<PAGE>
[Logo] M F S(R) Semiannual Report
INVESTMENT MANAGEMENT June 30, 1998
- --------------------------------------------------------------------------------
MFS(R) GROWTH WITH INCOME SERIES
A Series of MFS(R) Variable Insurance Trust(SM)
- --------------------------------------------------------------------------------
[Graphic Omitted]
<PAGE>
MFS(R) GROWTH WITH INCOME SERIES
A SERIES OF MFS(R) VARIABLE INSURANCE TRUST(SM)
<TABLE>
<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 MANAGERS
John D. Laupheimer, Jr.* For additional information,
Kevin R. Parke* contact your financial adviser.
CHAIRMAN AND PRESIDENT CUSTODIAN
Jeffrey L. Shames* State Street Bank and Trust Company
TREASURER WORLD WIDE WEB
W. Thomas London* 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
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
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.
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
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
Dear Contract Owners:
For the six months ended June 30, 1998, the Series provided a total return of
16.12% (including the reinvestment of any distributions). This compares to a
17.71% return for the Standard & Poor's 500 Composite Index (the S&P 500) for
the same period. The S&P 500 is a popular, unmanaged index of common stock
total return performance. It is not possible to invest directly in an index.
We feel the strength of this portfolio's long-term performance is the result
of our adherence to a strong investment discipline. We invest in large-
capitalization, high-quality companies, seek growth at a reasonable price,
strive for a dividend yield that is 90% of that of the S&P 500, seek to keep
volatility lower than that of the S&P 500, and try to stay fully invested. As
important, MFS(R) Original Research(SM), our process of selecting stocks
through in-depth fundamental analysis of companies' earnings outlooks,
managements, business models, competitive strategies, market positions, and
growth prospects, sets us apart and has been a clear factor in our success.
In the financial services sector, we're featuring investments in insurance
companies based on fundamental strengths and as a means of leveraging the
growing trend toward consolidation in this industry. Consolidation should
allow companies to function more efficiently and produce cleaner, more
profitable balance sheets, which positively impact share prices. Because
consolidation in the insurance industry is a newer phenomenon than it is in
the banking business, we are focusing less on banking and brokerage stocks.
Some key holdings for the sector include Hartford Financial Services, Chubb,
and Allstate.
Air Products, an industrial gas company, is a new stock in the portfolio's top
10 that exemplifies the type of company we seek out. It locates its plants at
customer sites, and customers contract to take a certain amount of product or
to pay the difference for what they don't use. Any excess product that the
plant can make is sold to other customers, which helps keep plants running
more profitably. Also, the company has modified its management compensation
plan to focus on earnings growth. As a result, Air Products is more rigorously
examining its corporate investments, which has helped earnings growth more
easily reach the bottom line. The company has potential earnings growth in the
mid teens, and its stock sells for a reasonable price given its earnings
prospects, so we get growth at a good price.
One of the household names in the portfolio, and a long-term holding, is
Gillette. Its much-touted new razor product is an excellent example of the
strength of the company's business model. Unlike companies that rely on
gaining new customers or increasing consumption among existing customers,
Gillette has built a successful business by constantly improving its products
and convincing customers to pay more for them.
Consolidation is a theme that has been prominent in many industries recently.
Among mergers that have had an impact on this portfolio is the one between
American Home Products (AHP) and Monsanto. This is a very strategic merger for
both companies. American Home Products, one of the world's largest
pharmaceutical and health care companies, produces products such as Advil and
Robitussin. Monsanto, in addition to producing well-known products like
NutraSweet and Round-Up, has cutting-edge agricultural products that should
thrive under AHP's management and strong financial discipline. We are
optimistic about the new company's growth prospects.
While the portfolio is allowed to invest up to 35% of assets in international
stocks, we'll probably never reach that level. Currently, we're only about 8%
invested in non-U.S. dollar stocks and feel that 10% to 15% is a reasonable
maximum. Investing in foreign and emerging market securities involves special
risks. These risks may increase share price volatility. Please see a
prospectus for details. We only invest overseas if we find a company with
quality and growth potential equivalent to those of a U.S. company and whose
stock is selling at a discount sufficient to compensate for currency risk. As
a result of this investment strategy, the portfolio doesn't have much exposure
to economies in Asia such as Malaysia, Indonesia, and Singapore. Japan is a
consumer economy, and some of our holdings have a presence there.
However, U.S. companies have had a hard time selling products in Japan because
of that country's trade barriers. This has provided some protection that,
combined with the strength of the European and American economies, has limited
the impact of Asian turmoil on stocks in the portfolio.
Respectfully,
/s/ John D. Laupheimer, Jr. /s/ Kevin R. Parke
John D. Laupheimer, Jr. Kevin R. Parke
Portfolio Manager Portfolio Manager
The opinions expressed in this report are those of the portfolio managers and
are only through the end of the period of the report as stated on the cover.
The managers' views are subject to change at any time based on market and
other conditions, and no forecasts can be guaranteed.
PORTFOLIO MANAGERS' PROFILES
John D. Laupheimer, Jr., is a Senior Vice President of MFS(R) Investment
Management(SM) and portfolio manager of Massachusetts Investors Trust,
America's oldest mutual fund. He also manages the Conservative Growth Series
offered through MFS(R)/Sun Life annuity products, MFS(R) Growth with Income
Series, part of MFS(R) Variable Insurance Trust(SM), and co-manages MFS(R)
American(SM) U.S. Equity Fund and MFS(R) Meridian(SM) U.S. Equity Fund. Mr.
Laupheimer joined the MFS Research Department in 1981 as an industry
specialist. He was named Investment Officer in 1983, Assistant Vice President
- -- Investments in 1984, Vice President -- Investments in 1986, portfolio
manager of MFS(R) Total Return Fund in 1987, portfolio manager of
Massachusetts Investors Trust in 1992, and Senior Vice President in 1995. Mr.
Laupheimer is a graduate of Boston University and the Sloan School of
Management of the Massachusetts Institute of Technology. He is a Chartered
Financial Analyst and a member of The Boston Security Analysts Society, Inc.
Kevin R. Parke was named Chief Equity Officer of MFS(R) Investment Management
(SM) effective August 1, 1998. Mr. Parke is an Executive Vice President, the
Director of Equity Research, and a member of the Executive Committee of MFS(R)
Investment Management(SM), as well as portfolio manager of Massachusetts
Investors Trust, the Conservative Growth Series offered through MFS(R)/Sun
Life annuity products, and MFS(R) Growth with Income Series, part of MFS(R)
Variable Insurance Trust(SM). He oversees the committee of analysts who
collectively manage MFS(R) Research Fund, MFS(R) Research Growth and Income
Fund, and MFS(R) Research International Fund. Mr. Parke also oversees the
MFS(R) Meridian(SM) Research Fund and MFS(R) American(SM) Research Fund. Mr.
Parke joined the Research Department in 1985 as an industry specialist. He was
named Assistant Vice President -- Investments in 1987, Vice President --
Investments and portfolio manager of MFS(R) Large Cap Growth Fund in 1988,
portfolio manager of Massachusetts Investors Trust in 1991, Senior Vice
President in 1993, Director of Equity Research in 1995, and Executive Vice
President in 1997. Mr. Parke is a graduate of Lehigh University and the
Harvard University Graduate School of Business Administration.
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.
<PAGE>
SERIES FACTS
Objective: Seeks reasonable current income and long-term growth of
capital and income.
Commencement of
investment operations: October 9, 1995
Size: $145.5 million net assets as of June 30, 1998
PERFORMANCE SUMMARY
Because the Series is designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for
the applicable time periods.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN THROUGH JUNE 30, 1998
6 Months 1 Year 10 Years/Life*
- --------------------------------------------------------------------------------
Cumulative Total Return +16.12% +27.77% +100.03%
- --------------------------------------------------------------------------------
Average Annual Total Return -- +27.77% + 28.96%
- --------------------------------------------------------------------------------
*For the period from the commencement of the Series' investment operations,
October 9, 1995, through June 30, 1998.
All results are historical and assume the reinvestment of dividends and
capital gains. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Performance results
reflect any applicable expense subsidies and waivers, without which the
results would have been less favorable. Subsidies and waivers may be rescinded
at any time. See the prospectus for details.
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.
<PAGE>
<TABLE>
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PORTFOLIO OF INVESTMENTS (Unaudited) - June 30, 1998
Stocks - 92.9%
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<CAPTION>
Issuer Shares Value
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 84.9%
Aerospace - 4.4%
Allied Signal, Inc. 26,155 $ 1,160,628
General Dynamics Corp. 10,218 475,137
Goodrich (B.F.) Co. 8,819 437,643
Lockheed - Martin Corp. 15,067 1,595,219
Raytheon Co., "A" 13,809 795,744
United Technologies Corp. 20,805 1,924,462
------------
$ 6,388,833
- ------------------------------------------------------------------------------------------------------
Agricultural Products - 0.1%
Case Corp. 3,700 $ 178,525
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Airlines - 0.1%
AMR Corp.* 1,770 $ 147,353
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Apparel and Textiles - 0.3%
VF Corp. 6,986 $ 359,779
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Automotive - 0.8%
Federal Mogul Corp. 6,700 $ 452,250
Ford Motor Co. 5,323 314,057
TRW, Inc. 5,900 322,287
------------
$ 1,088,594
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Banks and Credit Companies - 7.0%
Bank of New York, Inc. 1,077 $ 65,360
Comerica, Inc. 16,524 1,094,715
Firstar Corp. 9,200 349,600
Fleet Financial Group, Inc. 3,074 256,679
National City Corp. 16,562 1,175,902
Northern Trust Corp. 7,226 550,983
Norwest Corp. 50,777 1,897,790
State Street Corp. 13,992 972,444
SunTrust Banks, Inc. 7,988 649,524
US Bancorp 51,814 2,228,002
Washington Mutual, Inc. 22,237 965,920
------------
$ 10,206,919
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Building - 0.7%
American Standard Cos., Inc.* 10,741 $ 479,989
Sherwin Williams Co. 15,097 500,088
------------
$ 980,077
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Business Machines - 1.7%
International Business Machines Corp. 13,754 $ 1,579,131
Xerox Corp. 8,235 836,882
------------
$ 2,416,013
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Business Services - 1.0%
Computer Sciences Corp. 15,069 $ 964,416
DST Systems, Inc.* 8,815 493,640
------------
$ 1,458,056
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Cellular Telephones - 0.1%
Century Telephone Enterprises, Inc. 2,845 $ 130,514
- ------------------------------------------------------------------------------------------------------
Chemicals - 2.2%
Air Products & Chemicals, Inc. 55,546 $ 2,221,840
DuPont (E.I.) de Nemours & Co., Inc. 4,319 322,305
Praxair, Inc. 15,272 714,921
------------
$ 3,259,066
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Computer Software - Personal Computers - 1.6%
Compaq Computer Corp. 9,068 $ 257,304
Microsoft Corp.* 18,672 2,023,578
------------
$ 2,280,882
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Computer Software - Systems - 1.6%
BMC Software, Inc.* 7,172 $ 372,496
Computer Associates International, Inc. 26,278 1,460,071
Oracle Corp.* 20,274 497,980
------------
$ 2,330,547
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Consumer Goods and Services - 8.0%
Black & Decker Corp. 19,994 $ 1,219,634
Clorox Co. 4,751 453,127
Colgate-Palmolive Co. 18,312 1,611,456
Gillette Co. 28,434 1,611,852
Kimberly-Clark Corp. 35,219 1,615,672
Philip Morris Cos., Inc. 29,909 1,177,667
Procter & Gamble Co. 11,903 1,083,917
Service Corp. International 26,861 1,151,665
Tyco International Ltd. 27,847 1,754,361
------------
$ 11,679,351
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Electrical Equipment - 2.7%
Cooper Industries, Inc. 9,566 $ 525,532
General Electric Co. 22,911 2,084,901
Honeywell, Inc. 16,056 1,341,680
------------
$ 3,952,113
- ------------------------------------------------------------------------------------------------------
Entertainment - 0.6%
CBS Corp. 3,540 $ 112,395
Time Warner, Inc. 5,500 469,906
Viacom, Inc., "B"* 5,670 330,278
------------
$ 912,579
- ------------------------------------------------------------------------------------------------------
Financial Institutions - 4.1%
Associates First Capital Corp., "A" 5,610 $ 431,269
Beneficial Corp. 14,037 2,150,293
CIT Group, Inc., "A" 14,801 555,037
Federal Home Loan Mortgage Corp. 19,678 926,096
Heller Financial, Inc., "A"* 8,591 257,730
Household International, Inc. 8,380 416,905
Merrill Lynch & Co., Inc. 6,413 591,599
Morgan Stanley, Dean Witter & Co. 7,541 689,059
Waddell & Reed Financial, Inc., "A" 525 12,567
------------
$ 6,030,555
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Food and Beverage Products - 3.6%
Ace Ltd. 13,282 $ 517,998
Archer-Daniels-Midland Co. 18,755 363,378
Bestfoods Co. 13,900 807,069
Coca-Cola Co. 3,412 291,726
Corn Products International, Inc.* 850 28,794
General Mills, Inc. 3,435 234,868
Hershey Foods Corp. 4,651 320,919
Interstate Bakeries Corp. 13,568 450,288
McCormick & Co., Inc. 5,585 199,489
Nabisco Holdings Corp., "A" 8,000 288,500
Ralston Purina Co. 14,194 1,658,037
------------
$ 5,161,066
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Insurance - 9.1%
Allstate Corp. 18,265 $ 1,672,389
Chubb Corp. 23,560 1,893,635
CIGNA Corp. 21,158 1,459,902
Conseco, Inc. 2,183 102,055
Hartford Financial Services Group, Inc. 17,670 2,021,006
Lincoln National Corp. 11,357 1,037,746
MBIA, Inc. 5,211 390,174
Progressive Corp. 10,517 1,482,897
Torchmark Corp. 32,308 1,478,091
Transamerica Corp. 7,798 897,745
Travelers Group, Inc. 13,376 810,920
------------
$ 13,246,560
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Machinery - 0.6%
Eaton Corp. 9,300 $ 723,075
York International Corp. 4,761 207,401
------------
$ 930,476
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Medical and Health Products - 8.1%
American Home Products Corp. 40,146 $ 2,077,555
Bristol-Myers Squibb Co. 31,811 3,656,277
Johnson & Johnson 15,893 1,172,109
McKesson Corp. 7,171 582,644
Merck & Co., Inc. 2,579 344,941
Pfizer, Inc. 14,395 1,564,557
Pharmacia & Upjohn, Inc. 11,700 539,662
Schering Plough Corp. 1,865 170,881
Warner-Lambert Co. 24,041 1,667,844
------------
$ 11,776,470
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Medical and Health Technology and Services - 3.4%
Columbia/HCA Healthcare Corp. 35,725 $ 1,040,491
Fresenius National Medical Care, Inc.* 100 6
HEALTHSOUTH Corp.* 37,995 1,013,992
Medtronic, Inc. 6,724 428,655
Tenet Healthcare Corp.* 29,935 935,469
United Healthcare Corp. 24,975 1,585,912
------------
$ 5,004,525
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Metals and Minerals - 0.2%
Phelps Dodge Corp. 4,671 $ 267,123
- ------------------------------------------------------------------------------------------------------
Oils - 3.8%
Chevron Corp. 3,390 $ 281,582
Exxon Corp. 32,177 2,294,622
Mobil Corp. 14,351 1,099,645
Texaco, Inc. 19,189 1,145,344
USX-Marathon Group 20,539 704,744
------------
$ 5,525,937
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Photographic Products
Eastman Kodak Co. 600 $ 43,838
- ------------------------------------------------------------------------------------------------------
Pollution Control - 0.8%
Browning Ferris Industries, Inc. 4,744 $ 164,854
Waste Management, Inc. 28,555 999,425
------------
$ 1,164,279
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Printing and Publishing - 1.6%
Gannett Co., Inc. 19,039 $ 1,352,959
Tribune Co. 14,871 1,023,311
------------
$ 2,376,270
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Railroads - 1.0%
Burlington Northern Santa Fe Railway Co. 12,161 $ 1,194,058
CSX Corp. 4,749 216,080
------------
$ 1,410,138
- ------------------------------------------------------------------------------------------------------
Restaurants and Lodging - 0.6%
Cendant Corp.* 9,148 $ 190,964
McDonalds Corp. 9,170 632,730
------------
$ 823,694
- ------------------------------------------------------------------------------------------------------
Stores - 5.9%
CVS Corp. 19,356 $ 753,674
Home Depot, Inc. 11,738 974,988
Liz Claiborne, Inc. 5,343 279,172
Nordstrom, Inc. 11,555 892,624
Office Depot, Inc.* 9,776 308,555
Penney (J.C.), Inc. 23,859 1,725,304
Rite Aid Corp. 35,927 1,349,508
Sears, Roebuck & Co. 25,910 1,582,129
Wal-Mart Stores, Inc. 11,572 702,999
------------
$ 8,568,953
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Supermarkets - 1.3%
Kroger Co.* 10,842 $ 464,851
Meyer (Fred), Inc. 500 21,250
Safeway, Inc.* 34,390 1,399,243
------------
$ 1,885,344
- ------------------------------------------------------------------------------------------------------
Telecommunications - 3.1%
AirTouch Communications, Inc.* 3,843 $ 224,575
Alltel Corp. 11,600 539,400
Cincinnati Bell, Inc. 9,436 270,106
Cisco Systems, Inc.* 4,619 425,237
Lucent Technologies, Inc. 4,823 401,213
MCI Communications Corp. 16,786 975,686
Sprint Corp. 17,314 1,220,637
WorldCom, Inc.* 9,000 435,938
------------
$ 4,492,792
- ------------------------------------------------------------------------------------------------------
Utilities - Electric - 2.1%
Carolina Power & Light Co. 3,659 $ 158,709
Cinergy Corp. 12,742 445,970
CMS Energy Corp. 8,680 381,920
FPL Group, Inc. 7,119 448,497
Illinova Corp. 5,549 166,470
New Century Energies, Inc. 3,362 152,761
Pinnacle West Capital Corp. 5,975 268,875
Texas Utilities Co. 14,357 597,610
Unicom Corp. 8,849 310,268
Wisconsin Energy Corp. 5,240 159,165
------------
$ 3,090,245
- ------------------------------------------------------------------------------------------------------
Utilities - Gas - 0.9%
Columbia Gas System, Inc. 12,415 $ 690,556
KN Energy, Inc. 12,645 685,201
------------
$ 1,375,757
- ------------------------------------------------------------------------------------------------------
Utilities - Telephone - 1.8%
Bell Atlantic Corp. 5,390 $ 245,919
BellSouth Corp. 8,462 568,012
GTE Corp. 19,884 1,106,047
SBC Communications, Inc. 18,270 730,800
------------
$ 2,650,778
- ------------------------------------------------------------------------------------------------------
Total U.S. Stocks $123,594,001
- ------------------------------------------------------------------------------------------------------
Foreign Stocks - 8.0%
Bermuda - 0.7%
Exel Ltd. (Insurance) 12,656 $ 984,795
- ------------------------------------------------------------------------------------------------------
Canada - 0.7%
Canadian National Railway Co. (Railroads) 18,121 $ 962,678
- ------------------------------------------------------------------------------------------------------
France - 0.9%
Alcatel Alsthom Compagnie, ADR (Telecommunications) 23,365 $ 950,663
Sanofi S.A. (Medical and Health Products) 2,471 290,178
------------
$ 1,240,841
- ------------------------------------------------------------------------------------------------------
Germany - 0.5%
Henkel KGAA (Chemicals) 7,205 $ 711,925
- ------------------------------------------------------------------------------------------------------
Japan - 0.5%
AFLAC, Inc. (Insurance) 14,880 $ 451,050
Sony Corp. (Electronics) 3,000 259,463
------------
$ 710,513
- ------------------------------------------------------------------------------------------------------
Netherlands - 1.2%
Akzo Nobel N.V. (Chemicals) 4,836 $ 1,073,822
Ing Groep N V, ADR (Financial Services) 8,187 535,225
Ing Groep N.V. (Financial Services)* 2,600 170,057
------------
$ 1,779,104
- ------------------------------------------------------------------------------------------------------
Sweden - 0.8%
Mandamus Fastighet (Real Estate Investment Trust)* 280 $ 1,753
Securitas AB (Security Services) 2,026 99,080
Skandia Forsakrings AB (Insurance) 63,300 903,719
Sparbanken Sverige AB, "A" (Banks and Credit Cos.) 6,770 203,482
------------
$ 1,208,034
- ------------------------------------------------------------------------------------------------------
Switzerland - 0.7%
Nestle AG, Registered Shares (Food and Beverage Products) 275 $ 588,819
Novartis AG (Pharmaceuticals) 283 471,169
------------
$ 1,059,988
- ------------------------------------------------------------------------------------------------------
United Kingdom - 2.0%
British Petroleum PLC, ADR (Oils) 23,504 $ 2,074,228
Lloyds TSB Group PLC (Banks and Credit Cos.)* 22,377 312,969
PowerGen PLC (Utilities - Electric)* 32,392 447,368
------------
$ 2,834,565
- ------------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 11,492,443
- ------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $119,597,588) $135,086,444
- ------------------------------------------------------------------------------------------------------
Preferred Stock
- ------------------------------------------------------------------------------------------------------
Consumer Goods and Services
Newell Financial Trust Co.##* (Identified Cost, $11,325) 200 $ 11,550
- ------------------------------------------------------------------------------------------------------
Convertible Preferred Stock - 0.4%
- ------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 0.2%
Newell Financial Trust Co., 5.25%* 4,398 $ 253,984
- ------------------------------------------------------------------------------------------------------
Utilities - Electric - 0.2%
Houston Industries, Inc., 7% 4,265 $ 317,742
- ------------------------------------------------------------------------------------------------------
Total Convertible Preferred Stock (Identified Cost, $472,791) $ 571,726
- ------------------------------------------------------------------------------------------------------
Short-Term Obligations - 5.8%
- ------------------------------------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- ------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., due 7/01/98 $ 4,870 $ 4,870,000
Federal National Mortgage Assn., due 7/06/98 3,600 3,597,285
- ------------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 8,467,285
- ------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $128,548,989) $144,137,005
Other Assets, Less Liabilities - 0.9% 1,349,529
- ------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $145,486,534
- ------------------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- ------------------------------------------------------------------------------
June 30, 1998
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $128,548,989) $144,137,005
Cash 4,459
Receivable for investments sold 683,691
Receivable for Series shares sold 3,128,053
Dividends receivable 181,991
Deferred organization expenses 4,169
Other assets 458
------------
Total assets $148,139,826
------------
Liabilities:
Payable for investments purchased $ 2,388,876
Payable for Series shares reacquired 251,735
Payable to affiliates -
Management fee 8,798
Shareholder servicing agent fee 411
Administrative fee 180
Accrued expenses and other liabilities 3,292
------------
Total liabilities $ 2,653,292
------------
Net assets $145,486,534
============
Net assets consist of:
Paid-in capital $127,634,780
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 15,588,053
Accumulated undistributed net realized gain on investments
and foreign currency transactions 1,883,700
Accumulated undistributed net investment income 380,001
------------
Total $145,486,534
============
Shares of beneficial interest outstanding 7,620,796
=========
Net asset value per share
(net assets / shares of beneficial interest outstanding) $19.09
======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations (Unaudited)
- --------------------------------------------------------------------------------
Six Months Ended June 30, 1998
- --------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 708,005
Interest 161,099
Foreign taxes withheld (9,976)
-----------
Total investment income $ 859,128
-----------
Expenses -
Management fee $ 359,345
Trustees' compensation 1,017
Shareholder servicing agent fee 16,825
Administrative fee 7,171
Printing 31,831
Custodian fee 19,993
Auditing fees 10,350
Amortization of organization expenses 918
Miscellaneous 11,490
-----------
Total expenses $ 458,940
Fees paid indirectly (1,236)
Preliminary reimbursement of expense to investment adviser 21,423
-----------
Net expenses $ 479,127
-----------
Net investment income $ 380,001
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 2,041,914
Foreign currency transactions (2,071)
-----------
Net realized gain on investments and foreign currency
transactions $ 2,039,843
-----------
Change in unrealized appreciation -
Investments $10,323,099
Translation of assets and liabilities in foreign currencies 102
-----------
Net unrealized gain on investments and foreign currency
translation $10,323,201
-----------
Net realized and unrealized gain on investments and
foreign currency $12,363,044
-----------
Increase in net assets from operations $12,743,045
===========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------------------
<CAPTION>
Six Months Ended Year Ended
June 30, 1998 December 31, 1997
(Unaudited)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 380,001 $ 234,505
Net realized gain on investments and foreign currency
transactions 2,039,843 962,798
Net unrealized gain on investments and foreign
currency translation 10,323,201 4,430,038
------------ -----------
Increase in net assets from operations $ 12,743,045 $ 5,627,341
------------ -----------
Distributions declared to shareholders -
From net investment income $ -- $ (236,004)
From net realized gain on investments and foreign
currency transactions -- (962,798)
In excess of net investment income -- (501)
In excess of net realized gain on investments and
foreign currency transactions -- (143,538)
------------ -----------
Total distributions declared to shareholders $ -- $(1,342,841)
------------ -----------
Net increase in net assets from Series share
transactions $ 74,698,419 $44,586,457
------------ -----------
Total increase in net assets $ 87,441,464 $48,870,957
Net assets:
At beginning of period 58,045,070 9,174,113
------------ -----------
At end of period (including accumulated undistributed net
investment income of $380,001 and $0, respectively) $145,486,534 $58,045,070
============ ===========
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Year Ended December 31,
Six Months Ended ----------------------------- Period Ended
June 30, 1998 1997 1996 December 31, 1995*
(Unaudited)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $16.44 $12.98 $10.61 $10.00
------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.07 $ 0.16 $ 0.18 $ 0.05
Net realized and unrealized gain on
investments and foreign currency
transactions 2.58 3.70 2.42 0.61
------ ------ ------ ------
Total from investment operations $ 2.65 $ 3.86 $ 2.60 $ 0.66
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $(0.07) $(0.09) $(0.05)
From net realized gain on investments and
foreign currency transactions -- (0.29) (0.13) --
In excess of net realized gain on
investments and foreign currency
transactions -- (0.04) (0.01) --
------ ------ ------ ------
Total distributions declared to
shareholders $ -- $(0.40) $(0.23) $(0.05)
------ ------ ------ ------
Net asset value - end of period $19.09 $16.44 $12.98 $10.61
====== ====== ====== ======
Total return 16.12%++ 29.78% 24.46% 6.64%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 1.00%+ 1.00% 1.00% 1.00%+
Net investment income 0.79%+ 0.93% 1.52% 2.20%+
Portfolio turnover 18% 42% 41% 2%
Net assets at end of period (000 omitted) $145,487 $58,045 $9,174 $365
* For the period from the commencement of the Series' investment operations, October 9, 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 the expenses of the Series,
exclusive of management fees, at not more than 0.25% of average daily net assets. To the extent actual expenses were
over/under this limitation, the net investment income (loss) per share and the ratios would have been:
Net investment income (loss) $ 0.07 $ 0.13 $ 0.05 $ (0.41)
Ratios (to average net assets):
Expenses## 0.96%+ 1.10% 2.07% 21.44%+
Net investment income (loss) 0.83%+ 0.82% 0.46% (18.24)%+
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Growth with Income Series (the Series) is a diversified series of MFS(R)
Variable Insurance Trust(SM) (the Trust) which is comprised 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(R) 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 Series 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 37
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 reported at market value using last sale
prices. Unlisted equity securities or listed equity securities for which last
sale prices are not available are reported at market value using 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 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 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
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 as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains or
losses on foreign currency transactions.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All discount
is accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. 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' 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.
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.
(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 0.75%
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 0.25% 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 $63,790.
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 investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$87,657,731, and $16,414,592, 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 $128,548,989
------------
Gross unrealized appreciation $ 16,820,296
Gross unrealized depreciation (1,232,280)
------------
Net unrealized appreciation $ 15,588,016
============
(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, 1998 Year Ended December 31, 1997
--------------------------------- --------------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 4,712,988 $ 86,057,038 3,352,466 $52,088,636
Shares issued to shareholders in
reinvestment of distributions -- -- 83,407 1,342,841
Shares reacquired (622,888) (11,358,619) (611,729) (8,845,020)
--------- ------------ --------- -----------
Net increase 4,090,100 $ 74,698,419 2,824,144 $44,586,457
========= ============ ========= ===========
</TABLE>
(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 six months ended June 30, 1998, was $114.
(C)1998 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
VGI-3 8/98 33.4M
