<PAGE>
[Logo] M F S(R) SEMIANNUAL REPORT
INVESTMENT MANAGEMENT JUNE 30, 1999
75 YEARS
WE INVENTED THE MUTUAL FUND(R)
[graphic omitted]
A SERIES OF MFS(R) VARIABLE INSURANCE TRUST(SM)
MFS(R) LIMITED
MATURITY SERIES
<PAGE>
<TABLE>
MFS(R) LIMITED MATURITY 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.
James J. Calmas*
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
0.89% (including the reinvestment of any distributions), which compares to
1.27% for the Lehman Brothers One- to Three-Year Government/Corporate Bond
Index (the Lehman Index), a total return index consisting of all U.S.
government-agency, Treasury, and investment-grade corporate debt securities
with maturities of one to three years. Over the same period, the Series also
compares to 1.16% for the average short-term investment-grade debt fund
tracked by Lipper Analytical Services, Inc., an independent firm that reports
mutual fund performance.
Although we do not expect to see a dramatic increase in interest rates in
coming months, there is a possibility that the current environment of strong
economic growth could lead to a slight increase. Therefore, we are looking for
bonds with less price volatility and have begun a steady effort to upgrade the
credit quality of the Series. Although higher-rated bonds have somewhat lower
yields, their prices should be less volatile when interest rates rise. A year
ago the average credit quality of the portfolio, based on ratings from
agencies such as Moody's Investors Service, Inc. and Standard & Poor's Corp.,
was "A-"; it is now "A+," with the highest possible rating "AAA."
In upgrading the portfolio, we have cut the Series' exposure to home equity
lenders and consumer finance companies because many of them have not recovered
yet from the credit market turmoil set off by last summer's Russian bond
default. At the same time, we have increased the Series' holdings in the
energy sector, which has benefited from rising oil prices, and in the rapidly
expanding telecommunications sector. For example, we bought Boston Edison, an
electric utility, and Columbia Gas Systems, a natural gas pipeline company. We
believe these companies are in strong financial shape and are not heavily
reliant on the bond markets for financing. We have, however, kept some
consumer finance companies that we think have done a better job of evaluating
the credit quality of their borrowers, as well as companies that don't rely so
much on the bond markets to raise capital.
Looking ahead, we think the strong economy should help corporate debt. The
health of industries such as housing, autos, and technology is providing
momentum to the economy and, with inflation in check, we think any interest-
rate increase should be small. If interest rates do continue to rise, or if
there is an unexpected event similar to the emerging market crisis of 1997-98,
we believe the Series' increased credit quality should help limit a decline in
the price of the portfolio.
Respectfully,
/s/ James J. Calmas
James J. Calmas
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
James J. Calmas is Vice President of MFS Investment Management(R) and
portfolio manager of MFS(R) Intermediate Income Fund, MFS(R) Limited Maturity
Fund, and MFS(R) Limited Maturity Series (part of MFS(R) Variable Insurance
Trust(SM)).
Mr. Calmas joined MFS in 1988 and was named Assistant Vice President in 1991,
Vice President in 1993, and portfolio manager in 1998. He is a graduate of
Dartmouth College and holds an M.B.A. degree from the Amos Tuck School of
Business Administration of Dartmouth College.
All portfolio managers at MFS Investment Management(R) 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 primarily to provide as high a level of current income as is
believed to be consistent with prudent investment risk, and secondarily seeks
to protect shareholders' capital.
Commencement of investment operations: August 14, 1996
Size: $2.5 million net assets as of June 30, 1999
This report is prepared for the general information of contract owners. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other
MFS product is available from your financial adviser, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
PERFORMANCE SUMMARY
Because the Series is designed for investors with long-term goals, we have
provided the cumulative as well as the average annual total returns for the
applicable time periods. (See Notes to Performance Summary for more
information.)
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN THROUGH JUNE 30, 1999
6 Months 1 Year Life*
- -------------------------------------------------------------------------------
Cumulative Total Return +0.89% +3.46% +15.76%
- -------------------------------------------------------------------------------
Average Annual Total Return -- +3.46% + 5.22%
- -------------------------------------------------------------------------------
* For the period from the commencement of the Series' investment operations,
August 14, 1996, through June 30, 1999.
NOTES TO PERFORMANCE SUMMARY
All results are historical and assume the reinvestment of dividends and
capital gains. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND
UNITS, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Performance results reflect any
applicable expense subsidies and waivers, without which the results would have
been less favorable. Subsidies and waivers may be rescinded at any time. See
the prospectus for details.
RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF THE MORTALITY AND EXPENSE RISK
CHARGES AND ADMINISTRATION FEES. PLEASE REFER TO THE ANNUITY PRODUCT'S ANNUAL
REPORT FOR PERFORMANCE THAT REFLECTS THE DEDUCTION OF THE FEES AND CHARGES
IMPOSED BY INSURANCE COMPANY SEPARATE ACCOUNTS.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) - June 30, 1999
Bonds - 80.3%
- -----------------------------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Bonds - 77.1%
Apparel and Textiles - 1.3%
Hilfiger (Tommy) USA, Inc., 6.5s, 2003 $ 23 $ 22,435
Jones Apparel Group, Inc., 6.25s, 2001 10 9,962
----------
$ 32,397
- -----------------------------------------------------------------------------------------------------
Banks and Credit Companies - 3.3%
Aristar, Inc., 5.85s, 2004 $ 19 $ 18,367
Capital One Financial Corp., 7.25s, 2003 20 19,830
Great Western Financial Corp., 6.375s, 2000 22 22,051
GS Escrow Corp., 6.75s, 2001 19 18,768
Salton Sea Funding Corp., 6.69s, 2000 4 4,342
----------
$ 83,358
- -----------------------------------------------------------------------------------------------------
Containers - 1.0%
Owens-Illinois, Inc., 11s, 2003 $ 25 $ 25,875
- -----------------------------------------------------------------------------------------------------
Corporate Asset Backed - 17.2%
Aames Mortgage Trust, 6.75s, 2021 $ 17 $ 17,082
Americredit Automobile Receivable Trust, 5.78s, 2003 35 34,606
Amresco Residential Securities Mortgage Loan Trust,
5.94s, 2015 34 33,809
BankBoston Home Equity Loan Trust, 5.89s, 2013 17 16,828
Case Equipment Receivable Trust, 5.285s, 2002 40 39,850
Commonwealth Edison Transition Funding Trust, 5.29s, 2003 17 16,819
Discover Card Master Trust I, 5.85s, 2006 20 19,456
First Chicago Master Trust II, 5.268s, 2003 25 25,063
Ford Credit Auto Owner Trust, 5.31s, 2001 10 9,972
Green Tree Financial Corp., 6.04s, 2029 18 18,017
Green Tree Financial Corp., 6.39s, 2029 30 30,093
MBNA Master Credit Card Trust II, 5.25s, 2006 25 23,922
Merrill Lynch Mortgage Investors, Inc., 5.65s, 2030 16 15,877
Partners First Credit Card Master Trust, 5.088s, 2027 50 50,000
Premier Auto Trust, 5.88s, 2001 20 20,000
Sallie Mae Student Loan Trust, 5.167s, 2009 30 29,597
Student Loan Trust, 5.017s, 2004 15 15,075
Time Warner Pass-Through Asset Trust, 6.1s, 2001# 19 18,920
----------
$ 434,986
- -----------------------------------------------------------------------------------------------------
Financial Institutions - 4.7%
Countrywide Home Loan, Inc., 6.85s, 2004 $ 31 $ 31,039
General Motors Acceptance Corp., 7s, 2002 25 25,364
Lehman Brothers Holdings, Inc., 6.375s, 2001 23 22,903
Merrill Lynch & Co., 6.06s, 2001 40 39,832
----------
$ 119,138
- -----------------------------------------------------------------------------------------------------
Food and Beverage Products - 3.1%
RJ Reynolds Tobacco Holdings, 7.375s, 2003 $ 23 $ 22,535
Seagram (Joseph E.) & Sons, Inc., 5.79s, 2001 28 27,486
Whitman Corp., 6s, 2004 28 27,101
----------
$ 77,122
- -----------------------------------------------------------------------------------------------------
Forest and Paper Products - 0.9%
Georgia-Pacific Corp., 9.95s, 2002 $ 20 $ 21,768
- -----------------------------------------------------------------------------------------------------
Insurance - 1.4%
Conseco, Inc., 7.875s, 2000 $ 35 $ 35,181
- -----------------------------------------------------------------------------------------------------
Oils - 1.0%
Occidental Petroleum Corp., 10.125s, 2001 $ 23 $ 24,672
- -----------------------------------------------------------------------------------------------------
Railroads - 0.8%
Union Pacific Corp., 6.34s, 2003 $ 21 $ 20,679
- -----------------------------------------------------------------------------------------------------
Stores - 1.0%
Rite Aid Corp., 6.7s, 2001 $ 25 $ 24,877
- -----------------------------------------------------------------------------------------------------
Supermarkets - 0.7%
Safeway, Inc., 5.875s, 2001 $ 20 $ 19,787
- -----------------------------------------------------------------------------------------------------
Telecommunications - 5.9%
Comcast Corp., 9.125s, 2006 $ 28 $ 29,803
Sprint Capital Corp., 5.875s, 2004 26 24,917
Telecomunicaiones de Puerto Rico, 6.15s, 2002 30 29,626
TKR Cable, Inc., 10.5s, 2007 40 42,627
WorldCom, Inc., 8.875s, 2006 20 21,292
----------
$ 148,265
- -----------------------------------------------------------------------------------------------------
Transportation - 1.0%
Hertz Corp., 6.5s, 2000 $ 25 $ 25,072
- -----------------------------------------------------------------------------------------------------
U.S. Federal Agencies - 4.0%
Federal Home Loan Bank, 5.525s, 2000 $ 50 $ 49,953
Federal National Mortgage Assn., 7s, 2012 50 50,630
----------
$ 100,583
- -----------------------------------------------------------------------------------------------------
U.S. Government Guaranteed - 23.5%
U.S. Treasury Notes, 5.75s, 2000 $ 68 $ 68,161
U.S. Treasury Notes, 5s, 2001 100 99,218
U.S. Treasury Notes, 6.25s, 2001 185 187,615
U.S. Treasury Notes, 6.5s, 2001 175 178,282
U.S. Treasury Notes, 6.625s, 2002 30 30,745
U.S. Treasury Notes, 5.25s, 2003 30 29,489
----------
$ 593,510
- -----------------------------------------------------------------------------------------------------
Utilities - Electric - 4.8%
Boston Edison Co., 6.8s, 2000 $ 35 $ 35,228
California Infrastructure, 6.17s, 2003 26 26,033
Entergy Mississippi, Inc., 6.2s, 2004 30 29,151
MidAmerican Funding LLC, 5.85s, 2001 32 31,787
----------
$ 122,199
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Utilities - Gas - 1.5%
CMS Panhandle Holding Co., 6.125s, 2004 $ 18 $ 17,477
Columbia Gas Systems, Inc., 6.39s, 2000 21 21,023
----------
$ 38,500
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Total U.S. Bonds $1,947,969
- -----------------------------------------------------------------------------------------------------
Foreign Bonds - 3.2%
Australia - 0.5%
Westpac Banking, 9.125s, 2001 (Banks and Credit Cos.) $ 13 $ 13,678
- -----------------------------------------------------------------------------------------------------
Germany - 1.4%
Bayerische Landesbank Girozent, 5.625s, 2001 (Banks
and Credit Cos.) $ 35 $ 34,760
- -----------------------------------------------------------------------------------------------------
Iceland - 0.3%
Republic of Iceland, 6.125s, 2004 $ 8 $ 7,842
- -----------------------------------------------------------------------------------------------------
South Korea - 0.3%
Export-Import Bank Korea, 7.1s, 2007 (Banks and Credit Cos.) $ 9 $ 8,897
- -----------------------------------------------------------------------------------------------------
Supra-National - 0.7%
Corporacion Andina de Fomento, 7.1s, 2003 (Banks and Credit Cos.) $ 17 $ 16,653
- -----------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 81,830
- -----------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $2,056,118) $2,029,799
- -----------------------------------------------------------------------------------------------------
Short-Term Obligations - 18.6%
- -----------------------------------------------------------------------------------------------------
Federal Farm Credit Bank, due 7/01/99 at Amortized Cost $470 $ 470,000
- -----------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $2,526,118) $2,499,799
Other Assets, Less Liabilities - 1.1% 27,846
- -----------------------------------------------------------------------------------------------------
Net Assets - 100.0% $2,527,645
- -----------------------------------------------------------------------------------------------------
# SEC Rule 144A restriction.
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- --------------------------------------------------------------------------------
JUNE 30, 1999
- --------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $2,526,118) $2,499,799
Cash 2,402
Interest receivable 25,740
Deferred organization expenses 3,914
Other assets 75
----------
Total assets $2,531,930
----------
Liabilities:
Payable for Series shares reacquired $ 301
Payable to affiliate for management fee 38
Accrued expenses and other liabilities 3,946
----------
Total liabilities $ 4,285
----------
Net assets $2,527,645
==========
Net assets consist of:
Paid-in capital $2,512,493
Unrealized depreciation on investments (26,319)
Accumulated net realized loss on investments (13,147)
Accumulated undistributed net investment income 54,618
----------
Total $2,527,645
==========
Shares of beneficial interest outstanding 246,659
=======
Net asset value per share
(net assets / shares of beneficial interest outstanding) $10.25
======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations (Unaudited)
- -------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1999
- -------------------------------------------------------------------------------
Net investment income (loss):
Interest income $ 65,442
--------
Expenses -
Management fee $ 5,953
Trustees' compensation 1,123
Shareholder servicing agent fee 378
Administrative fee 161
Custodian fee 1,350
Printing 3,903
Auditing fees 4,993
Legal fees 1,524
Amortization of organization expenses 916
Miscellaneous 1,835
--------
Total expenses $ 22,136
Fees paid indirectly (275)
Reduction of expenses by investment adviser (11,037)
--------
Net expenses $ 10,824
--------
Net investment income $ 54,618
--------
Realized and unrealized loss on investments:
Realized loss (identified cost basis) on investment transactions $(13,140)
Change in unrealized depreciation on investments (23,065)
--------
Net realized and unrealized loss on investments $(36,205)
--------
Increase in net assets from operations $ 18,413
========
See notes to financial statements
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 54,618 $ 64,423
Net realized gain (loss) on investments (13,140) 2,093
Net unrealized loss on investments (23,065) (3,927)
---------- ----------
Increase in net assets from operations $ 18,413 $ 62,589
---------- ----------
Distributions declared to shareholders -
From net investment income $ -- $ (64,423)
From net realized gain on investments -- (1,008)
In excess of net investment income -- (384)
---------- ----------
Total distributions declared to shareholders $ -- $ (65,815)
---------- ----------
Net increase in net assets from Series share transactions $ 682,950 $1,128,448
---------- ----------
Total increase in net assets $ 701,363 $1,125,222
---------- ----------
Net assets:
At beginning of period 1,826,282 701,060
---------- ----------
At end of period (including accumulated undistributed
net investment income of $54,618 and $0,
respectively) $2,527,645 $1,826,282
========== ==========
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Financial Highlights
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED
DECEMBER 31, PERIOD ENDED
SIX MONTHS ENDED -------------------------- DECEMBER 31,
JUNE 30, 1999 1998 1997 1996*
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $10.16 $10.01 $10.01 $10.00
------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.26 $ 0.55 $ 0.62 $ 0.25
Net realized and unrealized gain (loss) on
investments (0.17) (0.01) (0.01) 0.01
------ ------ ------ ------
Total from investment operations $ 0.09 $ 0.54 $ 0.61 $ 0.26
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $(0.38) $(0.60) $(0.25)
From net realized gain on investments -- (0.01) (0.01) --
In excess of net investment income -- (0.00)+++ -- --
------ ------ ------ ------
Total distributions declared to shareholders $ -- $(0.39) $(0.61) $(0.25)
------ ------ ------ ------
Net asset value - end of period $10.25 $10.16 $10.01 $10.01
====== ====== ====== ======
Total return 0.89%++ 5.42% 6.08% 2.61%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.02%+ 1.03% 1.02% 1.03%+
Net investment income 5.02%+ 5.34% 6.13% 6.61%+
Portfolio turnover 44% 94% 167% 109%
Net assets at end of period (000 omitted) $2,528 $1,826 $ 701 $ 523
(S) Subject to reimbursement by the Series, the investment adviser agreed to maintain expenses of the Series, exclusive of
management fees, at not more than 0.45% of average daily net assets. To the extent actual expenses were over this
limitation, the net investment income per share and ratios would have been:
Net investment income $ 0.21 $ 0.38 $ 0.10 $ 0.01
Ratios (to average net assets):
Expenses## 2.04%+ 2.64% 6.20% 7.55%+
Net investment income 4.00%+ 3.73% 0.95% 0.09%+
* For the period from the commencement of the Series' investment operations, August 14, 1996, through December 31, 1996.
+ 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 arranagement 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.
See notes to financial statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Limited Maturity Series (the Series) is a diversified series of MFS(R)
Variable Insurance Trust(SM) (the Trust) which is comprised of the following
15 Funds: 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) Global
Growth Series, MFS(R) Growth with Income Series, MFS(R) High Income Series,
MFS Limited Maturity Series, MFS(R) Money Market Series, MFS(R) New Discovery
Series, MFS(R) Research Series, MFS(R) Total Return Series, and MFS(R)
Utilities Series. The Trust is organized as a Massachusetts business trust and
is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company.
The shareholders of each Series of the Trust are separate accounts of
insurance companies which offer variable annuity and/or life insurance
products. As of June 30, 1999, there were 7 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.
Investment Valuations - Debt securities (other than short-term obligations
which mature in 60 days or less), including listed issues, forward contracts,
and swap agreements, are valued on the basis of valuations furnished by
dealers or by a pricing service with consideration to factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other
market data, without exclusive reliance upon exchange or over-the-counter
prices. Short-term obligations, which mature in 60 days or less, are valued at
amortized cost, which approximates market value. Securities for which there
are no such quotations or valuations are valued at fair value as determined in
good faith by the Trustees.
Deferred Organization Expenses - Costs incurred by the Series in connection
with its organization have been deferred and are being amortized on a
straight-line basis over a five-year period beginning on the date of
commencement of Series' operations.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and discount is amortized/accreted for financial statement and tax reporting
purposes as required by federal income tax regulations. Interest payments
received in additional securities are recorded on the ex-interest date in an
amount equal to the value of the security on such date. Some securities may be
purchased on a "when-issued" or "forward delivery" basis, which means that the
securities will be delivered to the Series at a future date, usually beyond
customary settlement time.
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 0.55%
of the Series' average daily net assets.
The Series has a temporary expense reimbursement agreement whereby MFS has
voluntarily agreed to pay all of the Series' operating expenses, exclusive of
management fees. The Series in turn will pay MFS an expense reimbursement fee
not greater than 0.45% 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 $61,868.
The Series pays no compensation directly to its Trustees who are officers of
the investment adviser, or to officers of the Trust, all of whom receive
remuneration for their services to the Series from MFS. Certain officers and
Trustees of the Fund 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 short-term obligations, were as
follows:
PURCHASES SALES
- --------------------------------------------------------------------------------
U.S. government securities $340,619 $262,622
-------- --------
Investments (non-U.S. government securities) $986,291 $554,438
-------- --------
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Series, as computed on a federal income tax basis,
are as follows:
Aggregate cost $2,526,118
----------
Gross unrealized depreciation $ (26,735)
Gross unrealized appreciation 416
----------
Net unrealized depreciation $ (26,319)
==========
(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>
PERIOD ENDED JUNE 30, 1999 YEAR ENDED DECEMBER 31, 1998
-------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 115,806 $1,182,290 187,508 $1,935,225
Shares issued to shareholders in
reinvestment
of distributions -- -- 6,486 65,828
Shares reacquired (48,851) (499,340) (84,291) (872,605)
------- ---------- ------- ----------
Net increase 66,955 $ 682,950 109,703 $1,128,448
======= ========== ======= ==========
</TABLE>
(6) Line of Credit
The Series and other affiliated Funds participate in a $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 series, 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 Series at the end of each quarter. The commitment fee
allocated to the Series for the year ended June 30, 1999, was $4. The Series
had no borrowings during the period.
<PAGE>
(C)1999 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
VLM-3 8/99 260
