<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 MARKETS
EQUITY SERIES
(formerly MFS(R) Foreign & Colonial Emerging Markets
Equity Series)
<PAGE>
<TABLE>
MFS(R) EMERGING MARKETS EQUITY SERIES
A SERIES OF MFS(R) VARIABLE INSURANCE TRUST(SM)
<S> <C>
TRUSTEES INVESTMENT ADVISER
Jeffrey L. Shames* - Chairman and Chief Executive Officer, Massachusetts Financial Services Company
MFS Investment Management(R) 500 Boylston Street
Boston, MA 02116-3741
Nelson J. Darling, Jr.+ - Private investor and trustee
DISTRIBUTOR
William R. Gutow+ - Private investor and real estate consultant; MFS Fund Distributors, Inc.
Vice Chairman, Capitol Entertainment Management Company 500 Boylston Street
(video franchise) Boston, MA 02116-3741
CHAIRMAN AND PRESIDENT INVESTOR SERVICE
Jeffrey L. Shames* MFS Service Center, Inc.
P.O. Box 2281
DIRECTOR OF INTERNATIONAL Boston, MA 02107-9906
EQUITY RESEARCH
David A. Antonelli* For additional information,
contact your investment professional.
TREASURER
James O. Yost* CUSTODIAN
State Street Bank and Trust Company
ASSISTANT TREASURERS
Mark E. Bradley* WORLD WIDE WEB
Ellen Moynihan* www.mfs.com
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
* MFS Investment Management
+ Independent Trustee
-----------------------------------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
-----------------------------------------------------------------------------------------------------------
</TABLE>
<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 Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
July 17, 2000
(1) The use of a systematic investing program does not guarantee a profit or
protect against a loss in declining markets. You should consider your
financial ability to continue to invest through periods of low prices.
(2) Source: Lipper Inc. Decade performance: '80s -- 12/31/79-12/31/89,
'90s -- 12/31/89-12/31/99. The MSCI EAFE Index is an unmanaged,
market-capitalization-weighted total return index that measures the
performance of the same developed-country global stock markets included in
the MSCI World Index but excludes the United States, Canada, and the South
African mining component. The S&P 500 is a popular, unmanaged index of
common stock total return performance. It is not possible to invest directly
in an index. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
Investments in variable products will fluctuate and may be worth more or less
upon redemption. Please see your investment professional for more information.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
Dear Shareholders,
For the six months ended June 30, 2000, the series provided a total return of
-4.66%, including the reinvestment of any distributions. This compares to
returns of -7.99% and -9.59%, respectively, for the series' benchmarks, the
Morgan Stanley Capital International (MSCI) Emerging Markets Free (EMF) Index,
and the Lipper Emerging Markets Portfolios Index (the Lipper Index). The MSCI
EMF Index is a broad, unmanaged, market-capitalization-weighted index of
equities in emerging markets. The Lipper indices are unmanaged indices of the
largest qualifying portfolios within their respective investment objectives,
adjusted for the reinvestment of capital gain distributions and income
dividends.
During the first quarter of the period, the series benefited from an
impressive global economic recovery that spilled over into most emerging
markets. Our holdings in Southeast Asia and Latin America produced stellar
results. Year to date, however, we've seen a lot of correlation between the
performance of the U.S. market and emerging markets. As investors became
increasingly concerned about stock valuations and whether future earnings
could support those prices, we witnessed broad-based selling in emerging
markets. Technology and telecommunications stocks, two of the largest sector
weightings for the series, came under the most pressure. Unfortunately, some
of the more liquid markets, such as South Korea and Taiwan, where the
portfolio was overweighted relative to its benchmarks, were hardest hit.
Early in 2000, we began to reduce our overall positions in South Korea because
many of these stocks had reached our price targets and we believed they were
fairly valued following impressive results in 1999. In India, we added a
number of technology, telecommunications, and financial services stocks in an
effort to capitalize on what we saw as rapid growth at these companies. As
prices came down in Southeast Asian markets in the second quarter, we began to
increase our exposure to what we believe are high-quality companies selling at
reasonable valuations, especially in the telecommunications industry. We
believe to a large extent, many emerging market telecommunications companies -
through their wireless, Internet, and data transmission services - have
transformed themselves from slow-growth utilities into fast-growing, dynamic
companies. In addition to large, established telecommunications companies,
we've focused on new telecom entrants that possess innovative product lines
and dynamic business plans.
Our stock selection across a broad range of countries helped performance. A
particularly strong performer was Teva Pharmaceuticals, an Israeli
biotechnology and health care company whose stock price surged dramatically on
strong sales of its multiple sclerosis treatment Copaxone and recent approval
by the Food and Drug Administration of Nabumetone, its generic form of
arthritis treatment. Other strong contributors and significant holdings in the
series were Li & Fung Ltd. and Dimension Data. In Hong Kong, Li & Fung
benefited from surging sales and strong demand for apparel manufacturing
outsourcing due to the rebounding Southeast Asian economy. South African
computer services firm Dimension Data boosted series performance as the
company experienced strong demand for its information technology services as
well as favorable revenue and earnings growth.
Recently, we've increased the series' holdings in Taiwan because we've located
what we think are some compelling growth opportunities in this country. We
believe Taiwan is a very important emerging market that is slowly becoming
more open to investors as it enhances its stock market technology and improves
its financial reporting standards. We think these trends should help cash
flows into this market. More importantly, some of the most innovative and
competitive semiconductor companies in the world are located in Taiwan. In our
view, companies such as Taiwan Semiconductor are well positioned to benefit
from the global trend of increased spending on technology and the tremendous
growth potential of the Internet and telecommunications.
Ironically, some of the industries where we see the strongest prospects for
future earnings growth detracted from performance in recent months; namely,
technology and telecommunications. Primarily due to concerns about high
valuations, investors began to unload shares in these sectors. Along with many
technology and telecommunications companies, Korea Telecom, Telefonos de
Mexico, and Hyundai Electronics have experienced weakness in recent months. We
believe the fundamental business outlooks for these companies are still very
strong and their valuations have become more attractive.
In general, our outlook for emerging markets is positive. The prospects for
global economic growth are favorable, and we expect this growth to benefit a
wide range of our holdings. We also believe emerging market stock valuations
are very attractive, especially given the recent pullback. In addition, the
anticipated growth rates and earnings outlooks for emerging market equities
appear compelling compared to those of the United States and other developed
economies. From our standpoint, these markets provide some of the most
interesting growth opportunities in the world, and the positive trends we've
outlined could support investor interest in the region.
Respectfully,
/s/ David Antonelli
David A. Antonelli
Director of International Equity Research
The committee of MFS international equity research analysts is responsible for
the day-to-day management of the series under the general supervision of Mr.
Antonelli.
The opinions expressed in this report are those of the Director of
International Equity Research and are current only through the end of the
period of the report as stated on the cover. His 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.
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 capital appreciation.
Commencement of investment operations: October 16, 1997
Size: $1.3 million net assets as of June 30, 2000
PERFORMANCE SUMMARY
Because the series is designed for investors with long-term goals, we have
provided the cumulative as well as the average annual total returns for the
applicable time periods. Investment results reflect the percentage change in
net asset value, including the reinvestment of dividends. (See Notes to
Performance Summary.)
TOTAL RATES OF RETURN THROUGH JUNE 30, 2000
6 Months 1 Year Life*
-------------------------------------------------------------------------------
Cumulative Total Return -4.66% +7.65% -21.00%
-------------------------------------------------------------------------------
Average Annual Total Return -- +7.65% -8.35%
-------------------------------------------------------------------------------
* For the period from the commencement of the series' investment operations,
October 16, 1997, through June 30, 2000.
NOTES TO PERFORMANCE SUMMARY
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and
waivers may be rescinded at any time. See the prospectus for details. All
results are historical and assume the reinvestment of dividends and capital
gains. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MORE RECENT
RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. PAST PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS.
Returns shown do not reflect the deduction of the mortality and expense risk
charges and administration fees. Please refer to the variable product's annual
report for performance that reflects the deduction of the fees and charges
imposed by insurance company separate accounts.
Investments in foreign and emerging market securities may provide superior
returns but also involve greater risk than U.S. investments. Investments in
foreign and emerging market securities may be favorably or unfavorably
affected by changes in interest rates and currency exchange rates, market
conditions, and the economic and political conditions of the countries where
investments are made. These risks may increase share price volatility. See the
prospectus for details.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) - June 30, 2000
Stocks - 95.7%
<CAPTION>
-----------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
Argentina - 0.1%
IMPSAT Fiber Networks, Inc. (Telecommunications)* 106 $ 1,775
-----------------------------------------------------------------------------------------------------
Brazil - 12.2%
Banco Itau S.A. (Banks and Credit Cos.) 108,400 $ 9,529
Caemi Mineracao e Metalurgica S.A. (Minerals) 37,000 4,576
Cia Brasileira de Distribuicao Grupo Pao de Acucar, ADR
(Supermarkets) 309 9,927
Companhia Cervejaria Brahma, ADR (Beverages) 306 5,202
Embratel Participacoes S.A. (Telecommunications) 517 12,214
Petroleo Brasileiro S.A. (Oils) 318 9,607
Petroleo Brasileiro S.A., Preferred (Oils) 1,068 32,283
Tele Celular Sul Participacoes S.A. (Telecommunications) 10 453
Tele Centro Oeste Celular Participacoes S.A., ADR
(Telecommunications) 1,393 16,716
Tele Centro Sul Participacoes S.A. (Telecommunications) 498,600 5,061
Tele Centro Sul Participacoes S.A., ADR (Telecommunications) 76 5,553
Tele Centro Sul Participacoes S.A., Preferred (Telecommunications) 345,500 5,001
Tele Norte Celular Participacoes S.A., ADR (Cellular
Telecommunications) 232 11,774
Tele Sudeste Celular Participacoes S.A (Telecommunications) 201 9,364
Telecomunicacoes de Sao Paulo S.A. (Telecommunications) 93 2,576
Telemig Celular Participacoes (Cellular Telecommunications) 156 11,154
Telesp Participacoes S.A., Preferred (Telecommunications) 250 4,520
Uniao de Banco Brasiliero S.A. (Banks and Credit Cos.) 257 7,389
----------
$ 162,899
-----------------------------------------------------------------------------------------------------
China - 3.6%
China Telecom Hong Kong Ltd. (Telecommunications)* 121 $ 21,515
PetroChina Co. Ltd. (Oils) 126,000 26,186
----------
$ 47,701
-----------------------------------------------------------------------------------------------------
Croatia - 0.4%
Pliva d.d. Co. (Medical and Health Products)* 100 1,015
Pliva d.d. Co., GDR (Medical and Health Products) 414 $ 4,202
----------
$ 5,217
-----------------------------------------------------------------------------------------------------
Czechoslovakia - 0.6%
Cesky Telecom A.S. (Telecommunications)* 478 $ 7,959
-----------------------------------------------------------------------------------------------------
Egypt - 1.0%
Al Ahram Beverage Co. S.A., GDR (Beverages)* 321 $ 5,457
Egypt Mobile Phone (Telecommunications)* 230 7,502
----------
$ 12,959
-----------------------------------------------------------------------------------------------------
Estonia - 0.6%
AS Eesti Telekom GDR (Telephone Services) 385 $ 7,854
-----------------------------------------------------------------------------------------------------
Finland - 0.5%
Sonera Group PLC (Telecommunications) 150 $ 6,900
-----------------------------------------------------------------------------------------------------
Germany - 0.1%
Tricom S.A., ADR (Telecommunications)* 99 $ 1,516
-----------------------------------------------------------------------------------------------------
Greece - 1.3%
Hellenic Telecommunication Organization S.A., GDR
(Telecommunications) 450 $ 11,030
STET Hellas Telecommunications S.A., ADR
(Telecommunications)* 282 5,605
----------
$ 16,635
-----------------------------------------------------------------------------------------------------
Hong Kong - 3.9%
China Telecom Ltd. (Telecommunications) 2,000 $ 17,639
HSBC Holdings (Banks)* 1,200 13,740
Li & Fung Ltd. (Consumer Products) 4,000 20,013
----------
$ 51,392
-----------------------------------------------------------------------------------------------------
Hungary - 0.9%
Magyar Tavkozlesi Rt., ADR (Telecommunications) 358 $ 12,329
-----------------------------------------------------------------------------------------------------
India - 2.4%
Infosys Technologies Ltd., ADR (Computer Software - Services) 33 $ 5,849
Mahanagar Telephone Nigam Ltd., GDR (Telecommunications)## 546 5,460
Reliance Industries Ltd. (Conglomerate)## 433 8,985
Satyam Infoway Ltd. (Telecommunications)* 107 2,381
Videsh Sanchar Nigam Ltd., GDR (Telecommunications)## 637 9,714
----------
$ 32,389
-----------------------------------------------------------------------------------------------------
Israel - 3.3%
Partner Communications Co Ltd. (Telecommunications)* 1,159 $ 11,010
Teva Pharmaceuticals Industries Ltd. (Pharmaceuticals) 601 33,318
----------
$ 44,328
-----------------------------------------------------------------------------------------------------
Malaysia - 2.7%
Malaysian Pacific Industries Berhad (Electronics) 2,000 $ 20,527
Resorts World Berhad (Entertainment) 1,000 2,737
Sime Darby Berhad (Conglomerate) 2,000 2,569
Telekom Malaysia Berhad (Telecommunications) 1,000 3,447
Unisem (M) Berhad (Electronics) 1,000 7,105
----------
$ 36,385
-----------------------------------------------------------------------------------------------------
Mexico - 10.2%
Cifra S.A. de C.V. (Retail)* 2,509 $ 5,889
Fomento Economico Mexicano S.A. (Food and Beverage
Products) 105 4,522
Grupo Continential, S.A. (Food and Beverage Products) 2,395 2,434
Grupo Financiero Banorte S.A. de C.V. (Finance)* 3,321 4,590
Grupo Iusacell S. A. de C. V., ADR (Telecommunications)* 869 13,578
Grupo Mexico, S.A. (Metals)* 1,196 3,366
Grupo Modelo S.A. de C.V. (Brewery) 3,385 7,860
Grupo Television S.A. de C.V., GDR (Entertainment)* 204 14,063
Kimberly-Clark de Mexico S.A. de C.V. (Forest and Paper
Products) 3,982 11,330
Organiz Soriana S.A., "B" (Retail)* 2,729 10,870
Telefonos de Mexico S.A., ADR (Telecommunications) 909 51,927
Tubos de Acero de Mexico S.A. (Steel) 167 2,317
Wal-Mart de Mexico S.A. de C.V. (Retail)* 114 2,675
----------
$ 135,421
-----------------------------------------------------------------------------------------------------
Peru - 0.5%
Telefonica del Peru S.A., ADR (Telecommunications) 576 $ 6,552
-----------------------------------------------------------------------------------------------------
Philippines - 0.8%
Philippine Long Distance Telephone Co. (Utilities - Telephone) 609 $ 10,810
-----------------------------------------------------------------------------------------------------
Poland - 1.7%
Polski Koncern Naftowy S A (Oils) 1,210 $ 11,313
Telekomunikacja Polska S.A., GDR (Telecommunications)* 1,700 11,645
----------
$ 22,958
-----------------------------------------------------------------------------------------------------
Russia - 2.5%
Lukoil Oil Co., ADR (Oils) 300 $ 14,850
Surgutneftegaz (Oil Services) 1,000 12,375
Tatneft (Oil Services) 600 5,887
----------
$ 33,112
-----------------------------------------------------------------------------------------------------
Singapore - 5.6%
Chartered Semiconductor Manufacturing Co., ADR (Electronics)* 404 $ 36,360
Datacraft Asia Ltd. (Telecommunications) 3,000 26,400
Natsteel Electronics Ltd. (Electronics) 4,000 12,279
----------
$ 75,039
-----------------------------------------------------------------------------------------------------
South Africa - 6.9%
De Beers Centenary AG (Diamonds - Precious Stones) 400 $ 9,734
De Beers Consolidated Mines Ltd. (Mining) 121 2,942
Dimension Data Holdings Ltd. (Computer Services) 2,725 22,548
Imperial Holdings Ltd. (Conglomerate)* 1,015 8,264
Liberty Life Association of Africa Ltd. (Insurance) 730 6,945
Nedcor Ltd. (Banks and Credit Cos.)* 490 10,291
Sasol Ltd. (Oils) 1,875 12,583
South African Breweries Ltd. (Brewery) 1,306 9,747
South African Breweries Ltd., ADR (Brewery) 1,119 8,171
----------
$ 91,225
-----------------------------------------------------------------------------------------------------
South Korea - 12.5%
Housing & Commercial Bank of Korea (Banks and Credit Cos.) 280 $ 6,555
Hyundai Electronics Industries Co. (Electronics) 1,870 36,900
Korea Telecom Corp. (Telecommunications) 612 29,606
Mirae Corp. (Electronics) 2,600 10,599
Mirae Corp., ADR (Electronics) 107 829
Samsung Electro Mechanics Co. (Electronics) 100 6,270
Samsung Electronics (Electronics) 230 76,123
----------
$ 166,882
-----------------------------------------------------------------------------------------------------
Taiwan - 14.1%
Acer Inc. (Computers - Micro) 1,444 $ 13,285
Advanced Semiconducor, Inc., GDR (Electronics) 885 14,824
Far Eastern Textile Ltd. (Apparel & Textiles)* 300 3,705
R.O.C. Taiwan Fund ( Closed-end Mutual Fund)* 4,533 39,380
Ritek Corp. (Computer - Software Systems)## 618 4,820
Siliconware Precision Inds Ltd. (Electronics)* 2,500 23,125
Taipei Fund (Holding Co. & Other Investments)* 6 57,066
Taiwan Semiconductor Manufacturing Co. Ltd., ADR (Electronics) 802 31,078
----------
$ 187,283
-----------------------------------------------------------------------------------------------------
Thailand - 2.6%
Hana Microelectronics Public Co. Ltd. (Electronics) 900 $ 6,667
Total Access Communications Public Co., Ltd., ADR
(Telecommunications) 7,000 28,140
----------
$ 34,807
-----------------------------------------------------------------------------------------------------
Turkey - 2.1%
Turkiye Garanti Bankasi (Banks and Credit Cos.)* 1,318,429 $ 15,948
Vestel Electronic (Electronics)* 38,000 11,491
----------
$ 27,439
-----------------------------------------------------------------------------------------------------
United Kingdom - 1.1%
Anglo American PLC (Metals) 209 $ 9,932
Anglo American PLC, ADR (Metals) 49 2,315
Antofagasta Holdings PLC (Minerals) 523 2,809
----------
$ 15,056
-----------------------------------------------------------------------------------------------------
United States - 1.4%
Amdocs Ltd. (Telecom Services)* 145 $ 11,129
Santa Fe International Corp., (Oil & Gas) 200 6,987
----------
$ 18,116
-----------------------------------------------------------------------------------------------------
Venezuela - 0.1%
Mavesa S.A. (Consumer Goods and Services) 469 $ 1,466
-----------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $1,242,695) $1,274,404
-----------------------------------------------------------------------------------------------------
Short-Term Obligation - 1.4%
-----------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
-----------------------------------------------------------------------------------------------------
Federal Home Loan Bank, due 7/03/00, at Amortized Cost $ 19 $ 18,993
-----------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,261,688) $1,293,397
Other Assets, Less Liabilities - 2.9% 39,217
-----------------------------------------------------------------------------------------------------
Net Assets - 100.0% $1,332,614
-----------------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
-----------------------------------------------------------------------------------------------------
JUNE 30, 2000
-----------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at value (identified cost, $1,261,688) $1,293,397
Investment of cash collateral for securities loaned, at identified cost and value 209,576
Cash 1,399
Foreign currency, at value (identified cost, $15,556) 15,299
Receivable for investments sold 43,460
Dividends receivable 2,118
Deferred organization expenses 4,205
Other assets 9
----------
Total assets $1,569,463
----------
Liabilities:
Payable for investments purchased $ 23,537
Collateral for securities loaned, at value 209,576
Payable for Series shares reacquired 6
Payable to affiliates -
Management fee 47
Accrued expenses and other liabilities 3,683
----------
Total liabilities $ 236,849
----------
Net assets $1,332,614
==========
Net assets consist of:
Paid-in capital $1,754,616
Unrealized appreciation on investments and translation of assets and liabilities
in foreign currencies 31,072
Accumulated net realized loss on investments and foreign currency transactions (441,699)
Accumulated net investment loss (11,375)
----------
Total $1,332,614
==========
Shares of beneficial interest outstanding 171,477
=======
Net asset value per share
(net assets / shares of beneficial interest outstanding) $7.77
=====
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statement of Operations (Unaudited)
----------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2000
----------------------------------------------------------------------------------------------
<S> <C>
Net investment income:
Income -
Interest $ 380
Income on securities loaned 641
Dividends 6,899
Foreign taxes withheld (623)
---------
Total investment income $ 7,297
---------
Expenses -
Management fee $ 8,719
Administrative fee 112
Trustees' compensation 1,090
Shareholder servicing agent fee 243
Custodian fee 7,316
Auditing fees 10,400
Printing 221
Amortization of organization expenses 919
Legal fees 789
Miscellaneous 982
---------
Total expenses $ 30,791
Reduction of expenses by investment adviser (19,247)
Fees paid indirectly (603)
---------
Net expenses $ 10,941
---------
Net investment loss $ (3,644)
---------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 81,607
Foreign currency transactions (819)
---------
Net realized gain on investments and foreign currency transactions $ 80,788
---------
Change in unrealized depreciation -
Investments $(138,579)
Translation of assets and liabilities in foreign currencies (444)
---------
Net unrealized loss on investments and foreign currency translation $(139,023)
---------
Net realized and unrealized loss on investments and foreign currency $ (58,235)
---------
Decrease in net assets from operations $ (61,879)
=========
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
<CAPTION>
----------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income (loss) $ (3,644) $ 4,681
Net realized gain (loss) on investments and foreign
currency transactions 80,788 (188,161)
Net unrealized gain (loss) on investments and foreign
currency translation (139,023) 650,717
---------- ----------
Decrease in net assets from operations $ (61,879) $ (467,237)
---------- ----------
Distributions declared to shareholders -
From net investment income $ -- $ (454)
---------- ----------
Total distributions declared to shareholders $ -- $ (454)
---------- ----------
Net decrease in net assets from Series share transactions $ (49,324) $ (438,585)
---------- ----------
Total increase (decrease) in net assets $ (111,203) $ 28,198
Net assets:
At beginning of period 1,443,817 1,415,619
---------- ----------
At end of period (including accumulated net investment loss
of $11,375 and $7,731, respectively) $1,332,614 $1,443,817
========== ==========
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Financial Highlights
<CAPTION>
--------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED -----------------------------------
JUNE 30, 2000 1999 1998 1997*
(UNAUDITED)
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 8.16 $ 5.90 $ 9.00 $10.00
------ ------ ------ ------
Income from investment operations# -
Net investment income (loss)(S) $(0.02) $ 0.02 $ 0.11 $ -- +++
Net realized and unrealized gain (loss) on
investments and foreign currency transactions (0.37) 2.24 (3.11) (1.00)
------ ------ ------ ------
Total from investment operations $(0.39) $ 2.26 $(3.00) $(1.00)
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ -- +++ $(0.10) $ --
From paid-in capital -- -- -- +++ --
------ ------ ------ ------
Total distributions declared to shareholders $ -- $ -- $(0.10) $ --
------ ------ ------ ------
Net asset value - end of period $ 7.77 $ 8.16 $ 5.90 $ 9.00
====== ====== ====== ======
Total return (4.66)% 38.18% (33.37)% (10.00)%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.66%+ 1.57% 1.53% 1.50%+
Net investment income (loss) (0.52)%+ 0.35% 1.49% 0.16%+
Portfolio turnover 67% 148% 73% 8%
Net assets at end of period (000 omitted) $1,333 $1,444 $1,416 $1,357
(S) Subject to reimbursement by the series, MFS has voluntarily agreed under a temporary expense reimbursement agreement to pay
all of the series' operating expenses exclusive of management fee. In consideration, the series pays MFS a fee not greater
than 0.25% of average daily net assets. To the extent actual expenses were over this limitation, the net investment loss per
share would have been:
Net investment loss $(0.13) $(0.27) $(0.02) $(0.15)
Ratios (to average net assets):
Expenses## 4.43% 6.09% 3.26% 5.92%+
Net investment loss (3.29)% (4.17)% (0.24)% (4.26)%+
* For the period from the commencement of the investment operations, October 16, 1997, through December 31, 1997.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Emerging Markets Equity 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 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 7 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. 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 provide 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 $206,664. These loans
were collateralized by cash of $209,576 which was invested in the following
short-term obligations:
ISSUER SHARES VALUE
--------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio 209,576 $209,576
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 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. 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 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.
At December 31, 1999, the series, for federal income tax purposes, had a
capital loss carryforward of $493,472 which may be applied against any net
taxable realized gains of each succeeding year until the earlier of its
utilization or expiration on December 31, 2007, ($151,300), December 31, 2006,
($332,045), and December 31, 2005, ($10,127).
(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 1.25%
of the series' average daily net assets.
The series has a temporary expense reimbursement agreement whereby MFS has
voluntarily agreed to pay all of the series' operating expenses, exclusive of
management, distribution, and service fees. The series in turn will pay MFS an
expense reimbursement fee not greater than 0.25% of average daily net assets.
To the extent that the expense reimbursement fee exceeds the series' actual
expenses, the excess will be applied to amounts paid by MFS in prior years. At
June 30, 2000, aggregate unreimbursed expenses amounted to $117,346.
The series pays no compensation directly to its Trustees who are officers of
the investment adviser, or to officers of the series, all of whom receive
remuneration for their services to the series from MFS. Certain officers and
Trustees of the series are officers or directors of MFS, and MFS Service
Center, Inc. (MFSC).
Administrator - The series has an administrative services agreement with MFS
to provide the series with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the series incurs an administrative fee
at the following annual percentages of the series' average daily net assets:
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as
a percentage of the series' average daily net assets at an annual rate of
0.035%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated $919,854
and $1,015,025, respectively.
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the series, as computed on a federal income tax basis,
are as follows:
Aggregate cost $ 1,270,697
-----------
Gross unrealized appreciation $ 148,071
Gross unrealized depreciation (125,371)
-----------
Net unrealized appreciation $ 22,700
===========
(5) Shares of Beneficial Interest
The series' Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
series shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 2000 YEAR ENDED DECEMBER 31, 1999
------------------------------ ----------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 7,305 $ 56,527 26,133 $ 163,817
Shares issued to shareholders in
reinvestment of distributions -- -- 55 454
Shares reacquired (12,795) (105,851) (89,207) (602,856)
------- --------- ------- ---------
Net decrease (5,490) $ (49,324) (63,019) $(438,585)
======= ========= ======= =========
</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 series, 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 series' at
the end of each quarter. The commitment fee allocated to the series for the
six months ended June 30, 2000, was $4. 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 02116-3741.
VEM-3 8/00 3M
