<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) UTILITIES SERIES
<PAGE>
<TABLE>
MFS(R) UTILITIES 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.
Maura A. Shaughnessy*
CUSTODIAN
TREASURER State Street Bank and Trust Company
W. Thomas London*
WORLD WIDE WEB
ASSISTANT TREASURERS www.mfs.com
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
*Affiliated with the Investment Adviser
- --------------------------------------------------------------------------------------------
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
9.53% (including the reinvestment of any distributions), which compares to a
1.17% return for the Standard & Poor's Utility Index (the Utility Index), an
unmanaged, market-value-weighted total return index of all utility stocks in
the Standard & Poor's 500 Composite Index (the S&P 500).
The Series has benefited from consolidation or attempted acquisitions among
several of its top holdings. For example, Frontier Corp., which was the former
Rochester Telephone, has a new management and a new strategy. The company is
focusing on the growth sectors of telecommunications. Two rival companies,
Global Crossing and Qwest Communications, engaged in a bidding war over
Frontier, and Frontier's stock price rose as a result. Another successful
telecommunications position has been MediaOne. Like many cable companies, it
faced difficult regulation and the consequences of overspending. Now, however,
the regulatory picture has improved, and MediaOne's spending is paying off. As
a result, MediaOne has been the object of multiple buyout offers, and its
stock price has risen based on its proposed acquisition by AT&T.
Although consolidation has benefited the Series' telecommunications holdings,
these stocks generally have been performing better than utility stocks for
some time. We believe this pattern will continue for the near future because
demand in this sector is continually increasing. We are being selective,
however. We also bought Cincinnati Bell, a local telecommunications company
that is branching out, near the beginning of the year, and it has performed
well due to strong demand for its cellular and Internet services.
The Series' weighting has increased in the natural gas sector, another area
that has experienced consolidation. For example, El Paso Energy's takeover of
Sonat last spring created one of the country's largest natural gas pipeline
companies. The Series owns both Sonat and El Paso, and their stock prices have
increased since the deal was announced. Enron, which is the biggest player in
the trading of both natural gas and electricity, also has benefited from its
leadership position in energy outsourcing and has performed well.
Another natural gas holding is Atmos Energy, a local distribution company
(LDC). It is in nine different states and is probably one of the best-run
LDCs. The company has made some recent acquisitions that have nearly doubled
its growth rate. Peco Energy also has helped us. Thanks to increased earnings,
it is one of the few electric utilities that had a good first quarter.
We believe the supply/demand outlook for natural gas will improve, perhaps by
this fall. The past two winters have been unseasonably warm, which has cut
demand. However, we believe a return to any sort of normal weather pattern
should help this industry. As companies begin to fill gas storage facilities,
a tight market could be created, which would benefit companies like Coastal
Corp., a pipeline, exploration,
and production company. A stronger natural gas market also would benefit other
companies in the Series, such as El Paso and Williams.
Respectfully,
/s/ Maura A. Shaughnessy
Maura A. Shaughnessy
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on the
cover. The manager's views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
It is not possible to invest directly in an index.
The portfolio is actively managed, and current holdings may be different.
PORTFOLIO MANAGER'S PROFILE
Maura A. Shaughnessey is Senior Vice President of MFS Investment Management(R)
and portfolio manager of MFS(R) Capital Opportunities Fund, MFS(R) Utilities
Fund, MFS(R) Utilities Series and MFS(R) Capital Opportunities Series (both
part of MFS(R) Variable Insurance Trust(SM)), and the Utilities Series and
Capital Opportunities Series offered through MFS(R)/Sun Life annuity products.
Ms. Shaughnessy joined MFS in 1991 as a research analyst and became Vice
President and portfolio manager in 1992 and Senior Vice President in 1998. A
graduate of Colby College and the Amos Tuck School of Business Administration
of Dartmouth College, she is a Chartered Financial Analyst.
All equity portfolio managers began their careers at MFS Investment
Management(R) as research analysts. Our portfolio managers are supported by an
investment staff of over 100 professionals utilizing MFS(R) Original Research
(SM), a company-oriented, bottom-up process of selecting securities.
SERIES FACTS
Objective: Seeks capital growth and current income (income above that
available from a portfolio invested entirely in equity securities).
Commencement of investment operations: January 3, 1995
Size: $122.9 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.)
<TABLE>
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN THROUGH JUNE 30, 1999
<CAPTION>
6 Months 1 Year 3 Years Life*
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return +9.53% +15.91% +93.66% +170.33%
- -------------------------------------------------------------------------------------------------------------------
Average Annual Total Return -- +15.91% +24.62% + 24.81%
- -------------------------------------------------------------------------------------------------------------------
* For the period from the commencement of the Series' investment operations, January 3, 1995, through June 30, 1999.
</TABLE>
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.
The Series may focus its investments in certain sectors, thereby increasing
its vulnerability to any single economic, political, or regulatory
development. See the prospectus for details.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) - June 30, 1999
Stocks - 79.5%
<CAPTION>
- --------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 63.4%
Conglomerates - 1.0%
Eastern Enterprises 31,500 $ 1,252,125
- --------------------------------------------------------------------------------------------------------
Entertainment - 2.9%
Comcast Corp., "A" 28,800 $ 1,107,000
MediaOne Group, Inc.* 18,700 1,390,812
Time Warner, Inc. 15,000 1,102,500
------------
$ 3,600,312
- --------------------------------------------------------------------------------------------------------
Internet
Ask Jeeves, Inc. 100 $ 1,400
Phone.Com, Inc.* 200 11,200
------------
$ 12,600
- --------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts - 2.5%
Camden Property Trust 18,000 $ 499,500
CarrAmerica Realty Corp. 18,800 470,000
Equity Residential Properties Trust 12,000 540,750
Kilroy Realty Corp. 10,700 260,813
Mack-Cali Realty Corp. 14,300 442,406
SL Green Realty Corp. 19,400 396,487
TriNet Corporate Realty Trust, Inc. 17,600 487,300
------------
$ 3,097,256
- --------------------------------------------------------------------------------------------------------
Special Products and Services - 2.0%
Azurix Corp. 26,000 $ 520,000
MCN Energy Group, Inc. 68,800 1,427,600
USEC, Inc. 29,900 444,763
------------
$ 2,392,363
- --------------------------------------------------------------------------------------------------------
Telecommunications - 20.6%
Alltel Corp. 10,100 $ 722,150
Ameritech Corp. 3,900 286,650
Bell Atlantic Corp. 41,380 2,705,217
CenturyTel, Inc. 50,600 2,011,350
Cincinnati Bell, Inc. 83,800 2,089,762
GTE Corp. 48,100 3,643,575
Intermedia Communications, Inc.* 86,400 2,592,000
MCI WorldCom, Inc.* 31,182 2,683,601
Motorola, Inc. 6,700 634,825
NEXTEL Communications, Inc.* 25,000 1,254,688
Nortel Networks Corp. 14,700 1,276,144
NTL, Inc.* 1,900 163,756
PSINet, Inc.* 800 35,000
Qwest Communications International, Inc.* 16,400 542,225
SBC Communications, Inc. 58,800 3,410,400
Sprint Corp. 14,300 755,219
Viatel, Inc.* 1,100 61,738
Winstar Communications, Inc.* 8,100 394,875
------------
$ 25,263,175
- --------------------------------------------------------------------------------------------------------
Utilities - Electric - 20.3%
AES Corp.* 19,500 $ 1,133,437
Allegheny Energy, Inc. 19,500 625,219
Atmos Energy Corp. 58,200 1,455,000
BEC Energy 42,600 1,757,250
Calpine Corp. 12,600 680,400
Cinergy Corp. 1,900 60,800
CMS Energy Corp. 52,100 2,181,687
CMS Energy Corp., "G" 19,600 460,600
DQE, Inc. 44,000 1,765,500
Duke Energy Corp. 56,100 3,050,437
El Paso Electric Co.* 60,500 540,719
FirstEnergy Corp. 42,700 1,323,700
Midamerica Energy Holdings Co. 54,100 1,873,212
Niagara Mohawk Holdings, Inc. 20,200 324,463
NiSource, Inc. 38,200 986,038
Peco Energy Co. 21,700 908,688
Pinnacle West Capital Corp. 35,600 1,432,900
Public Service Co. of New Mexico 23,200 461,100
Sierra Pacific Resources 34,100 1,240,387
Texas Utilities Co. 45,200 1,864,500
Unicom Corp. 21,400 825,238
------------
$ 24,951,275
- --------------------------------------------------------------------------------------------------------
Utilities - Gas - 11.7%
Coastal Corp. 57,700 $ 2,308,000
Columbia Energy Group 44,150 2,767,653
Connecticut Energy Group 9,900 381,769
Consolidated Natural Gas Co. 9,400 571,050
El Paso Energy Corp. 34,900 1,228,044
Energen Corp. 29,600 551,300
Enron Corp. 10,200 833,850
KN Energy, Inc. 52,850 706,869
National Fuel Gas Co. 23,000 1,115,500
NICOR, Inc. 20,100 765,056
NUI Corp. 10,100 252,500
ONEOK, Inc. 8,700 276,225
Sonat, Inc. 7,400 245,125
Washington Gas Light Co. 12,800 332,800
Williams Cos., Inc. 48,300 2,055,768
------------
$ 14,391,509
- --------------------------------------------------------------------------------------------------------
Utilities - Telephone - 2.4%
Frontier Corp. 50,000 $ 2,950,000
- --------------------------------------------------------------------------------------------------------
Total U.S. Stocks $ 77,910,615
- --------------------------------------------------------------------------------------------------------
Foreign Stocks - 16.1%
Argentina - 0.5%
Telefonica de Argentina, ADR (Utilities - Telephone) 18,600 $ 583,575
- --------------------------------------------------------------------------------------------------------
Australia - 0.2%
Cable & Wireless Optus (Telecommunications)* 120,300 $ 273,460
- --------------------------------------------------------------------------------------------------------
Brazil - 0.5%
Companhia Electricas est Rio de Janeiro (Utilities - Electric)* 772,600 $ 187,694
Companhia Energetica do Ceara, Preferred "A"
(Utilities - Electric) 77,500 210,169
Companhia Riogrand Telecomunicacoes, Preferred "A"
(Utilities - Telephone) 505 122,541
Espirito Santo Centrais Eletricas S.A. (Utilities - Electric) 1,100 40,408
Espirito Santo Centrais Eletricas S.A., Preferred "B"
(Utilities - Electric) 320 122,823
------------
$ 683,635
- --------------------------------------------------------------------------------------------------------
Canada - 0.9%
AT & T Canada, Inc. (Telecommunications) 3,400 $ 217,812
BCE, Inc. (Telecommunications) 17,500 862,969
------------
$ 1,080,781
- --------------------------------------------------------------------------------------------------------
Chile - 0.5%
Chilectra S.A., ADR (Utilities - Electric) 28,300 $ 597,838
- --------------------------------------------------------------------------------------------------------
Finland - 0.4%
Helsingin Puhelin Oyj (Telecommunications) 7,200 $ 341,301
Telephone Cooperative HPY (Telecommunications) 60 154,946
------------
$ 496,247
- --------------------------------------------------------------------------------------------------------
Germany - 2.1%
Mannesmann AG (Conglomerate) 14,050 $ 2,099,386
VEBA AG (Oil and Gas) 8,300 487,529
------------
$ 2,586,915
- --------------------------------------------------------------------------------------------------------
Greece - 0.9%
Hellenic Telecommunication Organization S.A., GDR
(Telecommunications) 44,966 $ 962,854
STET Hellas Telecommunications S.A., ADR
(Telecommunications)* 6,300 140,963
------------
$ 1,103,817
- --------------------------------------------------------------------------------------------------------
Hungary - 0.9%
Magyar Tavkozlesi Rt., ADR (Telecommunications)* 41,500 $ 1,141,250
- --------------------------------------------------------------------------------------------------------
Italy - 1.8%
Telecom Italia Mobile S.p.A. (Telecommunications) 183,700 $ 1,096,063
Telecom Italia Mobile S.p.A., Saving Shares
(Telecommunications)* 33,600 123,610
Telecom Italia S.p.A. (Telecommunications) 91,400 949,412
------------
$ 2,169,085
- --------------------------------------------------------------------------------------------------------
Japan - 1.0%
Nippon Telephone & Telegraph Co. (Utilities - Telephone) 52 $ 606,351
NTT Mobile Communications Network, Inc. (Telecommunications) 9 122,064
NTT Mobile Communications Network, Inc. (Telecommunications)* 36 482,303
------------
$ 1,210,718
- --------------------------------------------------------------------------------------------------------
Netherlands - 1.2%
Equant N.V. (Computer Software - Services)* 12,700 $ 1,195,388
Koninklijke KPN N.V. (Telecommunications) 4,400 206,306
United Pan - Europe Com (Telecommunications)* 700 37,943
------------
$ 1,439,637
- --------------------------------------------------------------------------------------------------------
Portugal - 0.2%
Telecel - Comunicacoes Pessoais S.A. (Telecommunications) 2,000 $ 257,625
- --------------------------------------------------------------------------------------------------------
Spain - 2.8%
Telefonica de Espana S.A., ADR (Telecommunications) 13,639 $ 2,006,638
Telefonica Publicidad e Informacion S.A. (Utilities - Telephone) 11,500 229,312
Union Electrica Fenosa S.A. (Utilities - Electric) 97,500 1,274,007
------------
$ 3,509,957
- --------------------------------------------------------------------------------------------------------
United Kingdom - 2.2%
British Telecommunications PLC (Telecommunications) 38,200 $ 639,358
Cable & Wireless Communications PLC (Telecommunications) 9,700 93,252
Colt Telecom Group PLC (Telecommunications)* 6,200 535,525
Orange PLC (Telecommunications) 78,200 1,147,393
Vodafone Group PLC (Telecommunications) 1,200 236,400
------------
$ 2,651,928
- --------------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 19,786,468
- --------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $89,845,893) $ 97,697,083
- --------------------------------------------------------------------------------------------------------
Bonds - 6.8%
- --------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- --------------------------------------------------------------------------------------------------------
U.S. Bonds - 6.5%
Banks and Credit Companies - 0.1%
Beaver Valley Funding Corp. II, 9s, 2017 $ 75 $ 82,297
Midland Funding Corp., 10.33s, 2002 107 112,526
------------
$ 194,823
- --------------------------------------------------------------------------------------------------------
Construction Services - 0.1%
Georgia Pacific Corp., 9.5s, 2022 $ 100 $ 110,490
- --------------------------------------------------------------------------------------------------------
Entertainment - 0.1%
Hearst Argyle Television, Inc., 7.5s, 2027 $ 100 $ 94,009
- --------------------------------------------------------------------------------------------------------
Financial Institutions - 0.2%
Goldman Sachs Group LP, 5.9s, 2003 $ 150 $ 146,532
Salton Sea Funding Corp., 6.69s, 2000 22 21,712
Salton Sea Funding Corp., 7.84s, 2010 100 104,419
------------
$ 272,663
- --------------------------------------------------------------------------------------------------------
Oils - 0.1%
Oryx Energy Corp., 8.375s, 2004 $ 100 $ 104,852
- --------------------------------------------------------------------------------------------------------
Telecommunications - 0.8%
Intermedia Communications, Inc., 0s, 2009 $ 1,575 $ 893,812
Telecomunicaciones De Puerto, 6.65s, 2006## 30 28,960
WorldCom, Inc., 8.875s, 2006 100 106,462
------------
$ 1,029,234
- --------------------------------------------------------------------------------------------------------
U.S. Federal Agencies - 0.1%
Federal National Mortgage Association - 0.1% FNMA, 7s, 2029 $ 110 $ 108,606
- --------------------------------------------------------------------------------------------------------
U.S. Government Guaranteed - 0.9%
Government National Mortgage Association - 0.9%
GNMA, 6.5s, 2029 $ 39 $ 37,511
GNMA, 7s, 2028 237 234,026
GNMA, 7.5s, 2025 - 2028 693 699,330
GNMA, 8s, 2025 - 2027 124 127,515
------------
$ 1,098,382
- --------------------------------------------------------------------------------------------------------
U.S. Treasury Obligations
U.S. Treasury Notes, 5.625s, 2008 $ 50 $ 48,976
- --------------------------------------------------------------------------------------------------------
Total U.S. Government Guaranteed $ 1,147,358
- --------------------------------------------------------------------------------------------------------
Utilities - Electric - 3.2%
AEP Generating, 9.82s, 2022 $ 596 $ 731,717
California Infrastructure, 6.17s, 2003 322 322,403
CMS Energy Corp., 6.75s, 2004 150 143,501
CMS Panhandle Holding Co., 6.5s, 2009## 130 123,500
Connecticut Light & Power Co., 8.59s, 2003 100 105,651
Edison Mission Energy, 7.73s, 2009## 11 11,136
Illinois Power Special Purpose Trust, 5.26s, 2003 183 180,941
Long Island Lighting Co., 8.2s, 2023 150 149,441
Midamerican Funding LLC, 5.85s, 2001## 220 218,536
Midamerican Funding LLC, 6.927s, 2029## 110 103,495
National Rural Utilities Cooperative Finance, 5.75s, 2008 313 290,420
Niagara Mohawk Power Corp., 7.25s, 2002 200 201,152
Niagara Mohawk Power Corp., 8.5s, 2023 110 118,039
PacifiCorp, 5.65s, 2006 400 373,892
PP&L, Inc., 6.125s, 2001 250 250,155
Seabrook Station, 7.83s, 2019 86 88,096
Texas Utilities Co., 5.94s, 2001 250 247,402
Toledo Edison Co., 9.5s, 2001 140 146,191
TXU Eastern Funding Co., 6.75s, 2009## 150 141,713
------------
$ 3,947,381
- --------------------------------------------------------------------------------------------------------
Utilities - Gas - 0.9%
CE Generation LLC, 7.416s, 2018## $ 340 $ 324,938
Coastal Corp., 6.375s, 2009 266 251,067
El Paso Energy Corp., 6.75s, 2009 375 360,188
Tennessee Gas Pipeline Co., 7.625s, 2037 33 32,787
Texas Gas Transmission Corp., 7.25s, 2027 100 94,525
------------
$ 1,063,505
- --------------------------------------------------------------------------------------------------------
Total U.S. Bonds $ 8,072,921
- --------------------------------------------------------------------------------------------------------
Foreign Bonds - 0.3%
Canada - 0.1%
Gulf Canada Resources Ltd., 9.25s, 2004 (Oils) $ 90 $ 90,896
- --------------------------------------------------------------------------------------------------------
Chile - 0.2%
Empresa Electric Guacolda S.A., 7.6s, 2001 (Utilities
- Electric)## $ 250 $ 237,507
- --------------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 328,403
- --------------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $8,656,789) $ 8,401,324
- --------------------------------------------------------------------------------------------------------
Convertible Preferred Stocks - 1.7%
- --------------------------------------------------------------------------------------------------------
SHARES
- --------------------------------------------------------------------------------------------------------
Telecommunications - 1.4%
Global Telesystems Group, Inc., 7.25%## 9,400 $ 619,225
PSINet, Inc., 6.75% 10,100 487,325
UnitedGlobalCom, 7.00%## 12,800 644,800
------------
$ 1,751,350
- --------------------------------------------------------------------------------------------------------
Utilities - Gas - 0.3%
KN Energy, Inc., 8.25% 15,100 $ 390,712
- --------------------------------------------------------------------------------------------------------
Total Convertible Preferred Stocks (Identified Cost, $2,267,734) $ 2,142,062
- --------------------------------------------------------------------------------------------------------
Preferred Stocks - 0.1%
- --------------------------------------------------------------------------------------------------------
Celular CRT Participacoes (Telecommunications)
(Identified Cost, $236,730) 505 $ 67,619
- --------------------------------------------------------------------------------------------------------
Convertible Bonds - 3.1%
- --------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- --------------------------------------------------------------------------------------------------------
U.S. Convertible Bonds - 2.6%
Financial Institutions - 1.7%
ADT Operations, Inc., 0s, 2010 $ 840 $ 2,100,000
- --------------------------------------------------------------------------------------------------------
Financial Services - 0.4%
Bell Atlantic Financial Services, Inc., 4.25s, 2005## $ 530 $ 541,925
- --------------------------------------------------------------------------------------------------------
Telecommunications - 0.5%
Global Telesystems Group, Inc., 5.75s, 2010 $ 400 $ 632,000
- --------------------------------------------------------------------------------------------------------
Total U.S. Convertible Bonds $ 3,273,925
- --------------------------------------------------------------------------------------------------------
Foreign Convertible Bonds - 0.5%
Mexico - 0.2%
Telefonos de Mexico S.A., 4.25s, 2004 (Utilities - Telephone) $ 270 $ 279,113
- --------------------------------------------------------------------------------------------------------
United Kingdom - 0.3%
TeleWest Communications PLC, 5.25s, 2007 (Telecommunications)## $ 180 $ 293,041
- --------------------------------------------------------------------------------------------------------
Total Foreign Convertible Bonds $ 572,154
- --------------------------------------------------------------------------------------------------------
Total Convertible Bonds (Identified Cost, $3,067,529) $ 3,846,079
- --------------------------------------------------------------------------------------------------------
Short-Term Obligations - 8.1%
- --------------------------------------------------------------------------------------------------------
Federal Home Loan Bank, due 7/01/99, at Amortized Cost $ 9,900 $ 9,900,000
- --------------------------------------------------------------------------------------------------------
Other Short-Term Obligations - 11.9%
- --------------------------------------------------------------------------------------------------------
SHARES
- --------------------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio, at Cost 14,603,544 $ 14,603,544
- --------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $128,578,219) $136,657,711
Other Assets, Less Liabilities - (11.2)% (13,772,946)
- --------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $122,884,765
- --------------------------------------------------------------------------------------------------------
* Non-income producing security.
## 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, $128,578,219) $136,657,711
Cash 108,048
Receivable for Series shares sold 196,628
Receivable for investments sold 3,416,241
Interest and dividends receivable 359,650
Deferred organization expenses 951
Other assets 198
------------
Total assets $140,739,427
------------
Liabilities:
Distributions payable $ 115
Payable for Series shares reacquired 14,460
Payable for investments purchased 3,233,603
Collateral for securities loaned, at value 14,603,544
Payable to affiliate for management fee 2,517
Accrued expenses and other liabilities 423
------------
Total liabilities $ 17,854,662
------------
Net assets $122,884,765
============
Net assets consist of:
Paid-in capital $108,273,798
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 8,073,064
Accumulated undistributed net realized gain on investments
and foreign currency transactions 5,436,503
Accumulated undistributed net investment income 1,101,400
------------
Total $122,884,765
============
Shares of beneficial interest outstanding 6,072,618
=========
Net asset value per share
(net assets / shares of beneficial interest outstanding) $20.24
======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations (Unaudited)
- -------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1999
- -------------------------------------------------------------------------------
Net investment income (loss):
Income -
Dividends $ 1,091,804
Interest 494,432
Foreign taxes withheld (16,535)
-----------
Total investment income $ 1,569,701
-----------
Expenses -
Management fee $ 373,156
Trustees' compensation 1,123
Shareholder servicing agent fee 17,415
Administrative fee 7,463
Custodian fee 22,292
Printing 24,466
Auditing fees 16,849
Legal fees 1,681
Amortization of organization expenses 911
Miscellaneous 2,532
-----------
Total expenses $ 467,888
Fees paid indirectly (5,963)
Reimbursement of expenses to investment adviser 35,617
-----------
Net expenses $ 497,542
-----------
Net investment income $ 1,072,159
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) -
Investment transactions $ 5,599,840
Foreign currency transactions 29,369
-----------
Net realized gain on investments and foreign currency
transactions $ 5,629,209
-----------
Change in unrealized appreciation (depreciation) -
Investments $ 3,393,491
Translation of assets and liabilities in foreign currencies (7,751)
-----------
Net unrealized gain on investments and foreign currency
translation $ 3,385,740
-----------
Net realized and unrealized gain on investments and
foreign currency $ 9,014,949
-----------
Increase in net assets from operations $10,087,108
===========
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 $ 1,072,159 $ 1,283,044
Net realized gain on investments and foreign currency
transactions 5,629,209 6,049,822
Net unrealized gain on investments and foreign
currency translation 3,385,740 1,544,623
------------ -----------
Increase in net assets from operations $ 10,087,108 $ 8,877,489
------------ -----------
Distributions declared to shareholders -
From net investment income $ (1,238,327) $ (517,487)
From net realized gain on investments and foreign
currency transactions (6,226,495) (2,352,812)
------------ -----------
Total distributions declared to shareholders $ (7,464,822) $(2,870,299)
------------ -----------
Net increase in net assets from Series share
transactions $ 38,536,693 $45,571,784
------------ -----------
Total increase in net assets $ 41,158,979 $51,578,974
Net assets:
At beginning of period 81,725,786 30,146,812
------------ -----------
At end of period (including accumulated undistributed
net investment income of $1,101,400 and $1,267,568,
respectively) $122,884,765 $81,725,786
============ ===========
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 1995*
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $19.82 $17.99 $13.66 $12.57 $10.00
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.21 $ 0.46 $ 0.44 $ 0.55 $ 0.39
Net realized and unrealized gain on
investments and foreign currency 1.65 2.68 3.89 1.78 3.00
------ ------ ------ ------ ------
Total from investment operations $ 1.86 $ 3.14 $ 4.33 $ 2.33 $ 3.39
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.24) $(0.24) $ -- $(0.35) $(0.24)
From net realized gain on investments
and foreign currency transactions (1.20) (1.07) -- (0.88) (0.58)
In excess of net realized gain on
investments and foreign currency
transactions -- -- -- (0.01) --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(1.44) $(1.31) $ -- $(1.24) $(0.82)
------ ------ ------ ------ ------
Net asset value - end of period $20.24 $19.82 $17.99 $13.66 $12.57
====== ====== ====== ====== ======
Total return 9.53%++ 18.06% 31.70% 18.51% 33.94%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.01%+ 1.01% 1.00% 1.00% 1.00%+
Net investment income 2.16%+ 2.48% 2.92% 4.19% 3.66%+
Portfolio turnover 73% 133% 69% 121% 94%
Net assets at end of period (000
omitted) $122,885 $81,726 $30,147 $9,572 $2,373
(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/under
this limitation, the net investment income per share and the ratios would have been:
Net investment income $ 0.22 $ 0.47 $ 0.41 $ 0.32 $ 0.17
Ratios (to average net assets):
Expenses## 0.94%+ 0.98% 1.20% 2.75% 3.08%+
Net investment income 2.23%+ 2.51% 2.71% 2.44% 1.62%+
* For the period from the commencement of the Series' investment operations, January 3, 1995, through December 31, 1995.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Series has an expense offset arrangement which reduces the Series' custodian fee based upon the amount of cash
maintained by the Series with its custodian and dividend disbursing agent. The Series' expenses are calculated without
reduction for this expense offset arrangement.
See notes to financial statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Utilities 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(R) New Discovery Series,
MFS(R) Research Series, MFS(R) Total Return Series, and MFS 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 35 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. Debt securities (other than short-term obligations which
mature in 60 days or less), including listed issues and forward contracts, are
valued on the basis of valuations furnished by dealers or by a pricing service
with consideration to factors such as institutional-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics, and other market data, without exclusive reliance
upon exchange or over-the-counter prices. Short-term obligations, which mature
in 60 days or less, are valued at amortized cost, which approximates market
value. Securities for which there are no such quotations or valuations are
valued at fair value as determined in good faith by the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions. Gains and losses attributable to foreign currency
exchange rates on sales of securities are recorded for financial statement
purposes as net realized gains and losses on investments. Gains and losses
attributable to foreign exchange rate movements on income and expenses are
recorded for financial statement purposes as foreign currency transaction
gains and losses. That portion of both realized and unrealized gains and
losses on investments that results from fluctuations in foreign currency
exchange rates is not separately disclosed.
Deferred Organization Expenses - Costs incurred by the Series in connection
with its organization have been deferred and are being amortized on a
straight-line basis over a five-year period beginning on the date of
commencement of Series operations.
Security Loans - The Series may lend its securities to member banks of the
Federal Reserve System and to member firms of the New York Stock Exchange or
subsidiaries thereof. State Street Bank and Trust Company ("State Street"), as
agent, loans the securities to certain brokers (the "Borrowers") approved by
the Series. The loans are collateralized at all times by cash and U.S.
Treasury securities in an amount at least equal to the market value of the
securities loaned. State Street provides the Series with indemnification
against Borrower default. 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 $14,466,348. These loans
were collateralized by cash of $14,603,544. 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.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All discount
is accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend and interest payments received in additional
securities are recorded on the ex-dividend or ex-interest date in an amount
equal to the value of the security on such date.
Fees Paid Indirectly - The Series' custody fee is calculated as a percentage
of the Series' month end net assets. The fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the Series. This amount is shown as a reduction of expenses on the Statement
of Operations.
Tax Matters and Distributions - The Series' policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The Series
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits are reported in the financial statements as distributions from paid-in
capital. Differences in the recognition or classification of income between
the financial statements and tax earnings and profits, which result in
temporary over-distributions for financial statement purposes, are classified
as distributions in excess of net investment income or net realized gains.
(3) Transactions with Affiliates
Investment Adviser - The Series has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.75%
of 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 $104,188.
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 purchased option transactions
and short-term obligations, were as follows:
PURCHASES SALES
- --------------------------------------------------------------------------------
U.S. government securities $ 3,871,097 $ 5,271,746
----------- -----------
Investments (non-U.S. government securities) $90,726,362 $65,069,971
----------- -----------
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 $128,578,219
------------
Gross unrealized appreciation $ 11,852,066
Gross unrealized depreciation (3,772,574)
------------
Net unrealized appreciation $ 8,079,492
============
(5) Shares of Beneficial Interest
The Series' Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
Series' shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999 YEAR ENDED DECEMBER 31, 1998
------------------------------ ----------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,497,932 $ 49,517,955 4,092,549 $75,961,041
Shares issued to shareholders in
reinvestment of distributions 380,270 7,464,822 157,019 2,870,311
Shares reacquired (929,757) (18,446,084) (1,801,461) (33,259,568)
--------- ------------ ---------- -----------
Net increase 1,948,445 $ 38,536,693 2,448,107 $45,571,784
========= ============ ========== ===========
</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 $387. The Series had
no borrowings during the period.
<PAGE>
(C)1999 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
VUF-3 8/99 38M
