<PAGE>
[LOGO]
Annual Report for
Year Ended
December 31, 1995
MFS(R) RESEARCH SERIES
A Series of MFS(R) Variable Insurance Trust
<PAGE>
MFS(R) RESEARCH 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)
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 Director of Research 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/ Kevin R. Parke
- ---------------------- --------------------
A. Keith Brodkin Kevin R. Parke
Chairman and President Director of Research
January 12, 1996
<PAGE>
MFS(R) RESEARCH SERIES
The Research Series commenced investment operations on July 26, 1995 and
provided a total return of +10.62% from that date through December 31, 1995.
This compares to a +10.76% return for the S&P 500 for the same period.* The
Series' overweighting in the US defense industry contributed significantly to
performance. These stocks performed well due to continued consolidation of the
industry as well as improved margins for several specific programs. Stocks
within this group which contributed to performance included McDonnell Douglas
and Loral. The Series' holdings in technology contributed to performance. This
sector was volatile for the year, but our holdings outperformed the sector.
Particularly affecting performance was our computer software holdings which
appreciated due to successful new product introductions and continued strong
margins. Holdings in this category include Cadence Design, Oracle and Computer
Associates. Finally, the Series' holdings in financial services positively
affected performance. These stocks were strong due to decreased interest rates
and improved earnings due to industry consolidation.
Offsetting this strong performance was the Series' holdings in the retail and
cellular telephone industries. Retail stocks were very weak relative to the S&P
500 due to slowing consumer spending and increased competition. Cellular
telephone stocks were negatively affected by the purchase of Lin Broadcasting by
AT&T for a price lower than original expectations. In addition, subscriber
growth has slowed.
Our outlook for 1996 is that the slower U.S. economy will eventually affect
corporate earnings growth. Thus, the key to superior performance in the coming
year will be stock selection and strong relative earnings growth. Based on this
outlook, our committee of research analysts has overweighted technology,
financial services, health care, consumer staples, and industrial goods and
services. We believe stocks in these sectors could demonstrate strong earnings
even as the U.S. economy continues to slow. For example, within technology, we
are emphasizing computer software companies with strong product cycles and
proprietary niches. These attributes could enable these companies to sustain
their earnings growth and profit margins even if the overall technology market
slows.
A committee of MFS Research Analysts is responsible for the day-to-day
management of the Series under the general supervision of Mr. Parke.
PERFORMANCE SUMMARY
The information below illustrates the performance of the MFS Research Series
shares in comparison to a market indicator.
AGGREGATE TOTAL RETURNS 7/26/95* -
12/31/95
===============================================================================
MFS Research Series +10.62%
- -------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index+\1/ +10.76%
- -------------------------------------------------------------------------------
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.
+ The Standard & Poor's 500 Index is a popular, unmanaged index of common
stock 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 - 91.8%
========================================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 86.9%
Aerospace - 4.4%
General Dynamics Corp. 400 $ 23,650
Lockheed-Martin Corp. 400 31,600
McDonnell Douglas Corp. 500 46,000
United Technologies Corp. 100 9,487
--------------
$ 110,737
- --------------------------------------------------------------------------------------------------------
Agricultural Products - 3.0%
AGCO Corp. 600 $ 30,600
Case Corp. 1,000 45,750
--------------
$ 76,350
- --------------------------------------------------------------------------------------------------------
Apparel and Textiles - 1.1%
Nike, Inc., B 400 $ 27,850
- --------------------------------------------------------------------------------------------------------
Banks and Credit Companies - 3.9%
BayBanks, Inc. 300 $ 29,475
Chase Manhattan Corp. 400 24,250
First Interstate Bancorp 100 13,650
Integra Financial Corp. 300 18,900
Northern Trust Co. 200 11,200
--------------
$ 97,475
- --------------------------------------------------------------------------------------------------------
Business Machines - 1.1%
International Business Machines Corp. 300 $ 27,525
- --------------------------------------------------------------------------------------------------------
Business Services - 2.6%
Affiliated Computer Co.* 300 $ 11,250
Alco Standard Corp. 500 22,813
Ceridian Corp.* 700 28,875
Technology Solutions Co.* 200 3,900
--------------
$ 66,838
- --------------------------------------------------------------------------------------------------------
Cellular Phones - 0.3%
Telephone & Data Systems, Inc. 200 $ 7,900
- --------------------------------------------------------------------------------------------------------
Chemicals - 1.9%
Air Products & Chemicals, Inc. 300 $ 15,825
Grace (W.R.) & Co. 300 17,737
Hanna (M.A.) Co. 300 8,400
Uniroyal Chemical Corp.* 900 7,425
--------------
$ 49,387
- --------------------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 1.6%
Electronic Arts, Inc.* 500 $ 13,063
Microsoft Corp.* 300 26,325
--------------
$ 39,388
- --------------------------------------------------------------------------------------------------------
Computer Software - Systems - 7.2%
Adobe Systems, Inc. 400 $ 24,800
BMC Software, Inc.* 300 12,825
Cadence Design Systems, Inc.* 1,100 46,200
Compaq Computer Corp.* 300 14,400
Computer Associates International, Inc. 400 22,750
Compuware Corp.* 500 9,250
<PAGE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - continued
Common Stocks - continued
========================================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - continued
Computer Software - Systems - continued
Oracle Systems Corp.* 900 $ 38,137
Sybase, Inc.* 400 14,400
--------------
$ 182,762
- --------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 8.7%
Colgate-Palmolive Co. 500 $ 35,125
Duracell International, Inc. 600 31,050
Gillette Co. 600 31,275
META Group, Inc.* 100 3,062
Philip Morris Cos., Inc. 400 36,200
Procter & Gamble Co. 400 33,200
Schweitzer-Mauduit International, Inc.* 30 694
Service Corporation International 500 22,000
Tyco International Ltd. 800 28,500
--------------
$ 221,106
- --------------------------------------------------------------------------------------------------------
Defense Electronics - 1.7%
Loral Corp. 1,200 $ 42,450
- --------------------------------------------------------------------------------------------------------
Electronics - 3.5%
ESS Technology, Inc.* 100 $ 2,300
Intel Corp. 700 39,725
LSI Logic Corp.* 200 6,550
National Semiconductor Corp.* 400 8,900
Xilinx, Inc.* 1,000 30,500
--------------
$ 87,975
- --------------------------------------------------------------------------------------------------------
Entertainment - 2.1%
Aztar Corp.* 3,200 $ 25,600
Harrah's Entertainment, Inc.* 700 16,975
Heritage Media Corp., "A"* 400 10,250
--------------
$ 52,825
- --------------------------------------------------------------------------------------------------------
Financial Institutions - 1.2%
Advanta Corp., "B" 400 $ 14,550
Federal Home Loan Mortgage Corp. 200 16,700
--------------
$ 31,250
- --------------------------------------------------------------------------------------------------------
Food and Beverage Products - 4.5%
Campbell Soup Co. 400 $ 24,000
Kellogg Co. 300 23,175
Nabisco Holdings Corp., "A" 800 26,100
PepsiCo, Inc. 500 27,937
Universal Foods Corp. 300 12,038
--------------
$ 113,250
- --------------------------------------------------------------------------------------------------------
Forest and Paper Products - 1.8%
Fort Howard Corp.* 200 $ 4,500
Kimberly Clark Corp. 500 41,375
--------------
$ 45,875
- --------------------------------------------------------------------------------------------------------
Insurance - 8.8%
AFLAC, Inc. 400 $ 17,350
American Re Corp. 300 12,262
Amerin Corp.* 400 10,700
<PAGE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - continued
Common Stocks - continued
========================================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - continued
Insurance - continued
CIGNA Corp. 300 $ 30,975
Equitable of Iowa Cos. 600 19,275
GCR Holdings Ltd. 500 11,250
LaSalle Re Holdings Ltd.* 300 6,863
MBIA, Inc. 400 30,000
Penncorp Financial Group, Inc. 1,200 35,250
Prudential Reinsurance Holdings, Inc. 800 18,700
Sphere Drake Holdings Ltd. 800 11,200
Travelers, Inc. 300 18,863
--------------
$ 222,688
- --------------------------------------------------------------------------------------------------------
Machinery - 0.6%
York International Corp. 300 $ 14,100
- --------------------------------------------------------------------------------------------------------
Medical and Health Products - 4.5%
Johnson & Johnson 100 $ 8,563
Medisense, Inc.* 1,300 41,112
Neuromedical Systems, Inc.* 800 16,100
Pfizer, Inc. 300 18,900
Uromed Corp.* 2,200 28,325
Zoll Medical Corp.* 100 900
--------------
$ 113,900
- --------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 5.3%
Amisys Managed Care Systems* 900 $ 17,100
Community Health Systems* 400 14,250
Living Centers of America* 200 7,000
Mariner Health Group, Inc.* 100 1,662
Pacificare Health Systems, Inc., "B" 300 26,100
St. Jude Medical, Inc.* 700 30,100
United Healthcare Corp. 600 39,300
--------------
$ 135,512
- --------------------------------------------------------------------------------------------------------
Oils - 2.7%
Mobil Corp. 400 $ 44,800
Seacor Holdings, Inc.* 200 5,400
Union Pacific Resources Group, Inc. 700 17,762
--------------
$ 67,962
- --------------------------------------------------------------------------------------------------------
Pollution Control - 0.9%
WMX Technologies, Inc. 800 $ 23,900
- --------------------------------------------------------------------------------------------------------
Railroads - 1.9%
CSX Corp. 500 $ 22,813
Wisconsin Central Transportation Corp.* 400 26,300
--------------
$ 49,113
- --------------------------------------------------------------------------------------------------------
Restaurants and Lodging - 1.3%
HFS, Inc.* 100 $ 8,175
Promus Hotel Corp.* 400 8,900
Sonic Corp.* 850 16,150
--------------
$ 33,225
- --------------------------------------------------------------------------------------------------------
Special Products and Services - 2.1%
Intertape Polymer Group, Inc. 700 $ 21,963
Stanley Works 600 30,900
--------------
$ 52,863
- --------------------------------------------------------------------------------------------------------
<PAGE>
PORTFOLIO OF INVESTMENTS - continued
Common Stocks - continued
========================================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - continued
Stores - 4.2%
Circuit City Stores, Inc. 700 $ 19,337
Gymboree Corp.* 1,100 22,688
Hollywood Entertainment Corp.* 400 3,350
Home Depot, Inc. 300 14,362
Lowe's Cos., Inc. 300 10,050
Micro Warehouse, Inc.* 500 21,625
Office Depot, Inc.* 700 13,825
--------------
$ 105,237
- --------------------------------------------------------------------------------------------------------
Telecommunications - 1.9%
Cabletron Systems, Inc.* 400 $ 32,400
Cisco Systems, Inc.* 200 14,925
--------------
$ 47,325
- --------------------------------------------------------------------------------------------------------
Utilities - Gas - 2.1%
Coastal Corp. 700 $ 26,075
Enron Corp. 700 26,688
--------------
$ 52,763
- --------------------------------------------------------------------------------------------------------
Total U.S. Stocks $ 2,199,531
- --------------------------------------------------------------------------------------------------------
Foreign Stocks - 4.9%
Denmark - 0.2%
Tele Danmark, ADR (Utilities - Telephone) 200 $ 5,525
- --------------------------------------------------------------------------------------------------------
France - 1.2%
Pinault-Printemps (Stores) 100 $ 19,924
Television Francaise (Entertainment) 100 10,707
--------------
$ 30,631
- --------------------------------------------------------------------------------------------------------
Hong Kong - 0.2%
Giordano International Ltd. (Stores) 6,000 $ 5,121
- --------------------------------------------------------------------------------------------------------
Italy - 0.2%
Telecom Italia Mobile SpA (Telecommunications) 4,800 $ 5,051
- --------------------------------------------------------------------------------------------------------
Malaysia - 0.9%
New Straits Times Press (Publishing) 7,000 $ 23,439
- --------------------------------------------------------------------------------------------------------
Norway - 0.1%
Tomra Systems A/S (Pollution Control) 300 $ 2,367
- --------------------------------------------------------------------------------------------------------
Sweden - 2.1%
Astra AB, Free Shares, "B" (Medical and Health Products) 800 $ 31,666
Ericsson LM, "B" (Telecommunications) 500 9,783
Hennes & Mauritz, "B" (Stores) 200 11,137
--------------
$ 52,586
- --------------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 124,720
- --------------------------------------------------------------------------------------------------------
Total Common Stocks (Identified Cost, $2,211,269) $ 2,324,251
- --------------------------------------------------------------------------------------------------------
<PAGE>
Short-Term Obligation - 7.9%
========================================================================================================
Principal Amount
(000 Omitted)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Federal National Mortgage Assn., due 1/17/96, at Amortized Cost $200 $ 199,180
- --------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $2,410,449) $ 2,523,431
Other Assets, Less Liabilities - 0.3% 6,738
========================================================================================================
Net Assets - 100.0% $ 2,530,169
- --------------------------------------------------------------------------------------------------------
*Non-income producing security.
</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, $2,410,449) $ 2,523,431
Cash 62,531
Receivable for Series shares sold 28,201
Interest and dividends receivable 2,056
Receivable from investment adviser 6,619
Deferred organization expenses 8,398
---------------
Total assets $ 2,631,236
---------------
Liabilities:
Payable for investments purchased $ 86,813
Payable for Series shares reacquired 7
Payable to affiliates for management fee 155
Accrued expenses and other liabilities 14,092
---------------
Total liabilities $ 101,067
---------------
Net assets $ 2,530,169
===============
Net assets consist of:
Paid-in capital $ 2,417,438
Unrealized appreciation on investments
and translation of assets and liabilities in foreign currencies 112,983
Accumulated distributions in excess of net realized gain
on investments and foreign currency transactions (252)
---------------
Total $ 2,530,169
===============
Shares of beneficial interest outstanding 232,411
===============
Net asset value, offering price and redemption price per share
(net assets of $2,530,169 / 232,411 shares of beneficial interest outstanding) $10.89
===============
</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 $ 7,204
Dividends 5,442
--------------
Total investment income $ 12,646
--------------
Expenses -
Management fee $ 4,424
Trustees' compensation 708
Shareholder servicing agent fee 199
Auditing fees 10,593
Printing 4,032
Amortization of organization expenses 790
Legal fees 646
Custodian fee 436
Miscellaneous 1,105
--------------
Total expenses $ 22,933
Reduction of expenses by investment adviser (16,913)
Fees paid indirectly (123)
--------------
Net expenses $ 5,897
--------------
Net investment income $ 6,749
--------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 31,254
Foreign currency transactions (166)
--------------
Net realized gain on investments and foreign currency transactions $ 31,088
--------------
Change in unrealized appreciation -
Investments $ 112,982
Translation of assets and liabilities in foreign currencies 1
--------------
Net unrealized gain on investments $ 112,983
--------------
Net realized and unrealized gain on investments and foreign currency $ 144,071
--------------
Increase in net assets from operations $ 150,820
==============
*For the period from the commencement of investment operations, July 26, 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 $ 6,749
Net realized gain on investments and foreign currency transactions 31,088
Net unrealized gain on investments and foreign currency translation 112,983
---------------
Increase in net assets from operations $ 150,820
---------------
Distributions declared to shareholders -
From net investment income $ (6,583)
From net realized gain on investments and foreign currency transactions (31,506)
---------------
Total distributions declared to shareholders $ (38,089)
---------------
Series share (principal) transactions -
Net proceeds from sale of shares $ 2,485,755
Net asset value of shares issued to shareholders
in reinvestment of distributions 38,091
Cost of shares reacquired (115,008)
---------------
Increase in net assets from Series share transactions $ 2,408,838
---------------
Total increase in net assets $ 2,521,569
Net assets:
At beginning of period 8,600
---------------
At end of period $ 2,530,169
===============
*For the period from the commencement of investment operations, July 26, 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} $ 0.05
Net realized and unrealized gain on investments and foreign
currency transactions 1.01
--------------
Total from investment operations $ 1.06
--------------
Less distributions declared to shareholders -
From net investment income $ (0.03)
From net realized gain on investments and foreign currency transactions (0.14)
--------------
Total distributions declared to shareholders $ (0.17)
--------------
Net asset value - end of period $ 10.89
==============
Total return 10.62%++ Ratios (to average net assets)/Supplemental data{S}:
Expenses 1.00%+
Net investment income 1.15%+
Portfolio turnover 28%
Net assets at end of period (000 omitted) $ 2,530
<FN>
*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 loss per share and
the ratios would have been:
</FN>
<S> <C>
Net investment loss $ (0.08)
Ratios (to average net assets):
Expenses 3.90%+
Net investment loss (1.73)%+
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Research 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 six 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
and forward contracts, are valued on the basis of valuations furnished by
dealers or by a pricing service with consideration to factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data, without exclusive reliance upon exchange or over-the-counter prices.
Short-term obligations, which mature in 60 days or less, are valued at amortized
cost, which approximates market value. Securities for which there are no such
quotations or valuations are valued at fair value as determined in good faith by
or at the direction of the Trustees.
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.
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. During the period ended December 31, 1995, $166 was reclassified from
accumulated undistributed net investment income to accumulated distributions in
excess of net realized gain on investments and foreign currency transactions,
due to differences between book and tax accounting for currency transactions.
This change had no effect on the net assets or net asset value per share.
(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 $16,913.
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 $2,642,344
and $461,477, 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 $ 2,410,449
=============
Gross unrealized appreciation $ 161,963
Gross unrealized depreciation (48,981)
-------------
Net unrealized appreciation $ 112,982
=============
</TABLE>
(5) Shares of Beneficial Interest
The 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 238,822 $ 2,485,755
Shares issued to shareholders in reinvestment of distributions 3,521 38,091
Shares reacquired (10,792) (115,008)
------- --------------
Net increase 231,551 $ 2,408,838
======= ==============
*For the period from commencement of investment operations, July 26, 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) Financial Instruments
The Series trades financial instruments with off-balance sheet risk in the
normal course of its investing activities in order to manage exposure to market
risks such as foreign currency exchange rates. These financial instruments
include forward foreign currency exchange contracts. The notional or contractual
amounts of these instruments represent the investment the Series has in
particular classes of financial instruments and does not necessarily represent
the amounts potentially subject to risk. The measurement of the risks associated
with these instruments is meaningful only when all related and offsetting
transactions are considered.
At December 31, 1995, the Series had no such commitments under these contracts.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Variable Insurance Trust and Shareholders of MFS Research
Series:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS Research 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 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 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 Research 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>
VFR-2-2/96/3M
