<PAGE>
[LOGO] Annual Report for
THE FIRST NAME IN MUTUAL FUNDS Year Ended
December 31, 1995
MFS(R) HIGH INCOME SERIES
A Series of MFS(R) Variable Insurance Trust
<PAGE>
MFS(R) HIGH 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 MANAGER
Joan S. Batchelder*
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 as bond
prices rose in response to these declines, all of the fixed-income investments
in the Trust experienced positive total returns. 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.
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 have 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.
<PAGE>
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.
Comments from the portfolio manager of this Series are presented below. We
appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ A. Keith Brodkin /s/ Joan S. Batchelder
- ---------------------- ----------------------
A. Keith Brodkin Joan S. Batchelder
Chairman and President Portfolio Manager
January 12, 1996
MFS(R) HIGH INCOME SERIES
The Series commenced investment operations on July 26, 1995, and provided a
total return of +5.25% from that date through December 31, 1995. This compares
to a +3.93% return for the Lipper High Yield Bond Fund Index for the same
period.*
High-yield bond prices firmed during 1995 due primarily to the decline in
interest rates. Strong market technicals helped fuel the rally as the supply of
new high-yield bonds declined slightly from the previous year while demand
increased due to higher net cash flows into high-yield mutual funds. During
1995, the spread between the yield on Treasury securities and high-yield bonds
widened to about 425 basis points (4.25%) from a low of 350 basis points
(3.50%), reflecting investors' concern over the rise in the default rate. The
principal value and interest on Treasury securities are guaranteed by the U.S.
government if held to maturity. We do not expect credit losses to increase
materially in 1996 because we believe that lower interest rates will enable the
economy to continue to grow, albeit at a slower pace than in 1995.
In response to weak economic data, our investment strategy became progressively
more defensive. We reduced our positions in the steel, chemical and paper
sectors because we believed that the softness in commodity prices during the
second half of the year signaled the beginning of a cyclical downturn and was
not simply due to a temporary inventory correction. We continued to increase the
Series' weightings in less economically sensitive industries such as cable
television, paging and supermarkets. The Series remains underweighted in the
bonds of retailers because we expect that overcapacity will cause weakness in
this sector well into 1996. Given our outlook for slow economic growth and low
inflation, we anticipate the Federal Reserve to further reduce interest rates in
1996. Therefore, our investment strategy remains focused on bonds in the
upper-credit-quality tier of the high-yield market. These high-yield bonds could
benefit the most from a drop in interest rates because their returns are most
closely correlated with shifts in interest rates.
<PAGE>
PORTFOLIO MANAGER PROFILE
Joan Batchelder first joined MFS in 1978 as an Investment officer in the
Fixed-Income department and rejoined MFS in October of 1983. A graduate of
Colorado College and Maxwell School of Syracuse University, Ms. Batchelder was
appointed Assistant Vice President - Investments in 1979, Vice President -
Investments in 1980 and Senior Vice President in 1983. She has managed the MFS
High Income Series since its inception in July 1995.
PERFORMANCE SUMMARY
The information below illustrates the performance of the MFS High Income Series
shares in comparison to a market indicator.
AGGREGATE TOTAL RETURNS
7/26/95* -
12/31/95
===========================================================================
MFS High Income Series +5.25%
- ---------------------------------------------------------------------------
Lipper High Yield Bond Fund Index+\1/ +3.93%
- ---------------------------------------------------------------------------
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.
+Lipper indices are equally weighted composites of the largest qualifying
mutualfunds within their respective investment objectives, adjusted for
reinvestment of distributions. It is not possible to invest in an index.
\1/Source: Lipper Analytical Services, Inc.
<PAGE>
PORTFOLIO OF INVESTMENTS - December 31, 1995
Bonds - 93.9%
================================================================================
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------
Automotive - 5.3%
Harvard Industries, Inc., 11.125s, 2005 $50 $ 50,000
SPX Corp., 11.75s, 2002 50 53,000
-------------
$ 103,000
- --------------------------------------------------------------------------------
Building - 6.0%
American Standard Companies, Inc., 0s to 1998, $50 $ 42,875
10.5s to 2005
Nortek, Inc., 9.875s, 2004 50 46,750
USG Corp., 9.25s, 2001 25 26,750
-------------
$ 116,375
- --------------------------------------------------------------------------------
Chemicals - 2.7%
NL Industries, Inc., 11.75s, 2003 $50 $ 53,375
- --------------------------------------------------------------------------------
Consumer Goods and Services - 7.4%
ADT Operations, Inc., 9.25s, 2003 $40 $ 42,900
Revlon Consumer Products Corp., 10.5s, 2003 50 51,000
Westpoint Stevens, Inc., 9.375s, 2005 50 49,375
-------------
$ 143,275
- --------------------------------------------------------------------------------
Containers - 2.3%
Owens-Illinois, Inc., 11s, 2003 $40 $ 45,200
- --------------------------------------------------------------------------------
Entertainment - 6.7%
Bally's Grand, Inc., 10.375s, 2003 $50 $ 51,000
Grand Casinos, Inc., 10.125s, 2003 25 26,219
SCI Television, Inc., 11s, 2005 50 52,875
-------------
$ 130,094
- --------------------------------------------------------------------------------
Financial Institutions - 0.7%
GPA Delaware, Inc., 8.75s, 1998 $15 $ 14,100
- --------------------------------------------------------------------------------
Medical and Health Products - 4.3%
Tenet Healthcare Corp., 10.125s, 2005 $75 $ 83,438
- --------------------------------------------------------------------------------
Medical and Health Technology and Services - 2.7%
Quorum Health Group, Inc., 8.75s, 2005 $50 $ 51,688
- --------------------------------------------------------------------------------
Metals and Minerals - 2.4%
Jorgensen (Earle M.) Co., 10.75s, 2000 $50 $ 45,875
- --------------------------------------------------------------------------------
Oil - 2.1%
Gulf Canada Resources Ltd., 9.25s, 2004 $40 $ 41,400
- --------------------------------------------------------------------------------
Printing and Publishing - 2.2%
K-III Communications Corp., 10.625s, 2002 $40 $ 42,500
- --------------------------------------------------------------------------------
Restaurants and Lodging - 2.7%
Boyd Gaming Corp., 10.75s, 2003 $50 $ 52,750
- --------------------------------------------------------------------------------
<PAGE>
PORTFOLIO OF INVESTMENTS - continued
Bonds - continued
================================================================================
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------
Special Products and Services - 7.7%
Buckeye Cellulose Corp., 8.5s, 2005 $10 $ 10,263
IMO Industries, Inc., 12s, 2001 40 40,800
Interlake Corp., 12s, 2001 50 50,500
Synthetic Industries, Inc., 12.75s, 2002 50 49,000
-------------
$ 150,563
- --------------------------------------------------------------------------------
Steel - 2.9%
AK Steel Holding Corp., 10.75s, 2004 $50 $ 55,500
- --------------------------------------------------------------------------------
Stores - 1.7%
Finlay Enterprises, Inc., 0s to 1998, 12s to 2005 $50 $ 33,000
- --------------------------------------------------------------------------------
Supermarkets - 11.5%
Bruno's, Inc., 10.5s, 2005 $50 $ 49,500
Dominick's Finer Foods, Inc, 10.875s, 2005 75 79,688
Grand Union Co., 12s, 2004 25 21,625
Ralph's Grocery Co., 10.45s, 2004 50 50,750
Stop & Shop Companies, Inc., 9.75s, 2002 20 22,050
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$ 223,613
- --------------------------------------------------------------------------------
Telecommunications - 7.4%
Metrocall, Inc., 10.375s, 2007 $50 $ 53,000
Mobilemedia Communications Corp., 0s to 1998,
10.5s to 2003 50 39,000
Paging Network, Inc., 8.875s, 2006 50 51,250
-------------
$ 143,250
- --------------------------------------------------------------------------------
Telecommunications - Cable systems - 12.7%
Bell Cablemedia PLC, 0s to 2000, 11.875s to 2005## $50 $ 31,250
Cablevision Systems Corp., 9.25s, 2005 50 52,250
Comcast Corp., 9.375s, 2005 50 52,875
Continental Cablevision, Inc. 8.875s, 2005 40 41,900
Diamond Cable Communications PLC, 0s to 2000,
11.75s to 2005 10 5,875
Rogers Cablesystems Ltd., 10.125s, 2012 50 52,625
Videotron Ltee, 10.25s, 2002 10 10,500
-------------
$ 247,275
- --------------------------------------------------------------------------------
Utilities - Electric - 2.6%
Westinghouse Electric Corp., 8.375s, 2002 $50 $ 51,570
- --------------------------------------------------------------------------------
Total Bonds (Identified Cost, $1,799,263) $ 1,827,838
- --------------------------------------------------------------------------------
Other Assets, Less Liabilities - 6.1% 118,653
================================================================================
Net Assets - 100.0% $ 1,946,491
- --------------------------------------------------------------------------------
## SEC Rule 144A restriction.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
===============================================================================
December 31, 1995
- -------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $1,799,263) $ 1,827,838
Cash 79,842
Interest receivable 38,017
Receivable from investment adviser 6,317
Deferred organization expenses 8,398
--------------
Total assets $ 1,960,412
--------------
Liabilities:
Payable to affiliate for management fee $ 120
Accrued expenses and other liabilities 13,801
--------------
Total liabilities $ 13,921
--------------
Net assets $ 1,946,491
--------------
Net assets consist of:
Paid-in capital $ 1,920,119
Unrealized appreciation on investments 28,575
Accumulated net realized loss on investments (2,558)
Accumulated undistributed net investment income 355
--------------
Total $ 1,946,491
==============
Shares of beneficial interest outstanding 189,145
==============
Net asset value, offering price and redemption price per share
(net assets of $1,946,491 / 189,145 shares of beneficial
interest outstanding) $10.29
==============
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
===============================================================================
Period Ended December 31, 1995*
- -------------------------------------------------------------------------------
Net investment income:
Interest income $ 48,889
-------------
Expenses -
Management fee $ 3,996
Trustees' compensation 708
Shareholder servicing agent fee 181
Auditing fees 10,593
Printing 4,032
Legal fees 1,975
Amortization of organization expenses 790
Custodian fee 180
Miscellaneous 876
-------------
Total expenses $ 23,331
Reduction of expenses by investment adviser (17,847)
Fees paid indirectly (157)
-------------
Net expenses $ 5,327
-------------
Net investment income $ 43,562
-------------
Realized and unrealized gain (loss) on investments:
Realized loss (identified cost basis) on
net investment transactions $ (2,558)
Change in unrealized appreciation on investments 28,575
-------------
Net realized and unrealized gain on investments $ 26,017
-------------
Increase in net assets from operations $ 69,579
=============
*For the period from the commencement of investment operations, July 26, 1995
to December 31, 1995.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
===============================================================================
Period Ended December 31, 1995*
- -------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income $ 43,562
Net realized loss on investments (2,558)
Net unrealized gain on investments 28,575
-------------
Increase in net assets from operations $ 69,579
-------------
Distributions declared to shareholders from net
investment income $ (43,207)
-------------
Series share (principal) transactions -
Net proceeds from sale of shares $ 2,003,297
Net asset value of shares issued to shareholders in
reinvestment of distributions 43,207
Cost of shares reacquired (134,985)
-------------
Increase in net assets from Series share transactions $ 1,911,519
-------------
Total increase in net assets $ 1,937,891
Net assets:
At beginning of period 8,600
-------------
At end of period (including accumulated undistributed
net investment income of $355) $ 1,946,491
=============
*For the period from the commencement of investment operations, July 26, 1995 to
December 31, 1995.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights
===============================================================================
Period Ended December 31, 1995*
- -------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period)
Net asset value - beginning of period $ 10.00
----------
Income from investment operations# -
Net investment incomes{s} $ 0.34
Net realized and unrealized gain on investments 0.18
----------
Total from investment operations $ 0.52
----------
Less distributions declared to shareholders -
From net investment income $ (0.23)
----------
Net asset value - end of period $ 10.29
----------
Total return 5.25%++
Ratios (to average net assets)/Supplemental data{S}:
Expenses 1.00%+
Net investment income 8.17%+
Portfolio turnover 32%
Net assets at end of period (000 omitted) $ 1,946
*For the period from the commencement of investment operations,
July 26, 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 income per share and
the ratios would have been:
Net investment income $ 0.20
Ratios (to average net assets):
Expenses 4.38%+
Net investment income 4.82%+
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS High 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 July 26,
1995. As of December 31, 1995 there were five shareholders in the Series.
(2) Significant Accounting Policies
Investment Valuations - 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 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 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.
The Series can invest up to 100% of its portfolio in high-yield securities rated
below investment grade. Investments in high-yield securities are accompanied by
a greater degree of credit risk and the risk tends to be more sensitive to
economic conditions than that of higher rated securities.
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 in 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.
At December 31, 1995, the Series, for federal income tax purposes, had a capital
loss carryforward of $2,558, which may be applied against any net taxable
realized gains of each succeeding year until the earlier of its utilization or
expiration on December 31, 2003.
(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 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. At December 31,
1995, the aggregate unreimbursed expenses owed to MFS by the Series amounted to
$17,847.
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 $2,196,032
and $397,325, 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 $ 1,799,263
============
Gross unrealized appreciation $ 36,047
Gross unrealized depreciation (7,472)
------------
Net unrealized appreciation $ 28,575
============
(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 197,072 $ 2,003,297
Shares issued to shareholders in reinvestment
of distributions 4,211 43,207)
Shares reacquired (12,998) (134,985)
------- ------------
Net increase 188,285 $ 1,911,519)
======= ============
*For the period from commencement of investment operations,July 26, 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.
(7) Restricted Securities
The Series may not invest 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 1.6% of
net assets) which may not be sold publicly without registration under the
Securities Act of 1933 (the 1933 Act). The Series does not have the right to
demand that such a 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 Trustee. This security
may be offered and sold to "qualified institutional buyers" under Rule 144A of
the 1933 Act.
Date of Par
Description Acquisition Amount Cost Value
================================================================================
Bell Cablemedia PLC,
0s to 2000, 11.875s to 2005 9/13/95 $50,000 $29,744 $31,250
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Variable Insurance Trust and Shareholders of MFS High
Income Series:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS High Income Series (the Series) (one of the
series constituting the 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 26, 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 High 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
------------------------------------------------------------
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>
VHI-2-2/96/7M
