[MFS LOGO]
WE INVENTED THE MUTUAL FUND[RegTM]
MFS[RegTM] VARIABLE INSURANCE TRUST[SM]
MAY 1, 1999
Prospectus
MFS[RegTM] EMERGING GROWTH SERIES
MFS[RegTM] CAPITAL OPPORTUNITIES SERIES
MFS[RegTM] GROWTH WITH INCOME SERIES
MFS[RegTM] NEW DISCOVERY SERIES
MFS[RegTM] GROWTH SERIES
MFS[RegTM] TOTAL RETURN SERIES
MFS[RegTM] HIGH INCOME SERIES
MFS[RegTM] GLOBAL EQUITY SERIES
- --------------------------------------------------------------------------------
This Prospectus describes eight of the series of the MFS Variable Insurance
Trust (referred to as the trust):
1. MFS Emerging Growth Series seeks to provide long-term growth of capital
(referred to as the Emerging Growth Series);
2. MFS Capital Opportunities Series seeks capital appreciation (referred to as
the Capital Opportunities Series);
3. MFS Growth With Income Series seeks to provide reasonable current income and
long-term growth of capital and income (referred to as the Growth With
Income Series);
4. MFS New Discovery Series seeks capital appreciation (referred to as the New
Discovery Series);
5. MFS Growth Series seeks to provide long-term growth of capital and future
income rather than current income (referred to as the Growth Series);
6. MFS Total Return Series seeks primarily to provide above-average income
(compared to a portfolio invested entirely in equity securities) consistent
with the prudent employment of capital, and secondarily to provide a
reasonable opportunity for growth of capital and income (referred to as the
Total Return Series);
7. MFS High Income Series seeks high current income by investing primarily in a
professionally managed diversified portfolio of fixed income securities,
some of which may involve equity features (referred to as the High Income
Series); and
8. MFS Global Equity Series seeks capital appreciation (referred to as the
Global Equity Series);
The Securities and Exchange Commission has not approved the series' shares or
determined whether this prospectus is accurate or complete. Anyone who tells
you otherwise is committing a crime.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
I Expense Summary ............................................ 1
II Risk Return Summary ........................................ 3
1. Emerging Growth Series .................................. 3
2. Capital Opportunities Series ............................ 5
3. Growth With Income Series ............................... 8
4. New Discovery Series .................................... 10
5. Growth Series ........................................... 12
6. Total Return Series ..................................... 14
7. High Income Series ...................................... 18
8. Global Equity Series .................................... 21
III Certain Investment Strategies and Risks .................... 23
IV Management of the Series ................................... 23
V Description of Shares ...................................... 23
VI Other Information .......................................... 24
VII Financial Highlights ....................................... 25
Appendix A -- Investment Techniques and Practices .......... A-1
</TABLE>
<PAGE>
The trust offers shares of its 15 series to separate accounts established
by insurance companies in order to serve as investment vehicles for
variable annuity and variable life insurance contracts and to qualified
pension and retirement plans. Each of these series is managed by
Massachusetts Financial Services Company (referred to as MFS or the
adviser). Eight of these series are described below.
I EXPENSE SUMMARY
[arrow] Expense Table
This table describes the expense that you may pay when you hold shares
of the series. These fees and expenses do not take into account the fees
and expenses imposed by insurance companies through which your
investment in a series may be made.
Annual Series Operating Expenses (expenses that are deducted from a
series' assets):
<TABLE>
<CAPTION>
Growth
Emerging Capital With New
Growth Opportunities Income Discovery
Series Series Series Series
---------- ------------------ ---------- ------------------
<S> <C> <C> <C> <C>
Management Fee .................................... 0.75% 0.75% 0.75% 0.90%
Other Expenses(1) ................................. 0.10% 0.36% 0.13% 4.32%
---- ----- ---- -----
Total Annual Series Operating Expenses(1) ......... 0.85% 1.11% 0.88% 5.22%
Expense Reimbursement ............................ -- (0.09)%(2) -- (4.05)%(2)
---- ----- ---- -----
Net Expenses(1) .................................. 0.85% 1.02% 0.88% 1.17%
</TABLE>
<TABLE>
<CAPTION>
Total High Global
Growth Return Income Equity
Series Series Series Series
------------------ ---------- ---------- ------------------
<S> <C> <C> <C> <C>
Management Fee .................................... 0.75% 0.75% 0.75% 1.00%
Other Expenses(1) ................................. 3.28% 0.16% 0.28% 3.28%
----- ---- ---- -----
Total Annual Series Operating Expenses(1) ......... 4.03% 0.91% 1.03% 4.28%
Expense Reimbursement ............................ (3.03)%(2) -- -- (3.03)%(2)
----- ---- ---- -----
Net Expenses(1) .................................. 1.00% 0.91% 1.03% 1.25%
</TABLE>
-----------
(1) Each series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series with
its custodian and dividend disbursing agent. Each series may enter into
other such arrangements and directed brokerage arrangements, which would
also have the effect of reducing the series' expenses. Expenses do not
take into account these expense reductions, and are therefore higher than
the actual expenses of the series.
(2) MFS has contractually agreed to bear expenses for these series, subject
to reimbursement by these series, such that each such series' "Other
Expenses" shall not exceed 0.25% of the average daily net assets of the
series during the current fiscal year. The payments made by MFS on behalf
of each series under this arrangement are subject to reimbursement by the
series to MFS, which will be accomplished by the payment of an expense
reimbursement fee by the series to MFS computed and paid monthly at a
percentage of the series' average daily net assets for its then current
fiscal year, with a limitation that immediately after such payment the
series' "Other Expenses" will not exceed the percentage set forth above
for that series. The obligation of MFS to bear a series' "Other Expenses"
pursuant to this arrangement, and the series' obligation to pay the
reimbursement fee to MFS, terminates on the earlier of the date on which
payments made by the series' equal the prior payment of such reimbursable
expenses by MFS, or December 31, 2004 (May 1, 2001, in the case of the
New Discovery Series and May 1, 2002 in the case of the Growth Series and
the Global Equity Series). MFS may, in its discretion, terminate this
contractual arrangement at an earlier date, provided that the arrangement
will continue for each series until at least May 1, 2000, unless
terminated with the consent of the board of trustees which oversees the
series.
[arrow] Example of Expenses
These examples are intended to help you compare the cost of investing in
the series with the cost of investing in other mutual funds. These
examples do not take into account the fees and expenses imposed by
insurance companies through which your investment in a series may be
made.
The examples assume that:
o You invest $10,000 in the series for the time periods indicated and
you redeem your shares at the end of the time periods;
o Your investment has a 5% return each year and dividends and other
distributions are reinvested; and
o The series' operating expenses remain the same.
1
<PAGE>
Although your actual costs may be higher or lower, under these assumptions
your costs would be:
<TABLE>
<CAPTION>
Period
--------------------------------------------
Series 1 Year 3 Years 5 Years 10 Years
- --------------------------------- --------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Emerging Growth Series $ 87 $ 271 $ 471 $1,049
Capital Opportunities Series 104 344 603 1,344
Growth With Income Series 90 281 488 1,084
New Discovery Series 119 1,201 2,278 4,949
Growth Series 102 948 -- --
Total Return Series 93 290 504 1,120
High Income Series 105 328 569 1,259
Global Equity Series 127 1,022 -- --
</TABLE>
2
<PAGE>
II RISK RETURN SUMMARY
Investment strategies which are common to all series are described under
the caption "Certain Investment Strategies."
1: Emerging Growth Series
........................................................................
[arrow] Investment Objective
The series' investment objective is long term growth of capital. The
series' objective may be changed without shareholder approval.
[arrow] Principal Investment Policies
The series invests, under normal market conditions, at least 65% of its
total assets in common stocks and related securities, such as preferred
stocks, convertible securities and depositary receipts for those
securities, of emerging growth companies. Emerging growth companies are
companies which MFS believes are either:
o early in their life cycle but which have the potential to become major
enterprises, or
o major enterprises whose rates of earnings growth are expected to
accelerate because of special factors, such as rejuvenated management,
new products, changes in consumer demand, or basic changes in the
economic environment.
Emerging growth companies may be of any size, and MFS would expect these
companies to have products, technologies, management, markets and
opportunities which will facilitate earnings growth over time that is
well above the growth rate of the overall economy and the rate of
inflation. The series' investments may include securities listed on a
securities exchange or traded in the over-the-counter markets.
MFS uses a bottom-up, as opposed to a top-down, investment style in
managing the equity-oriented funds (such as the series) it advises. This
means that securities are selected based upon fundamental analysis
performed by the series' portfolio manager and MFS' large group of
equity research analysts.
[arrow] Principal Risks
The principal risks of investing in the series and the circumstances
reasonably likely to cause the value of your investment in the series to
decline are described below. As with any non-money market mutual fund,
the share price of the series will change daily based on market
conditions and other factors. Please note that there are many
circumstances which could cause the value of your investment in the
series to decline, and which could prevent the series from achieving its
objective, that are not described here.
The principal risks of investing in the series are:
o Market Risk: This is the risk that the price of a security held by the
series will fall due to changing economic, political or market
conditions or disappointing earnings results.
o Emerging Growth Risk: Prices of securities react to the economic
condition of the company that issued the security. The series' equity
investments in an issuer may rise and fall based on the issuer's
actual and anticipated earnings, changes in management and the
potential for takeovers and acquisitions. Investments in emerging
growth companies may be subject to more abrupt or erratic market
movements and may involve greater risks than investments in other
companies. Emerging growth companies often:
[arrow] have limited product lines, markets and financial
resources
[arrow] are dependent on management by one or a few key
individuals
[arrow] have shares which suffer steeper than average price
declines after disappointing earnings reports and are more
difficult to sell at satisfactory prices
o Over-the-Counter Risk: Over-the-counter (OTC) transactions involve
risks in addition to those associated with transactions in securities
traded on exchanges. OTC-listed companies may have limited product
lines, markets or financial resources. Many OTC stocks trade less
frequently and in smaller volume than exchange-listed stocks. The
values of these stocks may be more volatile than exchange-listed
stocks, and the series may experience difficulty in establishing or
closing out positions in these stocks at prevailing market prices.
o As with any mutual fund, you could lose money on your investment in
the series.
An investment in the series is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
3
<PAGE>
[arrow] Bar Chart and Performance Table
The bar chart and performance table below are intended to indicate some
of the risks of investing in the series by showing changes in the
series' performance over time. The performance table also shows how the
series performance over time compares with that of one or more broad
measures of market performance. The chart and table provide past
performance information. The series' past performance does not
necessarily indicate how the series will perform in the future. The
returns shown do not reflect fees and charges imposed under the variable
annuity and life insurance contracts through which an investment may be
made. If these fees and charges were included, they would reduce these
returns.
Bar Chart
The bar chart shows changes in the annual total returns of the series'
shares for each calendar year since they were first offered, assuming
the reinvestment of distributions.
[BAR CHART]
1996 1997 1998
17.02% 21.90% 34.16%
[END OF BAR CHART]
During the period shown in the bar chart, the highest quarterly
return was 27.04% (for the calendar quarter ended December 31, 1998)
and the lowest quarterly return was (13.11)% (for the calendar quarter
ended September 30, 1998).
Performance Table
This table shows how the average annual total returns of the series'
shares compares to a broad measure of market performance and various
other market indicators and assumes the reinvestment of distributions.
Average Annual Total Returns as of December 31, 1998
.......................................................................
<TABLE>
<CAPTION>
1 Year Life
<S> <C> <C>
Emerging Growth Series* 34.16% +26.55%
Russell 2000 Total Return Index**+ -2.55% +12.03%
Standard & Poor's 500 Composite Index**++ +28.58% +28.16%
</TABLE>
-----------
* "Life" refers to the period from the commencement of the series'
investment operations, July 24, 1995, through December 31, 1998.
** Source: CDA/Wiesenberger. "Life" refers to the period from August 1,
1995, through December 31, 1998.
+ The Russell 2000 Total Return Index is a broad based, unmanaged index
comprised of 2,000 of the smallest U.S.-domiciled company common
stocks (on the basis of capitalization) that are traded in the United
States on the New York Stock Exchange, the American Stock Exchange,
and Nasdaq.
++ The Standard & Poor's 500 Composite Index is a broad based, unmanaged
index of common stock total return performance.
[arrow] Portfolio Manager
John W. Ballen, President of MFS, has been employed by the Adviser as a
portfolio manager since 1984. Mr. Ballen has been the series' portfolio
manager since its inception. Toni Y. Shimura, a Vice President of MFS,
has been employed by the Adviser as a portfolio manager since 1987. Ms.
Shimura became portfolio manager of the series on November 30, 1995.
4
<PAGE>
2: Capital Opportunities Series
........................................................................
[arrow] Investment Objective
The series' investment objective is capital appreciation. The series'
objective may be changed without shareholder approval.
[arrow] Principal Investment Policies
The series invests, under normal market conditions, at least 65% of its
total assets in common stocks and related securities, such as preferred
stocks, convertible securities and depositary receipts for those
securities. The series focuses on companies which MFS believes have
favorable growth prospectus and attractive valuations based on current
and expected earnings or cash flow. The series' investments may include
securities listed on a securities exchange or traded in the
over-the-counter markets.
MFS uses a bottom-up, as opposed to a top-down, investment style in
managing the equity-oriented funds (such as the series) it advises. This
means that securities are selected based upon fundamental analysis
performed by the series' portfolio manager and MFS' large group of
equity research analysts.
The series may invest in foreign securities (including emerging market
securities), through which it may have exposure to foreign currencies.
[arrow] Principal Risks
The principal risks of investing in the series and the circumstances
reasonably likely to cause the value of your investment in the series to
decline are described below. As with any non-money market mutual fund,
the share price of the series will change daily based on market
conditions and other factors. Please note that there are many
circumstances which could cause the value of your investment in the
series to decline, and which could prevent the series from achieving its
objective, that are not described here.
The principal risks of investing in the series are:
o Market Risk: This is the risk that the price of a security held by the
series will fall due to changing economic, political or market
conditions or disappointing earnings results.
o Company Risk: Prices of securities react to the economic condition of
the company that issued the security. The series' equity investments
in an issuer may rise and fall based on the issuer's actual and
anticipated earnings, changes in management and the potential for
takeovers and acquisitions.
o Over-the-Counter Risk: Over-the-counter (OTC) transactions involve
risks in addition to those associated with transactions in securities
traded on exchanges. OTC-listed companies may have limited product
lines, markets or financial resources. Many OTC stocks trade less
frequently and in smaller volume than exchange-listed stocks. The
values of these stocks may be more volatile than exchange-listed
stocks, and the series may experience difficulty in establishing or
closing out positions in these stocks at prevailing market prices.
o Foreign Securities Risk: Investments in foreign securities involve
risks relating to political, social and economic developments abroad,
as well as risks resulting from the differences between the
regulations to which U.S. and foreign issuers and markets are subject:
[arrow] These risks may include the seizure by the government of
company assets, excessive taxation, withholding taxes on
dividends and interest, limitations on the use or transfer
of portfolio assets, and political or social instability.
[arrow] Enforcing legal rights may be difficult, costly and slow
in foreign countries, and there may be special problems
enforcing claims against foreign governments.
[arrow] Foreign companies may not be subject to accounting
standards or governmental supervision comparable to U.S.
companies, and there may be less public information about
their operations.
[arrow] Foreign markets may be less liquid and more volatile than
U.S. markets.
[arrow] Foreign securities often trade in currencies other than
the U.S. dollar, and the series may directly hold foreign
currencies and purchase and sell foreign currencies
through forward exchange contracts. Changes in currency
exchange rates will affect the series' net asset value,
the value of dividends and interest earned, and gains and
losses realized on the sale of securities. An increase in
the strength of the U.S. dollar relative to these other
currencies may cause the value of the series to decline.
Certain foreign currencies may be particularly volatile,
and foreign governments may intervene in the currency
markets, causing a decline in value or liquidity in the
series' foreign currency holdings. By entering into
forward foreign currency exchange contracts, the series
may be required to forego the benefits of advantageous
changes in exchange rates and, in the case of forward
contracts entered into for the purpose of increasing
return, the series may sustain losses
5
<PAGE>
which will reduce its gross income. Forward foreign
currency exchange contracts involve the risk that the
party with which the series enters the contract may fail
to perform its obligations to the series.
o Emerging Markets Risk: Emerging markets are generally defined as
countries in the initial stages of their industrialization cycles with
low per capita income. Investments in emerging markets securities
involve all of the risks of investments in foreign securities, and
also have additional risks:
[arrow] All of the risks of investing in foreign securities are
heightened by investing in emerging markets countries.
[arrow] The markets of emerging markets countries have been more
volatile than the markets of developed countries with more
mature economies. These markets often have provided
significantly higher or lower rates of return than
developed markets, and significantly greater risks, to
investors.
o As with any mutual fund, you could lose money on your investment in
the series.
An investment in the series is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
[arrow] Bar Chart and Performance Table
The bar chart and performance table below are intended to indicate some
of the risks of investing in the series by showing changes in the
series' performance over time. The performance table also shows how the
series performance over time compares with that of one or more broad
measures of market performance. The chart and table provide past
performance information. The series' past performance does not
necessarily indicate how the series will perform in the future. The
returns shown do not reflect fees and charges imposed under the variable
annuity and life insurance contracts through which an investment may be
made. If these fees and charges were included, they would reduce these
returns.
Bar Chart
The bar chart shows changes in the annual total returns of the series'
shares for each calendar year since they were first offered, assuming
the reinvestment of distributions.
[BAR CHART]
1997 1998
26.47% 26.80%
[END OF BAR CHART]
During the period shown in the bar chart, the highest quarterly return
was 24.04% (for the calendar quarter ended December 31, 1998) and the
lowest quarterly return was (13.91)% (for the calendar quarter ended
September 30, 1998).
6
<PAGE>
Performance Table
This table shows how the average annual total returns of the series'
shares compares to a broad measure of market performance and assumes the
reinvestment of distributions.
Average Annual Total Returns as of December 31, 1998
........................................................................
<TABLE>
<CAPTION>
1 Year Life
<S> <C> <C>
Capital Opportunities Series* 26.80% 26.33%
Standard & Poor's 500 Composite Index **++ 28.58% 28.16%
</TABLE>
-----------
* "Life" refers to the period from the commencement of the series'
investment operations on August 4, 1996, through December 31, 1998.
++ Source: CDA/Wiesenberger. "Life" refers to the period from September
1, 1996, through December 31, 1998.
** The Standard & Poor's 500 Composite Index is a broad based, unmanaged
index of common stock total return performance.
[arrow] Portfolio Manager
Maura A. Shaughnessy, a Senior Vice President of the Adviser, has been
employed as a portfolio manager by the Adviser since 1991. Ms.
Shaughnessy has been the series' portfolio manager since February 24,
1999.
7
<PAGE>
3: Growth With Income Series
........................................................................
[arrow] Investment Objective
The series' investment objective is to provide reasonable current income
and long-term growth of capital and income. The series' objective may be
changed without shareholder approval.
[arrow] Principal Investment Policies
The series invests, under normal market conditions, at least 65% of its
total assets in common stocks and related securities, such as preferred
stocks, convertible securities and depositary receipts for those
securities. These securities may be listed on a securities exchange or
traded in the over-the-counter markets. While the series may invest in
companies of any size, the series generally focuses on companies with
larger market capitalizations that MFS believes have sustainable growth
prospects and attractive valuations based on current and expected
earnings or cash flow.
MFS uses a bottom-up, as opposed to a top-down, investment style in
managing the equity-oriented funds (such as the series) it advises. This
means that securities are selected based upon fundamental analysis
performed by the series' portfolio manager and MFS' large group of
equity research analysts.
The series may invest in foreign securities a broad measure of market
performance and may have exposure to foreign currencies.
[arrow] Principal Risks
The principal risks of investing in the series and the circumstances
reasonably likely to cause the value of your investment in the series to
decline are described below. As with any non-money market mutual fund,
the share price of the series will change daily based on market
conditions and other factors. Please note that there are many
circumstances which could cause the value of your investment in the
series to decline, and which could prevent the series from achieving its
objectives, that are not described here.
The principal risks of investing in the series are:
o Market Risk: This is the risk that the price of a security held by the
series will fall due to changing economic, political or market
conditions or disappointing earnings results.
o Company Risk: Prices of securities react to the economic condition of
the company that issued the security. The series' equity investments
in an issuer may rise and fall based on the issuer's actual and
anticipated earnings, changes in management and the potential for
takeovers and acquisitions.
o Large Cap Companies Risk: Large cap companies tend to go in and out of
favor based on market and economic conditions. Large cap companies
tend to be less volatile than companies with smaller market
capitalizations. In exchange for this potentially lower risk, the
series' value may not rise as much as the value of series that
emphasize smaller cap companies.
o Foreign Markets Risk: Investing in foreign securities involves risks
relating to political, social and economic developments abroad, as
well as risks resulting from the differences between the regulations
to which U.S. and foreign issuers and markets are subject:
[arrow] These risks may include the seizure by the government of
company assets, excessive taxation, withholding taxes on
dividends and interest, limitations on the use or transfer
of portfolio assets, and political or social instability.
[arrow] Enforcing legal rights may be difficult, costly and slow
in foreign countries, and there may be special problems
enforcing claims against foreign governments.
[arrow] Foreign companies may not be subject to accounting
standards or governmental supervision comparable to U.S.
companies, and there may be less public information about
their operations.
[arrow] Foreign markets may be less liquid and more volatile than
U.S. markets.
[arrow] Foreign securities often trade in currencies other than
the U.S. dollar, and the series may directly hold foreign
currencies and purchase and sell foreign currencies
through forward exchange contracts. Changes in currency
exchange rates will affect the series' net asset value,
the value of dividends and interest earned, and gains and
losses realized on the sale of securities. An increase in
the strength of the U.S. dollar relative to these other
currencies may cause the value of the series to decline.
Certain foreign currencies may be particularly volatile,
and foreign governments may intervene in the currency
markets, causing a decline in value or liquidity in the
series' foreign currency holdings. By entering into
forward foreign currency exchange contracts, the series
may be required to
8
<PAGE>
forego the benefits of advantageous changes in exchange
rates and, in the case of forward contracts entered into
for the purpose of increasing return, the series may
sustain losses which will reduce its gross income. Forward
foreign currency exchange contracts involve the risk that
the party with which the series enters the contract may
fail to perform its obligations to the series.
o As with any mutual fund, you could lose money on your investment in
the series.
An investment in the series is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
[arrow] Bar Chart and Performance Table
The bar chart and performance table below are intended to indicate some
of the risks of investing in the series by showing changes in the
series' performance over time. The performance table also shows how the
series performance over time compares with that of one or more broad
measures of market performance. The chart and table provide past
performance information. The series' past performance does not
necessarily indicate how the series will perform in the future. The
returns shown do not reflect fees and charges imposed under the variable
annuity and life insurance contracts through which an investment may be
made. If these fees and charges were included, they would reduce these
returns.
Bar Chart
The bar chart shows changes in the annual total returns of the series'
shares for each calendar year since they were first offered, assuming
the reinvestment of distributions.
[BAR CHART]
1996 1997 1998
24.46% 29.78% 22.32%
[END OF BAR CHART]
During the period shown in the bar chart, the highest quarterly return
was 18.29% (for the calendar quarter ended December 31, 1998) and the
lowest quarterly return was (10.95)% (for the calendar quarter ended
September 30, 1998).
Performance Table
This table shows how the average annual total returns of the series'
shares compares to a broad measure of market performance and assumes the
reinvestment of distributions.
Average Annual Total Returns as of December 31, 1998
........................................................................
<TABLE>
<CAPTION>
1 Year Life
<S> <C> <C>
Growth With Income Series* 22.32% 25.98%
Standard & Poor's 500 Composite Index **++ 28.58% 28.16%
</TABLE>
------------
* "Life" refers to the period from the commencement of the series'
investment operations on October 9, 1995, through December 31, 1998.
++ Source: CDA/Wiesenberger. "Life" refers to the period from November 1,
1995, through December 31, 1998.
** The Standard & Poor's 500 Composite Index is a broad based, unmanaged
index of common stock total return performance.
[arrow] Portfolio Manager
John D. Laupheimer, a Senior Vice President of the Adviser, has been
employed by the Adviser as a portfolio manager since 1981. Mr.
Laupheimer has been the series' portfolio manager since its inception.
Mitchell D. Dynan, a Senior Vice President of the Adviser, has been
employed as a portfolio manager since 1986. Mr. Dynan has been the
series' portfolio manager since May 1, 1999.
9
<PAGE>
4: New Discovery Series
........................................................................
[arrow] Investment Objective
The series' investment objective is capital appreciation. The series'
objective may be changed without shareholder approval.
[arrow] Principal Investment Policies
The series invests, under normal market conditions, at least 65% of its
total assets in equity securities of emerging growth companies. Equity
securities include common stocks and related securities, such as
preferred stocks, convertible securities and depositary receipts for
those securities. Emerging growth companies are companies which MFS
believes offer superior prospects for growth and are either:
o early in their life cycle but which have the potential to become major
enterprises, or
o major enterprises whose rates of earnings growth are expected to
accelerate because of special factors, such as rejuvenated management,
new products, changes in consumer demand, or basic changes in the
economic environment.
While emerging growth companies may be of any size, the series will
generally focus on smaller cap emerging growth companies that are early
in their life cycle. MFS would expect these companies to have products,
technologies, management, markets and opportunities which will
facilitate earnings growth over time that is well above the growth rate
of the overall economy and the rate of inflation. The series'
investments in emerging growth companies may include securities listed
on a securities exchange or traded in the over-the-counter markets.
MFS uses a bottom-up, as opposed to a top-down, investment style in
managing the equity-oriented funds (such as the series) it advises. This
means that securities are selected based upon fundamental analysis
performed by the series' portfolio manager and MFS' large group of
equity research analysts.
[arrow] Principal Risks
The principal risks of investing in the series and the circumstances
reasonably likely to cause the value of your investment in the series to
decline are described below. As with any non-money market mutual fund,
the share price of the series will change daily based on market
conditions and other factors. Please note that there are many
circumstances which could cause the value of your investment in the
series to decline, and which could prevent the series from achieving its
objective, that are not described here.
The principal risks of investing in the series are:
o Market Risk: This is the risk that the price of a security held by the
series will fall due to changing economic, political or market
conditions or disappointing earnings results.
o Company Risk: Prices of securities react to the economic condition of
the company that issued the security. The series' equity investments
in an issuer may rise and fall based on the issuer's actual and
anticipated earnings, changes in management and the potential for
takeovers and acquisitions.
o Emerging Growth Companies Risk: Investments in emerging growth
companies may be subject to more abrupt or erratic market movements
and may involve greater risks than investments in other companies.
Emerging growth companies often:
[arrow] have limited product lines, markets and financial
resources
[arrow] are dependent on management by one or a few key
individuals
[arrow] have shares which suffer steeper than average price
declines after disappointing earnings reports and are more
difficult to sell at satisfactory prices
o Small Cap Companies Risk: Investments in small cap companies tend to
involve more risk and be more volatile than investments in larger
companies. Small cap companies may be more susceptible to market
declines because of their limited product lines, financial and
management resources, markets and distribution channels. Their shares
may be more difficult to sell at satisfactory prices during market
declines.
o Over-the-Counter Risk: Over-the-counter (OTC) transactions involve
risks in addition to those associated with transactions in securities
traded on exchanges. OTC listed companies may have limited product
lines, markets or financial resources. Many OTC stocks trade less
frequently and in smaller volume than exchange listed stocks. The
values of these stocks may be more volatile than exchange listed
stocks, and the series may experience difficulty in purchasing or
selling these securities at a fair price.
o As with any mutual fund, you could lose money on your investment in
the series.
10
<PAGE>
An investment in the series is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
[arrow] Bar Chart and Performance Table
The bar chart and performance table are not included because the series
did not have a full calendar year of operations on December 31, 1998.
[arrow] Portfolio Manager
Brian E. Stack, a Senior Vice President of the Adviser, has been
employed by the Adviser as a portfolio manager since 1993. Mr. Stack has
been the series' portfolio manager since its inception.
11
<PAGE>
5: Growth Series
........................................................................
[arrow] Investment Objective
The series' investment objective is to provide long-term growth of
capital and future income rather than current income. The series'
objective may be changed without shareholder approval.
[arrow] Principal Investment Policies
The series invests, under normal market conditions, at least 80% of its
total assets in common stocks and related securities, such as preferred
stocks, convertible securities and depositary receipts for those
securities, of companies which MFS believes offer better than average
prospects for long-term growth.
MFS uses a bottom-up, as opposed to a top-down, investment style in
managing the equity-oriented funds (such as the series) it advises. This
means that securities are selected based upon fundamental analysis
performed by the series' portfolio manager and MFS' large group of
equity research analysts.
In managing the series, MFS seeks to purchase securities of companies
which MFS considers well-run and poised for growth. MFS looks
particularly for companies which demonstrate:
o a strong franchise, strong cash flows and a recurring revenue stream
o a strong industry position, where there is
[arrow] potential for high profit margins
[arrow] substantial barriers to new entry in the industry
o a strong management with a clearly defined strategy
o new products or services
The series may invest in foreign securities through which it may have
exposure to foreign currencies.
[arrow] Principal Risks
The principal risks of investing in the series and the circumstances
reasonably likely to cause the value of your investment in the series to
decline are described below. As with any non-money market mutual fund,
the share price of the series will change daily based on market
conditions and other factors. Please note that there are many
circumstances which could cause the value of your investment in the
series to decline, and which could prevent the series from achieving its
objective, that are not described here.
The principal risks of investing in the series are:
o Market Risk: This is the risk that the price of a security held by the
series will fall due to changing economic, political or market
conditions or disappointing earnings results.
o Growth Companies Risk: Prices of growth company securities held by the
series may fall to a greater extent than the overall equity markets
(e.g., as represented by the Standard and Poor's Composite 500 Index)
due to changing economic, political or market conditions or
disappointing growth company earnings results.
o Foreign Securities Risk: Investments in foreign securities involve
risks relating to political, social and economic developments abroad,
as well as risks resulting from the differences between the
regulations to which U.S. and foreign issuers and markets are subject:
[arrow] These risks may include the seizure by the government of
company assets, excessive taxation, withholding taxes on
dividends and interest, limitations on the use or transfer
of portfolio assets, and political or social instability.
[arrow] Enforcing legal rights may be difficult, costly and slow
in foreign countries, and there may be special problems
enforcing claims against foreign governments.
[arrow] Foreign companies may not be subject to accounting
standards or governmental supervision comparable to U.S.
companies, and there may be less public information about
their operations.
[arrow] Foreign markets may be less liquid and more volatile than
U.S. markets.
12
<PAGE>
[arrow] Foreign securities often trade in currencies other than
the U.S. dollar, and the series may directly hold foreign
currencies and purchase and sell foreign currencies
through forward exchange contracts. Changes in currency
exchange rates will affect the series' net asset value,
the value of dividends and interest earned, and gains and
losses realized on the sale of securities. An increase in
the strength of the U.S. dollar relative to these other
currencies may cause the value of the series to decline.
Certain foreign currencies may be particularly volatile,
and foreign governments may intervene in the currency
markets, causing a decline in value or liquidity in the
series' foreign currency holdings. By entering into
forward foreign currency exchange contracts, the series
may be required to forego the benefits of advantageous
changes in exchange rates and, in the case of forward
contracts entered into for the purpose of increasing
return, the series may sustain losses which will reduce
its gross income. Forward foreign currency exchange
contracts involve the risk that the party with which the
series enters the contract may fail to perform its
obligations to the series.
o As with any mutual fund, you could lose money on your investment in
the series.
An investment in the series is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
[arrow] Bar Chart and Performance Table
The bar chart and performance table are not included because the series
had not commenced investment operations as of December 31, 1998.
[arrow] Portfolio Manager
Stephen Pesek, a Vice President of the Adviser, has been employed as a
portfolio manager by the Adviser since 1994. Mr. Pesek has been the
series portfolio manager since its inception.
13
<PAGE>
6: Total Return Series
............................................................................
[arrow] Investment Objectives
The series' investment objective is primarily to provide above-average
income (compared to a portfolio invested entirely in equity securities)
consistent with the prudent employment of capital. Its secondary
objective is to provide reasonable opportunity for growth of capital and
income. The series' objectives may be changed without shareholder
approval.
[arrow] Principal Investment Policies
The series is a "balanced fund," and invests in a combination of equity
and fixed income securities. Under normal market conditions, the series
invests:
o at least 40%, but not more than 75%, of its net assets in common
stocks and related securities (referred to as equity securities), such
as preferred stock; bonds, warrants or rights convertible into stock;
and depositary receipts for those securities, and
o at least 25% of its net assets in non-convertible fixed income
securities.
The series may vary the percentage of its assets invested in any one
type of security (within the limits described above) in accordance with
MFS's interpretation of economic and money market conditions, fiscal and
monetary policy and underlying security values.
Equity Investments. While the series may invest in all types of equity
securities, MFS generally seeks to purchase for the series equity
securities, such as common stocks, preferred stocks, convertible
securities and depositary receipts, of companies that MFS believes are
undervalued in the market relative to their long-term potential. The
equity securities of these companies may be undervalued because:
o they are viewed by MFS as being temporarily out of favor in the market
due to
[arrow] a decline in the market,
[arrow] poor economic conditions,
[arrow] developments that have affected or may affect the issuer
of the securities or the issuer's industry, or
o the market has overlooked them.
Undervalued equity securities generally have low price-to-book,
price-to-sales and/or price-to-earnings ratios. The series focuses on
undervalued equity securities issued by companies with relatively large
market capitalizations (i.e., market capitalizations of $5 billion or
more).
As noted above, the series' investments in equity securities include
convertible securities. A convertible security is a security that may be
converted within a specified period of time into a certain amount of
common stock of the same or a different issuer. A convertible security
generally provides:
o a fixed income stream, and
o the opportunity, through its conversion feature, to participate in an
increase in the market price of the underlying common stock.
MFS uses a bottom-up, as opposed to a top-down, investment style in
managing the equity-oriented funds (including the equity portion of the
series) it advises. This means that securities are selected based upon
fundamental analysis performed by the series' portfolio manager and MFS'
large group of equity research analysts.
Fixed Income Investments. The series invests in securities which pay a
fixed interest rate, which include:
o U.S. government securities, which are bonds or other debt obligations
issued by, or whose principal and interest payments are guaranteed or
supported by, the U.S. government or one of its agencies or
instrumentalities,
o mortgage-backed and asset-backed securities, which represent interests
in a pool of assets such as mortgage loans, car loan receivables, or
credit card receivables. These investments entitle the series to a
share of the principal and interest payments made on the underlying
mortgage, car loan, or credit card. For example, if the series invests
in a pool that includes your mortgage loan, a share of the principal
and interest payments on your mortgage would pass to the series, and
o corporate bonds, which are bonds or other debt obligations issued by
corporations or other similar entities.
In selecting fixed income investments for the series, MFS considers the
views of its large group of fixed income portfolio managers and research
analysts. This group periodically assesses the three-month total return
outlook for various segments of the fixed income markets.
14
<PAGE>
This three-month "horizon" outlook is used by the portfolio manager(s)
of MFS' fixed-income oriented series (including the fixed-income portion
of the series) as a tool in making or adjusting a series' asset
allocations to various segments of the fixed income markets. In
assessing the credit quality of fixed-income securities, MFS does not
rely solely on the credit ratings assigned by credit rating agencies,
but rather performs its own independent credit analysis.
[arrow] Principal Risks
The principal risks of investing in the series and the circumstances
reasonably likely to cause the value of your investment in the series to
decline are described below. As with any non-money market mutual fund,
the share price of the series will change daily based on market
conditions and other factors. Please note that there are many
circumstances which could cause the value of your investment in the
series to decline, and which could prevent the series from achieving its
objective, that are not described here.
The principal risks of investing in the series are:
o Allocation Risk: The series will allocate its investments between
equity and fixed income securities, and among various segments of the
fixed income markets, based upon judgments made by MFS. The series
could miss attractive investment opportunities by underweighting
markets where there are significant returns, and could lose value by
overweighting markets where there are significant declines.
o Market Risk: This is the risk that the price of a security held by the
series will fall due to changing economic, political or market
conditions or disappointing earnings results.
o Undervalued Securities Risk: Prices of securities react to the
economic condition of the company that issued the security. The
series' equity investments in an issuer may rise and fall based on the
issuer's actual and anticipated earnings, changes in management and
the potential for takeovers and acquisitions. MFS will invest in
securities that are undervalued based on its belief that the market
value of these securities will rise due to anticipated events and
investor perceptions. If these events do not occur or are delayed, or
if investor perceptions about the securities do not improve, the
market price of these securities may not rise or may fall.
o Interest Rate Risk: When interest rates rise, the prices of fixed
income securities in the series' portfolio will generally fall.
Conversely, when interest rates fall, the prices of fixed income
securities in the series' portfolio will generally rise.
o Convertible Securities Risk: Convertible securities, like fixed income
securities, tend to increase in value when interest rates decline and
decrease in value when interest rates rise. The market value of a
convertible security also tends to increase as the market value of the
underlying stock rises and decrease as the market value of the
underlying stock declines.
o Maturity Risk: Interest rate risk will generally affect the price of a
fixed income security more if the security has a longer maturity.
Fixed income securities with longer maturities will therefore be more
volatile than other fixed income securities with shorter maturities.
Conversely, fixed income securities with shorter maturities will be
less volatile but generally provide lower returns than fixed income
securities with longer maturities. The average maturity of the series'
fixed income investments will affect the volatility of the series'
share price.
o Credit Risk: Credit risk is the risk that the issuer of a fixed income
security will not be able to pay principal and interest when due.
Rating agencies assign credit ratings to certain fixed income
securities to indicate their credit risk. The price of a fixed income
security will generally fall if the issuer defaults on its obligation
to pay principal or interest, the rating agencies downgrade the
issuer's credit rating or other news affects the market's perception
of the issuer's credit risk.
o Liquidity Risk: The fixed income securities purchased by the series
may be traded in the over-the-counter market rather than on an
organized exchange and are subject to liquidity risk. This means that
they may be harder to purchase or sell at a fair price. The inability
to purchase or sell these fixed income securities at a fair price
could have a negative impact on the series' performance.
o Mortgage and Asset-Backed Securities:
[arrow] Maturity Risk:
[dagger] Mortgage-Backed Securities: A mortgage-backed security
will mature when all the mortgages in the pool mature or
are prepaid. Therefore, mortgage-backed securities do
not have a fixed maturity, and their expected maturities
may vary when interest rates rise or fall.
+ When interest rates fall, homeowners are more likely to
prepay their mortgage loans. An increased rate of
prepayments on the series' mortgage-backed securities
will result in an unforeseen loss of interest income to
the series as the series may be required to reinvest
assets at a lower interest rate. Because prepayments
increase when interest rates fall, the prices of
mortgage-backed securities does not increase as much as
other fixed income securities when interest rates fall.
15
<PAGE>
+ When interest rates rise, homeowners are less likely to
prepay their mortgage loans. A decreased rate of
prepayments lengthens the expected maturity of a
mortgage-backed security. Therefore, the prices of
mortgage-backed securities may decrease more than prices
of other fixed income securities when interest rates
rise.
[dagger] Collateralized Mortgage Obligations: The series may
invest in mortgage-backed securities called
collateralized mortgage obligations (CMOs). CMOs are
issued in separate classes with different stated
maturities. As the mortgage pool experiences
prepayments, the pool pays off investors in classes with
shorter maturities first. By investing in CMOs, the
series may manage the prepayment risk of mortgage-backed
securities. However, prepayments may cause the actual
maturity of a CMO to be substantially shorter than its
stated maturity.
[dagger] Asset-Backed Securities: Asset-backed securities have
prepayment risks similar to mortgage-backed securities.
[arrow] Credit Risk: As with any fixed income security, mortgage-backed
and asset-backed securities are subject to the risk that the
issuer will default on principal and interest payments. It may be
difficult to enforce rights against the assets underlying
mortgage-backed and asset-backed securities in the case of
default. The U.S. government or its agencies may guarantee the
payment of principal and interest on some mortgage-backed
securities. Mortgage-backed securities and asset-backed securities
issued by private lending institutions or other financial
intermediaries may be supported by insurance or other forms of
guarantees.
o As with any mutual fund, you could lose money on your investment in
the series.
An investment in the series is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
[arrow] Bar Chart and Performance Table
The bar chart and performance table below are intended to indicate some
of the risks of investing in the series by showing changes in the
series' performance over time. The performance table also shows how the
series performance over time compares with that of one or more broad
measures of market performance. The chart and table provide past
performance information. The series' past performance does not
necessarily indicate how the series will perform in the future. The
returns shown do not reflect fees and charges imposed under the variable
annuity and life insurance contracts through which an investment may be
made. If these fees and charges were included, they would reduce these
returns.
Bar Chart
The bar chart shows changes in the annual total returns of the series'
shares for each calendar year since they were first offered, assuming
the reinvestment of distributions.
[BAR CHART]
1996 1997 1998
14.37% 21.30% 12.33%
[END OF BAR CHART]
During the period shown in the bar chart, the highest quarterly return
was 9.86% (for the calendar quarter ended June 30, 1997) and the lowest
quarterly return was (4.28)% (for the calendar quarter ended September
30, 1998).
16
<PAGE>
Performance Table
This table shows how the average annual total returns of the series'
shares compares to a broad measure of market performance and various
other market indicators and assumes the reinvestment of distributions.
Average Annual Total Returns as of December 31, 1998
........................................................................
<TABLE>
<CAPTION>
1 Year Life
<S> <C> <C>
Total Return Series* +12.33% +18.73%
S&P 500 Composite Index**+ +28.58% +30.41%
Lehman Brothers Government/Corporate Bond Index**++ + 9.49% + 8.58%
Average balanced fund# +13.48% +17.64%
</TABLE>
-----------
* "Life" refers to the period from the commencement of the series'
investment operations, January 3, 1995, through December 31, 1998.
** Source: CDA/Wiesenberger. "Life" refers to the period from February
1, 1995, through December 31, 1998.
# Source: Lipper Analytical Services, Inc. "Life" refers to the period
from February 1, 1995, through December 31, 1998.
+ The Standard & Poor's 500 Composite Index is a broad based, unmanaged
index of common stock total return performance.
++ The Lehman Brothers Government/Corporate Bond Index is a broad based,
unmanaged, market-value-weighted index of U.S. Treasury and
government-agency securities (excluding mortgage-backed securities)
and investment-grade domestic corporate debt.
[arrow] Portfolio Manager
David M. Calabro, a Senior Vice President of MFS, has been employed by
the Adviser as a portfolio manager since 1992. Mr. Calabro is the head
of the series' portfolio management team and a manager of the common
stock portion of the series' portfolio. Geoffrey L. Kurinsky, a Senior
Vice President of MFS, has been employed by the Adviser as a portfolio
manager since 1987. Mr. Kurinsky is the manager of the series' fixed
income securities. Constantinos G. Mokas, a Vice President of MFS, has
been a portfolio manager of the series since April 1, 1998, and has been
employed by the Adviser as a portfolio manager since 1990. Mr. Mokas is
the manager of the series' convertible securities. Lisa B. Nurme, a
Senior Vice President of MFS, has been a portfolio manager of the series
since July 19, 1995, and has been employed by the Adviser as a portfolio
manager since 1987. Ms. Nurme is a manager of the common stock portion
of the series' portfolio. Kenneth J. Enright, a Vice President of MFS,
has been employed by the Adviser as a portfolio manager since 1986 and
has been a portfolio manager of the series since January 15, 1999. Mr.
Enright is a manager of the common stock portion of the series'
portfolio.
17
<PAGE>
7: High Income Series
........................................................................
[arrow] Investment Objective
The series' investment objective is to provide high current income by
investing primarily in a professionally managed diversified portfolio of
fixed income securities, some of which may involve equity features. The
series' objective may be changed without shareholder approval.
[arrow] Principal Investment Policies
The series invests, under normal market conditions, at least 80% of its
total assets in high yield fixed income securities. Fixed income
securities offering the high current income sought by the series
generally are lower rated bonds. These bonds, commonly known as junk
bonds, are assigned lower credit ratings by credit rating agencies or
are unrated and considered by MFS to be comparable to lower rated bonds.
While the series focuses its investments on bonds issued by corporations
or similar entitles, it may invest in all types of debt securities. The
series may invest in foreign securities (including emerging markets
securities), through which it may have exposure to foreign currencies.
In selecting fixed income investments for the series, MFS considers the
views of its large group of fixed income portfolio managers and research
analysts. This group periodically assesses the three-month total return
outlook for various segments of the fixed income markets. This
three-month "horizon" outlook is used by the portfolio manager(s) of
MFS' fixed income oriented funds (including the series) as a tool in
making or adjusting a series' asset allocations to various segments of
the fixed income markets. In assessing the credit quality of fixed
income securities, MFS does not rely solely on the credit ratings
assigned by credit rating agencies, but rather performs its own
independent credit analysis.
[arrow] Principal Risks
The principal risks of investing in the series and the circumstances
reasonably likely to cause the value of your investment in the series to
decline are described below. As with any non-money market mutual fund,
the share price of the series will change daily based on market
conditions and other factors. Please note that there are many
circumstances which could cause the value of your investment in the
series to decline, and which could prevent the series from achieving its
objective, that are not described here.
The principal risks of investing in the series are:
o Allocation Risk: The series will allocate its investments among fixed
income markets based upon judgments made by MFS. The series could miss
attractive investment opportunities by underweighting markets where
there are significant returns, and could lose value by overweighting
markets where there are significant declines.
o Interest Rate Risk: When interest rates rise, the prices of fixed
income securities in the series' portfolio will generally fall.
Conversely, when interest rates fall, the prices of fixed income
securities in the series' portfolio will generally rise.
o Maturity Risk: Interest rate risk will generally affect the price of a
fixed income security more if the security has a longer maturity.
Fixed income securities with longer maturities will therefore be more
volatile than other fixed income securities with shorter maturities.
Conversely, fixed income securities with shorter maturities will be
less volatile but generally provide lower returns than fixed income
securities with longer maturities. The average maturity of the series'
fixed income investments will affect the volatility of the series'
share price.
o Credit Risk: Credit risk is the risk that the issuer of a fixed income
security will not be able to pay principal and interest when due.
Rating agencies assign credit ratings to certain fixed income
securities to indicate their credit risk. The price of a fixed income
security will generally fall if the issuer defaults on its obligation
to pay principal or interest, the rating agencies downgrade the
issuer's credit rating or other news affects the market's perception
of the issuer's credit risk.
o Liquidity Risk: The fixed income securities purchased by the series
may be traded in the over-the-counter market rather than on an
organized exchange and are subject to liquidity risk. This means that
they may be harder to purchase or sell at a fair price. The inability
to purchase or sell these fixed income securities at a fair price
could have a negative impact on the series' performance.
o Junk Bond Risk:
[arrow] Higher Credit Risk: Junk bonds are subject to a
substantially higher degree of credit risk than higher
rated bonds. During recessions, a high percentage of
issuers of junk bonds may default on payments of principal
and interest. The price of a junk bond may therefore
fluctuate drastically due to bad news about the issuer or
the economy in general.
18
<PAGE>
[arrow] Higher Liquidity Risk: During recessions and periods of
broad market declines, junk bonds could become less
liquid, meaning that they will be harder to value or sell
at a fair price.
o Foreign Securities: Investments in foreign securities involve risks
relating to political, social and economic developments abroad, as
well as risks resulting from the differences between the regulations
to which U.S. and foreign issuers and markets are subject:
[arrow] These risks may include the seizure by the government of
company assets, excessive taxation, withholding taxes on
dividends and interest, limitations on the use or transfer
of portfolio assets, and political or social instability.
[arrow] Enforcing legal rights may be difficult, costly and slow
in foreign countries, and there may be special problems
enforcing claims against foreign governments.
[arrow] Foreign companies may not be subject to accounting
standards or governmental supervision comparable to U.S.
companies, and there may be less public information about
their operations.
[arrow] Foreign markets may be less liquid and more volatile than
U.S. markets.
[arrow] Foreign securities often trade in currencies other than
the U.S. dollar, and the series may directly hold foreign
currencies and purchase and sell foreign currencies
through forward exchange contracts. Changes in currency
exchange rates will affect the series' net asset value,
the value of dividends and interest earned, and gains and
losses realized on the sale of securities. An increase in
the strength of the U.S. dollar relative to these other
currencies may cause the value of the series to decline.
Certain foreign currencies may be particularly volatile,
and foreign governments may intervene in the currency
markets, causing a decline in value or liquidity in the
series' foreign currency holdings. By entering into
forward foreign currency exchange contracts, the series
may be required to forego the benefits of advantageous
changes in exchange rates and, in the case of forward
contracts entered into for the purpose of increasing
return, the series may sustain losses which will reduce
its gross income. Forward foreign currency exchange
contracts involve the risk that the party with which the
series enters the contract may fail to perform its
obligations to the series.
o As with any mutual fund, you could lose money on your investment in
the series.
An investment in the series is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
[arrow] Bar Chart and Performance Table
The bar chart and performance table below are intended to indicate some
of the risks of investing in the series by showing changes in the
series' performance over time. The performance table also shows how the
series performance over time compares with that of one or more broad
measures of market performance. The chart and table provide past
performance information. The series' past performance does not
necessarily indicate how the series will perform in the future. The
returns shown do not reflect fees and charges imposed under the variable
annuity and life insurance contracts through which an investment may be
made. If these fees and charges were included, they would reduce these
returns.
Bar Chart
The bar chart shows changes in the annual total returns of the series'
shares for each calendar year since they were first offered, assuming
the reinvestment of distributions.
[BAR CHART]
1996 1997 1998
11.80% 13.62% (0.18)%
[END OF BAR CHART]
During the period shown in the bar chart, the highest quarterly return
was 5.57% (for the calendar quarter ended September 30, 1996) and the
lowest quarterly return was (7.28)% (for the calendar quarter ended
September 30, 1998).
19
<PAGE>
Performance Table
This table shows how the average annual total returns of the series'
shares compares to a broad measure of market performance and various
other market indicators and assumes the reinvestment of distributions.
Average Annual Total Returns as of December 31, 1998
........................................................................
<TABLE>
<CAPTION>
1 Year Life
<S> <C> <C>
High Income Series* -0.18% +8.77%
Lehman Brothers High Yield Bond Index#++ +1.60% +8.83%
Lipper High Yield Bond Fund Index#+ -0.08% +8.72%
</TABLE>
-------------------
* "Life" refers to the period from the commencement of the series'
investment operations, July 26, 1995, through December 31, 1998.
# Source: Lipper Analytical Services, Inc. "Life" refers to the period
from August 1, 1995, through December 31, 1998.
+ The Lipper High Yield Bond Fund Index is a broad based, unmanaged,
net-asset-value-weighted index of the largest qualifying mutual funds
in this Lipper category adjusted for the reinvestment of capital gain
distributions and income dividends.
++ The Lehman Brothers High Yield Bond Index is a broad based, unmanaged
index of noninvestment-grade corporate debt.
[arrow] Portfolio Manager
Bernard Scozzafava, a Vice President of the Adviser, has been employed
by the Adviser as a portfolio manager since 1989. Mr. Scozzafava has
been the series' portfolio manager since its inception.
20
<PAGE>
8: Global Equity Series
........................................................................
[arrow] Investment Objective
The series' investment objective is capital appreciation. The series'
objective may be changed without shareholder approval.
[arrow] Principal Investment Policies
The series invests, under normal market conditions, at least 65% of its
total assets in common stocks and related securities, such as preferred
stock, convertible securities and depositary receipts, of U.S. and
foreign (including emerging market) issuers. The series spreads its
investments across these markets and focuses on companies which MFS
believes have favorable growth prospects and attractive valuations based
on current and expected earnings or cash flow. The series generally
seeks to purchase securities of companies with relatively large market
capitalizations relative to the market in which they are traded. The
series' investments may include securities traded in the
over-the-counter markets.
MFS uses a bottom-up, as opposed to a top-down, investment style in
managing the equity-oriented funds (such as the series) it advises. This
means that securities are selected based upon fundamental analysis
performed by the series' portfolio manager and MFS' large group of
equity research analysts.
[arrow] Principal Risks
The principal risks of investing in the series and the circumstances
reasonably likely to cause the value of your investment in the series to
decline are described below. As with any non-money market mutual fund,
the share price of the series will change daily based on market
conditions and other factors. Please note that there are many
circumstances which could cause the value of your investment in the
series to decline, and which could prevent the series from achieving its
objective, that are not described here.
The principal risks of investing in the series are:
o Market Risk: This is the risk that the price of a security held by the
series will fall due to changing economic, political or market
conditions or disappointing earnings results.
o Company Risk: Prices of securities react to the economic condition of
the company that issued the security. The series' equity investments
in an issuer may rise and fall based on the issuer's actual and
anticipated earnings, changes in management and the potential for
takeovers and acquisitions.
o Over-the-Counter Risk: Over-the-counter (OTC) transactions involve
risks in addition to those associated with transactions in securities
traded on exchanges. OTC-listed companies may have limited product
lines, markets or financial resources. Many OTC stocks trade less
frequently and in smaller volume than exchange-listed stocks. The
values of these stocks may be more volatile than exchange-listed
stocks, and the series may experience difficulty in establishing or
closing out positions in these stocks at prevailing market prices.
o Foreign Securities Risk: Investments in foreign securities involve
risks relating to political, social and economic developments abroad,
as well as risks resulting from the differences between the
regulations to which U.S. and foreign issuers and markets are subject:
[arrow] These risks may include the seizure by the government of
company assets, excessive taxation, withholding taxes on
dividends and interest, limitations on the use or transfer
of portfolio assets, and political or social instability.
[arrow] Enforcing legal rights may be difficult, costly and slow
in foreign countries, and there may be special problems
enforcing claims against foreign governments.
[arrow] Foreign companies may not be subject to accounting
standards or governmental supervision comparable to U.S.
companies, and there may be less public information about
their operations.
[arrow] Foreign markets may be less liquid and more volatile than
U.S. markets.
[arrow] Foreign securities often trade in currencies other than
the U.S. dollar, and the series may directly hold foreign
currencies and purchase and sell foreign currencies
through forward exchange contracts. Changes in currency
exchange rates will affect the series' net asset value,
the value of dividends and interest earned, and gains and
losses realized on the sale of securities. An increase in
the strength of the U.S. dollar relative to these other
currencies may cause the value of the series to decline.
Certain foreign currencies may be particularly volatile,
and foreign governments may intervene in the currency
markets, causing a decline in value or liquidity in
21
<PAGE>
the series' foreign currency holdings. Forward foreign
currency exchange contracts involve the risk that the
party with which the series enters the contract may fail
to perform its obligations to the series.
o Emerging Markets Risk: Emerging markets are generally defined as
countries in the initial stages of their industrialization cycles with
low per capita income. Investments in emerging markets securities
involve all of the risks of investments in foreign securities, and
also have additional risks:
[arrow] All of the risks of investing in foreign securities are
heightened by investing in emerging markets countries.
[arrow] The markets of emerging markets countries have been more
volatile than the markets of developed countries with more
mature economies. These markets often have provided higher
rates of return, and significantly greater risks, to
investors.
o As with any mutual fund, you could lose money on your investment in
the series.
An investment in the series is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
Bar Chart and Performance Table
The bar chart and performance table are not included because the series
had not commenced investment operations as of December 31, 1998.
[arrow] Portfolio Manager
The series' portfolio manager is David R. Mannheim, a Senior Vice
President of MFS. Mr. Mannheim has been the portfolio manager of the
series since its inception and has been employed as a portfolio manager
by MFS since 1988.
22
<PAGE>
III CERTAIN INVESTMENT STRATEGIES AND RISKS
Each series may depart from its principal investment strategies by
temporarily investing for defensive purposes when adverse market, economic
or political conditions exist. While a series invests defensively, it may
not be able to pursue its investment objective. A series defensive
investment policy may not be effective in protecting its value.
Each series may engage in active and frequent trading to achieve its
principal investment strategies. This may result in the realization and
distribution to shareholders of higher capital gains. Frequent trading also
increases transaction costs, which could detract from the series'
performance.
Each series may invest in various types of securities and engage in various
investment techniques and practices which are not the principal focus of
the series and therefore are not described in this Prospectus. The types of
securities and investment techniques and practices in which a series may
engage, including the principal investment techniques and practices
described above, are identified in Appendix A to this Prospectus, and are
discussed, together with their risks, in the trust's Statement of
Additional Information (referred to as the SAI), which you may obtain by
contacting MFS Service Center, Inc. (see back cover for address and phone
number).
IV MANAGEMENT OF THE SERIES
[arrow] Investment Adviser
Massachusetts Financial Services Company (referred to as MFS or the
adviser) is the investment adviser to each series. MFS is America's
oldest mutual fund organization. MFS and its predecessor organizations
have a history of money management dating from 1924 and the founding of
the first mutual fund, Massachusetts Investors Trust. Net assets under
the management of the MFS organization were approximately $102.9 billion
on behalf of approximately 3.8 million investor accounts as of January
31, 1999. As of such date, the MFS organization managed approximately
$73.6 billion of net assets in equity fund and equity portfolios.
Approximately $4.7 billion of the assets managed by MFS are invested in
securities of foreign issuers and foreign denominated securities of U.S.
issuers. MFS is located at 500 Boylston Street, Boston, Massachusetts
02116.
MFS provides investment management and related administrative services
and facilities to each series, including portfolio management and trade
execution. For these services each series pays MFS an annual management
fee as set forth in the Expense Summary.
MFS or its affiliates generally pay an administrative service fee to
insurance companies which use the series as underlying investment
vehicles for their variable annuity and variable life insurance
contracts based upon the aggregate net assets of the series attributable
to these contracts. These fees are not paid by the series, their
shareholders, or by the contract holders.
[arrow] Administrator
MFS provides each series with certain financial, legal, compliance,
shareholder communications and other administrative services. MFS is
reimbursed by each series for a portion of the costs it incurs in
providing these services.
[arrow] Distributor
MFS Fund Distributors, Inc. (referred to as MFD), a wholly owned
subsidiary of MFS, is the distributor of shares of the series.
[arrow] Shareholder Servicing Agent
MFS Service Center, Inc. (referred to as MFSC), a wholly owned
subsidiary of MFS, performs transfer agency and certain other services
for each series, for which it receives compensation from each series.
V DESCRIPTION OF SHARES
The trust offers shares of each of its series to separate accounts
established by insurance companies in order to serve as investment
vehicles for variable annuity and variable life insurance contracts. The
trust also offers shares of each of its series to qualified pension and
retirement plans. All purchases, redemptions and exchanges of shares are
made through these insurance company separate accounts and plans, which
are the record owner of the shares. Contract holders and plan
beneficiaries seeking to purchase, redeem or exchange interests in the
trust's shares should consult with the insurance company which issued
their contracts or their plan sponsor.
23
<PAGE>
VI OTHER INFORMATION
[arrow] Pricing of Series' Shares
The price of each series' shares is based on its net asset value. The
net asset value of each series' shares is determined at the close of
regular trading each day that the New York Stock Exchange is open for
trading (generally, 4:00 p.m., Eastern time) (referred to as the
valuation time). To determine net asset value, each series, except for
the Money Market Series, values its assets at current market values, or
at fair value as determined by the Adviser under the direction of the
Board of Trustees that oversees the series if current market values are
unavailable. Fair value pricing may be used by a series when current
market values are unavailable or when an event occurs after the close of
the exchange on which the series' portfolio securities are principally
traded that is likely to have changed the value of the securities. The
use of fair value pricing by a series may cause the net asset value of
its shares to differ significantly from the net asset value that would
be calculated using current market values. The Money Market Series
values its assets using the amortized cost method.
Insurance companies and plan sponsors are the designees of the trust for
receipt of purchase, exchange and redemption orders from contractholders
and plan beneficiaries. An order submitted to the trust's designee by
the valuation time will receive the net asset value next calculated;
provided that the trust receives notice of the order generally by 9:30
a.m. eastern time on the next day on which the New York Stock Exchange
is open for trading.
Certain series invest in securities which are primarily listed on
foreign exchanges that trade on weekends and other days when the series
does not price its shares. Therefore, the value of these series' shares
may change on days when you will not be able to purchase or redeem their
shares.
[arrow] Distributions
Each series intends to pay substantially all of its net income
(including net short-term capital gain) to shareholders as dividends at
least annually. Any realized net capital gains are also distributed at
least annually.
[arrow] Tax Considerations
Each series of the trust is treated as a separate entity for federal
income tax purposes. As long as a series qualifies for treatment as a
regulated investment company (which it has in the past and intends to do
so in the future), it pays no federal income tax on the earnings it
distributes to shareholders. In addition, each series also intends to
continue to diversify its assets to satisfy the federal diversification
tax rules applicable to separate accounts that fund variable insurance
and annuity contracts.
Shares of the series are offered to insurance company separate accounts
and qualified pension and retirement plan sponsors. Consult with the
insurance company which issued your contract or your plan sponsor or
financial advisor to understand the federal tax treatment of your
investment.
[arrow] Right to Reject Purchase and Exchange Orders
Purchases and exchanges should be made for investment purposes only.
Each series reserves the right to reject or restrict any specific
purchase or exchange request. Because an exchange request involves both
a request to redeem shares of one series and to purchase shares of
another series, the series consider the underlying redemption and
purchase requests conditioned upon the acceptance of each of these
underlying requests. Therefore, in the event that the series reject an
exchange request, neither the redemption nor the purchase side of the
exchange will be processed.
[arrow] Market Timing Policies
The series are not designed for professional market timing organizations
or other entities using programmed or frequent exchanges. The series
define a "market timer" as an individual, or organization acting on
behalf of one or more individuals, if the individual or organization
makes during the calendar year six or more exchange requests among the
series.
Accounts under common ownership or control, including accounts
administered by market timers, will be aggregated for purposes of this
definition.
24
<PAGE>
The series may impose specific limitations on market timers, including:
o delaying for up to seven days the purchase side of an exchange request
by market timers;
o rejecting or otherwise restricting purchase or exchange requests by
market timers; and
o permitting exchanges by market timers only into certain series.
[arrow] In-kind distributions
The series have reserved the right to pay redemption proceeds by a
distribution in-kind of portfolio securities (rather than cash). In the
event that the series makes an in-kind distribution, you could incur the
brokerage and transaction charges when converting the securities to
cash. The series do not expect to make in-kind distributions.
[arrow] Unique Nature of Series
MFS may serve as the investment adviser to other funds which have
similar investment goals and principal investment policies and risks to
the series, and which may be managed by the series' portfolio
manager(s). While a series may have many similarities to these other
funds, its investment performance will differ from their investment
performance. This is due to a number of differences between a series and
these similar products, including differences in sales charges, expense
ratios and cash flows.
[arrow] Year 2000 Readiness Disclosure
The series could be adversely affected if the computer systems used by
MFS, the series' other service providers or the companies in which the
series invests do not properly process date-related information from and
after January 1, 2000 (the "Year 2000 Issue"). MFS recognizes the
importance of the Year 2000 Issue and, to address Year 2000 compliance,
created a separately funded Year 2000 Program Management Office in 1996
comprised of a specialized staff reporting directly to MFS senior
management. The Office, with the help of external consultants, is
responsible for overall coordination, strategy formulation,
communications and issue resolution with respect to Year 2000 issues.
While MFS systems will be tested for Year 2000 readiness before the turn
of the century, there are significant systems interdependencies in the
domestic and foreign markets for securities, the business environments
in which companies held by the series operate and in MFS' own business
environment. MFS has been working with the series' other service
providers to identify and respond to potential problems with respect to
Year 2000 readiness and to develop contingency plans. Year 2000
readiness is also one of the factors considered by MFS in its ongoing
assessment of companies in which the series invests. There can be no
assurance, however, that these steps will be sufficient to avoid any
adverse impact on the series.
[arrow] Potential Conflicts
Shares of the series are offered to the separate accounts of insurance
companies that may be affiliated or unaffiliated with MFS and each other
("shared funding") and may serve as the underlying investments for both
variable annuity and variable life insurance contracts ("mixed
funding"). Due to differences in tax treatment or other considerations,
the interests of various contract owners might at some time be in
conflict. The trust currently does not foresee any such conflict.
Nevertheless, the board of trustees which oversees the series intends to
monitor events in order to identify any material irreconcilable
conflicts which may possibly arise and to determine what action, if any,
should be taken in response. If such a conflict were to occur, one or
more separate accounts of the insurance companies might be required to
withdraw its investments in one or more series. This might force a
series to sell securities at disadvantageous prices.
VII FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
series' financial performance for the past 5 years, or, if a series has
not been in operation that long, since the time it commenced investment
operations. Certain information reflects financial results for a single
series' share. The total returns in the table represent the rate by
which an investor would have earned (or lost) on an investment in a
series (assuming reinvestment of all distributions). This information
has been audited by the trust's independent auditors, whose report,
together with the trust's financial statements, are included in the
trust's Annual Report to shareholders. The series' Annual Report is
available upon request by contacting MFSC (see back cover for address
and telephone number). These financial statements are incorporated by
reference into the SAI. The trust's independent auditors are Deloitte &
Touche LLP.
25
<PAGE>
1. Emerging Growth Series
.............................................................................
<TABLE>
<CAPTION>
Period Ended
Year Ended December 31, December 31,
1998 1997 1996 1995*
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period ................... $ 16.13 $ 13.24 $ 11.41 $ 10.00
------- ------- ------- --------
Income from investment operations# --
Net investment income (loss)[sec] ....................... $ (0.05) $ (0.06) $ (0.01) $ 0.01
Net realized and unrealized gain on investments and
foreign currency ....................................... 5.55 2.95 1.95 1.74
------- ------- ------- --------
Total from investment operations ...................... $ 5.50 $ 2.89 $ 1.94 $ 1.75
------- ------- ------- --------
Less distributions declared to shareholders --
From net investment income .............................. $ -- $ -- $ -- $ (0.01)
From net realized gain on investments and foreign
currency transactions .................................. (0.05) -- (0.06) (0.26)
In excess of net realized gain on investments and
foreign currency transactions .......................... (0.11) -- (0.05) --
From paid-in capital .................................... -- -- -- (0.07)
------- ------- ------- --------
Total distributions declared to shareholders .......... $ (0.16) $ -- $ (0.11) $ (0.34)
------- ------- ------- --------
Net asset value -- end of period ......................... $ 21.47 $ 16.13 $ 13.24 $ 11.41
------- ------- ------- --------
Total return ............................................. 34.16% 21.90% 17.02% 17.41%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## .............................................. 0.85% 0.90% 1.00% 1.00%+
Net investment income (loss) ............................ (0.29)% (0.38)% (0.08)% 0.10%+
Portfolio turnover ....................................... 71% 112% 96% 73%
Net assets at end of period (000 omitted) ................ $908,987 $384,480 $104,956 $ 3,869
</TABLE>
-----------
* For the period from the commencement of the series' investment
operations, July 24, 1995, through December 31, 1995.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series with
its custodian and dividend disbursing agent. The series' expenses are
calculated without reduction for this expense offset arrangement.
[sec] Prior to January 1, 1998, the investment adviser voluntarily agreed
to maintain, subject to reimbursement by the series, the expenses of the
series at not more than 1.00% of average daily net assets. To the extent
actual expenses were over or under this limitation, the net investment
loss per share and the ratios would have been:
<TABLE>
<S> <C> <C> <C> <C>
Net investment loss ........... -- $(0.05) $(0.03) $(0.18)
Ratios (to average net assets):
Expenses## ................... -- 0.87% 1.16% 2.91%+
Net investment loss .......... -- (0.35)% (0.23)% (1.78)%+
</TABLE>
26
<PAGE>
2. Capital Opportunities Series
.........................................................................
<TABLE>
<CAPTION>
Period Ended
Year Ended December 31, December 31,
1998 1997 1996*
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period ................... $ 11.68 $ 10.66 $ 10.00
------- ------- --------
Income from investment operations# --
Net investment income[sec] .............................. $ 0.03 $ 0.12 $ 0.07
Net realized and unrealized gain on investments and
foreign currency ....................................... 3.11 2.66 0.88
------- ------- --------
Total from investment operations ...................... $ 3.14 $ 2.78 $ 0.95
------- ------- --------
Less distributions declared to shareholders --
From net investment income .............................. $ (0.02) $ (0.09) $ (0.03)
From net realized gain on investments and foreign
currency transactions .................................. (0.01) (1.54) (0.21)
In excess of net realized gain on investments and
foreign currency transactions .......................... -- -- (0.01)
From capital ............................................ -- (0.13) (0.04)
------- ------- --------
Total distributions declared to shareholders .......... $ (0.03) $ (1.76) $ (0.29)
------- ------- --------
Net asset value -- end of period ......................... $ 14.79 $ 11.68 $ 10.66
------- ------- --------
Total return ............................................. 26.80% 26.47% 8.78%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## .............................................. 1.02% 1.02% 1.02%+
Net investment income ................................... 0.21% 0.91% 1.72%+
Portfolio turnover ....................................... 144% 270% 44%
Net assets at end of period (000 omitted) ................ $ 23,908 $ 5,660 $ 1,351
</TABLE>
-----------
* For the period from the commencement of the series' investment
operations, August 14, 1996, through December 31, 1996.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series with
its custodian and dividend disbursing agent. The series' expenses are
calculated without reduction for this expense.
[sec] Subject to reimbursement by the series, the investment adviser 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 this limitation, the net investment income (loss) per
share and ratios would have been:
<TABLE>
<S> <C> <C> <C>
Net investment income (loss) .......... $0.02 $(0.02) $(0.04)
Ratios (to average net assets):
Expenses## ........................... 1.11% 2.08% 3.83%+
Net investment income (loss) ......... 0.12% (0.18)% (1.09)%+
</TABLE>
27
<PAGE>
3. Growth With Income Series
.............................................................................
<TABLE>
<CAPTION>
Period Ended
Year Ended December 31, December 31,
1998 1997 1996 1995*
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period .................. $ 16.44 $ 12.98 $ 10.61 $ 10.00
------- --------- -------- --------
Income from investment operations# --
Net investment income[sec] ............................. $ 0.13 $ 0.16 $ 0.18 $ 0.05
Net realized and unrealized gain on investments and
foreign currency ...................................... 3.54 3.70 2.42 0.61
------- --------- -------- --------
Total from investment operations ..................... $ 3.67 $ 3.86 $ 2.60 $ 0.66
------- --------- -------- --------
Less distributions declared to shareholders --
From net investment income ............................. $ -- $ (0.07) $ (0.09) $ (0.05)
From net realized gain on investments and foreign
currency transactions ................................. -- (0.29) (0.13) --
In excess of net realized gain on investments and
foreign currency transactions ......................... -- (0.04) (0.01) --
-------- --------- -------- --------
Total distributions declared to shareholders ......... $ -- $ (0.40) $ (0.23) $ (0.05)
-------- --------- -------- --------
Net asset value -- end of period ........................ $ 20.11 $ 16.44 $ 12.98 $ 10.61
-------- --------- -------- --------
Total return ............................................ 22.32% 29.78% 24.46% 6.64%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ............................................. 0.95% 1.00% 1.01% 1.00%+
Net investment income .................................. 0.73% 0.93% 1.52% 2.20%+
Portfolio turnover ...................................... 57% 42% 41% 2%
Net assets at end of period (000 omitted) ............... $244,310 $ 58,045 $ 9,174 $ 365
</TABLE>
----------------
* For the period from the commencement of the series' investment operations,
October 9, 1995, through December 31, 1995.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series with
its custodian. The series' expenses are calculated without reduction for
this expense offset arrangement.
[sec] Prior to October 2, 1998, 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 (loss) per share and ratios would
have been:
<TABLE>
<S> <C> <C> <C> <C>
Net investment income (loss) .......... $0.14 $(0.13) $(0.05) $ (0.41)
Ratios (to average net assets):
Expenses## ........................... 0.88% 1.10% 2.07% 21.44%+
Net investment income (loss) ......... 0.80% 0.82% 0.46% (18.24)%+
</TABLE>
28
<PAGE>
4. New Discovery Series
.............................................................................
<TABLE>
<CAPTION>
Period Ended
December 31,
1998*
------------------------------------------------------------------------------------
<S> <C>
Per share data (for a share outstanding throughout the period):
Net asset value -- beginning of period ............................... $ 10.00
--------
Income from investment operations# --
Net investment loss[sec] ............................................ $ (0.04)
Net realized and unrealized gain on investments and foreign currency 0.26
--------
Total from investment operations .................................. $ 0.22
--------
Net asset value -- end of period ..................................... $ 10.22
--------
Total return ......................................................... 2.20%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## .......................................................... 1.17%+
Net investment loss ................................................. (0.74)%+
Portfolio turnover ................................................... 130%
Net assets at end of period (000 omitted) ............................ $ 1,138
</TABLE>
--------------
* For the period from the commencement of the series' investment operations,
May 1, 1998, through December 31, 1998.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series with
its custodian and dividend disbursing agent. The series' expenses are
calculated without reduction for this expense offset arrangement.
[sec] Subject to reimbursement by the series, the investment adviser 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 this limitation, the net investment loss per share and
ratios would have been:
<TABLE>
<S> <C>
Net investment loss ........... $(0.28)
Ratios (to average net assets):
Expenses## ................... 5.22%+
Net investment loss .......... (4.79)%+
</TABLE>
29
<PAGE>
5. Total Return Series
.............................................................................
<TABLE>
<CAPTION>
Period Ended
Year Ended December 31, December 31,
1998 1997 1996 1995*
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period ................... $ 16.63 $ 13.71 $ 12.25 $ 10.00
-------- ------- ------- --------
Income from investment operations# --
Net investment income[sec] .............................. $ 0.53 $ 0.52 $ 0.46 $ 0.41
Net realized and unrealized gain on investments and
foreign currency ....................................... 1.49 2.40 1.30 2.32
-------- -------- -------- --------
Total from investment operations ...................... $ 2.02 $ 2.92 $ 1.76 $ 2.73
-------- -------- -------- --------
Less distributions declared to shareholders --
From net investment income .............................. $ (0.24) $ -- $ (0.21) $ (0.25)
From net realized gain on investments and foreign
currency transactions .................................. (0.29) -- (0.09) (0.23)
-------- ------- ------- --------
Total distributions declared to shareholders .......... $ (0.53) $ -- $ (0.30) $ (0.48)
-------- ------- ------- --------
Net asset value -- end of period ......................... $ 18.12 $ 16.63 $13.71 $ 12.25
-------- ------- ------- --------
Total return ............................................. 12.33% 21.30% 14.37% 27.34%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## .............................................. 1.00% 1.00% 1.00% 1.00%+
Net investment income ................................... 3.05% 3.25% 3.59% 3.83%+
Portfolio turnover ....................................... 100% 93% 76% 16%
Net assets at end of period (000 omitted) ................ $171,182 $75,612 $19,250 $ 2,797
</TABLE>
---------------
* 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 has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series with
its custodian and dividend disbursing agent. The series' expenses are
calculated without reduction for this expense.
[sec] 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:
<TABLE>
<S> <C> <C> <C> <C>
Net investment income .......... $ 0.54 $ 0.52 $ 0.32 $ 0.22
Ratios (to average net assets):
Expenses## .................... 0.91% 1.02% 2.10% 2.49%+
Net investment income ......... 3.14% 3.23% 2.49% 2.09%+
</TABLE>
30
<PAGE>
6. High Income Series
.............................................................................
<TABLE>
<CAPTION>
Period Ended
Year Ended December 31, December 31,
1998 1997 1996 1995*
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each
period):
Net asset value -- beginning of period .................... $ 12.34 $ 10.87 $ 10.29 $ 10.00
-------- ------- ------- --------
Income from investment operations# --
Net investment income[sec] ............................... $ 1.04 $ 0.95 $ 0.89 $ 0.34
Net realized and unrealized gain (loss) on investments
and foreign currency .................................... (1.02) 0.52 0.32 0.18
-------- ------- ------- --------
Total from investment operations ....................... $ 0.02 $ 1.47 $ 1.21 $ 0.52
-------- ------- ------- --------
Less distributions declared to shareholders --
From net investment income ............................... $ (0.62) $ -- $ (0.53) $ (0.23)
From net realized gain on investments and foreign
currency transactions ................................... (0.21) -- (0.10) --
In excess of net realized gain on investments and
foreign currency transactions ........................... (0.00)+++ -- -- --
-------- ------- -------- --------
Total distributions declared to shareholders ........... $ (0.83) $ -- $ (0.63) $ (0.23)
-------- ------- -------- --------
Net asset value -- end of period .......................... $ 11.53 $ 12.34 $ 10.87 $ 10.29
-------- ------- -------- --------
Total return .............................................. (0.18)% 13.52% 11.80% 5.25%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ............................................... 1.03% 1.01% 1.01% 1.03%+
Net investment income .................................... 8.67% 8.17% 8.18% 8.17%+
Portfolio turnover ........................................ 146% 139% 135% 32%
Net assets at end of period (000 omitted) ................. $ 42,890 $30,662 $ 12,994 $ 1,946
</TABLE>
-----------
* For the period from the commencement of the series' investment
operations, July 26, 1995, through December 31, 1995.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## The series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series
with its custodian and dividend disbursing agent. The series' expenses
are calculated without reduction for this expense offset arrangement.
[sec] Subject to reimbursement by the series, the investment adviser 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 ratios would have been:
<TABLE>
<S> <C> <C> <C> <C>
Net investment income .......... $1.05 $0.93 $0.82 $ 0.20
Ratios (to average net assets):
Expenses## .................... 0.96% 1.15% 1.62% 4.38%+
Net investment income ......... 8.74% 8.03% 7.57% 4.82%+
</TABLE>
31
<PAGE>
Appendix A Emerging Growth Series
[arrow] Investment Techniques and Practices
In pursuing its investment objective and investment policies, the
Emerging Growth Series may engage in the following investment techniques
and practices, which are described, together with their risks, in the
SAI. Investment techniques and practices which are the principal focus
of the series are also described in the Risk Return Summary of the
Prospectus.
Symbols [check mark] permitted -- not permitted
- -------------------------------------------------------------
<TABLE>
<S> <C>
Debt Securities
Asset-Backed Securities
Collateralized Mortgage Obligations and Multiclass
Pass-Through Securities --
Corporate Asset-Backed Securities --
Mortgage Pass-Through Securities --
Stripped Mortgage-Backed Securities --
Corporate Securities [check mark]
Loans and Other Direct Indebtedness --
Lower Rated Bonds [check mark]
Municipal Bonds --
Speculative Bonds [check mark]
U.S. Government Securities [check mark]
Variable and Floating Rate Obligations [check mark]
Zero Coupon Bonds, Deferred Interest Bonds
and PIK Bonds [check mark]
Equity Securities [check mark]
Foreign Securities Exposure
Brady Bonds --
Depositary Receipts [check mark]
Dollar-Denominated Foreign Debt Securities --
Emerging Markets [check mark]
Foreign Securities [check mark]
Forward Contracts [check mark]
Futures Contracts [check mark]
Indexed Securities/Structured Products --
Inverse Floating Rate Obligations --
</TABLE>
<TABLE>
<S> <C>
Investment in Other Investment Companies
Open-End Funds [check mark]
Closed-End Funds [check mark]
Lending of Portfolio Securities [check mark]
Leveraging Transactions
Bank Borrowings --*
Mortgage "Dollar-Roll" Transactions --*
Reverse Repurchase Agreements --*
Options
Options on Foreign Currencies [check mark]
Options on Futures Contracts [check mark]
Options on Securities [check mark]
Options on Stock Indices [check mark]
Reset Options --
"Yield Curve" Options --
Repurchase Agreements [check mark]
Restricted Securities [check mark]
Short Sales --
Short Sales Against the Box --
Short Term Instruments [check mark]
Swaps and Related Derivative Instruments --
Temporary Borrowings [check mark]
Temporary Defensive Positions [check mark]
Warrants [check mark]
"When-Issued" Securities [check mark]
</TABLE>
*May be changed only with shareholder approval.
A-1
<PAGE>
Appendix A Capital Opportunities Series
[arrow] Investment Techniques and Practices
In pursuing its investment objective and investment policies, the
Capital Opportunities Series may engage in the following investment
techniques and practices, which are described, together with their
risks, in the SAI. Investment techniques and practices which are the
principal focus of the series are also described in the Risk Return
Summary of the Prospectus.
Symbols [check mark] permitted -- not permitted
- -------------------------------------------------------------
<TABLE>
<S> <C>
Debt Securities
Asset-Backed Securities
Collateralized Mortgage Obligations and Multiclass
Pass-Through Securities --
Corporate Asset-Backed Securities --
Mortgage Pass-Through Securities --
Stripped Mortgage-Backed Securities --
Corporate Securities [check mark]
Loans and Other Direct Indebtedness --
Lower Rated Bonds [check mark]
Municipal Bonds --
Speculative Bonds [check mark]
U.S. Government Securities [check mark]
Variable and Floating Rate Obligations [check mark]
Zero Coupon Bonds, Deferred Interest Bonds and
PIK Bonds [check mark]
Equity Securities [check mark]
Foreign Securities Exposure
Brady Bonds [check mark]
Depositary Receipts [check mark]
Dollar-Denominated Foreign Debt Securities --
Emerging Markets [check mark]
Foreign Securities [check mark]
Forward Contracts [check mark]
Futures Contracts [check mark]
Indexed Securities/Structured Products --
Inverse Floating Rate Obligations --
</TABLE>
<TABLE>
<S> <C>
Investment in Other Investment Companies
Open-End Funds [check mark]
Closed-End Funds [check mark]
Lending of Portfolio Securities [check mark]
Leveraging Transactions
Bank Borrowings --*
Mortgage "Dollar-Roll" Transactions --*
Reverse Repurchase Agreements --*
Options
Options on Foreign Currencies [check mark]
Options on Futures Contracts [check mark]
Options on Securities [check mark]
Options on Stock Indices [check mark]
Reset Options --
"Yield Curve" Options --
Repurchase Agreements [check mark]
Restricted Securities [check mark]
Short Sales --
Short Sales Against the Box [check mark]
Short Term Instruments [check mark]
Swaps and Related Derivative Instruments --
Temporary Borrowings [check mark]
Temporary Defensive Positions [check mark]
Warrants [check mark]
"When-Issued" Securities [check mark]
</TABLE>
*May be changed only with shareholder approval.
A-2
<PAGE>
Appendix A Growth With Income Series
[arrow] Investment Techniques and Practices
In pursuing its investment objectives and investment policies, the
Growth With Income Series may engage in the following investment
techniques and practices, which are described, together with their
risks, in the SAI. Investment techniques and practices which are the
principal focus of the series are also described in the Risk Return
Summary of the Prospectus.
Symbols [check mark] permitted -- not permitted
- -------------------------------------------------------------
<TABLE>
<S> <C>
Debt Securities
Asset-Backed Securities
Collateralized Mortgage Obligations and Multiclass
Pass-Through Securities --
Corporate Asset-Backed Securities --
Mortgage Pass-Through Securities --
Stripped Mortgage-Backed Securities --
Corporate Securities [check mark]
Loans and Other Direct Indebtedness --
Lower Rated Bonds --
Municipal Bonds --
Speculative Bonds --
U.S. Government Securities --
Variable and Floating Rate Obligations [check mark]
Zero Coupon Bonds, Deferred Interest Bonds and
PIK Bonds [check mark]
Equity Securities [check mark]
Foreign Securities Exposure
Brady Bonds --
Depositary Receipts [check mark]
Dollar-Denominated Foreign Debt Securities --
Emerging Markets [check mark]
Foreign Securities [check mark]
Forward Contracts [check mark]
Futures Contracts [check mark]
Indexed Securities/Structured Products --
Inverse Floating Rate Obligations --
</TABLE>
<TABLE>
<S> <C>
Investment in Other Investment Companies
Open-End [check mark]
Closed-End [check mark]
Lending of Portfolio Securities [check mark]
Leveraging Transactions
Bank Borrowings --*
Mortgage "Dollar-Roll" Transactions --*
Reverse Repurchase Agreements --*
Options
Options on Foreign Currencies [check mark]
Options on Futures Contracts [check mark]
Options on Securities [check mark]
Options on Stock Indices [check mark]
Reset Options --
"Yield Curve" Options --
Repurchase Agreements [check mark]
Restricted Securities [check mark]
Short Sales --
Short Sales Against the Box [check mark]
Short Term Instruments [check mark]
Swaps and Related Derivative Instruments --
Temporary Borrowings [check mark]
Temporary Defensive Positions [check mark]
Warrants [check mark]
"When-Issued" Securities [check mark]
</TABLE>
*May be changed only with shareholder approval.
A-3
<PAGE>
Appendix A New Discovery Series
[arrow] Investment Techniques and Practices
In pursuing its investment objective and investment policies, the New
Discovery Series engage in the following investment techniques and
practices, which are described, together with their risks, in the SAI.
Investment techniques and practices which are the principal focus of the
series are also described in the Risk Return Summary of the Prospectus.
Symbols [check mark] permitted -- not permitted
- -------------------------------------------------------------
<TABLE>
<S> <C>
Debt Securities
Asset-Backed Securities
Collateralized Mortgage Obligations and Multiclass
Pass-Through Securities --
Corporate Asset-Backed Securities --
Mortgage Pass-Through Securities --
Stripped Mortgage-Backed Securities --
Corporate Securities [check mark]
Loans and Other Direct Indebtedness --
Lower Rated Bonds [check mark]
Municipal Bonds --
Speculative Bonds [check mark]
U.S. Government Securities [check mark]
Variable and Floating Rate Obligations [check mark]
Zero Coupon Bonds, Deferred Interest Bonds and
PIK Bonds [check mark]
Equity Securities [check mark]
Foreign Securities Exposure
Brady Bonds --
Depositary Receipts [check mark]
Dollar-Denominated Foreign Debt Securities [check mark]
Emerging Markets [check mark]
Foreign Securities [check mark]
Forward Contracts [check mark]
Futures Contracts [check mark]
Indexed Securities/Structured Products [check mark]
Inverse Floating Rate Obligations --
</TABLE>
<TABLE>
<S> <C>
Investment in Other Investment Companies
Open-End [check mark]
Closed-End [check mark]
Lending of Portfolio Securities [check mark]
Leveraging Transactions
Bank Borrowings *
Mortgage "Dollar-Roll" Transactions --*
Reverse Repurchase Agreements --*
Options
Options on Foreign Currencies [check mark]
Options on Futures Contracts [check mark]
Options on Securities [check mark]
Options on Stock Indices [check mark]
Reset Options [check mark]
"Yield Curve" Options [check mark]
Repurchase Agreements [check mark]
Restricted Securities [check mark]
Short Sales [check mark]
Short Sales Against the Box [check mark]
Short Term Instruments [check mark]
Swaps and Related Derivative Instruments [check mark]
Temporary Borrowings [check mark]
Temporary Defensive Positions [check mark]
Warrants [check mark]
"When-Issued" Securities [check mark]
</TABLE>
*May be changed only with shareholder approval.
A-4
<PAGE>
Appendix A Growth Series
[arrow] Investment Techniques and Practices
In pursuing its investment objective and investment policies, the Growth
Series may engage in the following investment techniques and practices,
which are described, together with their risks, in the SAI. Investment
techniques and practices which are the principal focus of the series are
also described in the Risk Return Summary of the Prospectus.
Symbols [check mark] permitted -- not permitted
- -------------------------------------------------------------
<TABLE>
<S> <C>
Debt Securities
Asset-Backed Securities
Collateralized Mortgage Obligations and Multiclass
Pass-Through Securities --
Corporate Asset-Backed Securities --
Mortgage Pass-Through Securities --
Stripped Mortgage-Backed Securities --
Corporate Securities --
Loans and Other Direct Indebtedness
Lower Rated Bonds --
Municipal Bonds --
Speculative Bonds --
U.S. Government Securities --
Variable and Floating Rate Obligations [check mark]
Zero Coupon Bonds, Deferred Interest Bonds and
PIK Bonds --
Equity Securities [check mark]
Foreign Securities Exposure
Brady Bonds --
Depositary Receipts [check mark]
Dollar-Denominated Foreign Debt Securities --
Emerging Markets [check mark]
Foreign Securities [check mark]
Forward Contracts [check mark]
Futures Contracts [check mark]
Indexed Securities/Structured Products --
Inverse Floating Rate Obligations --
</TABLE>
<TABLE>
<S> <C>
Investment in Other Investment Companies
Open-End Funds [check mark]
Closed-End Funds [check mark]
Lending of Portfolio Securities [check mark]
Leveraging Transactions
Bank Borrowings --*
Mortgage "Dollar-Roll" Transactions --*
Reverse Repurchase Agreements --*
Options
Options on Foreign Currencies [check mark]
Options on Futures Contracts [check mark]
Options on Securities [check mark]
Options on Stock Indices [check mark]
Reset Options --
"Yield Curve" Options --
Repurchase Agreements [check mark]
Restricted Securities [check mark]
Short Sales --
Short Sales Against the Box --
Short Term Instruments [check mark]
Swaps and Related Derivative Instruments --
Temporary Borrowing [check mark]
Temporary Defensive Positions [check mark]
Warrants --
"When-Issued" Securities [check mark]
</TABLE>
*May be changed only with shareholder approval.
A-5
<PAGE>
Appendix A Total Return Series
[arrow] Investment Techniques and Practices
In pursuing its investment objectives and investment policies, the Total
Return Series may engage in the following investment techniques and
practices, which are described, together with their risks, in the SAI.
Investment techniques and practices which are the principal focus of the
series are also described in the Risk Return Summary of the Prospectus.
Symbols [check mark] permitted -- not permitted
- --------------------------------------------------------------
<TABLE>
<S> <C>
Debt Securities
Asset-Backed Securities
Collateralized Mortgage Obligations and Multiclass
Pass-Through Securities [check mark]
Corporate Asset-Backed Securities [check mark]
Mortgage Pass-Through Securities [check mark]
Stripped Mortgage-Backed Securities [check mark]
Corporate Securities [check mark]
Loans and Other Direct Indebtedness [check mark]
Lower Rated Bonds [check mark]
Municipal Bonds [check mark]
Speculative Bonds [check mark]
U.S. Government Securities [check mark]
Variable and Floating Rate Obligations [check mark]
Zero Coupon Bonds, Deferred Interest Bonds and PIK
Bonds [check mark]
Equity Securities [check mark]
Foreign Securities Exposure
Brady Bonds [check mark]
Depositary Receipts [check mark]
Dollar-Denominated Foreign Debt Securities [check mark]
Emerging Markets [check mark]
Foreign Securities [check mark]
Forward Contracts [check mark]
Futures Contracts [check mark]
Indexed Securities/Structured Products [check mark]
Inverse Floating Rate Obligations [check mark]
</TABLE>
<TABLE>
<S> <C>
Investment in Other Investment Companies
Open-End Funds [check mark]
Closed-End Funds [check mark]
Lending of Portfolio Securities [check mark]
Leveraging Transactions
Bank Borrowings --*
Mortgage "Dollar-Roll" Transactions *
Reverse Repurchase Agreements *
Options
Options on Foreign Currencies [check mark]
Options on Futures Contracts [check mark]
Options on Securities [check mark]
Options on Stock Indices [check mark]
Reset Options [check mark]
"Yield Curve" Options [check mark]
Repurchase Agreements [check mark]
Restricted Securities [check mark]
Short Sales --
Short Sales Against the Box --
Short Term Instruments [check mark]
Swaps and Related Derivative Instruments [check mark]
Temporary Borrowings [check mark]
Temporary Defensive Positions [check mark]
Warrants [check mark]
"When-Issued" Securities [check mark]
</TABLE>
*May be changed only with shareholder approval.
A-6
<PAGE>
Appendix A High Income Series
[arrow] Investment Techniques and Practices
In pursuing its investment objective and investment policies, the High
Income Series may engage in the following investment techniques and
practices, which are described, together with their risks, in the SAI.
Investment techniques and practices which are the principal focus of the
series are also described in the Risk Return Summary of the Prospectus.
Symbols [check mark] permitted -- not permitted
- -------------------------------------------------------------
<TABLE>
<S> <C>
Debt Securities
Asset-Backed Securities
Collateralized Mortgage Obligations and Multiclass
Pass-Through Securities [check mark]
Corporate Asset-Backed Securities [check mark]
Mortgage Pass-Through Securities [check mark]
Stripped Mortgage-Backed Securities --
Corporate Securities [check mark]
Loans and Other Direct Indebtedness [check mark]
Lower Rated Bonds [check mark]
Municipal Bonds --
Speculative Bonds [check mark]
U.S. Government Securities [check mark]
Variable and Floating Rate Obligations [check mark]
Zero Coupon Bonds, Deferred Interest Bonds and PIK
Bonds [check mark]
Equity Securities [check mark]
Foreign Securities Exposure
Brady Bonds [check mark]
Depositary Receipts --
Dollar-Denominated Foreign Debt Securities [check mark]
Emerging Markets [check mark]
Foreign Securities [check mark]
Forward Contracts [check mark]
Futures Contracts [check mark]
Indexed Securities/Structured Products [check mark]
Inverse Floating Rate Obligations --
</TABLE>
<TABLE>
<S> <C>
Investment in Other Investment Companies
Open-End Funds [check mark]
Closed-End Funds [check mark]
Lending of Portfolio Securities [check mark]
Leveraging Transactions
Bank Borrowings --*
Mortgage "Dollar-Roll" Transactions --*
Reverse Repurchase Agreements *
Options
Options on Foreign Currencies --
Options on Futures Contracts --
Options on Securities [check mark]
Options on Stock Indices [check mark]
Reset Options --
"Yield Curve" Options --
Repurchase Agreements [check mark]
Restricted Securities [check mark]
Short Sales [check mark]
Short Sales Against the Box [check mark]
Short Term Instruments [check mark]
Swaps and Related Derivative Instruments [check mark]
Temporary Borrowings [check mark]
Temporary Defensive Positions [check mark]
Warrants [check mark]
"When-Issued" Securities [check mark]
</TABLE>
*May be changed only with shareholder approval.
A-7
<PAGE>
Appendix A Global Equity Series
[arrow] Investment Techniques and Practices
In pursuing its investment objective, the Global Equity Series may
engage in the following investment techniques and practices, which are
described, together with their risks, in the SAI. Investment techniques
and practices which are the principal focus of the series are also
described in the Risk Return Summary of the Prospectus.
Symbols [check mark] permitted -- not permitted
- -------------------------------------------------------------
<TABLE>
<S> <C>
Debt Securities
Asset-Backed Securities
Collateralized Mortgage Obligations and Multiclass
Pass-Through Securities --
Corporate Asset-Backed Securities --
Mortgage Pass-Through Securities --
Stripped Mortgage-Backed Securities --
Corporate Securities --
Loans and Other Direct Indebtedness --
Lower Rated Bonds --
Municipal Bonds --
Speculative Bonds --
U.S. Government Securities [check mark]
Variable and Floating Rate Obligations --
Zero Coupon Bonds, Deferred Interest Bonds
and PIK Bonds --
Equity Securities [check mark]
Foreign Securities Exposure
Brady Bonds --
Depositary Receipts [check mark]
Dollar-Denominated Foreign Debt Securities --
Emerging Markets [check mark]
Foreign Securities [check mark]
Forward Contracts [check mark]
Futures Contracts [check mark]
Indexed Securities/Structured Products --
Inverse Floating Rate Obligations --
</TABLE>
<TABLE>
<S> <C>
Investment in Other Investment Companies
Open-End Funds [check mark]
Closed-End Funds [check mark]
Lending of Portfolio Securities [check mark]
Leveraging Transactions
Bank Borrowings --*
Mortgage "Dollar-Roll" Transactions --*
Reverse Repurchase Agreements --*
Options
Options on Foreign Currencies [check mark]
Options on Futures Contracts [check mark]
Options on Securities [check mark]
Options on Stock Indices [check mark]
Reset Options --
"Yield Curve" Options --
Repurchase Agreements [check mark]
Restricted Securities [check mark]
Short Sales --
Short Sales Against the Box --
Short Term Instruments [check mark]
Swaps and Related Derivative Instruments --
Temporary Borrowings [check mark]
Temporary Defensive Positions [check mark]
Warrants [check mark]
"When-Issued" Securities [check mark]
</TABLE>
*May be changed only with shareholder approval.
A-8
<PAGE>
MFS[RegTM] VARIABLE INSURANCE TRUST(SM)
If you want more information about the trust and its series, the following
documents are available free upon request:
Annual/Semiannual Reports. These reports contain information about the
series' actual investments. Annual reports discuss the effect of recent
market conditions and the series' investment strategy on the series'
performance during its last fiscal year.
Statement of Additional Information (SAI). The SAI, dated May 1, 1999,
provides more detailed information about the trust and its series and is
incorporated into this prospectus by reference.
You can get free copies of the annual/semiannual reports, the SAI and other
information about the trust and its series, and make inquiries about the
trust and its series, by contacting:
MFS Service Center, Inc.
2 Avenue de Lafayette
Boston, MA 02111-1738
Telephone: 1-800-343-2829, ext. 3500
Internet: http://www.mfs.com
Information about the trust and its series (including its prospectus, SAI
and shareholder reports) can be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
Washington, D.C., 20549-6009
Information on the operation of the Public Reference Room may be obtained
by calling the Commission at 1-800-SEC-0330. Reports and other information
about the trust and its series are available on the Commission's Internet
website at http://www.sec.gov, and copies of this information may be
obtained, upon payment of a duplicating fee, by writing the Public
Reference Section at the above address.
The trust's Investment Company Act file number is 811-8326
MSG 11/98 224M 90/290/390/890