<PAGE>
[Logo] M F S(R) SEMIANNUAL REPORT
INVESTMENT MANAGEMENT JUNE 30, 1999
75 YEARS
WE INVENTED THE MUTUAL FUND(R)
[graphic omitted]
A SERIES OF MFS(R) VARIABLE INSURANCE TRUST(SM)
MFS(R) CAPITAL
OPPORTUNITIES SERIES
(FORMERLY MFS(R) VALUE SERIES)
<PAGE>
MFS(R) CAPITAL OPPORTUNITIES SERIES
A SERIES OF MFS(R) VARIABLE INSURANCE TRUST(SM)
<TABLE>
<CAPTION>
<S> <C>
TRUSTEES INVESTMENT ADVISER
Jeffrey L. Shames* Massachusetts Financial Services Company
Chairman, Chief Executive Officer, and 500 Boylston Street
Director, MFS Investment Management(R) Boston, MA 02116-3741
Nelson J. Darling, Jr. DISTRIBUTOR
Professional trustee MFS Fund Distributors, Inc.
500 Boylston Street
William R. Gutow Boston, MA 02116-3741
Vice Chairman,
Capitol Entertainment Management Company; SHAREHOLDER SERVICE CENTER
Private investor and real estate consultant MFS Service Center, Inc.
P.O. Box 2281
CHAIRMAN AND PRESIDENT Boston, MA 02107-9906
Jeffrey L. Shames*
For additional information,
PORTFOLIO MANAGER contact your financial adviser.
Maura A. Shaughnessy*
CUSTODIAN
TREASURER State Street Bank and Trust Company
W. Thomas London*
WORLD WIDE WEB
ASSISTANT TREASURERS www.mfs.com
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
*Affiliated with the Investment Adviser
</TABLE>
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- --------------------------------------------------------------------------------
<PAGE>
LETTER FROM THE CHAIRMAN
Dear Contract Owners,
It has been almost two years since financial turmoil began to rock markets in
Asia, Russia, and Latin America. Even developed markets such as Europe and the
United States were not immune. In the U.S. equity market, for example, investors
focused on a narrow group of 50 of the largest-company growth stocks because
they seemed to offer less volatility in uncertain times. Fixed-income investors
also became more concerned about risk, moving money into U.S. Treasury
securities and out of corporate and municipal bonds and mortgage-backed
securities.
The narrowness of the market was just one of three broad issues that dominated
the U.S. equity market until recently. The other two were a slowdown in
corporate earnings growth and high valuations, with stocks of many companies
selling at extremely high prices relative to their earnings.
Although these have been challenging issues, we now see signs that we feel
demonstrate each one is changing for the better. Today, we believe the markets
are presenting more opportunities for investors to diversify, for our portfolio
managers to find good values, and for us to show the benefits of staying with
our long-term objectives and strategies. Investors seem to be regaining
confidence in a wider range of companies. Stocks of some small and mid-sized
companies, as well as some large industrial companies, have begun to perform
better in the past few months than they had for the previous year or so. These
companies appear to have benefited from early signs of stability in emerging
markets and a continuation of economic growth in the United States.
U.S. companies also have produced better earnings. Corporate earnings were, on
average, relatively flat in 1998. However, we expect earnings to grow 12% to 14%
this year because more companies have benefited from the strong economy and from
aggressive consolidation and cost-cutting measures they have taken over the past
several years.
Based on their earnings projections, our analysts estimate that the U.S. stock
market is still about 30% overvalued. While there has been some shift to a wider
group of stocks, many investors are still focusing on the large-company stocks.
As a result, most of the overvaluation is in the 50 largest stocks in the
Standard & Poor's 500 Composite Index (the S&P 500), a popular, unmanaged index
of common stock total return performance. That means about 450 stocks are
selling at more attractive prices, particularly given what we see as the
improved earnings outlooks for these and many small and mid-sized companies not
in the S&P 500. These companies also benefit from consolidation, cost cutting,
and global growth. Because they are smaller, they may be able to respond to
these changes more quickly, and thus they have the potential to grow faster than
the big companies.
The fixed-income markets, meanwhile, seem to be approaching the level of
relative stability they enjoyed before the Asian turmoil. Some credit for this
stability goes to the Federal Reserve Board (the Fed), which has reassured
investors that it will act to prevent rapid economic growth from causing higher
inflation and reduced purchasing power. Also, once investors saw that the
overseas turmoil had little, if any, effect on the financial strength of most
domestic bond issuers, the major non-Treasury markets -- corporate, municipal,
and mortgage -- began to rebound. Our portfolio managers are now finding more
opportunities to buy bonds with relatively stable prices and attractive yields.
The past two years have challenged investors. However, we believe we are well
positioned for the current environment because our analysts and portfolio
managers continue to rely on MFS(R) Original Research(SM) to help evaluate the
long-term investment potential of each holding being considered for our
portfolios. Also, we believe our discipline of staying with our clearly defined
investment strategies can help us offer investment products with the potential
to sustain returns over a variety of market cycles.
We appreciate your confidence and welcome any questions or comments you may
have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
July 15, 1999
MANAGEMENT REVIEW AND OUTLOOK
Dear Contract Owners,
For the six months ended June 30, 1999, the Series provided a total return of
18.32% (including the reinvestment of any distributions), which compares to a
return of 13.68% for the average capital appreciation fund tracked by Lipper
Analytical Services, Inc., an independent firm that reports mutual fund
performance. Over the same period, the Series' return also compares to 12.23%
for the Standard & Poor's 500 Composite Index (the S&P 500), a popular,
unmanaged index of common stock total return performance.
Since becoming portfolio manager of the Series in February, my goal has been to
increase the portfolio's diversification, which I have done by adding some
stocks and selling or reducing positions in some existing companies. New
holdings include paper companies such as Asia Pulp & Paper Ltd. Previously,
oversupply had made paper company stocks unattractive, but we believe an upturn
in Asia's economy will boost demand. The Series' position in industrial
conglomerate Tyco International was reduced to increase diversification among
our largest holdings. When Tyco recently acquired AMP, we felt that our already
significant position in the resulting company was too concentrated for this
portfolio. The Series' holding in Freddie Mac, the Federal Home Loan Mortgage
Corp., also was reduced, again to increase diversification.
Utilities and communications led by telecommunications companies, is currently
the Series' largest sector. Holdings included AirTouch Communications, which was
acquired by Vodafone early this year. We believe the stock should benefit from
planned cost cutting and consolidation in the United States and abroad. Also,
AirTouch has been penetrating the global wireless market successfully, a
strategy that has helped the stock's performance. MCI WorldCom also has helped
performance. We believe the company is very well run and has a strong position
in the expanding telecommunications market. The Series also owns Mannesmann, a
German company that is becoming a bigger player in telecommunications. The
company has not only competed strongly in Germany, but throughout Europe, with
increased presence in Italy and France.
In technology, the Series' second-largest sector, we have avoided the pure
Internet stocks because we feel they are overvalued. Instead, the Series has
gained exposure to the sector through companies that provide infrastructure to
the Internet. For example, Cisco Systems, which manufactures networking
hardware, is an expensive stock, but we believe it is a well-positioned company.
Other technology holdings are in the semiconductor area, which finally has seen
a rebound in sales, due in part to the recovery in Asia. LSI Logic, which
manufactures integrated circuits and storage systems, is attractive to us
because it has consolidated by closing some plants and it has increased its
sales of computer chips.
This year's increase in oil prices has created potential opportunities in the
energy sector, including natural gas companies. Enron Oil & Gas, a major
producer of natural gas in the United States and Asia, was added to the
portfolio, as was Burlington Resources, one of the largest U.S. oil and gas
companies.
The Series' health care weighting has been reduced. We think drug companies are
looking less attractive now, partly due to new regulations on drug coverage and
the belief that earnings growth is slowing in the industry. In addition,
cutbacks in Medicare prescription benefits do not favor pharmaceuticals at this
point. In the medical devices area, Becton, Dickinson & Co. has underperformed
in 1999. The company missed its earnings projections for three quarters in a row
and has had trouble executing its business plan. Rite Aid, a drug store holding,
declined by 50% due to overexpansion of its retail chain and difficulty
financing the acquisition of PCS, a leading mail order prescription service.
However, we are maintaining a small position in Rite Aid because the company has
brought in new management that we feel could improve its outlook.
My philosophy on managing money is to be flexible and open about the companies
in which I invest. I will consider any company with more than $1 billion in
market capitalization and will look for stronger potential growth in the mid-
and small-cap areas, where it may be easier to find reasonable stock prices.
In addition, I continue to be flexible geographically.
Respectfully,
/s/ Maura A. Shaughnessy
Muara A. Shaughnessy
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and are
current only through the end of the period of the report as stated on the cover.
The manager's views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
It is not possible to invest directly in an index.
The portfolio is actively managed, and current holdings may be different.
PORTFOLIO MANAGER'S PROFILE
Maura A. Shaughnessy is Senior Vice President of MFS Investment Management(R)
and portfolio manager of MFS(R) Capital Opportunities Fund, MFS(R) Utilities
Fund, MFS(R) Utilities Series and MFS(R) Capital Opportunities Series (both part
of MFS(R) Variable Insurance Trust(SM)), and the Utilities Series and Capital
Opportunities Series offered through MFS(R)/Sun Life annuity products.
Ms. Shaughnessy joined MFS in 1991 as a research analyst and became Vice
President and portfolio manager in 1992 and Senior Vice President in 1998. A
graduate of Colby College and the Amos Tuck School of Business Administration of
Dartmouth College, she is a Chartered Financial Analyst.
All equity portfolio managers began their careers at MFS Investment
Management(R) as research analysts. Our portfolio managers are supported by an
investment staff of over 100 professionals utilizing MFS(R) Original
Research(SM), a company-oriented, bottom-up process of selecting securities.
SERIES FACTS
Objective: Seeks capital appreciation.
Commencement of investment operations: August 14, 1996
Size: $37.0 million net assets as of June 30, 1999
This report is prepared for the general information of contract owners. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other MFS
product is available from your financial adviser, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
PERFORMANCE SUMMARY
Because the Series is designed for investors with long-term goals, we have
provided the cumulative as well as the average annual total returns for the
applicable time periods. (See Notes to Performance Summary for more
information.)
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN THROUGH JUNE 30, 1999
6 Months 1 Year Life*
- -------------------------------------------------------------------------------
Cumulative Total Return +18.32% +26.34% +106.40%
- -------------------------------------------------------------------------------
Average Annual Total Return -- +26.34% + 28.65%
- -------------------------------------------------------------------------------
*For the period from the commencement of the Series' investment operations,
August 14, 1996, through June 30, 1999.
NOTES TO PERFORMANCE SUMMARY
All results are historical and assume the reinvestment of dividends and capital
gains. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND UNITS, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS. Performance results reflect any applicable
expense subsidies and waivers, without which the results would have been less
favorable. Subsidies and waivers may be rescinded at any time. See the
prospectus for details.
RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF THE MORTALITY AND EXPENSE RISK
CHARGES AND ADMINISTRATION FEES. PLEASE REFER TO THE ANNUITY PRODUCT'S ANNUAL
REPORT FOR PERFORMANCE THAT REFLECTS THE DEDUCTION OF THE FEES AND CHARGES
IMPOSED BY INSURANCE COMPANY SEPARATE ACCOUNTS.
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) - June 30, 1999
Stocks - 93.8%
- -------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------
U.S. Stocks - 81.0%
Advertising - 0.9%
Outdoor Systems, Inc.* 3,500 $ 127,750
Young & Rubicam, Inc. 4,500 204,469
-----------
$ 332,219
- -------------------------------------------------------------------------------
Aerospace - 0.8%
AlliedSignal, Inc. 4,400 $ 277,200
- -------------------------------------------------------------------------------
Banks and Credit Companies - 2.2%
Bank of New York Co., Inc. 6,300 $ 231,131
Chase Manhattan Corp. 1,300 112,613
Mellon Bank Corp. 6,600 240,075
US Bancorp 20 680
Wells Fargo Co. 5,460 233,415
-----------
$ 817,914
- -------------------------------------------------------------------------------
Broadcasting - 0.9%
Infinity Broadcasting Corp.* 11,600 $ 345,100
- -------------------------------------------------------------------------------
Business Machines - 2.5%
Kulicke & Soffa Industries, Inc.* 4,700 $ 126,019
Texas Instruments, Inc. 1,700 246,500
Xerox Corp. 9,260 546,918
-----------
$ 919,437
- -------------------------------------------------------------------------------
Business Services - 0.2%
Computer Sciences Corp.* 1,300 $ 89,944
- -------------------------------------------------------------------------------
Computer Hardware - Systems - 0.7%
Hewlett-Packard Co. 2,700 $ 271,350
- -------------------------------------------------------------------------------
Computer Software - Personal Computers - 0.8%
America Online, Inc.* 200 $ 22,100
Microsoft Corp.* 3,200 288,600
-----------
$ 310,700
- -------------------------------------------------------------------------------
Computer Software - Services - 0.5%
EMC Corp.* 3,400 $ 187,000
- -------------------------------------------------------------------------------
Computer Software - Systems - 4.3%
Ariba, Inc.* 50 $ 4,863
BMC Software, Inc.* 14,200 766,800
Oracle Corp.* 14,618 542,693
Unisys Corp. 6,700 260,881
-----------
$ 1,575,237
- -------------------------------------------------------------------------------
Consumer Goods and Services - 6.2%
Galileo International, Inc. 2,719 $ 145,297
Newell Rubbermaid, Inc. 4,700 218,550
Tyco International Ltd. 20,360 1,929,110
-----------
$ 2,292,957
- -------------------------------------------------------------------------------
Containers - 0.2%
Smurfit-Stone Container Corp.* 2,700 $ 55,519
- -------------------------------------------------------------------------------
Electronics - 5.2%
Altera Corp.* 6,300 $ 231,919
Analog Devices, Inc.* 9,053 454,347
Intel Corp. 2,000 119,000
Lattice Semiconductor Corp.* 4,800 298,800
LSI Logic Corp.* 12,200 562,725
Micron Technology, Inc.* 1,800 72,563
Teradyne, Inc.* 2,400 172,200
-----------
$ 1,911,554
- -------------------------------------------------------------------------------
Entertainment - 9.1%
CBS Corp.* 8,984 $ 390,242
Clear Channel Communications, Inc.* 4,519 311,529
Comcast Corp., "A" 13,400 515,062
Disney (Walt) Co. 11,400 351,263
Harrah's Entertainment, Inc.* 19,606 431,332
Hearst-Argyle Television, Inc.* 10,700 256,800
MediaOne Group, Inc.* 7,558 562,126
Time Warner, Inc. 7,300 536,550
-----------
$ 3,354,904
- -------------------------------------------------------------------------------
Financial Institutions - 5.8%
Associates First Capital Corp., "A" 6,710 $ 297,337
Citigroup, Inc. 11,300 536,750
Donaldson, Lufkin & Jenrette, Inc. 610 36,753
Federal Home Loan Mortgage Corp. 6,647 385,526
Finova Group, Inc. 10,370 545,721
Merrill Lynch & Co., Inc. 2,800 223,825
Paine Webber Group, Inc. 1,990 93,032
Providian Financial Corp. 400 37,400
-----------
$ 2,156,344
- -------------------------------------------------------------------------------
Food and Beverage Products - 0.8%
Anheuser-Busch Cos., Inc. 2,300 $ 163,156
Suiza Foods Corp.* 3,390 141,956
-----------
$ 305,112
- -------------------------------------------------------------------------------
Forest and Paper Products - 1.2%
Bowater, Inc. 3,100 $ 146,475
Champion International Corp. 900 43,087
Jefferson Smurfit Corp. 78,400 185,338
Westvaco Corp. 2,600 75,400
-----------
$ 450,300
- -------------------------------------------------------------------------------
Insurance - 6.4%
American International Group, Inc. 1,800 $ 210,712
Annuity & Life Re Holdings Ltd. 3,893 87,349
CIGNA Corp. 5,252 467,428
Equitable Cos., Inc. 6,670 446,890
Hartford Financial Services Group, Inc. 8,729 509,010
Nationwide Financial Services, Inc., "A" 3,571 161,588
ReliaStar Financial Corp. 10,941 478,669
-----------
$ 2,361,646
- -------------------------------------------------------------------------------
Internet
Ask Jeeves, Inc. 50 $ 700
- -------------------------------------------------------------------------------
Medical and Health Products - 2.6%
American Home Products Corp. 8,070 $ 464,025
Becton, Dickinson & Co. 7,800 234,000
Pfizer, Inc. 900 98,775
Pharmacia & Upjohn, Inc. 3,100 176,119
-----------
$ 972,919
- -------------------------------------------------------------------------------
Medical and Health Technology and Services - 1.9%
Mid Atlantic Medical Services, Inc.* 6,440 $ 63,595
United HealthCare Corp. 8,234 515,654
Wellpoint Health Networks, Inc.* 1,500 127,313
-----------
$ 706,562
- -------------------------------------------------------------------------------
Oil Services - 0.8%
Baker Hughes, Inc. 3,900 $ 130,650
Burlington Resources, Inc. 3,600 155,700
-----------
$ 286,350
- -------------------------------------------------------------------------------
Oils - 1.2%
Conoco, Inc., "A" 8,300 $ 231,362
Enron Oil & Gas Co. 10,400 210,600
-----------
$ 441,962
- -------------------------------------------------------------------------------
Printing and Publishing - 1.9%
Gannett Co., Inc. 1,200 $ 85,650
Meredith Corp. 4,500 155,813
Scripps (E.W.) Howard, Inc., "A" 5,500 261,594
Tribune Co. 2,100 182,962
-----------
$ 686,019
- -------------------------------------------------------------------------------
Restaurants and Lodging - 1.2%
Promus Hotel Corp.* 6,100 $ 189,100
Wendy's International, Inc. 8,800 249,150
-----------
$ 438,250
- -------------------------------------------------------------------------------
Retail - 0.8%
Tandy Corp. 6,400 $ 312,800
- -------------------------------------------------------------------------------
Special Products and Services
Phone.Com, Inc.* 100 $ 5,600
- -------------------------------------------------------------------------------
Stores - 2.4%
CVS Corp. 6,600 $ 334,950
Office Depot, Inc.* 1,700 37,506
Rite Aid Corp. 14,452 355,881
TJX Cos., Inc. 4,500 149,906
-----------
$ 878,243
- -------------------------------------------------------------------------------
Supermarkets - 2.3%
Kroger Co.* 30,778 $ 859,860
- -------------------------------------------------------------------------------
Telecommunications - 12.3%
CenturyTel, Inc. 5,098 $ 202,645
Cisco Systems, Inc.* 7,600 489,725
General Instrument Corp.* 6,900 293,250
GTE Corp. 4,100 310,575
MCI WorldCom, Inc.* 9,400 808,987
Motorola, Inc. 4,600 435,850
NEXTEL Communications, Inc.* 8,400 421,575
Nortel Networks Corp. 1,100 95,494
NTL, Inc.* 5,700 491,269
PSINet, Inc.* 3,200 140,000
Qwest Communications International, Inc.* 3,100 102,494
SBC Communications, Inc. 3,400 197,200
Scientific-Atlanta, Inc. 3,900 140,400
Sprint Corp. (PCS Group)* 5,350 305,619
Winstar Communications, Inc.* 2,600 126,750
-----------
$ 4,561,833
- -------------------------------------------------------------------------------
Utilities - Electric - 0.9%
AES Corp.* 1,600 $ 93,000
Duke Energy Corp. 4,100 222,937
-----------
$ 315,937
- -------------------------------------------------------------------------------
Utilities - Gas - 2.4%
Coastal Corp. 8,200 $ 328,000
Sonat, Inc. 4,700 155,687
Williams Cos., Inc. 9,500 404,344
-----------
$ 888,031
- -------------------------------------------------------------------------------
Utilities - Telephone - 1.6%
Frontier Corp. 9,800 $ 578,200
- -------------------------------------------------------------------------------
Total U.S. Stocks $29,947,703
- -------------------------------------------------------------------------------
Foreign Stocks - 12.8%
Bermuda - 0.5%
Ace Ltd. (Insurance) 6,656 $ 188,032
- -------------------------------------------------------------------------------
Canada - 1.1%
Abitibi-Consolidated, Inc.
(Forest and Paper Products) 14,400 $ 163,800
AT & T Canada, Inc. (Telecommunications) 1,100 70,469
Canadian National Railway Co. (Railroads) 2,500 167,500
-----------
$ 401,769
- -------------------------------------------------------------------------------
Finland - 1.1%
Nokia Corp., ADR (Telecommunications) 3,360 $ 307,650
Telephone Cooperative HPY (Telecommunications)* 32 82,638
-----------
$ 390,288
- -------------------------------------------------------------------------------
France - 0.7%
Axa (Insurance) 400 $ 48,763
Bouygues (Construction) 850 224,500
-----------
$ 273,263
- -------------------------------------------------------------------------------
Germany - 2.7%
Mannesmann AG (Conglomerate) 6,540 $ 977,223
- -------------------------------------------------------------------------------
Greece - 0.3%
Hellenic Telecommunication Organization S.A., GDR
(Telecommunications) 5,500 $ 117,771
- -------------------------------------------------------------------------------
Ireland - 0.1%
Jefferson Smurfit Group PLC, ADR (Containers) 1,145 $ 26,979
- -------------------------------------------------------------------------------
Japan - 1.2%
Nippon Telephone & Telegraph Co. (Utilities -
Telephone) 16 $ 186,570
NTT Mobile Communications Network, Inc.
(Telecommunications) 4 54,251
NTT Mobile Communications Network, Inc.
(Telecommunications) 16 214,356
-----------
$ 455,177
- -------------------------------------------------------------------------------
Netherlands - 0.1%
Benckiser N.V., "B" (Consumer Goods and Services) 965 $ 51,462
- -------------------------------------------------------------------------------
Portugal - 0.2%
Telecel - Comunicacoes Pessoais S.A.
(Telecommunications) 600 $ 77,287
- -------------------------------------------------------------------------------
Singapore - 0.9%
Asia Pulp & Paper Co. Ltd., ADR
(Consumer Goods and Services) 30,100 $ 289,712
Development Bank of Singapore Ltd.
(Banks and Credit Cos.) 2,000 24,449
-----------
$ 314,161
- -------------------------------------------------------------------------------
Spain - 0.4%
Acciona S. A. (Construction) 2,900 $ 138,156
Telefonica Publicidad e Informacion, S.A.
(Telephone) 400 7,976
-----------
$ 146,132
- -------------------------------------------------------------------------------
Sweden - 0.2%
Ericsson LM, ADR (Telecommunications) 2,500 $ 82,344
- -------------------------------------------------------------------------------
United Kingdom - 3.3%
Cable & Wireless Communications PLC
(Telecommunications) 3,200 $ 30,764
Capital Radio PLC (Broadcasting) 3,390 44,851
Colt Telecom Group PLC (Telecommunications)* 2,100 181,388
Orange PLC (Telecommunications) 25,200 369,748
Vodafone Group PLC (Telecommunications) 3,069 604,593
-----------
$ 1,231,344
- -------------------------------------------------------------------------------
Total Foreign Stocks $ 4,733,232
- -------------------------------------------------------------------------------
Total Stocks (Identified Cost, $29,894,973) $34,680,935
- -------------------------------------------------------------------------------
Convertible Preferred Stock - 0.6%
- -------------------------------------------------------------------------------
Telecommunications - 0.6%
UnitedGlobalCom, 7.00%##
(Identified Cost, $205,000) 4,100 $ 206,538
- -------------------------------------------------------------------------------
Convertible Bond - 0.6%
- -------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- -------------------------------------------------------------------------------
Financial Services - 0.6%
Bell Atlantic Financial Services, Inc.,
4.25s, 2005## (Identified Cost, $260,724) $ 230 $ 235,175
- -------------------------------------------------------------------------------
Rights
- -------------------------------------------------------------------------------
SHARES
- -------------------------------------------------------------------------------
Bouygues (Construction) (Identified Cost, $2,306) 850 $ 2,260
- -------------------------------------------------------------------------------
Short-Term Obligations - 4.5%
- -------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- -------------------------------------------------------------------------------
General Electric Capital Corp., due 7/01/99, at
Amortized Cost $1,655 $ 1,655,000
Other Short-Term Obligations - 14.2%
- -------------------------------------------------------------------------------
SHARES
- -------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio,
at Cost 5,260,043 $ 5,260,043
- -------------------------------------------------------------------------------
Total Investments (Identified Cost, $37,278,046) $42,039,951
Other Assets, Less Liabilities - (13.7)% (5,065,306)
- -------------------------------------------------------------------------------
Net Assets - 100.0% $36,974,645
- -------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- -------------------------------------------------------------------------------
JUNE 30, 1999
- -------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $37,278,046) $42,039,951
Cash 5,388
Receivable for Series shares sold 271,799
Receivable for investments sold 1,267,691
Interest and dividends receivable 29,800
Deferred organization expenses 3,914
Other assets 1,867
-----------
Total assets $43,620,410
-----------
Liabilities:
Payable for Series shares reacquired $ 14,011
Payable for investments purchased 1,362,849
Collateral for securities loaned, at value 5,260,043
Payable to affiliate for management fee 749
Accrued expenses and other liabilities 8,113
-----------
Total liabilities $ 6,645,765
-----------
Net assets $36,974,645
===========
Net assets consist of:
Paid-in capital $28,357,916
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 4,761,018
Accumulated undistributed net realized gain on
investments and foreign currency transactions 3,862,211
Accumulated net investment loss (6,500)
-----------
Total $36,974,645
===========
Shares of beneficial interest outstanding 2,119,624
=========
Net asset value, offering price, and redemption price per share
(net assets / shares of beneficial interest outstanding) $17.44
======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations (Unaudited)
- ------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1999
- ------------------------------------------------------------------------------
Net investment (income) loss:
Income -
Dividends $ 96,252
Interest 43,537
Foreign taxes withheld (1,170)
----------
Total investment income $ 138,619
----------
Expenses -
Management fee $ 109,496
Trustees' compensation 1,123
Shareholder servicing agent fee 5,102
Administrative fee 2,190
Custodian fee 9,163
Printing 13,251
Auditing fees 9,504
Legal fees 1,840
Amortization of organization expenses 911
Miscellaneous 5,801
----------
Total expenses $ 158,381
Fees paid indirectly (1,830)
Reduction of expenses by investment adviser (10,559)
----------
Net expenses $ 145,992
----------
Net investment loss $ (7,373)
----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $3,818,466
Foreign currency transactions (8,929)
----------
Net realized gain on investments and foreign
currency transactions $3,809,537
----------
Change in unrealized appreciation -
Investments $1,346,024
Translation of assets and liabilities in
foreign currencies 1,249
----------
Net unrealized gain on investments and foreign
currency translation $1,347,273
----------
Net realized and unrealized gain on investments
and foreign currency $5,156,810
----------
Increase in net assets from operations $5,149,437
==========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
(UNAUDITED)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income (loss) $ (7,373) $ 28,572
Net realized gain on investments and foreign currency
transactions 3,809,537 209,476
Net unrealized gain on investments and foreign currency
translation 1,347,273 3,052,898
------------ ------------
Increase in net assets from operations $ 5,149,437 $ 3,290,946
------------ ------------
Distributions declared to shareholders -
From net investment income $ -- $ (28,505)
From net realized gain on investments and foreign
currency transactions (100,358) (19,522)
------------ ------------
Total distributions declared to shareholders $ (100,358) $ (48,027)
------------ ------------
Net increase in net assets from Series share transactions $ 8,017,237 $ 15,005,582
------------ ------------
Total increase in net assets $ 13,066,316 $ 18,248,501
Net assets:
At beginning of period 23,908,329 5,659,828
------------ ------------
At end of period (including accumulated net investment
loss of $(6,500) and accumulated net investment income
of $873, respectively) $ 36,974,645 $ 23,908,329
============ ============
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED
DECEMBER 31, PERIOD ENDED
SIX MONTHS ENDED ------------------------------- DECEMBER 31,
JUNE 30, 1999 1998 1997 1996*
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C>
Net asset value - beginning of period $14.79 $11.68 $10.66 $10.00
------ ------ ------ ------
Income from investment operations# -
Net investment income (loss)(S) $ -- $ 0.03 $ 0.12 $ 0.07
Net realized and unrealized gain on investments
and foreign currency 2.70 3.11 2.66 0.88
------ ------ ------ ------
Total from investment operations $ 2.70 $ 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 (0.05) (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 $(0.05) $(0.03) $(1.76) $(0.29)
------ ------ ------ ------
Net asset value - end of period $17.44 $14.79 $11.68 $10.66
====== ====== ====== ======
Total return 18.32%++ 26.80% 26.47% 8.78%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.01%+ 1.02% 1.02% 1.02%+
Net investment income (loss) (0.05)%+ 0.21% 0.91% 1.72%+
Portfolio turnover 73% 144% 270% 44%
Net assets at end of period (000 omitted) $36,975 $23,908 $5,660 $1,351
(S) 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:
Net investment income (loss) $(0.01) $ 0.02 $(0.02) $(0.04)
Ratios (to average net assets):
Expenses## 1.09%+ 1.11% 2.08% 3.83%+
Net investment income (loss) (0.13)%+ 0.12% (0.18)% (1.11)%+
* 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 offset arrangement.
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Capital Opportunities Series (the Series), formerly known as MFS(R) Value
Series, is a diversified series of MFS(R) Variable Insurance Trust(SM) (the
Trust) which is comprised of the following 15 Series: MFS(R) Bond Series, MFS
Capital Opportunities Series, MFS(R) Emerging Growth Series, MFS(R)/Foreign &
Colonial Emerging Markets Equity Series, MFS(R) Global Equity Series, MFS(R)
Global Governments Series (formerly MFS(R) World Governments Series), MFS(R)
Growth Series, MFS(R) Growth with Income Series, MFS(R) High Income Series,
MFS(R) Limited Maturity Series, MFS(R) Money Market Series, MFS(R) New Discovery
Series, MFS(R) Research Series, MFS(R) Total Return Series, and MFS(R) Utilities
Series. The Trust is organized as a Massachusetts business trust and is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company. The shareholders of each series of the Trust are
separate accounts of insurance companies which offer variable annuity and/or
life insurance products. As of June 30, 1999, there were 17 shareholders of the
Series.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last sale
prices. Unlisted equity securities or listed equity securities for which last
sale prices are not available are reported at market value using last quoted bid
prices. Debt securities (other than short-term obligations which mature in 60
days or less), including listed issues, are valued on the basis of valuations
furnished by dealers or by a pricing service with consideration to factors such
as institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other market
data, without exclusive reliance upon exchange or over-the-counter prices.
Short-term obligations, which mature in 60 days or less, are valued at amortized
cost, which approximates market value. Securities for which there are no such
quotations or valuations are valued at fair value as determined in good faith by
the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
Deferred Organization Expenses - Costs incurred by the Series in connection with
its organization have been deferred and are being amortized on a straight-line
basis over a five-year period beginning on the date of commencement of Series
operations.
Security Loans - The Series may lend its securities to member banks of the
Federal Reserve System and to member firms of the New York Stock Exchange or
subsidiaries thereof. State Street Bank and Trust Company ("State Street"), as
agent, loans the securities to certain brokers (the "Borrowers") approved by the
Series. The loans are collateralized at all times by cash and U.S. Treasury
securities in an amount at least equal to the market value of the securities
loaned. State Street provides the Series with indemnification against Borrower
default.
At June 30, 1999, the value of securities loaned was $5,107,455. These loans
were collateralized by cash of $5,260,043 and U.S. Treasury securities of
$4,423. Cash collateral is invested in short-term securities, which are included
in the Portfolio of Investments. A portion of the income generated upon
investment of the collateral is remitted to the Borrowers, and the remainder is
allocated between the Fund and State Street in its capacity as lending agent. On
loans collateralized by U.S. Treasury securities, a fee is received from the
Borrower, and is allocated between the Series and State Street. Income from
securities lending is included in interest income on the Statement of
Operations. The dividend and interest income earned on the securities loaned is
accounted for in the same manner as other dividend and interest income.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All discount is
accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend and interest payments received in additional
securities are recorded on the ex-dividend or ex-interest date in an amount
equal to the value of the security on such date.
Fees Paid Indirectly - The Series' custody fee is calculated as a percentage of
the Series' month end net assets. The fee is reduced according to an arrangement
that measures the value of cash deposited with the custodian by the Series. This
amount is shown as a reduction of expenses on the Statement of Operations.
Tax Matters and Distributions - The Series' policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The Series
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits are reported in the financial statements as distributions from paid-in
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains.
(3) Transactions with Affiliates
Investment Adviser - The Series has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.75% of
the Series' average daily net assets. The Series has a temporary expense
reimbursement agreement whereby MFS has voluntarily agreed to pay all of the
Series' operating expenses, exclusive of management fees. The Series in turn
will pay MFS an expense reimbursement fee not greater than 0.25% of average
daily net assets. To the extent that the expense reimbursement fee exceeds the
Series' actual expenses, the excess will be applied to amounts paid by MFS in
prior years. At June 30, 1999, the aggregate unreimbursed expenses owed to MFS
by the Series amounted to $79,937.
Each Series pays no compensation directly to its Trustees who are officers of
the investment adviser, or to officers of the Series, all of whom receive
remuneration for their services to the Series from MFS. Certain officers and
Trustees of the Series are officers or directors of MFS and MFS Service Center,
Inc. (MFSC).
Administrator - The Series has an administrative services agreement with MFS to
provide the Series with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Series pays MFS an administrative fee
at the following annual percentages of the Series' average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the Series' average daily net assets at an effective annual rate
of 0.035%.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions and
short-term obligations, were as follows:
PURCHASES SALES
- ------------------------------------------------------------------------------
U.S. government securities $ 59,513 $ 584,764
----------- -----------
Investments (non-U.S. government securities) $29,605,350 $19,863,272
----------- -----------
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the Series, as computed on a federal income tax basis, are
as follows:
Aggregate cost $37,278,046
-----------
Gross unrealized appreciation $ 5,367,876
Gross unrealized depreciation (605,971)
-----------
Net unrealized appreciation $ 4,761,905
===========
(5) Shares of Beneficial Interest
The Series' Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
Series shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999 YEAR ENDED DECEMBER 31, 1998
------------------------------ ---------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 665,909 $10,634,919 1,423,149 $18,806,882
Shares issued to shareholders in
reinvestment of distributions 5,754 100,358 3,280 48,045
Shares reacquired (168,841) (2,718,040) (293,995) (3,849,345)
-------- ----------- --------- -----------
Net increase 502,822 $ 8,017,237 1,132,434 $15,005,582
======== =========== ========= ===========
</TABLE>
(6) Line of Credit
The Series and other affiliated funds participate in an $820 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of
Series shares. Interest is charged to each fund, based on its borrowings, at a
rate equal to the bank's base rate. In addition, a commitment fee, based on the
average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fee allocated to
the Series for the six months ended June 30, 1999, was $120. The Series had no
borrowings during the period.
<PAGE>
(C)1999 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
VCO-3 8/99 17M
