MFS(R) Variable Insurance Trust(SM)
MFS(R) Money Market Series
Semiannual Report
June 30, 1995
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Dear Contract Owner:
A general slowdown in most major economies has resulted in favorable performance
for both stock and bond markets around the world during the past six months.
Yields on many fixed-income securities declined over the period, resulting in
favorable price performance for these investments. At the same time, the decline
in interest rates and strong corporate earnings reports caused many stock prices
to rise over the period, producing strong returns. For the six months ended June
30, 1995, the market, as measured by the Standard & Poor's 500 Composite Index
(the S&P 500), a popular, unmanaged index of common stock performance, returned
+20.19%.
U.S. Outlook
In response to increasing evidence of economic weakness during the second
quarter, the Federal Reserve Board has reversed policy by lowering the federal
funds rate 0.25%. This marks the first time in three years that this rate has
been lowered, and brings the Federal Reserve's 18-month monetary-tightening
initiative to at least a temporary conclusion. Although inflation at the
consumer level has been trending higher this year at a 3 1/2% annualized rate,
recent evidence suggests that these pressures are beginning to moderate,
allowing the Federal Reserve to shift its policy focus toward sustaining
economic growth. Despite the economy's apparent lackluster performance in the
second quarter, we do not anticipate that the economy will lapse into recession.
Rather, we believe it will continue to expand at a more moderate, sustainable
pace, supported by lower prevailing interest rates and a healthy export sector.
Bond Markets
As the economy's ability to create jobs has diminished along with its use of
available productive capacity, fixed-income markets have become increasingly
convinced that inflationary pressures will remain subdued. As a result,
long-term U.S. Treasury bond yields have declined to 6.50% from their 7.85%
level at the beginning of the year. As bond yields continued to decline, it
became apparent that the markets had been anticipating an easing of the Federal
Reserve's policy. Now that the easing has begun, we believe that prevailing
rates may consolidate near present levels in the near term. Longer term, we feel
that continuing moderate growth should result in interest rates maintaining
their present levels or perhaps declining moderately over the balance of this
year.
The general slowdown of world economies has resulted in solid performance in
world bond markets during the past six months. European markets continue to be
buoyed by slow growth, low and controlled inflation and recent interest rate
cuts from key central banks. The Japanese market also has been strong as anemic
economic growth and consumer price deflation have helped interest rates stage a
major decline. We remain positive on overseas markets because we anticipate
continued slow growth and minimal inflationary pressures.
Comments from the portfolio manager of this Series are presented below. We
appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ A. Keith Brodkin /s/ Geoffrey L. Kurinsky
A. Keith Brodkin Geoffrey L. Kurinsky
Chairman and President Portfolio Manager
July 18, 1995 July 18, 1995
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MFS(R) Money Market Series
MFS Money Market Series seeks as high a level of current income as is considered
consistent with the preservation of capital and liquidity by investing in
short-term money market securities issued or guaranteed by the U.S. Treasury or
its agencies, or instrumentalities of the U.S. government, as well as to the
highest quality corporate issues in order to minimize credit risk. As of June
30, 1995, the portfolio had assets of approximately $65,000, of the Series'
total assets were invested in four different government issues with an average
maturity of 23 days.
Portfolio Manager Profile
Geoffrey Kurinsky began his career at MFS in 1987 in the Fixed Income
Department. Mr. Kurinsky is a graduate of the University of Massachusetts and
Boston University's Graduate School of Management. He was named Assistant Vice
President in 1988 and Vice President in 1989. In 1992, he became Portfolio
Manager of MFS Money Market Series. He was named Senior Vice President in 1993.
Mr. Kurinsky is a Certified Public Accountant.
Objective and Policies
MFS Money Market Series' investment objective is to seek as high a level of
current income as is considered consistent with the preservation of capital and
liquidity.
MFS Money Market Series seeks to achieve its investment objective by investing
primarily (i.e., at least 80% of its assets under normal circumstances) in
obligations issued or guaranteed by the U.S. Treasury or agencies or
instrumentalities of the U.S. government, (including repurchase agreements
collateralized by such securities), obligations of banks, commercial paper and
short-term corporate obligations.
Performance Summary
The aggregate total return from January 3, 1995+ to June 30, 1995 was +1.99%.
All Series results represent past performance and are not necessarily an
indication of future results. Investment return and principal value will
fluctuate, and units, when redeemed, may be worth more or less than their
original cost. All Series results reflect the applicable expense subsidy which
is explained in the Notes to Financial Statements. Had the subsidy not been in
effect, the results would have been less favorable. The subsidy may be rescinded
by MFS at any time. All Series results do not reflect expenses that would be
imposed by insurance company separate accounts.
+ Commencement of offering of shares.
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MFS Variable Insurance Trust --
MFS Money Market Series
Portfolio of Investments -- June 30, 1995
U.S. Government and Agency Obligations -- 85.6%
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Principal Amount
Issuer (000 Omitted) Value
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Federal Home Loan Bank, due 7/10/95 $ 20 $ 19,971
Federal Home Loan Mortgage Corp.,
due 7/05/95 -- 8/04/95 12 11,958
Federal National Mortgage Assn., due 7/31/95 15 14,926
Tennessee Valley Authority, due 7/27/95 18 17,924
- -------------------------------------------------------------------------------
Total Investments, at Amortized Cost $ 64,779
Other Assets, Less Liabilities -- 14.4% 10,883
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Net Assets -- 100.0% $ 75,662
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See notes to financial statements
MFS Variable Insurance Trust --
MFS Money Market Series
Statement of Assets and Liabilities
================================================================================
June 30, 1995
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Assets:
Investments, at amortized cost and value $ 64,779
Cash 5,235
Receivable from investment adviser 7,206
Deferred organization expenses 5,260
-----------
Total assets $ 82,480
-----------
Liabilities:
Distributions payable $ 230
Accrued expenses and other liabilities 6,588
-----------
Total liabilities $ 6,818
-----------
Net assets (represented by paid-in capital) $ 75,662
===========
Shares of beneficial interest outstanding 75,662
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Net asset value, offering price and redemption price per share
(net assets / shares of beneficial interest outstanding) $ 1.00
===========
See notes to financial statements
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MFS Variable Insurance Trust --
MFS Money Market Series
Statement of Operations
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Period Ended June 30, 1995 *
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Net investment income:
Interest income $ 1,380
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Expenses --
Management fee $ 145
Trustees' compensation 1,018
Shareholder servicing agent fee 10
Auditing fees 5,982
Legal fees 819
Amortization of organization expenses 725
Printing 532
Miscellaneous 226
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Total expenses $ 9,457
Preliminary reduction of expenses by investment adviser (9,282)
-----------
Net expenses $ 175
-----------
Net investment income $ 1,205
===========
* For the period from the commencement of investment operations, January 3,
1995 to June 30, 1995.
See notes to financial statements
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MFS Variable Insurance Trust --
MFS Money Market Series
Statement of Changes in Net Assets
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Period Ended June 30, 1995*
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Increase in net assets:
From operations --
Net investment income, declared as distributions
to shareholders $ 1,205
============
Series share (principal) transactions at net asset
value of $1.00 per share --
Net proceeds from sale of shares $ 66,087
Net asset value of shares issued to shareholders
in reinvestment of distributions 975
------------
Total increase in net assets $ 67,062
Net assets:
At beginning of period 8,600
------------
At end of period $ 75,662
============
* For the period from the commencement of investment operations, January 3,
1995 to June 30, 1995.
See notes to financial statements
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MFS Variable Insurance Trust --
MFS Money Market Series
Financial Highlights
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Period ended June 30, 1995 *
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Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 1.00
---------
Income from investment operations # --
Net investment income## $ 0.02
Less distributions declared to shareholders
from net investment income (0.02)
---------
Net asset value-- end of period $ 1.00
=========
Total return 1.99%+
Ratios (to average net assets)/Supplemental data##:
Expenses 0.60%+
Net investment income 2.04%+
Net assets at end of period (000 omitted) $ 76
* For the period from the commencement of investment operations, January 3,
1995 to June 30, 1995 .
+ Annualized;
++ Not annualized
# Per share data is based on average shares outstanding.
## The adviser voluntarily agreed to maintain the expenses of the Series at
not more than 1.00% of average daily net assets. To the extent actual
expenses were over these limitations, the net investment income per share
and the ratios would have been:
Net investment loss $ (0.13)
Ratios (to average net assets):
Expenses 32.76%+
Net investment loss (27.98)%+
See notes to financial statements
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NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Money Market Series (the Series) is a non-diversified series of MFS Variable
Insurance Trust (the Trust) which is comprised of the following twelve series:
Bond Series, Emerging Growth Series, Growth Series, Growth With Income Series,
High Income Series, Limited Maturity Series, Money Market Series, Research
Series, Strategic Fixed Income Series, Total Return Series, Utilities Series and
World Governments Series. 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. The
Series was seeded on or about February 1, 1994 but has remained inactive until
the current period. The commencement of investment operations took place on
January 3, 1995. As of June 30, 1995, there were three shareholders, who own all
of the outstanding shares of the Series.
(2) Significant Accounting Policies
Investment Valuations -- Money market instruments are valued at amortized cost,
which the Trustees have determined in good faith constitutes fair value. The
Series' use of amortized cost is subject to the Series' compliance with certain
conditions as specified under Rule 2a-7 of the Investment Company Act of 1940.
Repurchase Agreements -- The Series may enter into repurchase agreements with
institutions that the Series' investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The Series requires
that the securities purchased in a repurchase transaction be transferred to the
custodian in a manner sufficient to enable the Series to obtain those securities
in the event of a default under the repurchase agreement. The Series monitors,
on a daily basis, the value of the securities transferred to ensure that the
value, including accrued interest, of the securities under each repurchase
agreement is greater than amounts owed to the Series under each such repurchase
agreement.
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 operations of the Series.
Investment Transactions and Income -- Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and original issue discount are amortized or accreted for financial statement
and tax reporting purposes as required by federal income tax regulations.
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 income.
Accordingly, no provision for federal income or excise tax is provided. The net
income of the Series is determined once daily, as of the close of the New York
Stock Exchange, and all of the net income so determined is declared in shares as
a dividend to shareholders of record at the time of such determination.
Distributions are made in the form of additional shares of the Series or, at the
election of the shareholder, in cash, on the last business day of the month.
(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 effective annual rate of
0.50% of average daily net assets. Under a temporary expense reimbursement
agreement with MFS, MFS has voluntarily agreed to limit the operating expenses
of the Series at levels which increase over time. Currently MFS has agreed to
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limit the Series' expenses at an effective annual rate of 0.60% of average daily
net assets. MFS will pay all Series expenses in excess of the current limit
subject to reimbursement by the Series at a later date. To the extent that
actual Series expenses do not reach the limit, the Series will reimburse MFS for
prior expenses paid by MFS on behalf of the Series such that the Series' expense
ratio does not exceed 0.60% of average daily net assets. At June 30, 1995, the
aggregrate unreimbursed expenses owed to MFS by the Series amounted to $9,282.
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 of the officers
and Trustees of the Series are officers or directors of MFS and MFS Service
Center, Inc. (MFSC).
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 average daily net assets at an effective annual rate of up to
0.15%.
(4) Portfolio Securities
Purchases and maturities and sales of money market investments, exclusive of
securities subject to repurchase agreements, consisted solely of U.S. government
securities and aggregated $1,470,400 and $1,407,000 respectively.
(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 (without par value).
(6) Line of Credit
The Series entered into an agreement which enables it to participate with other
funds managed by MFS in an unsecured line of credit with a bank which permits
borrowings up to $350 million, collectively. Borrowings may be made to
temporarily finance the repurchase of Series shares. Interest is charged to each
funds, based on its borrowings, at a rate equal to the bank's base rate. In
addition, a commitment fee, based on the average daily unused portion of the
line of credit, is allocated among the participating funds at the end of each
quarter.
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Independent Auditors' Report
To the Trustees of MFS Variable Insurance Trust and Shareholders of MFS Money
Market Series:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS Money Market Series (the Series) (one of
the series constituting MFS Variable Insurance Trust) as of June 30, 1995, the
related statements of operations, changes in net assets and financial highlights
for the period from January 3, 1995 (the commencement of investment operations)
to June 30, 1995. These financial statements and financial highlights are the
responsibility of the Series' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the securities owned at June 30, 1995 by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS Money Market
Series at June 30, 1995, the results of its operations, the changes in its net
assets, and its financial highlights for the period from January 3, 1995 (the
commencement of investment operations) to June 30, 1995 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
August 4, 1995
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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.
