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Semiannual Report
June 30, 1996
MFS(R) MONEY MARKET SERIES
A Series of MFS(R) Variable Insurance Trust
[graphic omitted: two men in sitting in front of a window]
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MFS(R) MONEY MARKET 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 MANAGER Boston, MA 02107-9906
Geoffrey L. Kurinsky*
For additional information,
TREASURER contact your financial adviser.
W. Thomas London*
CUSTODIAN
ASSISTANT TREASURER Investors Bank & Trust Company
James O. Yost*
AUDITORS
SECRETARY Deloitte & Touche LLP
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
*Affiliated with the Investment Adviser
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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.
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, an unmanaged, market-capitalization-weighted total return index of
global stock market performance, was up 10.4%, while the Standard & Poor's 500
Composite Index (the S&P 500), a popular, unmanaged index of common stock
performance, returned 10.09%. 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, therefore, 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 manager 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/ Geoffrey L. Kurinsky
A. Keith Brodkin Geoffrey L. Kurinsky
Chairman and President Portfolio Manager
July 10, 1996
MFS(R) MONEY MARKET SERIES
For the six months ended June 30, 1996, the Series provided a total return of
2.19%. Interest rates on short-term (30 days and less) debt instruments
decreased moderately during the past six months, as the Federal Reserve lowered
rates on January 31, 1996 by 25 basis points (0.25%). At the present time, 100%
of the Series is invested in U.S. government or government guaranteed issues.
Furthermore, the average maturity of the Series on June 30, 1996 was 28 days,
versus 17 days on December 31, 1995. We continue to limit the Series'
investments to securities issued or guaranteed by the U.S. Treasury or agencies
or instrumentalities of the U.S. government, as well as to the highest quality
corporate issues, to help provide maximum security against credit risk.
We anticipate short-term interest rates remaining stable to slightly higher
over the next several months, and we expect to maintain relatively short
maturities in the portfolio.
The Series is neither insured nor guaranteed by the U.S. government, and
there can be no assurance that it will be able to maintain a stable net asset
value of $1.00 per share.
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.
PERFORMANCE SUMMARY
The information below illustrates the performance of MFS Money Market Series
shares.
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AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
1/03/95*-
6 Months 1 Year 6/30/96
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Cumulative Total Return +2.19% +4.58% +6.66%
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Average Annual Total Return -- +4.58% +4.42%
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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.
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PORTFOLIO OF INVESTMENTS - June 30, 1996
U.S. Government and Agency Obligations - 99.7%
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Principal Amount
Issuer (000 Omitted) Value
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Federal Agricultural Mortgage Corp., due 7/01/96 $11 $ 10,917
Federal Farm Credit Bank, due 7/11/96 - 8/09/96 23 22,867
Federal Home Loan Bank, due 7/10/96 - 7/29/96 32 31,818
Federal Home Loan Mortgage Corp., due 7/17/96 12 11,903
Federal National Mortgage Assn., due 7/12/96 - 8/29/96 38 37,632
Tennessee Valley Authority, due 8/01/96 17 16,875
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Total Investments, at Amortized Cost $132,012
Other Assets, Less Liabilities - 0.3% 385
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Net Assets - 100.0% $132,397
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See notes to financial statements
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FINANCIAL STATEMENTS
Statement of Assets and Liabilities
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June 30, 1996
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Assets:
Investments, at amortized cost and value $132,012
Cash 406
Interest receivable 506
Receivable from investment adviser 7,445
Deferred organization expenses 6,461
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Total assets $146,830
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Liabilities:
Distributions payable $ 507
Payable to affiliates -
Management fee 5
Shareholder servicing agent fee 9
Accrued expenses and other liabilities 13,912
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Total liabilities $ 14,433
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Net assets (represented by paid-in capital) $132,397
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Shares of beneficial interest outstanding 132,397
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Net asset value, offering price and redemption price
per share (net assets of $132,397 / 132,397 shares
of beneficial interest outstanding) $1.00
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See notes to financial statements
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Statement of Operations
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Six Months Ended June 30, 1996
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Net investment income:
Interest income $ 3,767
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Expenses -
Management fee $ 374
Trustees' compensation 1,017
Shareholder servicing agent fee 35
Printing 11,402
Auditing fees 3,342
Amortization of organization expenses 916
Legal fees 372
Custodian fee 69
Miscellaneous 288
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Total expenses $ 17,815
Preliminary reduction of expenses by investment adviser (17,341)
Fees paid indirectly (25)
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Net expenses $ 449
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Net investment income $ 3,318
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See notes to financial statements
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Statement of Changes in Net Assets
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Six Months Ended Period Ended
June 30, 1996 December 31, 1995*
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Increase (decrease) in net assets:
From operations -
Net investment income, declared as
distributions to shareholders $ 3,318 $ 5,423
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Series share (principal) transactions at
net asset value of $1.00 per share -
Net proceeds from sale of shares $ 85,475 $290,633
Net asset value of shares
issued to shareholders in reinvestment
of distributions 2,800 5,321
Cost of shares reacquired (136,012) (124,420)
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Total increase (decrease) in net
assets $(47,737) $171,534
Net assets:
At beginning of period 180,134 8,600
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At end of period $132,397 $180,134
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* For the period from the commencement of investment operations,
January 3, 1995 to December 31, 1995.
See notes to financial statements
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FINANCIAL STATEMENTS - continued
Financial Highlights
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Six Months Ended Period Ended
June 30, 1996 December 31, 1995*
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Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $ 1.00 $ 1.00
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Income from investment operations# -
Net investment income(S) $ 0.02 $ 0.04
Less distributions declared to shareholders
from net investment income (0.02) (0.04)
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Net asset value - end of period $ 1.00 $ 1.00
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Total return 4.39%+ 4.37%+
Ratios (to average net assets)/Supplemental data(S):
Expenses 0.60%+ 0.60%+
Net investment income 4.43%+ 4.54%+
Net assets at end of period (000 omitted) $ 132 $ 180
* For the period from the commencement of investment operations, January
3, 1995 to December 31, 1995.
+ Annualized.
# Per share data is based on average shares outstanding.
(S) The Adviser voluntarily agreed to maintain the expenses of the Series at
not more than 0.60% 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 $(0.08) $ (0.14)
Ratios (to average net assets):
Expenses 23.81%+ 21.54%+
Net investment loss (18.77)%+ (16.37)%+
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 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 7 shareholders in the Series.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
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.
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.
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 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 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.
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
0.50% 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
0.60% of its average daily net assets. The Series in turn will pay MFS an
expense reimbursement fee not greater than 0.60% 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 $42,317, including $17,341 incurred during the 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 maturities and sales of money market investments, exclusive of
securities subject to repurchase agreements, consisted solely of U.S. government
securities and aggregated $1,067,637 and $1,104,290, respectively.
(5) Shares of Beneficial Interest
The 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
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 period ended June
30, 1996 was $10.
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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, 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 the period from January 3, 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. 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 Money Market
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
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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.
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VMM-3-8/96
