<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT SEMIANNUAL REPORT
We invented the mutual fund(R) JUNE 30, 2000
[Graphic Omitted]
A SERIES OF MFS(R) VARIABLE INSURANCE TRUST(SM)
MFS(R) LIMITED
MATURITY SERIES
<PAGE>
<TABLE>
MFS(R) LIMITED MATURITY SERIES
A SERIES OF MFS(R) VARIABLE INSURANCE TRUST(SM)
<S> <C>
TRUSTEES INVESTMENT ADVISER
Jeffrey L. Shames* - Chairman and Chief Executive Massachusetts Financial Services Company
Officer, MFS Investment Management(R) 500 Boylston Street
Boston, MA 02116-3741
Nelson J. Darling, Jr.+ - Private investor and
trustee DISTRIBUTOR
MFS Fund Distributors, Inc.
William R. Gutow+ - Private investor and real 500 Boylston Street
estate consultant; Vice Chairman, Capitol Boston, MA 02116-3741
Entertainment Management Company (video franchise)
INVESTOR SERVICE
CHAIRMAN AND PRESIDENT MFS Service Center, Inc.
Jeffrey L. Shames* P.O. Box 2281
Boston, MA 02107-9906
PORTFOLIO MANAGER
James J. Calmas* For additional information,
contact your investment professional.
TREASURER
James O. Yost* CUSTODIAN
State Street Bank and Trust Company
ASSISTANT TREASURERS
Mark E. Bradley* WORLD WIDE WEB
Ellen Moynihan* www.mfs.com
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
* MFS Investment Management
+ Independent Trustee
</TABLE>
--------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
--------------------------------------------------------------------------------
<PAGE>
LETTER FROM THE CHAIRMAN
Dear Shareholders,
I'm sure you've noticed that whenever financial markets suffer a large
decline, as they did this past spring, there's a flurry of information on "how
to deal with market volatility" -- both in the popular press and from those of
us in the investment business. Our own thinking on this is that, first, for
long-term investors volatility is not necessarily something to be feared;
occasional volatility may in fact be healthy for the markets.
Second, our experience has been that when markets begin to fall, it's often
too late to act. The best response may be to do nothing -- if you're properly
prepared with a long-term plan, created with the help of your investment
professional. To help you create or update that plan and take market
volatility in stride, here are some points you may want to consider the next
time you talk with your investment professional.
1. VOLATILITY CAN BE A GOOD THING
We would argue that the markets today are much healthier than they were before
the period of volatility this past spring, in the sense that stock prices have
returned to more reasonable levels and we have a stronger base for future
growth. Perhaps the worst of the market's wrath descended on companies with very
high stock prices, relative to their earnings, or with business concepts that
looked great in the euphoria of a booming market but in the end appeared to have
no fundamental backing. It has always been our view that one of the best
protections against market volatility is to invest in stocks and bonds of
fundamentally good companies selling at reasonable prices. When discussing
potential investments with your investment professional, you may want to ask how
they fared in previous periods of volatility, as well as in the good times.
2. INVEST FOR THE LONG TERM
You've heard that before, but we think it's still probably the most important
concept in investing. Time is one of an investor's greatest allies. Over
nearly all long-term periods -- 5, 10, 20 years, and more -- stock and bond
returns, as represented by most common indices, have been positive and have
considerably outpaced inflation. Investing is the best way we know of to make
your money work for you while you're doing something else.
Where investors can get into trouble is by confusing investing with trading.
In our view, traders who buy securities with the intention of selling them at
a profit in a matter of hours, days, or weeks are gambling. We believe this
seldom turns out to be a good strategy for increasing your wealth.
3. INVEST REGULARLY
Waiting for the "right time" to invest is almost always a poor strategy,
because only in retrospect do we know when that right time really was. Periods
of volatility are probably the worst times to make an investment decision.
Faced with turmoil in the markets, many investors have opted to simply stay on
the sidelines.
On the other hand, we think one of the best techniques for investing is
through automatic monthly or quarterly deductions from a checking or savings
account. This approach has at least three major benefits. First, you can
formulate a long-term plan -- how much to invest, how often, and into which
portfolios -- in a calm, rational manner, working with your investment
professional. Second, with this approach you invest regularly without
agonizing over the decision each time you buy shares. And, third, if you
invest equal amounts of money at regular intervals, you'll be taking advantage
of a strategy called dollar-cost averaging: by investing a fixed amount while
the share cost fluctuates, you end up with an average share cost to you that
is lower than the average share price over your investment period.(1) If all
this sounds familiar, it's probably because you're already taking advantage of
dollar-cost averaging by investing regularly for retirement through a 401(k)
or similar account at work.
4. DIVERSIFY
One of the dangers of not having an investment plan is that you may be tempted
to simply chase performance, by moving money into whatever asset class appears
to be outperforming at the moment -- small, mid, or large cap; growth or value;
United States or international; stocks or bonds. The problem with this approach
is that by the time a particular area is generally recognized as "hot," you may
have already missed some of the best performance.
International investing offers a case in point. In the 1980s, international
investments, as represented by the Morgan Stanley Capital International (MSCI)
Europe, Australia, Far East (EAFE) Index, outperformed U.S. investments, as
represented by the Standard & Poor's 500 Composite Index (S&P 500), in 7 out
of 10 years.(2) For the decade, the MSCI EAFE's average annual performance was
23%, compared to 18% for the S&P 500. Going into the 1990s, then, an investor
looking only at recent performance might have favored international
investments over U.S. investments.
But the 1990s turned out to be virtually a mirror image of the '80s. Domestic
investments outperformed international investments in 7 out of 10 years, with
the S&P 500 returning an average of 18% annually for the decade and the MSCI
EAFE returning a 7% annual average. Looking ahead, however, we are optimistic
about international markets because we feel that many of the same forces that
propelled the current U.S. economic boom -- deregulation, restructuring, and
increased adoption of technology -- have taken root overseas.
The lesson to be learned is that nobody really knows what asset class will be
the next to outperform or how long that performance will be sustained. We
would suggest that one way to potentially profit from swings in the market --
to potentially be invested in various asset classes before the market shifts
in their favor -- is with a diversified portfolio covering several asset
classes.
If you haven't already done so, we encourage you to discuss these thoughts
with your investment professional and factor them into your long-range
financial planning. Hopefully, the next time the markets appear to be going
wild, you'll feel confident enough in your plan to view periods of volatility
as a time of potential opportunity -- or perhaps just a time to sit back and
do nothing.
As always, 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 17, 2000
(1) The use of a systematic investing program does not guarantee a profit or
protect against a loss in declining markets. You should consider your
financial ability to continue to invest through periods of low prices.
(2) Source: Lipper Inc. Decade performance: '80s -- 12/31/79-12/31/89,
'90s -- 12/31/89-12/31/99. The MSCI EAFE Index is an unmanaged,
market-capitalization-weighted total return index that measures the
performance of the same developed-country global stock markets included in
the MSCI World Index but excludes the United States, Canada, and the South
African mining component. The S&P 500 is a popular, unmanaged index of
common stock total return performance. It is not possible to invest directly
in an index. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
Investments in variable products will fluctuate and may be worth more or less
upon redemption. Please see your investment professional for more information.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
Dear Shareholders,
For the six months ended June 30, 2000, the series provided a total return of
2.34%, including the reinvestment of any distributions. This compares to a
2.95% return for the series' benchmark, the Lehman Brothers One- to Three-Year
Government/Corporate Bond Index (the Lehman Index), a total return index
consisting of all U.S. government-agency, Treasury, and investment-grade
corporate debt securities with maturities of one to three years.
Rising interest rates and persistent inflation worries put pressure on nearly
all bonds, with the exception of long-term U.S. Treasury securities. The
Federal Reserve Board (the Fed) continued to raise short-term interest rates
over the past six months in an effort to curb economic growth and stave off
inflationary pressures. As interest rates moved higher, bond yields rose and
bond prices fell.
In contrast to most other types of bonds, long-term Treasury bonds rallied
during the past year as their supply diminished and demand grew. Swelling
federal budget surpluses prompted the U.S. Treasury to limit the size and
frequency of its auctions of new debt and to buy back nearly $30 billion of
Treasury bonds outstanding in the first four months of 2000. The anticipated
scarcity of long-term Treasury bonds caused them to rally even as short-term
interest rates kept climbing and most other fixed-income investments lost
ground. The series' underweighting in Treasury securities versus the Lehman
Index caused the series to trail its benchmark over the past six months.
In addition to rising interest rates, a number of technical challenges plagued
corporate bonds. Increased stock market volatility and the inversion of the
yield curve caused the difference in yield (the spread) between Treasuries and
corporate securities to remain wide during the past six months, keeping
corporate bond prices low. Despite the recent disappointing performance of
corporate bonds, however, we maintained our holdings in them because we
believe that strong economic conditions will continue to support strong
corporate business fundamentals. In our view, good news on the fundamental
front eventually will overwhelm the negative market backdrop stemming from
reduced Treasury supply, higher interest rates, and periodic concerns about
corporate earnings.
During the period, we favored bonds issued by telecommunications and cable
companies. The promise of the Internet, the explosion in demand for cellular
and data transmission, and the ongoing convergence of telecommunications and
cable companies have helped boost their prospects. Some of our largest
holdings in these areas include Sprint Spectrum and Comcast.
Asset-backed securities held up much better than corporate bonds over the past
year. Asset-backed securities are credit card receivables, home equity loans,
and auto loans. Approximately 17% of the portfolio's assets are invested in
these bonds. The reasons why we own them were the same factors that helped
their recent performance: their high "AAA"-rated quality and attractive
yields. In addition, personal income growth helped push delinquencies and
bankruptcies lower and supply of asset-backed securities diminished in the
first quarter of 2000.
Throughout much of the period, we kept the series' duration, which is an
indicator of interest-rate sensitivity, in line with the Lehman Index. We take
a neutral positioning when we don't have a strong conviction about the
direction of interest rates.
While we don't foresee major credit-related problems for most of the corporate
bond market, we do believe that there will be a gradual rise in default rates
over the next year or so and that the market will continue to severely
penalize those that stumble. That's why we have increased the series' stake in
higher-grade bonds, those rated "A" to "AAA." That said, occasionally we have
found attractively priced opportunities among lower-rated, investment-grade
bonds ("BBB"-rated) that carried enough yield, in our view, to compensate for
their added credit risk.
With the U.S. economy posting continued strong economic growth and many other
areas of the world enjoying an economic rebound, we believe that the Fed may
continue to raise interest rates as it battles potential inflationary
pressures. The positive effects of a reduced Treasury supply already appear to
be priced into Treasuries. Given that assumption, we believe that corporate,
asset-backed, and mortgage-backed securities will begin to close the yield gap
with Treasuries and outpace them in the process. (Principal value and interest
on Treasury securities are guaranteed by the U.S. government if held to
maturity.) Furthermore, their yield advantage over Treasuries may help cushion
corporate and asset-backed securities against rising rates. Even if rates
remain stable at present levels, the higher yields offered by corporate and
asset-backed securities may help them outperform Treasuries.
Respectfully,
/s/ James J. Calmas
James J. Calmas
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on the
cover. The manager's views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
It is not possible to invest directly in an index.
The portfolio is actively managed, and current holdings may be different.
PORTFOLIO MANAGER'S PROFILE
James J. Calmas is Vice President of MFS Investment Management(R) and
portfolio manager of MFS(R) Limited Maturity Fund, and MFS(R) Limited Maturity
Series (part of MFS(R) Variable Insurance Trust(SM)).
Mr. Calmas joined MFS in 1988 and was named Assistant Vice President in 1991,
Vice President in 1993, and portfolio manager in 1998. He is a graduate of
Dartmouth College and holds an M.B.A. degree from the Amos Tuck School of
Business Administration of Dartmouth College.
All portfolio managers at MFS Investment Management(R) are supported by an
investment staff of over 100 professionals utilizing MFS Original Research(R),
a global, company-oriented, bottom-up process of selecting securities.
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus. A prospectus containing more information,
including all charges and expenses, for any MFS product is available from your
investment professional, or by calling MFS at 1-800-225-2606. Please read it
carefully before investing or sending money.
<PAGE>
SERIES FACTS
Objective: Seeks primarily to provide as high a level of current income as is
believed to be consistent with prudent investment risk, and secondarily seeks
to protect shareholders' capital.
Commencement of investment operations: August 14, 1996
Size: $1.5 million net assets as of June 30, 2000
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. Investment results reflect the percentage change in
net asset value, including the reinvestment of dividends. (See Notes to
Performance Summary.)
TOTAL RATES OF RETURN THROUGH JUNE 30, 2000
6 Months 1 Year 3 Years Life*
-------------------------------------------------------------------------------
Cumulative Total Return +2.34% +3.74% +14.07% +20.08%
-------------------------------------------------------------------------------
Average Annual Total Return -- +3.74% + 4.49% + 4.83%
-------------------------------------------------------------------------------
* For the period from the commencement of the series' investment operations,
August 14, 1996, through June 30, 2000.
NOTES TO PERFORMANCE SUMMARY
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. All
results are historical and assume the reinvestment of dividends and capital
gains. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MORE RECENT
RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. PAST PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS.
Returns shown do not reflect the deduction of the mortality and expense risk
charges and administration fees. Please refer to the variable 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, 2000
<CAPTION>
Bonds - 83.7%
-------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Bonds - 78.9%
Aerospace and Defense - 1.1%
Raytheon Co., 5.7s, 2003 $ 17 $ 15,917
-------------------------------------------------------------------------------------------------------
Banks and Credit Companies - 1.5%
Great Western Financial Corp., 6.375s, 2000 $ 22 $ 22,000
-------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 0.6%
Hasbro, Inc., 7.95s, 2003 $ 10 $ 9,895
-------------------------------------------------------------------------------------------------------
Corporate Asset Backed - 16.7%
Americredit Automobile Receivable Trust, 5.78s, 2003 $ 35 $ 34,561
BankBoston Home Equity Loan Trust, 5.89s, 2013 17 16,713
Case Equipment Receivables Trust, 5.285s, 2002 9 8,807
Commonwealth Edison Transition Funding Trust, 5.29s, 2003 14 13,365
DLJ Mortgage Acceptance Corp., 8.1s, 2004 25 25,455
First Chicago Master Trust II, 6.931s, 2003 25 25,047
Ford Credit Auto Owner Trust, 5.31s, 2001 0 188
Ford Credit Auto Owner Trust, 6.2s, 2002 25 25,160
Green Tree Financial Corp., 6.04s, 2029 5 5,094
Green Tree Financial Corp., 6.39s, 2029 7 6,721
Morgan Stanley Capital I, Inc., 6.01s, 2030 18 17,002
Premier Auto Trust, 5.88s, 2001 14 14,426
Student Loan Trust, 6.314s, 2004 10 9,490
Student Loan Trust, 6.514s, 2009 30 29,651
Time Warner Pass-Through Asset Trust, 6.1s, 2001## 19 18,637
----------
$ 250,317
-------------------------------------------------------------------------------------------------------
Financial Institutions - 1.1%
KFW International Finance, Inc., 9.4s, 2004 $ 15 $ 16,204
-------------------------------------------------------------------------------------------------------
Financial Services - 1.0%
National Rural Utilities Cooperative Finance, 7.375s, 2003 $ 15 $ 15,053
-------------------------------------------------------------------------------------------------------
Food and Beverage Products - 3.7%
Coca-Cola Bottling, 8.56s, 2002 $ 29 $ 29,571
Whitman Corp., 6s, 2004 28 25,960
----------
$ 55,531
-------------------------------------------------------------------------------------------------------
Railroads - 1.5%
Union Pacific Corp., 5.78s, 2001 $ 3 $ 2,931
Union Pacific Corp., 6.34s, 2003 21 20,135
----------
$ 23,066
-------------------------------------------------------------------------------------------------------
Supermarkets - 1.3%
Safeway, Inc., 5.875s, 2001 $ 20 $ 19,591
-------------------------------------------------------------------------------------------------------
Telecommunications - 8.2%
Comcast Corp., 9.125s, 2006 $ 28 $ 29,313
Sprint Spectrum LP, 11s, 2006 34 37,201
Telecomunica De Puerto Rico, 6.15s, 2002 30 29,067
United Telecommunications Co., 9.5s, 2003 26 27,069
----------
$ 122,650
-------------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 35.9%
U.S. Treasury Notes, 6.5s, 2002 $ 275 $ 275,171
U.S. Treasury Notes, 5.875s, 2004 190 187,239
U.S. Treasury Notes, 6.75s, 2005 75 76,746
----------
$ 539,156
-------------------------------------------------------------------------------------------------------
Utilities - Electric - 4.9%
California Infrastructure, 6.17s, 2003 $ 21 $ 20,418
CMS Panhandle Holding Co., 6.125s, 2004 18 16,919
Entergy Mississippi, Inc., 6.2s, 2004 30 28,453
Narragansett Electric Co., 7.83s, 2002 7 7,092
----------
$ 72,882
-------------------------------------------------------------------------------------------------------
Utilities - Gas - 1.4%
Columbia Gas Systems, Inc., 6.39s, 2000 $ 21 $ 20,890
-------------------------------------------------------------------------------------------------------
Total U.S. Bonds $1,183,152
-------------------------------------------------------------------------------------------------------
Foreign Bonds - 4.8%
Australia - 0.9%
Westpac Banking, 9.125s, 2001 (Banks and Credit Cos.) $ 13 $ 13,234
-------------------------------------------------------------------------------------------------------
Canada - 1.6%
MetroNet Communications Corp., 12s, 2007 (Telecommunications) $ 22 $ 24,832
-------------------------------------------------------------------------------------------------------
Germany - 2.3%
Bayerische Landesbank Girozent, 5.625s, 2001 (Banks
and Credit Cos.) $ 35 $ 34,680
-------------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 72,746
-------------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $1,267,259) $1,255,898
-------------------------------------------------------------------------------------------------------
Short-Term Obligations - 15.1%
-------------------------------------------------------------------------------------------------------
Federal Home Loan Bank, due 7/03/00, at Amortized Cost $ 227 $ 226,917
-------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,494,176) $1,482,815
Other Assets, Less Liabilities - 1.2% 18,160
-------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $1,500,975
-------------------------------------------------------------------------------------------------------
## SEC Rule 144A restriction.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
-------------------------------------------------------------------------------
JUNE 30, 2000
-------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $1,494,176) $1,482,815
Cash 9,457
Receivable for series shares sold 7
Interest receivable 18,825
Deferred organization expenses 2,085
----------
Total assets $1,513,189
----------
Liabilities:
Payable for series shares reacquired $ 10,163
Payable to affiliates -
Management fee 23
Reimbursement fee 19
Accrued expenses and other liabilities 2,009
----------
Total liabilities $ 12,214
----------
Net assets $1,500,975
==========
Net assets consist of:
Paid-in capital $1,529,436
Unrealized depreciation on investments (11,361)
Accumulated net realized loss on investments (69,164)
Accumulated undistributed net investment income 52,064
----------
Total $1,500,975
==========
Shares of beneficial interest outstanding 149,477
=======
Net asset value per share:
(net assets / shares of beneficial interest outstanding) $10.04
======
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations (Unaudited)
-------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2000
-------------------------------------------------------------------------------
Net investment income:
Interest income $ 61,234
--------
Expenses -
Management fee $ 5,044
Trustees' compensation 1,090
Shareholder servicing agent fee 322
Administrative fee 147
Custodian fee 3,227
Printing 3,524
Auditing fees 8,700
Legal fees 426
Amortization of organization expenses 913
Miscellaneous 442
--------
Total expenses $ 23,835
Fees paid indirectly (176)
Reduction of expenses by investment adviser (14,489)
--------
Net expenses $ 9,170
--------
Net investment income $ 52,064
--------
Realized and unrealized gain (loss) on investments:
Realized loss (identified cost basis) on investment
transactions $(35,134)
Change in unrealized appreciation on investments 27,674
--------
Net realized and unrealized loss on investments $ (7,460)
--------
Increase in net assets from operations $ 44,604
========
See notes to financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
<CAPTION>
Statement of Changes in Net Assets
------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
(UNAUDITED)
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 52,064 $ 124,786
Net realized loss on investments (35,134) (34,021)
Net unrealized gain (loss) on investments 27,674 (35,781)
---------- ----------
Increase in net assets from operations $ 44,604 $ 54,984
---------- ----------
Distributions declared to shareholders -
From net investment income $ -- $ (124,786)
Paid-in capital -- (268)
---------- ----------
Total distributions declared to shareholders $ -- $ (125,054)
---------- ----------
Net increase in net assets from series share transactions $ (778,186) $ 478,345
---------- ----------
Total increase (decrease) in net assets $ (733,582) $ 408,275
Net assets:
At beginning of period 2,234,557 1,826,282
---------- ----------
At end of period (including accumulated undistributed
net investment income of $52,064 and $0,
respectively) $1,500,975 $2,234,557
========== ==========
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
<CAPTION>
Financial Highlights
----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
SIX MONTHS ENDED -------------------------------------------- DECEMBER 31,
JUNE 30, 2000 1999 1998 1997 1996*
(UNAUDITED)
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.81 $10.16 $10.01 $10.01 $10.00
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.28 $ 0.54 $ 0.55 $ 0.62 $ 0.25
Net realized and unrealized gain (loss)
on investments (0.05) (0.31) (0.01) (0.01) 0.01
------ ------ ------ ------ ------
Total from investment operations $ 0.23 $ 0.23 $ 0.54 $ 0.61 $ 0.26
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $(0.58) $(0.38) $(0.60) $(0.25)
From net realized gain on investments -- -- (0.01) (0.01) --
In excess of net investment income -- -- (0.00)+++ -- --
From paid-in capital -- (0.00)+++ -- -- --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $ -- $(0.58) $(0.39) $(0.61) $(0.25)
------ ------ ------ ------ ------
Net asset value - end of period $10.04 $ 9.81 $10.16 $10.01 $10.01
====== ====== ====== ====== ======
Total return 2.34%++ 2.26% 5.42% 6.08% 2.61%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.02%+ 1.00% 1.03% 1.02% 1.03%+
Net investment income 5.69%+ 5.16% 5.34% 6.13% 6.61%+
Portfolio turnover 59% 103% 94% 167% 109%
Net assets at end of period (000 omitted) $1,501 $2,235 $1,826 $701 $523
(S) Subject to reimbursement by the series, the investment adviser voluntarily agreed under a temporary expense reimbursement
agreement to pay all of the series' operating expenses, exclusive of management fees. In consideration, the series pays
the investment adviser a reimbursement fee not greater than 0.45% of average daily net assets. To the extent actual
expenses were over this limitation, the net investment income per share and the ratios would have been:
Net investment income $ 0.20 $ 0.39 $ 0.38 $ 0.10 $ 0.01
Ratios (to average net assets):
Expenses## 2.60%+ 2.48% 2.64% 6.20% 7.55%+
Net investment income 4.11%+ 3.68% 3.73% 0.95% 0.09%+
* For the period from the commencement of the series' investment operations, August 14, 1996, through December 31, 1996.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Limited Maturity Series (the series) is a diversified series of MFS
Variable Insurance Trust (the trust). The trust is organized as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940 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, 2000, there were 6 shareholders in the series.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Investment Valuations - Debt securities (other than short-term obligations
which mature in 60 days or less), including listed issues 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 in good faith, at fair value, by the Trustees.
Deferred Organization Expenses - Costs incurred by the series in connection
with its organization have been deferred and are being amortized on a
straight-line basis over a five-year period beginning on the date of
commencement of series operations.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All discount
is accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Interest payments received in additional
securities are recorded on the ex-interest date in an amount equal to the
value of the security on such date.
Fees Paid Indirectly - The series' custody 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 net 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 those only distributions in excess of tax basis earnings
and profits are reported in the financial statements as distributions from
paid-in capital. Differences in the recognition or classification of income
between the financial statements and tax earnings and profits, which result in
temporary over-distributions for financial statement purposes, are classified
as distributions in excess of net investment income or net realized gains.
(3) Transactions with Affiliates
Investment Adviser - The series has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.55%
of the series' average daily net assets.
The series has a temporary expense reimbursement agreement whereby MFS has
voluntarily agreed to pay all the series' operating expenses, exclusive of
management fees. The series in turn will pay MFS an expense reimbursement fee
not greater than 0.45% of average daily net assets. To the extent that the
expense reimbursement fee exceeds the series' actual expenses, the excess will
be applied to amounts paid by MFS in prior years. At June 30, 2000, the
aggregate expenses owed to MFS by the series amounted to $112,156.
The series pays no compensation directly to its Trustees who are officers of
the investment adviser, or to officers of the Trust, all of whom receive
remuneration for their services to the series from MFS. Certain officers and
Trustees of the 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 incurs an administrative fee
at the following annual percentages of the series' average daily net assets:
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 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 annual rate of
0.035%.
(4) Portfolio Securities
Purchases and sales of investments, other than short-term obligations, were as
follows:
PURCHASES SALES
-----------------------------------------------------------------------------
U.S. government securities $750,139 $ 686,892
-------- ----------
Investments (non-U.S. government securities) $250,820 $1,158,242
-------- ----------
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 $1,494,176
----------
Gross unrealized depreciation $ (15,091)
Gross unrealized appreciation 3,730
----------
Net unrealized depreciation $ (11,361)
==========
(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, 2000 YEAR ENDED DECEMBER 31, 1999
------------------------------ -----------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 24,934 $ 245,880 180,166 $ 1,844,305
Shares issued to shareholders in
reinvestment of distributions -- -- 12,742 124,999
Shares reacquired (103,354) (1,024,066) (144,715) (1,490,959)
-------- ----------- ------- -----------
Net decrease (78,420) $ (778,186) 48,193 $ 478,345
======== =========== ======= ===========
</TABLE>
(6) Line of Credit
The series and other affiliated funds participate in a $1.1 billion unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. 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, 2000, was $5. The series had no borrowings during
the period.
<PAGE>
(c)2000 MFS Investment Management(R).
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
VLM-3 8/00 275
