<PAGE>
[Logo] M F S(R)
INVESTMENT MANAGEMENT SEMIANNUAL REPORT
75 YEARS JUNE 30, 1999
WE INVENTED THE MUTUAL FUND(R)
[graphic omitted]
A SERIES OF MFS(R) VARIABLE INSURANCE TRUST(SM)
MFS(R) NEW DISCOVERY
SERIES
<PAGE>
<TABLE>
MFS(R) NEW DISCOVERY SERIES
A SERIES OF MFS(R) VARIABLE INSURANCE TRUST(SM)
<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.
Brian E. Stack*
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
- --------------------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- --------------------------------------------------------------------------------------------
</TABLE>
<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
20.21% (including the reinvestment of any distributions). This compares to a
9.28% return for the Russell 2000 Total Return Index (the Russell 2000) for
the same period. The Russell 2000 is an unmanaged index comprised of 2,000 of
the smallest U.S.-domiciled company common stocks that are traded on the New
York Stock Exchange, the American Stock Exchange, and NASDAQ.
The Series has benefited from the strong performance of companies in rapidly
growing industries such as technology, health care, and business services. In
technology, the Series' software holdings include Security Dynamics
Technologies and Gemstar International. Security Dynamics provides software
that ensures secure transactions over corporate networks and the Internet.
Gemstar provides electronic program guides for television and cable set top
boxes. We think it has a dominant, patent-protected market position, and its
technology could establish it as an Internet "portal" as TVs become Internet-
access appliances. The Series also has significant holdings among companies
that make integrated circuits used in networking and the Internet, such as
PMC-Sierra and Applied Micro Circuits.
Other than these companies, the Series has not invested heavily in Internet
stocks. Although we believe the Internet is a transforming event for both
corporate America and the individual consumer, we don't think the valuations
of many Internet stocks reflect their business and investment risks, which
include growing competition, low entry barriers, and unstable business models.
Therefore, while our underweighting of Internet stocks relative to the Russell
2000 probably has detracted from performance in the short term, we believe
this weighting is correct in the long run.
In health care, the Series owns Total Renal Care, a major operator of kidney
dialysis clinics, and Medpartners. MedPartners has exited some businesses that
were underperforming to focus on its pharmacy benefit-management business,
which we feel should grow earnings 25% while generating strong cash flow and
paying off debt. Finally, our business services holdings, such as BISYS, DST
Systems, and NOVA Corp., provide a range of computer processing services and
enjoy growing revenues, improving margins, and strong cash flow.
The Series looks for emerging companies with solid business models we believe
can sustain unit, revenue, and growth rates that substantially exceed the
growth rates of global economies. We search for companies with good market
opportunities, proprietary products or services, visionary managements that
can anticipate and adapt to changing business risks, and financial
characteristics that are the hallmarks of good businesses, such as high profit
margins, the ability to generate strong cash flow, and strong balance sheets.
Because the small-capitalization marketplace is volatile and inefficient, this
is a very research-intensive process. Ultimately, we are trying to identify
companies we believe may post long-term growth rates that are both high and
sustainable.
We expect to see a continuation of the recovery in small-company stocks that
began this spring. Although large-cap growth stocks have led the way for more
than a year, superior earnings growth historically has been rewarded with
superior valuations. However, past performance is no guarantee of future
results. Currently, many small companies are growing at rates well above that
of the average company in the Standard & Poor's 500 Composite Index, a
popular, unmanaged index of common stock total return performance. We believe
these growth rates may eventually be recognized by the market.
Respectfully,
/s/ Brian E. Stack
Brian E. Stack
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
Brian E. Stack is Senior Vice President of MFS Investment Management(R) and
portfolio manager of MFS(R) New Discovery Fund, the New Discovery Series
offered through MFS(R)/Sun Life annuity products, and MFS(R) New Discovery
Series (part of MFS(R) Variable Insurance Trust(SM)). He is also a portfolio
manager of MFS(R) Institutional Emerging Equities Fund.
Mr. Stack joined MFS in 1993 as a research analyst following the chemical,
hospital management, health maintenance organizations, medical services, and
business services industries. He was named portfolio manager in 1996 and Senior
Vice President in 1999. Prior to joining MFS, he had worked as an equity analyst
since 1987. He is a graduate of Boston College and has an M.B.A. degree from the
University of Virginia.
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: May 1, 1998
Size: $2.3 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.
<PAGE>
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 +20.21% +24.35% +22.86%
- --------------------------------------------------------------------------------
Average Annual Total Return -- +24.35% +19.34%
- --------------------------------------------------------------------------------
* For the period from the commencement of the Series' investment operations,
May 1, 1998, 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.
Investing in small or emerging growth companies involves greater risk than is
customarily associated with more-established companies. These risks may
increase unit price volatility. See the prospectus for details.
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) - June 30, 1999
Stocks - 85.5%
- --------------------------------------------------------------------------------
ISSUER SHARES VALUE
- --------------------------------------------------------------------------------
U.S. Stocks - 84.6%
Advertising - 0.6%
TMP Worldwide, Inc.* 205 $ 13,018
- --------------------------------------------------------------------------------
Airlines - 0.8%
Atlas Air, Inc.* 422 $ 13,609
Skywest, Inc. 167 4,165
----------
$ 17,774
- --------------------------------------------------------------------------------
Auto Parts - 0.6%
Brooks Automation, Inc.* 518 $ 14,018
- --------------------------------------------------------------------------------
Business Machines - 2.2%
Affiliated Computer Services, Inc., "A"*# 726 $ 36,754
Kulicke & Soffa Industries, Inc.* 510 13,674
----------
$ 50,428
- --------------------------------------------------------------------------------
Business Services - 14.4%
BISYS Group, Inc.*# 517 $ 30,244
Bright Horizons Family Solutions, Inc.* 244 4,606
Catalina Marketing Corp.* 96 8,832
Ceridian Corp.* 296 9,675
Complete Business Solutions, Inc.* 944 16,933
Concord EFS, Inc.* 150 6,347
Dendrite International, Inc.* 501 18,099
Diamond Technology Partners, Inc., "A"* 380 8,503
DST Systems, Inc.*# 563 35,399
IMRglobal Corp.* 886 17,055
ITT Educational Services, Inc.* 469 12,223
Learning Tree International, Inc.* 690 7,547
Memberworks, Inc.* 141 4,089
Meta Group, Inc.* 454 6,980
Modis Professional Services, Inc.* 549 7,549
Nextera Enterprises, Inc.* 1,172 7,545
NOVA Corp.* 1,286 32,150
Paymentech, Inc.* 942 23,903
Professional Detailing, Inc.* 140 3,290
Quintiles Transnational Corp.* 910 38,220
Renaissance Worldwide, Inc.* 798 6,359
Romac International, Inc.* 816 7,242
Technology Solutions Co.* 1,482 16,024
Teletech Holdings, Inc.* 361 3,655
----------
$ 332,469
- --------------------------------------------------------------------------------
Computer Software - Personal Computers - 0.6%
Apex PC Solutions, Inc.* 412 $ 8,446
Intuit, Inc.* 72 6,489
----------
$ 14,935
- --------------------------------------------------------------------------------
Computer Software - Services - 1.0%
Hyperion Solutions Corp.* 740 $ 13,181
Tier Technologies, Inc.* 1,382 9,674
----------
$ 22,855
- --------------------------------------------------------------------------------
Computer Software - Systems - 12.4%
Acxiom Corp.* 20 $ 499
Aspen Technology, Inc.* 1,426 16,755
AVT Corp.* 222 8,408
Black Box Corp.* 222 11,128
Cadence Design Systems, Inc.*# 436 5,559
Checkfree Holdings Corp.* 81 2,233
Clarify, Inc.* 264 10,890
Dialogic Corp.* 113 4,958
Eclipsys Corp.* 428 10,245
Edify Corp.* 80 1,070
Etec Systems, Inc.* 429 14,264
Exchange Applications Software* 432 17,604
Fair, Isaac & Co., Inc. 78 2,735
Harbinger Corp.* 587 7,338
JDA Software Group, Inc.* 497 4,628
Keane, Inc. 60 1,358
Peerless Systems Corp.* 424 4,452
Redback Networks, Inc.* 50 6,278
Security Dynamics Technologies, Inc.* 2,128 45,220
Sterling Software, Inc.*# 355 9,474
Summit Design, Inc.* 923 2,769
SunGard Data Systems, Inc.*# 612 21,114
Synopsys, Inc.* 471 25,993
Transaction System Architects, Inc., "A"* 723 28,197
Vantive Corp.* 1,355 15,498
Wind River Systems, Inc.* 568 9,123
----------
$ 287,790
- --------------------------------------------------------------------------------
Conglomerates - 0.8%
Sodexho Marriott Services, Inc.* 554 $ 10,630
Valley Media, Inc.* 493 7,333
----------
$ 17,963
- --------------------------------------------------------------------------------
Consumer Goods and Services - 2.9%
Blyth Industries, Inc.* 305 $ 10,485
Galileo International, Inc. 427 22,818
InfoUSA, Inc., "A"* 457 4,056
InfoUSA, Inc., "B"* 230 1,955
LoJack Corp.* 769 6,440
Sportsline USA, Inc.* 582 20,879
----------
$ 66,633
- --------------------------------------------------------------------------------
Containers - 0.4%
Ivex Packaging Corp.* 392 $ 8,624
- --------------------------------------------------------------------------------
Electrical Equipment - 0.5%
Barnett, Inc.* 265 $ 1,988
QLogic Corp.* 79 10,428
----------
$ 12,416
- --------------------------------------------------------------------------------
Electronics - 6.6%
Analog Devices, Inc.* 424 $ 21,279
Applied Micro Circuits Corp.* 143 11,762
Burr-Brown Corp.* 637 23,330
Cable Design Technologies Corp.* 579 8,938
Credence Systems Corp.* 228 8,464
DuPont Photomasks, Inc.* 107 5,123
GaSonics International Corp.* 729 10,206
GlobeSpan, Inc.* 50 1,988
Lattice Semiconductor Corp.* 239 14,878
LTX Corp.* 330 4,393
MKS Instruments, Inc.* 765 14,248
Photronics, Inc.* 422 10,339
PMC-Sierra, Inc.* 180 10,609
SIPEX Corp.* 314 6,437
----------
$ 151,994
- --------------------------------------------------------------------------------
Entertainment - 3.7%
Emmis Broadcasting Corp., "A"* 40 $ 1,975
Gemstar International Group Ltd.*# 1,064 69,426
Young Broadcasting, Inc., "A"* 346 14,727
----------
$ 86,128
- --------------------------------------------------------------------------------
Financial Institutions - 1.4%
Conning Corp. 145 $ 2,356
Federated Investors, Inc., "A" 511 9,166
Financial Federal Corp.* 313 6,886
Waddell & Reed Financial, Inc., "A"# 474 13,006
----------
$ 31,414
- --------------------------------------------------------------------------------
Food and Beverage Products - 0.4%
Del Monte Foods Co.* 625 $ 10,469
- --------------------------------------------------------------------------------
Insurance - 0.8%
Annuity & Life Re Holdings Ltd. 167 $ 3,747
Executive Risk, Inc. 96 8,166
Inspire Insurance Solutions, Inc.* 390 5,655
----------
$ 17,568
- --------------------------------------------------------------------------------
Internet - 0.1%
Ask Jeeves, Inc. 50 $ 700
Security First Tech Corp.* 30 1,354
Software.com, Inc.* 50 1,159
----------
$ 3,213
- --------------------------------------------------------------------------------
Machinery - 0.7%
Applied Science and Technology, Inc.* 296 $ 6,660
Asyst Technologies, Inc.* 261 7,814
Genzyme Corp. 400 1,762
----------
$ 16,236
- --------------------------------------------------------------------------------
Medical and Health Products - 1.0%
Haemonetics Corp.* 725 $ 14,545
PSS World Medical, Inc.* 766 8,570
----------
$ 23,115
- --------------------------------------------------------------------------------
Medical and Health Technology and Services - 13.0%
Concentra Managed Care, Inc.* 674 $ 9,984
Cytyc Corp.* 200 3,900
Henry Schein, Inc.* 169 5,355
Hologic, Inc.* 361 2,031
IDEXX Laboratories, Inc.*# 2,111 49,213
IDX Systems Corp.* 965 21,773
Impath, Inc.* 565 15,255
LifePoint Hospitals, Inc.* 1,202 16,152
Martek Biosciences Corp.*## 554 4,709
MEDE AMERICA Corp.* 83 3,133
MedPartners, Inc.* 5,042 38,130
Mid Atlantic Medical Services, Inc.* 986 9,737
NCS Healthcare, Inc., "A"* 605 3,290
Orthodontic Centers of America, Inc.* 553 7,811
Osteotech, Inc. 160 4,600
Parexel International Corp.* 1,339 17,825
Pediatrix Medical Group, Inc.* 231 4,909
Quorum Health Group, Inc.* 591 7,424
Steris Corp.* 358 6,936
Superior Consultant Holdings Corp.* 187 4,617
Total Renal Care Holdings, Inc.* 3,343 52,025
Ventana Medical Systems, Inc.* 456 8,721
Virgin Islands Technologies, Inc.* 797 3,985
----------
$ 301,515
- --------------------------------------------------------------------------------
Oil Services - 2.9%
Cooper Cameron Corp.* 357 $ 13,231
Dril-Quip, Inc.* 123 2,821
Global Industries, Inc.* 1,346 17,246
Input/Output, Inc.* 1,396 10,557
National Oilwell, Inc.* 444 6,216
Noble Drilling Corp.* 682 13,427
Weatherford International, Inc.* 129 4,725
----------
$ 68,223
- --------------------------------------------------------------------------------
Oils - 0.5%
Newfield Exploration Co.* 412 $ 11,716
- --------------------------------------------------------------------------------
Pharmaceuticals - 0.2%
Boron, LePore & Associates, Inc.* 565 $ 4,732
- --------------------------------------------------------------------------------
Pollution Control - 0.3%
Superior Services, Inc.* 261 $ 6,965
- --------------------------------------------------------------------------------
Printing and Publishing - 1.9%
Harte-Hanks Communications, Inc. 360 $ 9,765
Scholastic Corp.* 682 34,526
----------
$ 44,291
- --------------------------------------------------------------------------------
Real Estate Investment Trusts - 0.4%
Kilroy Realty Corp. 183 $ 4,461
MeriStar Hospitality Corp. 229 5,138
----------
$ 9,599
- --------------------------------------------------------------------------------
Restaurants and Lodging - 2.0%
Buffets, Inc.* 1,210 $ 13,915
Coldwater Creek, Inc.* 164 3,198
Four Seasons Hotels, Inc. 168 7,402
Landry's Seafood Restaurants, Inc.* 549 4,392
Mortons Restaurant Group, Inc.* 192 3,660
Papa John's International, Inc.* 106 4,737
Sonic Corp.* 296 9,657
----------
$ 46,961
- --------------------------------------------------------------------------------
Special Products and Services - 1.0%
Caliber Learning Network, Inc.* 369 $ 1,753
Edutrek International, Inc., "A"* 352 1,672
Verisign, Inc.* 109 9,401
Watsco, Inc. 573 9,383
----------
$ 22,209
- --------------------------------------------------------------------------------
Stores - 3.6%
BJ's Wholesale Club, Inc.* 353 $ 10,612
Copart, Inc.* 640 13,600
CSK Auto Corp.* 424 11,448
Gymboree Corp.* 782 8,211
Micro Warehouse, Inc.* 556 9,938
Petco Animal Supplies, Inc.* 792 12,474
Pier 1 Imports, Inc. 551 6,199
Regis Corp. 602 11,551
----------
$ 84,033
- --------------------------------------------------------------------------------
Telecommunications - 6.5%
Adelphia Communications Corp. "A"* 130 $ 8,271
American Tower Corp., "A"* 287 6,888
Aspect Telecommunications Corp.* 616 6,006
Copper Mountain Networks, Inc.* 1 77
DSP Communications, Inc.* 363 10,482
Intermedia Communications, Inc.* 1,375 41,250
International Telecommunication Data Systems, Inc.* 694 11,104
Lightbridge, Inc.* 299 3,756
Network Solutions, Inc.* 20 1,583
Nextlink Communications, Inc., "A"* 187 13,908
Pinnicle Holdings, Inc.* 665 16,293
Proxim, Inc.* 261 15,138
Transaction Network Services, Inc.* 532 15,561
----------
$ 150,317
- --------------------------------------------------------------------------------
Transportation - 0.4%
Coach USA, Inc.* 206 $ 8,639
- --------------------------------------------------------------------------------
Total U.S. Stocks $1,958,260
- --------------------------------------------------------------------------------
Foreign Stocks - 0.9%
United Kingdom - 0.9%
CBT Group PLC, ADR (Computer Software - Personal
Computers)* 1,282 $ 21,153
- --------------------------------------------------------------------------------
Total Stocks (Identified Cost, $1,772,615) $1,979,413
- --------------------------------------------------------------------------------
Convertible Bonds - 0.1%
- --------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- --------------------------------------------------------------------------------
Medical and Health Technology and Services - 0.1%
Concentra Managed Care, Inc., 4.5s, 2003
(Identified Cost, $1,402) $ 2 $ 1,880
- --------------------------------------------------------------------------------
Short-Term Obligations - 6.5%
- --------------------------------------------------------------------------------
Federal Home Loan Bank, due 7/01/99,
at Amortized Cost $ 150 $ 150,000
- --------------------------------------------------------------------------------
Other Short-Term Obligations - 0.4%
- --------------------------------------------------------------------------------
SHARES
- --------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio,
at Cost 9,905 $ 9,905
- --------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,933,922) $2,141,198
Other Assets, Less Liabilities - 7.5% 173,566
- --------------------------------------------------------------------------------
Net Assets - 100.0% $2,314,764
- --------------------------------------------------------------------------------
* Non-income producing security.
# Security or a portion of the security was pledged to cover margin
requirements. At the period end, the value of securities pledged amounted to
$110,488.
## 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, $1,933,922) $2,141,198
Cash 4,398
Foreign currency, at value (identified cost, $12) 11
Receivable for Series shares sold 227,046
Receivable for investments sold 263,746
Interest and dividends receivable 132
----------
Total assets $2,636,531
----------
Liabilities:
Payable for Series shares reacquired $ 8,508
Payable for investments purchased 303,289
Collateral for securities loaned, at value 9,905
Payable to affiliate for management fee 50
Accrued expenses and other liabilities 15
----------
Total liabilities $ 321,767
----------
Net assets $2,314,764
==========
Net assets consist of:
Paid-in capital $2,007,856
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 207,274
Accumulated undistributed net realized gain on investments
and foreign currency transactions 105,179
Accumulated net investment loss (5,545)
----------
Total $2,314,764
==========
Shares of beneficial interest outstanding 189,374
=======
Net asset value, offering price, and redemption price per share
(net assets / shares of beneficial interest outstanding) $12.22
======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations (Unaudited)
- --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1999
- --------------------------------------------------------------------------------
Net investment (income) loss:
Income -
Interest $ 1,409
Dividends 568
Foreign taxes withheld (1)
--------
Total investment income $ 1,976
--------
Expenses -
Management fee $ 5,886
Trustees' compensation 1,123
Shareholder servicing agent fee 229
Administrative fee 98
Custodian fee 1,692
Printing 26,864
Auditing fees 8,150
Legal fees 1,785
Miscellaneous 1,177
--------
Total expenses $ 47,004
Fees paid indirectly (233)
Reduction of expenses by investment adviser (39,250)
--------
Net expenses $ 7,521
--------
Net investment loss $ (5,545)
--------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $173,561
Securities sold short (4,363)
Foreign currency transactions 2
--------
Net realized gain on investments and foreign
currency transactions $169,200
--------
Change in unrealized appreciation (depreciation) -
Investments $112,802
Translation of assets and liabilities in foreign currencies (3)
--------
Net unrealized gain on investments and foreign currency
translation $112,799
--------
Net realized and unrealized gain on investments and
foreign currency $281,999
--------
Increase in net assets from operations $276,454
========
See notes to financial statements
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
JUNE 30, 1999 DECEMBER 31, 1998*
(UNAUDITED)
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (5,545) $ (4,026)
Net realized gain (loss) on investments and foreign
currency transactions 169,200 (50,853)
Net unrealized gain on investments and foreign currency
translation 112,799 94,475
----------
Increase in net assets from operations $ 276,454 $ 39,596
---------- ----------
Distributions declared to shareholders from net realized
gain on investments and foreign currency transactions $ (9,142) $ --
---------- ----------
Net increase in net assets from Series share transactions $ 909,172 $1,098,684
---------- ----------
Total increase in net assets $1,176,484 $1,138,280
Net assets:
At beginning of period 1,138,280 --
---------- ----------
At end of period (including accumulated net investment
loss of $5,545 and $0, respectively) $2,314,764 $1,138,280
========== ==========
* For the period from the commencement of the Series' investment operations, May 1, 1998, through
December 31, 1998.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Financial Highlights
- -----------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
JUNE 30, 1999 DECEMBER 31, 1998*
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $10.22 $10.00
------ ------
Income from investment operations# -
Net investment loss(S) $(0.04) $(0.04)
Net realized and unrealized gain on investments and foreign
currency 2.13 0.26
------ ------
Total from investment operations $ 2.09 $ 0.22
------ ------
Less distributions declared to sharesholders from net realized
gain on investments and foreign currency transactions $(0.09) $ --
------ ------
Net asset value - end of period $12.22 $10.22
====== ======
Total return 20.21%++ 2.20%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.19%+ 1.17%+
Net investment loss (0.85)%+ (0.74)%+
Portfolio turnover 150% 130%
Net assets at end of period (000 omitted) $2,315 $1,138
(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 loss per share and ratios
would have been:
Net investment loss $(0.34) $(0.28)
Ratios (to average net assets):
Expenses## 7.20%+ 5.22%+
Net investment loss (6.86)%+ (4.79)%+
* 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.
See notes to financial statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS New Discovery Series (the 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(R) Capital Opportunities Series (formerly MFS(R) Value
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 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 22 shareholders in the Series.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Investments in foreign securities are vulnerable to the effects of changes in
the relative values of the local currency and the U.S. dollar and to the
effects of changes in each country's legal, political, and economic
environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last
sale prices. Unlisted equity securities or listed equity securities for which
last sale prices are not available are reported at market value using last
quoted bid prices. 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.
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. The Series bears the risk of loss with respect to
the investment of cash collateral.
At June 30, 1999, the value of securities loaned was $9,426. These loans were
collateralized by cash of $9,905. 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 Series and State Street
in its capacity as lending agent. 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.
Short Sales - The Series may enter into short sales. A short sale transaction
involves selling a security which the Series does not own with the intent of
purchasing it later at a lower price. The Series will realize a gain if the
security price decreases and a loss if the security price increases between
the date of the short sale and the date on which the Series must replace the
borrowed security. Losses can exceed the proceeds from short sales and can be
greater than losses from the actual purchase of a security. The amount of any
gain will be decreased, and the amount of any loss increased, by the amount of
the premium, dividends, or interest the Series may be required to pay in
connection with a short sale. Whenever the Series engages in short sales, its
custodian segregates cash or marketable securities in an amount that, when
combined with the amount of proceeds from the short sale deposited with the
broker, at least equals the current market value of the security sold short.
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 0.90%
of average daily net assets. The Series has a temporary expense reimbursement
agreement whereby MFS has voluntarily agreed to pay all of the Series'
operating expenses, exclusive of management fees. The Series in turn will pay
MFS an expense reimbursement fee not greater than 0.25% of average daily net
assets. To the extent that the expense reimbursement fee exceeds the Series'
actual expenses, the excess will be applied to amounts paid by MFS in prior
years. At June 30, 1999, the aggregate unreimbursed expenses owed to MFS by
the Series amounted to $61,233.
The Series pays no compensation directly to its Trustees who are officers of
the investment adviser, or to officers of the Series, all of whom receive
remuneration for their services to the Series from MFS. Certain officers and
Trustees of the Series are officers or directors of MFS and MFS Service
Center, Inc. (MFSC).
Administrator - The Series has an administrative services agreement with MFS
to provide the Series with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Series pays MFS an administrative
fee at the following annual percentages of the Series' average daily net
assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as
a percentage of the Series' average daily net assets at an effective annual
rate of 0.035%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities and
short-term obligations, aggregated $2,600,710 and $1,992,497, respectively.
The cost and unrealized appreciation and depreciation in value of the
investments owned by the Series, as computed on a federal income tax basis,
are as follows:
Aggregate cost $1,933,922
----------
Gross unrealized appreciation $ 232,170
Gross unrealized depreciation (24,894)
----------
Net unrealized appreciation $ 207,276
==========
(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 PERIOD ENDED DECEMBER 31, 1998*
----------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 201,271 $ 2,230,517 112,023 $1,104,461
Shares issued to shareholders in reinvestment
of distributions 846 9,142 --
Shares reacquired (124,093) (1,330,487) (673) (5,777)
-------- ----------- ------- ----------
Net increase 78,024 $ 909,172 111,350 $1,098,684
======== =========== ======= ==========
* For the period from the commencement fo the Series' investment operations, May 1, 1998, through December 31, 1998.
</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 $7. The Series had
no significant borrowings during the period.
<PAGE>
(c)1999 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
VND-2 8/99 21M
