<PAGE>
[Logo](SM) Semiannual Report
INVESTMENT MANAGEMENT June 30, 1997
MFS(R) EMERGING GROWTH SERIES
A Series of MFS(R) Variable Insurance Trust(SM)
[Graphic Omitted]
<PAGE>
<TABLE>
MFS(R) EMERGING GROWTH SERIES
A SERIES OF MFS(R) VARIABLE INSURANCE TRUST(SM)
<S> <C>
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 Management Company INVESTOR SERVICE
(Blockbuster Video franchise) MFS Service Center, Inc.
P.O. Box 2281
PORTFOLIO MANAGERS Boston, MA 02107-9906
John W. Ballen*
Toni Y. Shimura* For additional information,
contact your financial adviser.
TREASURER
W. Thomas London* CUSTODIAN
Investors Bank & Trust Company
ASSISTANT TREASURERS
Mark E. Bradley* AUDITORS
Ellen Moynihan* Deloitte & Touche LLP
James O. Yost*
WORLD WIDE WEB
SECRETARY www.mfs.com
Stephen E. Cavan*
ASSISTANT SECRETARY [Graphic Omitted] For the third year
James R. Bordewick, Jr.* in a row, MFS earned a #1 ranking in
the DALBAR, Inc. Broker/Dealer
Survey, Main Office Operations
Service Quality Category. The firm
achieved a 3.48 overall score on a
scale of 1 to 4 in the 1996 survey.
A total of 110 firms responded,
offering input on the quality of
service they received from 29 mutual
fund companies nationwide. The
survey contained questions about
service quality in 15 categories,
including "knowledge of phone
service contacts," "accuracy of
transaction processing," and
"overall ease of doing business with
the firm."
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
Dear Contract Owner:
An unprecedented combination of generally positive factors has helped the U.S.
economy enjoy a sustained period of relative stability and moderate growth in
which thousands of new jobs have been created every month, inflation remains
under control, and the investment climate -- at least until now -- has been
favorable. For example, the increased use of technology and other productivity
enhancements, as well as corporate restructuring and global competition, is
improving companies' balance sheets and helping control inflation. Meanwhile,
borrowing by corporations and governments continues to decline, while consumer
confidence is increasing, although consumer debt levels are still
uncomfortably high. While some lenders are beginning to tighten standards to
address this problem, consumer debt and personal bankruptcies continue to
rise. Because of this, plus slight declines in other indicators such as
average hourly wages and the corporate purchasing-managers index, we do not
expect the rapid pace of growth seen in the first quarter of 1997 to continue.
While second-quarter growth has slowed dramatically, we do expect the second
half of the year to pick up once again with real (inflation-adjusted) growth
centering around 2 1/2%.
We have been surprised by the strength of the U.S. equity market in the
first half of 1997. Much of this is the result of continuing gains in
corporate earnings. Even as the current recovery enters its seventh year, more
and more U.S. companies have been exceeding MFS analysts' earnings estimates.
In the first quarter of 1997, for example, two-thirds of all companies met or
exceeded MFS analysts' expectations, a trend that could be an important
indicator of the U.S. equity market's future direction. However, while the
near-term outlook for profits is generally favorable, we believe equity
valuations have risen to a point where a cautious investment approach seems
warranted.
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
A. Keith Brodkin
Chairman and President
July 14, 1997
MFS EMERGING GROWTH SERIES
For the six months ended June 30, 1997, the Series provided a total return of
10.80%. This compares to a 10.20% return for the Russell 2000 Total Return
Index (the Russell 2000) and to a 20.60% return for the Standard & Poor's 500
Composite Index (the S&P 500) for the same period. The Russell 2000 is an
unmanaged index comprised of 2,000 of the smallest U.S.-domiciled company
common stocks (on the basis of capitalization) that are traded in the United
States on the New York Stock Exchange, the American Stock Exchange, and
NASDAQ. The S&P 500 is an unmanaged index of common stock total return
performance.
The performance of the Series and the Russell 2000 relative to the S&P 500
has been hampered by the underperformance of small, rapidly growing companies,
the continuation of a trend that began in the summer of 1996. The
underperformance of the Russell 2000 has been the largest one-year under-
performance of that index relative to the S&P 500 since the Russell 2000 began.
Not only have smaller stocks underperformed, but so have mid- capitalization
stocks. Because of this underperformance, we believe the smaller companies are
currently very attractively valued, although we are unsure what catalyst will
re-ignite interest in this sector, or when. However, we remain confident that
earnings growth will eventually be recognized.
One action that we have taken is to increase the Series' average company
size as measured by market capitalization, a move that has helped performance.
Despite this increase in size, we have not altered the Series' growth
characteristics. While a short-term abandoning of our focus might be appealing,
history has shown that a focus on smaller, rapidly growing companies has
produced strong returns for investors. In fact, many studies show superior
returns from small-company investing relative to the larger companies of the S&P
500.
More important than sector selection this year has been stock selection.
Technology companies have benefited the Series this year, including companies
in the software industry such as Compuware, Altera, BMC Software, and
Microwarehouse, all of which have been strong performers. Meanwhile, Cadence
Design and Synopsys, both market leaders in the software industry, have been
laggards.
Most health maintenance organizations (HMOs) have performed well this
year, with Healthsource selling to CIGNA for a very large premium. Similarly,
United Healthcare has been an excellent performer.
A major disappointment so far this year has been HFS, Inc., the nation's
largest hotel and real estate franchiser. While HFS has far exceeded analysts'
earnings estimates in each quarter for the past year, enhancing its future
prospects, Wall Street has chosen to ignore the company and its valuation has
suffered, which we believe to be a temporary phenomenon. The management team
at HFS has been responsible for a 14-fold increase in its stock price over the
past five years and, while we are discouraged by the company's recent stock
price performance, cash flow and earnings for this year are substantially in
excess of what we would have expected a year ago, and we see strong gains
ahead.
In the U.S. economy as a whole, there are several sectors in which we see
very strong growth. The software industry is expected to grow its earnings in
excess of 30% in 1997 and in excess of 25% in 1998 -- the fastest growth of
any industry. Similarly, above-average growth is expected for the health care
and consumer industries. These three sectors are among the largest weightings
in the Series, and we expect them to grow their earnings in excess of 20% in
1997, a healthy pace when compared to the 12% to 13% anticipated earnings
growth for corporate America as a whole.
One sector that did not perform well in 1996 but has rebounded nicely in
1997 is health care, a resurgence that was reflected in the strong performance
of our large position in several HMOs. After profit margins increased in 1996,
premiums have been rising in excess of costs so far this year, a trend we
expect to continue.
Respectfully,
/s/ John W. Ballen /s/ Toni Y. Shimura
John W. Ballen Toni Y. Shimura
Portfolio Manager Portfolio Manager
PORTFOLIO MANAGERS' PROFILES
John W. Ballen began his career at MFS as an industry specialist in 1984. A
graduate of Harvard College, the University of New South Wales, and Stanford
University's Graduate School of Business Administration, he was promoted to
Investment Officer in 1986, Vice President - Investments in 1987, Director of
Research in 1988, and Senior Vice President in 1990. In 1993, he became
Director of Equity Portfolio Management, and in 1995, he became Chief Equity
Officer. He has managed MFS Emerging Growth Series since 1995.
Toni Y. Shimura joined the MFS Research Department in 1987. A graduate of
Wellesley College and of Massachusetts Institute of Technology's Sloan School
of Management, she was promoted to Investment Officer in 1990, Assistant Vice
President - Investments in 1991, and Vice President - Investments in 1992. She
has managed MFS Emerging Growth Series since 1995.
OBJECTIVE AND POLICIES
The Series seeks to provide long-term growth of capital. Dividend and interest
income from portfolio securities, if any, is incidental to the Series'
investment objective of long-term growth of capital.
Commencement of investment operations: July 24, 1995.
<PAGE>
PERFORMANCE SUMMARY
The information below illustrates the performance of MFS Emerging Growth
Series.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
6 Months 1 Year Life of Series*
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return +10.80% +12.68% +52.24%
- -----------------------------------------------------------------------------------------------------------
Average Annual Total Return -- +12.68% +24.23%
- -----------------------------------------------------------------------------------------------------------
*For the period from the commencement of the Series' investment operations,
July 24, 1995, through June 30, 1997.
</TABLE>
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.
Returns shown do not reflect the deduction of the mortality and expense risk
charges and administration fees. Please refer to the annuity product's annual
report for performance that reflects the deduction of the fees and charges
imposed by insurance company separate accounts.
All results reflect any applicable expense subsidies and waivers, without
which the performance results would have been less favorable. Subsidies and
waivers may be rescinded at any time. See the prospectus for details.
<PAGE>
PORTFOLIO OF INVESTMENTS - June 30, 1997
Stocks - 95.1%
- ------------------------------------------------------------------------------
Issuer Shares Value
- ------------------------------------------------------------------------------
U.S. Stocks - 87.2%
Automotive - 0.1%
Tower Automotive, Inc.* 4,800 $ 206,400
- -----------------------------------------------------------------------------
Building - 0.1%
Newport News Shipbuilding, Inc. 7,100 $ 138,006
- -----------------------------------------------------------------------------
Business Machines - 0.7%
Affiliated Computer Co.* 31,800 $ 890,400
Sun Microsystems, Inc. 25,700 956,521
------------
$ 1,846,921
- -----------------------------------------------------------------------------
Business Services - 10.4%
ADT, Ltd.* 295,900 $ 9,764,700
Accustaff, Inc.* 72,100 1,707,869
CUC International, Inc.* 90,500 2,336,031
Ceridian Corp.* 12,300 519,675
CORESTAFF, Inc.* 12,800 345,600
DST Systems, Inc.* 43,100 1,435,769
Employee Solutions, Inc.* 37,200 206,925
First Data Corp. 26,000 1,142,375
Ikon Office Solutions, Inc. 2,400 59,850
Learning Tree International, Inc.* 108,000 4,792,500
Pierce Leahy Corp.* 1,800 32,400
Sabre Group Holdings, Inc.* 3,900 105,787
Staff Leasing, Inc.* 2,200 41,250
Technology Solutions, Inc.* 74,450 2,940,775
Transaction System Architects, Inc., "A"* 12,500 431,250
------------
$ 25,862,756
- -----------------------------------------------------------------------------
Computer Software - Personal Computers - 2.8%
Autodesk, Inc. 685 $ 26,244
Microsoft Corp. 54,750 6,919,031
------------
$ 6,945,275
- -----------------------------------------------------------------------------
Computer Software - Systems - 19.0%
Adobe Systems, Inc. 2,100 $ 73,631
BMC Software, Inc.* 146,700 8,123,513
Cadence Design Systems, Inc.* 175,550 5,880,925
Computer Associates International, Inc. 221,000 12,306,938
Compuware Corp.* 138,500 6,613,375
Genesys Telecommunications Laboratories, Inc.* 600 16,650
Great Plains Software, Inc.* 400 10,800
Lear Corp.* 10,700 474,812
Oracle Systems Corp.* 243,900 12,286,462
RWD Technologies, Inc.* 400 6,900
Sybase, Inc.* 1,150 17,106
Synopsys, Inc.* 25,800 948,150
Xionics Document Technologies, Inc.* 19,000 280,250
------------
$ 47,039,512
- -----------------------------------------------------------------------------
Construction Services
Shaw Group, Inc.* 800 $ 13,000
- -----------------------------------------------------------------------------
Consumer Goods and Services - 5.6%
800-JR CIGAR, Inc.* 600 $ 12,450
Carson, Inc.* 73,600 791,200
Gibson Greetings, Inc.* 9,100 204,750
Hertz Corp., "A" 1,900 68,400
Keystone International, Inc.* 22,500 780,469
Service Corp. International 67,700 2,225,637
Silgan Holdings, Inc.* 2,000 77,500
Stone Container Corp.* 17,200 246,175
Tyco International Ltd. 136,700 9,509,194
------------
$ 13,915,775
- -----------------------------------------------------------------------------
Electronics - 1.6%
Altera Corp.* 51,600 $ 2,605,809
Kulicke & Soffa Industries, Inc.* 23,700 769,508
Xilinx, Inc.* 12,300 603,468
------------
$ 3,978,785
- -----------------------------------------------------------------------------
Entertainment - 3.5%
American Radio Systems Corp.* 7,700 $ 307,038
Clear Channel Communications, Inc.* 23,900 1,469,850
Cox Radio, Inc., "A"* 47,000 1,204,375
Emmis Broadcasting Corp., "A"* 18,400 802,700
Gemstar International Group, Ltd.* 14,000 257,250
Harrah's Entertainment, Inc.* 43,700 786,600
Heritage Media Corp., "A"* 48,200 909,775
Jacor Communications, Inc.* 11,300 432,225
LIN Television Corp.* 39,100 1,725,287
Univision Communications, Inc.* 20,200 790,325
------------
$ 8,685,425
- -----------------------------------------------------------------------------
Financial Institutions - 1.3%
AmeriTrade Holding Corp., "A"* 5,400 $ 85,050
Franklin Resources, Inc. 42,900 3,112,931
New Century Financial Corp.* 1,600 23,200
------------
$ 3,221,181
- -----------------------------------------------------------------------------
Food and Beverage Products - 1.3%
Smith's Food & Drug Centers, Inc., "B"* 60,200 $ 3,228,225
- -----------------------------------------------------------------------------
Insurance - 0.4%
Hartford Life, Inc., "A"* 2,000 $ 75,000
Nationwide Financial Services, Inc., "A" 34,800 924,375
------------
$ 999,375
- -----------------------------------------------------------------------------
Machinery - 0.4%
JLK Direct Distribution, Inc., "A"* 500 $ 12,812
SI Handling Systems, Inc. 15,700 290,450
SPX Corp.* 9,700 628,681
------------
$ 931,943
- -----------------------------------------------------------------------------
Medical and Health Products - 1.3%
Boston Scientific Corp.* 15,700 $ 964,568
Guidant Corp.* 20,700 1,759,500
Mentor Corp. 21,300 631,012
------------
$ 3,355,080
- -----------------------------------------------------------------------------
Medical and Health Technology and Services - 11.5%
AmeriSource Health Corp., "A" 10,800 $ 538,650
Cardinal Health, Inc. 13,600 778,600
Columbia/HCA Healthcare Corp. 23,550 925,809
Foundation Health Systems, Inc., "A"* 460 13,944
Genesis Health Ventures, Inc.* 27,000 911,250
Health Management Associates, Inc.* 18,300 521,550
Healthsource, Inc.* 17,100 370,865
HealthSouth Corp.* 243,800 6,079,762
IDX Systems Corp.* 7,100 244,950
Mariner Health Group, Inc.* 13,300 205,318
MedPartners, Inc.* 54,000 1,167,750
Medtronic, Inc. 27,200 2,203,200
Tenet Healthcare Corp.* 106,400 3,145,450
United Healthcare Corp. 176,900 9,198,800
Vencor, Inc.* 54,350 2,296,287
------------
$ 28,602,185
- -----------------------------------------------------------------------------
Oils - 0.1%
Hanover Compressor Co.* 1,200 $ 23,400
Santa Fe International Corp. 3,600 122,400
------------
$ 145,800
- -----------------------------------------------------------------------------
Pollution Control - 0.5%
USA Waste Services, Inc.* 32,200 $ 1,243,725
- -----------------------------------------------------------------------------
Railroad - 0.2%
Wisconsin Central Transportation Corp.* 13,300 $ 495,425
- -----------------------------------------------------------------------------
Restaurants and Lodging - 5.7%
Applebee's International, Inc.* 39,200 $ 1,048,600
HFS, Inc.* 206,077 11,952,466
Hilton Hotels Corp. 29,300 778,281
Promus Hotel Corp.* 9,800 379,750
Wyndham Hotel Corp.* 7,200 234,900
------------
$ 14,393,997
- -----------------------------------------------------------------------------
Stores - 9.2%
American Stores Co. 22,800 $ 1,125,750
Consolidated Stores Corp.* 41,500 1,442,125
Corporate Express, Inc.* 181,000 2,613,187
Costco Cos., Inc.* 30,200 992,825
CVS Corp. 43,700 2,239,625
Dillards, Inc., "A" 24,000 831,000
Global DirectMail Corp.* 3,900 101,634
Hollywood Entertainment Corp.* 4,900 112,087
Home Depot, Inc. 30,200 2,081,913
Micro Warehouse, Inc. 49,800 852,825
Office Depot, Inc.* 27,100 526,756
Rite Aid Corp. 108,200 5,396,475
Staples, Inc.* 192,600 4,477,950
------------
$ 22,794,152
- -----------------------------------------------------------------------------
Telecommunications - 11.5%
Aspect Telecommunications Corp.* 2,200 $ 48,950
Cisco Systems, Inc. 150,000 10,068,750
Intermedia Communications, Inc.* 20,500 663,687
Lucent Technologies, Inc. 42,900 3,091,481
MCI Communications Corp. 86,200 3,299,839
Qwest Communications International, Inc.* 1,400 38,150
Sprint Corp. 28,900 1,520,862
Tel-Save Holdings, Inc.* 9,800 149,450
Worldcom, Inc.* 300,600 9,619,200
------------
$ 28,500,369
- -----------------------------------------------------------------------------
Total U.S. Stocks $216,543,312
- -----------------------------------------------------------------------------
Foreign Stocks - 7.9%
Brazil - 1.2%
Telecomunicacoes Brasileiras SA, ADR
(Telecommunications) 19,800 $ 3,004,650
- -----------------------------------------------------------------------------
Canada - 0.6%
BioChem Pharma, Inc. (Medical and Health
Products)* 62,700 $ 1,395,075
- -----------------------------------------------------------------------------
Germany - 1.6%
SAP AG (Computer Software - Systems) 18,425 $ 3,827,670
- -----------------------------------------------------------------------------
Japan - 3.1%
Canon, Inc. (Business Services) 64,000 $ 1,744,992
Nidec Corp. (Computer Hardware) 5,000 244,691
Rohm Co. (Electronics)* 13,000 1,340,556
Secom Co. (Electronics)* 33,000 2,425,322
Sony Corp. (Electronics)* 5,000 436,511
Sony Corp., ADR (Electronics) 11,700 1,029,600
Takeda Chemical Industries
(Pharmaceuticals)* 16,000 450,230
------------
$ 7,671,902
- -----------------------------------------------------------------------------
Netherlands
Gucci Group N.V. (Apparel and Textiles)* 500 $ 32,188
- -----------------------------------------------------------------------------
Portugal - 0.1%
Telecel-Comunicacaoes Pessoais SA
(Telecommunications)* 3,000 $ 249,161
- -----------------------------------------------------------------------------
Switzerland - 0.1%
Kuoni Reisen AG (Business Services) 100 $ 342,970
- -----------------------------------------------------------------------------
United Kingdom - 1.2%
Danka Business Systems PLC, ADR (Business
Services) 75,100 $ 3,069,712
- -----------------------------------------------------------------------------
Total Foreign Stocks $ 19,593,328
- -----------------------------------------------------------------------------
Total Stocks (Identified Cost, $209,300,589) $236,136,640
- -----------------------------------------------------------------------------
Short-Term Obligations - 5.2%
- -----------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- -----------------------------------------------------------------------------
Federal Home Loan Bank, due
6/2/97 - 7/14/97 $ 400 $ 397,484
Federal Home Loan Mortgage Corp.,
due 5/14/97 - 7/15/97 2,200 2,192,726
Federal National Mortgage Assn.,
due 6/30/97 - 7/9/97 7,740 7,729,454
Federal National Mortgage Assn.,
due 6/24/97 - 7/29/97 2,500 2,486,876
- -----------------------------------------------------------------------------
Total Short-Term Investments, at Amortized Cost $ 12,806,540
- -----------------------------------------------------------------------------
Total Investments (Identified Cost, $222,107,129) $248,943,180
Other Assets, Less Liabilities - (0.3)% (779,486)
- -----------------------------------------------------------------------------
Net Assets - 100.0% $248,163,694
- -----------------------------------------------------------------------------
*Non-income producing security.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- ----------------------------------------------------------------------------
June 30, 1997
- ----------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $222,107,129) $248,943,180
Cash 18,859
Receivable for Series shares sold 1,136,538
Receivable for investments sold 2,070,525
Interest and dividends receivable 68,254
Receivable from investment adviser 38,200
Deferred organization expenses 5,625
Other assets 6,000
------------
Total assets $252,287,181
------------
Liabilities:
Payable for Series shares reacquired $ 213,352
Payable for investments purchased 3,614,495
Net payable for forward foreign currency exchange contracts
closed or subject to master netting agreements 229,246
Payable to affiliates -
Management fee 15,151
Administrative fee 2,482
Shareholder servicing agent fee 714
Accrued expenses and other liabilities 48,047
------------
Total liabilities $ 4,123,487
------------
Net assets $248,163,694
============
Net assets consist of:
Paid-in capital $ 26,605,557
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 225,141,546
Accumulated undistributed net realized loss on investments
and foreign currency transactions (3,302,908)
Accumulated undistributed net investment loss (249,920)
------------
Total $248,163,694
============
Shares of beneficial interest outstanding 16,917,592
==========
Net asset value per share
(net assets of $248,163,694 / 16,917,592 shares of
beneficial interest outstanding) $14.67
======
See notes to financial statements
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statement of Operations
- ----------------------------------------------------------------------------------------------------
Six Months Ended June 30, 1997
- ----------------------------------------------------------------------------------------------------
<S> <C>
Net investment income:
Income -
Interest $ 383,032
Dividends 168,806
Foreign taxes withheld (2,892)
-----------
Total investment income $ 548,946
-----------
Expenses -
Management fee $ 630,293
Administrative fee 11,747
Trustees' compensation 1,017
Shareholder servicing agent fee 29,717
Custodian fee 14,569
Printing 12,958
Auditing fee 20,000
Legal fee 255
Amortization of organization expenses 921
-----------
Total expenses $ 721,477
Fees paid indirectly (1,232)
Preliminary reimbursement of expense to investment adviser 78,621
-----------
Net expenses $ 798,866
-----------
Net investment loss $ (249,920)
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $(2,883,306)
Foreign currency transactions 1,376
-----------
Net realized loss on investment and foreign currency transactions $(2,881,930)
-----------
Change in unrealized appreciation (depreciation) -
Investments $24,852,201
Translation of assets and liabilities in foreign currencies (230,494)
-----------
Net unrealized gain on investment and foreign currency translation $24,621,707
-----------
Net realized and unrealized gain on investments and foreign currency $21,739,777
-----------
Increase in net assets from operations $21,489,857
===========
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statements of Changes in Net Assets
<CAPTION>
- ------------------------------------------------------------------------------------------------
Six Months Ended Year Ended
June 30, 1997 December 31, 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (249,920) $ (31,458)
Net realized gain (loss) on investments and
foreign currency transactions (2,881,930) 503,597
Net unrealized gain on investments and foreign
currency translation 24,621,707 1,810,131
------------ ------------
Increase in net assets from operations $ 21,489,857 $ 2,282,270
------------ ------------
Distributions declared to shareholders -
From net realized gain on investments and
foreign currency transactions $ -- $ (503,597)
In excess of net realized gain on investments
and foreign currency transactions -- (374,343)
------------ ------------
Total distributions declared to shareholders $ -- $ (877,940)
------------ ------------
Series share (principal) transactions -
Net proceeds from sale of shares $206,844,396 $149,594,616
Net asset value of shares issued to shareholders
in reinvestment of distributions -- 877,940
Cost of shares reacquired (85,126,863) (50,789,212)
------------ ------------
Increase in net assets from Series share
transactions $121,717,533 $ 99,683,344
------------ ------------
Total increase in net assets $143,207,390 $101,087,674
Net assets:
At beginning of period 104,956,304 3,868,630
------------ ------------
At end of period, including accumulated net
investment loss of $280,501 and $30,581,
respectively $248,163,694 $104,956,304
============ ============
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Financial Highlights
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended Period Ended
June 30, 1997 December 31, 1996 December 31, 1995*
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share
outstanding throughout each period):
Net asset value - beginning of
period $13.24 $11.41 $10.00
------ ------ ------
Income from investment operations# -
Net investment income (loss) $(0.02) $(0.01) $ 0.01
Net realized and unrealized
gain on investments and
foreign currency
transactions 1.45 1.95 1.74
------ ------ ------
Total from investment
operations $ 1.43 $ 1.94 $ 1.75
------ ------ ------
Less distributions declared to
shareholders -
From net investment income $ -- $ -- $(0.01)
From net realized gain on
investments and foreign
currency transactions -- (0.06) (0.26)
In excess of net realized
gain on investments and
foreign currency
transactions -- (0.05) --
Tax return of capital -- -- (0.07)
------ ------ ------
Total distributions
declared to shareholders
$ -- $(0.11) $(0.34)
------ ------ ------
Net asset value - end of
period $14.67 $13.24 $11.41
====== ====== ======
Total return 10.80%++ 17.02% 17.41%++
Ratios (to average net assets)/Supplemental data:
Expenses 0.95%+ 1.00% 1.00%+
Net investment income (loss) (0.25)%+ (0.08)% 0.10%+
Portfolio turnover 59% 96% 73%
Average commission rate### $0.0578 $0.0401 $ --
Net assets at end of period
(000 omitted) $248,164 $104,956 $3,869
*For the period from the commencement of the Series' investment operations, July 24, 1995, through
December 31, 1995.
+Annualized.
++Not annualized.
#Per share data are 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, subject to reimbursement by the Series, the expenses
of the Series at not more than 1.00% of average daily net assets. To the extent actual expenses
were over or under these limitations, the net investment loss per share and the ratios would have
been:
Net investment loss $(0.01) $(0.03) $(0.18)
Ratios (to average net
assets):
Expenses 0.85% 1.16% 2.91%+
Net investment loss (0.15)% (0.23)% (1.78)%+
See notes to financial statements
</TABLE>
<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 12
series: MFS(R) Bond Series, MFS Emerging Growth Series, MFS(R) Growth with
Income Series, MFS(R) High Income Series, MFS(R) Limited Maturity Series,
MFS(R) Money Market Series, MFS(R) Research Series, MFS(R) Strategic Fixed
Income Series, MFS(R) Total Return Series, MFS(R) Utilities Series, MFS(R)
Value Series and MFS(R) 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, 1997, there were 45 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. Debt securities (other
than short-term obligations which mature in 60 days or less), including listed
issues and forward contracts, 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 result 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 Series operations.
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. The Series may also use
contracts in a manner intended to protect foreign currency-denominated
securities from declines in value due to un-
favorable 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' custody fee is calculated as a percentage
of 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 net 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. 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 limitation
agreement with MFS, MFS has voluntarily agreed to pay all of the Series'
operating expenses, exclusive of management fees. The Series in turn will pay
MFS an expense reimbursement fee not greater than 0.25% 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, 1997, the aggregate unreimbursed expenses owed to MFS
by the Series amounted to $0, after reimbursement in the current period.
Administrator - Effective March 1, 1997, the Series has an administrative
services agreement with MFS to provide the Series with certain financial,
legal, compliance, shareholder communications, and other administrative
services. As a partial reimbursement for the cost of providing these services,
the Series pays MFS an administrative fee up to 0.015% per annum of the
Series' average daily net assets, provided that the administrative fee is not
assessed on Series assets that exceed $3 billion.
The Series pays no compensation directly to its Trustees who are officers of
the investment adviser, or to officers of the Series, all of whom receive
remuneration for their services to the Series from MFS. Certain officers and
Trustees of the Series are officers or directors of MFS and MFS Service
Center, Inc. (MFSC).
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as
a percentage of the Series' average daily net assets at an 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
$208,512,115 and $93,014,657, 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 $ 222,107,129
=============
Gross unrealized appreciation $ 29,857,987
Gross unrealized depreciation (3,021,936)
-------------
Net unrealized appreciation $ 26,836,051
=============
(5) Shares of Beneficial Interest
The Series' Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Series shares were as follows:
<TABLE>
<CAPTION>
Six Months Ended June 30, 1997 Year Ended December 31, 1996
---------------------------------- ----------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 15,267,618 $208,844,396 11,363,299 $149,594,616
Shares issued to shareholders in
reinvestment
of distributions -- -- 66,160 877,940
Shares reacquired (6,278,706) (85,126,863) (3,839,801) (50,789,212)
---------- ------------ ---------- ------------
Net increase 8,988,912 $121,717,533 7,589,658 $ 99,683,344
========== ============ ========== ============
</TABLE>
(6) Line of Credit
The Series and other affiliated funds participate in a $400 million unsecured
Line of Credit provided by a syndication of banks under a line of credit
agreement. 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, 1997, was $291.
(7) Financial Instruments
The Series trades financial instruments with off-balance sheet risk in the
normal course of its investing activities in order to manage exposure to
market risks such as interest rates and foreign currency exchange rates. These
financial instruments include forward foreign currency exchange contracts. The
notional or contractual amounts of these instruments represent the investment
the Series has in particular classes of financial instruments and does not
necessarily represent the amounts potentially subject to risk. The measurement
of the risks associated with these instruments is meaningful only when all
related and offsetting transactions are considered.
Forward foreign currency purchases and sales under master netting arrangements
and closed forward foreign currency exchange contracts amounted to a net
payable of $229,246 with Goldman Sachs at
June 30, 1997.
At June 30, 1997, the Series had sufficient cash and/or securities to cover
any commitments under these contracts.
<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 the MFS Variable Insurance Trust) as
of June 30, 1997, the related statement of operations for the six months then
ended, the statements of changes in net assets for the six months then ended
and the year ended December 31, 1996, and financial highlights for the six
months then ended, the year ended December 31, 1996, and the period from July
24, 1995 (the 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, 1997 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, 1997, 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 1, 1997
---------------------------------------------
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>
(C)1997 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
VEG-3-8/97 39M
