<PAGE>
[LOGO: MFS] SEMIANNUAL REPORT
THE FIRST NAME IN MUTUAL FUNDS JUNE 30, 1996
MFS(R) GROWTH WITH INCOME SERIES
A Series of MFS(R) Variable Insurance Trust
[graphic omitted: two men sitting in front of a window]
<PAGE>
MFS(R) GROWTH WITH INCOME SERIES
A SERIES OF MFS(R) VARIABLE INSURANCE TRUST
TRUSTEES INVESTMENT ADVISER
A. Keith Brodkin* Massachusetts Financial Services Company
Chairman and President 500 Boylston Street
Boston, MA 02116-3741
Nelson J. Darling, Jr.
Trustee, Eastern Enterprises DISTRIBUTOR
(diversified holding company) MFS Fund Distributors, Inc.
500 Boylston Street
William R. Gutow Boston, MA 02116-3741
Vice Chairman,
Capitol Entertainment SHAREHOLDER SERVICE CENTER
(Blockbuster Video Franchise) MFS Service Center, Inc.
P.O. Box 1400
PORTFOLIO MANAGERS Boston, MA 02107-9906
John D. Laupheimer, Jr.*
Kevin R. Parke* For additional information,
contact your financial adviser.
TREASURER
W. Thomas London* CUSTODIAN
Investors Bank & Trust Company
ASSISTANT TREASURER
James O. Yost* AUDITORS
Deloitte & Touche LLP
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
*Affiliated with the Investment Adviser
<PAGE>
Dear Contract Owner:
Rising global liquidity has underpinned international equity markets over the
past six months, and equities so far have ignored the "growth scare" that has
affected most bond markets in 1996. Low interest rates in Europe and Japan and a
growing money supply, plus signs of economic recovery and accelerating corporate
earnings in those areas, have reinforced the positive message coming from the
U.S. equity market. Investors in these markets believe that the same trends are
at work as in the United States, but that the international markets are in an
earlier phase of their cycle. For the six months ended June 30, 1996, the U.S.
stock market, as measured by the Standard & Poor's 500 Composite Index (the S&P
500), a popular, unmanaged index of common stock performance, returned 10.09%.
U.S. Outlook
Real (inflation-adjusted) economic growth in the first quarter of 1996 was 2.3%
on an annualized basis, and it appears that second-quarter growth could be even
stronger. Thus, real growth in gross domestic product has started the year at a
rate exceeding our expectations. While we continue to believe that growth from
quarter to quarter will be uneven, it is now our expectation that growth for all
of 1996 could exceed 2.5%. Although individual consumers appear to be carrying
an excessive debt load, the consumer sector itself, which represents two-thirds
of the economy, continues to be impressive as the auto and housing markets
remain resilient. Consumer spending has also been positively impacted by
widespread job growth. At the same time, however, the economies of Europe and
Japan continue to be in the doldrums, weakening U.S. export markets while
subduing the capital spending plans of American corporations. Finally, due to
the pickup in economic activity and increasing job growth, it appears that
inflation may accelerate slightly this year, and the Federal Reserve Board is
expected to continue its diligent anti-inflationary stance.
Global Outlook
The first half of 1996 has seen a continuation of the positive performance of
global equity markets exhibited in 1995. Positive local currency returns were
generated throughout the world. The Morgan Stanley Capital International (MSCI)
Europe Index was up 10.4%, with returns ranging from 2.6% in the United Kingdom
to 20.9% in Spain; the MSCI Pacific Index was up 7.5%, with returns ranging from
- -2.2% in New Zealand to 14.3% in Malaysia. The MSCI indices are unmanaged,
market-capitalization-weighted total return indices of global stock market
performance. Meanwhile, the S&P 500 gained 10.1%, and the IFC (International
Finance Corporation) Global Composite Index, a market-capitalization-weighted
index comprising the most active stocks of emerging markets (as defined by the
World Bank), rose 13.5%. The only major negative was the strong U.S. dollar,
which gained 6% against the Japanese yen and the German mark and ate into
dollar-based returns. We believe that the equity markets will continue to be
fundamentally driven, although the economic outlook is uncertain, with the
strength of the U.S. economy unclear, Japan starting to show more meaningful
signs of recovery, and Europe's recovery still in its early stages. Lower
interest rates, particularly in Europe and Japan, have helped support strong
equity markets. While we believe that interest rates are unlikely to fall
further, a subdued global inflation outlook could mean that rates rise little
from current levels, which should help support current equity market valuations.
Therefore, for the remainder of 1996, we believe corporate earnings growth will
be the key to further stock market gains. It is not possible to invest in an
index.
Bond Markets
Persistent signs of economic weakness led to decreases in short-term interest
rates by the Federal Reserve in late 1995 and early 1996. However, should signs
of economic growth and, particularly, of higher inflation continue, we would
expect the Fed to maintain its anti-inflationary stance. In the beginning of the
year, bond markets were trading in a narrow range, as investors shifted between
concern about the lack of a budget resolution in Washington and hopes that
sluggish economic reports and low inflation might lead to lower interest rates.
Later, fixed-income markets began reacting to conflicting signals regarding the
strength of the economy with more-volatile trading patterns marked by an upward
bias in interest rates. Interest rates may move even higher over the coming
months, but we believe the current rise in bond yields is reaching a point where
fixed-income markets are becoming attractively valued.
In world bond markets, the most important development has been the
better-than-expected strength of the U.S. economy. Market expectations for
further interest rate reductions by the Federal Reserve have shifted to concerns
of possible interest rate increases as growth has appeared to be in an
above-trend pattern. Long-term interest rates have also risen, reflecting
increased concerns about inflation and disappointment with the failed attempt to
reach an accord on the federal budget. The rise in U.S. rates has helped push up
rates worldwide, although foreign rates have generally risen less than in the
United States. The overperformance has been most pronounced in some of the
higher-yielding European bond markets.
Overall, the combination of rising interest rates and a stronger dollar has
translated into negative performance for international bonds. Looking forward,
we believe dollar strength may continue until growth in Europe, and especially
in Germany, rebounds, which we expect to occur in the second half of this year.
The outlook for world growth is continuing to improve and, thus, some caution
regarding bond markets is probably warranted.
Stock Market
While we do not expect the U.S. stock market to match the extraordinary
performance of 1995, we continue to be positive about the equity market this
year. Although we believe the equity market represents fair value at current
levels, the expected slowdown in the growth of corporate earnings and the
increases in interest rates experienced so far this year raise near-term
concerns. Further increases in interest rates, and an acceleration of inflation
coupled with an additional slowdown in corporate earnings growth, could have a
negative effect on the stock market. However, to the extent that some earnings
disappointments are taken as a sign that the economy is not overheating, this
may prove beneficial for the longer-term health of the equity market. We
continue to believe that many of the technology-driven productivity gains that
U.S. companies have made in recent years will continue to enhance corporate
America's competitiveness and profitability. Therefore, while we have some
near-term concerns, we remain quite constructive on the long-term viability of
the equity market.
Comments from the portfolio managers of the Series are presented below. We
appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ A. Keith Brodkin /s/ John D. Laupheimer, Jr. /s/ Kevin R. Parke
---------------- ----------------------- --------------
A. Keith Brodkin John D. Laupheimer, Jr. Kevin R. Parke
Chairman and President Portfolio Manager Portfolio Manager
July 10, 1996
MFS(R) GROWTH WITH INCOME SERIES
For the six months ended June 30, 1996, the Growth with Income Series provided a
total return of 11.12%. This compares to a 10.09% return for the S&P 500 for the
same period. The Series follows a conservative growth investment policy. We
attempt to structure the portfolio with stocks which we believe possess modestly
above-average earnings growth prospects relative to the S&P 500. We also attempt
to maintain an overall conservative investment posture by focusing on companies
with moderately below-average price-to-earnings ratios relative to the S&P 500.
In addition, we concentrate on large-capitalization, well-established, and
recognized corporations. This is a long-term investment strategy unaffected by
our short-term market outlook.
The Series is essentially fully invested, which is our long-term policy, as
we believe that the potential long-term returns of the stock market outweigh its
normal fluctuations. The Series is positioned with overweightings in financial
services, where we seek to find companies which we believe have strong growth
potential selling at substantial discounts to the market, and industrial goods
and services, particularly in the aerospace and defense industry. We are
underweighted in basic materials, where we do not see strong enough demand to
offset high capacity growth, and utilities, where we see little growth and
increased competition.
Despite the long duration of the current economic upturn, we look forward to
continued economic growth. The combination of low short-term interest rates and
a vigilant long-term bond market leads us to believe that the economy will
unfold in a slow-growth, low-inflation pattern. This has two implications for
the equity market. First, the valuation levels of the market, while high
relative to periods of higher inflation, could be sustainable. Second, profit
growth could slow relative to last year's very healthy pace. We feel that the
most important factor in portfolio performance will be the earnings performance
of individual companies.
Looking forward, we see a market where sector or industry trends are less
important than individual company earnings. We expect this to be our primary
focus for the rest of 1996.
PORTFOLIO MANAGER PROFILES
John Laupheimer joined the MFS Research Department in 1981 as an industry
specialist. A graduate of Boston University and the Sloan School of Management
of Massachusetts Institute of Technology, he was named Investment Officer in
1983, Assistant Vice President - Investments in 1984, Vice President Investments
in 1986 and Senior Vice President in 1995.
Kevin R. Parke joined the MFS Research Department in 1985. A graduate of Lehigh
University and the Harvard University Graduate School of Business
Administration, he was named Assistant Vice President - Investments in 1987,
Vice President - Investments in 1988, Senior Vice President in 1993 and Director
of Equity Research in 1995. He and John Laupheimer have managed MFS Growth with
Income Series since its inception in October 1995.
PERFORMANCE SUMMARY
The information below illustrates the performance of MFS Growth with Income
Series shares.
CUMULATIVE TOTAL RATES OF RETURN
10/09/95* -
6 Months 6/30/96
- --------------------------------------------------------------------------------
Cumulative Total Return +11.12% +18.50%
- --------------------------------------------------------------------------------
All results are historical and, therefore, are not an indication of future
results. The investment return and principal value of an investment in the
product will vary with changes in market conditions, and shares, 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. No Series results reflect expenses that would be imposed by insurance
company separate accounts.
*Commencement of investment operations.
<PAGE>
PORTFOLIO OF INVESTMENTS - June 30, 1996
Common Stocks - 67.7%
- -----------------------------------------------------------------------------
Issuer Shares Value
- -----------------------------------------------------------------------------
U.S. Stocks - 65.5%
Aerospace - 5.7%
Allied Signal, Inc. 550 $ 31,419
Boeing Co. 200 17,425
General Dynamics Corp. 200 12,400
Lockheed-Martin Corp. 600 50,400
McDonnell Douglas Co. 1,000 48,500
Raytheon Co. 900 46,462
United Technologies Corp. 300 34,500
----------
$ 241,106
- -----------------------------------------------------------------------------
Agricultural Products - 0.5%
AGCO Corp. 200 $ 5,550
Case Corp. 300 14,400
----------
$ 19,950
- -----------------------------------------------------------------------------
Apparel and Textiles - 1.5%
Intimate Brands, Inc., "A" 100 $ 2,288
Nike, Inc., "B" 400 41,100
VF Corp. 300 17,887
----------
$ 61,275
- -----------------------------------------------------------------------------
Automotive - 0.4%
Eaton Corp. 100 $ 5,863
Ford Motor Co. 100 3,238
General Motors Corp. 100 5,237
Goodrich (B.F.) Co. 100 3,738
----------
$ 18,076
- -----------------------------------------------------------------------------
Banks and Credit Companies - 5.4%
Chase Manhattan Corp. 100 $ 7,063
First Bank System, Inc. 800 46,400
First Chicago NBD Corp. 650 25,431
Firstar Corp. 400 18,450
National City Corp. 800 28,100
Northern Trust Co. 300 17,325
Norwest Corp. 1,300 45,338
SunTrust Banks, Inc. 600 22,200
U.S. Bancorp 400 14,450
----------
$ 224,757
- -----------------------------------------------------------------------------
Biotechnology - 0.2%
Guidant Corp. 200 $ 9,850
- -----------------------------------------------------------------------------
Business Machines - 0.7%
Digital Equipment Corp.* 200 $ 9,000
Hewlett-Packard Co. 100 9,963
Sun Microsystems, Inc.* 200 11,775
----------
$ 30,738
- -----------------------------------------------------------------------------
Business Services - 0.9%
Alco Standard Corp. 500 $ 22,625
Computer Sciences, Inc.* 200 14,950
----------
$ 37,575
- -----------------------------------------------------------------------------
Cellular Telephones - 0.1%
AirTouch Communications, Inc.* 100 $ 2,825
- -----------------------------------------------------------------------------
Chemicals - 0.9%
du Pont (E. I.) de Nemours & Co. 200 $ 15,825
Grace (W.R.) & Co. 100 7,088
Monsanto Corp. 500 16,250
----------
$ 39,163
- -----------------------------------------------------------------------------
Computer Software - Personal Computers - 0.6%
Microsoft Corp.* 200 $ 24,025
- -----------------------------------------------------------------------------
Computer Software - Systems - 1.1%
Computer Associates International, Inc. 400 $ 28,500
Oracle Systems Corp.* 400 15,775
----------
$ 44,275
- -----------------------------------------------------------------------------
Consumer Goods and Services - 6.1%
Colgate-Palmolive Co. 400 $ 33,900
Gillette Co. 1,050 65,494
Philip Morris Cos., Inc. 800 83,200
Procter & Gamble Co. 400 36,250
Service Corp. International 200 11,500
Sherwin-Williams Co. 100 4,650
Tyco International Ltd. 300 12,225
UST, Inc. 200 6,850
----------
$ 254,069
- -----------------------------------------------------------------------------
Defense Electronics - 0.2%
Loral Space & Communications* 500 $ 6,813
- -----------------------------------------------------------------------------
Electrical Equipment - 2.5%
General Electric Co. 800 $ 69,200
Honeywell, Inc. 650 35,425
----------
$ 104,625
- -----------------------------------------------------------------------------
Electronics - 1.2%
Intel Corp. 600 $ 44,063
LSI Logic Corp.* 300 7,800
----------
$ 51,863
- -----------------------------------------------------------------------------
Entertainment - 1.5%
Circus Circus Enterprises, Inc.* 200 $ 8,200
Comcast Corp., "A" 100 1,850
Disney (Walt) Co. 300 18,863
Harrah's Entertainment, Inc.* 300 8,475
Mirage Resorts, Inc.* 200 10,800
Viacom, Inc., "B"* 400 15,550
----------
$ 63,738
- -----------------------------------------------------------------------------
Financial Institutions - 2.3%
Associates First Capital, "A"* 100 $ 3,763
Beneficial Corp. 750 42,093
Federal Home Loan Mortgage Corp. 200 17,100
MBNA Corp. 100 2,850
State Street Boston Corp. 500 25,500
Union Planters Corp. 200 6,075
----------
$ 97,381
- -----------------------------------------------------------------------------
Food and Beverage Products - 3.9%
CPC International, Inc. 300 $ 21,600
Campbell Soup Co. 100 7,050
General Mills, Inc. 800 43,600
Nabisco Holding Corp., "A" 500 17,688
PepsiCo, Inc. 1,300 45,987
Ralston-Purina Group 450 28,856
----------
$ 164,781
- -----------------------------------------------------------------------------
Forest and Paper Products - 0.9%
Kimberly Clark Corp. 500 $ 38,625
- -----------------------------------------------------------------------------
Insurance - 4.6%
AFLAC, Inc. 500 $ 14,938
CIGNA Corp. 350 41,256
CNA Financial Corp., "A" 100 10,300
MBIA, Inc. 300 23,362
Progressive Corp. Ohio 700 32,375
St. Paul Cos., Inc. 300 16,050
Torchmark Corp. 550 24,062
Transamerica Corp. 400 32,400
----------
$ 194,743
- -----------------------------------------------------------------------------
Machinery - 1.9%
Deere & Co., Inc. 550 $ 22,000
Ingersoll Rand Co. 500 21,875
York International Corp. 700 36,225
----------
$ 80,100
- -----------------------------------------------------------------------------
Medical and Health Products - 4.0%
American Home Products Corp. 300 $ 18,038
Baxter International, Inc. 300 14,175
Johnson & Johnson 800 39,600
Lilly (Eli) & Co. 300 19,500
Pfizer, Inc. 400 28,550
Rhone-Poulenc Rorer, Inc. 200 13,425
Warner-Lambert Co. 600 33,000
----------
$ 166,288
- -----------------------------------------------------------------------------
Medical and Health Technology and Services - 1.2%
Medtronic, Inc. 200 $ 11,200
Pacificare Health Systems, Inc., "B"* 300 20,325
St. Jude Medical, Inc.* 300 10,050
United Healthcare Corp. 200 10,100
----------
$ 51,675
- -----------------------------------------------------------------------------
Metals and Minerals - 0.6%
Aluminum Companies of America 100 $ 5,738
Phelps Dodge Corp. 300 18,712
----------
$ 24,450
- -----------------------------------------------------------------------------
Oil Services - 0.2%
Schlumberger Ltd. 100 $ 8,425
- -----------------------------------------------------------------------------
Oils - 4.0%
Amoco Corp. 300 $ 21,713
Chevron Corp. 100 5,900
Exxon Corp. 400 34,750
Mobil Corp. 550 61,669
Royal Dutch Petroleum Co. 100 15,375
Texaco, Inc. 100 8,387
USX-Marathon Group 900 18,112
----------
$ 165,906
- -----------------------------------------------------------------------------
Photographic Products - 0.7%
Eastman Kodak Co. 400 $ 31,100
- -----------------------------------------------------------------------------
Pollution Control - 0.2%
WMX Technologies, Inc. 200 $ 6,550
- -----------------------------------------------------------------------------
Printing and Publishing - 1.2%
Gannett Co., Inc. 200 $ 14,150
Tribune Co., Inc. 500 36,312
----------
$ 50,462
- -----------------------------------------------------------------------------
Railroads - 2.7%
CSX Corp. 1,000 $ 48,250
Conrail, Inc. 400 26,550
Illinois Central Corp. 825 23,409
Norfolk Southern 200 16,950
----------
$ 115,159
- -----------------------------------------------------------------------------
Restaurants and Lodging - 0.1%
Mandarin Oriental International Ltd. 2,000 $ 2,800
- -----------------------------------------------------------------------------
Special Products and Services - 0.3%
Stanley Works 400 $ 11,900
- -----------------------------------------------------------------------------
Stores - 2.8%
Circuit City Stores, Inc. 500 $ 18,063
Home Depot, Inc. 300 16,200
Lowes Cos., Inc. 500 18,063
May Department Stores Co. 550 24,062
Penney (J.C.), Inc. 400 21,000
Sears, Roebuck & Co. 300 14,587
TJX Companies, Inc. (The) (New) 200 6,750
----------
$ 118,725
- -----------------------------------------------------------------------------
Supermarkets - 0.5%
Safeway, Inc.* 400 $ 13,200
Vons Cos., Inc.* 200 7,475
----------
$ 20,675
- -----------------------------------------------------------------------------
Telecommunications - 0.3%
Lucent Technologies, Inc. 300 $ 11,363
- -----------------------------------------------------------------------------
Utilities - Electric - 1.0%
Cinergy Corp. 200 $ 6,400
DPL, Inc. 200 4,875
FPL Group, Inc. 200 9,200
Illinova Corp. 100 2,875
PECO Energy Co. 200 5,200
Pinnacle West Capital Corp. 100 3,037
Portland General Corp. 400 12,350
----------
$ 43,937
- -----------------------------------------------------------------------------
Utilities - Gas - 0.4%
Pacific Enterprises 200 $ 5,925
Pan Energy Corp. 300 9,862
----------
$ 15,787
- -----------------------------------------------------------------------------
Utilities - Telephone - 2.2%
AT&T Co. 100 $ 6,200
Ameritech Corp. 200 11,875
Bell Atlantic Corp. 100 6,375
BellSouth Corp. 300 12,712
GTE Corp. 550 24,613
MCI Communications Corp. 400 10,250
Pacific Telesis Group 200 6,750
SBC Communications, Inc. 200 9,850
Sprint Corp. 100 4,200
----------
$ 92,825
- -----------------------------------------------------------------------------
Total U.S. Stocks $2,748,380
- -----------------------------------------------------------------------------
Foreign Stocks - 2.2%
Hong Kong - 0.2%
Wharf Holdings Ltd. (Real Estate) 2,000 $ 7,157
- -----------------------------------------------------------------------------
Italy - 0.1%
Telecom Italia Mobile S.p.A.
(Telecommunications) 800 $ 1,787
- -----------------------------------------------------------------------------
Japan - 0.4%
Takeda Chemical Industry (Chemicals) 1,000 $ 17,713
- -----------------------------------------------------------------------------
Netherlands - 0.1%
IHC Caland NV (Transportation) 100 $ 4,922
- -----------------------------------------------------------------------------
New Zealand - 0.1%
Lion Nathan Ltd. (Beverages) 2,300 $ 6,013
- -----------------------------------------------------------------------------
Sweden - 0.8%
Astra AB, Free Shares, "B" (Medical and
Health Products) 650 $ 28,354
Sparbanken Svergie, "A" (Financial
Services) 500 6,490
----------
$ 34,844
- -----------------------------------------------------------------------------
United Kingdom - 0.5%
PowerGen PLC (Utilities - Electric) 1,400 $ 10,193
PowerGen PLC, Partly Paid Shares (Utilities
- Electric) 2,000 10,214
----------
$ 20,407
- -----------------------------------------------------------------------------
Total Foreign Stocks $ 92,843
- -----------------------------------------------------------------------------
Total Common Stocks (Identified Cost, $2,708,600) $2,841,223
- -----------------------------------------------------------------------------
Convertible Preferred Stock - 0.1%
- -----------------------------------------------------------------------------
Issuer Shares Value
- -----------------------------------------------------------------------------
Oils
Atlantic Richfield Co., 9% (Identified Cost,
$2,691) 100 $ 2,438
- -----------------------------------------------------------------------------
Convertible Bonds - 0.5%
- -----------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- -----------------------------------------------------------------------------
Chemicals - 0.3%
Sandoz Capital BVI Ltd., 2s, 2002## $ 10 $ 10,650
- -----------------------------------------------------------------------------
Medical and Health Technology and Services - 0.2%
Roche Holdings, Inc., 0s, 2010## $ 20 $ 8,450
- -----------------------------------------------------------------------------
Total Convertible Bonds (Identified Cost, $19,275) $ 19,100
- -----------------------------------------------------------------------------
Short-Term Obligation - 31.2%
- -----------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., due 7/01/96,
at Amortized Cost $1,310 $1,309,402
- -----------------------------------------------------------------------------
Total Investments (Identified Cost, $4,039,968) $4,172,163
Other Assets, Less Liabilities - 0.5% 21,488
- -----------------------------------------------------------------------------
Net Assets - 100.0% $4,193,651
- -----------------------------------------------------------------------------
*Non-income producing security.
##SEC Rule 144A restriction.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- ------------------------------------------------------------------------------
June 30, 1996
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $4,039,968) $4,172,163
Cash 5,182
Receivable for Series shares sold 13,648
Interest and dividends receivable 6,396
Receivable from investment adviser 8,245
Deferred organization expenses 7,849
----------
Total assets $4,213,483
----------
Liabilities:
Payable for investments purchased $ 4,606
Payable for Series shares reacquired 70
Payable to affiliates -
Management fee 257
Shareholder servicing agent fee 20
Accrued expenses and other liabilities 14,879
----------
Total liabilities $ 19,832
----------
Net assets $4,193,651
==========
Net assets consist of:
Paid-in capital $4,036,362
Unrealized appreciation on investments and translation of
assets and liabilities
in foreign currencies 132,198
Accumulated undistributed net realized gain on investments
and foreign currency transactions 12,206
Accumulated undistributed net investment income 12,885
----------
Total $4,193,651
==========
Shares of beneficial interest outstanding 355,812
==========
Net asset value, offering price, and redemption price per
share (net assets of $4,193,651 / 355,812 shares of
beneficial interest outstanding) $11.79
======
See notes to financial statements
<PAGE>
Statement of Operations
- ------------------------------------------------------------------------------
Six Months Ended June 30, 1996
- ------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 14,959
Interest 5,980
Foreign taxes withheld (279)
--------
Total investment income $ 20,660
--------
Expenses -
Management fee $ 5,831
Trustees' compensation 1,017
Shareholder servicing agent fee 281
Printing 10,734
Auditing fees 5,592
Amortization of organization expenses 916
Custodian fee 881
Legal fees 372
Miscellaneous 304
--------
Total expenses $ 25,928
Preliminary reduction of expenses by investment adviser (17,993)
Fees paid indirectly (160)
--------
Net expenses $ 7,775
--------
Net investment income $ 12,885
--------
Realized and unrealized gain on investments:
Realized gain (identified cost basis) -
Investment transactions $ 12,134
Foreign currency transactions 72
--------
Net realized gain on investments and foreign currency
transactions $ 12,206
--------
Change in unrealized appreciation -
Investments $111,443
Translation of assets and liabilities in foreign currencies 3
--------
Net unrealized gain on investments $111,446
--------
Net realized and unrealized gain on investments and
foreign currency $123,652
--------
Increase in net assets from operations $136,537
========
See notes to financial statements
<PAGE>
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------
Six Months Ended Period Ended
June 30, 1996 December 31, 1995*
- ------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income $ 12,885 $ 1,747
Net realized gain on investments and
foreign currency transactions 12,206 47
Net unrealized gain on investments
and foreign currency translation 111,446 20,752
---------- ----------
Increase in net assets from
operations $ 136,537 $ 22,546
---------- ----------
Distributions declared to shareholders -
From net investment income $ -- $ (1,794)
In excess of net investment income -- (20)
Tax return of capital -- (35)
---------- ----------
Total distributions declared to
shareholders $ -- (1,849)
---------- ----------
Series share (principal) transactions -
Net proceeds from sale of shares $3,712,919 $ 338,677
Net asset value of shares issued to
shareholders in reinvestment of
distributions -- 1,849
Cost of shares reacquired (20,628) (5,000)
---------- ----------
Increase in net assets from Series
share transactions $3,692,291 $ 335,526
---------- ----------
Total increase in net assets $3,828,828 $ 356,223
Net assets:
At beginning of period 364,823 8,600
---------- ----------
At end of period (including
accumulated undistributed net
investment income of $12,885 and
$0, respectively) $4,193,651 $ 364,823
========== ==========
*For the period from the commencement of investment operations, October 9, 1995
to December 31, 1995.
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
- ---------------------------------------------------------------------------------------------------------
Six Months Ended Period Ended
June 30, 1996 December 31, 1995*
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $10.61 $10.00
------ ------
Income from investment operations# -
Net investment income(S) $ 0.09 $ 0.05
Net realized and unrealized gain on
investments and foreign currency
transactions 1.09 0.61
------ ------
Total from investment operations $ 1.18 $ 0.66
------ ------
Less distributions declared to shareholders -
From net investment income $ -- $(0.05)
------ ------
Total distributions declared to shareholders $ -- $(0.05)
------ ------
Net asset value - end of period $11.79 $10.61
====== ======
Total return 11.12%++ 6.64%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 1.00%+ 1.00%+
Net investment income 1.66%+ 2.20%+
Portfolio turnover 9% 2%
Average Commission Rate### $0.0342 --
Net assets at end of period (000 omitted) $4,194 $365
*For the period from the commencement of investment operations, October 9, 1995 to December 31, 1995.
+Annualized.
++Not annualized.
#Per share data is based on average shares outstanding.
###Average Commission Rate is calculated for Funds with fiscal years beginning on or after September 1, 1995.
(S)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 loss per
share and the ratios would have been:
Net investment loss $(0.04) $(0.41)
Ratios (to average net assets):
Expenses 3.33%+ 21.44%+
Net investment loss (0.68)%+ (18.24)%+
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Growth with Income Series (the Series) is a diversified series of MFS
Variable Insurance Trust (the Trust) which is comprised of the following twelve
series: MFS Bond Series, MFS Emerging Growth Series, MFS Growth Series, MFS
Growth with Income Series, MFS High Income Series, MFS Limited Maturity Series,
MFS Money Market Series, MFS Research Series, MFS Strategic Fixed Income Series,
MFS Total Return Series, MFS Utilities Series, and MFS 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. As of
June 30, 1996 there were 9 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. Investments
in foreign securities are vulnerable to the affects of changes in the relative
values of the local currency and the U.S. dollar and to the affects 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 valued at last sale prices. Unlisted
equity securities or listed equity securities for which last sale prices are not
available are valued at last quoted bid prices. Debt securities (other than
short-term obligations which mature in 60 days or less), including listed
issues, are valued on the basis of valuations furnished by dealers or by a
pricing service with consideration to factors such as institutional-size trading
in similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics and other market data, without exclusive reliance
upon exchange or over-the-counter prices. Short-term obligations, which mature
in 60 days or less, are valued at amortized cost, which approximates market
value. Securities for which there are no such quotations or valuations are
valued at fair value as determined in good faith by or at the direction of 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
operations of the Series.
Forward Foreign Currency Exchange Contracts - The Series may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering these contracts from the potential inability of counterparties to meet
the terms of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar. The Series will enter into forward
contracts for hedging purposes as well as for non-hedging purposes. For hedging
purposes, the Series may enter into contracts to deliver or receive foreign
currency it will receive from or require for its normal investment activities.
It may also use contracts in a manner intended to protect foreign
currency-denominated securities from declines in value due to unfavorable
exchange rate movements. For non-hedging purposes, the Series may enter into
contracts with the intent of changing the relative exposure of the Series'
portfolio of securities to different currencies to take advantage of anticipated
changes. The forward foreign currency exchange contracts are adjusted by the
daily exchange rate of the underlying currency and any gains or losses are
recorded for financial statement purposes as unrealized until the contract
settlement date.
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. Dividend
income is recorded on the ex-dividend date for dividends received in cash.
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' custodian bank calculates its fee based on
the Series' average daily net assets. This fee is reduced according to an
expense offset arrangement with State Street Bank, the dividend disbursing
agent, which provides for partial reimbursement of custody fees based on a
formula developed to measure the value of cash deposited by the Series with the
custodian and with the dividend disbursing agent. This amount is shown as a
reduction of expenses in 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 taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Series files a tax
return annually using tax accounting methods required under provisions of the
Code which may differ from generally accepted accounting principles, the basis
on which these financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial statements
may differ from that reported on the Series' tax return, and consequently, the
character of distributions to shareholders reported in the financial highlights
may differ from that reported to shareholders on Form 1099-DIV. Foreign taxes
have been provided for on interest and dividend income earned on foreign
investments in accordance with the applicable country's tax rates and to the
extent unrecoverable are recorded as a reduction of investment income.
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 are reported in the financial statements as a tax return of
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 accumulated net realized
gains.
(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
0.75% of average daily net assets. Under a temporary expense reimbursement
agreement with MFS, MFS has voluntarily agreed to pay the Series' operating
expenses such that the total operating expenses of the Series shall not exceed
1.00% of its average daily net assets. The Series in turn will pay MFS an
expense reimbursement fee not greater than 1.00% of the Series' 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, 1996, the aggregate unreimbursed expenses owed to MFS by the
Series amounted to $34,219, including $17,993 incurred in the current period.
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
0.035%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions and short-term obligations, aggregated $2,544,744
and $142,466 respectively.
The cost and unrealized appreciation or depreciation in value of the investments
owned by the Series, as computed on a federal income tax basis, are as follows:
Aggregate cost $4,039,968
==========
Gross unrealized appreciation 174,556
Gross unrealized depreciation (42,361)
----------
Net unrealized appreciation $ 132,195
==========
(5) Shares of Beneficial Interest
The Trust's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par value).
Transactions in Series shares were as follows:
Six Months Ended Period Ended
June 30, 1996 December 31, 1995*
------------------------- --------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------
Shares sold 323,173 $3,712,919 33,867 $338,677
Shares issued to shareholders
in reinvestment of
distributions -- -- 175 1,849
Shares reacquired (1,763) (20,628) (500) (5,000)
------- ---------- ------ --------
Net increase 321,410 $3,692,291 33,542 $335,526
======= ========== ====== ========
*For the period from commencement of investment operations, October 9, 1995, to
December 31, 1995.
(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
fund, based on its borrowings, at a rate equal to the bank's base rate. In
addition, a commitment fee, based on the average daily unused portion of the
line of credit, is allocated among the participating funds at the end of each
quarter. The commitment fee allocated to the Series for the six months ended
June 30, 1996 was $6.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Variable Insurance Trust and Shareholders of MFS Growth
with Income Series:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS Growth with Income Series (the Series) (one
of the series constituting MFS Variable Insurance Trust) as of June 30, 1996,
the related statement of operations for the six months then ended, and the
statements of changes in net assets and financial highlights for the six months
then ended and for the period from October 9, 1995 (commencement of investment
operations) to December 31, 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 audits.
We conducted our audits 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, 1996 by correspondence with the custodian and brokers; where replies were
not received from brokers, we performed other auditing procedures. 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 audits provide 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 Growth with
Income Series at June 30, 1996, the results of its operations, the changes in
its net assets, and its financial highlights for the respective stated periods
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
August 2, 1996
---------------------------------------------
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.
<PAGE>
VGI-3-8/96/1.25M
