
PAE, Inc. | 1.6% | |||
Lakeland Financial Corp. | 1.6% | |||
Plexus Corp. | 1.5% | |||
Element Solutions, Inc. | 1.5% | |||
Univar Solutions, Inc. | 1.4% | |||
LKQ Corp. | 1.4% |
GICS equity sectors (g) | ||||
Financials | 22.1% | |||
Industrials | 18.5% | |||
Consumer Discretionary | 12.1% | |||
Information Technology | 9.2% | |||
Real Estate | 9.2% | |||
Materials | 8.8% | |||
Utilities | 5.4% | |||
Energy | 4.4% | |||
Consumer Staples | 4.3% | |||
Health Care | 3.2% | |||
Communication Services | 0.7% |
(g) | The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and S&P Global Market Intelligence Inc. (“S&P Global Market Intelligence”). GICS is a service mark of MSCI and S&P Global Market Intelligence and has been licensed for use by MFS. |
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 June 30, 2020.
The portfolio is actively managed and current holdings may be different.
2
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MFS New Discovery Value Portfolio
Fund Expenses Borne by the Contract Holders during the Period,
January 1, 2020 through June 30, 2020
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, 2020 through June 30, 2020.
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 1/01/20 | Ending 6/30/20 | Expenses Paid During Period (p) 1/01/20-6/30/20 | ||||||||||||||
Initial Class | Actual | 0.88% | $1,000.00 | $799.57 | $3.94 | |||||||||||||
Hypothetical (h) | 0.88% | $1,000.00 | $1,020.49 | $4.42 | ||||||||||||||
Service Class | Actual | 1.13% | $1,000.00 | $797.84 | $5.05 | |||||||||||||
Hypothetical (h) | 1.13% | $1,000.00 | $1,019.24 | $5.67 |
(h) | 5% class return per year before expenses. |
(p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
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MFS New Discovery Value Portfolio
PORTFOLIO OF INVESTMENTS – 6/30/20 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – 97.9% | ||||||||
Aerospace – 2.5% |
| |||||||
CACI International, Inc., “A” (a) | 1,939 | $ | 420,530 | |||||
PAE, Inc. (a) | 77,818 | 743,940 | ||||||
|
| |||||||
$ | 1,164,470 | |||||||
|
| |||||||
Apparel Manufacturers – 1.4% | ||||||||
PVH Corp. | 5,449 | $ | 261,824 | |||||
Skechers USA, Inc., “A” (a) | 13,146 | 412,522 | ||||||
|
| |||||||
$ | 674,346 | |||||||
|
| |||||||
Automotive – 3.1% | ||||||||
LKQ Corp. (a) | 25,455 | $ | 666,921 | |||||
Methode Electronics, Inc. | 9,855 | 308,067 | ||||||
Stoneridge, Inc. (a) | 9,150 | 189,039 | ||||||
Visteon Corp. (a) | 4,105 | 281,193 | ||||||
|
| |||||||
$ | 1,445,220 | |||||||
|
| |||||||
Business Services – 1.5% | ||||||||
BrightView Holdings, Inc. (a) | 20,946 | $ | 234,595 | |||||
Stamps.com, Inc. (a) | 1,205 | 221,346 | ||||||
WNS (Holdings) Ltd., ADR (a) | 4,467 | 245,596 | ||||||
|
| |||||||
$ | 701,537 | |||||||
|
| |||||||
Chemicals – 1.5% | ||||||||
Element Solutions, Inc. (a) | 64,485 | $ | 699,662 | |||||
|
| |||||||
Computer Software – 0.9% | ||||||||
8x8, Inc. (a) | 26,236 | $ | 419,776 | |||||
|
| |||||||
Computer Software – Systems – 1.2% | ||||||||
Verint Systems, Inc. (a) | 12,409 | $ | 560,639 | |||||
|
| |||||||
Construction – 2.0% | ||||||||
GMS, Inc. (a) | 12,847 | $ | 315,908 | |||||
Toll Brothers, Inc. | 18,379 | 598,971 | ||||||
|
| |||||||
$ | 914,879 | |||||||
|
| |||||||
Consumer Products – 2.5% | ||||||||
Energizer Holdings, Inc. | 9,420 | $ | 447,356 | |||||
Newell Brands, Inc. | 20,613 | 327,335 | ||||||
Prestige Brands Holdings, Inc. (a) | 10,531 | 395,544 | ||||||
|
| |||||||
$ | 1,170,235 | |||||||
|
| |||||||
Consumer Services – 1.6% | ||||||||
Grand Canyon Education, Inc. (a) | 5,751 | $ | 520,638 | |||||
Regis Corp. (a) | 27,410 | 224,214 | ||||||
|
| |||||||
$ | 744,852 | |||||||
|
| |||||||
Containers – 5.1% | ||||||||
Berry Global Group, Inc. (a) | 14,213 | $ | 629,920 | |||||
Graphic Packaging Holding Co. | 66,401 | 928,950 | ||||||
Owens Corning | 7,553 | 421,155 | ||||||
Silgan Holdings, Inc. | 12,673 | 410,479 | ||||||
|
| |||||||
$ | 2,390,504 | |||||||
|
|
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Electrical Equipment – 3.6% | ||||||||
HD Supply Holdings, Inc. (a) | 14,292 | $ | 495,218 | |||||
Littlefuse, Inc. | 2,176 | 371,291 | ||||||
TriMas Corp. (a) | 19,817 | 474,617 | ||||||
WESCO International, Inc. (a) | 10,320 | 362,335 | ||||||
|
| |||||||
$ | 1,703,461 | |||||||
|
| |||||||
Electronics – 2.0% | ||||||||
nLIGHT, Inc. (a) | 11,309 | $ | 251,738 | |||||
Plexus Corp. (a) | 10,044 | 708,705 | ||||||
|
| |||||||
$ | 960,443 | |||||||
|
| |||||||
Energy – Independent – 2.9% | ||||||||
Magnolia Oil & Gas Corp., “A” (a) | 56,833 | $ | 344,408 | |||||
Parsley Energy, Inc., “A” | 55,018 | 587,592 | ||||||
WPX Energy, Inc. (a) | 69,969 | 446,402 | ||||||
|
| |||||||
$ | 1,378,402 | |||||||
|
| |||||||
Engineering – Construction – 4.6% | ||||||||
Construction Partners, Inc., “A” (a) | 19,647 | $ | 348,931 | |||||
KBR, Inc. | 46,127 | 1,040,164 | ||||||
Quanta Services, Inc. | 20,194 | 792,210 | ||||||
|
| |||||||
$ | 2,181,305 | |||||||
|
| |||||||
Entertainment – 1.3% | ||||||||
IMAX Corp. (a) | 31,124 | $ | 348,900 | |||||
Six Flags Entertainment Corp. | 14,137 | 271,572 | ||||||
|
| |||||||
$ | 620,472 | |||||||
|
| |||||||
Food & Beverages – 2.9% | ||||||||
Hostess Brands, Inc. (a) | 37,330 | $ | 456,173 | |||||
Nomad Foods Ltd. (a) | 25,033 | 536,958 | ||||||
Sanderson Farms, Inc. | 3,031 | 351,262 | ||||||
|
| |||||||
$ | 1,344,393 | |||||||
|
| |||||||
Gaming & Lodging – 0.8% | ||||||||
Wyndham Hotels & Resorts, Inc. | 8,502 | $ | 362,355 | |||||
|
| |||||||
Insurance – 3.0% | ||||||||
CNO Financial Group, Inc. | 29,617 | $ | 461,137 | |||||
Everest Re Group Ltd. | 1,285 | 264,967 | ||||||
Hanover Insurance Group, Inc. | 3,003 | 304,294 | ||||||
Third Point Reinsurance Ltd. (a) | 49,149 | 369,109 | ||||||
|
| |||||||
$ | 1,399,507 | |||||||
|
| |||||||
Leisure & Toys – 1.0% | ||||||||
Brunswick Corp. | 5,839 | $ | 373,754 | |||||
Funko, Inc., “A” (a)(l) | 18,435 | 106,923 | ||||||
|
| |||||||
$ | 480,677 | |||||||
|
| |||||||
Machinery & Tools – 4.1% | ||||||||
AGCO Corp. | 7,715 | $ | 427,874 | |||||
Enerpac Tool Group Corp. | 14,091 | 248,002 | ||||||
ITT, Inc. | 3,515 | 206,471 | ||||||
Kennametal, Inc. | 16,381 | 470,298 | ||||||
Regal Beloit Corp. | 6,476 | 565,484 | ||||||
|
| |||||||
$ | 1,918,129 | |||||||
|
|
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Table of Contents
MFS New Discovery Value Portfolio
Portfolio of Investments (unaudited) – continued
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Major Banks – 1.2% |
| |||||||
TCF Financial Corp. | 19,849 | $ | 583,958 | |||||
|
| |||||||
Medical & Health Technology & Services – 1.9% |
| |||||||
HMS Holdings Corp. (a) | 10,460 | $ | 338,799 | |||||
Premier, Inc., “A” (a) | 15,988 | 548,069 | ||||||
|
| |||||||
$ | 886,868 | |||||||
|
| |||||||
Medical Equipment – 0.4% | ||||||||
Envista Holdings Corp. (a) | 9,473 | $ | 199,785 | |||||
|
| |||||||
Natural Gas – Distribution – 2.7% | ||||||||
New Jersey Resources Corp. | 19,136 | $ | 624,790 | |||||
South Jersey Industries, Inc. | 26,250 | 655,988 | ||||||
|
| |||||||
$ | 1,280,778 | |||||||
|
| |||||||
Natural Gas – Pipeline – 0.6% | ||||||||
Plains GP Holdings LP | 29,584 | $ | 263,298 | |||||
|
| |||||||
Oil Services – 0.8% | ||||||||
Frank’s International N.V. (a) | 104,920 | $ | 233,971 | |||||
NOW, Inc. (a) | 15,371 | 132,652 | ||||||
|
| |||||||
$ | 366,623 | |||||||
|
| |||||||
Other Banks & Diversified Financials – 18.6% |
| |||||||
Air Lease Corp. | 13,817 | $ | 404,700 | |||||
Bank of Hawaii Corp. | 7,770 | 477,156 | ||||||
Brookline Bancorp, Inc. | 40,465 | 407,887 | ||||||
Cathay General Bancorp, Inc. | 21,116 | 555,351 | ||||||
Cullen/Frost Bankers, Inc. | 8,413 | 628,535 | ||||||
Element Fleet Management Corp. | 76,049 | 567,454 | ||||||
Encore Capital Group, Inc. (a) | 14,832 | 506,958 | ||||||
First Hawaiian, Inc. | 30,140 | 519,614 | ||||||
Hanmi Financial Corp. | 25,697 | 249,518 | ||||||
Lakeland Financial Corp. | 15,864 | 739,104 | ||||||
Prosperity Bancshares, Inc. | 9,848 | 584,774 | ||||||
Sandy Spring Bancorp, Inc. | 7,818 | 193,730 | ||||||
Signature Bank | 6,166 | 659,269 | ||||||
SLM Corp. | 44,035 | 309,566 | ||||||
Textainer Group Holdings Ltd. (a) | 31,047 | 253,964 | ||||||
UMB Financial Corp. | 12,360 | 637,158 | ||||||
Umpqua Holdings Corp. | 47,519 | 505,602 | ||||||
Wintrust Financial Corp. | 11,753 | 512,666 | ||||||
|
| |||||||
$ | 8,713,006 | |||||||
|
| |||||||
Pollution Control – 0.8% | ||||||||
U.S. Ecology, Inc. | 10,985 | $ | 372,172 | |||||
|
| |||||||
Real Estate – 9.9% | ||||||||
Brixmor Property Group, Inc., REIT | 32,536 | $ | 417,112 | |||||
Corporate Office Properties Trust, REIT | 26,115 | 661,754 | ||||||
Empire State Realty Trust, REIT, “A” | 31,117 | 217,819 | ||||||
Industrial Logistics Properties Trust, REIT | 30,979 | 636,619 | ||||||
Invesco Mortgage Capital, Inc., REIT | 31,710 | 118,595 | ||||||
Lexington Realty Trust, REIT | 40,138 | 423,456 | ||||||
Life Storage, Inc., REIT | 4,465 | 423,952 | ||||||
Office Properties Income Trust, REIT | 19,622 | 509,583 | ||||||
Spirit Realty Capital, Inc., REIT | 4,914 | 171,302 | ||||||
STAG Industrial, Inc., REIT | 15,732 | 461,262 |
Issuer | Shares/Par | Value ($) | ||||||
COMMON STOCKS – continued | ||||||||
Real Estate – continued | ||||||||
Two Harbors Investment Corp., REIT | 47,679 | $ | 240,302 | |||||
Urban Edge Properties, REIT | 31,728 | 376,611 | ||||||
|
| |||||||
$ | 4,658,367 | |||||||
|
| |||||||
Specialty Chemicals – 4.9% | ||||||||
Axalta Coating Systems Ltd. (a) | 17,249 | $ | 388,965 | |||||
ChampionX Corp. (a) | 18,224 | 177,866 | ||||||
Compass Minerals International, Inc. | 9,469 | 461,614 | ||||||
Ferro Corp. (a) | 47,295 | 564,702 | ||||||
Ferroglobe PLC (a) | 47,823 | 23,716 | ||||||
Univar Solutions, Inc. (a) | 39,729 | 669,831 | ||||||
|
| |||||||
$ | 2,286,694 | |||||||
|
| |||||||
Specialty Stores – 2.3% | ||||||||
BJ’s Wholesale Club Holdings, Inc. (a) | 6,110 | $ | 227,720 | |||||
Urban Outfitters, Inc. (a) | 25,891 | 394,061 | ||||||
Zumiez, Inc. (a) | 17,197 | 470,854 | ||||||
|
| |||||||
$ | 1,092,635 | |||||||
|
| |||||||
Trucking – 1.6% | ||||||||
Schneider National, Inc. | 30,706 | $ | 757,517 | |||||
|
| |||||||
Utilities – Electric Power – 2.7% | ||||||||
Black Hills Corp. | 10,800 | $ | 611,928 | |||||
Portland General Electric Co. | 15,564 | 650,731 | ||||||
|
| |||||||
$ | 1,262,659 | |||||||
|
| |||||||
Total Common Stocks (Identified Cost, $44,003,162) | $ | 45,959,624 | ||||||
|
| |||||||
INVESTMENT COMPANIES (h) – 2.8% |
| |||||||
Money Market Funds – 2.8% | ||||||||
MFS Institutional Money Market Portfolio, 0.17% (v) (Identified Cost, $1,344,409) | 1,344,274 | $ | 1,344,409 | |||||
|
| |||||||
OTHER ASSETS, LESS LIABILITIES – (0.7)% |
| (342,632 | ) | |||||
|
| |||||||
NET ASSETS – 100.0% |
| $ | 46,961,401 | |||||
|
|
(a) | Non-income producing security. |
(h) | An affiliated issuer, which 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. At period end, the aggregate values of the fund’s investments in affiliated issuers and in unaffiliated issuers were $1,344,409 and $45,959,624, respectively. |
(l) | A portion of this security is on loan. See Note 2 for additional information. |
(v) | Affiliated issuer 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 |
REIT | Real Estate Investment Trust |
See Notes to Financial Statements
5
Table of Contents
MFS New Discovery Value Portfolio
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 6/30/20 | ||||
Assets | ||||
Investments in unaffiliated issuers, at value, including $52,942 of securities on loan (identified cost, $44,003,162) | $45,959,624 | |||
Investments in affiliated issuers, at value (identified cost, $1,344,409) | 1,344,409 | |||
Cash | 1,670 | |||
Receivables for | ||||
Investments sold | 314,908 | |||
Fund shares sold | 44,484 | |||
Interest and dividends | 71,731 | |||
Receivable from investment adviser | 8,972 | |||
Other assets | 886 | |||
Total assets | $47,746,684 | |||
Liabilities | ||||
Payables for | ||||
Investments purchased | $644,976 | |||
Fund shares reacquired | 99,368 | |||
Payable to affiliates | ||||
Administrative services fee | 96 | |||
Shareholder servicing costs | 19 | |||
Distribution and/or service fees | 118 | |||
Accrued expenses and other liabilities | 40,706 | |||
Total liabilities | $785,283 | |||
Net assets | $46,961,401 | |||
Net assets consist of | ||||
Paid-in capital | $42,541,497 | |||
Total distributable earnings (loss) | 4,419,904 | |||
Net assets | $46,961,401 | |||
Shares of beneficial interest outstanding | 6,304,665 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Initial Class | $38,020,399 | 5,093,705 | $7.46 | |||||||||
Service Class | 8,941,002 | 1,210,960 | 7.38 |
See Notes to Financial Statements
6
Table of Contents
MFS New Discovery Value Portfolio
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 6/30/20 | ||||
Net investment income (loss) | ||||
Income | ||||
Dividends | $437,464 | |||
Dividends from affiliated issuers | 4,916 | |||
Other | 2,415 | |||
Income on securities loaned | 54 | |||
Foreign taxes withheld | (1,106 | ) | ||
Total investment income | $443,743 | |||
Expenses | ||||
Management fee | $206,051 | |||
Distribution and/or service fees | 11,096 | |||
Shareholder servicing costs | 1,612 | |||
Administrative services fee | 8,720 | |||
Independent Trustees’ compensation | 792 | |||
Custodian fee | 2,413 | |||
Shareholder communications | 2,262 | |||
Audit and tax fees | 27,722 | |||
Legal fees | 264 | |||
Miscellaneous | 12,772 | |||
Total expenses | $273,704 | |||
Reduction of expenses by investment adviser | (60,901 | ) | ||
Net expenses | $212,803 | |||
Net investment income (loss) | $230,940 | |||
Realized and unrealized gain (loss) | ||||
Realized gain (loss) (identified cost basis) | ||||
Unaffiliated issuers | $(1,775,556 | ) | ||
Affiliated issuers | 213 | |||
Foreign currency | (1,311 | ) | ||
Net realized gain (loss) | $(1,776,654 | ) | ||
Change in unrealized appreciation or depreciation | ||||
Unaffiliated issuers | $(7,025,854 | ) | ||
Translation of assets and liabilities in foreign currencies | 9 | |||
Net unrealized gain (loss) | $(7,025,845 | ) | ||
Net realized and unrealized gain (loss) | $(8,802,499 | ) | ||
Change in net assets from operations | $(8,571,559 | ) |
See Notes to Financial Statements
7
Table of Contents
MFS New Discovery Value Portfolio
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 6/30/20 | Year ended 12/31/19 | |||||||
(unaudited) | ||||||||
Change in net assets | ||||||||
From operations | ||||||||
Net investment income (loss) | $230,940 | $479,827 | ||||||
Net realized gain (loss) | (1,776,654 | ) | 3,851,791 | |||||
Net unrealized gain (loss) | (7,025,845 | ) | 9,877,996 | |||||
Change in net assets from operations | $(8,571,559 | ) | $14,209,614 | |||||
Total distributions to shareholders | $— | $(8,140,140 | ) | |||||
Change in net assets from fund share transactions | $4,917,289 | $(506,413 | ) | |||||
Total change in net assets | $(3,654,270 | ) | $5,563,061 | |||||
Net assets | ||||||||
At beginning of period | 50,615,671 | 45,052,610 | ||||||
At end of period | $46,961,401 | $50,615,671 |
See Notes to Financial Statements
8
Table of Contents
MFS New Discovery Value Portfolio
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 that 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 6/30/20 | Year ended | ||||||||||||||||||||||
12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $9.33 | $8.45 | $11.13 | $10.79 | $9.44 | $10.74 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (loss) (d) | $0.04 | $0.10 | $0.08 | $0.05 | $0.09 | (c) | $0.09 | |||||||||||||||||
Net realized and unrealized gain (loss) | (1.91 | ) | 2.46 | (0.94 | ) | 1.44 | 2.34 | (0.40 | ) | |||||||||||||||
Total from investment operations | $(1.87 | ) | $2.56 | $(0.86 | ) | $1.49 | $2.43 | $(0.31 | ) | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.08 | ) | $(0.06 | ) | $(0.11 | ) | $(0.10 | ) | $(0.07 | ) | |||||||||||||
From net realized gain | — | (1.60 | ) | (1.76 | ) | (1.04 | ) | (0.98 | ) | (0.92 | ) | |||||||||||||
Total distributions declared to shareholders | $— | $(1.68 | ) | $(1.82 | ) | $(1.15 | ) | $(1.08 | ) | $(0.99 | ) | |||||||||||||
Net asset value, end of period (x) | $7.46 | $9.33 | $8.45 | $11.13 | $10.79 | $9.44 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | (20.04 | )(n) | 33.65 | (10.78 | ) | 15.24 | 27.03 | (c) | (2.56 | ) | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.15 | (a) | 1.13 | 1.11 | 1.08 | 1.05 | (c) | 1.10 | ||||||||||||||||
Expenses after expense reductions (f) | 0.88 | (a) | 0.88 | 0.88 | 0.88 | 0.87 | (c) | 0.88 | ||||||||||||||||
Net investment income (loss) | 1.06 | (a) | 1.02 | 0.72 | 0.48 | 0.91 | (c) | 0.83 | ||||||||||||||||
Portfolio turnover | 32 | (n) | 38 | 55 | 52 | 48 | 53 | |||||||||||||||||
Net assets at end of period (000 omitted) | $38,020 | $41,098 | $36,665 | $45,470 | $46,635 | $47,068 | ||||||||||||||||||
Service Class | Six months 6/30/20 | Year ended | ||||||||||||||||||||||
12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $9.25 | $8.38 | $11.05 | $10.72 | $9.38 | $10.68 | ||||||||||||||||||
Income (loss) from investment operations | ||||||||||||||||||||||||
Net investment income (loss) (d) | $0.03 | $0.07 | $0.05 | $0.03 | $0.06 | (c) | $0.06 | |||||||||||||||||
Net realized and unrealized gain (loss) | (1.90 | ) | 2.45 | (0.93 | ) | 1.43 | 2.33 | (0.40 | ) | |||||||||||||||
Total from investment operations | $(1.87 | ) | $2.52 | $(0.88 | ) | $1.46 | $2.39 | $(0.34 | ) | |||||||||||||||
Less distributions declared to shareholders | ||||||||||||||||||||||||
From net investment income | $— | $(0.05 | ) | $(0.03 | ) | $(0.09 | ) | $(0.07 | ) | $(0.04 | ) | |||||||||||||
From net realized gain | — | (1.60 | ) | (1.76 | ) | (1.04 | ) | (0.98 | ) | (0.92 | ) | |||||||||||||
Total distributions declared to shareholders | $— | $(1.65 | ) | $(1.79 | ) | $(1.13 | ) | $(1.05 | ) | $(0.96 | ) | |||||||||||||
Net asset value, end of period (x) | $7.38 | $9.25 | $8.38 | $11.05 | $10.72 | $9.38 | ||||||||||||||||||
Total return (%) (k)(r)(s)(x) | (20.22 | )(n) | 33.43 | (11.00 | ) | 15.01 | 26.73 | (c) | (2.90 | ) | ||||||||||||||
Ratios (%) (to average net assets) and Supplemental data: | ||||||||||||||||||||||||
Expenses before expense reductions (f) | 1.40 | (a) | 1.38 | 1.36 | 1.33 | 1.30 | (c) | 1.35 | ||||||||||||||||
Expenses after expense reductions (f) | 1.13 | (a) | 1.13 | 1.13 | 1.13 | 1.12 | (c) | 1.13 | ||||||||||||||||
Net investment income (loss) | 0.81 | (a) | 0.78 | 0.45 | 0.24 | 0.66 | (c) | 0.58 | ||||||||||||||||
Portfolio turnover | 32 | (n) | 38 | 55 | 52 | 48 | 53 | |||||||||||||||||
Net assets at end of period (000 omitted) | $8,941 | $9,518 | $8,387 | $10,907 | $8,376 | $8,437 |
See Notes to Financial Statements
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Financial Highlights – continued
(a) | Annualized. |
(c) | Amount reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher. |
(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 New Discovery Value Portfolio (the fund) is a diversified series of MFS Variable Insurance Trust III (the trust). The trust is organized as a Delaware statutory 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 will generally focus on securities of small size companies which may be more volatile than those of larger companies.
In March 2020, the FASB issued Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional, temporary relief with respect to the financial reporting of contracts subject to certain types of modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other IBOR-based reference rates as of the end of 2021. The temporary relief provided by ASU 2020-04 is effective for certain reference rate-related contract modifications that occur during the period from March 12, 2020 through December 31, 2022. Management is evaluating the impact of ASU 2020-04 on the fund’s investments, derivatives, debt and other contracts that will undergo reference rate-related modifications as a result of the reference rate reform.
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, or similar 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. In determining values, 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 halt 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 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
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Notes to Financial Statements (unaudited) – continued
generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.
Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. The following is a summary of the levels used as of June 30, 2020 in valuing the fund’s assets or liabilities:
Financial Instruments | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Securities | $45,959,624 | $— | $— | $45,959,624 | ||||||||||||
Mutual Funds | 1,344,409 | — | — | 1,344,409 | ||||||||||||
Total | $47,304,033 | $— | $— | $47,304,033 |
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, 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. The lending agent provides the fund with indemnification against Borrower default. In the event of Borrower default, the lending agent 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, the lending agent assumes the fund’s rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, the lending agent 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 $52,942. The fair value of the fund’s investment securities on loan is presented gross in the Statement of Assets and Liabilities. These loans were collateralized by U.S. Treasury Obligations of $54,816 held by the lending agent. The collateral on securities loaned exceeded the value of securities on loan at period end. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the fund and the lending agent. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the Borrower, and is allocated between the fund and the lending agent. Income from securities lending is 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.
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Notes to Financial Statements (unaudited) – continued
Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Dividend 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.
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.
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.
Book/tax differences primarily relate to wash sale loss deferrals.
The tax character of distributions declared to shareholders for the last two fiscal years is as follows:
Year ended | ||||
12/31/19 | ||||
Ordinary income (including any short-term capital gains) | $1,970,102 | |||
Long-term capital gains | 6,170,038 | |||
Total distributions | $8,140,140 |
The federal tax cost and the tax basis components of distributable earnings were as follows:
As of 6/30/20 | ||||
Cost of investments | $46,340,092 | |||
Gross appreciation | 5,482,977 | |||
Gross depreciation | (4,519,036 | ) | ||
Net unrealized appreciation (depreciation) | $963,941 | |||
As of 12/31/19 | ||||
Undistributed ordinary income | 1,227,565 | |||
Undistributed long-term capital gain | 3,457,651 | |||
Other temporary differences | 11 | |||
Net unrealized appreciation (depreciation) | 8,306,236 |
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:
Six months ended 6/30/20 | Year ended 12/31/19 | |||||||
Initial Class | $— | $6,657,895 | ||||||
Service Class | — | 1,482,245 | ||||||
Total | $— | $8,140,140 |
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Notes to Financial Statements (unaudited) – continued
(3) | Transactions with Affiliates |
Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates based on the fund’s average daily net assets:
Up to $250 million | 0.90% | |||
In excess of $250 million | 0.85% |
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, 2020, this management fee reduction amounted to $2,475, 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, 2020 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 0.88% of average daily net assets for the Initial Class shares and 1.13% 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, 2022. For the six months ended June 30, 2020, this reduction amounted to $58,426, which 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, 2020, the fee was $1,464, 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, 2020, these costs amounted to $148.
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, 2020 was equivalent to an annual effective rate of 0.0381% 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 from MFS for their services to the fund. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other – 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. This money market fund does not pay a management fee to MFS but does incur investment and operating costs.
The fund is permitted to engage in purchase and sale transactions with funds and accounts for which MFS serves as investment adviser or sub-adviser (“cross-trades”) 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. During the six months ended June 30, 2020, the fund engaged in purchase transactions pursuant to this policy, which amounted to $9,773.
The adviser has voluntarily undertaken to reimburse the fund from its own resources on a quarterly basis for the cost of investment research embedded in the cost of the fund’s securities trades. This agreement may be rescinded at any time. For the six months ended June 30, 2020, this reimbursement amounted to $2,415, which is included in “Other” income in the Statement of Operations.
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Notes to Financial Statements (unaudited) – continued
(4) | Portfolio Securities |
For the six months ended June 30, 2020, purchases and sales of investments, other than short-term obligations, aggregated $19,942,027 and $14,876,747, 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 6/30/20 | Year ended 12/31/19 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | ||||||||||||||||
Initial Class | 1,166,369 | $7,423,452 | 189,404 | $1,751,071 | ||||||||||||
Service Class | 377,380 | 2,436,719 | 124,339 | 1,127,071 | ||||||||||||
1,543,749 | $9,860,171 | 313,743 | $2,878,142 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Initial Class | — | $— | 832,237 | $6,657,895 | ||||||||||||
Service Class | — | — | 186,916 | 1,482,245 | ||||||||||||
— | $— | 1,019,153 | $8,140,140 | |||||||||||||
Shares reacquired | ||||||||||||||||
Initial Class | (475,464 | ) | $(3,473,595 | ) | (957,300 | ) | $(8,904,637 | ) | ||||||||
Service Class | (195,868 | ) | (1,469,287 | ) | (282,688 | ) | (2,620,058 | ) | ||||||||
(671,332 | ) | $(4,942,882 | ) | (1,239,988 | ) | $(11,524,695 | ) | |||||||||
Net change | ||||||||||||||||
Initial Class | 690,905 | $3,949,857 | 64,341 | $(495,671 | ) | |||||||||||
Service Class | 181,512 | 967,432 | 28,567 | (10,742 | ) | |||||||||||
872,417 | $4,917,289 | 92,908 | $(506,413 | ) |
Effective at the close of business on August 14, 2019, the fund is closed to new investors subject to certain exceptions. Please see the fund’s prospectus for details.
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 43%, 14%, and 9%, 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 syndicate 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 highest of one month LIBOR, the Federal Funds Effective Rate and the Overnight Bank Funding Rate, 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. 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 rates equal to customary reference rates plus an agreed upon spread. For the six months ended June 30, 2020, the fund’s commitment fee and interest expense were $122 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.
(7) | Investments in 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 following were affiliated issuers:
Affiliated Issuers | Beginning Value | Purchases | Sales Proceeds | Realized Gain (Loss) | Change in Unrealized Appreciation or Depreciation | Ending Value | ||||||||||||||||||
MFS Institutional Money Market Portfolio | $954,852 | $16,413,856 | $16,024,512 | $213 | $— | $1,344,409 | ||||||||||||||||||
Affiliated Issuers | Dividend Income | Capital Gain Distributions | ||||||||||||||||||||||
MFS Institutional Money Market Portfolio |
| $4,916 | $— |
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Notes to Financial Statements (unaudited) – continued
(8) | Impacts of COVID-19 |
The pandemic related to the global spread of novel coronavirus disease (COVID-19), which was first detected in December 2019, has resulted in significant disruptions to global business activity and the global economy, as well as the economies of individual countries, the financial performance of individual companies and sectors, and the securities and commodities markets in general. This pandemic, the full effects of which are still unknown, has resulted in substantial market volatility and may have adversely impacted the prices and liquidity of the fund’s investments and the fund’s performance.
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STATEMENT REGARDING LIQUIDITY RISK MANAGEMENT PROGRAM
The fund has adopted and implemented a liquidity risk management program (the “Program”) as required by Rule 22e-4 under the Investment Company Act of 1940, as amended. The fund’s Board of Trustees (the “Board”) has designated MFS as the administrator of the Program. The Program is reasonably designed to assess and manage the liquidity risk of the fund. Liquidity risk is the risk that the fund could not meet requests to redeem shares issued by the fund without significant dilution of remaining investors’ interests.
MFS provided a written report to the Board for consideration at its April 2020 meeting that addressed the operation of the Program and provided an assessment of the adequacy and effectiveness of the Program during the period from the adoption of the Program on December 1, 2018 to December 31, 2019 (the “Covered Period”). The report concluded that during the Covered Period the Program had operated effectively and had adequately and effectively been implemented to assess and manage the fund’s liquidity risk. MFS also reported that there were no liquidity events that impacted the fund or its ability to timely meet redemptions without dilution to existing shareholders during the Covered Period.
There can be no assurance that the Program will achieve its objectives in the future. Further information on liquidity risk, and other principal risks to which an investment in the fund may be subject, can be found in the prospectus.
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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/proxyvoting, 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/proxyvoting, or by visiting the SEC’s Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at http://www.sec.gov. A shareholder can obtain the portfolio holdings report for the first and third quarters of the fund’s fiscal year at mfs.com/vit3 by choosing the fund’s name and then selecting the “Resources” tab and clicking on “Prospectus and Reports”.
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 at https://www.mfs.com/announcements or at mfs.com/vit3 by choosing the fund’s name and then selecting the “Resources” tab and clicking on the “Announcements” tab, if any.
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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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 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. | DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable to the Registrant.
ITEM 13. | EXHIBITS. |
(a) (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. Not applicable. |
(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 as EX-99.302CERT. |
(3) | Any written solicitation to purchase securities under Rule 23c-1 under the Act (17 CFR 270.23c-1) sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable. |
(4) | Change in the registrant’s independent public accountant. Not applicable. |
(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 as EX-99.906CERT. |
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Notice
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 III
By (Signature and Title)* | /S/ DAVID L. DILORENZO | |
David L. DiLorenzo, President |
Date: August 17, 2020
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)* | /S/ DAVID L. DILORENZO | |
David L. DiLorenzo, President (Principal Executive Officer) |
Date: August 17, 2020
By (Signature and Title)* | /S/ JAMES O. YOST | |
James O. Yost, Treasurer (Principal Financial Officer and Accounting Officer) |
Date: August 17, 2020
* | Print name and title of each signing officer under his or her signature. |