[MFS 75 YEARS LOGO]
MFS[RegTM] VARIABLE INSURANCE TRUST (SM)
MAY 1, 1999
Prospectus
MFS[RegTM] GROWTH WITH INCOME SERIES
MFS[RegTM] NEW DISCOVERY SERIES
MFS[RegTM] HIGH INCOME SERIES
MFS[RegTM] BOND SERIES
- --------------------------------------------------------------------------------
This Prospectus describes four of the series of the MFS Variable Insurance Trust
(referred to as the trust):
1. 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);
2. MFS New Discovery Series seeks capital appreciation (referred to as the New
Discovery Series);
3. 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
4. MFS Bond Series seeks primarily to provide as high a level of current income
as is believed consistent with prudent investment risk and secondarily to
protect shareholders' capital (referred to as the Bond 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>
<S> <C> <C>
Page
TABLE OF CONTENTS
I Expense Summary ............................................ 1
II Risk Return Summary ........................................ 3
1. Growth With Income Series .............................. 3
2. New Discovery Series ................................... 6
3. High Income Series ..................................... 8
4. Bond Series ............................................ 11
III Certain Investment Strategies and Risks .................... 14
IV Management of the Series ................................... 14
V Description of Shares ...................................... 15
VI Other Information .......................................... 15
VII Financial Highlights ....................................... 17
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). Four of the series are
described below.
I EXPENSE SUMMARY
o 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
With New High
Income Discovery Income Bond
Series Series Series Series
---------- ------------------ ---------- ------------------
<S> <C> <C> <C> <C>
Management Fee ....................................... 0.75% 0.90% 0.75% 0.60%
Other Expenses(1) .................................... 0.13% 4.32% 0.28% 0.63%
---- ----- ---- -----
Total Annual Series Operating Expenses(1) ............ 0.88% 5.22% 1.03% 1.23%
Expense Reimbursement ............................... -- (4.05)%(2) -- (0.21)%(2)
---- ----- ---- -----
Net Expenses(1) ..................................... 0.88% 1.17% 1.03% 1.02%
</TABLE>
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(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 the following percentages of the average daily
net assets of the series during the current fiscal year: 0.40% for the Bond
Series, and 0.25% for each remaining series. 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). 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.
1
<PAGE>
o 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.
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>
Growth With Income Series $ 90 $ 281 $ 488 $ 1,084
New Discovery Series 119 1,201 2,278 4,949
High Income Series 105 328 569 1,259
Bond Series 104 370 655 1,470
</TABLE>
2
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II RISK RETURN SUMMARY
Investment strategies which are common to all series are described under
the caption "Certain Investment Strategies."
1: Growth With Income Series
........................................................................ .
o 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.
o 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.
o 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:
- 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.
- Enforcing legal rights may be difficult, costly and slow in foreign
countries, and there may be special problems enforcing claims against
foreign governments.
- 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.
- Foreign markets may be less liquid and more volatile than U.S.
markets.
- 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
3
<PAGE>
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.
o 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.
[Tablular representation of Bar Graph]
1996 = 24.46%
1997 = 29.78%
1998 = 22.32%
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>
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* "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.
4
<PAGE>
o 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.
5
<PAGE>
2: New Discovery Series
........................................................................ .
o Investment Objective
The series' investment objective is capital appreciation. The series'
objective may be changed without shareholder approval.
o 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.
o 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:
- have limited product lines, markets and financial resources
- are dependent on management by one or a few key individuals
- 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.
6
<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.
o 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.
o 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.
7
<PAGE>
3: High Income Series
.............................................................................
o 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.
o 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.
o 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:
- 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.
8
<PAGE>
- 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:
- 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.
- Enforcing legal rights may be difficult, costly and slow in foreign
countries, and there may be special problems enforcing claims against
foreign governments.
- 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.
- Foreign markets may be less liquid and more volatile than U.S.
markets.
- 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.
o 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.
[Tablular representation of Bar Graph]
1996 = 11.80%
1997 = 13.62%
1998 = -0.18%
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).
9
<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>
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* "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 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.
o 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.
10
<PAGE>
4: Bond Series
............................................................................
o Investment Objectives
The series' investment objective is primarily to provide as high a level of
current income as is believed to be consistent with prudent risk. Its
secondary objective is to protect shareholders' capital. The series'
objectives may be changed without shareholder approval.
o Principal Investment Policies
The series invests, under normal market conditions, at least 65% of its
total assets in the following fixed income securities:
o corporate bonds, which are bonds or other debt obligations issued by
domestic or foreign (including emerging market) corporations or other
similar entities.
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 (including mortgage-backed securities), and
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.
While the series may purchase corporate bonds which have been assigned
lower credit ratings by credit rating agencies (commonly known as junk
bonds), it focuses on investment grade bonds. These bonds are rated in the
higher rating categories by credit rating agencies or are unrated and
considered by MFS to be comparable in quality.
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.
The series may invest in derivative securities. Derivatives are securities
whose value may be based on other securities, currencies, interest rates,
or indices. Derivatives include:
o futures and forward contracts,
o options on futures contracts, foreign currencies, securities and bond
indices,
o structured notes and indexed securities, and
o swaps, caps, collars and floors.
o 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 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, or could lose
value 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.
11
<PAGE>
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 Lower Rated Bonds Risk:
- Higher Credit Risk: Junk bonds are subject to a substantially higher
degree of credit risk than investment grade 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.
- 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 Mortgage-Backed and Asset-Backed Securities Risk
- Maturity Risk:
+ 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.
[plus sign] 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 do not increase as much as other fixed
income securities when interest rates fall.
[plus sign] 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.
+ 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.
+ Asset-Backed Securities: Asset-backed securities have prepayment
risks similar to mortgage-backed securities.
- 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 Derivatives Risk:
- Hedging Risk: When a derivative is used as a hedge against an
opposite position that the series also holds, any loss generated by
the derivative should be substantially offset by gains on the hedged
investment, and vice versa. While hedging can reduce or eliminate
losses, it can also reduce or eliminate gains.
- Correlation Risk: When the series uses derivatives to hedge, it takes
the risk that changes in the value of the derivative will not match
those of the asset being hedged. Incomplete correlation can result in
unanticipated losses.
- Investment Risk: When the series uses derivatives as an investment
vehicle to gain market exposure, rather than for hedging purposes,
any loss on the derivative investment will not be offset by gains on
another hedged investment. The series is therefore directly exposed
to the risks of that derivative. Gains or losses from derivative
investments may be substantially greater than the derivative's
original cost.
12
<PAGE>
- Availability Risk: Derivatives may not be available to the series
upon acceptable terms. As a result, the series may be unable to use
derivatives for hedging or other purposes.
- Credit Risk: When the series uses derivatives, it is subject to the
risk that the other party to the agreement will not be able to
perform.
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.
o 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.
[Tabular representation of Bar Graph]
1996 = 2.09%
1997 = 10.14%
1998 = 6.79%
During the period shown in the bar chart, the highest quarterly return
was 3.96% (for the calendar quarter ended September 30, 1997) and the
lowest quarterly return was (2.65)% (for the calendar quarter ended March
31, 1996).
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>
Bond Series* +6.79% +6.90%
Lehman Brothers Government/Corporate Bond Index**+ +9.49% +7.99%
</TABLE>
- ---------
* "Life" refers to the period from the commencement of the series'
investment operations, October 24, 1995, through December 31, 1998.
** Source: CDA/Wiesenberger. "Life" refers to the period from November 1, 1995,
through December 31, 1998.
+ 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
debt obligations of domestic corporations.
o Portfolio Manager
Geoffrey L. Kurinsky, a Senior Vice President of the Adviser, has been
employed by the Adviser as a portfolio manager since 1987. Mr. Kurinsky has
been the series' portfolio manager since its inception.
13
<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
o 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.
o 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.
o Distributor
MFS Fund Distributors, Inc. (referred to as MFD), a wholly owned subsidiary
of MFS, is the distributor of shares of the series.
o 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.
14
<PAGE>
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.
VI OTHER INFORMATION
o 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 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.
o 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.
o 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.
o 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.
15
<PAGE>
o 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.
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.
o 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.
o 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.
o 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.
o 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.
16
<PAGE>
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.
17
<PAGE>
1. 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>
18
<PAGE>
2. 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>
19
<PAGE>
3. 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>
20
<PAGE>
4. Bond 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 .................... $ 11.08 $10.06 $10.19 $ 10.00
------- ------ ------ --------
Income from investment operations# --
Net investment income[sec] ............................... $ 0.64 $ 0.64 $ 0.58 $ 0.09
Net realized and unrealized gain (loss) on investments
and foreign currency .................................... 0.09 0.38 (0.36) 0.21
------- ------ ------ --------
Total from investment operations ....................... $ 0.73 $ 1.02 $ 0.22 $ 0.30
------- ------ ------ --------
Less distributions declared to shareholders --
From net investment income ............................... $ (0.29) $ -- $(0.35) $ (0.09)
From net realized gain on investments and foreign
currency transactions ................................... (0.14) -- -- (0.02)
------- ------ ------ --------
Total distributions declared to shareholders ........... $ (0.43) $ -- $(0.35) $ (0.11)
------- ------ ------ --------
Net asset value -- end of period .......................... $ 11.38 $11.08 $10.06 $ 10.19
------- ------ ------ --------
Total return .............................................. 6.79% 10.14% 2.09% 3.02%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ............................................... 1.02% 1.01% 1.03% 1.00%+
Net investment income .................................... 5.76% 6.04% 5.84% 4.89%+
Portfolio turnover ........................................ 244% 219% 231% 55%
Net assets at end of period (000 omitted) ................. $12,165 $4,004 $ 853 $ 228
</TABLE>
---------
* For the period from the commencement of the series' investment
operations, October 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. 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 fee, at not
more than 0.40% 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> <C>
Net investment income (loss)# ......... $0.61 $0.37 $(0.26) $ (0.70)
Ratios (to average net assets):
Expenses## ........................... 1.23% 3.58% 9.45% 43.85%+
Net investment income (loss) ......... 5.55% 3.46% (2.61)% (37.96)%+
</TABLE>
21
<PAGE>
Appendix A Growth With Income Series
o 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.
<TABLE>
<S> <C>
Symbols [check mark] permitted -- not permitted
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Debt Securities
Asset-Backed Securities
Collateralized Mortgage Obligations and Multiclas s
--
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-1
<PAGE>
Appendix A New Discovery Series
o 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.
<TABLE>
<S> <C>
Symbols [check mark] permitted -- not permitted
- --------------------------------------------------------------------------------
</TABLE>
<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-2
<PAGE>
Appendix A High Income Series
o 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.
<TABLE>
<S> <C>
Symbols [check mark] permitted -- not permitted
- -------------------------------------------------------------------------------
</TABLE>
<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
[check mark]
Bonds
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-3
<PAGE>
Appendix A Bond Series
o Investment Techniques and Practices
In pursuing its investment objectives and investment policies, the Bond
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.
<TABLE>
<S> <C>
Symbols [check mark] permitted -- not permitted
- --------------------------------------------------------------------------------
</TABLE>
<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
[check mark]
Bonds
Equity Securities --
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 [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 --
Reset Options --
"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 --
"When-Issued" Securities [check mark]
</TABLE>
*May be changed only with shareholder approval.
A-4
<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