<PAGE>
[Logo] M F S(R) Semiannual Report
INVESTMENT MANAGEMENT June 30, 1998
- --------------------------------------------------------------------------------
MFS(R) UTILITIES SERIES
A Series of MFS(R) Variable Insurance Trust(SM)
- --------------------------------------------------------------------------------
[Graphic Omitted]
<PAGE>
MFS(R) UTILITIES SERIES
A SERIES OF MFS(R) VARIABLE INSURANCE TRUST(SM)
<TABLE>
<S> <C>
TRUSTEES INVESTMENT ADVISER
Jeffrey L. Shames* Massachusetts Financial Services Company
Chairman, Chief Executive Officer, and Director, 500 Boylston Street
MFS(R) Investment Management(SM) Boston, MA 02116-3741
DISTRIBUTOR
Nelson J. Darling, Jr. MFS Fund Distributors, Inc.
Professional Trustee 500 Boylston Street
Boston, MA 02116-3741
William R. Gutow
Vice Chairman, SHAREHOLDER SERVICE CENTER
Capitol Entertainment Management Company; MFS Service Center, Inc.
Real Estate Consultant P.O. Box 2281
Boston, MA 02107-9906
PORTFOLIO MANAGER
Maura A. Shaughnessy* For additional information,
contact your financial adviser.
CHAIRMAN AND PRESIDENT
Jeffrey L. Shames* CUSTODIAN
State Street Bank and Trust Company
TREASURER
W. Thomas London* WORLD WIDE WEB
www.mfs.com
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
*Affiliated with the Investment Adviser
</TABLE>
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- -------------------------------------------------------------------------------
<PAGE>
LETTER FROM THE CHAIRMAN
Dear Contract Owners:
With the U.S. stock market well into its fourth year of record-breaking
advances, it is necessary to take a cautious outlook. By most commonly accepted
measures, equity valuations appear to have risen to a point at which the stock
market has become more vulnerable to changes in the investment environment such
as rising inflation and interest rates or a slowing economy. As a result, while
we continue to hold a favorable long-term outlook for the equity markets, we
also believe that a significant market correction is possible and that such a
correction would be a healthy near-term event.
Currently, equity investors seem to be primarily focused on interest rates,
which have been relatively stable for several months as inflation has remained
low. In an environment of low interest rates, stocks become more attractive than
most fixed-income investments, while low inflation helps control companies'
costs, such as for raw materials, wages, and benefits. The near-term outlook for
a continuation of this environment appears relatively favorable. However, this
year has seen a marked slowdown in corporate earnings. This means that as equity
prices continue to rise, price-to-earnings (P/E) ratios, or the amount an
investor pays for a stock in relation to the company's earnings per share, also
go up. A year ago, the average P/E ratio for stocks in the unmanaged Standard &
Poor's 500 Composite Index stood at approximately 22; this summer, the average
P/E ratio was 32% higher, at about 29. In some cases, such as with some of the
newer companies associated with the Internet, P/E ratios have soared to levels
that are unlikely to be sustained.
As long as interest rates remain low and the economy continues to grow, it is
possible that some of these valuations can be supported. We expect corporate
earnings to grow 4% to 6% this year. However, just as no one can predict market
cycles, so too no one can predict economic cycles -- except to say that these
cycles do exist and that an economic slowdown at some point is inevitable.
We believe it is prudent to remind investors of the need to take a long-term
view and to diversify their investments across a range of asset classes. This
includes portfolios that focus on bonds and international investments as well as
on the U.S. stock market. The likelihood of an eventual market correction also
makes it important for us to use original, bottom-up research to find companies
that we think can keep growing or gain market share in the face of the
occasional downturn. To help achieve this, and to provide the broadest possible
coverage of industry sectors and individual companies, MFS continues to increase
its number of full-time research analysts. These analysts thoroughly investigate
each company's earnings potential and position in its industry as well as the
overall prospects for that industry.
MFS also uses active portfolio management on the fixed-income side, taking
advantage of our extensive research and credit analysis to help reduce the
potential for price declines and enhance the opportunity for appreciation. Every
year, both fixed-income and equity managers meet with thousands of credit
issuers and companies. They also attend many presentations, closely follow
sources of industry research, and keep track of competitors.
We believe that applying this discipline of thorough, bottom-up research to both
the equity and fixed-income markets is the best way to provide favorable
long-term performance for our shareholders -- regardless of changes in the
overall market environment.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS(R) Investment Management(SM)
July 13, 1998
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
Dear Contract Owners:
For the six months ended June 30, 1998, the Series provided a total return of
11.57% (including the reinvestment of any distributions). This compares to a
6.90% return for the Standard & Poor's Utility Index (the Utility Index), an
unmanaged, market-value-weighted, total return index of all utility stocks in
the Standard & Poor's 500 Composite Index (the S&P 500). For the same period,
the S&P 500, a popular unmanaged index of common stock total return performance,
returned 17.71%.
This is a flexibly managed portfolio that seeks great investment ideas around
the world. The Series seeks to attain its goals of capital appreciation and
current income by blending stock and bond investments. We invest at least 65% of
our assets in utility companies, and up to 35% of assets can be invested in
foreign utilities. The portfolio is typically allocated 80% to stocks and 20% to
bonds and convertible securities, which has allowed it to achieve solid capital
appreciation and a steady income stream.
The strength of our research has been a key factor in the long-term success of
this portfolio. By gaining a real understanding of companies' fundamental
strengths, the abilities of their management teams, and the regulatory
environment in which utility companies operate, we believe we can pick stocks
that offer the greatest prospects for growth anywhere in the world. It's
important to stress that we don't buy securities on a sector-weighting or
regional-allocation basis. We buy individual companies that meet the portfolio's
criteria. As long as a company's regulatory environment and fundamental outlook
are sound, and we have faith in its management team, we are willing to buy. For
example, Chilectra, a Chilean electric power provider, is a well-run company
that has taken advantage of Chile's very rational industrial regulations to grow
a successful business. Now Chilectra is investing in distribution businesses in
Argentina, Peru, Brazil, and Colombia. We expect that Chilectra's management
strength and business model will help make these other operations successful as
well.
Another attractive stock in our portfolio is CalEnergy, an independent power
provider based in the United States. This is a great company that is making
inroads in both emerging markets like the Philippines, where it serves as a
power generator, and in developed markets such as the United States, the United
Kingdom, and Australia, where it provides both power generation and power
distribution services. We feel the stock represents a good value now and may be
a good partner for a bigger player in the industry.
Because the U.S. gas and electric industries are fairly mature, there is ample
room for cost savings through consolidation in many companies. This could result
in cleaner balance sheets and corresponding boosts in earnings growth and
valuations. Though we feel this would make good economic sense, the realization
of the scenario is hindered by the domestic regulatory environment, which makes
consolidation difficult. The Public Utility Holding Company Act is a roadblock
to consolidation and, until and unless it is repealed, it's unlikely that there
will be much more activity. If the regulations change, we anticipate a flurry of
activity that would be beneficial to individual stocks.
In the telecommunications industry, a company's ability to handle data --
including Internet, fax, and wide-area network traffic -- is the key
differentiator in its ability to compete in the future. In fact, in some parts
of California, electronic data traffic already exceeds traditional telephone
transmissions, and the volume of fax communications there is greater than that
of telephone communications between the United States and Europe. The greatest
opportunities for telecommunications companies lie in bundling Internet and
other enhanced services with phone service as a means of broadening their
offerings to customers, enhancing their sales opportunities, and creating the
perception of leadership.
Merger activity in the sector has been heavy and has aided stock performance.
The WorldCom and MCI union is one of the more prominent among these, and
WorldCom continues to be one of the biggest positions in the portfolio. We feel
that the merger will create the best-positioned large-cap telecommunications
company in the world. Both companies grew up with a highly entrepreneurial
attitude that they've used to successfully compete with monopolies in the United
States. They are now exporting that attitude and business model and are finding
success competing against the big telecommunications companies of Europe.
Respectfully,
/s/ Maura Shaughnessy
Maura Shaughnessy
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and are
only through the end of the period of the report as stated on the cover. The
manager's views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
PORTFOLIO MANAGER'S PROFILE
Maura A. Shaughnessy is a Senior Vice President of MFS(R) Investment
Management(SM) and is portfolio manager of MFS(R) Utilities Fund, MFS(R)
Utilities Series, part of MFS(R) Variable Insurance Trust(SM), and the Utilities
Series offered through MFS(R)/Sun Life annuity products. She is also a member of
the portfolio management team of MFS(R) Total Return Fund.
Ms. Shaughnessy joined MFS in 1991 as an equity analyst and was promoted to Vice
President in 1992 and Senior Vice President in 1998. A graduate of Colby College
and the Amos Tuck School of Business at Dartmouth College, she is a Chartered
Financial Analyst.
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus for the product being offered. Please
read it carefully before investing or sending money.
<PAGE>
SERIES FACTS
Objective: Seeks capital growth and current income
(income above that available from a portfolio
invested entirely in equity securities).
Commencement of
investment operations: January 3, 1995
Size: $52.7 million net assets as of June 30, 1998
PERFORMANCE SUMMARY
Because the Series is designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for the
applicable time periods.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN THROUGH JUNE 30, 1998
6 Months 1 Year 3 Years 10 Years/Life*
- -------------------------------------------------------------------------------
Cumulative Total Return +11.57% +31.61% +107.12% +133.37%
- -------------------------------------------------------------------------------
Average Annual Total Return -- +31.61% + 27.47% + 27.48%
- -------------------------------------------------------------------------------
*For the period from the commencement of the Series' investment operations,
January 3, 1995, through June 30, 1998.
All results are historical and assume the reinvestment of dividends and capital
gains. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS. Performance results reflect any applicable
expense subsidies and waivers, without which the results would have been less
favorable. Subsidies and waivers may be rescinded at any time. See the
prospectus for details.
Returns shown do not reflect the deduction of the mortality and expense risk
charges and administration fees. Please refer to the annuity product's annual
report for performance that reflects the deduction of the fees and charges
imposed by insurance company separate accounts.
The Series may focus its investments in certain sectors, thereby increasing its
vulnerability to any single economic, political, or regulatory development.
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS (Unaudited) - June 30, 1998
Stocks - 80.0%
- ------------------------------------------------------------------------------------------------------
Issuer Shares Value
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 60.2%
Conglomerates - 1.1%
Eastern Enterprises 13,500 $ 578,813
- ------------------------------------------------------------------------------------------------------
Oils - 0.5%
Enron Oil & Gas Co. 13,900 $ 281,475
- ------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts - 6.3%
Beacon Capital Partners, Inc.*## 16,700 $ 334,000
Camden Property Trust 12,500 371,875
Carramerica Realty Corp. 10,500 297,937
CBL & Associates Properties, Inc. 4,500 109,125
Highwood Properties, Inc. 9,000 290,812
Hospitality Properties Trust 3,700 118,863
Kilroy Realty Corp. 9,300 232,500
Mack California Realty Corp. 2,400 82,500
National Health Investors, Inc. 3,550 117,594
Patriot American Hospitality, Inc. 11,100 265,706
Prime Group Realty Trust 5,400 92,475
SL Green Realty Corp. 18,300 411,750
Starwood Lodging Trust 5,300 256,056
Storage Trust Realty 6,700 156,613
TriNet Corporate Realty Trust, Inc. 6,000 204,000
------------
$ 3,341,806
- ------------------------------------------------------------------------------------------------------
Special Products and Services - 0.3%
MCN Energy Group, Inc. 6,300 $ 156,713
- ------------------------------------------------------------------------------------------------------
Telecommunications - 10.5%
Allegiance Telecom, Inc.* 2,200 $ 33,000
Alltel Corp. 8,200 381,300
Cellular Communications International* 7,800 389,025
Century Telephone Enterprises, Inc. 9,600 440,400
Cincinnati Bell, Inc. 12,500 357,812
Global TeleSystems Group, Inc.* 11,000 536,250
Hyperion Telecommunications, Inc., "A"* 300 4,706
Intermedia Communications, Inc.* 6,600 276,788
IXC Communications, Inc.* 11,700 567,450
MCI Communications Corp. 5,300 308,063
Nextlink Communications, Inc., "A"* 9,300 352,237
Qwest Communications International, Inc.* 17,159 598,420
WorldCom, Inc.* 25,970 1,257,922
------------
$ 5,503,373
- ------------------------------------------------------------------------------------------------------
Utilities - Electric - 23.3%
AES Corp.* 9,200 $ 483,575
Atmos Energy Corp. 14,900 454,450
Baltimore Gas & Electric Co. 6,600 205,013
CalEnergy Co., Inc.* 35,500 1,067,219
Carolina Power & Light Co. 16,900 733,037
Cinergy Corp. 17,500 612,500
CMS Energy Corp. 8,400 206,850
CMS Energy Corp., "G" 15,300 673,200
El Paso Electric Co.* 31,600 290,325
Florida Progress Corp. 13,300 546,963
GPU, Inc. 13,300 502,906
Illinova Corp. 19,400 582,000
LG & E Energy Corp. 4,800 129,900
New Century Energies, Inc. 13,500 613,406
Niagara Mohawk Power Corp.* 19,800 295,763
Nipsco Industries, Inc. 22,900 641,200
Peco Energy Co. 11,800 344,413
Public Service Co. of New Mexico 16,700 378,881
Public Service Enterprise Group 15,300 526,894
Scana Corp. 12,300 366,694
Sempra Energy* 3,700 102,675
Sierra Pacific Resources 17,800 646,362
Texas Utilities Co. 24,300 1,011,487
TNP Enterprises, Inc. 9,800 302,575
Unicom Corp. 16,200 568,012
------------
$ 12,286,300
- ------------------------------------------------------------------------------------------------------
Utilities - Gas - 13.6%
Coastal Corp. 7,700 $ 537,556
Columbia Gas System, Inc. 18,050 1,004,031
Consolidated Natural Gas Co. 6,700 394,463
Energen Corp. 8,100 163,013
Enron Corp. 15,600 843,375
KN Energy, Inc. 25,800 1,398,037
National Fuel Gas Co. 19,300 840,756
NICOR, Inc. 14,600 585,825
NUI Corp. 17,800 452,788
ONEOK, Inc. 1,800 71,775
Questar Corp. 25,900 508,287
Washington Gas Light Co. 13,600 363,800
------------
$ 7,163,706
- ------------------------------------------------------------------------------------------------------
Utilities - Telephone - 4.6%
Ameritech Corp. 10,100 $ 453,237
Bell Atlantic Corp. 18,880 861,400
GTE Corp. 14,800 823,250
SBC Communications, Inc. 7,616 304,640
------------
$ 2,442,527
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Total U.S. Stocks $ 31,754,713
- ------------------------------------------------------------------------------------------------------
Foreign Stocks - 19.8%
Brazil - 4.3%
CEMIG (Utilities - Electric) 4,575,000 $ 142,412
Companhia Electricas est Rio de Janeiro (Utilities -
Electric)* 639,400 315,139
Companhia Paranaense de Energia, Preferred "B"
(Utilities - Electric) 40,700,000 380,078
Companhia Riogrand Telecomunicacoes (Utilities -
Telephone) 439,400 479,103
Espirito Santo Centrais Eletricas S.A. (Utilities -
Electric) 1,100 64,678
Espirito Santo Centrais Eletricas S.A., Preferred
(Utilities - Electric) 119,700 91,082
Telecomunicacoes Brasileiras S.A., ADR (Telecommunications) 5,600 611,450
Telecomunicacoes Sao Paulo (Telecommunications) 674,000 158,520
------------
$ 2,242,462
- ------------------------------------------------------------------------------------------------------
Canada - 1.1%
BCE, Inc. (Telecommunications) 8,400 $ 358,575
Bell Canada International, Inc. (Telecommunications)* 9,000 210,375
------------
$ 568,950
- ------------------------------------------------------------------------------------------------------
Chile - 1.2%
Chilectra S.A., ADR (Utilities - Electric) 20,800 $ 445,120
Empresa Nacional de Electricidad S.A., ADR (Utilities
- Electric) 9,500 205,438
------------
$ 650,558
- ------------------------------------------------------------------------------------------------------
Finland - 0.1%
Helsingin Puhelin Oyj (Telecommunications) 1,500 $ 69,706
- ------------------------------------------------------------------------------------------------------
France - 0.4%
Alcatel Alsthom Compagnie, ADR (Telecommunications) 5,500 $ 223,781
- ------------------------------------------------------------------------------------------------------
Germany - 3.4%
Mannesmann AG (Conglomerate) 12,350 $ 1,268,157
VEBA AG (Oil and Gas) 6,250 419,838
VEBA AG, ADR (Oil and Gas) 1,400 92,137
------------
$ 1,780,132
- ------------------------------------------------------------------------------------------------------
Greece - 1.3%
Hellenic Telecommunication Organization S.A., GDR
(Telecommunications) 27,666 $ 708,988
- ------------------------------------------------------------------------------------------------------
Hong Kong - 0.4%
Hutchison Whampoa Ltd. (Conglomerate) 41,000 $ 216,472
- ------------------------------------------------------------------------------------------------------
Hungary - 0.4%
Magyar Tavkozlesi Rt, ADR (Telecommunications) 7,500 $ 220,781
- ------------------------------------------------------------------------------------------------------
Italy - 1.5%
Telecom Italia S.p.A. (Telecommunications)* 66,200 $ 486,918
Telecom Italia S.p.A. di Risp (Telecommunications)* 61,100 295,540
------------
$ 782,458
- ------------------------------------------------------------------------------------------------------
Peru - 0.1%
Luz del Sur S.A. (Utilities - Electric) 53,900 $ 39,906
- ------------------------------------------------------------------------------------------------------
Portugal - 2.6%
Electricidade de Portugal (Utilities - Electric) 27,400 $ 636,286
Portugal Telecom S.A. (Utilities - Telephone) 1,200 63,534
Portugal Telecom S.A., ADR (Utilities - Telephone) 8,200 434,087
Telecel - Comunicacaoes Pessoais S.A. (Telecommunications)* 1,300 230,599
------------
$ 1,364,506
- ------------------------------------------------------------------------------------------------------
Spain - 2.3%
Endesa S.A., ADR (Utilities - Electric) 3,100 $ 67,742
Iberdrola S.A. (Utilities - Electric) 28,000 454,113
Telefonica de Espana S.A., ADR (Telecommunications) 3,145 437,352
Union Electrica Fenosa S.A. (Utilities - Electric) 17,700 227,692
------------
$ 1,186,899
- ------------------------------------------------------------------------------------------------------
United Kingdom - 0.7%
Cable & Wireless Communications PLC (Telecommunications)* 34,900 $ 353,354
- ------------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 10,408,953
- ------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $38,835,605) $ 42,163,666
- ------------------------------------------------------------------------------------------------------
Convertible Preferred Stock - 2.5%
- ------------------------------------------------------------------------------------------------------
Issuer Shares Value
- ------------------------------------------------------------------------------------------------------
Insurance - 0.6%
Conseco, Inc., 7% 6,600 $ 300,960
- ------------------------------------------------------------------------------------------------------
Telecommunications - 1.0%
IXC Communications, Inc., 6.75%* 11,000 $ 528,000
- ------------------------------------------------------------------------------------------------------
Utilities - Electric - 0.9%
CalEnergy Capital Trust III, 6.5%*## 6,800 $ 308,125
CalEnergy Capital Trust III, 6.75% 3,800 172,188
------------
$ 480,313
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Total Convertible Preferred Stock (Identified Cost, $1,313,099) $ 1,309,273
- ------------------------------------------------------------------------------------------------------
Bonds - 10.0%
- ------------------------------------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- ------------------------------------------------------------------------------------------------------
U.S. Bonds - 9.5%
Banks and Credit Companies - 0.2%
Beaver Valley Funding Corp., 9s, 2017 $ 75 $ 85,766
- ------------------------------------------------------------------------------------------------------
Conglomerates - 0.1%
News America Holdings, Inc., 8.875s, 2023 $ 50 $ 59,572
- ------------------------------------------------------------------------------------------------------
Construction Services - 0.2%
Georgia Pacific Corp., 9.5s, 2022 $ 100 $ 116,613
- ------------------------------------------------------------------------------------------------------
Entertainment - 0.6%
Circus Circus Enterprises, Inc., 6.45s, 2006 $ 50 $ 47,022
Hearst Argyle Television, Inc., 7.5s, 2027 100 106,524
Time Warner, Inc., 9.15s, 2023 120 151,291
------------
$ 304,837
- ------------------------------------------------------------------------------------------------------
Financial Institutions - 0.6%
Goldman Sachs Group LP, 5.9s, 2003 $ 150 $ 148,020
Salton Sea Funding Corp., 6.69s, 2000 47 47,206
Salton Sea Funding Corp., 7.84s, 2010 100 108,841
------------
$ 304,067
- ------------------------------------------------------------------------------------------------------
Forest and Paper Products
Boise Cascade Co., 7.43s, 2005 $ 15 $ 15,358
- ------------------------------------------------------------------------------------------------------
Industrial
Owens Illinois, Inc., 7.35s, 2008 $ 2 $ 2,025
Owens Illinois, Inc., 7.5s, 2010 2 2,028
Owens Illinois, Inc., 7.8s, 2018 2 2,051
------------
$ 6,104
- ------------------------------------------------------------------------------------------------------
Insurance - 0.3%
NGC Corp. Capital Trust I, 8.316s, 2027 $ 145 $ 171,283
- ------------------------------------------------------------------------------------------------------
Oils - 0.5%
Oryx Energy Co., 8.375s, 2004 $ 100 $ 107,813
Sun Co., Inc., 9s, 2024 150 294,172
------------
$ 294,172
- ------------------------------------------------------------------------------------------------------
Telecommunications - 1.0%
Cellular Communications International, 6s, 2005 $ 341 $ 267,148
Tele-Communications, Inc., 10.125s, 2001 125 138,641
WorldCom, Inc., 8.875s, 2006 100 108,787
------------
$ 514,576
- ------------------------------------------------------------------------------------------------------
U.S. Government Agencies - 0.2%
Federal National Mortgage Association - 0.2%
FNMA, 6.5s, 2013 $ 108 $ 108,755
- ------------------------------------------------------------------------------------------------------
U.S. Government Guaranteed - 2.6%
Government National Mortgage Association - 0.7%
GNMA, 7s, 2028 $ 42 $ 43,120
GNMA, 7.5s, 2027 159 162,940
GNMA, 8s, 2025 - 2027 156 161,932
------------
$ 367,992
- ------------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 1.9%
U.S. Treasury Bonds, 6.125s, 2027 $ 515 $ 551,854
U.S. Treasury Bonds, 9.875s, 2015 40 58,262
U.S. Treasury Notes, 6.5s, 2006 270 286,705
U.S. Treasury Notes, 6.625s, 2002 25 25,894
U.S. Treasury Notes, 9.125s, 1999 75 77,273
------------
$ 999,988
- ------------------------------------------------------------------------------------------------------
Total U.S. Government Guaranteed $ 1,367,980
- ------------------------------------------------------------------------------------------------------
Utilities - Electric - 2.4%
AEP Generating, 9.82s, 2022 $ 99 $ 128,372
Commonwealth Edison Co., 7.625s, 2007 40 42,521
Connecticut Light & Power Co., 8.59s, 2003 100 101,125
First PV Funding Corp., 10.15s, 2016 10 10,652
Long Island Lighting Co., 8.2s, 2023 150 167,628
Long Island Lighting Co., 9s, 2022 5 5,703
Montana Power Co., 7.875s, 2026 25 28,967
Niagara Mohawk Power Corp., 7.25s, 2002 200 199,864
Niagara Mohawk Power Corp., 7.625s, 2005 200 200,848
Niagara Mohawk Power Corp., 8.5s, 2023 110 121,718
Seabrook Station - Unit 1, 7.83s, 2019 92 97,310
Texas & New Mexico Power Co., 12.5s, 1999 50 51,506
Texas Utilities Co., 6.375s, 2008 120 117,594
------------
$ 1,273,808
- ------------------------------------------------------------------------------------------------------
Utilities - Gas - 0.6%
Coastal Corp., 6.95s, 2028 $ 65 $ 62,795
Coastal Corp., 7.42s, 2037 90 94,094
Tennessee Gas Pipeline Co., 7.625s, 2037 50 54,118
Texas Gas Transmission Corp., 7.25s, 2027 100 104,055
------------
$ 315,062
- ------------------------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 0.2%
Long Island Power Authority, New York Electric, 5.25s,
2026 $ 100 $ 98,561
- ------------------------------------------------------------------------------------------------------
Total U.S. Bonds $ 5,036,514
- ------------------------------------------------------------------------------------------------------
Foreign Bonds - 0.5%
Argentina - 0.2%
Hidroelectrica Alicura, 8.375s, 1999 (Utilities -
Electric)## $ 100 $ 99,500
- ------------------------------------------------------------------------------------------------------
Canada - 0.2%
Gulf Canada, 9.25s, 2004 (Oils) $ 90 $ 94,074
- ------------------------------------------------------------------------------------------------------
South Korea - 0.1%
Republic of Korea, 8.875s, 2008 (Government) $ 40 $ 36,178
- ------------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 229,752
- ------------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $5,135,010) $ 5,266,266
- ------------------------------------------------------------------------------------------------------
Convertible Bonds - 2.0%
- ------------------------------------------------------------------------------------------------------
Financial Institutions - 0.5%
ADT Operations, Inc., 0s, 2010 $ 160 $ 269,800
- ------------------------------------------------------------------------------------------------------
Telecommunications - 1.5%
Cellular Commerce International, Inc., 6s, 2005## $ 560 $ 795,200
- ------------------------------------------------------------------------------------------------------
Total Convertible Bonds (Identified Cost, $686,481) $ 1,065,000
- ------------------------------------------------------------------------------------------------------
Rights
- ------------------------------------------------------------------------------------------------------
Shares
- ------------------------------------------------------------------------------------------------------
Telecomunicacoes de Sao Paulo (Utilities - Telephone)
(Identified Cost, $0)* 31,676 $ 25
- ------------------------------------------------------------------------------------------------------
Short-Term Obligations - 8.5%
- ------------------------------------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- ------------------------------------------------------------------------------------------------------
Federal Home Loan Bank, due 7/01/98 $ 1,500 $ 1,500,000
Federal Home Loan Mortgage Corp., due 7/27/98 2,000 1,992,099
Federal National Mortgage Assn., due 7/07/98 1,000 999,073
- ------------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 4,491,172
- ------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $50,461,367) $ 54,295,402
Other Assets, Less Liabilities - (3.0)% (1,576,542)
- ------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $ 52,718,860
- ------------------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- ----------------------------------------------------------------------------
June 30, 1998
- ----------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $50,461,367) $54,295,402
Cash 5,427
Foreign currency, at value (identified cost, $778) 770
Receivable for Series shares sold 1,382,330
Receivable for investments sold 257,998
Net receivable for foreign currency exchange contracts
subject to master netting agreements 3,081
Interest and dividends receivable 203,847
Deferred organization expenses 2,779
Other assets 198
-----------
Total assets $56,151,832
-----------
Liabilities:
Payable for Series shares reacquired $ 471,766
Payable for investments purchased 2,955,620
Payable to affiliates -
Management fee 3,174
Shareholder servicing agent fee 141
Administrative fee 60
Accrued expenses and other liabilities 2,211
-----------
Total liabilities $ 3,432,972
-----------
Net assets $52,718,860
===========
Net assets consist of:
Paid-in capital $45,503,194
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 3,836,049
Accumulated undistributed net realized gain on investment
and foreign currency transactions 2,862,174
Accumulated undistributed net investment income 517,443
-----------
Total $52,718,860
===========
Shares of beneficial interest outstanding 2,815,485
=========
Net asset value per share
(net assets / shares of beneficial interest outstanding) $18.72
======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations (Unaudited)
- ------------------------------------------------------------------------------
Six Months Ended June 30, 1998
- ------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 524,825
Interest 214,586
Foreign taxes withheld (20,076)
----------
Total investment income $ 719,335
----------
Expenses -
Management fee $ 147,960
Trustees' compensation 1,017
Shareholder servicing agent fee 6,902
Administrative fee 2,921
Printing 23,372
Custodian fee 12,356
Auditing fees 8,050
Legal fees 1,115
Amortization of organization expenses 919
Miscellaneous 5,121
----------
Total expenses $ 209,733
Fees paid indirectly (1,626)
Preliminary reduction of expenses by investment adviser (10,826)
----------
Net expenses $ 197,281
----------
Net investment income $ 522,054
----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $2,889,344
Foreign currency transactions (7,324)
----------
Net realized gain on investment and foreign
currency transactions $2,882,020
----------
Change in unrealized appreciation -
Investments $ 691,282
Translation of assets and liabilities in
foreign currencies 2,066
----------
Net unrealized gain on investments and foreign
currency translation $ 693,348
----------
Net realized and unrealized gain on investments
and foreign currency $3,575,368
----------
Increase in net assets from operations $4,097,422
==========
See notes to financial statements
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
<CAPTION>
- ----------------------------------------------------------------------------------------
Six Months Ended Year Ended
June 30, 1998 December 31, 1997
(Unaudited)
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 522,054 $ 514,611
Net realized gain on investment and foreign
currency transactions 2,882,020 2,337,591
Net unrealized gain on investments and foreign
currency translation 693,348 2,531,459
----------- -----------
Increase in net assets from operations $ 4,097,422 $ 5,383,661
----------- -----------
Distributions declared to shareholders -
From net investment income $ (517,487) $ --
From net realized gain on investment and foreign
currency transactions (2,352,812) --
----------- -----------
Total distributions declared to shareholders $(2,870,299) $ --
----------- -----------
Net increase in net assets from Series share
transactions $21,344,925 $15,191,010
----------- -----------
Total increase in net assets $22,572,048 $20,574,671
----------- -----------
Net assets:
At beginning of period 30,146,812 9,572,141
----------- -----------
At end of period (including accumulated
undistributed net investment income of
$517,443 and $512,876, respectively) $52,718,860 $30,146,812
=========== ===========
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
Six Months Ended ----------------------------- Period Ended
June 30, 1998 1997 1996 December 31, 1995*
(Unaudited)
- -------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C>
Net asset value - beginning of period $17.99 $13.66 $12.57 $10.00
------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.24 $ 0.44 $ 0.55 $ 0.39
Net realized and unrealized gain on investment and
foreign currency transactions 1.80 3.89 1.78 3.00
------ ------ ------ ------
Total from investment operations $ 2.04 $ 4.33 $ 2.33 $ 3.39
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.24) $ -- $(0.35) $(0.24)
From net realized gain on investment and foreign
currency transactions (1.07) -- (0.88) (0.58)
In excess of net realized gain on investment and
foreign currency transactions -- -- (0.01) --
------ ------ ------ ------
Total distributions declared to shareholders $(1.31) $ -- $(1.24) $(0.82)
------ ------ ------ ------
Net asset value - end of period $18.72 $17.99 $13.66 $12.57
====== ====== ====== ======
Total return 11.57%++ 31.70% 18.51% 33.94%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 1.00%+ 1.00% 1.00% 1.00%+
Net investment income 2.65%+ 2.92% 4.19% 3.66%+
Portfolio turnover 60% 69% 121% 94%
Net assets at end of period (000 omitted) $52,719 $30,147 $9,572 $2,373
* For the period from the commencement of the Series' investment operations, January 3, 1995, through December 31, 1995.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Series' expenses are calculated without reduction for fees paid indirectly.
(S) Subject to reimbursement by the Series, the investment adviser voluntarily agreed to maintain the expenses of the Series,
exclusive of management fees, at not more than 0.25% of average daily net assets. To the extent actual expenses were
over/under this limitation, the net investment income per share and the ratios would have been:
Net investment income $ 0.23 $ 0.41 $ 0.32 $ 0.17
Ratios (to average net assets):
Expenses## 1.06%+ 1.20% 2.75% 3.08%+
Net investment income 2.59%+ 2.71% 2.44% 1.62%+
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Utilities Series (the Series) is a non-diversified series of MFS(R) Variable
Insurance Trust(SM) (the Trust) which is comprised of the following 13 series:
MFS(R) Bond Series, MFS(R) Emerging Growth Series, MFS(R)/Foreign & Colonial
Emerging Markets Equity Series, MFS(R) Growth with Income Series, MFS(R) High
Income Series, MFS(R) Limited Maturity Series, MFS(R) Money Market Series,
MFS(R) New Discovery Series, MFS(R) Research Series, MFS(R) Total Return Series,
MFS Utilities Series, MFS(R) Value Series, and MFS(R) World Governments Series.
The Trust is organized as a Massachusetts business trust and is registered under
the Investment Company Act of 1940, as amended, as an open-end management
investment company. The shareholders of each Series of the Trust are separate
accounts of insurance companies which offer variable annuity and/or life
insurance products. As of June 30, 1998, there were 23 shareholders of the
Series.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Investments
in foreign securities are vulnerable to the effects of changes in the relative
values of the local currency and the U.S. dollar and to the effects of changes
in each country's legal, political, and economic environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last sale
prices. Unlisted equity securities or listed equity securities for which last
sale prices are not available are reported at market value using last quoted bid
prices. Debt securities (other than short-term obligations which mature in 60
days or less), including listed issues and forward contracts, are valued on the
basis of valuations furnished by dealers or by a pricing service with
consideration to factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics, and other market data, without exclusive reliance upon exchange
or over-the-counter prices. Short-term obligations, which mature in 60 days or
less, are valued at amortized cost, which approximates market value. Securities
for which there are no such quotations or valuations are valued at fair value as
determined in good faith by or at the direction of the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. 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. 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 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.
Deferred Organization Expenses - Costs incurred by the Series in connection with
its organization have been deferred and are being amortized on a straight-line
basis over a five-year period beginning on the date of commencement of Series
operations.
Forward Foreign Currency Exchange Contracts - The Series may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties to
meet the terms of their contracts and from unanticipated movements in the value
of a foreign currency relative to the U.S. dollar. The Series will enter into
forward contracts for hedging purposes as well as for non-hedging purposes. For
hedging purposes, the Series may enter into contracts to deliver or receive
foreign currency it will receive from or require for its normal investment
activities. The Series may also use contracts in a manner intended to protect
foreign currency-denominated securities from declines in value due to
unfavorable exchange rate movements. For non-hedging purposes, the Series may
enter into contracts with the intent of changing the relative exposure of the
Series' portfolio of securities to different currencies to take advantage of
anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains or
losses on foreign currency transactions.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All discount is
accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend and interest payments received in additional
securities are recorded on the ex-dividend or ex-interest date in an amount
equal to the value of the security on such date.
Fees Paid Indirectly - The Series' custody fee is calculated as a percentage of
the Series' month end net assets. The fee is reduced according to an arrangement
that measures the value of cash deposited with the custodian by the Series. This
amount is shown as a reduction of expenses on the Statement of Operations.
Tax Matters and Distributions - The Series' policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Series' files a tax
return annually using tax accounting methods required under provisions of the
Code, which may differ from generally accepted accounting principles, the basis
on which these financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial statements
may differ from that reported on the Series' tax return.
Distributions to shareholders are recorded on the ex-dividend date. The Series
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits are reported in the financial statements as a tax return of capital.
Differences in the recognition or classification of income between the financial
statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains.
(3) Transactions with Affiliates
Investment Adviser - The Series has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.75% of
average daily net assets. The Series has a temporary expense reimbursement
agreement whereby MFS has voluntarily agreed to pay all of the Series' operating
expenses, exclusive of management fees. The Series in turn will pay MFS an
expense reimbursement fee not greater than 0.25% of average daily net assets. To
the extent that the expense reimbursement fee exceeds the Series' actual
expenses, the excess will be applied to amounts paid by MFS in prior years. At
June 30, 1998, the aggregate unreimbursed expenses owed to MFS by the Series
amounted to $163,587.
The Series pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Series, all of whom receive
remuneration for their services to the Series from MFS. Certain officers and
Trustees of the Series are officers or directors of MFS and MFS Service Center,
Inc. (MFSC).
Administrator - The Series has an administrative services agreement with MFS to
provide the Series with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Series pays MFS an administrative fee
at the following annual percentages of the Series' average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the Series' average daily net assets at an effective annual rate
of 0.035%.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions and
short-term obligations, were as follows:
Purchases Sales
- -------------------------------------------------------------------------------
U.S. government securities $ 1,961,744 $ 2,735,226
=========== ===========
Investments (non-U.S. government securities) $39,318,023 $20,500,311
=========== ===========
The cost and unrealized appreciation or depreciation in value of the investments
owned by the Series, as computed on a federal income tax basis, are as follows:
Aggregate cost $50,461,367
===========
Gross unrealized appreciation $ 4,863,916
Gross unrealized depreciation (1,029,881)
-----------
Net unrealized appreciation $ 3,834,035
===========
(5) Shares of Beneficial Interest
The Series' Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par value).
Transactions in Series' shares were as follows:
Six Months Ended Year Ended
June 30, 1998 December 31, 1997
------------------- --------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------
Shares sold 1,893,590 $35,381,181 1,542,046 $23,966,904
Shares issued to
shareholders in
reinvestment of
distributions 157,019 2,870,299 -- --
Shares reacquired (911,189) (16,906,555) (566,548) (8,775,894)
--------- ----------- --------- -----------
Net increase 1,139,420 $21,344,925 975,498 $15,191,010
========= =========== ========= ===========
(6) Line of Credit
The Series and other affiliated funds participate in a $805 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of
Series shares. Interest is charged to each fund, based on its borrowings, at a
rate equal to the bank's base rate. In addition, a commitment fee, based on the
average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fee allocated to
the Series for the six months ended June 30, 1998, was $50.
(7) Financial Instruments
The Series trades financial instruments with off-balance-sheet risk in the
normal course of its investing activities in order to manage exposure to market
risks such as interest rates and foreign currency exchange rates. These
financial instruments include forward foreign currency exchange contracts. The
notional or contractual amounts of these instruments represent the investment
the Series has in particular classes of financial instruments and does not
necessarily represent the amounts potentially subject to risk. The measurement
of the risks associated with these instruments is meaningful only when all
related and offsetting transactions are considered.
Forward foreign currency purchases and sales under master netting agreements
with Merrill Lynch & Co. amounted to a net receivable of $3,081 at June 30,
1998. At June 30, 1998, the Series had sufficient cash and/or securities to
cover any commitments under these contracts.
<PAGE>
(C)1998 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
VUF-3 8/98 25.7M
