<PAGE>
[LOGO] Annual Report for
THE FIRST NAME IN MUTUAL FUNDS Year Ended
December 31, 1995
MFS(R) GROWTH WITH INCOME SERIES
A Series of MFS(R) Variable Insurance Trust
<PAGE>
MFS(R) GROWTH WITH INCOME SERIES
A SERIES OF MFS(R) VARIABLE INSURANCE TRUST
TRUSTEES
A. Keith Brodkin*
Chairman and President
Nelson J. Darling, Jr.
Trustee, Eastern Enterprises
(diversified holding company)
William R. Gutow
Vice Chairman,
Capitol Entertainment
(Blockbuster Video Franchise)
PORTFOLIO MANAGERS
John D. Laupheimer, Jr.*
Kevin R. Parke*
TREASURER
W. Thomas London*
ASSISTANT TREASURER
James O. Yost*
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116-3741
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
SHAREHOLDER SERVICE CENTER
MFS Service Center, Inc.
P.O. Box 1400
Boston, MA 02107-9906
For additional information,
contact your financial adviser.
CUSTODIAN
Investors Bank & Trust Company
AUDITORS
Deloitte & Touche LLP
*Affiliated with the Investment Adviser
<PAGE>
Dear Contract Owner:
An environment of declining interest rates and a favorable outlook for inflation
helped establish a pattern of positive performance in both fixed-income and
equity markets around the world during the past 12 months. Yields on many
fixed-income securities continued to decline throughout the year, and bond
prices rose in response to these declines. At the same time, lower interest
rates and strong corporate earnings reports through most of the year helped the
prices of many stocks to rise over the period, producing strong returns. For the
12 months ended December 31, 1995, the U.S. stock market, as measured by the
Standard & Poor's 500 Composite Index (the S&P 500), a popular, unmanaged index
of common stock performance, returned +37.53%. All of the series in the Trust
which invest in equity securities participated in this favorable performance and
achieved positive total returns.
U.S. Outlook
Moderate but sustainable growth was the hallmark of the economic expansion's
fifth year, although some signs of sluggishness were evident late in the year.
Recent retail sales, for example, have been disappointing, in part because of
rising levels of consumer debt. In addition, growth is not expected to get much
help from the manufacturing sector as order flows from manufacturers have
moderated. Export activity, meanwhile, is also expected to remain modest as
continued weakness abroad limits demand for many U.S. goods. However, the
Federal Reserve Board's consistent and, so far, successful efforts to fight
inflation seem to be giving consumers and businesses enough longer-term
confidence to help maintain modest growth in real (adjusted for inflation) gross
domestic product into 1996.
Global Outlook
A pattern of slow to moderate growth and low and controlled inflation remains a
dominant theme in major industrialized countries, including the United States.
While the recent recovery of the dollar against the German mark and the Japanese
yen has added some strength to the economies of Europe and Japan, the outlook is
for sluggish economic growth, in the near term at least. And although moves by
central banks in Germany and Japan to lower interest rates have helped stimulate
domestic demand, many industrial companies in these countries are still
struggling to compete in a global marketplace in which the prices of their
products are less competitively priced. On the positive side, this does mean
little to no inflationary pressure in these countries, and we believe that this,
combined with further reductions in interest rates, could help provide a
foundation for stronger economic growth in the long run. Also, we believe that
many of the cost-cutting measures taken by companies in these countries over the
past few years will ultimately provide earnings leverage when economic growth
improves. Inflation in most overseas economies remains in a downward trend,
providing fixed-income investors with opportunities for relatively attractive
real rates of interest, possibly accompanied by moderate price appreciation.
While the dollar continues to represent a sound store of long-term value, its
relative strength in the near term is being restrained by the persistent U.S.
current-account deficit.
Bond Markets
Given the recent signs of economic weakness, prospects for the Federal Reserve
Board's further decreasing short-term interest rates are good. Long-term rates,
meanwhile, moved noticeably downward in the latter months of 1995 in
anticipation of more modest fourth-quarter growth with continued low inflation.
While there were some increases in commodity prices early in the year, companies
found it difficult to pass these on at the consumer level as they continue to
fight for market share. Additionally, unit labor costs remain under control and
seem to be growing at a pace that is near or below the ongoing inflation rate.
Thus, with long-term U.S. government bonds yielding approximately 6% in an
environment of 2% to 3% inflation, real rates of return in the fixed-income
markets remain relatively attractive.
In world bond markets, slowing economic growth, low inflation, and declining
official interest rates helped result in solid performance during the past 12
months. European governments are engaged in multi-year programs to reduce their
budget deficits and debt levels. These programs are positive for bonds in that
lower government spending tends to reduce inflationary pressures and lower
issuance of government debt reduces supply pressures on the bond market. In the
Japanese market, powerful deflationary forces have supported a drop in yields to
historically low levels. We now feel this process may be drawing to an end,
given a reversal of priorities at the central bank from fighting inflation,
which is now non-existent, to offsetting the downward spiral of deflation. The
high returns of the U.S. bond market, as measured by the Lehman Brothers
Government Bond Index, have been echoed in other U.S. dollar-bloc markets,
including Australia, New Zealand, and Canada, all of which saw positive
performance over the past year according to Salomon Brothers. Currently, the
Australian market offers significantly higher yields than the U.S. market, and,
we believe, represents good value. As long as the outlook for U.S. bonds remains
positive, these related markets could outperform the U.S. market.
Stock Markets
After some volatility late in the third quarter, the stock market continued to
strengthen. Although many companies reported solid third-quarter results, there
was some weakness in the earnings of retail, financial services and even some
technology companies. However, a slowdown in earnings may be a positive
development if it is an indication that the economy is not overheating and
inflation is under control. While we see a deceleration of corporate earnings as
the inevitable consequence of traditional business cycles, we remain encouraged
by the high absolute level of profitability among U.S. companies. Also, many
companies' increasing emphasis on cost containment and growing use of technology
have helped keep them highly competitive and reasonably profitable. Looking
ahead, we believe that a stabilizing interest rate environment, coupled with
reasonable earnings reports, could justify current market valuations.
Comments from the portfolio manager of this Series are presented on the
following page. We appreciate your support and welcome any questions or comments
you may have.
Respectfully,
/s/ A. Keith Brodkin /s/ John D. Laupheimer, Jr. /s/ Kevin R. Parke
- -------------------- -------------------------- ------------------
A. Keith Brodkin John D. Laupheimer, Jr. Kevin R. Parke
Chairman and Preside nt Portfolio Manager Portfolio Manager
January 12, 1996
<PAGE>
MFS(R) GROWTH WITH INCOME SERIES
The Growth with Income Series commenced investment operations on October 9,
1995, and provided a total return of +6.64% from this date through December 31,
1995. This compares to a +6.02% return for the S&P 500 for the same period.* The
Series' technology holdings ended the year at a near-market weighting, which is
unusual for our conservative methodology. Another area of overweighting was
industrial goods and services, where we were concentrated in machinery and
aerospace and defense companies.
As we enter 1996, we continue to feel that relative earnings strength will be
the key to superior performance. We have, for example, invested in financial
services, including insurance companies, as well as consumer non-durables and
industrial companies. We have also invested in the retail sector, an area which
has underperformed the S&P 500 for several years. However, we feel stable
companies with solid long-term prospects in this sector can be bought at modest
valuations.
A key to 1996 performance will be judging the effectiveness of the Federal
Reserve's monetary easing. So far, the market has benefited from the overall
reduction in interest rates but, specifically, economically sensitive stocks
have lagged. We feel one of the major challenges of the Series will be to
measure when and how significantly these stocks will respond. As of this
writing, we have not made significant moves in this direction.
PORTFOLIO MANAGER PROFILES
John Laupheimer joined the MFS Research Department in 1981 as an industry
specialist. A graduate of Boston University and the Sloan School of Management
of Massachusetts Institute of Technology, he was named Investment Officer in
1983, Assistant Vice President - Investments in 1984, Vice President Investments
in 1986 and Senior Vice President in 1995.
Kevin R. Parke joined the MFS Research Department in 1985. A graduate of Lehigh
University and the Harvard University Graduate School of Business
Administration, he was named an Assistant Vice President - Investments in 1987,
a Vice President - Investments in 1988, a Senior Vice President in 1993 and
Director of Equity Research in 1995. He and John Laupheimer have managed the MFS
Growth with Income Series since its inception in October 1995.
PERFORMANCE SUMMARY
The information below illustrates the performance of the MFS Growth with Income
Series shares in comparison to a market indicator.
AGGREGATE ANNUAL TOTAL RETURNS
10/9/95* -
12/31/95
==============================================================================
MFS Growth with Income Series +6.64%
- ------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index+\1/ +6.02%
- ------------------------------------------------------------------------------
All results are historical and, therefore, are not an indication of future
results. The investment return and principal value of an investment in the
product will vary with changes in market conditions, and shares, when redeemed,
may be worth more or less than their original cost. All Series results reflect
the applicable expense subsidy which is explained in the Notes to Financial
Statements. Had the subsidy not been in effect, the results would have been less
favorable. All Series results do not reflect expenses that would be imposed by
insurance company separate accounts..
*Commencement of investment operations; benchmark comparisons are from
September 30, 1995.
+The Standard & Poor's 500 Index is a popular, unmanaged but commonly used
measure of common stock total return performance. It is not possible to
invest in an index.
\1/Source: Lipper Analytical Services, Inc.
<PAGE>
PORTFOLIO OF INVESTMENTS - December 31, 1995
<TABLE>
<CAPTION>
Common Stocks - 92.9%
====================================================================================================
Issuer Shares Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 91.2%
Aerospace - 9.2%
Allied Signal, Inc. 150 $ 7,125
Lockheed Martin Corp. 100 7,900
McDonnell Douglas Corp. 100 9,200
Raytheon Co. 200 9,450
-----------
$ 33,675
- ----------------------------------------------------------------------------------------------------
Apparel and Textiles - 1.9%
Nike, Inc., "B" 100 $ 6,963
- ----------------------------------------------------------------------------------------------------
Banks and Credit Companies - 9.3%
First Bank System, Inc. 300 $ 14,887
First Chicago NBD Corp. 150 5,925
Norwest Corp. 400 13,200
-----------
$ 34,012
- ----------------------------------------------------------------------------------------------------
Consumer Goods and Services - 12.6%
Colgate- Palmolive Co. 100 $ 7,025
Gillette Co. 250 13,031
Philip Morris Cos., Inc. 195 17,647
Procter & Gamble Co 100 8,300
-----------
$ 46,003
- ----------------------------------------------------------------------------------------------------
Defense Electronics - 2.9%
Loral Corp. 300 $ 10,613
- ----------------------------------------------------------------------------------------------------
Electrical Equipment - 5.9%
General Electric Co. 200 $ 14,400
Honeywell, Inc. 150 7,294
-----------
$ 21,694
- ----------------------------------------------------------------------------------------------------
Electronics - 1.6%
Intel Corp. 100 $ 5,675
- ----------------------------------------------------------------------------------------------------
Financial Institutions- 1.9%
Benefical Corp. 150 $ 6,994
- ----------------------------------------------------------------------------------------------------
Food and Beverage Product - 7.7%
CPC International, Inc. 150 $ 10,293
PepsiCo, Inc. 150 8,381
Ralston-Purina Group 150 9,356
-----------
$ 28,030
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Forest and Paper Products - 2.3%
Kimberly-Clark Corp. 100 $ 8,275
- ----------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - continued
Common Stocks - continued
====================================================================================================
Issuer Shares Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - continued
Insurance - 7.3%
Cigna Corp. 50 $ 5,162
MBIA, Inc. 100 7,500
Torchmark Corp. 150 6,787
Transamerica Corp. 100 7,287
-----------
$ 26,736
- ----------------------------------------------------------------------------------------------------
Machinery - 1.5%
Deere & Co., Inc. 150 $ 5,288
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Medical and Health Products - 6.7%
Johnson & Johnson 100 $ 8,563
Pfizer, Inc. 100 6,300
Warner-Lambert Co. 100 9,712
-----------
$ 24,575
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Oils - 8.8%
Amoco Corp. 100 $ 7,188
Exxon Corp. 100 8,013
Mobil Corp. 150 16,800
-----------
$ 32,001
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Railroads - 6.0%
Conrail, Inc. 100 $ 7,000
CSX Corp. 200 9,125
Illinois Central Corp. 150 5,756
-----------
$ 21,881
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Stores - 3.8%
Dayton-Hudson Corp. 100 $ 7,500
May Department Stores Co. 150 6,338
-----------
$ 13,838
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Utilities - Telephone - 1.8%
GTE Corp. 150 $ 6,600
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Total U.S. Common Stocks $ 332,853
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Foreign Stocks - 1.7%
Sweden
Astra AB, Free, "B" 150 $ 5,953
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Total Common Stocks (Identified Cost, $318,054) $ 338,806
- ----------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 7.1% 26,017
====================================================================================================
Net Assets - 100.0% $ 364,823
- ----------------------------------------------------------------------------------------------------
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
========================================================================================================
December 31, 1995
- --------------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at value (identified cost, $318,054) $ 338,806
Cash 24,044
Dividends receivable 880
Receivable from investment adviser 5,546
Deferred organization expenses 8,765
-------------
Total assets $ 378,041
-------------
Liabilities:
Payable to affiliate for management fee $ 22
Accrued expenses and other liabilities 13,196
-------------
Total liabilities $ 13,218
-------------
Net assets $ 364,823
-------------
Net assets consist of:
Paid-in capital $ 344,071
Unrealized appreciation on investments 20,752
-------------
Total $ 364,823
=============
Shares of beneficial interest outstanding 34,402
=============
Net asset value, offering price and redemption price per share
(net assets of $364,823 / 34,402 shares of beneficial interest outstanding) $10.61
=============
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statement of Operations
========================================================================================================
Period Ended December 31, 1995*
- --------------------------------------------------------------------------------------------------------
<S> <C>
Net investment income:
Income -
Dividends $ 1,890
Interest 653
-----------
Total investment income $ 2,543
-----------
Expenses -
Management fee $ 597
Trustees' compensation 508
Shareholder servicing agent fee 33
Auditing fees 10,507
Printing 4,032
Legal fees 682
Amortization of organization expenses 423
Custodian fee 10
Miscellaneous 230
-----------
Total expenses $ 17,022
Reduction of expenses by investment adviser (16,226)
-----------
Net expenses $ 796
-----------
Net investment income $ 1,747
-----------
Realized and unrealized gain on investments:
Realized gain (identified cost basis) -
Investment transactions $ 42
Foreign currency transactions 5
-----------
Net realized gain on investments and foreign currency transactions $ 47
Change in unrealized appreciation on investments 20,752
-----------
Net realized and unrealized gain and foreign currency $ 20,799
-----------
Increase in net assets from operations $ 22,546
===========
*For the period from the commencement of investment operations, October 9, 1995 to December 31, 1995.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
========================================================================================================
Period Ended December 31, 1995*
- --------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 1,747
Net realized gain on investments and foreign currency transactions 47
Net unrealized gain on investments 20,752
-----------
Increase in net assets from operations $ 22,546
-----------
Distributions declared to shareholders -
From net investment income $ (1,794)
In excess of net investment income (20)
Tax return of capital (35)
-----------
Total distributions declared to shareholders $ (1,849)
-----------
Series share (principal) transactions -
Net proceeds from sale of shares $ 338,677
Net asset value of shares issued to shareholders in reinvestment
of distributions 1,849
Cost of shares reacquired (5,000)
-----------
Increase in net assets from Series share transactions $ 335,526
-----------
Total increase in net assets $ 356,223
Net assets:
At beginning of period 8,600
-----------
At end of period $ 364,823
===========
*For the period from the commencement of investment operations, October 9, 1995 to December 31, 1995.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
- --------------------------------------------------------------------------------------------------------
Period Ended December 31, 1995*
- --------------------------------------------------------------------------------------------------------
<S> <C>
Per share data (for a share outstanding throughout the period):
Net asset value - beginning of period $ 10.00
----------
Income from investment operations# -
Net investment income{s} $ 0.05
Net realized and unrealized gain on investments 0.61
----------
Total from investment operations $ 0.66
----------
Less distributions declared to shareholders -
From net investment income $ (0.05)
----------
Total distributions declared to shareholders $ (0.05)
----------
Net asset value - end of period $ 10.61
----------
Total return 6.64%++ Ratios (to average net assets)/Supplemental data{S}:
Expenses 1.00%+
Net investment income 2.20%+
Portfolio turnover 2%
Net assets at end of period (000 omitted) $365
*For the period from the commencement of investment operations, October 9, 1995 to December 31, 1995.
+Annualized.
++Not annualized.
#Per share data is based on average shares outstanding.
{S}The adviser voluntarily agreed to maintain the expenses of the Series at
not more than 1.00% of average daily net assets. To the extent actual
expenses were over these limitations, the net investment loss per share and
the ratios would have been:
Net investment loss $(0.04)
Ratios (to average net assets):
Expenses 21.44%+
Net investment loss (18.24)%+
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Growth With Income Series (the Series) is a diversified series of MFS
Variable Insurance Trust (the Trust) which is comprised of the following twelve
series: MFS Bond Series, MFS Emerging Growth Series, MFS Growth Series, MFS
Growth with Income Series, MFS High Income Series, MFS Limited Maturity Series,
MFS Money Market Series, MFS Research Series, MFS Strategic Fixed Income Series,
MFS Total Return Series, MFS Utilities Series and MFS World Governments Series.
The Trust is organized as a Massachusetts business trust and is registered under
the Investment Company Act of 1940, as amended, as an open-end management
investment company.
The shareholders of each Series of the Trust are separate accounts of insurance
companies which offer variable annuity and/or life insurance products. The
Series was seeded on or about February 1, 1994, but remained inactive until the
current period. The commencement of investment operations took place on October
9, 1995. As of December 31, 1995 there were five shareholders in the Series.
(2) Significant Accounting Policies
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, 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.
Repurchase Agreements - The Series may enter into repurchase agreements with
institutions that the Series' investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The Series requires
that the securities purchased in a repurchase transaction be transferred to the
custodian in a manner sufficient to enable the Series to obtain those securities
in the event of a default under the repurchase agreement. The Series monitors,
on a daily basis, the value of the securities transferred to ensure that the
value, including accrued interest, of the securities under each repurchase
agreement is greater than amounts owed to the Series under each such repurchase
agreement.
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
investment operations of the Series.
Forward Foreign Currency Exchange Contracts - The Series may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering these contracts from the potential inability of counterparties to meet
the terms of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar. The Series will enter into forward
contracts for hedging purposes as well as for non-hedging purposes. For hedging
purposes, the Series may enter into contracts to deliver or receive foreign
currency it will receive from or require for its normal investment activities.
It may also use contracts in a manner intended to protect foreign
currency-denominated securities from declines in value due to unfavorable
exchange rate movements. For non-hedging purposes, the Series may enter into
contracts with the intent of changing the relative exposure of the Series'
portfolio of securities to different currencies to take advantage of anticipated
changes. The forward foreign currency exchange contracts are adjusted by the
daily exchange rate of the underlying currency and any gains or losses are
recorded for financial statement purposes as unrealized until the contract
settlement date.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
original issue discount are amortized or accreted for financial statement and
tax reporting purposes as required by federal income tax regulations. Dividend
income is recorded on the ex-dividend date for dividends received in cash.
Dividend 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.
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 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 its average daily net assets. Under a temporary expense reimbursement
agreement with MFS, MFS has voluntarily agreed to limit the operating expenses
of the Series at levels which increase over time. Currently, MFS agreed to limit
the Series' expenses at an effective annual rate of 1.00% of its average daily
net assets. MFS will pay all Series expenses in excess of the current limit
subject to reimbursement by the Series at a later date. To the extent that
actual Series expenses do not reach the limit, the Series will reimburse MFS for
prior expenses paid by MFS on behalf of the Series such that the Series' expense
ratio does not exceed 1.00% of its average daily net assets. As of December 31,
1995, the aggregate unreimbursed expenses owed to MFS by the Series amounted to
$16,226.
The Series pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Series, all of whom receive
remuneration for their services to the Series from MFS. Certain of the officers
and Trustees of the Series are officers or directors of MFS and MFS Service
Center, Inc. (MFSC).
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the average daily net assets at an effective annual rate of up to
0.035%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions and short-term obligations, aggregated $324,422
and $6,410, 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 $ 318,054
==========
Gross unrealized appreciation $ 24,027
Gross unrealized depreciation (3,275)
----------
Net unrealized appreciation $ 20,752
==========
(5) Shares of Beneficial Interest
The Trust's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par value).
Transactions in Series shares were as follows:
Period Ended December 31, 1995* Shares Amount
=============================================================================
Shares sold 33,867 $ 338,677
Shares issued to shareholders in
reinvestment of distributions 175 1,849
Shares reacquired (500) (5,000)
----------- -----------
Net increase 33,542 $ 335,526
=========== ===========
*For the period from commencement of investment operations, October 9, 1995 to
December 31, 1995.
(6) Line of Credit
The Series entered into an agreement which enables it to participate with other
funds managed by MFS in an unsecured line of credit with a bank which permits
borrowings up to $350 million, collectively. Borrowings may be made to
temporarily finance the repurchase of Series shares. Interest is charged to each
fund, based on its borrowings, at a rate equal to the bank's base rate. In
addition, a commitment fee, based on the average daily unused portion of the
line of credit, is allocated among the participating funds at the end of each
quarter.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Variable Insurance Trust and Shareholders of MFS Growth
with Income Series:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS Growth with Income Series (the Series) (one
of the series constituting MFS Variable Insurance Trust) as of December 31,
1995, the related statements of operations and changes in net assets and the
financial highlights for the period from October 9, 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
December 31, 1995 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS Growth with
Income Series at December 31, 1995, the results of its operations, the changes
in its net assets and its financial highlights for the stated period in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 2, 1996
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This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus
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VGI-2-2/96/5.5M
