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[Logo]
THE FIRST NAME IN MUTUAL FUNDS SEMIANNUAL REPORT
JUNE 30, 1996
MFS(R) EMERGING GROWTH SERIES
A SERIES OF MFS(R) VARIABLE INSURANCE TRUST
[graphic omitted: two men sitting in front of a window]
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MFS(R) EMERGING GROWTH 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
Nelson J. Darling, Jr. Boston, MA 02116-3741
Trustee, Eastern Enterprises
(diversified holding company) DISTRIBUTOR
MFS Fund Distributors, Inc.
William R. Gutow 500 Boylston Street
Vice Chairman, Boston, MA 02116-3741
Capitol Entertainment
(Blockbuster Video Franchise) SHAREHOLDER SERVICE CENTER
MFS Service Center, Inc.
PORTFOLIO MANAGERS P.O. Box 1400
John W. Ballen* Boston, MA 02107-9906
Toni Y. Shimura*
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
<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 W. Ballen /s/ Toni Y. Shimura
A. Keith Brodkin John W. Ballen Toni Y. Shimura
Chairman and President Portfolio Manager Portfolio Manager
July 10, 1996
MFS(R) EMERGING GROWTH SERIES
For the six months ended June 30, 1996, the Series provided a total return of
15.07%. This compares to an 11.92% return for 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 companies' common
stocks (on the basis of capitalization) that are traded in the United States
on the NYSE, AMEX, and NASDAQ. It is not possible to invest in an index. The
Series' performance has benefited from the strong appreciation in the stock
prices of many of its holdings in the technology and consumer sectors. The
technology sector started the year with very poor performance as investors
worried about the slowdown in this sector's earnings growth versus 1995's very
strong earnings growth rate of 50%. However, once investors became accustomed
to the fact that 1996 earnings for the technology sector would still be in a
range of 25% to 30%, and that this growth would appear to be very strong
versus corporate America as a whole, the sector rebounded strongly.
Consumer stocks, which were some of the most disappointing in terms of
earnings and stock performance in 1995, have rebounded very smartly in the
first half of 1996. One sector which has not performed as yet for the Series
in 1996 is health care. Perhaps because of the strength in other areas of the
market, many of our health care companies have lagged the general market in
spite of strong earnings growth.
The performance of our consumer-oriented stocks has been particularly
helpful. HFS, the nation's largest franchiser of hotels and real estate
companies, saw the price of its stock appreciate almost 50% as strong earnings
gains and acquisitions appeared to assure investors of its future growth
prospects. In our opinion, HFS has one of the most creative and shareholder-
oriented managements around, and this position is the Series' largest.
Several of the Series' retail and restaurant stocks rebounded dramatically
based on strong consumer sentiment. Applebee's, the nation's largest
franchiser of casual restaurants, appreciated substantially as strong earnings
were reported from the first quarter.
While the Series' technology stocks had, on average, mixed results, the
Series, fortunately, was overweighted in software and networking stocks
relative to computer systems and semiconductors. Stocks of software and
networking companies such as Oracle and Cisco responded quite positively to
strong earnings reports. Meanwhile, an excess of semiconductor manufacturing
investors has been a drag on earnings for this sector so far this year. While
we expect this overhang to dissipate, other investors have aggressively sold
their positions and depressed the stocks.
We have been surprised that our health care stocks have not performed
better. United Healthcare, the largest managed health care company in the
nation and one of the Series' largest positions, has been a particularly poor
performer this year. Despite reporting strong earnings versus last year and
maintaining its position as a dominant force in the sector, the stock is down
for the year. We expect the health maintenance organization (HMO) companies to
perform better by the end of the year, and have recently added to our holdings
in this area with stocks such as Healthsource, which operates HMOs in New
England, the Midwest, and the Southeast.
This year, the stock market and the Series' investments moved higher
despite a rise in interest rates and a slowdown in overall corporate earnings.
While we have not been surprised by the strong performance of smaller
companies relative to larger companies, we have been surprised by how strong
the market has been this year. We believe 1996 could end with smaller
companies substantially outperforming larger companies. We are living through
an unprecedented time of productivity gains for corporate America. We believe
the smaller companies are the ones that are providing the technology and
resources to drive this productivity to the bottom line, and that the stock
market will continue to reward these companies.
PORTFOLIO MANAGER PROFILES
John Ballen joined the MFS Research Department in 1984. A graduate of Harvard
College, the University of New South Wales in Australia and Stanford
University, he was named Investment Officer in 1986, Vice President -
Investments in 1987, Director of Research in 1988, Senior Vice President in
1990, Director of Equity Portfolio Management in 1993 and Chief Equity Officer
in 1995. He has managed MFS Emerging Growth Series since its inception in July
1995.
Toni Shimura joined MFS in 1987 as a member of the Research Department. A
graduate of Wellesley College and the Sloan School of Management at the
Massachusetts Institute of Technology, she was named Investment Officer in
1990, Assistant Vice President -- Investments in 1991, and Vice President --
Investments in 1992. She has managed MFS Emerging Growth Series since November
1995.
PERFORMANCE SUMMARY
The information below illustrates the performance of MFS Emerging Growth
Series shares.
CUMULATIVE TOTAL RATES OF RETURN
7/24/95* -
6 Months 6/30/96
- ------------------------------------------------------------------------------
Cumulative Total Return +15.07% +35.11%
- ------------------------------------------------------------------------------
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
Stocks - 84.9%
- -----------------------------------------------------------------------------
Issuer Shares Value
- -----------------------------------------------------------------------------
U.S. Stocks - 78.7%
Advertising
Outdoor System, Inc.* 100 $ 3,525
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Apparel and Textiles - 0.9%
Nine West Group, Inc.* 6,200 $ 316,975
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Automotive - 0.1%
APS Holding Corp., "A"* 1,700 $ 37,400
Harvard Industries, Inc.* 1,100 13,475
-----------
$ 50,875
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Biotechnology - 0.2%
Guidant Corp. 1,300 $ 64,025
Integra Lifesciences Corp.* 300 2,925
-----------
$ 66,950
- -----------------------------------------------------------------------------
Business Machines - 1.5%
Affiliated Computer Co.* 8,800 $ 413,600
Sun Microsystems, Inc.* 2,250 132,469
-----------
$ 546,069
- -----------------------------------------------------------------------------
Business Services - 13.8%
ADT Ltd.* 6,500 $ 122,687
Accustaff, Inc.* 20,800 566,800
BDM International, Inc.* 1,600 74,400
BISYS Group, Inc.* 1,900 71,725
CUC International, Inc.* 16,200 575,100
Career Horizons, Inc.* 4,800 168,000
Ceridian Corp.* 13,800 696,900
Computer Sciences, Inc.* 3,400 254,150
Corestaff, Inc.* 3,150 140,963
DST System, Inc.* 8,000 256,000
Employee Solutions, Inc.* 10,000 315,000
Equity Corporation International * 2,000 54,000
First USA Paymentech, Inc.* 100 4,000
Global DirectMail Corp.*. 1,300 51,350
ICT Group, Inc.* 100 1,925
Learning Tree International, Inc.* 15,200 467,400
Loewen Group, Inc. 5,900 178,475
Reynolds & Reynolds Co., "A" 2,700 143,775
Technology Solutions Co.* 26,000 900,250
Transaction Systems Architects, Inc., "A"* 2,700 180,900
-----------
$ 5,223,800
- -----------------------------------------------------------------------------
Chemicals - 0.3%
Praxair, Inc. 2,500 $ 105,625
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Computer Software - Personal Computers - 3.2%
Autodesk, Inc. 12,585 $ 375,977
Electronic Arts, Inc.* 250 6,687
First Data Corp. 7,100 566,058
Microsoft Corp.* 1,925 231,316
Spectrum Holobyte, Inc.* 2,100 12,075
Symantec Corp.* 300 3,750
-----------
$ 1,195,863
- -----------------------------------------------------------------------------
Computer Software - Systems - 19.7%
Adobe Systems, Inc. 5,000 $ 179,375
BMC Software, Inc.* 19,650 1,174,087
Cadence Design Systems, Inc.* 44,350 1,496,813
Computer Associates International, Inc. 12,100 862,125
Compuware Corp.* 16,200 639,275
Control Data Systems, Inc.* 5,100 109,012
Edify Corp.* 100 2,650
Forte Software, Inc.* 100 5,225
Informix Corp.* 2,700 60,750
Oracle Systems Corp.* 51,075 2,014,270
Sapient Corp.* 100 4,225
Sybase, Inc.* 22,450 530,381
System Software Associates, Inc. 18,100 307,700
USCS International, Inc.* 2,000 38,500
-----------
$ 7,424,388
- -----------------------------------------------------------------------------
Construction Services - 0.5%
Shaw Group, Inc.* 10,300 $ 194,413
- -----------------------------------------------------------------------------
Consumer Goods and Services - 1.1%
META Group, Inc.* 100 $ 2,450
Service Corp. International 1,250 71,875
Tyco International Ltd. 8,700 354,525
-----------
$ 428,850
- -----------------------------------------------------------------------------
Electronics - 1.2%
Altera Corp.* 5,200 $ 197,600
LSI Logic Corp.* 4,700 122,200
Xilinx, Inc.* 4,100 130,175
-----------
$ 449,975
- -----------------------------------------------------------------------------
Entertainment - 5.3%
American Radio Systems Corp.* 3,300 $ 141,900
Bally Entertainment Corp.* 10,000 275,000
Grand Casinos, Inc.* 10,100 260,075
Harrah's Entertainment, Inc.* 19,100 539,575
Heritage Media Corp., "A"* 4,800 191,400
Infinity Broadcasting Corp., "A"* 1,950 58,500
Jacor Communications, Inc.* 5,400 166,725
Lin Television Corp.* 4,000 144,000
Showboat, Inc. 100 3,013
Sinclair Broadcasting Group, Inc., "A" * 5,100 221,850
-----------
$ 2,002,038
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Machinery
SI Handling Systems, Inc. 1,200 $ 12,300
- -----------------------------------------------------------------------------
Medical and Health Products - 0.3%
Cohr, Inc.* 100 $ 2,375
IDEC Pharmaceuticals Corp.* 4,300 99,437
-----------
$ 101,812
- -----------------------------------------------------------------------------
Medical and Health Technology and Services - 7.8%
Columbia/HCA Healthcare Corp. 400 $ 21,350
Community Health Systems* 2,100 108,675
Foundation Health Corp.* 700 25,113
Health Management Assoc., Inc.* 2,400 $ 48,600
Healthsource, Inc.* 8,800 154,700
Healthsouth Corp.* 18,290 658,440
IDX Systems Corp.* 2,500 97,500
Orthodontic Centers of America, Inc.* 2,100 55,650
Oxford Health Plans, Inc.* 1,500 61,687
Pacificare Health Systems, Inc., "A"* 1,000 66,000
Pacificare Health Systems, Inc., "B"* 5,900 399,725
Pharmaceutical Product Development, Inc.* 100 3,350
Renal Treatment Centers, Inc.* 2,400 69,000
Schein (Henry), Inc.* 100 3,825
St. Jude Medical, Inc.* 2,800 93,800
Total Renal Care Holdings, Inc.* 800 33,800
United Healthcare Corp. 20,500 1,036,599
-----------
$ 2,937,814
- -----------------------------------------------------------------------------
Metals and Minerals - 0.1%
Titanium Metals Corp.* 1,800 $ 46,575
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Oils - 0.3%
Seacor Holdings, Inc.* 2,900 $ 129,775
- -----------------------------------------------------------------------------
Pollution Control - 0.7%
Republic Industries, Inc.* 600 $ 17,475
Sanfill, Inc.* 4,900 241,325
-----------
$ 258,800
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Printing and Publishing - 0.2%
Pulitzer Publishing Co. 1,200 $ 71,100
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Railroads - 0.3%
Wisconsin Central Transportation Corp.* 3,200 $ 104,000
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Restaurants and Lodging - 8.0%
Applebee's International, Inc.* 22,900 $ 735,662
Buffets, Inc.* 1,200 14,700
HFS, Inc.* 27,550 1,928,500
Interstate Hotels Co.* 600 13,350
Promus Hotel Corp.* 5,700 168,863
Renaissance Hotel Group N.V.* 7,500 159,375
-----------
$ 3,020,450
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Special Products and Services - 0.2%
Yes+ Entertainment Corp.* 3,800 $ 56,050
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Stores - 3.0%
BT Office Products International, Inc.* 1,700 $ 30,387
Corporate Express, Inc.* 4,900 196,000
General Nutrition Cos., Inc.* 17,800 310,188
Hollywood Entertainment Corp.* 2,300 35,650
Micro Warehouse, Inc.* 500 10,000
Office Depot, Inc.* 22,300 454,362
Officemax, Inc.* 4,500 107,438
-----------
$ 1,144,025
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Telecommunications - 10.0%
Bay Networks, Inc.* 600 $ 15,450
Cabletron Systems, Inc.* 17,450 1,197,506
Cisco Systems, Inc.* 16,000 903,250
ECI Telecommunications Limited Designs 6,900 160,425
Glenayre Technologies, Inc.* 11,000 550,000
Premiere Technologies, Inc.* 100 3,150
Sterling Commerce, Inc.* 800 29,700
Tel-Save Holdings, Inc.* 8,200 174,250
Worldcom, Inc.* 13,600 752,575
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$ 3,786,306
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Total U.S. Stocks $29,678,353
- -----------------------------------------------------------------------------
Foreign Stocks - 6.2%
Canada - 0.6%
Biochem Pharma, Inc. (Medical and Health
Products)* 4,750 $ 178,125
Loewen Group (Special Products and
Services)## 1,900 57,475
-----------
$ 235,600
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France
Dassault Systems S.A., ADR (Computer
Software)* 300 $ 6,900
- -----------------------------------------------------------------------------
Germany - 0.2%
SGL Carbon AG, ADR (Metals and Minerals)* 2,300 $ 87,975
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Hong Kong - 0.2%
Asia Satellite Telecommunications Holdings
Ltd., ADR (Telecommunications)* 100 $ 2,975
Guangnan Holdings (Wholesale) 109,000 65,128
-----------
$ 68,103
- -----------------------------------------------------------------------------
Ireland - 0.3%
Elan Corp. PLC, ADR (Medical and Health
Products)* 1,750 $ 99,969
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Italy - 2.8%
Fila Holdings S.p.A., ADR (Apparel and
Textiles) 7,250 $ 625,312
Luxottica Group S.p.A., ADR (Consumer
Goods and Services) 4,850 355,869
Telecom Italia Mobile S.p.A.
(Telecommunications) 58,500 79,753
-----------
$ 1,060,934
- -----------------------------------------------------------------------------
Netherlands - 0.6%
Gucci Group N.V. (Apparel and Textiles)* 3,650 $ 235,425
- -----------------------------------------------------------------------------
Philippines - 0.4%
Pilipino Telegraph & Telephone Corp.
(Telecommunications)* 104,200 $ 159,093
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South Korea - 0.8%
Korea Mobile Telecommunications, ADR
(Telecommunications)* 17,700 $ 303,112
- -----------------------------------------------------------------------------
United Kingdom - 0.3%
Danka Business Systems PLC, ADR (Business
Services) 2,600 $ 74,750
Jarvis Hotels PLC (Restaurants and
Lodging)*+ 700 1,880
Pace Micro Technology PLC (Electronics)* 8,600 25,366
Planning Sciences, International PLC, ADR
(Computer Software - Systems)* 100 2,250
-----------
$ 104,246
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Total Foreign Stocks $ 2,361,357
- -----------------------------------------------------------------------------
Total Stocks (Identified Cost, $30,795,039) $32,039,710
- -----------------------------------------------------------------------------
Short-Term Obligations - 15.6%
- -----------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------
Farm Credit Discount Note, due 7/11/96 $1,100 $ 1,097,741
Federal Home Loan Bank, due 7/12/96 3,800 3,792,197
Federal National Mortgage Assn., due 7/25/96 1,000 995,023
- -----------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 5,884,961
- -----------------------------------------------------------------------------
Total Investments (Identified Cost, $36,680,000) $37,924,671
Other Assets, Less Liabilities - (0.5)% (190,603)
- -----------------------------------------------------------------------------
Net Assets - 100.0% $37,734,068
- -----------------------------------------------------------------------------
*Non-income producing security.
+Restricted 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, $36,680,000) $37,924,671
Cash 30,687
Receivable for investments sold 468,674
Receivable for Series shares sold 427,874
Interest and dividends receivable 7,718
Receivable from investment adviser 16,121
Deferred organization expenses 7,472
Other assets 42
-----------
Total assets $38,883,259
-----------
Liabilities:
Payable for investments purchased $ 1,114,086
Payable for Series shares reacquired 9,160
Payable to affiliates -
Management fee 2,297
Shareholder servicing agent fee 130
Accrued expenses and other liabilities 23,518
-----------
Total liabilities $ 1,149,191
-----------
Net assets $37,734,068
===========
Net assets consist of:
Paid-in capital $36,331,176
Unrealized appreciation on investments and translation of
assets and liabilities in
foreign currencies 1,244,645
Accumulated undistributed net realized gain on investments
and foreign currency transactions 172,427
Accumulated undistributed net investment loss (14,180)
-----------
Total $37,734,068
===========
Shares of beneficial interest outstanding 2,873,035
===========
Net asset value, offering price, and redemption price per share
(net assets of $37,734,068 / 2,873,035 shares of beneficial
interest outstanding) $13.13
======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
- --------------------------------------------------------------------------------
Six Months Ended June 30, 1996
- --------------------------------------------------------------------------------
Net investment income:
Income -
Interest $ 53,980
Dividends 7,163
Foreign taxes withheld (369)
----------
Total investment income $ 60,774
----------
Expenses -
Management fee $ 56,216
Trustees' compensation 1,017
Shareholder servicing agent fee 2,657
Printing 41,434
Auditing fees 11,942
Custodian fee 3,214
Amortization of organization expenses 916
Legal fees 579
Miscellaneous 1,305
----------
Total expenses $ 119,280
Preliminary reduction of expenses by investment adviser (43,458)
Fees paid indirectly (868)
----------
Net expenses $ 74,954
----------
Net investment loss $ (14,180)
----------
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) -
Investment transactions $ 172,339
Foreign currency transactions 88
----------
Net realized gain on investments and foreign currency
transactions $ 172,427
----------
Change in unrealized appreciation (depreciation) -
Investments $1,070,952
Translation of assets and liabilities in foreign currencies (26)
----------
Net unrealized gain on investments and foreign currency
translation $1,070,926
----------
Net realized and unrealized gain on investments and
foreign currency $1,243,353
----------
Increase in net assets from operations $1,229,173
==========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
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 (loss) $ (14,180) $ 877
Net realized gain on investments and
foreign currency transactions 172,427 81,576
Net unrealized gain on investments
and foreign currency translation 1,070,926 173,719
----------- ----------
Increase in net assets from
operations $ 1,229,173 $ 256,172
----------- ----------
Distributions declared to shareholders -
From net investment income $ $
-- (877)
From net realized gain on investments
and foreign currency transactions -- (81,576)
In excess of net investment income -- (283)
Tax return of capital -- (21,847)
----------- ----------
Total distributions declared to
shareholders $ -- $ (104,583)
----------- ----------
Series share (principal) transactions -
Net proceeds from sale of shares $38,725,377 $5,564,342
Net asset value of shares issued to
shareholders in reinvestment of
distributions -- 104,583
Cost of shares reacquired (6,089,112) (1,960,484)
----------- ----------
Increase in net assets from Series
share transactions $32,636,265 $3,708,441
----------- ----------
Total increase in net assets $33,865,438 $3,860,030
Net assets:
At beginning of period 3,868,630 8,600
----------- ----------
At end of period (including
accumulated undistributed net
investment loss of $14,180 and $0,
respectively) $37,734,068 $3,868,630
=========== ==========
*For the period from the commencement of investment operations, July 24, 1995
to December 31, 1995.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights
- --------------------------------------------------------------------------------
Six Months Ended Period Ended
June 30, 1996 December 31, 1995*
- --------------------------------------------------------------------------------
Per share data (for a share
outstanding throughout each period):
Net asset value -
beginning of period $11.41 $10.00
------ ------
Income from investment operations# -
Net investment income (loss)(S) $ (0.01) $ 0.01
Net realized and unrealized gain on
investments and foreign currency
transactions 1.73 1.74
------ ------
Total from investment operations $ 1.72 $ 1.75
------ ------
Less distributions
declared to shareholders -
From net investment income $ -- $ (0.01)
From net realized gain on investments
and foreign currency transactions -- (0.26)
Tax return of capital -- (0.07)
------ ------
Total distributions declared
to shareholders $ -- $ (0.34)
------ ------
Net asset value - end of period $13.13 $11.41
====== ======
Total return 15.07%++ 17.41%++
Ratios (to average net assets)
/Supplemental data(S)
Expenses 1.00%+ 1.00%+
Net investment income (loss) (0.19)%+ 0.10%+
Portfolio turnover 29% 73%
Average commission rate### $0.0362 --
Net assets at end of period
(000 omitted) $37,734 $3,869
* For the period from the commencement of investment operations, July 24, 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) $(0.18)
Ratios (to average net assets):
Expenses 1.59%+ 2.91%+
Net investment loss (0.78)%+ (1.78)%+
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Emerging Growth 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 21 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 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 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. 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 into 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 payments received in additional securities are recorded on the
ex-dividend 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 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. 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 $59,117, including $43,458 incurred during 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
$32,168,035 and $4,733,539, 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 $36,680,000
===========
Gross unrealized appreciation $ 2,499,686
Gross unrealized depreciation (1,255,015)
-----------
Net unrealized appreciation $ 1,244,671
===========
(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).
Transactions in Series shares were as follows:
Period Ended Period Ended
June 30, 1996 December 31, 1995*
-------------------------- ---------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------
Shares sold 3,020,841 $38,725,377 501,081 $ 5,564,342
Shares issued to
shareholders in
reinvestment of
distributions -- -- 9,255 104,583
Shares reacquired (486,828) (6,089,112) (172,174) (1,960,484)
--------- ----------- -------- ------------
Net increase 2,534,013 $32,636,265 338,162 $ 3,708,441
========= =========== ======= ============
*For the period from commencement of investment operations, July 24, 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 period ended
June 30, 1996 was $64.
(7) Restricted Securities
The Series may invest not more than 15% of its net assets in securities which
are subject to legal or contractual restrictions on resale. At June 30, 1996,
the Series owned the following restricted securities (constituting 0.01% of
net assets) which may not be publicly sold without registration under the
Securities Act of 1933. The Series does not have the right to demand that such
securities be registered. The value of these securities is determined by
valuations supplied by a pricing service or brokers or, if not available, in
good faith by or at the direction of the Trustees.
Date of
Description Acquisition Shares Cost Value
- ------------------------------------------------------------------------------
Jarvis Hotels PLC 6/21/96 700 $1,882 $1,880
======
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Variable Insurance Trust and Shareholders of MFS
Emerging Growth Series:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of MFS Emerging Growth 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 July 24, 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 Emerging
Growth 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>
VEG-3-8/96/17.25M
