<PAGE>
[LOGO] M F S(SM) Semiannual Report
INVESTMENT MANAGEMENT June 30, 1997
MFS(R) TOTAL RETURN SERIES
A Series of MFS(R) Variable Insurance Trust(SM)
[Graphic omitted]
<PAGE>
MFS(R) TOTAL RETURN SERIES
A SERIES OF MFS(R) VARIABLE INSURANCE TRUST(SM)
TRUSTEES INVESTMENT ADVISER
A. Keith Brodkin* Massachusetts Financial Services Company
Chairman and President 500 Boylston Street
Boston, MA 02116-3741
Nelson J. Darling, Jr.
Trustee, Eastern Enterprises DISTRIBUTOR
(diversified holding company) MFS Fund Distributors, Inc.
500 Boylston Street
William R. Gutow Boston, MA 02116-3741
Vice Chairman,
Capitol Entertainment Management INVESTOR SERVICE
Company MFS Service Center, Inc.
(Blockbuster Video franchise) P.O. Box 2281
Boston, MA 02107-9906
PORTFOLIO MANAGER
David M. Calabro* For additional information,
Geoffrey L. Kurinsky* contact your financial adviser.
Judith N. Lamb*
Lisa B. Nurme* CUSTODIAN
Maura A. Shaughnessy* Investors Bank & Trust Company
TREASURER AUDITORS
W. Thomas London* Deloitte & Touche LLP
ASSISTANT TREASURERS WORLD WIDE WEB
Mark E. Bradley* www.mfs.com
Ellen Moynihan*
James O. Yost* [DALBAR For the third year in a row,
LOGO] MFS earned a #1 ranking in the
SECRETARY DALBAR, Inc. Broker/Dealer Survey,
Stephen E. Cavan* Main Office Operations Service Quality
Category. The firm achieved a 3.48
ASSISTANT SECRETARY overall score on a scale of 1 to 4 in
James R. Bordewick, Jr.* the 1996 survey. A total of 110 firms
responded, offering input on the
quality of service they received from
29 mutual fund companies nationwide.
The survey contained questions about
service quality in 15 categories,
including "knowledge of phone service
contacts," "accuracy of transaction
processing," and "overall ease of
doing business with the firm."
*Affiliated with the Investment Adviser
<PAGE>
Dear Contract Owner:
An unprecedented combination of generally positive factors has helped the U.S.
economy enjoy a sustained period of relative stability and moderate growth in
which thousands of new jobs have been created every month, inflation remains
under control, and the investment climate -- at least until now -- has been
favorable. For example, the increased use of technology and other productivity
enhancements, as well as corporate restructuring and global competition, is
improving companies' balance sheets and helping control inflation. Meanwhile,
borrowing by corporations and governments continues to decline, while consumer
confidence is increasing, although consumer debt levels are still uncomfortably
high. While some lenders are beginning to tighten standards to address this
problem, consumer debt and personal bankruptcies continue to rise. Because of
this, plus slight declines in other indicators such as average hourly wages and
the corporate purchasing-managers index, we do not expect the rapid pace of
growth seen in the first quarter of 1997 to continue. While second-quarter
growth has slowed dramatically, we do expect the second half of the year to pick
up once again with real (inflation-adjusted) growth centering around 2 1/2%.
We have been surprised by the strength of the U.S. equity market in the
first half of 1997. Much of this is the result of continuing gains in corporate
earnings. Even as the current recovery enters its seventh year, more and more
U.S. companies have been exceeding MFS analysts' earnings estimates. In the
first quarter of 1997, for example, two-thirds of all companies met or exceeded
MFS analysts' expectations, a trend that could be an important indicator of the
U.S. equity market's future direction. However, while the near-term outlook for
profits is generally favorable, we believe equity valuations have risen to a
point where a cautious investment approach seems warranted.
In the fixed-income markets, we have been encouraged by the Federal Reserve
Board's decision to not raise short-term interest rates at its July meeting. But
we cannot rule out the possibility of future monetary tightening in the second
half of the year if, as we now expect, the economy strengthens in the second
half of 1997. Therefore, our risk/reward outlook for the fixed-income markets is
neutral, and we believe that fixed-income investors should think in terms of
earning the coupon income from their investments rather than seeking possible
gains from price appreciation.
Comments from the head of the MFS Total Return Series Team are presented on
the next page. We appreciate your support and welcome any questions or comments
you may have.
Respectfully,
/s/ A. Keith Brodkin
A. Keith Brodkin
Chairman and President
July 14, 1997
<PAGE>
MFS TOTAL RETURN SERIES
For the six months ended June 30, 1997, the Series provided a total return of
11.38% (including the reinvestment of distributions). This compares to a 20.60%
return for the Standard & Poor's 500 Composite Index (the S&P 500), a popular,
unmanaged index of common stock total return performance, and to a 2.74% return
for the Lehman Brothers Government Corporate Bond Index, an unmanaged,
market-value-weighted index of U.S. Treasury and government-agency securities,
excluding mortgage-backed securities.
The pace of economic activity in the second quarter has slowed from the 5.9%
annual rate posted in the first quarter of 1997. However, the U.S. economy
remains firm, which should support corporate earnings growth. The rate of
unemployment remains low, ending June at 5% and, while inflation has not been a
problem in recent years, we are keeping a close eye out for any signs of an
increase.
We believe the continuing strength of the dollar should serve to dampen the
U.S. economy in the near future. Conversely, we feel that the rise in the
dollar's value over the past year should help improve the competitiveness of
many foreign corporations, which could serve to accelerate foreign economies.
Still, investors remain bullish on corporate America, and stock prices have
risen throughout most of the period.
Our allocations remain conservative. At the end of June, 58% of the
portfolio was invested in stocks, preferred stocks, and convertible bonds. We
generally consider a 60% stock weighting neutral and anything over 65%
aggressive. We have been maintaining this conservative equity posture for some
time because, in our view, equities are not cheap by historical standards.
Specifically, the yield on the S&P 500 is under 2%, which is close to an
all-time low.
In selecting stocks for the Series, we prefer to own companies in which we
anticipate stable earnings growth. We also like to pay a price for these
securities (as measured by price-to-earnings ratios, dividend yields, and
price-to-book ratios) that is below the average for the market. We have found
these characteristics in the financial services and industrial goods and
services sectors, both of which did well during the period. Both sectors have
reported solid earnings, while consolidation activity continues to boost values
of financial services stocks.
We continue to be underweighted in the technology and the consumer
nondurable goods sectors. While we feel there are many fine companies in both of
these sectors, we do not think their valuations have been compelling in recent
months.
The performance of aerospace and defense stocks has been disappointing, in
part because, after years of consolidation, the market is beginning to fear that
the industry is in for a period of slow growth. However, we still find this
sector attractive because we believe these companies can continue to produce
solid earnings over the long term. Another disappointment came in the utility
sector, where the pace of deregulation continues to pick up, bringing
uncertainty and placing lower values on the sector.
Looking ahead, we see a modest growth rate in the U.S. economy over the next
12 months. Over the near term, however, we believe the Federal Reserve Board
will keep a close watch on wage inflation and general economic activity and may
raise interest rates again should economic indicators suggest a
stronger-than-expected economy.
Our bond portfolio represents approximately 33% of the Series, with
two-thirds in corporates and one-third in Treasuries. The duration, or
interest-rate sensitivity, of the bond portfolio has been approximately 5.4
years over the period.
Given where equity valuations are today, we feel comfortable with our asset
allocation. However, should the stock market correct, we would be looking to buy
additional stocks.
Respectfully,
/s/ David M. Calabro
David M. Calabro
(On behalf of the MFS Total Return Team)
<PAGE>
PORTFOLIO MANAGERS' PROFILES
David M. Calabro, Vice President; Geoffrey L. Kurinsky, Senior Vice President;
Judith N. Lamb, Vice President; Lisa B. Nurme, Vice President; and Maura A.
Shaughnessy, Vice President, are the Series' portfolio managers. Mr. Calabro
is the head of this portfolio management team and a manager of the common
stock portion of the Series' portfolio. Mr. Calabro has been employed by MFS
since 1992. Mr. Kurinsky, the manager of the Series' fixed-income securities,
has been employed by MFS since 1987. Ms. Lamb, the manager of the Series'
convertible securities, has been employed by MFS since 1992. Ms. Nurme, a
manager of the common stock portion of the Series' portfolio, has been
employed by MFS since 1987. Ms. Shaughnessy, also a manager of the common
stock portion of the Series' portfolio, has been employed by MFS since 1991.
OBJECTIVES AND POLICIES
The Series' primary investment objective is to provide above-average income
consistent with the prudent employment of capital. Its secondary objective is to
provide a reasonable opportunity for growth of capital and income, since many
securities offering a better-than-average yield may also possess growth
potential.
Commencement of investment operations: January 3, 1995.
PERFORMANCE SUMMARY
The information below illustrates the performance of MFS Total Return Series.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN AS OF JUNE 30, 1997
6 Months 1 Year Life of Series*
- -------------------------------------------------------------------------------
Cumulative Total Return +11.38% +21.06% +62.22%
- -------------------------------------------------------------------------------
Average Annual Total Return -- +21.06% +21.44%
- -------------------------------------------------------------------------------
* For the period from the commencement of the Series' investment operations,
January 3, 1995, through June 30, 1997.
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.
Returns shown do not reflect the deduction of the mortality and expense risk
charges and administration fees. Please refer to the annuity product's annual
report for performance that reflects the deduction of the fees and charges
imposed by insurance company separate accounts.
All results reflect any applicable expense subsidies and waivers, without which
the performance results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details.
<PAGE>
PORTFOLIO OF INVESTMENTS - June 30, 1997
Bonds - 31.7%
- -------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------
U.S. Bonds - 28.9%
Aerospace - 0.1%
Northrup Grumman Corp., 9.375s, 2024 $ 20 $ 21,949
- -------------------------------------------------------------------------------
Airlines - 0.6%
Continental Airlines, Inc., 9.5s, 2001## $ 50 $ 52,063
Continental Airlines, Inc., 9.5s, 2013 24 27,565
Delta Airlines, Inc., 8.5s, 2002 160 168,912
-----------
$ 248,540
- -------------------------------------------------------------------------------
Banks and Credit Companies - 1.6%
Beaver Valley II Funding Corp., 8.25s, 2003 $ 80 $ 80,944
Beaver Valley II Funding Corp., 8.625s, 2007 30 30,666
Capital One Bank Co., 6.97s, 2002 25 24,649
Capital One Financial Corp., 7.25s, 2003 50 48,900
MBNA Capital, 8.278s, 2026 270 261,260
Riggs National Corp., 8.5s, 2006 20 20,800
Washington Mutual Capital I, 8.375s, 2027 200 203,250
-----------
$ 670,469
- -------------------------------------------------------------------------------
Business Machines
International Business Machines Corp.,
7.125s, 2096 $ 20 $ 18,847
- -------------------------------------------------------------------------------
Electronics - 1.0%
Harman International Industries, 7.32s, 2007 $ 420 $ 420,000
- -------------------------------------------------------------------------------
Entertainment - 1.9%
NWCG Holdings, Corp., 0s, 1999 $ 20 $ 17,584
Paramount Communications, 7.5s, 2002 297 297,546
Time Warner, Inc., 6.1s, 2001 320 306,521
Time Warner, Inc., 9.15s, 2023 185 204,330
-----------
$ 825,981
- -------------------------------------------------------------------------------
Financial Institutions - 0.5%
Contifinancial Corp., 8.375s, 2003 $ 50 $ 51,375
HSBC Americas Capital Trust II, 8.38s, 2027## 20 20,175
Lehman Brothers, Inc., 7.5s, 2026 10 10,276
Nationwide Mutual Insurance Co., 7.5s, 2024## 25 23,627
Salton Sea Funding Corp., 7.84s, 2010 25 24,960
St. George Funding Co., 8.485s, 2049## 100 99,990
-----------
$ 230,403
- -------------------------------------------------------------------------------
Forest and Paper Products - 1.4%
Boise Cascade Corp., 9.85s, 2002 $ 25 $ 27,883
Boise Cascade Corp., 7.43s, 2005 50 50,221
Georgia-Pacific Corp., 9.5s, 2022 500 539,525
-----------
$ 617,629
- -------------------------------------------------------------------------------
Insurance - 0.2%
Conseco Finance Trust III, 8.796s, 2027 $ 20 $ 20,525
NGC Corp. Capital Trust I, 8.316s, 2027## 40 40,650
Travelers Capital, 7.75s, 2036 20 19,400
-----------
$ 80,575
- -------------------------------------------------------------------------------
Medical and Health Technology and Services - 0.1%
Tenet Healthcare Corp., 10.125s, 2005 $ 20 $ 21,850
Tenet Healthcare Corp., 8s, 2005 20 20,050
-----------
$ 41,900
- -------------------------------------------------------------------------------
Mining
Freeport McMoRan Corp., 7.5s, 2006 $ 14 $ 13,899
- -------------------------------------------------------------------------------
Oils - 1.0%
Chesapeake Energy Corp., 7.875s, 2004 $ 200 $ 194,000
Clark Oil & Refining Corp., 10.5s, 2001 120 123,600
Enserch Exploration, Inc., 7.54s, 2009## 20 19,666
Oryx Energy Co., 8.375s, 2004 50 52,375
Transocean Offshore, 8s, 2027 40 41,350
-----------
$ 430,991
- -------------------------------------------------------------------------------
Railroads - 0.1%
Norfolk Southern Corp., 7.8s, 2027 $ 12 $ 12,325
Norfolk Southern Corp., 7s, 2004 20 20,298
-----------
$ 32,623
- -------------------------------------------------------------------------------
Restaurants and Lodging
Hilton Hotels Corp., 7.95s, 2007 $ 20 $ 20,475
- -------------------------------------------------------------------------------
Special Products and Services - 0.4%
Loewen Group International, Inc., 7.5s, 2001 $ 155 $ 153,644
- -------------------------------------------------------------------------------
Telecommunications - 1.1%
360 Communications Co., 7.5s, 2006 $ 33 $ 32,919
Continental Cablevision, Inc., 11s, 2007 250 281,112
TCI Communications, 9.65s, 2027 20 20,175
Tele-Communications, Inc., 7.385s, 2001 140 140,443
-----------
$ 474,649
- -------------------------------------------------------------------------------
Transportation - 0.6%
Federal Express Corp., 7.65s, 2014 $ 250 $ 258,438
- -------------------------------------------------------------------------------
U.S. Government Guaranteed - 13.7%
Government National Mortgage Association - 2.6%
GNMA, 8s, 2017 $ 92 $ 96,138
GNMA, 7.5s, 2026 402 404,526
GNMA, 8.5s, 2026 487 506,988
GNMA, REMIC, 8s, 2025 100 102,906
-----------
$ 1,110,558
- -------------------------------------------------------------------------------
U.S. Treasury Obligations - 11.1%
U.S. Treasury Notes, 5.875s, 1998 $ 176 $ 175,945
U.S. Treasury Notes, 6s, 1998 400 400,436
U.S. Treasury Notes, 9.25s, 1998 35 36,252
U.S. Treasury Notes, 9.125s, 1999 40 42,118
U.S. Treasury Notes, 8.5s, 2000 260 274,219
U.S. Treasury Notes, 7.5s, 2001 300 312,609
U.S. Treasury Notes, 6.625s, 2002 1,000 1,009,220
U.S. Treasury Notes, 7.25s, 2004 20 20,846
U.S. Treasury Notes, 6.5s, 2006 47 46,801
U.S. Treasury Notes, 7s, 2006 45 46,293
U.S. Treasury Notes, 6.25s, 2007 1,080 1,056,715
U.S. Treasury Notes, 6.625s, 2007 70 70,579
U.S. Treasury Bonds, 9.875s, 2015 30 39,450
U.S. Treasury Bonds, 6.5s, 2026 988 947,551
U.S. Treasury Bonds, 6.625s, 2027 280 273,963
-----------
$ 4,752,997
- -------------------------------------------------------------------------------
Total U.S. Government Guaranteed $ 5,863,555
- -------------------------------------------------------------------------------
Utilities - Electric - 3.6%
Cleveland Electric Illuminating, 9.25s, 1999 $ 50 $ 52,183
Cleveland Electric Illuminating, 9.375s, 2017 10 10,428
Coastal Corp., 7.42s, 2037 110 105,418
Commonwealth Edison Co., 6.4s, 2005 100 93,531
Commonwealth Edison Co., 7.625s, 2007 20 20,050
Entergy Louisiana, 8s, 2017 100 100,000
First PV Funding Corp., 10.3s, 2014 49 51,673
Long Island Lighting Co., 9s, 2022 350 383,257
Long Island Lighting Co., 8.9s, 2019 50 52,113
Long Island Lighting Co., 9.625s, 2024 25 25,625
Midland Cogeneration Venture Corp., 10.33s, 2002 51 54,857
Niagara Mohawk Power, 8.77s, 2018 200 201,800
North Atlantic Energy, 9s, 2002 382 386,461
Southern Co. Capital Trust I, 8.19s, 2037## 20 20,275
Texas-New Mexico Power Co., 12.5s, 1999 20 21,447
-----------
$ 1,579,118
- -------------------------------------------------------------------------------
Utilities - Gas - 1.0%
California Energy Co., 0s, 2004 $ 15 $ 16,128
Tennessee Gas Pipeline, 7.625s, 2037 400 397,500
-----------
$ 413,628
- -------------------------------------------------------------------------------
Total U.S. Bonds $12,417,313
- -------------------------------------------------------------------------------
Foreign Bonds - 2.8%
Argentina - 0.5%
Hidroelectrica Alicura, 8.375s, 1999
(Utilities - Electric)## $ 200 $ 202,250
- -------------------------------------------------------------------------------
Canada
Gulf Canada Resources Ltd., 8.25s, 2017
(Utilities - Gas) $ 10 $ 9,925
- -------------------------------------------------------------------------------
Chile
Empresa Nacional de Electricidad S.A.,
7.325s, 2037 (Utilities - Electric) $ 20 $ 20,057
- -------------------------------------------------------------------------------
Indonesia - 0.6%
PT Indah Kiat Pulp & Paper, 8.875s, 2000
(Forest & Paper Products)## $ 120 $ 120,000
PT Polysindo Eka Perkasa, 13s, 2001 (Chemicals) 100 113,375
-----------
$ 233,375
- -------------------------------------------------------------------------------
Korea - 1.1%
Korea Development Bank, 9.6s, 2000 (Banks
and Credit Companies) $ 382 $ 414,939
Korea Development Bank, 6.75s, 2005 (Banks
and Credit Companies) 20 19,378
Korea Electric Power, 7s, 2007 (Utilities
- Electric) 20 19,608
-----------
$ 453,925
- -------------------------------------------------------------------------------
Mexico - 0.3%
Banco Comercial S.A., 8.25s, 2007 (Banks
and Credit Companies) $ 100 $ 100,050
United Mexican States, 9.875s, 2007 (Government) 20 21,100
-----------
$ 121,150
- -------------------------------------------------------------------------------
Netherlands - 0.3%
APP International Finance, 10.25s, 2000
(Financial Institutions) $ 120 $ 124,200
- -------------------------------------------------------------------------------
Panama
Republic of Panama, 7.875s, 2002 (Government)## $ 20 $ 19,950
- -------------------------------------------------------------------------------
Qatar
Ras Laffan Liquefied Natural Gas, 8.294s,
2014 (Utilities - Gas)## $ 20 $ 20,900
- -------------------------------------------------------------------------------
Thailand
Total Access Communications, 8.375s, 2006
(Telecommunications)## $ 20 $ 19,638
- -------------------------------------------------------------------------------
Total Foreign Bonds $ 1,225,370
- -------------------------------------------------------------------------------
Total Bonds (Identified Cost, $14,850,185) $13,642,683
- -------------------------------------------------------------------------------
Convertible Bonds - 0.3%
- -------------------------------------------------------------------------------
Daimler Benz, 0s, 2017 (Automotive)## $ 120 $ 54,900
Diamond Offshore Drilling, 3.75s, 2007 (Oil
Services) 60 68,700
- -------------------------------------------------------------------------------
Total Convertible Bonds (Identified Cost, $109,278) $ 123,600
- -------------------------------------------------------------------------------
Stocks - 54.6%
- -------------------------------------------------------------------------------
Shares
- -------------------------------------------------------------------------------
U.S. Stocks - 48.6%
Aerospace - 3.1%
Allied Signal, Inc. 5,280 $ 443,520
General Dynamics Corp. 2,600 195,000
Lockheed-Martin Corp. 700 72,494
Raytheon Co. 4,450 226,950
United Technologies Corp. 4,980 413,340
-----------
$ 1,351,304
- -------------------------------------------------------------------------------
Apparel and Textiles - 0.4%
VF Corp. 2,130 $ 180,517
- -------------------------------------------------------------------------------
Automotive - 1.0%
Dana Corp. 4,510 $ 171,380
Ford Motor Co. 6,800 256,700
General Motors Corp. 350 19,490
-----------
$ 447,570
- -------------------------------------------------------------------------------
Banks and Credit Companies - 6.3%
Bank of New York, Inc. 6,060 $ 263,610
BankBoston Corp. 1,350 97,284
BB&T Corp. 4,050 182,250
Chase Manhattan Corp. 2,662 258,380
Crestar Financial Corp. 1,000 38,875
Fleet/Norstar Financial Group, Inc. 5,150 325,737
National City Corp. 7,100 372,750
NationsBank Corp. 5,980 385,710
Northern Trust Co. 4,800 232,200
Norwest Corp. 5,800 326,250
PNC Bank Corp. 5,400 224,775
-----------
$ 2,707,821
- -------------------------------------------------------------------------------
Business Machines - 1.1%
Digital Equipment Corp.* 3,400 $ 120,487
International Business Machines Corp. 3,920 353,535
-----------
$ 474,022
- -------------------------------------------------------------------------------
U.S. Stocks - continued
Cellular Phones - 0.2%
Telephone & Data Systems, Inc. 2,300 $ 87,256
- -------------------------------------------------------------------------------
Chemicals - 1.9%
Air Products & Chemicals, Inc. 1,900 $ 154,375
Dexter Corp. 3,700 118,400
Dow Chemical Co. 580 50,532
du Pont (E.I.) de Nemours & Co. 4,240 266,590
Nalco Chemical Co. 1,900 73,387
Rohm & Haas Co. 1,200 108,075
Witco Corp. 1,180 44,766
-----------
$ 816,125
- -------------------------------------------------------------------------------
Computer Software - Systems - 0.1%
Lear Corp. 1,300 $ 57,687
- -------------------------------------------------------------------------------
Conglomerates - 0.9%
Eastern Enterprises 1,400 $ 48,562
Goodrich (B.F.) Co. 7,650 331,340
-----------
$ 379,902
- -------------------------------------------------------------------------------
Consumer Goods and Services - 2.6%
Colgate-Palmolive Co. 1,800 $ 117,450
Fortune Brands, Inc. 1,030 38,431
Hertz Corp. 3,000 108,000
Philip Morris Cos., Inc. 10,330 458,393
Rubbermaid, Inc. 4,810 143,097
Service Corp. International 2,657 87,348
Tyco International Ltd. 2,500 173,906
-----------
$ 1,126,625
- -------------------------------------------------------------------------------
Electrical Equipment - 1.8%
Cooper Industries, Inc. 4,500 $ 223,875
General Electric Co. 7,400 483,775
Honeywell, Inc. 1,010 76,633
NCR Corp. 1 22
-----------
$ 784,305
- -------------------------------------------------------------------------------
Financial Institutions - 2.6%
American Express Co. 4,690 $ 349,405
Edwards (A.G.) Inc. 5,200 222,300
Federal Home Loan Mortgage Corp. 4,240 145,750
Federal National Mortgage Assn. 6,000 261,750
Franklin Resources, Inc. 2,150 156,009
-----------
$ 1,135,214
- -------------------------------------------------------------------------------
Food and Beverage Products - 0.8%
Anheuser-Busch (Cos.), Inc. 200 $ 8,387
Dimon, Inc. 800 21,200
General Mills, Inc. 1,350 87,918
McCormick & Co., Inc. 1,600 40,400
PepsiCo, Inc. 4,700 176,543
-----------
$ 334,448
- -------------------------------------------------------------------------------
Forest and Paper Products - 0.7%
Weyerhaeuser Co. 5,600 $ 291,200
- -------------------------------------------------------------------------------
Insurance - 4.7%
Allstate Corp. 2,100 $ 153,300
Chubb Corp. 4,800 321,000
Cigna Corp. 2,500 443,750
Lincoln National Corp. 2,000 128,750
Nationwide Financial Services 4,400 116,875
Provident Companies 2,900 155,150
St. Paul Cos., Inc. 2,790 212,737
Torchmark Corp. 3,200 228,000
Travelers, Inc. 3,866 243,800
-----------
$ 2,003,362
- -------------------------------------------------------------------------------
Machinery - 0.9%
Deere & Co., Inc. 6,300 $ 345,712
York International Corp. 580 26,680
-----------
$ 372,392
- -------------------------------------------------------------------------------
Medical and Health Products - 2.2%
American Home Products Corp. 4,140 $ 316,710
Baxter International, Inc. 980 51,205
Bristol-Myers Squibb Co. 6,400 518,400
Rhone-Poulenc Rorer, Inc. 600 54,525
-----------
$ 940,840
- -------------------------------------------------------------------------------
Medical and Health Technology and Services - 0.5%
Columbia HCA Healthcare 1,000 $ 39,312
United Healthcare Corp. 3,300 171,600
-----------
$ 210,912
- -------------------------------------------------------------------------------
Metals and Minerals - 0.6%
Aluminum Companies of America 2,850 $ 214,818
Phelps Dodge Corp. 300 25,556
-----------
$ 240,374
- -------------------------------------------------------------------------------
Oils - 4.4%
Amoco Corp. 1,490 $ 129,536
Atlantic Richfield Co. 2,820 198,810
Chevron Corp. 2,700 199,631
Exxon Corp. 6,800 418,200
Mobil Corp. 2,260 157,917
Occidental Petroleum Corp. 5,400 135,337
Sun, Inc. 270 8,370
Texaco, Inc. 3,400 369,750
Ultramar Corp. 500 16,312
Union Pacific Resources Group 2,100 52,237
USX-Marathon Group 6,700 193,462
-----------
$ 1,879,562
- -------------------------------------------------------------------------------
Photographic Products - 0.7%
Eastman Kodak Co. 4,030 $ 309,302
- -------------------------------------------------------------------------------
Pollution Control - 1.4%
Browning-Ferris Industries, Inc. 8,600 $ 285,950
Waste Management, Inc. 9,200 295,550
-----------
$ 581,500
- -------------------------------------------------------------------------------
Railroad - 1.3%
Burlington Northern-Sante Fe 1,770 $ 159,078
Illinois Central Corp. 5,850 204,384
Norfolk Southern Corp. 1,800 181,350
-----------
$ 544,812
- -------------------------------------------------------------------------------
Real Estate Investment Trusts - 0.9%
Arden Realty Group, Inc. 2,000 $ 52,000
Boston Properties 3,900 107,250
Hospitality Properties Trust 2,500 76,562
Meditrust Corp. 1,500 59,812
Trinet Corp. Realty Trust 2,800 92,575
-----------
$ 388,199
- -------------------------------------------------------------------------------
Special Products and Services
Stanley Works 500 $ 20,000
- -------------------------------------------------------------------------------
Stores - 1.5%
May Department Stores Co. 950 $ 44,887
Penney (++++++++J.C.), Inc. 2,500 130,468
Rite-Aid Corp. 7,400 369,075
Sears, Roebuck & Co. 1,800 96,750
-----------
$ 641,180
- -------------------------------------------------------------------------------
Utilities - Electric - 2.2%
Carolina Power & Light Co. 2,900 $ 104,037
CMS Energy Corp. 2,000 70,500
DPL, Inc. 600 14,775
Duke Power Co. 4,073 195,257
FPL Group, Inc. 3,800 175,037
GPU, Inc. 2,700 96,862
PacifiCorp 1,700 37,400
Pinnacle West Capital Corp. 5,500 165,343
Portland General Corp. 1,400 55,562
Public Service Co. 300 12,450
Texas Utilities Co. 950 32,715
-----------
$ 959,938
- -------------------------------------------------------------------------------
Utilities - Gas - 1.1%
Coastal Corp. 5,230 $ 278,170
Pacific Enterprises 500 16,812
UGI Corp. 2,400 53,100
Williams Cos., Inc. 3,300 144,375
-----------
$ 492,457
- -------------------------------------------------------------------------------
Utilities - Telephone - 2.7%
BellSouth Corp. 4,600 $ 213,325
GTE Corp. 7,950 348,806
MCI Communications Corp. 2,900 111,015
SBC Communications 2,872 177,710
Sprint Corp. 6,300 331,537
-----------
$ 1,182,393
- -------------------------------------------------------------------------------
Total U.S. Stocks $20,941,219
- -------------------------------------------------------------------------------
Foreign Stocks - 6.0%
Canada
Canadian National Railway Co. (Railroad) 500 $ 21,875
- -------------------------------------------------------------------------------
Germany - 0.5%
Henkel KGaA (Chemicals) 3,500 $ 197,241
- -------------------------------------------------------------------------------
Italy - 0.3%
ENI S.p.A., ADR (Oils) 2,100 $ 119,438
- -------------------------------------------------------------------------------
Netherlands - 1.2%
Akzo Nobel N.V. (Chemicals) 1,500 $ 205,938
Royal Dutch Petroleum Co. (Oils) 5,680 308,850
-----------
$ 514,788
- -------------------------------------------------------------------------------
Spain - 0.3%
Repsol S.A., ADR (Oils) 3,200 $ 135,800
- -------------------------------------------------------------------------------
Sweden
Volvo AB, ADR (Automotive) 590 $ 15,782
- -------------------------------------------------------------------------------
Switzerland - 0.6%
Novartis AG (Medical and Health Products) 158 $ 252,956
- -------------------------------------------------------------------------------
United Kingdom - 3.1%
British Petroleum PLC, ADR (Oils) 7,168 $ 536,704
Gallaher Group PLC, ADR (Consumer Goods
and Services) 1,030 18,990
Grand Metropolitan PLC (Food and Beverage
Products) 28,800 277,044
SmithKline Beecham PLC, ADR (Medical and
Health Products) 5,280 483,780
-----------
$ 1,316,518
- -------------------------------------------------------------------------------
Total Foreign Stocks $ 2,574,398
- -------------------------------------------------------------------------------
Total Stocks (Identified Cost, $18,429,596) $23,515,617
- -------------------------------------------------------------------------------
Convertible Preferred Stocks - 1.3%
- -------------------------------------------------------------------------------
American Radio Systems Co., 7%
(Entertainment)## 300 $ 16,800
Case Corp., $4.50 (Agricultural Products) 700 112,437
Enron Corp., 6.25% (Utilities - Gas) 2,300 43,987
Finova Finance Trust, 5.5% (Financial Institutions) 600 34,500
Host Marriott Financial, 6.75% (Restaurants
and Lodging)## 2,300 134,263
Loral Space & Communications, 6% (Aerospace)## 900 45,000
McKesson Financing Trust, 5% (Bank and
Credit Companies)## 2,000 123,750
Timet Capital Trust, 6.625% (Metals and Minerals)## 700 37,326
Unocal Corp., 6.25% (Oils)## 1 23
- -------------------------------------------------------------------------------
Total Convertible Preferred Stocks (Identified Cost, $690,921) $ 548,086
- -------------------------------------------------------------------------------
Short-Term Obligations - 13.3%
- -------------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- -------------------------------------------------------------------------------
Federal Home Loan Bank, due 8/14/97 $ 2,000 $ 1,986,450
Federal National Mortgage Assn.,
due 7/09/97 - 7/30/97 3,750 3,737,669
- -------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 5,724,119
- -------------------------------------------------------------------------------
Total Investments (Identified Cost, $39,804,099) $43,554,105
Other Assets, Less Liabilities - (1.2)% (527,539)
- -------------------------------------------------------------------------------
Net Assets - 100.0% $43,026,566
- -------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
June 30, 1997
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $39,804,099) $43,554,105
Cash 16,756
Receivable for Series shares sold 340,771
Receivable for investments sold 216,020
Interest and dividends receivable 267,110
Deferred organization expenses 4,942
Other assets 1,597
-----------
Total assets $44,401,301
-----------
Liabilities:
Payable for Series shares reacquired $ 157,599
Payable for investments purchased 1,210,873
Payable to affiliate for management fee 2,634
Accrued expenses and other liabilities 3,629
-----------
Total liabilities $ 1,374,735
-----------
Net assets $43,026,566
===========
Net assets consist of:
Paid-in capital $38,541,104
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 3,749,989
Accumulated undistributed net realized gain on investments
and foreign currency transactions 238,979
Accumulated undistributed net investment income 496,494
-----------
Total $43,026,566
===========
Shares of beneficial interest outstanding 2,817,952
=========
Net asset value per share
(net assets of $43,026,566 / 2,817,952 shares of beneficial
interest outstanding) $15.27
======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
- -------------------------------------------------------------------------------
Six Months Ended June 30, 1997
- -------------------------------------------------------------------------------
Net investment income:
Income -
Interest $ 437,811
Dividends 205,735
Foreign taxes withheld (1,853)
----------
Total investment income $ 641,693
----------
Expenses -
Management fee $ 109,190
Trustees' compensation 1,017
Shareholder servicing agent fee 4,222
Administrative fee 1,613
Amortization of organization expenses 593
Miscellaneous 120
----------
Total expenses $ 116,755
Preliminary reimbursement of expenses to investment adviser 28,670
----------
Net expenses $ 145,425
----------
Net investment income $ 496,268
----------
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) -
Investment transactions $ 233,844
Foreign currency transactions 67
----------
Net realized gain on investment and foreign currency
transactions $ 233,911
----------
Change in unrealized appreciation (depreciation) -
Investments $2,676,048
Translation of assets and liabilities in foreign currencies (9)
----------
Net unrealized gain on investment and foreign currency
translation $2,676,039
----------
Net realized and unrealized gain on investments and
foreign currency $2,909,950
----------
Increase in net assets from operations $3,406,218
==========
See notes to financial statements
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statements of Changes in Net Assets
<CAPTION>
- ------------------------------------------------------------------------------------------------
Six Months Ended Year Ended
June 30, 1997 December 31, 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 496,268 $ 289,998
Net realized gain on investments and foreign
currency transactions 233,911 125,166
Net unrealized gain on investments and foreign
currency transactions 2,676,039 823,206
----------- -----------
Increase in net assets from operations $ 3,406,218 $ 1,238,370
----------- -----------
Distributions declared to shareholders -
From net investment income
$ -- $ (287,177)
From net realized gain on investments and
foreign currency transactions -- (124,941)
----------- -----------
Total distributions declared to shareholders $ -- $ (412,118)
----------- -----------
Series share (principal) transactions -
Net proceeds from sale of shares $21,997,038 $17,739,649
Net asset value of shares issued to shareholders
in reinvestment of distributions -- 412,118
Cost of shares reacquired (1,626,462) (2,525,317)
----------- -----------
Increase in net assets from Series share
transactions $20,370,576 $15,626,450
----------- -----------
Total increase in net assets $23,776,794 $16,452,702
Net assets:
At beginning of period 19,249,772 2,797,070
----------- -----------
At end of period (including accumulated
undistributed net
investment income of $496,494 and $226,
respectively) $43,026,566 $19,249,772
=========== ===========
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Financial Highlights
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended Period Ended
June 30, 1997 December 31, 1996 December 31, 1995*
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $13.71 $12.25 $10.00
------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.24 $ 0.46 $ 0.41
Net realized and unrealized gain on investments and
foreign currency transactions 1.32 1.30 2.32
------ ------ ------
Total from investment operations $ 1.56 $ 1.76 $ 2.73
------ ------ ------
Less distributions declared to shareholders -
From net investment income $
-- $(0.21) $(0.25)
From net realized gain on investments and foreign
currency transactions -- (0.09) (0.23)
------ ------ ------
Total distributions declared to shareholders $ -- $(0.30) $(0.48)
------ ------ ------
Net asset value - end of period $15.27 $13.71 $12.25
====== ====== ======
Total return 11.38%++ 14.37% 27.34%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 1.00%+ 1.00% 1.00%+
Net investment income 3.39%+ 3.59% 3.83%+
Portfolio turnover 52% 76% 16%
Average commission rate### $0.0524 $0.0485 --
Net assets at end of period (000 omitted) $43,027 $19,250 $2,797
*For the period from the commencement of the Series' investment operations, January 3, 1995, through December 31, 1995.
+Annualized.
++Not annualized.
#Per share data are based on average shares outstanding.
###Average commission rate is calculated for funds with fiscal years beginning on or after September 1, 1995.
(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/under these limitations, the net investment income per share and the ratios would have been:
Net investment income $ 0.26 $ 0.32 $ 0.22
Ratios (to average net assets):
Expenses 0.80%+ 2.10% 2.49%+
Net investment income 3.59%+ 2.49% 2.09%+
See notes to financial statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Total Return Series (the Series) is a diversified series of MFS(R) Variable
Insurance Trust (the Trust) which is comprised of the following 12 series:
MFS(R) Bond Series, MFS(R) Emerging Growth Series, MFS(R) Growth with Income
Series, MFS(R) High Income Series, MFS(R) Limited Maturity Series, MFS(R) Money
Market Series, MFS(R) Research Series, MFS(R) Strategic Fixed Income Series, MFS
Total Return Series, MFS(R) Utilities Series, MFS(R) Value Series, and MFS(R)
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. As of
June 30, 1997, there were 24 shareholders in the Series.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Investments
in foreign securities are vulnerable to the effects of changes in the relative
values of the local currency and the U.S. dollar and to the effects of changes
in each country's legal, political, and economic environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last sale
prices. Unlisted equity securities or listed equity securities for which last
sale prices are not available are reported at market value using last quoted bid
prices. Debt securities (other than short-term obligations which mature in 60
days or less), including listed issues, are valued on the basis of valuations
furnished by dealers or by a pricing service with consideration to factors such
as institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other market
data, without exclusive reliance upon exchange or over-the-counter prices.
Short-term obligations, which mature in 60 days or less, are valued at amortized
cost, which approximates market value. Securities for which there are no such
quotations or valuations are valued at fair value as determined in good faith by
or at the direction of the Trustees.
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 result 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 Series
operations.
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' custody fee is calculated as a percentage of
the Series' average daily net assets. This fee is reduced according to an
expense offset arrangement with State Street Bank, the 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 and, consequently, the
character of distributions to shareholders reported in the financial highlights
may differ from that reported to shareholders on Form 1099-DIV. 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 tax 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 average daily net assets. Under a temporary expense limitation
agreement with MFS, MFS has voluntarily agreed to pay all of the Series'
operating expenses, exclusive of management fees. The Series in turn will pay
MFS an expense reimbursement fee not greater than 0.25% of average daily net
assets. To the extent that the expense reimbursement fee exceeds the Series'
actual expenses, the excess will be applied to amounts paid by MFS in prior
years. At June 30, 1997, the aggregate unreimbursed expenses owed to MFS by the
Series amounted to $84,143 after net reimbursement in the current period.
Administrator - Effective March 1, 1997, the Series has an administrative
services agreement with MFS to provide the Series with certain financial, legal
and other administrative services. As a partial reimbursement for the cost of
providing these services, the Series pays MFS an administrative fee up to 0.015%
per annum of the Series average daily net assets, provided that the
administrative fee is not assessed on Series assets that exceed $3 billion.
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 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 series' 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:
Purchases Sales
- -------------------------------------------------------------------------------
U.S. government securities $10,618,305 $8,532,745
=========== ==========
Investments (non-U.S. government securities) $20,056,550 $4,759,056
=========== ==========
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 $39,804,099
===========
Gross unrealized appreciation $ 3,838,982
Gross unrealized depreciation (88,976)
-----------
Net unrealized appreciation $ 3,750,006
===========
(5) Shares of Beneficial Interest
The Series' 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 June 30, 1997 Year Ended December 31, 1996
-------------------------- ----------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,525,901 $ 21,997,038 1,341,544 $ 17,739,649
Shares issued to shareholders in
reinvestment of distributions -- -- 29,841 412,118
Shares reacquired (112,477) (1,626,462) (195,111) (2,525,317)
--------- ------------ --------- ------------
Net increase 1,413,424 $ 20,370,576 1,176,274 $ 15,626,450
========= ============ ========= ============
</TABLE>
(6) Line of Credit
The Series and other affiliated funds participate in a $400 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. 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. The commitment fee allocated to
the Series for the period ended June 30, 1997, was $58.
<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 the MFS Variable Insurance Trust) as of June 30, 1997,
the related statement of operations for the six months then ended, the
statements of changes in net assets for the six months then ended and for the
year ended December 31, 1996, and financial highlights for the six months then
ended, the year ended December 31, 1996, and 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 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 June
30, 1997 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 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 Total Return
Series at June 30, 1997, the results of its operations, the changes in its net
assets, and its financial highlights for the respective periods in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
August 1, 1997
---------------------------------------------
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>
(C)1997 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
VTR-3 8/97 4M
