<PAGE>
[LOGO] Annual Report for
THE FIRST NAME IN MUTUAL FUNDS Year Ended
December 31, 1995
MFS(R) TOTAL RETURN SERIES
A Series of MFS(R) Variable Insurance Trust
<PAGE>
MFS(R) TOTAL RETURN 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
David Calabro*
(Head of Portfolio Management Team)
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. 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 head of the portfolio management team 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/ David Calabro
- ---------------------- -------------------
A. Keith Brodkin David Calabro
Chairman and President Head of the Portfolio Management Team
January 12, 1996
<PAGE>
MFS(R) TOTAL RETURN SERIES
For the past twelve months, the Series provided a total return of +27.34%. This
compares to a +24.61% return for the Lipper Balanced Fund Index.
We believe the current environment warrants a conservative investment posture.
Economies in both the United States and Europe remain sluggish, and revenue
growth for many major corporations has slowed. Earnings growth, a key driver to
stock prices, also has slowed over the past few quarters. In addition,
valuations are on the high side, especially with the S&P 500 dividend yield at
just 2.4%.
Therefore, we are carrying a below-normal equity allocation. Common stocks have
represented approximately 55% of the Series over the past several months. Our
major concentrations remain in the energy and financial services sectors, where
fundamentals and valuations appear sound. We are also finding some good values
in the telephone industry, the electric utility industry and the
defense/aerospace industry.
The bond portion has ranged close to 30% of the Series, while cash has been
approximately 10%. Our duration remains around six years, and corporate bonds
make up the majority of the Series. However, we have recently been adding more
Treasury securities.
PROFILE
David Calabro heads a team of portfolio managers for the MFS Total Return
Series. He is Vice President - Investments and manages the equity portion of the
Series along with Judith N. Lamb, Vice President - Investments, Lisa B. Nurme,
Vice President - Investments and Maura Shaughnessy, Vice President -
Investments. Geoffrey L. Kurinsky, Senior Vice President - Investments, manages
the fixed-income portion of the Series and has been with MFS since 1987. Mr.
Calabro has been with MFS since 1992. Ms. Lamb has been with MFS since 1992. Ms.
Nurme has been with MFS since 1987. Ms. Shaughnessy has been with MFS since
1991. This portfolio management team has managed the MFS Total Return Series
since July 1995.
<PAGE>
PERFORMANCE SUMMARY
The information below illustrates the historical performance of MFS Total Return
Series shares in comparison to various market indicators. Series results do not
reflect the deduction of any applicable surrender charge. Benchmark comparisons
are unmanaged and do not reflect any fees or expenses. You cannot invest in an
index. All results reflect the reinvestment of all dividends and capital gains.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the Period from January 3, 1995* to December 31, 1995)
MFS Lipper
Total Balanced Consumer
Return Funds Price
Date Series Index Indes
- ---- ------ -------- --------
01/03/95 10,000 10,000 10,000
01/31/95 10,500 10,100 10,040
02/95 10,400 10,400 10,080
03/95 10,600 10,600 10,100
04/95 10,800 10,800 10,140
05/95 11,200 11,100 10,160
06/95 11,300 11,300 10,180
07/95 11,400 11,600 10,180
08/95 11,600 11,700 10,210
09/95 11,960 11,950 10,230
10/95 11,900 11,920 10,260
11/95 12,500 12,300 10,260
12/31/95 12,734 12,461 10,254
AGGREGATE TOTAL RETURNS 1/03/95* -
12/31/95
===============================================================================
MFS Total Return Series +27.34%
- -------------------------------------------------------------------------------
Lipper Balanced Fund Index#\1/ +24.61%
- -------------------------------------------------------------------------------
Consumer Price Index{S}\1/ + 2.54%
- -------------------------------------------------------------------------------
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.
#Lipper indices are equally weighted composites of the largest qualifying
mutual funds within their respective investment objective; adjusted for
reinvestment of distributions.
{S}The Consumer Price Index is a popular measure of change in prices.
\1/Source: Lipper Analytical Services, Inc.
<PAGE>
PORTFOLIO OF INVESTMENTS - December 31, 1995
<TABLE>
<CAPTION>
Non-Convertible Bonds - 28.5%
- -----------------------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Obligations - 28.5%
U.S. Treasury Notes, 7.125s, 1999 $ 300 $ 318,093
U.S. Treasury Notes, 6.125s, 2000 300 309,000
U.S. Treasury Bonds, 6.875s, 2025 150 169,171
- -----------------------------------------------------------------------------------------------------
Total Non-Convertible Bonds (Identified Cost, $758,409) $ 796,264
- -----------------------------------------------------------------------------------------------------
Convertible Bonds - 1.9%
- -----------------------------------------------------------------------------------------------------
ADT Operations, Inc., 0s, 2010 (Electronics) $ 40 $ 18,800
Time Warner, Inc., 8.75s, 2015 (Entertainment) 11 11,385
Valhi, Inc., 0s, 2007 (Chemicals) 63 23,546
- -----------------------------------------------------------------------------------------------------
Total Convertible Bonds (Identified Cost, $48,214) $ 53,731
- -----------------------------------------------------------------------------------------------------
<CAPTION>
Common Stocks - 54.6%
- -----------------------------------------------------------------------------------------------------
Shares
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 51.8%
Aerospace - 1.9%
Allied Signal, Inc. 400 $ 19,000
Raytheon Co. 300 14,175
United Technologies Corp. 200 18,975
------------
$ 52,150
- -----------------------------------------------------------------------------------------------------
Automotive - 1.4%
Dana Corp. 200 $ 5,850
Ford Motor Co. 200 5,800
General Motors Corp. 500 26,438
------------
$ 38,088
- -----------------------------------------------------------------------------------------------------
Banks and Credit Companies - 6.0%
Bank of New York, Inc. 600 $ 29,250
BankAmerica Corp. 400 25,900
Chase Manhattan Corp. 400 24,250
Comerica, Inc. 400 16,050
Fleet Financial Group, Inc. 200 8,150
National City Corp. 800 26,500
NationsBank Corp. 300 20,888
Northern Trust Co. 300 16,800
------------
$ 167,788
- -----------------------------------------------------------------------------------------------------
Business Machines - 0.5%
Xerox Corp. 100 $ 13,700
- -----------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - continued
Common Stocks - continued
- -----------------------------------------------------------------------------------------------------
Issuer Shares Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - continued
Chemicals - 1.3%
Dow Chemical Co. 200 $ 14,075
du Pont (E. I.) de Nemours & Co. 300 20,963
------------
$ 35,038
- -----------------------------------------------------------------------------------------------------
Conglomerates - 0.5%
Eastern Enterprises 400 $ 14,100
- -----------------------------------------------------------------------------------------------------
Consumer Goods and Services - 2.5%
Colgate-Palmolive Co. 300 $ 21,075
Philip Morris Cos., Inc. 500 45,250
Rubbermaid, Inc. 100 2,550
------------
$ 68,875
- -----------------------------------------------------------------------------------------------------
Defense Electronics - 0.9%
Loral Corp. 700 $ 24,762
- -----------------------------------------------------------------------------------------------------
Electrical Equipment - 2.1%
General Electric Co. 400 $ 28,800
Honeywell, Inc. 600 29,175
------------
$ 57,975
- -----------------------------------------------------------------------------------------------------
Financial Institutions - 0.9%
Federal Home Loan Mortgage Corp. 300 $ 25,050
- -----------------------------------------------------------------------------------------------------
Food and Beverage Products - 1.7%
Anheuser-Busch Cos., Inc. 100 $ 6,687
General Mills, Inc. 300 17,325
Kellogg Co. 100 7,725
McCormick & Co., Inc. 200 4,825
PepsiCo, Inc. 200 11,175
------------
$ 47,737
- -----------------------------------------------------------------------------------------------------
Forest and Paper Products - 0.5%
Weyerhaeuser Co. 300 $ 12,975
- -----------------------------------------------------------------------------------------------------
Insurance - 3.4%
Aetna Life & Casualty Co. 200 $ 13,850
CIGNA Corp. 100 10,325
GCR Holdings Ltd.* 100 2,250
Prudential Reinsurance Holdings, Inc. 500 11,687
St. Paul Cos., Inc. 300 16,687
Torchmark Corp. 500 22,625
Transport Holdings, Inc., "A"* 1 41
Travelers, Inc. 300 18,863
------------
$ 96,328
- -----------------------------------------------------------------------------------------------------
Machinery - 1.9%
Deere & Co., Inc. 600 $ 21,150
Ingersoll Rand Co. 500 17,562
York International Corp. 300 14,100
------------
$ 52,812
- -----------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - continued
Common Stocks - continued
- -----------------------------------------------------------------------------------------------------
Issuer Shares Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - continued
Medical and Health Products - 1.9%
American Home Products Corp. 300 $ 29,100
Baxter International, Inc. 600 25,125
------------
$ 54,225
- -----------------------------------------------------------------------------------------------------
Metals and Minerals - 0.2%
Phelps Dodge Corp. 100 $ 6,225
- -----------------------------------------------------------------------------------------------------
Oil Services - 0.7%
Schlumberger Ltd. 300 $ 20,775
- -----------------------------------------------------------------------------------------------------
Oils - 5.6%
Amoco Corp. 500 $ 35,937
Exxon Corp. 400 32,050
Mobil Corp. 300 33,600
Occidental Petroleum Corp. 700 14,963
USX- Marathon Group 1,200 23,400
Ultramar Corp. 500 12,875
Union Pacific Resources Group, Inc. 100 2,538
------------
$ 155,363
- -----------------------------------------------------------------------------------------------------
Photographic Products - 1.4%
Eastman Kodak Co. 600 $ 40,200
- -----------------------------------------------------------------------------------------------------
Pollution Control - 0.4%
WMX Technologies, Inc. 400 $ 11,950
- -----------------------------------------------------------------------------------------------------
Printing and Publishing - 0.5%
Dun Bradstreet Corp. 200 $ 12,950
- -----------------------------------------------------------------------------------------------------
Railroads - 0.6%
CSX Corp. 400 $ 18,250
- -----------------------------------------------------------------------------------------------------
Real Estate Investment Trusts - 0.8%
Hospitality Properties Trust 800 $ 21,400
- -----------------------------------------------------------------------------------------------------
Special Products and Services - 0.8%
Minnesota Mining & Manufacturing Co. 100 $ 6,625
Stanley Works 300 15,450
------------
$ 22,075
- -----------------------------------------------------------------------------------------------------
Stores - 1.1%
May Department Stores Co. 300 $ 12,675
Sears, Roebuck & Co. 500 19,500
------------
$ 32,175
- -----------------------------------------------------------------------------------------------------
Utilities - Electric - 2.7%
FPL Group, Inc. 500 $ 23,187
PECO Energy Co. 600 18,075
Portland Gen Corp. 700 20,388
Unicom Corp. 400 13,100
------------
$ 74,750
- -----------------------------------------------------------------------------------------------------
Utilities - Gas - 4.2%
Coastal Corp. 600 $ 22,350
Enron Corp. 500 19,062
Pacific Enterprises 1,000 28,250
Sonat, Inc. 500 17,813
Williams Cos., Inc. 700 30,713
------------
$ 118,188
- -----------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - continued
Common Stocks - continued
- -----------------------------------------------------------------------------------------------------
Issuer Shares Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - continued
Utilities - Telephone - 5.4%
AT&T Corp. 600 $ 38,850
Ameritech Corp. 300 17,700
Frontier Corp. 700 21,000
GTE Corp. 600 26,400
MCI Communications Corp. 800 20,900
NYNEX Corp. 500 27,000
------------
$ 151,850
- -----------------------------------------------------------------------------------------------------
Total U.S. Stocks $ 1,447,754
- -----------------------------------------------------------------------------------------------------
Foreign Stocks - 2.8%
Canada - 0.3%
Canadian National Railway Co. (Railroads)* 500 $ 7,500
- -----------------------------------------------------------------------------------------------------
Netherlands - 1.0%
Royal Dutch Petroleum Co. (Oils) 200 $ 28,225
- -----------------------------------------------------------------------------------------------------
United Kingdom - 1.5%
British Petroleum PLC, ADR (Oils) 200 $ 20,425
National Power PLC, ADR (Utilities - Electric) 100 240
SmithKline Beecham PLC, ADR (Medical and Health Products) 400 22,200
------------
$ 42,865
- -----------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 78,590
- -----------------------------------------------------------------------------------------------------
Total Common Stocks (Identified Cost, $1,322,548) $ 1,526,344
- -----------------------------------------------------------------------------------------------------
Convertible Preferred Stocks - 2.0%
=====================================================================================================
Allstate Corp., 2.281% (Insurance) 400 $ 16,400
Browning-Ferris Industries, 7.25% (Precious Metals and Minerals)* 400 12,550
Enron Corp. (Utilities - Gas) 500 12,000
SCI Finance LLC, "A", $3.125 (Medical and Health
Technology and Services) 200 14,800
- -----------------------------------------------------------------------------------------------------
Total Convertible Preferred Stocks (Identified Cost, $52,174) $ 55,750
- -----------------------------------------------------------------------------------------------------
<CAPTION>
Short-Term Obligation - 10.7%
- -----------------------------------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Federal Home Loan Mortgage Corp., due 1/02/96,
at Amortized Cost $ 300 $ 299,817
- -----------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $2,481,162) $ 2,731,906
Other Assets, Less Liabilities - 2.3% 65,164
=====================================================================================================
Net Assets - 100.0% $ 2,797,070
- -----------------------------------------------------------------------------------------------------
*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, $2,481,162) $ 2,731,906
Cash 66,044
Interest and dividends receivable 19,892
Receivable from investment adviser 7,620
Deferred organization expenses 7,377
--------------
Total assets $ 2,832,839
--------------
Liabilities:
Payable for investments purchased $ 21,446
Payable to affiliates for management fee 171
Accrued expenses and other liabilities 14,152
--------------
Total liabilities $ 35,769
--------------
Net assets $ 2,797,070
--------------
Net assets consist of:
Paid-in capital $ 2,545,202
Unrealized appreciation on investments 250,744
Accumulated undistributed net realized loss on investments and foreign
currency transactions (14)
Accumulated undistributed net investment income 1,138
--------------
Total $ 2,797,070
==============
Shares of beneficial interest outstanding 228,254
==============
Net asset value, offering price and redemption price per share
(net assets of $2,797,070 / 228,254 shares of beneficial interest outstanding) $12.25
==============
</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 $ 42,436
Dividends 27,350
Foreign taxes withheld (62)
-------------
Total investment income $ 69,724
-------------
Expenses -
Management fee $ 10,826
Trustees' compensation 1,725
Shareholder servicing agent fee 497
Auditing fees 14,843
Printing 7,038
Amortization of organization expenses 1,811
Custodian fee 1,154
Legal fees 682
Miscellaneous 1,364
-------------
Total expenses $ 39,940
Reduction of expenses by investment adviser (25,092)
Fees paid indirectly (414)
-------------
Net expenses $ 14,434
-------------
Net investment income $ 55,290
-------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 50,820
Foreign currency transactions (14)
-------------
Net realized gain on investments and foreign currency transactions $ 50,806
-------------
Change in unrealized appreciation -
Investments $ 250,744
-------------
Net realized and unrealized gain on investments and foreign currency $ 301,550
-------------
Increase in net assets from operations $ 356,840
=============
*For the period from the commencement of investment operations, January 3, 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 $ 55,290
Net realized gain on investments and foreign currency transactions 50,806
Net unrealized gain on investments and foreign currency translation 250,744
--------------
Increase in net assets from operations $ 356,840
--------------
Distributions declared to shareholders -
From net investment income $ (54,152)
From net realized gain on investments and foreign currency transactions (50,806)
In excess of net realized gain on investments and foreign currency transactions (14)
--------------
Total distributions declared to shareholders $ (104,972)
--------------
Series share (principal) transactions -
Net proceeds from sale of shares $ 3,794,238
Net asset value of shares issued to shareholders
in reinvestment of distributions 104,970
Cost of shares reacquired (1,362,606)
--------------
Increase in net assets from Series share transactions $ 2,536,602
--------------
Total increase in net assets $ 2,788,470
Net assets:
At beginning of period 8,600
--------------
At end of period (including accumulated undistributed net
investment income of $1,138) $ 2,797,070
==============
*For the period from the commencement of investment operations, January 3, 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} $ 0.41
Net realized and unrealized gain on investments and foreign
currency transactions 2.32
------------
Total from investment operations $ 2.73
------------
Less distributions declared to shareholders -
From net investment income $ (0.25)
From net realized gain on investments and foreign currency transactions (0.23)
------------
Total distributions declared to shareholders $ (0.48)
------------
Net asset value - end of period $ 12.25
============
Total return 27.34%++
Ratios (to average net assets)/Supplemental data{S}:
Expenses 1.00%+
Net investment income 3.83%+
Portfolio turnover 16%
Net assets at end of period (000 omitted) $ 2,797
<FN>
*For the period from the commencement of investment operations, January 3,
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:
</FN>
<S> <C>
Net investment income $ 0.22
Ratios (to average net assets):
Expenses 2.77%+
Net investment income 2.09%+
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Total Return 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 January
3, 1995. As of December 31, 1995 there were nine 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.
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.
(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 $25,092.
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 purchased option transactions and
short-term obligations, were as follows:
<TABLE>
<CAPTION>
Purchases Sales
========================================================================================================
<S> <C> <C>
U.S. government securities $ 805,805 $ 51,141
============= ==============
Investments (non-U.S. government securities) $ 1,575,182 $ 190,428
============= ==============
</TABLE>
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 $ 2,481,162
=============
Gross unrealized appreciation $ 256,095
Gross unrealized depreciation (5,351)
-------------
Net unrealized appreciation $ 250,744
=============
</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 333,436 $ 3,794,238
Shares issued to shareholders in reinvestment of distributions 8,611 104,970
Shares reacquired (114,653) (1,362,606)
-------- --------------
Net increase 227,394 $ 2,536,602
======== ==============
*For the period from commencement of investment operations, January 3, 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.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Variable Insurance Trust and Shareholders of MFS Total
Return Series:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS Total Return 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 January 3, 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; 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 Total Return
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>
VTR-2-2/96/2M
