<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) GROWTH WITH
INCOME SERIES
<PAGE>
<TABLE>
MFS(R) GROWTH WITH INCOME SERIES
A SERIES OF MFS(R) VARIABLE INSURANCE TRUST(SM)
<S>
TRUSTEES <C>
Jeffrey L. Shames* - Chairman and Chief Executive INVESTMENT ADVISER
Officer, MFS Investment Management(R) Massachusetts Financial Services Company
500 Boylston Street
Nelson J. Darling, Jr.+ - Private investor and Boston, MA 02116-3741
trustee
DISTRIBUTOR
William R. Gutow+ - Private investor and real MFS Fund Distributors, Inc.
estate consultant; Vice Chairman, Capitol 500 Boylston Street
Entertainment Management Company (video franchise) Boston, MA 02116-3741
CHAIRMAN AND PRESIDENT
Jeffrey L. Shames* INVESTOR SERVICE
MFS Service Center, Inc.
PORTFOLIO MANAGER P.O. Box 2281
John D. Laupheimer, Jr.* Boston, MA 02107-9906
TREASURER For additional information,
James O. Yost* contact your investment professional.
ASSISTANT TREASURERS CUSTODIAN
Mark E. Bradley* State Street Bank and Trust Company
Ellen Moynihan*
WORLD WIDE WEB
SECRETARY www.mfs.com
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 0.52%, including the reinvestment of
any distributions. This compares to a -0.42% return for the series' benchmark,
the Standard & Poor's 500 Composite Index (the S&P 500), a popular, unmanaged
index of common stock total return performance.
During a difficult period for stocks the series managed to outperform the S&P
500, primarily because we kept a close eye on valuations in the portfolio. As a
result, we were underweighted in technology stocks relative to the S&P 500,
which has been a big advantage in this volatile environment. At the same time,
we're not simply value investors; we also try to seek out growth at the right
price. Our broad stock selection expresses this philosophy and proved to be a
significant contributor to performance. Our well-diversified portfolio includes
Hartford Financial Services, State Street Corp., Pharmacia, Pfizer, Safeway, and
BP Amoco, which are all great examples of stocks that we believe offer favorable
growth opportunities at reasonable valuations.
In the technology sector, we think there are a lot of opportunities and the
potential for large profits. Some of the fastest-growing and most innovative
companies in the world are the ones that create new technologies. However, we
recently decreased the portfolio's exposure to this sector because we could not
ignore their valuations. If stock prices get too far ahead, which we felt they
did in the first quarter of 2000, the stocks have to tread water until the
companies' growth rates can catch up. Very few industries can grow 30% per year
over the long term, but we had a period over the last year where many tech
stocks were up well over 100%, and we felt that was just too far too fast. With
that in mind, while the portfolio has remained underweighted in technology
versus the S&P 500, it is still the largest sector weighting in the portfolio
because we continue to see great opportunities for long-term growth.
Early in the year, we were buying pharmaceutical stocks when most investors
shunned that sector. There were several reasons why we were bullish on these
stocks. First, we believe many of the issues surrounding the industry's decline
in 1999 have subsided, including the threat of onerous government pricing
regulation and Medicare reform. Second, many drug stocks maintained strong
growth rates in 1999 and 2000 but were hurt last year by somewhat exaggerated
concerns about fading product pipelines. Today, we see plenty of new products in
the pipeline, and, with quicker FDA approval rates, there is always the
possibility that a new blockbuster drug could be right around the corner.
Finally, health care and pharmaceutical stocks historically have held up well in
a weakening economy. If the Federal Reserve Board's rate hikes succeed in
slowing the economy, we believe traditionally stable, steady growers such as
health care stocks could outperform the overall market.
Despite the market selloff in March and April, some investors feel the market is
still expensive. From our standpoint, however, no matter what direction the
market is headed, it usually provides opportunities to those investors who do
their homework. While there are pockets of the market that still appear pricey,
we see strong potential for the market to head higher given what we view as an
environment of healthy economic growth, reasonable interest rates, and a
favorable outlook for corporate earnings growth. We also have found that it's
very difficult to predict what the market will do in the short term. As a
result, we continue to focus on finding companies that we believe offer the best
fundamental business prospects and the potential for superior long-term
performance.
Respectfully,
/s/ John D. Laupheimer, Jr.
John D. Laupheimer, Jr.
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and are
current only through the end of the period of the report as stated on the cover.
The manager's views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
It is not possible to invest directly in an index.
The portfolio is actively managed, and current holdings may be different.
PORTFOLIO MANAGER'S PROFILE
John D. Laupheimer, Jr., is Senior Vice President and Director of Equity
Research of MFS Investment Management(R). He is also lead portfolio manager of
Massachusetts Investors Trust, America's oldest mutual fund. He also manages
MFS(R) Institutional Core Equity Fund, the Massachusetts Investors Trust Series
offered through MFS(R)/Sun Life annuity products, and MFS(R) Growth with Income
Series (part of MFS(R) Variable Insurance Trust(SM)).
Mr. Laupheimer joined the MFS Research Department in 1981 as a research analyst.
He was named Investment Officer in 1983, Assistant Vice President in 1984, Vice
President in 1986, portfolio manager in 1987, Senior Vice President in 1995, and
Director of Equity Research in 1999. Mr. Laupheimer is a graduate of Boston
University and the Sloan School of Management of Massachusetts Institute of
Technology. He is a Chartered Financial Analyst and a member of The Boston
Security Analysts Society, Inc.
All equity portfolio managers began their careers at MFS Investment
Management(R) as research analysts. Our portfolio managers are supported by an
investment staff of over 100 professionals utilizing MFS 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 reasonable current income and long-term growth of capital and
income.
Commencement of investment operations: October 9, 1995
Class inception: Initial Class October 9, 1995
Service Class May 1, 2000
Size: $438.2 million 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
INITIAL CLASS
6 Months 1 Year 3 Years Life*
------------------------------------------------------------------------------
Cumulative Total Return +0.52% +1.33% +44.35% +125.97%
------------------------------------------------------------------------------
Average Annual Total Return -- +1.33% +13.02% + 18.83%
------------------------------------------------------------------------------
SERVICE CLASS
6 Months 1 Year 3 Years Life*
------------------------------------------------------------------------------
Cumulative Total Return +0.52% +1.33% +44.35% +125.97%
------------------------------------------------------------------------------
Average Annual Total Return -- +1.33% +13.02% + 18.83%
------------------------------------------------------------------------------
*For the period from the commencement of the series' investment operations,
October 9, 1995, through June 30, 2000.
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.
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) - June 30, 2000
Stocks - 89.3%
------------------------------------------------------------------------------
ISSUER SHARES VALUE
------------------------------------------------------------------------------
U.S. Stocks - 79.5%
Aerospace - 3.1%
Boeing Co. 82,200 $ 3,436,988
General Dynamics Corp. 32,808 1,714,218
TRW, Inc. 23,800 1,032,325
United Technologies Corp. 126,710 7,460,051
------------
$ 13,643,582
------------------------------------------------------------------------------
Auto Parts - 0.2%
Delphi Automotive Systems Corp. 47,600 $ 693,175
------------------------------------------------------------------------------
Banks and Credit Companies - 1.7%
Capital One Financial Corp. 21,500 $ 959,437
Chase Manhattan Corp. 10,650 490,566
Providian Financial Corp. 8,200 738,000
U.S. Bancorp 122,964 2,367,057
Wells Fargo Co. 72,677 2,816,234
------------
$ 7,371,294
------------------------------------------------------------------------------
Biotechnology - 2.4%
Abbott Laboratories, Inc. 25,800 $ 1,149,713
PE Corp. - PE Biosystems Group 5,000 329,375
Pharmacia Corp. 178,213 9,211,384
------------
$ 10,690,472
------------------------------------------------------------------------------
Business Machines - 3.9%
Hewlett-Packard Co. 78,300 $ 9,777,712
International Business Machines Corp. 17,100 1,873,519
Sun Microsystems, Inc.* 60,102 5,465,526
------------
$ 17,116,757
------------------------------------------------------------------------------
Business Services - 2.8%
Automatic Data Processing, Inc. 91,500 $ 4,900,969
Computer Sciences Corp.* 37,600 2,808,250
DST Systems, Inc.* 7,285 554,571
First Data Corp. 83,500 4,143,687
------------
$ 12,407,477
------------------------------------------------------------------------------
Cellular Telephones - 1.6%
Motorola, Inc. 163,716 $ 4,757,996
Sprint Corp. (PCS Group)* 40,974 2,437,953
------------
$ 7,195,949
------------------------------------------------------------------------------
Chemicals - 1.0%
Air Products & Chemicals, Inc. 51,400 $ 1,583,762
Dow Chemical Co. 5,400 163,013
E.I. du Pont de Nemours & Co., Inc. 10,049 439,644
Rohm & Haas Co. 58,300 2,011,350
------------
$ 4,197,769
------------------------------------------------------------------------------
Computer Hardware - Systems - 1.1%
Compaq Computer Corp. 48,000 $ 1,227,000
Dell Computer Corp.* 72,200 3,560,363
------------
$ 4,787,363
------------------------------------------------------------------------------
Computer Software - Personal Computers - 2.4%
Microsoft Corp.* 133,004 $ 10,640,320
------------------------------------------------------------------------------
Computer Software - Systems - 2.4%
BMC Software, Inc.* 16,322 $ 595,498
Computer Associates International, Inc. 37,788 1,934,273
EMC Corp.* 32,400 2,492,775
Oracle Corp.* 46,282 3,890,581
Rational Software Corp.* 11,000 1,022,312
VERITAS Software Corp.* 6,700 757,205
------------
$ 10,692,644
------------------------------------------------------------------------------
Conglomerates - 1.0%
Tyco International Ltd. 87,554 $ 4,147,871
------------------------------------------------------------------------------
Consumer Goods and Services - 1.3%
Cintas Corp. 12,800 $ 469,600
Clorox Co. 14,162 634,635
Colgate-Palmolive Co. 48,364 2,895,794
Gillette Co. 14,004 489,265
Philip Morris Cos., Inc. 29,100 772,969
Procter & Gamble Co. 4,273 244,629
------------
$ 5,506,892
------------------------------------------------------------------------------
Electrical Equipment - 4.0%
Emerson Electric Co. 41,450 $ 2,502,544
General Electric Co. 283,173 15,008,169
------------
$ 17,510,713
------------------------------------------------------------------------------
Electronics - 4.6%
Agilent Technologies, Inc.* 5,161 $ 380,624
Analog Devices, Inc.* 6,200 471,200
Flextronics International Ltd.* 600 41,213
Intel Corp. 107,600 14,384,775
LSI Logic Corp.* 7,500 405,938
Micron Technology, Inc.* 12,600 1,109,587
National Semiconductor Corp.* 36,100 2,048,675
Solectron Corp.* 21,100 883,562
Texas Instruments, Inc. 7,400 508,287
------------
$ 20,233,861
------------------------------------------------------------------------------
Energy - 0.4%
TXU Corp. 53,317 $ 1,572,852
------------------------------------------------------------------------------
Entertainment - 1.7%
Infinity Broadcasting Corp., "A"* 31,300 $ 1,140,494
Time Warner, Inc. 62,530 4,752,280
Viacom, Inc., "B"* 25,100 1,711,506
------------
$ 7,604,280
------------------------------------------------------------------------------
Financial Institutions - 4.4%
American Express Co. 52,500 $ 2,736,562
Bank of New York Co., Inc. 14,900 692,850
Citigroup, Inc. 47,050 2,834,762
Federal Home Loan Mortgage Corp. 122,138 4,946,589
Federal National Mortgage Assn. 38,100 1,988,344
Merrill Lynch & Co., Inc. 2,700 310,500
State Street Corp. 53,882 5,714,860
------------
$ 19,224,467
------------------------------------------------------------------------------
Financial Services - 0.7%
AXA Financial, Inc. 87,200 $ 2,964,800
------------------------------------------------------------------------------
Food and Beverage Products - 2.3%
Anheuser-Busch Cos., Inc. 43,000 $ 3,211,563
Coca-Cola Co. 51,732 2,971,357
PepsiCo., Inc. 14,060 624,791
Quaker Oats Co. 43,300 3,252,912
------------
$ 10,060,623
------------------------------------------------------------------------------
Insurance - 3.3%
American International Group, Inc. 38,312 $ 4,501,660
CIGNA Corp. 18,688 1,747,328
Hartford Financial Services Group, Inc. 109,320 6,115,087
Lincoln National Corp. 12,394 447,733
Marsh & McLennan Cos., Inc. 10,100 1,054,819
St. Paul Cos., Inc. 22,000 750,750
------------
$ 14,617,377
------------------------------------------------------------------------------
Internet - 0.1%
America Online, Inc.* 7,900 $ 416,725
------------------------------------------------------------------------------
Machinery - 1.5%
Deere & Co., Inc. 115,700 $ 4,280,900
Ingersoll Rand Co. 39,900 1,605,975
W.W. Grainger, Inc. 22,900 705,606
------------
$ 6,592,481
------------------------------------------------------------------------------
Medical and Health Products - 6.6%
American Home Products Corp. 42,426 $ 2,492,527
Bausch & Lomb, Inc. 22,700 1,756,413
Bristol-Myers Squibb Co. 128,402 7,479,416
Johnson & Johnson Co. 5,723 583,031
Pfizer, Inc. 285,752 13,716,096
Schering Plough Corp. 29,300 1,479,650
UnitedHealth Group, Inc.* 14,435 1,237,801
------------
$ 28,744,934
------------------------------------------------------------------------------
Medical and Health Technology and Services - 0.9%
Fresenius National Medical Care, Inc.* 100 $ 3
Medtronic, Inc. 78,040 3,887,367
------------
$ 3,887,370
------------------------------------------------------------------------------
Oil Services - 0.7%
Baker Hughes, Inc. 77,500 $ 2,480,000
Global Marine, Inc.* 22,500 634,219
------------
$ 3,114,219
------------------------------------------------------------------------------
Oils - 4.6%
Chevron Corp. 14,390 $ 1,220,452
Coastal Corp. 76,300 4,644,762
Conoco, Inc. 136,700 3,357,694
Exxon Mobil Corp. 119,232 9,359,712
Transocean Sedco Forex, Inc. 29,700 1,587,094
------------
$ 20,169,714
------------------------------------------------------------------------------
Printing and Publishing - 1.9%
Gannett Co., Inc. 54,469 $ 3,257,927
New York Times Co. 76,300 3,013,850
Tribune Co. 63,502 2,222,570
------------
$ 8,494,347
------------------------------------------------------------------------------
Restaurants and Lodging - 0.2%
McDonald's Corp. 28,120 $ 926,203
------------------------------------------------------------------------------
Retail - 2.5%
CVS Corp. 123,476 $ 4,939,040
Wal-Mart Stores, Inc. 105,864 6,100,413
------------
$ 11,039,453
------------------------------------------------------------------------------
Supermarkets - 2.6%
Kroger Co.* 84,904 $ 1,873,194
Safeway, Inc.* 213,390 9,629,224
------------
$ 11,502,418
------------------------------------------------------------------------------
Telecommunications - 9.9%
Alltel Corp. 58,070 $ 3,596,711
Bell Atlantic Corp. 116,440 5,916,607
BroadWing, Inc. 41,800 1,084,188
Cabletron Systems, Inc.* 58,300 1,472,075
Cisco Systems, Inc.* 148,512 9,439,794
Comcast Corp., "A"* 4,000 162,000
Corning, Inc. 32,700 8,824,912
Qwest Communications International, Inc.* 12,600 626,063
SBC Communications, Inc. 81,069 3,506,234
Sprint Corp.* 47,628 2,429,028
Tellabs, Inc.* 37,900 2,593,781
WorldCom, Inc.* 80,541 3,694,818
------------
$ 43,346,211
------------------------------------------------------------------------------
Utilities - Electric - 0.8%
Peco Energy Co. 67,210 $ 2,709,403
Unicom Corp. 15,209 588,398
------------
$ 3,297,801
------------------------------------------------------------------------------
Utilities - Gas - 0.7%
Enron Corp. 15,100 $ 973,950
Williams Cos., Inc. 46,900 1,955,144
------------
$ 2,929,094
------------------------------------------------------------------------------
Utilities - Telephone - 0.2%
BellSouth Corp. 19,504 $ 831,358
------------------------------------------------------------------------------
Total U.S. Stocks 348,172,866
------------------------------------------------------------------------------
Foreign Stocks - 9.8%
Bermuda - 0.4%
Global Crossing Ltd. (Telecommunications)* 59,000 $ 1,552,437
------------------------------------------------------------------------------
Canada - 2.4%
Canadian National Railway Co. (Railroads) 29,316 $ 855,661
Nortel Networks Corp. (Telecommunications) 141,900 9,684,675
------------
$ 10,540,336
------------------------------------------------------------------------------
Finland - 0.4%
Nokia Corp., ADR (Telecommunications) 31,500 $ 1,573,031
------------------------------------------------------------------------------
Japan - 0.5%
Fast Retailing Co. (Retail) 3,000 $ 1,255,656
Nippon Telegraph & Telephone Co.
(Utilities - Telephone) 79 1,050,057
------------
$ 2,305,713
------------------------------------------------------------------------------
Netherlands - 1.8%
Akzo Nobel N.V. (Chemicals) 30,100 $ 1,278,639
ING Groep N.V. (Financial Services)* 14,200 959,717
KPN N.V. (Telecommunications)* 26,350 1,178,451
Royal Dutch Petroleum Co. (Oils) 73,800 4,586,262
------------
$ 8,003,069
------------------------------------------------------------------------------
Switzerland - 0.5%
Nestle S.A. (Food and Beverage Products) 1,213 $ 2,428,529
------------------------------------------------------------------------------
United Kingdom - 3.8%
AstraZeneca Group PLC
(Medical and Health Products) 32,600 $ 1,521,238
BP Amoco PLC, ADR (Oils) 196,584 11,119,282
HSBC Holdings PLC (Banks and Credit Cos.)* 71,400 815,938
Reuters Group PLC, ADR (Business Services) 13,790 1,378,138
Vodafone AirTouch PLC (Telecommunications)* 418,648 1,690,770
------------
$ 16,525,366
------------------------------------------------------------------------------
Total Foreign Stocks $ 42,928,481
------------------------------------------------------------------------------
Total Stocks (Identified Cost, $354,603,776) $391,101,347
------------------------------------------------------------------------------
Convertible Preferred Stock - 0.3%
------------------------------------------------------------------------------
Bermuda - 0.3%
Global Crossing Ltd., 6.75% (Telecommunications)
(Identified Cost, $1,700,000) 6,800 $ 1,490,900
------------------------------------------------------------------------------
Preferred Stock - 0.1%
------------------------------------------------------------------------------
Energy - 0.1%
TXU Corp.* (Identified Cost, $331,880) 8,200 $ 284,950
------------------------------------------------------------------------------
Convertible Bonds - 0.3%
------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
------------------------------------------------------------------------------
Financial Services - 0.1%
Bell Atlantic Financial Services, Inc.,
4.25s, 2005## $ 475 $ 577,368
------------------------------------------------------------------------------
Oils - 0.1%
Transocean Sedco Forex Inc., 0s, 2020 $
$ 440 265,364
------------------------------------------------------------------------------
Telecommunications - 0.1%
NTL, Inc., 5.75s, 2009## $ 744 $ 584,040
------------------------------------------------------------------------------
Total Convertible Bonds (Identified Cost, $1,530,405) $ 1,426,772
------------------------------------------------------------------------------
Short-Term Obligations - 9.9%
------------------------------------------------------------------------------
Federal Home Loan Bank, due 7/03/00 $ 4,373 $ 4,371,404
General Electric Capital Corp., due 7/03/00 5,000 4,998,070
Morgan Stanley Dean Witter, due 7/05/00 19,000 18,985,539
Salomon Smith Barney Holdings, Inc., due 7/03/00 15,000 14,994,333
------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 43,349,346
------------------------------------------------------------------------------
Total Investments (Identified Cost, $401,515,407) $437,653,315
Other Assets, Less Liabilities - 0.1% 565,869
------------------------------------------------------------------------------
Net Assets - 100.0% $438,219,184
------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
------------------------------------------------------------------------------
JUNE 30, 2000
------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $401,515,407) $437,653,315
Investments of cash collateral for securities loaned,
at value (identified cost, $6,601,576) 6,601,576
Cash 2,860
Foreign currency, at value (identified cost, $457) 458
Receivable for investments sold 2,554,060
Receivable for series shares sold 742,343
Dividends and interest receivable 363,662
Deferred organization expenses 505
Other assets 1,537
------------
Total assets $447,920,316
------------
Liabilities:
Payable for investments purchased $ 2,735,924
Payable for series shares reacquired 280,694
Collateral for securities loaned, at value 6,601,576
Payable to affiliates -
Management fee 8,948
Shareholder servicing agent fee 418
Distribution fee 2
Administrative fee 209
Accrued expenses and other liabilities 73,361
------------
Total liabilities $ 9,701,132
------------
Net assets $438,219,184
============
Net assets consist of:
Paid-in capital $393,443,217
Unrealized appreciation on investments and
translation of assets and liabilities in
foreign currencies 36,138,636
Accumulated undistributed net realized gain on
investments and foreign currency transactions 7,449,582
Accumulated undistributed net investment income 1,187,749
------------
Total $438,219,184
============
Shares of beneficial interest outstanding 20,716,562
==========
Initial Class of shares:
Net asset value per share
(net assets of $437,742,825 / 20,694,038 shares
of beneficial interest outstanding) $21.15
======
Service Class of shares:
Net asset value per share
(net assets of $476,359 / 22,524 shares of
beneficial interest outstanding) $21.15
======
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations (Unaudited)
------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2000
------------------------------------------------------------------------------
Net investment income (loss):
Income -
Dividends $ 2,147,501
Interest 754,123
Foreign taxes withheld (26,412)
------------
Total investment income $ 2,875,212
------------
Expenses -
Management fee $ 1,493,257
Trustees' compensation 4,500
Shareholder servicing agent fee 69,919
Distribution fee (Service Class) 63
Administrative fee 32,481
Custodian fee 76,989
Printing 20,590
Postage 19
Auditing fees 17,400
Legal fees 468
Amortization of organization expenses 916
Miscellaneous 3,681
------------
Total expenses $ 1,720,283
Fees paid indirectly (33,127)
------------
Net expenses $ 1,687,156
------------
Net investment income $ 1,188,056
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 8,298,691
Foreign currency transactions (28,159)
------------
Net realized gain on investments and foreign
currency transactions $ 8,270,532
------------
Change in unrealized appreciation (depreciation) -
Investments $ (6,872,466)
Translation of assets and liabilities in
foreign currencies 921
------------
Net unrealized loss on investments and foreign
currency translation $(6,871,545)
------------
Net realized and unrealized gain on investments
and foreign currency $ 1,398,987
------------
Increase in net assets from operations $ 2,587,043
============
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<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 $ 1,188,056 $ 1,874,666
Net realized gain on investments and foreign currency
transactions 8,270,532 9,483,705
Net unrealized gain (loss) on investments and foreign
currency translation (6,871,545) 11,147,548
------------ -------------
Increase in net assets from operations $ 2,587,043 $ 22,505,919
------------ -------------
Distributions declared to shareholders -
From net investment income (Initial Class) $ (1,847,140) $ (1,007,248)
From net realized gain on investments and foreign
currency transactions (Initial Class) (3,354,074) (1,209,007)
------------ -------------
Total distributions declared to shareholders $ (5,201,214) $ (2,216,255)
------------ -------------
Net increase in net assets from series share transactions $ 50,070,889 $ 126,162,535
------------ -------------
Total increase in net assets $ 47,456,718 $ 146,452,199
Net assets:
At beginning of period 390,762,466 244,310,267
------------ -------------
At end of period (including accumulated undistributed
net investment income of $1,187,749 and $1,846,833,
respectively) $438,219,184 $ 390,762,466
============ =============
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<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
-----------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C> <C>
Net asset value - beginning of
period $21.31 $20.11 $16.44 $12.98 $10.61 $10.00
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.06 $ 0.12 $ 0.13 $ 0.16 $ 0.18 $ 0.05
Net realized and unrealized
gain on investments and
foreign currency 0.05 1.22 3.54 3.70 2.42 0.61
------ ------ ------ ------ ------ ------
Total from investment operations $ 0.11 $ 1.34 $ 3.67 $ 3.86 $ 2.60 $ 0.66
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.10) $(0.06) $ -- $(0.07) $(0.09) $(0.05)
From net realized gain on
investments and foreign
currency transactions (0.17) (0.08) -- (0.29) (0.13) --
In excess of net realized
gain on investments and
foreign currency transactions -- -- -- (0.04) (0.01) --
------ ------ ------ ------ ------ ------
Total distributions declared
to shareholders $(0.27) $(0.14) $ -- $(0.40) $(0.23) $(0.05)
------ ------ ------ ------ ------ ------
Net asset value - end of period $21.15 $21.31 $20.11 $16.44 $12.98 $10.61
====== ====== ====== ====== ====== ======
Total return 0.52%++ 6.69% 22.32% 29.78% 24.46% 6.64%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.87%+ 0.88% 0.95% 1.00% 1.01% 1.00%+
Net investment income 0.54%+ 0.56% 0.73% 0.93% 1.52% 2.20%+
Portfolio turnover 42% 72% 57% 42% 41% 2%
Net assets at end of period
(000 Omitted) $437,743 $390,762 $244,310 $58,045 $9,174 $365
(S) Prior to October 2, 1998, 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 paid the investment adviser a fee not greater than 0.25% of average daily net assets. To the extent actual expenses
were over/under this limitation, the net investment income (loss) per share and ratios would have been:
Net investment income (loss) -- -- $ 0.14 $ 0.13 $ 0.05 $(0.41)
Ratios (to average net assets):
Expenses## -- -- 0.88% 1.10% 2.07% 21.44%+
Net investment income (loss) -- -- 0.80% 0.82% 0.46% (18.24)%+
* For the period from the commencement of the series' investment operations, October 9, 1995, through December 31, 1995.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from directed brokerage and certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
-----------------------------------------------------------------------------
PERIOD ENDED
JUNE 30, 2000*
(UNAUDITED)
-----------------------------------------------------------------------------
SERVICE CLASS SHARES
-----------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $20.90
------
Income from investment operations# -
Net investment income $ 0.02
Net realized and unrealized gain on investments and
foreign currency 0.23
------
Total from investment operations $ 0.25
------
Net asset value - end of period $21.15
======
Total return 0.52%++
Ratios (to average net assets)/
Supplemental data:
Expenses## 1.05%+
Net investment income 0.30%+
Portfolio turnover 42%
Net assets at end of period (000 Omitted) $476
* 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 directed brokerage and certain
expense offset arrangements.
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Growth with Income 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 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
83 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. 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. 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.
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"), as
lending agent, 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
provides the series with indemnification against Borrower default. The series
bears the risk of loss with respect to the investment of cash collateral.
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 agent. On loans
collateralized by U.S. Treasury securities, a fee is received from the Borrower,
and is allocated between the series and the lending agent. Income from
securities lending is included in interest income on the Statement of
Operations. The dividend and interest income earned on the securities loaned is
accounted for in the same manner as other dividend and interest income.
At June 30, 2000, the value of securities loaned was $6,532,668. These loans
were collateralized by U.S. Treasury securities of $102,495 and cash of
$6,601,576 which was invested in the following short-term obligations:
SHARES VALUE
------ -----
Navigator Securities Lending Prime Portfolio 6,601,576 $6,601,576
---------
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All discount is
accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend and interest payments received in additional
securities are recorded on the ex-dividend or ex-interest date in an amount
equal to the value of the security on such date.
Fees Paid Indirectly - The series' custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by the
series. During the period, the series' custodian fees were reduced by $15,258
under this arrangement. The series has entered into a directed brokerage
agreement, under which the broker will credit the series a portion of the
commissions generated, to offset certain expenses of the series. For the period,
the series' custodian fees were reduced by $17,869 under this agreement. These
amounts are 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 that only distributions in excess of tax basis earnings and
profits be 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 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.
Each series pays no compensation directly to its Trustees who are officers of
the investment adviser, or to officers of the series, all of whom receive
remuneration for their services to the series from MFS. Certain officers and
Trustees of the series are officers or directors of MFS and MFS Service Center,
Inc. (MFSC).
Administrator - The series has an administrative services agreement with MFS to
provide the series with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the series 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 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 $ 5,234,516 $ --
------------ ------------
Investments (non-U.S. government securities) $181,233,693 $158,401,620
------------ ------------
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 $401,515,407
------------
Gross unrealized appreciation $ 54,584,482
Gross unrealized depreciation (18,446,574)
------------
Net unrealized appreciation $ 36,137,908
============
(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>
Initial Class Shares
SIX MONTHS ENDED JUNE 30, 2000 YEAR ENDED DECEMBER 31, 1999
---------------------------------- ------------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 4,686,603 $ 97,726,372 12,094,104 $ 245,884,679
Shares issued to shareholders
in reinvestment of
distributions 246,387 5,201,237 106,154 2,216,255
Shares reacquired (2,574,968) (53,329,640) (6,010,291) (121,938,399)
---------- ------------- ---------- --------------
Net increase 2,358,022 $ 49,597,969 6,189,967 $ 126,162,535
========== ============= ========== ==============
<CAPTION>
Service Class Shares
PERIOD ENDED JUNE 30, 2000*
----------------------------------
SHARES AMOUNT
--------------- ----------------
<S> <C> <C>
Shares sold 22,531 $ 473,078
Shares reacquired (7) (158)
---------- -------------
Net increase 22,524 $ 472,920
========== =============
* 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 $1,421. 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
VGI-3 8/00 44M
