<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) EMERGING
GROWTH SERIES
<PAGE>
<TABLE>
MFS(R) EMERGING GROWTH 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 MANAGERS
John W. Ballen* For additional information,
Toni Y. Shimura* contact your investment professional.
TREASURER CUSTODIAN
James O. Yost* State Street Bank and Trust Company
ASSISTANT TREASURERS WORLD WIDE WEB
Mark E. Bradley* www.mfs.com
Ellen Moynihan*
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' Initial Class and Service
Class shares each provided total returns of -2.29%, including the reinvestment
of any distributions. This compares to returns of -0.42% and 3.04%,
respectively, over the same period for the series' benchmarks, the Standard &
Poor's 500 Composite Index (the S&P 500) and the Russell 2000 Total Return Index
(the Russell 2000). The S&P 500 is a popular, unmanaged index of common stock
total return performance. The Russell 2000 is an unmanaged index comprised of
2,000 of the smallest U.S.-domiciled company common stocks that are traded on
the New York Stock Exchange, the American Stock Exchange, and NASDAQ.
Late in the first quarter, there was a global correction in the high-growth
segments of the market in which we invest. Fueled by investor concerns over
further Federal Reserve Board (Fed) interest rate increases, this correction
in the valuations of technology, media, telecommunications, and biotechnology
stocks continued into the first two months of the second quarter.
In early June, we began to see some signs that the Fed's six interest rate
increases since last summer may have begun to slow the economy. Some key
economic indicators, including a modest rise in unemployment, a slowing in
housing starts, and lower-than-expected wage gains, gave us hope that there
will be fewer or no increases going forward. We have also seen more attractive
valuations in the high-growth areas of the market, and we believe we may have
seen the lows in the NASDAQ Composite Index (an unmanaged, market-weighted
index of all over-the-counter common stocks traded on the National Association
of Securities Dealers Automated Quotation System) following the correction
earlier this year. While we anticipate further market volatility as investors
adjust to the latest news on the economy and interest rates, we believe we may
be entering a more favorable investment environment.
In light of the rising interest rate environment we had earlier this year, we
reduced our positions in some of our highest-valuation stocks that we felt had
limited upside potential, and selectively added more defensive holdings such
as generic drug and pharmaceutical companies, as well as food and drug
retailers. However, we still expect to find our best investment ideas in
technology, telecommunications, and health care. Particularly in an
environment where interest rates stabilize or drop, these high-growth segments
of the market could continue to deliver superior revenue and earnings growth.
We continue to focus on technology as our core sector because we believe these
companies offer the most attractive growth characteristics that we can
identify across a range of industries. Although we have shifted our technology
weightings from time to time, we believe we are well positioned to take
advantage of what we expect to be much narrower leadership than we've seen in
the past. We expect to see certain core, high-quality technology companies
emerge as leaders in their respective markets, and we hope to own those
companies that are first to market with new products and services.
Among our technology holdings are several companies that enable e-commerce,
both business to business and business to consumer. We believe the most
successful will be those with the scale to meet the demands of corporations
eagerly buying the latest business technologies in order to stay competitive.
Our technology holdings also include select Internet infrastructure and
software companies such as VeriSign and Check Point, in addition to
semiconductor companies such as Micron Technology and Intel.
With respect to telecommunications, we have reduced our holdings in telecom
service providers because changes taking place in the industry -- most
notably, the cost of doing business, particularly in terms of licensing and
capital spending -- are expected to go higher and make these companies less
profitable. Our largest telecom holdings currently are in equipment companies
such as Nortel Networks, Corning, CIENA, and ADC Telecom. Despite some good
investment opportunities, we probably won't see significant upside earnings
surprises among the handset delivery companies.
In health care, we have targeted quality names like the emerging
pharmaceutical company Sepracor and companies like PE Biosystems that make
equipment used in genetics research. Among the thousands of health care
companies available, we're focusing on the biotechnology and emerging
pharmaceutical companies that we believe have the best intellectual property
and product pipelines, both of which should help them better meet shareholder
expectations. Finally, we're somewhat cautious on retail because rising
interest rates tend to dampen consumer confidence and slow the pace of
consumer spending.
We are in a volatile period where we need to see how much further interest
rates must rise in order to cool off the economy. We remain optimistic on the
long-term outlook for growth stocks, and believe the market leadership will
continue to be in technology, telecommunications, and health care. Within
these sectors, we are working to build positions in companies that we think
can become leaders in their industries and deliver growth over long periods of
time, thus creating value for shareholders.
Respectfully,
/s/ John W. Ballen /s/ Toni Y. Shimura
John W. Ballen Toni Y. Shimura
Portfolio Manager Portfolio Manager
The opinions expressed in this report are those of the portfolio managers and
are current only through the end of the period of the report as stated on the
cover. The managers' 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.
<PAGE>
PORTFOLIO MANAGERS' PROFILES
John W. Ballen is President, Chief Investment Officer, and a member of the
Management Committee and Board of Directors of MFS Investment Management(R).
He is a portfolio manager of MFS(R) Emerging Growth Fund, MFS(R) Emerging
Growth Series (part of MFS(R) Variable Insurance Trust(SM)), the Emerging
Growth Series offered through MFS(R)/Sun Life annuity products, MFS(R) Global
Growth Fund, and the Global Growth Series offered through MFS(R)/Sun Life
annuity products. In addition, Mr. Ballen oversees the portfolio management of
MFS(R) Institutional Mid Cap Growth Fund and MFS(R) Institutional Emerging
Equities Fund. He joined the MFS Research Department in 1984 as a research
analyst. He was named Investment Officer and portfolio manager in 1986, Vice
President in 1987, Director of Research in 1988, Senior Vice President in
1990, Director of Equity Portfolio Management in 1993, Chief Equity Officer in
1995, Executive Vice President in 1997, and President, Chief Investment
Officer, and a member of the Board in 1998. Mr. Ballen is a graduate of
Harvard College and earned a Master of Commerce degree from the University of
New South Wales in Australia and an M.B.A. degree from Stanford University.
Toni Y. Shimura is Senior Vice President of MFS Investment Management(R) and
portfolio manager of MFS(R) Managed Sectors Fund and the Managed Sectors
Series offered through MFS(R)/Sun Life annuity products. She is also a
portfolio manager of MFS(R) Global Growth Fund, MFS(R) Emerging Growth Series
(part of MFS(R) Variable Insurance Trust(SM)), and the Global Growth Series
and the Emerging Growth Series, both offered through MFS(R)/Sun Life annuity
products. Ms. Shimura joined MFS in 1987 as a research analyst. She was named
Investment Officer in 1990, Assistant Vice President in 1991, Vice President
in 1992, portfolio manager in 1993, and Senior Vice President in 1999. Ms.
Shimura is a graduate of Wellesley College and the Sloan School of Management
of the Massachusetts Institute of Technology.
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 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 long-term growth of capital.
Commencement of investment operations: July 24, 1995
Class inception: Initial Class July 24, 1995
Service Class May 1, 2000
Size: $2.6 billion 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.)
<TABLE>
TOTAL RATES OF RETURN THROUGH JUNE 30, 2000
INITIAL CLASS
<CAPTION>
6 Months 1 Year 3 Years Life*
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return -2.29% +53.05% +154.85% +287.97%
--------------------------------------------------------------------------------------------------------------------
Average Annual Total Return -- +53.05% + 36.59% + 31.60%
--------------------------------------------------------------------------------------------------------------------
<CAPTION>
SERVICE CLASS
6 Months 1 Year 3 Years Life*
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return -2.29% +53.05% +154.85% +287.97%
--------------------------------------------------------------------------------------------------------------------
Average Annual Total Return -- +53.05% + 36.59% + 31.60%
--------------------------------------------------------------------------------------------------------------------
* For the period from the commencement of the series' investment operations, July 24, 1995, through June 30, 2000.
</TABLE>
NOTES TO PERFORMANCE SUMMARY
Initial Class and Service Class shares have no sales charge; however, Service
Class shares carry a 0.20% annual Rule 12b-1 fee. Service Class share
performance includes the performance of the series' Initial Class shares for
periods prior to the inception of Service Class shares (blended performance).
These blended performance figures have not been adjusted to take into account
differences in the class-specific operating expenses (such as Rule 12b-1
fees). Because operating expenses of Service Class shares are higher than
those of Initial Class shares, the blended Service Class share performance is
higher than it would have been had Service Class shares been offered for the
entire period.
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.
Investing in small or emerging growth companies involves greater risk than is
customarily associated with more-established companies. These risks may
increase share price volatility. See the prospectus for details.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) - June 30, 2000
<CAPTION>
Stocks - 95.7%
-------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 85.1%
Banks and Credit Companies - 0.4%
Comerica, Inc. 21,900 $ 982,763
First Tennessee National Corp. 1,600 26,500
PNC Bank Corp. 92,600 4,340,625
Providian Financial Corp. 45,300 4,077,000
--------------
$ 9,426,888
-------------------------------------------------------------------------------------------------------
Biotechnology - 1.4%
Abbott Laboratories, Inc. 286,100 $ 12,749,331
Abgenix, Inc.* 12,700 1,522,214
Alkermes, Inc.* 5,000 235,625
Genentech, Inc.* 84,700 14,568,400
Pharmacia Corp. 49,600 2,563,700
Waters Corp.* 27,100 3,382,419
--------------
$ 35,021,689
-------------------------------------------------------------------------------------------------------
Business Machines - 1.6%
Seagate Technology, Inc.* 60,300 $ 3,316,500
Sun Microsystems, Inc.* 386,400 35,138,250
Texas Instruments, Inc. 28,700 1,971,331
--------------
$ 40,426,081
-------------------------------------------------------------------------------------------------------
Business Services - 2.5%
Amgen, Inc.* 255,400 $ 17,941,850
Automatic Data Processing, Inc. 315,200 16,882,900
Bea Systems, Inc.* 12,400 613,025
Computer Sciences Corp.* 180,100 13,451,219
First Data Corp. 168,900 8,381,663
Fiserv, Inc.* 29,900 1,293,175
IMRglobal Corp.* 13,300 173,731
Insight Enterprises, Inc.* 1,550 91,934
Learning Tree International, Inc.* 92,600 5,671,750
Pegasus Systems, Inc.* 2,250 24,469
--------------
$ 64,525,716
-------------------------------------------------------------------------------------------------------
Cellular Telephones - 2.3%
Motorola, Inc. 33,150 $ 963,422
Sprint Corp. (PCS Group)* 469,900 27,959,050
Voicestream Wireless Corp.* 257,490 29,945,282
--------------
$ 58,867,754
-------------------------------------------------------------------------------------------------------
Computer Hardware - Systems - 0.5%
Compaq Computer Corp. 129,200 $ 3,302,675
Dell Computer Corp.* 174,100 8,585,306
--------------
$ 11,887,981
-------------------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 3.8%
Mercury Interactive Corp.* 45,300 $ 4,382,775
Microsoft Corp.* 1,159,400 92,752,000
--------------
$ 97,134,775
-------------------------------------------------------------------------------------------------------
Computer Software - Services - 1.8%
EMC Corp.* 592,100 $ 45,554,694
Internet Commerce Corp.* 5,800 84,100
Lightspan, Inc.* 3,440 18,920
--------------
$ 45,657,714
-------------------------------------------------------------------------------------------------------
Computer Software - Systems - 15.1%
Ariba, Inc.* 15,000 $ 1,470,703
BMC Software, Inc.* 502,480 18,332,669
Brocade Communications Systems, Inc.* 35,100 6,440,302
Cadence Design Systems, Inc.* 130,200 2,652,825
Computer Associates International, Inc. 232,600 11,906,212
Comverse Technology, Inc.* 72,600 6,751,800
E.piphany, Inc.* 16,200 1,736,437
Foundry Networks, Inc.* 15,500 1,705,000
I2 Technologies, Inc.* 33,900 3,534,605
Oracle Corp.* 3,345,150 281,201,672
Redback Networks, Inc.* 17,400 3,097,200
Siebel Systems, Inc.* 93,600 15,309,450
StorageNetworks, Inc.* 4,260 384,465
Sycamore Networks, Inc.* 121,300 13,388,487
VERITAS Software Corp.* 190,000 21,472,969
--------------
$ 389,384,796
-------------------------------------------------------------------------------------------------------
Conglomerates - 3.2%
Tyco International Ltd. 1,756,958 $ 83,235,885
-------------------------------------------------------------------------------------------------------
Consumer Goods and Services
Philip Morris Cos., Inc. 32,100 $ 852,656
Carson, Inc.,"A"* 65,300 293,850
--------------
$ 1,146,506
-------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.6%
Capstone Turbine Corp.* 2,770 $ 124,823
Emerson Electric Co. 22,100 1,334,288
General Electric Co. 255,800 13,557,400
Jabil Circuit, Inc.* 31,500 1,563,187
Micrel, Inc.* 4,600 199,813
--------------
$ 16,779,511
-------------------------------------------------------------------------------------------------------
Electronics - 17.0%
Altera Corp.* 653,100 $ 66,575,381
Analog Devices, Inc.* 492,200 37,407,200
Applied Materials, Inc.* 93,900 8,509,687
Atmel Corp.* 143,300 5,284,188
ATMI, Inc.* 2,200 102,300
Burr-Brown Corp.* 2,850 247,059
Conductus, Inc.* 8,400 165,900
Credence Systems Corp.* 4,600 253,863
Flextronics International Ltd.* 208,600 14,328,212
Intel Corp. 569,400 76,121,662
Lam Research Corp.* 186,700 7,001,250
Linear Technology Corp. 232,500 14,865,469
LSI Logic Corp.* 313,700 16,979,012
LTX Corp.* 5,900 206,131
Marvell Technology Group Ltd.* 2,300 131,100
Maxim Integrated Products, Inc.* 2,200 149,463
Microchip Technology, Inc.* 2,100 122,358
Micron Technology, Inc.* 968,800 85,314,950
National Semiconductor Corp.* 277,800 15,765,150
Novellus Systems, Inc.* 26,700 1,510,219
Photronics, Inc.* 2,300 65,263
PMC-Sierra, Inc.* 39,100 6,947,581
Quanta Services, Inc.* 3,600 198,000
Sanmina Corp.* 135,040 11,545,920
SDL, Inc.* 8,600 2,452,613
SIPEX Corp.* 13,400 371,013
Solectron Corp.* 177,300 7,424,437
Teradyne, Inc.* 144,400 10,613,400
Xilinx, Inc.* 548,500 45,285,531
--------------
$ 435,944,312
-------------------------------------------------------------------------------------------------------
Energy - 0.4%
Devon Energy Corp. 60,300 $ 3,388,106
Dynegy, Inc. 102,600 7,008,863
--------------
$ 10,396,969
-------------------------------------------------------------------------------------------------------
Entertainment - 1.0%
Clear Channel Communications, Inc.* 88,500 $ 6,637,500
International Speedway Corp. 3,079 127,394
USA Networks, Inc.* 220,200 4,761,825
Viacom, Inc., "B"* 215,600 14,701,225
--------------
$ 26,227,944
-------------------------------------------------------------------------------------------------------
Financial Institutions - 1.8%
American Express Co. 82,800 $ 4,315,950
Charter One Financial, Inc. 52,400 1,205,200
Citigroup, Inc. 256,300 15,442,075
Golden West Financial Corp. 108,600 4,432,237
Household International, Inc. 90,800 3,773,875
Merrill Lynch & Co., Inc. 134,700 15,490,500
State Street Corp. 13,200 1,400,025
Waddell & Reed Financial, Inc., "A" 3,000 98,438
--------------
$ 46,158,300
-------------------------------------------------------------------------------------------------------
Financial Services - 0.4%
AXA Financial, Inc. 141,600 $ 4,814,400
Mellon Financial Corp. 117,100 4,266,831
--------------
$ 9,081,231
-------------------------------------------------------------------------------------------------------
Food and Beverage Products - 0.4%
Anheuser-Busch Cos., Inc. 63,500 $ 4,742,656
Coca-Cola Co. 94,200 5,410,613
--------------
$ 10,153,269
-------------------------------------------------------------------------------------------------------
Insurance - 0.5%
American International Group, Inc. 75,600 $ 8,883,000
Hartford Financial Services Group, Inc. 68,400 3,826,125
--------------
$ 12,709,125
-------------------------------------------------------------------------------------------------------
Internet - 2.2%
Art Technology Group, Inc.* 7,000 $ 706,563
Juniper Networks, Inc.* 87,200 12,693,050
VeriSign, Inc.* 245,387 43,310,805
--------------
$ 56,710,418
-------------------------------------------------------------------------------------------------------
Medical and Health Products - 2.0%
Allergan, Inc. 49,900 $ 3,717,550
Alza Corp.* 23,600 1,395,350
American Home Products Corp. 49,100 2,884,625
Bausch & Lomb, Inc. 61,800 4,781,775
Bristol-Myers Squibb Co. 120,100 6,995,825
Immunex Corp.* 147,400 7,287,087
Pfizer, Inc. 526,475 25,270,800
--------------
$ 52,333,012
-------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 1.5%
Allscripts, Inc.* 3,650 $ 83,950
BioSource International, Inc.* 26,700 594,075
BioSphere Medical, Inc.* 9,800 137,200
Cardinal Health, Inc. 86,100 6,371,400
Human Genome Sciences, Inc.* 3,800 506,825
MedImmune, Inc. 52,600 3,892,400
Merrill Lynch HOLDRs Trust* 55,400 9,861,200
PE Corp-PE Biosystems Group 245,000 16,139,375
Quest Diagnostics, Inc.* 18,500 1,382,875
--------------
$ 38,969,300
-------------------------------------------------------------------------------------------------------
Office Equipment
United Stationers, Inc.* 3,400 $ 110,075
-------------------------------------------------------------------------------------------------------
Oil Services - 1.0%
Baker Hughes, Inc. 298,600 $ 9,555,200
Global Marine, Inc.* 144,000 4,059,000
Halliburton Co. 83,600 3,944,875
Noble Affiliates, Inc. 27,800 1,035,550
Noble Drilling Corp.* 137,600 5,667,400
Weatherford International, Inc.* 51,000 2,030,438
--------------
$ 26,292,463
-------------------------------------------------------------------------------------------------------
Oils - 1.8%
Anadarko Petroleum Corp. 131,200 $ 6,469,800
Apache Corp. 77,400 4,552,087
Coastal Corp. 194,700 11,852,362
EOG Resources, Inc. 547,200 18,331,200
Grant Pride Co., Inc.* 51,000 1,275,000
Transocean Sedco Forex, Inc. 61,800 3,302,438
--------------
$ 45,782,887
-------------------------------------------------------------------------------------------------------
Pharmaceuticals - 1.5%
Andrx Corp.* 11,000 $ 703,141
Sepracor, Inc.* 274,300 33,087,437
Teva Pharmaceutical Industries Ltd. 83,000 4,601,313
--------------
$ 38,391,891
-------------------------------------------------------------------------------------------------------
Restaurants and Lodging
Cendant Corp.* 68,679 $ 961,506
-------------------------------------------------------------------------------------------------------
Retail - 1.4%
CVS Corp. 176,000 $ 7,040,000
Kohl's Corp.* 23,600 1,312,750
RadioShack Corp.* 224,600 10,640,425
Wal-Mart Stores, Inc. 287,700 16,578,713
--------------
$ 35,571,888
-------------------------------------------------------------------------------------------------------
Special Products and Services
Newport News Shipbuilding, Inc. 500 $ 18,375
-------------------------------------------------------------------------------------------------------
Supermarkets - 1.5%
Albertsons, Inc. 150,700 $ 5,010,775
Kroger Co.* 123,000 2,713,687
Safeway, Inc.* 672,600 30,351,075
--------------
$ 38,075,537
-------------------------------------------------------------------------------------------------------
Telecommunications - 15.6%
ADC Telecommunications, Inc.* 253,804 $ 21,287,810
Amdocs Ltd.* 6,900 529,575
AT&T Corp., "A"* 412,400 10,000,700
Cabletron Systems, Inc.* 119,900 3,027,475
CIENA Corp.* 307,400 51,239,737
Cisco Systems, Inc.* 2,100,812 133,532,863
Corning, Inc. 246,200 66,443,225
Emulex Corp.* 20,600 1,353,162
Intermedia Communications, Inc.* 4,500 133,875
ITC Deltacom, Inc.* 3,500 78,094
JDS Uniphase Corp.* 143,042 17,147,160
Lucent Technologies, Inc. 22,100 1,309,425
Metromedia Fiber Network, Inc., "A"* 804,970 31,947,247
MGC Communications, Inc.* 39,200 2,349,550
MRV Communications, Inc.* 21,600 1,452,600
New Focus, Inc.* 1,710 140,434
NEXTEL Communications, Inc.* 102,000 6,241,125
Nextlink Communications, Inc., "A"* 14,000 531,125
ONI Systems Corp.* 3,560 417,243
Scientific-Atlanta, Inc. 3,500 260,750
Sprint Corp.* 182,500 9,307,500
Tellabs, Inc.* 288,300 19,730,531
WorldCom, Inc.* 490,531 22,503,110
--------------
$ 400,964,316
-------------------------------------------------------------------------------------------------------
Utilities - Electric - 1.6%
AES Corp.* 194,600 $ 8,878,625
Calpine Corp.* 508,600 33,440,450
--------------
$ 42,319,075
-------------------------------------------------------------------------------------------------------
Utilities - Gas - 0.3%
Enron Corp. 112,600 $ 7,262,700
-------------------------------------------------------------------------------------------------------
Total U.S. Stocks $2,187,929,889
-------------------------------------------------------------------------------------------------------
Foreign Stocks - 10.6%
Bermuda - 0.3%
Global Crossing Ltd. (Telecommunications)* 288,300 $ 7,585,894
-------------------------------------------------------------------------------------------------------
Canada - 3.8%
Call-Net Enterprises, Inc. (Telecommunications)* 5,000 $ 12,188
Nortel Networks Corp. (Telecommunications) 1,429,240 97,545,630
--------------
$ 97,557,818
-------------------------------------------------------------------------------------------------------
Finland - 1.8%
Nokia Corp., ADR (Telecommunications) 730,900 $ 36,499,319
Sonera Oyj (Telecommunications) 195,800 8,924,986
--------------
$ 45,424,305
-------------------------------------------------------------------------------------------------------
France - 1.0%
Alcatel Alsthom Compagnie, ADR (Telecommunications) 85,900 $ 5,712,350
Bouygues S.A. (Telecommunications) 31,198 20,847,131
--------------
$ 26,559,481
-------------------------------------------------------------------------------------------------------
Germany
Medigene AG (Pharmaceuticals)* 3,350 $ 217,458
SAP AG, ADR (Computer Software - Systems) 9,700 455,294
--------------
$ 672,752
-------------------------------------------------------------------------------------------------------
Hong Kong
China Telecom Ltd. (Telecommunications) 1,000 $ 8,820
-------------------------------------------------------------------------------------------------------
Israel - 0.8%
Check Point Software Technologies Ltd.
(Computer Software - Services)* 100,600 $ 21,302,050
-------------------------------------------------------------------------------------------------------
Sweden - 0.9%
Ericsson LM, ADR (Telecommunications) 1,211,100 $ 24,222,000
-------------------------------------------------------------------------------------------------------
United Kingdom - 2.0%
ARM Holdings PLC (Electronics)* 138,500 $ 1,483,226
ARM Holdings PLC, ADR (Electronics)* 769,200 25,287,450
Vodafone AirTouch PLC (Telecommunications)* 3,511,253 14,180,700
Vodafone AirTouch PLC, ADR (Telecommunications) 218,500 9,054,094
--------------
$ 50,005,470
-------------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 273,338,590
-------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $1,848,396,806) $2,461,268,479
-------------------------------------------------------------------------------------------------------
Short-Term Obligations - 4.6%
-------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
-------------------------------------------------------------------------------------------------------
American Express Credit Corp., due 7/03/00 $ 100,000 $ 99,961,778
Federal Home Loan Mortgage Corp., due 7/03/00 18,297 18,290,321
-------------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 118,252,099
-------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,966,648,905) $2,579,520,578
Other Assets, Less Liabilities - (0.3)% (8,524,354)
-------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $2,570,996,224
-------------------------------------------------------------------------------------------------------
* Non-income producing security.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
-------------------------------------------------------------------------------
JUNE 30, 2000
-------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $1,966,648,905) $2,579,520,578
Investments of cash collateral for securities loaned,
at identified cost and value 21,699,106
Cash 715,130
Receivable for series shares sold 5,452,840
Receivable for investments sold 50,238,827
Interest and dividends receivable 494,558
Deferred organization expenses 121
Other assets 6,736
--------------
Total assets $2,658,127,896
--------------
Liabilities:
Payable for series shares reacquired $ 1,506,578
Payable for investments purchased 63,620,432
Collateral for securities loaned, at value 21,699,106
Payable to affiliates -
Management fee 51,979
Shareholder servicing agent fee 2,426
Administrative fee 1,148
Accrued expenses and other liabilities 250,003
--------------
Total liabilities $ 87,131,672
--------------
Net assets $2,570,996,224
==============
Net assets consist of:
Paid-in capital $1,680,911,518
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 612,867,823
Accumulated net realized gain on investments and foreign
currency transactions 278,738,592
Accumulated net investment loss (1,521,709)
--------------
Total $2,570,996,224
==============
Shares of beneficial interest outstanding 73,340,864
==========
Initial Class shares:
Net asset value, offering price, and redemption price
per share (net assets of $2,570,238,070 / 73,319,232
shares of beneficial interest outstanding) $35.06
======
Service Class shares:
Net asset value, offering price, and redemption price
per share (net assets of $758,154 / 21,632 shares of
beneficial interest outstanding) $35.05
======
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations (Unaudited)
-------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2000
-------------------------------------------------------------------------------
Net investment income (loss):
Income -
Interest $ 6,917,791
Dividends 1,724,955
Foreign taxes withheld (117,703)
--------------
Total investment income $ 8,525,043
--------------
Expenses -
Management fee $ 8,968,014
Trustees' compensation 11,100
Shareholder servicing agent fee 418,508
Distribution fee (Service Class) 105
Administrative fee 179,190
Custodian fee 371,718
Printing 92,722
Auditing fee 18,850
Legal fees 906
Amortization of organization expenses 916
Miscellaneous 84,934
--------------
Total expenses $ 10,146,963
Fees paid indirectly (100,211)
--------------
Net expenses $ 10,046,752
--------------
Net investment loss $ (1,521,709)
--------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 284,806,766
Foreign currency transactions (302,467)
--------------
Net realized gain on investments and foreign currency
transactions $ 284,504,299
--------------
Change in unrealized appreciation (depreciation) -
Investments $ (350,274,012)
Translation of assets and liabilities in foreign currency (12,722)
--------------
Net unrealized loss on investments and foreign currency
translation $ (350,286,734)
--------------
Net realized and unrealized loss on investments and
foreign currency $ (65,782,435)
--------------
Decrease in net assets from operations $ (67,304,144)
==============
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 loss $ (1,521,709) $ (2,876,317)
Net realized gain on investments and foreign
currency transactions 284,504,299 175,149,671
Net unrealized gain (loss) on investments and
foreign currency translation (350,286,734) 712,931,920
-------------- --------------
Increase (decrease) in net assets from operations $ (67,304,144) $ 885,205,274
-------------- --------------
Distributions declared to shareholders from net
realized gain on investments and foreign currency
transactions (Initial Class) $ (131,948,496) $ --
-------------- --------------
Net increase in net assets from series share
transactions $ 637,720,760 $ 338,336,291
-------------- --------------
Total increase in net assets $ 438,468,120 $1,223,541,565
Net assets:
At beginning of period 2,132,528,104 908,986,539
-------------- --------------
At end of period (including accumulated net
investment loss of $1,521,709 and $0,
respectively) $2,570,996,224 $2,132,528,104
============== ==============
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 1995*
(UNAUDITED)
-----------------------------------------------------------------------------------------------------------------------------
INITIAL CLASS SHARES
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -
beginning of period $37.94 $21.47 $16.13 $13.24 $11.41 $10.00
------ ------ ------ ------ ------ ------
Income (loss) from investment operations# -
Net investment income (loss) $(0.02) $(0.06) $(0.05) $(0.06) $(0.01) $ 0.01
Net realized and unrealized
gain (loss) on investments
and foreign currency (0.85) 16.53 5.55 2.95 1.95 1.74
------ ------ ------ ------ ------ ------
Total from investment
operations $(0.87) $16.47 $ 5.50 $ 2.89 $ 1.94 $ 1.75
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ -- $ -- $ -- $ -- $(0.01)
From net realized gain on
investments and foreign
currency transactions (2.01) -- (0.05) -- (0.06) (0.26)
In excess of net realized gain
on investments and foreign
currency transactions -- -- (0.11) -- (0.05) --
From paid-in capital -- -- -- -- -- (0.07)
------ ------ ------ ------ ------ ------
Total distributions
declared to shareholders $(2.01) $ -- $(0.16) $ -- $(0.11) $(0.34)
------ ------ ------ ------ ------ ------
Net asset value - end of
period $35.06 $37.94 $21.47 $16.13 $13.24 $11.41
====== ====== ====== ====== ====== ======
Total return (2.29)%++ 76.71% 34.16% 21.90% 17.02% 17.41%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.85%+ 0.84% 0.85% 0.90% 1.00% 1.00%+
Net investment income
(loss) (0.13)%+ (0.23)% (0.29)% (0.38)% (0.08)% 0.10%+
Portfolio turnover 101% 176% 71% 112% 96% 73%
Net assets at end of period
(000 Omitted) $2,570,239 $2,132,528 $908,987 $384,480 $104,956 $3,869
(S) Prior to January 1, 1998, subject to reimbursement by the series, the investment adviser voluntarily agreed to maintain the
expenses of the series at not more than 1.00% of average daily net assets. To the extent actual expenses were over or under
this limitation, the net investment loss per share and the ratios would have been:
Net investment loss# $(0.05) $(0.03) $(0.18)
Ratios (to average net assets):
Expenses## 0.87% 1.16% 2.91%+
Net investment loss (0.35)% (0.23)% (1.78)%+
* For the period from the commencement of the series' investment operations, July 24, 1995, through December 31, 1995.
+ Annualized.
++ Not annualized.
# 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>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
-------------------------------------------------------------------------------
PERIOD ENDED
JUNE 30, 2000*
(UNAUDITED)
-------------------------------------------------------------------------------
SERVICE CLASS SHARES
-------------------------------------------------------------------------------
Per share data (for a share outstanding throughout the period):
Net asset value - beginning of period $35.70
------
Income (loss) from investment operations# -
Net investment loss $(0.02)
Net realized and unrealized loss on investments and foreign
currency (0.63)
------
Total from investment operations $(0.65)
------
Net asset value - end of period $35.05
======
Total return (1.82)%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.05%+
Net investment loss (0.42)%+
Portfolio turnover 101%
Net assets at end of period (000 Omitted) $758
* For the period from the inception of Service Class shares, May 1, 2000,
through June 30, 2000.
+ Annualized.
++ Not annualized.
# 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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Emerging Growth 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 amended, as an open-end management investment company. The
shareholders of the series are separate accounts of insurance companies which
offer variable annuity and/or life insurance products. As of June 30, 2000,
there were 124 shareholders of 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. The series
can invest in foreign securities. 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 in good faith, at
fair value, 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 - State Street Bank and Trust Company ("State Street") and
Chase Manhattan Bank ("Chase"), as lending agents, may loan the securities of
the series to certain qualified institutions (the "Borrowers") approved by the
series. The loans are collateralized at all times by cash and/or U.S. Treasury
securities in an amount at least equal to the market value of the securities
loaned. State Street and Chase provide the series with indemnification against
Borrower default.
Cash collateral is invested in short-term securities. 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 the lending agents. On loans
collateralized by U.S. Treasury securities, a fee is received from the
Borrower, and is allocated between the series and the lending agents. 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.
At June 30, 2000, the value of securities loaned was $70,879,659. These loans
were collateralized by U.S. Treasury securities of $50,233,799 and cash of
$21,699,106, which was invested in the following short-term obligations:
AMORTIZED COST
SHARES AND VALUE
-------------------------------------------------------------------------------
Bayerische- und Vereinsbank, 6.26%, due 7/20/00 $ 1,000,000 $ 999,813
Salomon Smith Barney, Inc., 7.13%, due 7/3/00 10,699,293 10,699,293
Salomon Smith Barney, Inc., 6.85%, due 7/3/00 10,000,000 10,000,000
----------- -----------
Total investments of cash collateral for
securities loaned $21,699,293 $21,699,106
=========== ===========
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 payments received in additional securities are
recorded on the ex-dividend 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 total 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 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.
Multiple Classes of Shares of Beneficial Interest - The series offers multiple
classes of shares that differ in their respective distribution and service
fees. All shareholders bear the common expenses of the series based on daily
net assets of each class, without distinction between share classes. Dividends
are declared separately for each class. Differences in per share dividend
rates are generally due to differences in separate class expenses.
(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.
The trust 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, MFS Fund
Distributors, Inc. (MFD), 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%
Distributor - The Trustees have adopted a distribution plan for the Service
Class shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as
follows:
The series' distribution plan provides that the series will pay MFD up to
0.25% per annum of its average daily net assets attributable to Service Class
shares in order that MFD may pay expenses on behalf of the series related to
the distribution of its shares. A portion of this distribution fee is
currently being paid by the series; payment of the remaining 0.05% per annum
of the Service Class distribution fee will become payable on such date as the
Trustees of the trust may determine. Fees incurred under the distribution plan
during the six months ended June 30, 2000, were 0.20% of average daily net
assets attributable to Service Class shares on an annualized basis.
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 purchased option transactions
and short-term obligations, were as follows:
PURCHASES SALES
-------------------------------------------------------------------------------
U.S. government securities $ 9,218,134 $ 8,359,927
-------------- --------------
Investments (non-U.S. government securities) $2,624,632,882 $2,180,628,133
-------------- --------------
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 $1,966,648,905
--------------
Gross unrealized appreciation $ 687,426,324
Gross unrealized depreciation (74,554,651)
--------------
Net unrealized appreciation $ 612,871,673
==============
(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>
Initial Class shares
<CAPTION>
SIX MONTHS ENDED JUNE 30, 2000 YEAR ENDED DECEMBER 31, 1999
-------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 19,715,743 $ 742,653,169 30,176,209 $ 743,064,297
Shares issued to shareholders
in reinvestment of
distributions 3,782,927 131,948,486 -- --
Shares reacquired (6,387,180) (237,618,437) (16,305,783) (404,728,006)
---------- -------------- ---------- --------------
Net increase 17,111,490 $ 636,983,218 13,870,426 $ 338,336,291
========== ============== ========== ==============
Service Class shares
<CAPTION>
PERIOD ENDED JUNE 30, 2000*
--------------------------------
SHARES AMOUNT
------------------------------------------------------------------
<S> <C> <C>
Shares sold 22,118 $ 753,813
Shares reacquired (486) (16,271)
---------- --------------
Net increase 21,632 $ 737,542
========== ==============
* For the period from the inception of Service Class shares, May 1, 2000, through June 30, 2000.
</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 $9,462. 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.
VEG-3 8/00 114M
