<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) GROWTH WITH
INCOME SERIES
<PAGE>
<TABLE>
MFS(R) GROWTH WITH INCOME 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.
John D. Laupheimer, Jr.*
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
5.84% (including the reinvestment of any distributions). This compares to a
12.23% return for the Standard & Poor's 500 Composite Index (the S&P 500), a
popular, unmanaged index of common stock total return performance for the same
period.
The Series seeks to provide growth of capital with less risk, or price
volatility, than the overall market as represented by the S&P 500. We believe
we can provide favorable long-term returns by taking this risk-adjusted
approach rather than by overweighting sectors that may be showing strong
performance in the short term. This strategy has resulted in an underweighting
relative to the S&P 500 in technology and cyclicals, that is, companies whose
businesses tend to improve during strong economic cycles. This is the primary
reason for the Series' underperformance over the past six months.
Even though many technology stocks have performed well for over a year, we
feel the price volatility of this sector relative to its long-term potential
is too great for this portfolio. Meanwhile, stocks of cyclical companies such
as chemicals performed quite well this spring, but they have since stalled
out. That did not surprise us because we feel very few cyclical stocks have
the potential to grow their earnings at the rate we're looking for. We prefer
companies whose price-to-earnings ratios have been more favorable than that of
the market as a whole. Therefore, the Series has large weightings in companies
such as United Technologies, an aerospace, defense, and building-equipment
company; Xerox, an office equipment company; AlliedSignal, an aerospace,
automotive, and environmental-controls company; and Bell Atlantic, a
telecommunications company.
One of the Series' best-performing sectors has been utilities and
communications. The biggest positions in this sector are telecommunications
companies, including Bell Atlantic, MCI WorldCom, Alltel Corp., SBC
Communications, and Sprint's long-distance telephone group. Sales growth for
these companies and for telecommunications companies in general has been very
strong. The Internet has driven demand for telecommunications services, and
both telecommunications equipment and service companies have performed well as
a result.
Recent additions to the Series included Newell Rubbermaid. Newell bought
Rubbermaid in the first quarter of this year, and we believe the combined
company could have a near monopoly on a range of consumer staples, including
Rolodexes. It also sells home products such as drapery, hardware, and kitchen
accessories. Rubbermaid had a broad product line that was very popular, but
its reputation for customer satisfaction was poor, while we feel Newell brings
a strong customer orientation to the table.
Wells Fargo & Co., a California-based bank, is now among the Series' top 10
holdings. It acquired Norwest Corp., a Minnesota-based bank, last fall,
bringing together two complementary financial services companies: one with
good cost controls and another with, in our opinion, growth potential. The
financial services industry has been a favorite for a long time, but we are
slowly lowering our stake in this area. Most banks prefer to see interest
rates go up so they can reprice loans and fee-based services quickly when they
do. So far, however, there has been little indication that interest rates are
going to go up enough to let the banks take these steps. Also, as the number
of mergers continues to increase, there has been competition for market share
but little real growth in the sector.
Going forward, we will continue to avoid stocks that we feel are expensive in
relation to their earnings potential, and we will not pursue what we feel are
short-term market trends. We believe this risk-adjusted approach should
provide favorable long-term results.
Respectfully,
/s/ John D. Laupheimer, Jr.
John D. Laupheimer, Jr.
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
John D. Laupheimer, Jr., is Senior Vice President and Director of Equity
Research of MFS Investment Management(R). He is also lead portfolio manager of
Massachusetts Investors Trust, America's oldest mutual fund. He also manages
MFS(R) Institutional Core Equity Fund, the Massachusetts Investors Trust
Series offered through MFS(R)/Sun Life annuity products, and MFS(R) Growth
with Income Series (part of MFS(R) Variable Insurance Trust(SM)).
Mr. Laupheimer joined the MFS Research Department in 1981 as a research analyst.
He was named Investment Officer in 1983, Assistant Vice President in 1984, Vice
President in 1986, portfolio manager in 1987, Senior Vice President in 1995, and
Director of Equity Research in 1999. Mr. Laupheimer is a graduate of Boston
University and the Sloan School of Management of the Massachusetts Institute of
Technology. He is a Chartered Financial Analyst and a member of The Boston
Security Analysts Society, Inc.
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.
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>
SERIES FACTS
Objective: Seeks reasonable current income and long-term growth of capital and
income.
Commencement of investment operations: October 9, 1995
Size: $365.3 million net assets as of June 30, 1999
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 +5.84% +11.50% +87.24% +123.01%
- ---------------------------------------------------------------------------------------------------------------------
Average Annual Total Return -- +11.50% +23.46% + 24.02%
- ---------------------------------------------------------------------------------------------------------------------
* For the period from the commencement of the Series' investment operations, October 9, 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.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) - June 30, 1999
Stocks - 95.1%
<CAPTION>
- --------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 89.5%
Aerospace - 4.4%
AlliedSignal, Inc. 69,565 $ 4,382,595
General Dynamics Corp. 22,508 1,541,798
Lockheed-Martin Corp. 14,900 555,025
Raytheon Co., "A" 30,300 2,086,913
United Technologies Corp. 106,710 7,649,773
------------
$ 16,216,104
- --------------------------------------------------------------------------------------------------------
Automotive - 1.0%
Federal-Mogul Corp. 33,820 $ 1,758,640
Ford Motor Co. 22,730 1,282,824
TRW, Inc. 12,400 680,450
------------
$ 3,721,914
- --------------------------------------------------------------------------------------------------------
Banks and Credit Companies - 5.2%
Bank America Corp. 47,870 $ 3,509,469
Chase Manhattan Corp. 800 69,300
Comerica, Inc. 12,874 765,198
Fleet Financial Group, Inc. 9,948 441,443
National City Corp. 12,312 806,436
Northern Trust Corp. 21,636 2,098,692
PNC Bank Corp. 8,500 489,813
State Street Corp. 26,182 2,235,288
US Bancorp 86,564 2,943,176
Wells Fargo Co. 133,877 5,723,242
------------
$ 19,082,057
- --------------------------------------------------------------------------------------------------------
Business Machines - 2.7%
International Business Machines Corp. 19,600 $ 2,533,300
Xerox Corp. 124,370 7,345,603
------------
$ 9,878,903
- --------------------------------------------------------------------------------------------------------
Business Services - 1.7%
Computer Sciences Corp.* 30,500 $ 2,110,219
DST Systems, Inc.* 28,785 1,809,857
First Data Corp. 45,100 2,207,081
------------
$ 6,127,157
- --------------------------------------------------------------------------------------------------------
Chemicals - 0.2%
E.I. du Pont de Nemours & Co., Inc. 5,249 $ 358,572
PPG Industries, Inc. 5,100 301,219
Rohm & Haas Co. 5,100 218,663
------------
$ 878,454
- --------------------------------------------------------------------------------------------------------
Computer Hardware - Systems - 0.9%
Hewlett-Packard Co. 33,400 $ 3,356,700
- --------------------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 2.8%
Microsoft Corp.* 113,804 $ 10,263,698
- --------------------------------------------------------------------------------------------------------
Computer Software - Services - 0.5%
Sun Microsystems, Inc.* 28,900 $ 1,990,488
- --------------------------------------------------------------------------------------------------------
Computer Software - Systems - 2.2%
BMC Software, Inc.* 28,322 $ 1,529,388
Computer Associates International, Inc. 71,688 3,942,840
Oracle Corp.* 67,141 2,492,610
------------
$ 7,964,838
- --------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 6.4%
Clorox Co. 16,631 $ 1,776,398
Colgate-Palmolive Co. 27,632 2,728,660
Gillette Co. 80,404 3,296,564
Newell Rubbermaid, Inc. 82,140 3,819,510
Philip Morris Cos., Inc. 40,495 1,627,393
Procter & Gamble Co. 45,973 4,103,090
Tyco International Ltd. 65,277 6,184,996
------------
$ 23,536,611
- --------------------------------------------------------------------------------------------------------
Electrical Equipment - 2.5%
Emerson Electric Co. 44,850 $ 2,819,944
General Electric Co. 48,291 5,456,883
Honeywell, Inc. 7,000 811,125
------------
$ 9,087,952
- --------------------------------------------------------------------------------------------------------
Entertainment - 2.6%
Disney (Walt) Co. 73,890 $ 2,276,736
MediaOne Group, Inc.* 25,940 1,929,287
Time Warner, Inc. 69,330 5,095,755
------------
$ 9,301,778
- --------------------------------------------------------------------------------------------------------
Financial Institutions - 3.5%
American Express Co. 11,900 $ 1,548,488
Associates First Capital Corp., "A" 66,520 2,947,667
Citigroup, Inc. 99,050 4,704,875
Federal Home Loan Mortgage Corp. 58,038 3,366,204
Goldman Sachs Group, Inc.* 3,200 231,200
------------
$ 12,798,434
- --------------------------------------------------------------------------------------------------------
Food and Beverage Products - 4.1%
Anheuser-Busch Cos., Inc. 72,200 $ 5,121,687
Bestfoods Co. 26,170 1,295,415
Coca-Cola Co. 24,232 1,514,500
Hershey Foods Corp. 9,271 550,466
Interstate Bakeries Corp. 21,948 492,458
Nabisco Holdings Corp., "A" 13,400 579,550
PepsiCo., Inc. 12,860 497,521
Quaker Oats Co. 22,200 1,473,525
Ralston-Ralston Purina Co. 115,462 3,514,375
------------
$ 15,039,497
- --------------------------------------------------------------------------------------------------------
Forest and Paper Products - 0.1%
International Paper Co. 9,800 $ 494,900
- --------------------------------------------------------------------------------------------------------
Insurance - 7.9%
Allstate Corp. 74,630 $ 2,677,351
American International Group, Inc. 25,970 3,040,113
Chubb Corp. 16,900 1,174,550
CIGNA Corp. 65,488 5,828,432
Equitable Cos., Inc. 18,730 1,254,910
Hartford Financial Services Group, Inc. 97,420 5,680,804
Lincoln National Corp. 57,794 3,023,349
MBIA, Inc. 18,951 1,227,077
Progressive Corp. 25,517 3,699,965
Torchmark Corp. 32,508 1,109,335
------------
$ 28,715,886
- --------------------------------------------------------------------------------------------------------
Manufacturing - 0.8%
Danaher Corp. 18,400 $ 1,069,500
Illinois Tool Works, Inc. 23,420 1,920,440
------------
$ 2,989,940
- --------------------------------------------------------------------------------------------------------
Medical and Health Products - 8.5%
American Home Products Corp. 67,726 $ 3,894,245
Becton, Dickinson & Co. 32,100 963,000
Bristol-Myers Squibb Co. 79,702 5,614,010
Johnson & Johnson Co. 44,623 4,373,054
Merck & Co., Inc. 31,718 2,347,132
Pfizer, Inc. 44,015 4,830,646
Pharmacia & Upjohn, Inc. 67,410 3,829,731
Schering Plough Corp. 41,600 2,204,800
Warner-Lambert Co. 44,921 3,116,394
------------
$ 31,173,012
- --------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 2.7%
Fresenius National Medical Care, Inc.* 100 $ 2
Guidant Corp. 66,080 3,398,990
HEALTHSOUTH Corp.* 49,870 744,933
Medtronic, Inc. 41,420 3,225,582
United HealthCare Corp. 38,135 2,388,204
------------
$ 9,757,711
- --------------------------------------------------------------------------------------------------------
Oils - 2.9%
Chevron Corp. 15,790 $ 1,503,011
Exxon Corp. 64,607 4,982,815
Mobil Corp. 38,051 3,767,049
USX-Marathon Group 11,929 388,438
------------
$ 10,641,313
- --------------------------------------------------------------------------------------------------------
Printing and Publishing - 1.6%
Gannett Co., Inc. 27,069 $ 1,932,050
New York Times Co. 37,000 1,362,062
Tribune Co. 27,001 2,352,462
------------
$ 5,646,574
- --------------------------------------------------------------------------------------------------------
Restaurants and Lodging - 1.4%
McDonald's Corp. 119,920 $ 4,954,195
- --------------------------------------------------------------------------------------------------------
Special Products and Services - 0.2%
Carnival Corp. 14,200 $ 688,700
- --------------------------------------------------------------------------------------------------------
Stores - 5.3%
CVS Corp. 76,376 $ 3,876,082
Dayton Hudson Corp. 37,630 2,445,950
Home Depot, Inc. 35,306 2,275,030
Nordstrom, Inc. 33,310 1,115,885
Office Depot, Inc.* 55,324 1,220,586
Rite Aid Corp. 42,257 1,040,579
TJX Cos., Inc. 92,820 3,092,066
Wal-Mart Stores, Inc. 89,864 4,335,938
------------
$ 19,402,116
- --------------------------------------------------------------------------------------------------------
Supermarkets - 3.2%
Albertsons, Inc. 52,191 $ 2,691,098
Kroger Co.* 155,204 4,336,012
Safeway, Inc.* 96,490 4,776,255
------------
$ 11,803,365
- --------------------------------------------------------------------------------------------------------
Telecommunications - 9.4%
Alltel Corp. 60,170 $ 4,302,155
Ameritech Corp. 26,570 1,952,895
Bell Atlantic Corp. 108,040 7,063,115
Cisco Systems, Inc.* 41,006 2,642,324
MCI WorldCom, Inc.* 69,694 5,998,040
Motorola, Inc. 36,500 3,458,375
Nortel Networks Corp. 11,100 963,619
SBC Communications, Inc. 80,080 4,644,640
Sprint Corp. 47,628 2,515,353
Sprint Corp. (PCS Group) 11,487 656,195
------------
$ 34,196,711
- --------------------------------------------------------------------------------------------------------
Utilities - Electric - 3.6%
CMS Energy Corp. 26,940 $ 1,128,112
Duke Energy Corp. 32,500 1,767,187
FirstEnergy Corp. 35,150 1,089,650
GPU, Inc. 25,230 1,064,391
New Century Energies, Inc. 14,802 574,503
NiSource, Inc. 38,900 1,004,106
Peco Energy Co. 34,610 1,449,294
Pinnacle West Capital Corp. 33,935 1,365,884
Texas Utilities Co. 57,817 2,384,951
Unicom Corp. 29,109 1,122,516
------------
$ 12,950,594
- --------------------------------------------------------------------------------------------------------
Utilities - Gas - 1.0%
Coastal Corp. 14,600 $ 584,000
Columbia Energy Group 45,964 2,881,368
------------
$ 3,465,368
- --------------------------------------------------------------------------------------------------------
Utilities - Telephone - 0.2%
BellSouth Corp. 18,804 $ 881,438
- --------------------------------------------------------------------------------------------------------
Total U.S. Stocks $327,006,408
- --------------------------------------------------------------------------------------------------------
Foreign Stocks - 5.6%
Canada - 0.6%
Canadian National Railway Co. (Railroads) 32,281 $ 2,162,827
- --------------------------------------------------------------------------------------------------------
France - 0.2%
Axa (Insurance) 4,700 $ 572,968
- --------------------------------------------------------------------------------------------------------
Germany - 0.8%
HypoVereinsbank (Banks and Credit Cos.) 6,700 $ 434,974
Mannesmann AG (Conglomerate) 18,000 2,689,604
------------
$ 3,124,578
- --------------------------------------------------------------------------------------------------------
Japan - 0.2%
AFLAC, Inc. (Insurance) 16,000 $ 766,000
- --------------------------------------------------------------------------------------------------------
Netherlands - 0.2%
Wolters Kluwer NV (Publishing) 14,800 $ 588,705
- --------------------------------------------------------------------------------------------------------
Sweden - 0.4%
Ericsson LM, ADR (Telecommunications) 45,000 $ 1,482,188
- --------------------------------------------------------------------------------------------------------
Switzerland - 0.3%
Nestle S.A. (Food and Beverage Products) 595 $ 1,072,041
- --------------------------------------------------------------------------------------------------------
United Kingdom - 2.9%
BP Amoco PLC, ADR (Oils) 57,634 $ 6,253,289
Rentokil Initial PLC (Environmental Services) 138,060 535,253
Reuters Group PLC (Business Services) 121,780 1,601,616
Reuters Group PLC, ADR (Business Services) 13,790 1,117,852
Zeneca Group PLC (Medical and Health Products) 29,500 1,140,448
------------
$ 10,648,458
- --------------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 20,417,765
- --------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $305,098,185) $347,424,173
- --------------------------------------------------------------------------------------------------------
Convertible Preferred Stocks - 0.3%
- --------------------------------------------------------------------------------------------------------
Utilities - Electric - 0.3%
Reliant Energy, Inc., 7.00% 6,705 $ 799,571
Texas Utilities Co., 3.315% 5,700 251,513
------------
$ 1,051,084
- --------------------------------------------------------------------------------------------------------
Total Convertible Preferred Stocks (Identified Cost, $737,118) $ 1,051,084
- --------------------------------------------------------------------------------------------------------
Convertible Bonds - 0.1%
- --------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- --------------------------------------------------------------------------------------------------------
Financial Services - 0.1%
Bell Atlantic Financial Services, Inc., 4.25s, 2005##
(Identified Cost, $489,085) $ 438 $ 447,855
- --------------------------------------------------------------------------------------------------------
Short-Term Obligations - 4.1%
- --------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., due 7/23/99 $ 11,840 $ 11,804,835
General Electric Capital Corp., due 7/01/99 3,195 3,195,000
- --------------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 14,999,835
- --------------------------------------------------------------------------------------------------------
Other Short-Term Obligations - 6.9%
- --------------------------------------------------------------------------------------------------------
SHARES
- --------------------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio, at Cost 24,967,671 $ 24,967,671
- --------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $346,291,894) $388,890,618
Other Assets, Less Liabilities - (6.5)% (23,625,119)
- --------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $365,265,499
- --------------------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
</TABLE>
<PAGE>
See notes to financial statements
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- --------------------------------------------------------------------------------
JUNE 30, 1999
- --------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $346,291,894) $388,890,618
Cash 9,357
Receivable for Series shares sold 2,796,394
Receivable for investments sold 2,795,488
Dividends and interest receivable 283,767
Deferred organization expenses 2,339
Other assets 1,530
------------
Total assets $394,779,493
------------
Liabilities:
Payable for investments purchased $ 4,406,456
Payable for Series shares reacquired 73,278
Collateral for securities loaned, at value 24,967,671
Payable to affiliates --
Management fee 7,372
Shareholder servicing agent fee 110
Administrative fee 155
Accrued expenses and other liabilities 58,952
------------
Total liabilities $ 29,513,994
------------
Net assets $365,265,499
============
Net assets consist of:
Paid-in capital $315,264,545
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 42,593,458
Accumulated undistributed net realized gain on investments
and foreign currency transactions 6,590,087
Accumulated undistributed net investment income 817,409
------------
Total $365,265,499
============
Shares of beneficial interest outstanding 17,280,564
==========
Net asset value per share
(net assets / shares of beneficial interest outstanding) $21.14
======
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 $ 1,783,535
Interest 344,293
Foreign taxes withheld (10,555)
------------
Total investment income $ 2,117,273
------------
Expenses -
Management fee $ 1,108,445
Trustees' compensation 1,123
Shareholder servicing agent fee 51,617
Administrative fee 22,161
Custodian fee 52,343
Printing 39,460
Auditing fees 15,504
Legal fees 1,502
Amortization of organization expenses 911
Miscellaneous 11,295
------------
Total expenses $ 1,304,361
Fees paid indirectly (6,196)
------------
Net expenses $ 1,298,165
------------
Net investment income $ 819,108
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 7,156,751
Foreign currency transactions (4,161)
------------
Net realized gain on investments and foreign currency
transactions $ 7,152,590
------------
Change in unrealized appreciation (depreciation) -
Investments $ 10,736,456
Translation of assets and liabilities in foreign currencies (5,631)
------------
Net unrealized gain on investments and foreign currency
translation $ 10,730,825
------------
Net realized and unrealized gain on investments and
foreign currency $ 17,883,415
------------
Increase in net assets from operations $ 18,702,523
============
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 $ 819,108 $ 1,008,353
Net realized gain on investments and foreign currency
transactions 7,152,590 781,320
Net unrealized gain on investments and foreign
currency translation 10,730,825 26,597,781
------------ ------------
Increase in net assets from operations $ 18,702,523 $ 28,387,454
------------ ------------
Distributions declared to shareholders -
From net investment income $ (1,007,248) $ --
From net realized gain on investments and foreign
currency transactions (1,209,006) --
------------ ------------
Total distributions declared to shareholders $ (2,216,254) $ --
------------ ------------
Net increase in net assets from Series share
transactions $104,468,963 $157,877,743
------------ ------------
Total increase in net assets $120,955,232 $186,265,197
Net assets:
At beginning of period 244,310,267 58,045,070
------------ ------------
At end of period (including accumulated undistributed
net investment income of $817,409 and $1,005,549,
respectively) $365,265,499 $244,310,267
============ ============
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 $20.11 $16.44 $12.98 $10.61 $10.00
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.06 $ 0.13 $ 0.16 $ 0.18 $ 0.05
Net realized and unrealized gain on
investments and foreign currency 1.12 3.54 3.70 2.42 0.61
------ ------ ------ ------ ------
Total from investment operations $ 1.18 $ 3.67 $ 3.86 $ 2.60 $ 0.66
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.07) $ -- $(0.07) $(0.09) $(0.05)
From net realized gain on
investments and foreign currency
transactions (0.08) -- (0.29) (0.13) --
In excess of net realized gain on
investments and foreign currency -- -- (0.04) (0.01) --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.15) $ -- $(0.40) $(0.23) $(0.05)
------ ------ ------ ------ ------
Net asset value - end of period $21.14 $20.11 $16.44 $12.98 $10.61
====== ====== ====== ====== ======
Total return 5.84%++ 22.32% 29.78% 24.46% 6.64%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.88%+ 0.95% 1.00% 1.01% 1.00%+
Net investment income 0.55%+ 0.73% 0.93% 1.52% 2.20%+
Portfolio turnover 27% 57% 42% 41% 2%
Net assets at end of period (000
omitted) $365,265 $244,310 $58,045 $9,174 $365
(S) Prior to October 2, 1998, subject to reimbursement by the Series, the investment adviser voluntarily
agreed to maintain the expenses of the Series, exclusive of management fees, at not more than 0.25% of
average daily net assets. To the extent actual expenses were over/under this limitation, the net
investment income (loss) per share and ratios would have been:
Net investment income (loss) -- $ 0.14 $ 0.13 $ 0.05 $(0.41)
Ratios (to average net assets):
Expenses## -- 0.88% 1.10% 2.07% 21.44%+
Net investment income (loss) -- 0.80% 0.82% 0.46% (18.24)%+
* For the period from the commencement of the Series' investment operations, October 9, 1995, through
December 31, 1995.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Series has an expense offset arrangement which reduces the Series' custodian fee based upon the amount
of cash maintained by the Series with its custodian. The Series' expenses are calculated without reduction
for this expense offset arrangement.
See notes to financial statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Growth with Income 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
Growth with Income Series, MFS(R) High Income Series, MFS(R) Limited Maturity
Series, MFS(R) Money Market Series, MFS(R) New Discovery Series, MFS(R) Research
Series, MFS(R) Total Return Series, and MFS(R) Utilities Series. The Series 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 52 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.
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 $24,448,175. These loans
were collateralized by cash of $24,967,671. 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.
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.
Forward Foreign Currency Exchange Contracts - The Series may enter into
forward foreign currency exchange contracts for the purchase or sale of a
specific foreign currency at a fixed price on a future date. Risks may arise
upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar. The
Series may enter into forward contracts for hedging purposes as well as for
non-hedging purposes. For hedging purposes, the Series may enter into
contracts to deliver or receive foreign currency it will receive from or
require for its normal investment activities. The Series may also use
contracts in a manner intended to protect foreign currency-denominated
securities from declines in value due to unfavorable exchange rate movements.
For non-hedging purposes, the Series may enter into contracts with the intent
of changing the relative exposure of the Series' portfolio of securities to
different currencies to take advantage of anticipated changes. The forward
foreign currency exchange contracts are adjusted by the daily exchange rate of
the underlying currency and any gains or losses are recorded as unrealized
until the contract settlement date. On contract settlement date, the gains or
losses are recorded as realized gains or losses on foreign currency
transactions.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All discount
is accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend and interest payments received in additional
securities are recorded on the ex-dividend or ex-interest date in an amount
equal to the value of the security on such date.
Fees Paid Indirectly - The Series' custody fee is calculated as a percentage
of the Series' month end net assets. The fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the Series. This amount is shown as a reduction of expenses on the Statement
of Operations.
Tax Matters and Distributions - The Series' policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The Series
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits are reported in the financial statements as distributions from paid-in
capital. Differences in the recognition or classification of income between
the financial statements and tax earnings and profits, which result in
temporary over-distributions for financial statement purposes, are classified
as distributions in excess of net investment income or net realized gains.
(3) Transactions with Affiliates
Investment Adviser - The Series has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.75%
of the Series' average daily net assets.
Each Series pays no compensation directly to its Trustees who are officers of
the investment adviser, or to officers of the Series, all of whom receive
remuneration for their services to the Series from MFS. Certain officers and
Trustees of the Series are officers or directors of MFS and MFS Service
Center, Inc. (MFSC).
Administrator - The Series has an administrative services agreement with MFS
to provide the Series with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Series pays MFS an administrative
fee at the following annual percentages of the Series' average daily net
assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as
a percentage of the Series' average daily net assets at an effective annual
rate of 0.035%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
175,169,069 and $76,293,308, respectively.
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the Series, as computed on a federal income tax basis,
are as follows:
Aggregate cost $346,291,894
------------
Gross unrealized appreciation 47,861,383
Gross unrealized depreciation $ (5,262,659)
------------
Net unrealized appreciation $ 42,598,724
============
(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 6,876,460 $139,834,170 10,781,895 $197,503,394
Shares issued to shareholders
in reinvestment of distributions 106,154 2,216,254 -- --
Shares reacquired (1,848,099) (37,581,461) (2,166,542) (39,625,651)
---------- ------------ ---------- ------------
Net increase 5,134,515 $104,468,963 8,615,353 $157,877,743
========== ============ ========== ============
</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 $1,202. The Series
had no significant borrowings during the period.
<PAGE>
(C)1999 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
VGI-3 8/99 56M
