<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) NEW DISCOVERY
SERIES
<PAGE>
<TABLE>
MFS(R) NEW DISCOVERY SERIES
A SERIES OF MFS(R) VARIABLE INSURANCE TRUST(SM)
<S> <C>
TRUSTEES INVESTMENT ADVISER
Jeffrey L. Shames* - Chairman and Chief Executive Massachusetts Financial Services Company
Officer, MFS Investment Management(R) 500 Boylston Street
Boston, MA 02116-3741
Nelson J. Darling, Jr.+ - Private investor and
trustee DISTRIBUTOR
MFS Fund Distributors, Inc.
William R. Gutow+ - Private investor and real 500 Boylston Street
estate consultant; Vice Chairman, Capitol Boston, MA 02116-3741
Entertainment Management Company (video franchise)
INVESTOR SERVICE
CHAIRMAN AND PRESIDENT MFS Service Center, Inc.
Jeffrey L. Shames* P.O. Box 2281
Boston, MA 02107-9906
PORTFOLIO MANAGER
Brian E. Stack* For additional information,
contact your investment professional.
TREASURER
James O. Yost* CUSTODIAN
State Street Bank and Trust Company
ASSISTANT TREASURERS
Mark E. Bradley* WORLD WIDE WEB
Ellen Moynihan* www.mfs.com
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
* MFS Investment Management
+ Independent Trustee
</TABLE>
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<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 a total return of 8.34%, including the reinvestment
of any distributions. This compares to a 3.04% return for the series'
benchmark, the Russell 2000 Total Return Index (the Russell 2000) for the same
period. The Russell 2000 is an unmanaged index comprised of 2,000 of the
smallest U.S.-domiciled company common stocks that are traded on the New York
Stock Exchange, the American Stock Exchange, and NASDAQ.
Despite a dramatic market correction this past spring, performance of the
portfolio remained strong. We feel this was in large measure due to our
consistent bottom-up focus on the fundamentals of each individual stock we
hold. And although ours is a growth portfolio, we remain constantly vigilant
on valuations (prices in relation to projected fundamentals and earnings). In
late 1999 and into the first quarter of this year, we felt that even stocks of
some sound companies with high growth rates had reached valuations that
substantially exceeded what was fundamentally justified. This led us to reduce
our exposure to a number of technology issues. In March and April, when it
became clear that the Federal Reserve Board (the Fed) was intent upon slowing
the growth rate of the economy and muting the wealth effect created by a
strong stock market, many of the high valuation stocks that we had previously
sold were extremely hard hit. The portfolio's strong relative performance
during such difficult periods illustrates how a disciplined, research-driven
approach may translate into consistent outperformance during down markets, as
well as up.
Over the recent period, selected stocks in the energy, business services, and
health care sectors were among the portfolio's strongest performers. In the
energy sector, our research correctly anticipated last year that rising energy
prices would bring many deep-water oil drilling companies and natural gas
exploration and production companies out of their cyclical slump. During the
second half of 1999, at a time when the market was largely ignoring these
stocks, we increased our holdings in drilling industry firms such as Noble
Drilling and Cooper Cameron and natural gas producers such as EOG Resources.
Over the first half of 2000, the market apparently recognized the potential of
these companies, and as a result their stocks have been strong performers for
the portfolio.
Business services companies have been a significant theme in the portfolio for
some time. These are firms that design and implement computer and information
technology systems for other companies, helping their clients use technology
to increase productivity and reduce costs. One characteristic that makes
business services companies attractive is their relative predictability of
earnings, because much of their income is based on long-term contracts.
Because they are selling services more than products, they also appear to be
able to ride the technology wave with less risk of a product becoming
obsolete.
However, the stocks of many of these firms were beaten down throughout early
and mid-1999, due to fears about a Year 2000 (Y2K) related sales slump. We
took the view that the Y2K problem was going to be relatively short-lived and,
indeed, during late 1999 and the first half of 2000, many of these stocks came
back strongly. Among them were CSG Systems, which does billing for cable and
telecommunications companies, and Diamond Technology Partners, which helps
Fortune 500 companies develop and implement Internet strategies.
In the health care sector, we view several companies in the medical services
and medical technology areas as having strong growth potential. These areas
have not been staples of many aggressive growth funds in the past year or so,
due largely to cutbacks in government reimbursement. In our view, however,
there will be tremendous opportunity in this sector as the average American
grows older and lives longer, and as new technologies become available to
treat many conditions more effectively. Caremark Rx, our largest health care
position, provides an example of how we use our MFS Original Research(R)
process to uncover new opportunities.
Caremark was a relatively unknown company in the pharmacy benefit management
(PBM) business. It manages drug benefits for HMOs and employers, addressing an
urgent need to contain prescription drug inflation. When we looked at the
company, we noted that Caremark was the second largest independent player in a
fast-growing industry. Moreover, it was achieving the industry's fastest rate
of revenue growth, and it boasted the industry's highest profit margins.
Most importantly, Caremark was relatively unknown to Wall Street. New
management had recently taken charge and discontinued some unattractive legacy
businesses. Looking more closely, we discovered two important elements of
value that hadn't yet impacted the stock price. Firstly was Caremark's chronic
disease management business. This unit provides care to patients with chronic
diseases, frequently utilizing newly-developed biotechnology-based drugs. The
valuations of similar public companies suggested this unit might be worth
almost Caremark's entire share price at the time of our purchase. Secondly,
Caremark's net operating loss carryforward, which had been generated by the
discontinued lines of business, could be used to shelter future taxable
income. This asset was worth another several dollars per share. Together, the
value of these assets suggested that by buying Caremark, we were getting the
fast-growing PBM business for free. We thus acquired a sizeable position in
Caremark, which has already appreciated considerably this year. We see
continued strong gains for Caremark in the months ahead.
Looking ahead, we remain confident that small-cap investing presents a
compelling combination. It exposes investors to many of the highest growth
companies in the economy, yet currently offers lower average valuations than
large-cap stocks. And even if the economy weakens in response to higher
interest rates, we think small caps may continue to enjoy rapid earnings
growth. Our experience has been that in a slowing economy, earnings growth may
be a bit more resilient among small-cap growth companies because historically
they achieve much of their growth based on innovation and seem to be less
locked in to the economic cycle.
Respectfully,
/s/ Brian E. Stack
Brian E. Stack
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
Brian E. Stack is Senior Vice President of MFS Investment Management(R) and
portfolio manager of MFS(R) New Discovery Fund, MFS(R) Institutional Emerging
Equities Fund, and the New Discovery Series offered through MFS(R)/Sun Life
annuity products. He is also portfolio manager of MFS(R) New Discovery Series
(part of MFS(R) Variable Insurance Trust(SM)).
Mr. Stack joined MFS in 1993 as a research analyst following the chemical,
hospital management, health maintenance organization, medical services, and
business services industries. He was named portfolio manager in 1996 and
Senior Vice President in 1999. Prior to joining MFS, he had worked as an
equity analyst since 1987. He is a graduate of Boston College and has an
M.B.A. degree from the University of Virginia.
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 capital appreciation.
Commencement of investment operations: May 1, 1998
Class inception: Initial Class May 1, 1998
Service Class May 1, 2000
Size: $94.2 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.)
<TABLE>
TOTAL RATES OF RETURN THROUGH JUNE 30, 2000
<CAPTION>
INITIAL CLASS
6 Months 1 Year Life*
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return +8.34% +56.28% +92.01%
--------------------------------------------------------------------------------------------------------------
Average Annual Total Return -- +56.28% +35.18%
--------------------------------------------------------------------------------------------------------------
<CAPTION>
SERVICE CLASS
6 Months 1 Year Life*
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return +8.34% +56.28% +92.01%
--------------------------------------------------------------------------------------------------------------
Average Annual Total Return -- +56.28% +35.18%
--------------------------------------------------------------------------------------------------------------
* For the period from the commencement of the series' investment operations, May 1, 1998, through June 30, 2000.
</TABLE>
NOTES TO PERFORMANCE SUMMARY
Initial Class and Service Class shares have no sales charge; however, Service
Class shares carry a 0.20% annual Rule 12b-1 fee. Service Class share
performance includes the performance of the series' Initial Class shares for
periods prior to the inception of Service Class shares (blended performance).
These blended performance figures have not been adjusted to take into account
differences in the class-specific operating expenses (such as Rule 12b-1
fees). Because operating expenses of Service Class shares are higher than
those of Initial Class shares, the blended Service Class share performance is
higher than it would have been had Service Class shares been offered for the
entire period.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and
waivers may be rescinded at any time. See the prospectus for details. All
results are historical and assume the reinvestment of dividends and capital
gains. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MORE RECENT
RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. PAST PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS.
Returns shown do not reflect the deduction of the mortality and expense risk
charges and administration fees. Please refer to the variable product's annual
report for performance that reflects the deduction of the fees and charges
imposed by insurance company separate accounts.
Investing in small or emerging growth companies involves greater risk than is
customarily associated with more-established companies. These risks may
increase share price volatility. See the prospectus for details.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) - June 30, 2000
<CAPTION>
Stocks - 89.4%
-------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 86.5%
Advertising - 0.1%
24/7 Media, Inc.* 8,370 $ 130,781
-------------------------------------------------------------------------------------------------------
Airlines - 0.8%
Atlas Air, Inc.* 13,361 $ 479,326
Skywest, Inc. 7,741 286,901
-----------
$ 766,227
-------------------------------------------------------------------------------------------------------
Agricultural Products - 0.6%
Delta and Pine Land Co. 21,980 $ 550,874
-------------------------------------------------------------------------------------------------------
Auto Parts - 0.5%
Brooks Automation, Inc.* 7,832 $ 500,759
-------------------------------------------------------------------------------------------------------
Business Machines - 1.0%
Affiliated Computer Services, Inc., "A"*# 27,111 $ 896,357
-------------------------------------------------------------------------------------------------------
Business Services - 17.1%
BISYS Group, Inc.*# 13,760 $ 846,240
Braun Consulting, Inc.* 9,940 209,982
Carbo Ceramics, Inc. 8,930 313,666
Complete Business Solutions, Inc.*# 27,641 485,445
Computer Horizons Corp.* 14,150 190,141
Concord EFS, Inc.* 55,530 1,443,780
CSG Systems International, Inc.* 6,596 369,788
Dendrite International, Inc.* 26,933 897,206
Diamond Technology Partners, Inc., "A"* 5,662 498,256
Digimarc Corp.* 3,210 123,585
EGL, Inc.* 26,900 827,175
eLoyalty Corp.* 72,922 929,755
Gartner Group, Inc., "A"* 15,800 189,600
iGATE Capital Corp.*# 18,040 248,050
IMRglobal Corp.*# 54,289 709,150
infoUSA, Inc.* 36,776 239,044
Interim Services, Inc.* 21,100 374,525
Learning Tree International, Inc.*# 3,422 209,598
Meta Group, Inc.* 10,287 198,025
Mettler Toledo International, Inc.* 8,910 356,400
Modis Professional Services, Inc.*# 49,839 380,022
National Data Corp. 31,520 724,960
Navigant Consulting Co.* 59,880 254,490
NCO Group, Inc.* 16,110 372,544
Nextera Enterprises, Inc.* 34,456 164,743
NOVA Corp.* 51,645 1,442,832
Peregrine Systems, Inc.* 33,333 1,156,238
Probusiness Services, Inc.* 11,105 294,977
Radiant Systems, Inc.* 38,034 912,816
Renaissance Worldwide, Inc.* 37,074 57,928
S1 Corp.* 13,838 322,598
Technology Solutions Co.*# 57,792 357,588
-----------
$16,101,147
-------------------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 1.2%
HNC Software, Inc.* 8,770 $ 541,548
Verity, Inc.* 15,980 607,240
-----------
$ 1,148,788
-------------------------------------------------------------------------------------------------------
Computer Software - Services - 5.0%
Concord Communications, Inc.* 9,690 $ 386,389
Hyperion Solutions Corp.* 25,358 822,550
Lightspan, Inc.* 68,220 375,210
RSA Security, Inc.* 44,166 3,058,495
Tier Technologies, Inc.* 15,068 79,107
-----------
$ 4,721,751
-------------------------------------------------------------------------------------------------------
Computer Software - Systems - 10.6%
Acxiom Corp.* 14,665 $ 399,621
Alteon Websystems, Inc.* 2,780 278,174
Aspen Technology, Inc.*# 38,999 1,501,461
AVT Corp.*# 41,982 309,617
Cadence Design Systems, Inc.* 11,700 238,388
Cambridge Technology Partners, Inc.* 33,316 290,474
Checkfree Holdings Corp.* 14,278 736,209
Computer Network Technology Corp.* 41,068 713,556
Cysive, Inc.* 8,090 193,149
Exchange Applications Software* 15,742 419,131
Intelligroup, Inc.* 13,530 162,360
Mercator Software, Inc.* 7,740 532,125
MMC Networks, Inc.* 41,490 2,217,122
New Era of Networks, Inc.* 10,200 433,500
Packeteer, Inc.* 6,100 177,663
RAVISENT Technologies, Inc.* 41,450 292,741
StorageNetworks, Inc.* 160 14,440
Transaction System Architects, Inc., "A"* 37,583 643,609
Wind River Systems, Inc.* 10,816 409,656
-----------
$ 9,962,996
-------------------------------------------------------------------------------------------------------
Conglomerates - 0.4%
Sodexho Marriott Services, Inc. 23,533 $ 376,528
-------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 0.2%
Sportsline USA, Inc.* 9,717 $ 165,796
-------------------------------------------------------------------------------------------------------
Containers - 0.4%
Ivex Packaging Corp.* 32,682 $ 363,587
-------------------------------------------------------------------------------------------------------
Electrical Equipment
Capstone Turbine Corp.* 750 $ 33,797
-------------------------------------------------------------------------------------------------------
Electronics - 8.2%
Alliance Semiconductor Corp.* 5,300 $ 130,181
Burr-Brown Corp.* 17,950 1,556,041
Cable Design Technologies Corp.* 7,769 260,261
Credence Systems Corp.* 7,184 396,467
DuPont Photomasks, Inc.* 12,894 883,239
GaSonics International Corp.* 14,391 567,545
Integrated Device Technology, Inc.* 12,970 776,579
Marvell Technology Group Ltd.* 600 34,200
MKS Instruments, Inc.* 7,021 274,697
Photronics, Inc.* 25,913 735,281
Sawtek, Inc.* 2,920 168,083
SIPEX Corp.* 12,009 332,499
Triquint Semiconductor, Inc.* 4,188 400,739
Varian Semiconductor Equipment Associates, Inc.* 10,890 684,028
Veeco Instruments, Inc.* 6,480 474,660
-----------
$ 7,674,500
-------------------------------------------------------------------------------------------------------
Entertainment - 0.6%
Emmis Broadcasting Corp., "A"* 7,102 $ 293,845
Spanish Broadcasting Systems, Inc.* 11,875 244,180
-----------
$ 538,025
-------------------------------------------------------------------------------------------------------
Financial Institutions - 0.5%
Federated Investors, Inc., "A" 11,000 $ 385,688
Financial Federal Corp.* 6,768 117,594
-----------
$ 503,282
-------------------------------------------------------------------------------------------------------
Food and Beverage Products - 0.2%
Del Monte Foods Co.*# 30,113 $ 205,145
-------------------------------------------------------------------------------------------------------
Healthcare - 3.1%
Caremark Rx, Inc.* 430,612 $ 2,933,544
-------------------------------------------------------------------------------------------------------
Insurance - 0.2%
Inspire Insurance Solutions, Inc.* 69,195 $ 207,585
-------------------------------------------------------------------------------------------------------
Internet - 2.9%
Digital Insight Corp.* 5,767 $ 196,078
HealthGate Data Corp.* 2,590 4,209
Jupiter Communications, Inc.* 11,665 268,295
L90, Inc.* 9,430 99,015
Lante Corp.* 5,820 118,946
Netopia, Inc.* 2,593 104,368
Netzee, Inc.* 5,320 30,424
Onesource Information Services, Inc.* 20,290 152,175
Ticketmaster Online-Citysearch, Inc.* 5,060 80,644
VeriSign, Inc.* 7,728 1,363,992
Versata, Inc.* 8,170 329,353
Virage, Inc.* 190 3,432
-----------
$ 2,750,931
-------------------------------------------------------------------------------------------------------
Machinery - 0.6%
Applied Science and Technology, Inc.* 5,679 $ 146,944
Asyst Technologies, Inc.* 12,372 423,741
-----------
$ 570,685
-------------------------------------------------------------------------------------------------------
Manufacturing - 0.3%
Kemet Corp.* 13,070 $ 327,567
-------------------------------------------------------------------------------------------------------
Media - 0.1%
Radio One, Inc.* 3,090 $ 68,173
-------------------------------------------------------------------------------------------------------
Medical and Health Products - 1.7%
Closure Med Corp.* 10,900 $ 250,700
CONMED Corp.* 20,520 530,955
Haemonetics Corp.* 24,396 512,316
ORATEC Interventions, Inc.* 9,620 321,067
-----------
$ 1,615,038
-------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 6.4%
Allos Therapeutics, Inc.* 11,090 $ 108,127
BioSource International, Inc.* 5,310 118,147
Cyberonics, Inc.* 20,135 241,620
Cytyc Corp.* 21,604 1,153,113
Express Scripts, Inc.* 2,720 168,980
IDEXX Laboratories, Inc.*# 11,645 266,379
IDX Systems Corp.* 16,471 232,653
Impath, Inc.* 9,317 505,447
LifePoint Hospitals, Inc.* 20,144 448,204
Lincare Holdings, Inc.* 17,120 421,580
Martek Biosciences Corp.* 554 10,388
Omnicare, Inc. 40,250 364,766
Orthodontic Centers of America, Inc.* 17,727 401,073
Osteotech, Inc.* 24,714 259,497
Parexel International Corp.* 34,250 327,516
Summit Technology, Inc.* 16,680 314,835
Superior Consultant Holdings Corp.* 897 4,261
Total Renal Care Holdings, Inc.* 63,717 382,302
V. I. Technologies, Inc.* 24,977 174,839
VISX, Inc.* 3,000 84,188
-----------
$ 5,987,915
-------------------------------------------------------------------------------------------------------
Oil Services - 6.7%
Cooper Cameron Corp.* 6,479 $ 427,614
Dril-Quip, Inc.* 5,874 274,610
Global Industries, Inc.* 102,620 1,936,953
Input/Output, Inc.* 36,304 306,315
Key Energy Services, Inc.* 28,320 272,580
National Oilwell, Inc.* 13,085 430,169
Noble Drilling Corp.* 33,392 1,375,333
Trico Marine Services, Inc.* 71,840 915,960
Weatherford International, Inc.* 9,839 391,715
-----------
$ 6,331,249
-------------------------------------------------------------------------------------------------------
Oils - 4.8%
EOG Resources, Inc. 15,600 $ 522,600
Grant Pride Co., Inc.* 9,839 245,975
Houston Exploration Co.* 22,298 560,237
Louis Dreyfus Natural Gas Corp.* 11,430 357,902
Marine Drilling Companies, Inc.* 28,280 791,840
Newfield Exploration Co.* 17,872 699,242
Oceaneering International, Inc.* 32,860 624,340
Santa Fe Snyder Corp.* 59,200 673,400
-----------
$ 4,475,536
-------------------------------------------------------------------------------------------------------
Printing and Publishing - 0.6%
Scholastic Corp.*# 8,667 $ 529,770
-------------------------------------------------------------------------------------------------------
Restaurants and Lodging - 1.0%
Papa John's International, Inc.* 21,376 $ 523,712
Sonic Corp.* 13,218 388,279
-----------
$ 911,991
-------------------------------------------------------------------------------------------------------
Retail - 0.4%
CSK Auto Corp.* 8,226 $ 62,209
PETCO Animal Supplies, Inc.* 15,654 307,210
-----------
$ 369,419
-------------------------------------------------------------------------------------------------------
Special Products and Services - 0.6%
Harmonic Lightwaves, Inc.* 3,000 $ 74,250
Sylvan Learning Systems, Inc.* 37,510 515,763
-----------
$ 590,013
-------------------------------------------------------------------------------------------------------
Technology - 1.1%
Galileo Technology Ltd.* 17,120 $ 368,080
Varian, Inc.* 13,826 637,724
-----------
$ 1,005,804
-------------------------------------------------------------------------------------------------------
Telecommunications - 8.5%
Advanced Fibre Communications, Inc.* 11,570 $ 524,266
ANTEC Corp.* 13,740 571,069
Aware, Inc.* 10,070 514,829
Cabletron Systems, Inc.* 26,780 676,195
California Amplifier, Inc.* 9,530 435,997
Carrier Access Corp.* 5,550 293,456
Emulex Corp.* 8,160 536,010
Intermedia Communications, Inc.* 20,437 608,001
MGC Communications, Inc.* 8,980 538,239
Natural Microsystems Corp.* 8,240 926,485
Net Perceptions, Inc.* 7,300 115,887
Pinnacle Holdings, Inc.* 16,741 904,014
Proxim, Inc.* 4,271 422,695
Telaxis Communications Corp.* 11,200 350,000
Viasystems Group, Inc.* 3,430 55,523
Tekelec Co.* 11,230 541,146
-----------
$ 8,013,812
-------------------------------------------------------------------------------------------------------
Telecom - Wire Line - 0.1%
Epresence, Inc.* 16,960 $ 122,960
-------------------------------------------------------------------------------------------------------
Total U.S. Stocks $81,452,332
-------------------------------------------------------------------------------------------------------
Foreign Stocks - 2.9%
Canada - 0.5%
Intertape Polymer Group, Inc. (Containers) 26,700 $ 460,575
-------------------------------------------------------------------------------------------------------
Ireland - 1.9%
SmartForce PLC* (Internet) 37,650 $ 1,807,200
-------------------------------------------------------------------------------------------------------
Israel - 0.5%
Fundtech Ltd.*# (Computer Software - Systems) 19,500 $ 507,000
-------------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 2,774,775
-------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $81,868,855) $84,227,107
-------------------------------------------------------------------------------------------------------
Preferred Stock - 0.3%
-------------------------------------------------------------------------------------------------------
Business Services - 0.3%
Sitara Networks Inc. (Identified Cost, $276,024) 42,400 $ 276,024
-------------------------------------------------------------------------------------------------------
Warrants
-------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services
Martek Biosciences Corp.## (Identified Cost, $0) 166 $ 3,112
-------------------------------------------------------------------------------------------------------
Short-Term Obligations - 8.9%
-------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
-------------------------------------------------------------------------------------------------------
Federal Home Loan Bank, due 7/03/00, at Amortized Cost $ 8,343 $ 8,339,955
-------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $90,484,834) $92,846,198
-------------------------------------------------------------------------------------------------------
Securities Sold Short (0.1)%
-------------------------------------------------------------------------------------------------------
SHARES
-------------------------------------------------------------------------------------------------------
Internet - (0.1)%
Retek, Inc.* (Proceeds Received, $143,542) (1,940) $ (62,080)
-------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 1.5% 1,369,901
-------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $94,154,019
-------------------------------------------------------------------------------------------------------
* Non-income producing security.
# Security or a portion of the security was pledged to cover collateral requirements for securities
sold short. At June 30, 2000, the value of securities pledged amounted to $1,315,879.
## SEC Rule 144A restriction.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
-------------------------------------------------------------------------------
JUNE 30, 2000
-------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $90,484,834) $ 92,846,198
Investment of cash collateral for securities loaned, at
identified cost and value 14,688,820
Cash 812
Deposits with brokers for securities sold short 143,542
Receivable for series shares sold 547,148
Receivable for investments sold 1,150,359
Interest and dividends receivable 1,920
Other assets 49
------------
Total assets $109,378,848
------------
Liabilities:
Securities sold short, at value (proceeds received, $143,542) $ 62,080
Payable for series shares reacquired 296,059
Payable for investments purchased 175,169
Collateral for securities loaned, at value 14,688,820
Payable to affiliates --
Management fee 2,290
Reimbursement fee 381
Distribution fee 30
------------
Total liabilities $ 15,224,829
------------
Net assets $ 94,154,019
============
Net assets consist of:
Paid-in capital $ 88,196,968
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 2,442,827
Accumulated undistributed net realized gain on investments
and foreign currency transactions 3,646,242
Accumulated net investment loss (132,018)
------------
Total $ 94,154,019
============
Shares of beneficial interest outstanding 5,128,300
=========
Initial Class shares:
Net asset value, offering price, and redemption price
per share (net assets of $88,164,871 / 4,801,905
shares of beneficial interest outstanding) $18.36
======
Service Class shares:
Net asset value, offering price, and redemption price
per share (net assets of $5,989,148 / 326,395
shares of beneficial interest outstanding) $18.35
======
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations (Unaudited)
-------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2000
-------------------------------------------------------------------------------
Net investment loss:
Income -
Interest $ 141,571
Income on securities loaned 9,653
Dividends 7,744
Foreign taxes withheld (368)
------------
Total investment income $ 158,600
------------
Expenses -
Management fee $ 236,769
Trustees' compensation 1,090
Shareholder servicing agent fee 9,208
Distribution fee (Service Class) 759
Administrative fee 4,387
Custodian fee 13,153
Printing 31,986
Postage 7
Auditing fees 12,100
Legal fees 402
Miscellaneous 1,232
------------
Total expenses $ 311,093
Fees paid indirectly (1,820)
Reduction of expenses by investment adviser (18,655)
------------
Net expenses $ 290,618
------------
Net investment loss $ (132,018)
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 3,815,313
Securities sold short (49,612)
Foreign currency transactions 2
------------
Net realized gain on investments and foreign currency
transactions $ 3,765,703
------------
Change in unrealized appreciation (depreciation) -
Investments $ (1,170,368)
Securities sold short 83,321
Translation of assets and liabilities in foreign currencies 2
------------
Net unrealized loss on investments and foreign currency
translation $ (1,087,045)
------------
Net realized and unrealized gain on investments and
foreign currency $ 2,678,658
------------
Increase in net assets from operations $ 2,546,640
============
See notes to financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
<CAPTION>
Statement of Changes in Net Assets
-------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
(UNAUDITED)
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (132,018) $ (30,129)
Net realized gain on investments and foreign currency
transactions 3,765,703 1,457,686
Net unrealized gain (loss) on investments and foreign
currency translation (1,087,045) 3,435,397
------------
Increase in net assets from operations $ 2,546,640 $ 4,862,954
------------ ------------
Distributions declared to shareholders from net realized
gain on investments and foreign currency transactions
(Initial Class) $ (1,180,832) $ (311,307)
------------ ------------
Net increase in net assets from series share transactions $ 74,673,032 $ 12,425,252
------------ ------------
Total increase in net assets $ 76,038,840 $ 16,976,899
Net assets:
At beginning of period $ 18,115,179 $ 1,138,280
------------ ------------
At end of period (including accumulated net investment
loss of $132,018 and $0, respectively) $ 94,154,019 $ 18,115,179
============ ============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
<CAPTION>
Financial Highlights
-----------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
JUNE 30, 2000 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1999 1998*
-----------------------------------------------------------------------------------------------------------------
INITIAL CLASS SHARES
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $17.27 $10.22 $10.00
------ ------ ------
Income from investment operations# -
Net investment loss(S) $(0.04) $(0.09) $(0.04)
Net realized and unrealized gain on investments and
foreign currency 1.45 7.53 0.26
------ ------ ------
Total from investment operations $ 1.41 $ 7.44 $ 0.22
------ ------ ------
Less distributions declared to shareholders from net
realized gain on investments and foreign currency
transactions $(0.32) $(0.39) $ --
------ ------ ------
Net asset value - end of period $18.36 $17.27 $10.22
====== ====== ======
Total return 8.34%++ 73.41% 2.20%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.11%+ 1.17% 1.17%+
Net investment loss (0.50)%+ (0.72)% (0.74)%+
Portfolio turnover 39% 185% 130%
Net assets at end of period (000 omitted) $88,165 $18,115 $1,138
(S) Subject to reimbursement by the series, the investment adviser voluntarily agreed under a temporary expense
reimbursement agreement to pay all of the series' operating expenses, exclusive of management fees. In
consideration, the series pays the investment adviser a reimbursement fee not greater than 0.15% of average
daily net assets. Prior to May 1, 2000, this fee was 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 and the ratios would
have been:
Net investment loss $(0.05) $(0.25) $(0.28)
Ratios (to average net assets):
Expenses## 1.18%+ 2.49% 5.22%+
Net investment loss (0.57)%+ (2.04)% (4.79)%+
* For the period from the commencement of the series' investment operations, May 1, 1998, through December 31, 1998.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights
-------------------------------------------------------------------------------
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 $17.24
------
Income from investment operations# -
Net investment loss(S) $(0.04)
Net realized and unrealized gain on investments and foreign
currency 1.15
------
Total from investment operations $ 1.11
------
Net asset value - end of period $18.35
======
Total return 8.34%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.31%+
Net investment loss (0.69)%+
Portfolio turnover 39%
Net assets at end of period (000 omitted) $5,989
(S) Subject to reimbursement by the series, the investment adviser voluntarily
agreed under a temporary expense reimbursement agreement to pay all of the
series' operating expenses, exclusive of management and distribution fees.
In consideration, the series pays the investment adviser a reimbursement fee
not greater than 0.15% of average daily net assets. To the extent actual
expenses were over this limitation, the net investment loss per share and
the ratios would have been:
Net investment loss $(0.05)
Ratios (to average net assets):
Expenses## 1.38%+
Net investment loss (0.76)%+
* For the period from the inception of the Service Class shares, May 1, 2000,
through June 30, 2000.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset
arrangements.
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business Organization
MFS New Discovery 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 63 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.
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. 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 $14,185,050. These loans
were collateralized by cash of $14,688,820 which was invested in the following
short-term obligation:
IDENTIFIED COST
SHARES AND VALUE
------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio 14,688,820 $14,688,820
Short Sales - The series may enter into short sales. A short sale transaction
involves selling a security which the series does not own with the intent of
purchasing it later at a lower price. The series will realize a gain if the
security price decreases and a loss if the security price increases between
the date of the short sale and the date on which the series must replace the
borrowed security. Losses can exceed the proceeds from short sales and can be
greater than losses from the actual purchase of a security. The amount of any
gain will be decreased, and the amount of any loss increased, by the amount of
the premium, dividends, or interest the series may be required to pay in
connection with a short sale. Whenever the series engages in short sales, its
custodian segregates cash or marketable securities in an amount that, when
combined with the amount of proceeds from the short sale deposited with the
broker, at least equals the current market value of the security sold short.
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. 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 distribution in excess of tax basis earnings and
profits are reported in the financial statements as distributions from paid-in
capital. Differences in the recognition or classification of income between
the financial statements and tax earnings and profits, which result in
temporary over-distributions for financial statement purposes, are classified
as distributions in excess of net investment income or net realized gains.
Multiple Classes of Shares of Beneficial Interest - The series offers multiple
classes of shares, which 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 0.90%
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 and distribution fees. The
series in turn will pay MFS an expense reimbursement fee not greater than
0.15% of average daily net assets. Prior to May 1, 2000, this fee was 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 owed to MFS by the series amounted to $95,567.
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%
Distributor - The Trustees have adopted a distribution plan relating to
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 a
distribution fee of 0.25% per annum of the series' average daily net assets
attributable to the Service Class shares in order that MFD may pay expenses on
behalf of the series. A portion of this distribution fee is currently being
paid by the series; payment of the remaining 0.05% per annum of the Service
Class distribution fee will become payable on such a date as the Trustees' of
the Trust may determine. Fees incurred under the distribution plan during the
period ended June 30, 2000, were 0.20% of average daily assets attributable to
Service Class 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 U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$18,919,745 and $7,846,823, 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 $90,484,834
-----------
Gross unrealized appreciation $11,019,025
Gross unrealized depreciation (8,657,661)
-----------
Net unrealized appreciation $ 2,361,364
===========
(5) Shares of Beneficial Interest
The series' Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
series shares were as follows:
<TABLE>
Initial Class shares
<CAPTION>
SIX MONTHS ENDED JUNE 30, 2000 YEAR ENDED DECEMBER 31, 1999
------------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 4,468,952 $82,010,083 1,306,924 $17,118,606
Shares issued to shareholders in
reinvestment of distributions 69,757 1,180,830 18,737 311,327
Shares reacquired (785,926) (14,218,075) (387,890) (5,004,681)
--------- ----------- --------- -----------
Net increase 3,752,783 $68,972,838 937,771 $12,425,252
========= =========== ========= ===========
<CAPTION>
Service Class shares
PERIOD ENDED JUNE 30, 2000*
--------------------------------
SHARES AMOUNT
----------------------------------------------------------------------
<S> <C> <C>
Shares sold 371,059 $6,459,989
Shares reacquired (44,664) (759,795)
--------- -----------
Net increase 326,395 $5,700,194
========= ===========
* 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 series 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 $192. The series had no significant
borrowings during the six month 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.
VND-3 8/00 60M
