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[Logo] M F S(R) Semiannual Report
INVESTMENT MANAGEMENT June 30, 1998
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MFS(R) MONEY MARKET SERIES
A Series of MFS(R) Variable Insurance Trust(SM)
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[Graphic Omitted]
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MFS(R) MONEY MARKET SERIES
A SERIES OF MFS(R) VARIABLE INSURANCE TRUST(SM)
<S> <C>
TRUSTEES INVESTMENT ADVISER
Jeffrey L. Shames* Massachusetts Financial Services Company
Chairman, Chief Executive Officer, and 500 Boylston Street
Director, MFS(R) Boston, MA 02116-3741
Investment Management(SM)
DISTRIBUTOR
Nelson J. Darling, Jr. MFS Fund Distributors, Inc.
Professional Trustee 500 Boylston Street
Boston, MA 02116-3741
William R. Gutow
Vice Chairman, SHAREHOLDER SERVICE CENTER
Capitol Entertainment Management Company; MFS Service Center, Inc.
Real Estate Consultant P.O. Box 2281
Boston, MA 02107-9906
PORTFOLIO MANAGER
Jean O. Alessandro* For additional information,
contact your financial adviser.
CHAIRMAN AND PRESIDENT
Jeffrey L. Shames* CUSTODIAN
State Street Bank and Trust Company
TREASURER
W. Thomas London* WORLD WIDE WEB
www.mfs.com
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
*Affiliated with the Investment Adviser
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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LETTER FROM THE CHAIRMAN
Dear Contract Owners:
With the U.S. stock market well into its fourth year of record-breaking
advances, it is necessary to take a cautious outlook. By most commonly
accepted measures, equity valuations appear to have risen to a point at which
the stock market has become more vulnerable to changes in the investment
environment such as rising inflation and interest rates or a slowing economy.
As a result, while we continue to hold a favorable long-term outlook for the
equity markets, we also believe that a significant market correction is
possible and that such a correction would be a healthy near-term event.
Currently, equity investors seem to be primarily focused on interest rates,
which have been relatively stable for several months as inflation has remained
low. In an environment of low interest rates, stocks become more attractive
than most fixed-income investments, while low inflation helps control
companies' costs, such as for raw materials, wages, and benefits. The near-
term outlook for a continuation of this environment appears relatively
favorable. However, this year has seen a marked slowdown in corporate
earnings. This means that as equity prices continue to rise, price-to-earnings
(P/E) ratios, or the amount an investor pays for a stock in relation to the
company's earnings per share, also go up. A year ago, the average P/E ratio
for stocks in the unmanaged Standard & Poor's 500 Composite Index stood at
approximately 22; this summer, the average P/E ratio was 32% higher, at about
29. In some cases, such as with some of the newer companies associated with
the Internet, P/E ratios have soared to levels that are unlikely to be
sustained.
As long as interest rates remain low and the economy continues to grow, it is
possible that some of these valuations can be supported. We expect corporate
earnings to grow 4% to 6% this year. However, just as no one can predict
market cycles, so too no one can predict economic cycles -- except to say that
these cycles do exist and that an economic slowdown at some point is
inevitable.
Given this reality, we believe it is prudent to remind investors of the need
to take a long-term view and to diversify their investments across a range of
asset classes. This includes portfolios that focus on bonds and international
investments as well as on the U.S. stock market. The likelihood of an eventual
market correction also makes it important for us to use original, bottom-up
research to find companies that we think can keep growing or gain market share
in the face of the occasional downturn. To help achieve this, and to provide
the broadest possible coverage of industry sectors and individual companies,
MFS continues to increase its number of full-time research analysts. These
analysts thoroughly investigate each company's earnings potential and position
in its industry as well as the overall prospects for that industry.
MFS also uses active portfolio management on the fixed-income side, taking
advantage of our extensive research and credit analysis to help reduce the
potential for price declines and enhance the opportunity for appreciation.
Every year, both fixed-income and equity managers meet with thousands of
credit issuers and companies. They also attend many presentations, closely
follow sources of industry research, and keep track of competitors.
We believe that applying this discipline of thorough, bottom-up research to
both the equity and fixed-income markets is the best way to provide favorable
long-term performance for our shareholders --regardless of changes in the
overall market environment.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS(R) Investment Management(SM)
July 13, 1998
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MANAGEMENT REVIEW AND OUTLOOK
Dear Contract Owners:
The Series seeks as high a level of current income as is considered consistent
with the preservation of capital and liquidity by investing in short-term
money market securities issued or guaranteed by the U.S. Treasury, its
agencies, or instrumentalities of the U.S. government, as well as in the
highest-quality corporate issues, in order to minimize credit risk. As of June
30, 1998, the portfolio had assets of approximately $7.3 million, which were
90% invested in government agencies, with the balance in corporate and bank
issues. The average maturity of the Series was 39 days.
We expect short-term interest rates to be flat over the next several months.
Respectfully,
/s/ Jean O. Alessandro
Jean O. Alessandro
Portfolio Manager
Note to Shareholders: Effective January 2, 1998, the Series is being managed
by Jean O. Alessandro, who succeeds Geoffrey L. Kurinsky.
The opinions expressed in this report are those of the portfolio manager and
are only through the end of the period of the report as stated on the cover.
The manager's views are subject to change at any time based on market and
other conditions, and no forecasts can be guaranteed.
PORTFOLIO MANAGER'S PROFILE
Jean O. Alessandro is a portfolio manager at MFS(R) Investment Management(SM).
She manages MFS(R) Cash Reserve Fund, MFS(R) Government Money Market Fund,
MFS(R) Money Market Fund, MFS(R) Meridian(SM) Money Market Fund, and the Money
Market Series offered through MFS(R)/Sun Life annuity products and MFS(R)
Variable Insurance Trust.
Ms. Alessandro joined MFS in 1985 as a fixed-income trading assistant. From
1986 to 1990, she was a money market trader and, from 1990 to 1993, a senior
money market specialist. She has been an Investment Officer since 1993. Ms.
Alessandro earned a bachelor's degree from the University of Connecticut.
SERIES FACTS
Objective: Seeks as high a level of current income as is
considered consistent with the preservation of
capital and liquidity.
Commencement of
investment operations: January 3, 1995
Size: $7.3 million net assets as of June 30, 1998
Investments in the Series are neither insured nor guaranteed by the U.S.
government, and there is no assurance that the Series will be able to maintain
a stable net asset value.
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 for the product being offered. Please read
it carefully before investing or sending money.
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PORTFOLIO OF INVESTMENTS (Unaudited) - June 30, 1998
Commercial Paper - 10.2%
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Principal Amount
Issuer (000 Omitted) Value
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General Electric Capital Corp., due 7/10/98 $ 265 $ 264,632
National Rural Utilities Cooperative Finance
Corp., due 8/07/98 - 8/13/98 235 233,583
Sheffield Receivables Corp., due 7/23/98 250 249,149
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Total Commercial Paper, at amortized cost and value $ 747,364
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U.S. Government and Agency Obligations - 90.1%
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Federal Farm Credit Bank, due 7/01/98 - 9/29/98 $1,185 $1,181,116
Federal Home Loan Bank, due 7/08/98 - 8/07/98 1,580 1,574,729
Federal Home Loan Mortgage Corp., due 7/22/98 - 9/30/98 1,386 1,375,869
Federal National Mortgage Assn., due 7/07/98 - 10/06/98 1,508 1,497,839
Tennessee Valley Authority, due 7/16/98 - 8/26/98 955 950,269
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Total U.S. Government and Agency Obligations,
at amortized cost and value $6,579,822
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Total Investments, at amortized cost and value $7,327,186
Other Assets, Less Liabilities - (0.3)% (25,356)
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Net Assets - 100.0% $7,301,830
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See notes to financial statements
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FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
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June 30, 1998
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Assets:
Investments, at amortized cost and value $7,327,186
Cash 162
Receivable for Series shares sold 22,478
Deferred organization expenses 2,787
Other assets 57
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Total assets $7,352,670
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Liabilities:
Payable for Series shares reacquired $ 47,408
Payable to affiliates for management fee 300
Accrued expenses and other liabilities 3,132
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Total liabilities $ 50,840
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Net assets (represented by paid-in capital) $7,301,830
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Shares of beneficial interest outstanding 7,301,830
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Net asset value per share
(net assets of $7,301,830 / 7,301,830 shares of beneficial
interest outstanding) $1.00
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See notes to financial statements
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FINANCIAL STATEMENTS - continued
Statement of Operations (Unaudited)
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Six Months Ended June 30, 1998
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Net investment income:
Interest income $226,987
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Expenses -
Management fee $ 20,638
Trustees' compensation 1,017
Shareholder servicing agent fee 1,432
Administrative fee 612
Custodian fee 3,745
Printing 6,680
Auditing fees 4,900
Legal fees 666
Amortization of organization expenses 911
Miscellaneous 631
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Total expenses $ 41,232
Fees paid indirectly (798)
Preliminary reduction of expenses by investment adviser (15,668)
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Net expenses $ 24,766
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Net investment income $202,221
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See notes to financial statements
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FINANCIAL STATEMENTS - continued
Statements of Changes in Net Assets
<CAPTION>
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Six Months Ended Year Ended
June 30, 1998 December 31, 1997
(Unaudited)
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Increase (decrease) in net assets:
From operations -
Net investment income $ 202,221 $ 260,099
Net realized loss on investments -- (24)
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Increase in net assets from operations $ 202,221 $ 260,075
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Distributions declared to shareholders from net investment income $ (202,221) $ (260,075)
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Series share (principal) transactions at net asset value of $1.00 per share -
Net proceeds from sale of shares $ 3,377,604 $15,357,398
Net asset value of shares issued to shareholders in reinvestment of
distributions 201,918 230,346
Cost of shares reacquired (5,033,124) (7,464,930)
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Total increase (decrease) in net assets $(1,453,602) $ 8,122,814
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Net assets:
At beginning of period 8,755,432 632,618
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At end of period $ 7,301,830 $ 8,755,432
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See notes to financial statements
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FINANCIAL STATEMENTS - continued
Financial Highlights
<CAPTION>
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Year Ended December 31,
Six Months Ended --------------------------------------
June 30, 1998 1997 1996 1995*
(Unaudited)
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Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
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Income from investment operations# -
Net investment income(S) $ 0.02 $ 0.05 $ 0.04 $ 0.04
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Less distributions declared to
shareholders from net
investment income $(0.02) $(0.05) $(0.04) $(0.04)
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Net asset value - end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
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Total return 2.46%++ 4.91% 4.55% 4.37%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 0.60%+ 0.60% 0.60% 0.60%+
Net investment income 4.90%+ 4.91% 4.53% 4.54%+
Net assets at end of period (000 omitted) $7,302 $8,755 $633 $180
*For the period from the commencement of the Series' investment operations, January 3, 1995, through December 31, 1995.
+Annualized.
++Not annualized.
#Per share data are based on average shares outstanding.
##The Series' expenses are calculated without reduction for fees paid indirectly.
(S)Subject to reimbursement by the Series, the investment adviser voluntarily agreed to maintain expenses of the Series, exclusive
of management fees, at not more than 0.10% of average daily net assets. To the extent actual expenses were over/under this
limitation, the net investment income per share and the ratios would have been:
Net investment income (loss) $ 0.02 $ 0.04 $(0.21) $(0.14)
Ratios (to average net assets):
Expenses## 1.00%+ 1.36% 27.74% 21.54%+
Net investment income (loss) 4.50%+ 4.15% (22.61)% (16.37)%+
See notes to financial statements
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NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Money Market Series (the Series) is a diversified series of MFS(R)
Variable Insurance Trust(SM) (the Trust) which is composed of the following 13
series MFS(R) Bond Series, MFS(R) Emerging Growth Series, MFS(R)/Foreign &
Colonial Emerging Markets Equity Series, MFS(R) Growth with Income Series,
MFS(R) High Income Series, MFS(R) Limited Maturity Series, MFS Money Market
Series, MFS(R) New Discovery Series, MFS(R) Research 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, 1998, there were eight 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 approximates market value.
The Trust's use of amortized cost is subject to the Trust's 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 Series operations.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and discount is amortized or accreted for financial statement and tax
reporting purposes as required by federal income tax regulations.
Fees Paid Indirectly - The Series' custody fee is calculated as a percentage
of the Series' month end net assets. The fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the Series. 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.
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 net realized gains.
At December 31, 1997, the Series, for federal income tax purposes, had a
capital loss carryforward of $24 which may be applied against any net taxable
gains until the earlier of utilization or expiration on December 31, 2005.
(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 annual rate of 0.50%
of average daily net assets. The Series has a temporary expense reimbursement
agreement whereby 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 0.10% of 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, 1998, the aggregate unreimbursed expenses owed to MFS by
the Series amounted to $127,523.
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).
Administrator - The Series has an administrative services agreement with MFS
to provide the Series with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Series pays MFS an administrative
fee at the following annual percentages of the Series' average daily net
assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
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 0.035%.
(4) Portfolio Securities
Purchases and sales of money market investments, exclusive of securities
subject to repurchase agreements, consisted solely of U.S. government
securities and aggregated $23,930,989 and $25,574,835, respectively.
(5) Shares of Beneficial Interest
The Series' Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value, $1.00 per share).
(6) Line of Credit
The Series and other affiliated funds participate in a $805 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, 1998, was $20.
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(C)1998 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
VMM-3 8/98 430
