<PAGE>
[LOGO] Annual Report for
THE FIRST NAME IN MUTUAL FUNDS Year Ended
December 31, 1995
MFS(R) EMERGING GROWTH SERIES
A Series of MFS(R) Variable Insurance Trust
<PAGE>
MFS(R) EMERGING GROWTH 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 MANAGER
John W. Ballen*
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 W. Ballen
- ---------------------- ------------------
A. Keith Brodkin John W. Ballen
Chairman and President Portfolio Manager
January 12, 1996
<PAGE>
MFS(R) EMERGING GROWTH SERIES
The Emerging Growth Series commenced investment operations on July 24, 1995, and
provided a total return of +17.41% from that date through December 31, 1995.
This compares to a +6.14% return for the Russell 2000 Index for the same
period.* The Series' performance benefited from strong appreciation in the stock
prices of many of its holdings in the technology sector. The technology stocks
responded to strong earnings growth for semiconductor, hardware, software,
networking and processing companies. Oracle Systems (database software), System
Software (manufacturing application software), and Informix (database software
and tools) reported very strong earnings and their stock prices responded
positively, while Sybase (database software) and BMC Software (systems software)
also contributed to the positive performance of the Series. Other strong
performers included networking stocks such as Cabletron and Bay Networks. The
stocks of our semiconductor companies responded positively to their very strong
earnings reports. Compuware (system software) and Autodesk (computer-aided
design) reported disappointing earnings and have been disappointing stocks. We
maintain positions in these companies because we believe their stock prices will
rebound from their currently depressed levels.
The performance of our leisure stocks was particularly helpful. HFS, the
nation's largest franchiser of hotels and real estate companies, saw its stock
price more than double this year. Strong earnings gains and acquisitions such as
Century 21 assured investors of its future growth prospects.
We established major positions in the health care sector to take advantage of
what we believe to be depressed prices caused by investor confusion concerning
the effect of lower Medicare reimbursement levels. Even though Medicare
reimbursement has been cut for many companies, we believe well-managed companies
will adjust their costs accordingly. We also believe health maintenance
organizations (HMO's) will provide many of the solutions to the high level of
the nation's health care costs.
In 1995, the stock market moved higher as companies reported
better-than-expected earnings. We believe this trend of investors favoring
companies with strong earnings will continue into 1996 and could benefit the
share prices of our companies if they can deliver those strong earnings. Our
largest sector concentration continues to be technology. While earnings gains
may not be as strong in 1996 as they were in 1995, we believe this sector will
still have the strongest earnings gains of any group in 1996. We are also
positive on the healthcare service and consumer sectors. Both groups performed
poorly in 1995, and we believe their stock prices to be depressed. We believe
that the healthcare cost-containment companies will ultimately benefit from the
cost-reduction initiatives in Washington. We believe the consumer sector is
poised to respond very positively to only a small positive change in consumer
spending.
We believe the companies in the portfolio are particularly well-suited to
benefit from technology-driven productivity enhancements. Obviously, our
technology companies are providing the tools to the rest of the economy. Our
other companies are using technology to increase their productivity and lower
their costs. We remain optimistic that the progress for our portfolio companies
will be rewarded by investors in 1996.
<PAGE>
PORTFOLIO MANAGER PROFILE
John Ballen joined the MFS Research Department in 1984. A graduate of Harvard
College, the University of New South Wales in Australia and Stanford University,
he was named Investment Officer in 1986, Vice President - Investments in 1987,
Director of Research in 1988, Senior Vice President in 1990, Director of Equity
Portfolio Management in 1993 and Chief Equity Officer in 1995. He has managed
the MFS Emerging Growth Series since its inception in July 1995.
PERFORMANCE SUMMARY
The information below illustrates the performance of the MFS Emerging Growth
Series shares in comparison to various market indicators.
AGGREGATE TOTAL RETURNS 7/24/95* -
12/31/95
===============================================================================
MFS Emerging Growth Series +17.41%
- -------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index+\1/ +10.76%
- -------------------------------------------------------------------------------
Russell 2000 Index++\1/ + 6.14%
- -------------------------------------------------------------------------------
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 July
31, 1995.
+Standard & Poor 500 Index is an unmanaged but commonly used measure of
common stock total return performance. It is not possible to invest in an
index.
++The Russell 2000 Index is unmanaged and comprised of 2,000 of the smallest
U.S.-domiciled company common stocks (on the basis of capitalization) which
are traded in the U.S. on the New York Stock Exchange (NYSE), American Stock
Exchange (AMEX) and NASDAQ. 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 - 86.9%
=========================================================================================================
Issuer Shares Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 83.6%
Airlines - 0.1%
Eagle USA Airfreight, Inc.* 100 $ 2,625
Midwest Express Holdings, Inc.* 100 2,775
-------------
$ 5,400
- ---------------------------------------------------------------------------------------------------------
Apparel and Textiles - 0.3%
Eastbay, Inc.* 200 $ 3,950
Nine West Group, Inc.* 200 7,500
-------------
$ 11,450
- ---------------------------------------------------------------------------------------------------------
Biotechnology - 0.9%
Guidant Corp.* 700 $ 29,575
Myriad Genetics, Inc.* 100 3,263
-------------
$ 32,838
- ---------------------------------------------------------------------------------------------------------
Business Machines - 0.3%
Affiliated Computer Co.* 300 $ 11,250
- ---------------------------------------------------------------------------------------------------------
Business Services - 14.5%
ADT Ltd.* 2,800 $ 42,000
APAC Teleservices, Inc.* 100 3,338
Accustaff, Inc.* 1,000 44,000
BISYS Group, Inc.* 700 21,525
CUC International, Inc.* 2,000 68,250
Ceridian Corp.* 1,600 66,000
Computer Sciences, Inc.* 400 28,100
Corestaff, Inc.* 100 3,650
DST System, Inc.* 1,700 48,450
Franklin Quest Co.* 1,100 21,450
Global DirectMail Corp.* 400 11,000
Learning Tree International, Inc.* 2,300 35,938
Mail-Well, Inc.* 200 2,450
National Data Corp. 1,200 29,700
Paychex, Inc. 200 9,975
Personnel Group of America, Inc.* 1,000 14,625
Reynolds & Reynolds Co., "A" 300 11,663
Romac International, Inc.* 100 2,350
SPS Transaction Services, Inc.* 900 26,663
Technology Solutions Co.* 1,800 35,100
Transaction Systems Architects, Inc., "A"* 1,000 33,750
-------------
$ 559,977
- ---------------------------------------------------------------------------------------------------------
Chemicals - 0.1%
Arcadian Corp. 100 $ 1,938
- ---------------------------------------------------------------------------------------------------------
Computer Software - 0.3%
Hummingbird Communications* 300 $ 12,150
- ---------------------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 2.9%
Autodesk, Inc. 1,985 $ 67,986
Electronic Arts, Inc.* 100 2,612
First Data Corp. 450 30,094
Spectrum Holobyte, Inc.* 300 1,950
Symantec Corp.* 300 6,975
Visio Corp.* 100 2,825
-------------
$ 112,442
- ---------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - continued
Common Stocks - continued
=========================================================================================================
Issuer Shares Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - continued
Computer Software - Systems - 18.7%
Adobe Systems, Inc. 1,100 $ 68,200
BMC Software, Inc.* 2,350 100,462
Black Box Corp.* 100 1,637
Cadence Design Systems, Inc.* 2,650 111,300
Checkfree Corp.* 100 2,150
Citrix Systems, Inc.* 100 3,250
Computer Associates International, Inc. 1,100 62,562
Computer Management Sciences, Inc.* 100 1,775
Compuware Corp.* 900 16,650
DataWorks Corp.* 100 1,262
Enterprise Systems, Inc.* 100 3,050
Harbinger Corp.* 100 2,300
Informix Corp.* 800 24,000
Network Appliance, Inc.* 100 4,012
Objective Systems Integrators, Inc.* 100 5,475
Oracle Systems Corp.* 3,800 161,025
Premenos Technology Corp.* 100 2,637
Softquad International, Inc.* 300 1,594
Summit Medical System, Inc.* 100 2,150
Sybase, Inc.* 2,800 100,800
System Software Associates, Inc. 1,800 39,150
Vantive Corp.* 100 2,250
Verity, Inc.* 100 4,425
-------------
$ 722,116
- ---------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 1.9%
Blyth Industries, Inc.* 200 $ 5,900
Coleman Co., Inc.* 100 3,513
Department 56, Inc.* 300 11,513
META Group, Inc.* 100 3,063
Service Corp. International 500 22,000
Sola International, Inc.* 100 2,525
Tyco International Ltd. 700 24,938
-------------
$ 73,452
- ---------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.1%
UCAR International, Inc.* 100 $ 3,375
- ---------------------------------------------------------------------------------------------------------
Electronics - 1.6%
Ade Corp.* 100 $ 1,450
Cyberoptics Corp.* 100 3,975
Euphonix, Inc.* 100 850
LSI Logic Corp.* 1,200 39,300
Linear Technology Corp. 300 11,775
Xilinx, Inc.* 200 6,100
-------------
$ 63,450
- ---------------------------------------------------------------------------------------------------------
Entertainment - 2.4%
Grand Casinos, Inc.* 750 $ 17,438
Harrah's Entertainment, Inc.* 2,500 60,625
Infinity Broadcasting Corp., "A"* 400 14,900
Wireless One, Inc.* 100 1,650
-------------
$ 94,613
- ---------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - continued
Common Stocks - continued
=========================================================================================================
Issuer Shares Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - continued
Financial Institutions - 0.2%
Allmerica Financial Corp. 100 $ 2,700
Donaldson, Lufkin & Jenrette, Inc. 100 3,125
Union Acceptance Corp., "A"* 100 1,400
-------------
$ 7,225
- ---------------------------------------------------------------------------------------------------------
Food and Beverage Products - 0.1%
Redhook Ale Brewery, Inc.* 100 $ 2,600
- ---------------------------------------------------------------------------------------------------------
Insurance - 0.6%
Amerin Corp.* 400 $ 10,700
Compdent Corp.* 200 8,300
LaSalle Re Holdings Ltd.* 100 2,288
Prudential Reinsurance Holdings, Inc. 100 2,338
-------------
$ 23,626
- ---------------------------------------------------------------------------------------------------------
Medical and Health Products - 0.7%
Medisense, Inc.* 400 $ 12,650
Neuromedical Systems, Inc.* 500 10,063
Orthofix International N.V.* 300 2,213
Parexel International Corp.* 100 3,325
-------------
$ 28,251
- ---------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 14.3%
AHI Healthcare Systems, Inc.* 100 $ 575
Community Care of America, Inc.* 100 1,050
Community Health Systems* 1,000 35,625
Foundation Health Corp.* 1,000 43,000
Health Management Assoc., Inc.* 1,000 26,125
Healthsource, Inc.* 1,400 50,400
Healthsouth Corp.* 1,000 29,125
IDX Systems Corp.* 1,200 41,700
Lincare Holdings, Inc.* 300 7,500
Mid-Atlantic Medical Services, Inc.* 800 19,400
Norland Medical Systems, Inc.* 100 2,325
Owen Healthcare, Inc.* 100 2,763
Pacificare Health Systems, Inc., "A"* 300 26,100
Pacificare Health Systems, Inc., "B"* 500 43,500
Pediatrix Medical Group, Inc.* 100 2,750
St. Jude Medical, Inc.* 400 17,200
Schein (Henry), Inc.* 100 2,950
Sterling Healthcare Group* 100 1,062
Surgical Care Affiliates, Inc. 700 23,800
Total Renal Care Holdings, Inc.* 100 2,950
United Dental Care, Inc.* 100 4,125
United Healthcare Corp. 2,600 170,300
-------------
$ 554,325
- ---------------------------------------------------------------------------------------------------------
Oils - 0.7%
Union Pacific Research Group, Inc. 1,000 $ 25,375
- ---------------------------------------------------------------------------------------------------------
Pollution Control - 0.3%
Sanfill, Inc.* 400 $ 13,350
- ---------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts - 0.2%
NHP, Inc.* 400 $ 7,400
- ---------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
Portfolio of Investments - continued
Common Stocks - continued
=========================================================================================================
Issuer Shares Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - continued
Restaurants and Lodging - 8.0%
Applebee's International, Inc.* 1,800 $ 40,950
Bristol Hotel Co. 100 2,437
Buffets, Inc.* 1,000 13,750
Extended Stay America, Inc.* 100 2,750
HFS, Inc.* 2,250 183,937
IHOP Corp.* 700 18,200
Promus Hotel Corp.* 1,000 22,250
Renaissance Hotel Group N.V.* 900 22,950
Sonic Corp.* 100 1,900
--------------
$ 309,124
- ---------------------------------------------------------------------------------------------------------
Special Products and Services - 0.1%
Central Parking Corp. 100 $ 2,875
- ---------------------------------------------------------------------------------------------------------
Steel - 0.1%
Carbide/Graphite Group, Inc.* 100 $ 1,437
Citation Corp.* 100 1,200
--------------
$ 2,637
- ---------------------------------------------------------------------------------------------------------
Stores - 5.2%
Boise Cascade Office Products* 100 $ 4,275
Consolidated Stores Corp.* 200 4,350
Corporate Express, Inc.* 600 18,075
Dollar Tree Stores, Inc.* 100 2,475
General Nutrition Cos., Inc.* 1,000 23,000
Hollywood Entertainment Corp.* 800 6,700
MSC Industrial Direct Co., Inc., "A"* 100 2,750
Micro Warehouse, Inc.* 1,000 43,250
Movie Gallery, Inc.* 400 12,200
Office Depot, Inc.* 3,000 59,250
Officemax, Inc.* 800 17,900
Renters Choice, Inc.* 100 1,375
US Office Products Co.* 300 6,825
--------------
$ 202,425
- ---------------------------------------------------------------------------------------------------------
Telecommunications - 7.2%
Bay Networks, Inc.* 1,400 $ 57,575
Cabletron Systems, Inc.* 1,200 97,200
ECI Telecommunications Limited Designs 500 11,406
Tel-Save Holdings, Inc.* 600 8,325
Tellabs, Inc.* 300 11,100
Teltrend, Inc.* 100 4,675
U.S. Robotics Corp.* 350 30,712
Westell Technologies, Inc., "A"* 100 2,512
Worldcom, Inc.* 1,600 56,400
--------------
$ 279,905
- ---------------------------------------------------------------------------------------------------------
Utilities - Telephone - 1.8%
Frontier Corp. 1,000 $ 30,000
MCI Communications Corp. 1,500 39,187
--------------
$ 69,187
- ---------------------------------------------------------------------------------------------------------
Total U.S. Stocks $ 3,232,756
- ---------------------------------------------------------------------------------------------------------
<PAGE>
PORTFOLIO OF INVESTMENTS - continued
<CAPTION>
Common Stocks - continued
=========================================================================================================
Issuer Shares Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Foreign Stocks - 3.3%
Canada - 1.2%
Biochem Pharma, Inc. (Medical and Health Products)* 550 $ 22,069
PC Docs Group International, Inc. (Computer Software - Systems)* 1,300 23,237
-----------
$ 45,306
- ---------------------------------------------------------------------------------------------------------
Ireland - 0.1%
CBT Group PLC (Computer Software)* 100 $ 5,300
- ---------------------------------------------------------------------------------------------------------
Italy - 1.5%
De Rigo SPA, ADR (Stores)* 700 $ 15,925
Fila Holdings SPA, ADR (Apparel and Textiles) 900 40,950
-------------
$ 56,875
- ---------------------------------------------------------------------------------------------------------
Netherlands - 0.1%
Gucci Group NV (Apparel and Textiles)* 100 $ 3,887
- ---------------------------------------------------------------------------------------------------------
South Korea - 0.4%
Korea Mobile Telecommunications, ADR*## 400 $ 17,800
- ---------------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 129,168
- ---------------------------------------------------------------------------------------------------------
Total Common Stocks (Identified Cost, $3,188,205) $ 3,361,924
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
Short-Term Obligations - 16.8%
=========================================================================================================
Principal Amount
(000 Omitted)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Federal Home Loan Mortgage Corp., due 1/02/96 - 1/22/96 $450 $ 449,016
Federal National Mortgage Assn., due 1/17/96 200 199,514
- ---------------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 648,530
- ---------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $3,836,735) $ 4,010,454
Other Assets, Less Liabilities - (3.7)% (141,824)
=========================================================================================================
Net Assets - 100.0% $ 3,868,630
- ---------------------------------------------------------------------------------------------------------
*Non-income producing security.
## SEC Rule 144A restriction.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
========================================================================================================
December 31, 1995
- --------------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at value (identified cost, $3,836,735) $ 4,010,454
Cash 13,806
Receivable for investments sold 5,650
Receivable for Series shares sold 42,072
Dividends receivable 311
Receivable from investment adviser 7,162
Deferred organization expenses 8,388
-------------
Total assets $ 4,087,843
-------------
Liabilities:
Payable for investments purchased $ 203,591
Payable for Series shares reacquired 838
Payable to affiliates for management fee 237
Accrued expenses and other liabilities 14,547
-------------
Total liabilities $ 219,213
-------------
Net assets $ 3,868,630
=============
Net assets consist of:
Paid-in capital $ 3,694,911
Unrealized appreciation on investments 173,719
-------------
Total $ 3,868,630
=============
Shares of beneficial interest outstanding 339,022
=============
Net asset value, offering price and redemption price per share
(net assets of $3,868,630 / 339,022 shares
of beneficial interest outstanding) $11.41
=============
</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 -
Interest $ 8,766
Dividends 462
-------------
Total investment income $ 9,228
-------------
Expenses -
Management fee $ 6,262
Trustees' compensation 708
Shareholder servicing agent fee 281
Auditing fees 9,911
Printing 4,000
Amortization of organization expenses 800
Custodian fee 470
Legal fees 127
Miscellaneous 1,664
-------------
Total expenses $ 24,223
Reduction of expenses by investment adviser (15,659)
Fees paid indirectly (213)
-------------
Net expenses $ 8,351
-------------
Net investment income $ 877
-------------
Realized and unrealized gain on investments:
Realized gain (identified cost basis) on investment transactions $ 81,576
Change in unrealized appreciation on investments 173,719
-------------
Net realized and unrealized gain on investments $ 255,295
-------------
Increase in net assets from operations $ 256,172
=============
*For the period from the commencement of investment operations, July 24, 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 $ 877
Net realized gain on investments 81,576
Net unrealized gain on investments 173,719
-------------
Increase in net assets from operations $ 256,172
-------------
Distributions declared to shareholders -
From net investment income $ (877)
From net realized gain on investments (81,576)
In excess of net investment income (283)
Tax return of capital (21,847)
-------------
Total distributions declared to shareholders $ (104,583)
-------------
Series share (principal) transactions -
Net proceeds from sale of shares $ 5,564,342
Net asset value of shares issued to shareholders
in reinvestment of distributions 104,583
Cost of shares reacquired (1,960,484)
-------------
Increase in net assets from Series share transactions $ 3,708,441
-------------
Total increase in net assets $ 3,860,030
Net assets:
At beginning of period 8,600
-------------
At end of period $ 3,868,630
=============
*For the period from the commencement of investment operations, July 24, 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 each period):
Net asset value - beginning of period $ 10.00
-------------
Income from investment operations# -
Net investment income{S} $ 0.01
Net realized and unrealized gain on investments 1.74
-------------
Total from investment operations $ 1.75
-------------
Less distributions declared to shareholders -
From net investment income $ (0.01)
From net realized gain on investments (0.26)
Tax return of capital (0.07)
-------------
Total distributions declared to shareholders $ (0.34)
-------------
Net asset value - end of period $ 11.41
=============
Total return 17.41%++
Ratios (to average net assets)/Supplemental data{S}:
Expenses 1.00%+
Net investment income 0.10%+
Portfolio turnover 73%
Net assets at end of period (000 omitted) $ 3,869
<FN>
*For the period from the commencement of investment operations, July 24, 1995 to December 31, 1995.
+Annualized.
++Not annualized.
#Per share data is based on average shares outstanding.
{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:
</FN>
<S> <C>
Net investment loss $ (0.18)
Ratios (to average net assets):
Expenses 2.91 %+
Net investment loss (1.78)%+
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Emerging Growth Series (the Series) is a diversified series of MFS Variable
Insurance Trust (the Trust) which is comprised of the following twelve series:
MFS Bond Series, MFS Emerging Growth Series, MFS Growth Series, MFS Growth with
Income Series, MFS High Income Series, MFS Limited Maturity Series, MFS Money
Market Series, MFS Research Series, MFS Strategic Fixed Income Series, MFS Total
Return Series, MFS Utilities Series and MFS World Governments Series. The Trust
is organized as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
The shareholders of each Series of the Trust are separate accounts of insurance
companies which offer variable annuity and/or life insurance products. 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 July 24,
1995. As of December 31, 1995 there were ten 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. 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.
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.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
original issue discount are amortized or accreted for financial statement and
tax reporting purposes as required by federal income tax regulations. Dividend
income is recorded on the ex-dividend date for dividends received in cash.
Dividend payments received in additional securities are recorded on the
ex-dividend date in an amount equal to the value of the security on such date.
Fees Paid Indirectly - The Series' custodian bank calculates its fee based on
the Series' average daily net assets. This fee is reduced according to an
expense offset arrangement with State Street Bank and Trust Company, the Trust's
dividend disbursing agent, which provides for partial reimbursement of custody
fees based on a formula developed to measure the value of cash deposited by the
Series with the custodian and with the dividend disbursing agent. This amount is
shown as a reduction of expenses on the Statement of Operations.
Tax Matters and Distributions - The Series' policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Series files a tax
return annually using tax accounting methods required under provisions of the
Code which may differ from generally accepted accounting principles, the basis
on which these financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial statements
may differ from that reported on the Series' tax return. 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 has agreed to
limit the Series' expenses at an effective annual rate of 1.00% of its 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. At December 31, 1995, the
aggregate unreimbursed expenses owed to MFS by the Series amounted to $15,659.
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 $4,632,026
and $1,525,399, 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:
<TABLE>
<CAPTION>
<S> <C>
Aggregate cost $ 3,836,735
============
Gross unrealized appreciation $ 297,653
Gross unrealized depreciation (123,934)
------------
Net unrealized appreciation $ 173,719
============
</TABLE>
(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:
<TABLE>
<CAPTION>
Period Ended December 31, 1995* Shares Amount
========================================================================================================
<S> <C> <C>
Shares sold 501,081 $ 5,564,342
Shares issued to shareholders in reinvestment of distributions 9,255 104,583
Shares reacquired (172,174) (1,960,484)
------- -------------
Net increase 338,162 $ 3,708,441
======== =============
*For the period from the commencement of investment operations, July 24, 1995 to December 31, 1995.
</TABLE>
(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.
(7) Restricted Securities
The Series may invest not more than 15% of its total assets in securities which
are subject to legal or contractual restrictions on resale. At December 31,
1995, the Series owned the following restricted security (constituting 0.5% of
net assets) which may not be publicly sold without registration under the
Securities Act of 1933 (the 1933 Act). The Series does not have the right to
demand that such security be registered. The value of this security is
determined by valuations supplied by a pricing service or brokers or, if not
available, in good faith by or at the direction of the Trustees. This security
may be offered and sold to "qualified institutional buyers" under Rule 144A of
the 1933 Act.
<TABLE>
<CAPTION>
Date of Share
Description Acquisition Amount Cost Value
==========================================================================================================
<S> <C> <C> <C> <C>
Korea Mobile Telecommunications, ADR 12/28/95 400 $ 17,900 $ 17,800
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Variable Insurance Trust and Shareholders of MFS Emerging
Growth Series:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS Emerging Growth Series (the Series) (one of
the series constituting MFS Variable Insurance Trust) as of December 31, 1995,
the related statements of operations and changes in net assets and financial
highlights for the period from July 24, 1995 (the commencement of investment
operations) to December 31, 1995. These financial statements and financial
highlights are the responsibility of the Series' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit 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 and brokers; where replies were not received
from brokers, we performed other auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS Emerging Growth
Series at 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
--------------------------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
<PAGE>
VEG-2-2/96/14.5M
