<PAGE>
[LOGO] M F S(SM)
INVESTMENT MANAGEMENT Annual Report
for Year Ended
December 31, 1997
MFS(R) TOTAL RETURN SERIES
A Series of MFS(R) Variable Insurance Trust(SM)
[Graphic Omitted]
<PAGE>
<TABLE>
<CAPTION>
MFS(R) TOTAL RETURN SERIES
A SERIES OF MFS(R) VARIABLE INSURANCE TRUST(SM)
<S> <C>
TRUSTEES INVESTMENT ADVISER
Nelson J. Darling, Jr. Massachusetts Financial Services Company
Trustee, Eastern Enterprises 500 Boylston Street
(diversified holding company) Boston, MA 02116-3741
William R. Gutow DISTRIBUTOR
Vice Chairman, MFS Fund Distributors, Inc.
Capitol Entertainment Management Company 500 Boylston Street
(Blockbuster Video franchise) Boston, MA 02116-3741
PORTFOLIO MANAGERS INVESTOR SERVICE
David M. Calabro* MFS Service Center, Inc.
Geoffrey L. Kurinsky* P.O. Box 2281
Judith Noelle Lamb* Boston, MA 02107-9906
Lisa B. Nurme*
Maura A. Shaughnessy* For additional information,
contact your financial adviser.
TREASURER
W. Thomas London* CUSTODIAN
State Street Bank and Trust Company
ASSISTANT TREASURERS
Mark E. Bradley* AUDITORS
Ellen Moynihan* Deloitte & Touche LLP
James O. Yost*
WORLD WIDE WEB
SECRETARY www.mfs.com
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
</TABLE>
[logo omitted} For the fourth year in a row, MFS earned a #1 ranking in the
DALBAR, Inc. Broker/Dealer Survey, Main Office Operations
Service Quality Category. The firm achieved a 3.42 overall score
on a scale of 1 to 4 in the 1997 survey. A total of 111 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 11 categories,
including "knowledge of operations contact," "keeping you
informed," and "ease of doing business" with the firm.
*Affiliated with the Investment Adviser
<PAGE>
MFS Mourns Chairman's Passing
It is with deep regret that we inform you of the death on February 2,
1998, of A. Keith Brodkin, Chairman and Chief Executive Officer of MFS
Investment Management(SM). Mr. Brodkin joined MFS in 1970 and made
enormous contributions to the organization, including helping to build the
firm's investment staff, which will continue to manage all of the MFS
investment portfolios. His leadership, friendship, and wise counsel will
be sorely missed.
Dear Contract Owners:
Thanks to a sustained period of relative stability and moderate growth, the
U.S. economy has produced thousands of new jobs, inflation has remained under
control, and the investment climate has -- for the most part -- been
favorable. 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. The rapid
pace of growth seen in the first quarter slowed to an annual rate of 3.3% in
the second quarter and 3.5% in the third. We believe this economic momentum
will carry well into the first quarter of 1998 as a result of lower interest
rates and continuing growth in the money supply. While U.S. economic growth
continues to be impressive, events in the Pacific Rim will somewhat offset
that and, therefore, markets are likely to continue to focus on Federal
Reserve Board (Fed) activity.
The extreme volatility seen in the U.S. equity market in the fall was, we
believe, the consequence of overvaluations that had been evident for some
months. As a result, the stock market has been vulnerable to some type of
correction and has been impacted in the near term by chaotic market conditions
in the Pacific Rim. In the face of all this, however, the equity market
continues to exhibit surprising strength, much of it the result of continued
gains in corporate earnings, a trend that could be an important indicator of
the market's future direction. Certainly the situation throughout Asia bears
close scrutiny because it appears to be clearly deflationary and raises the
prospect of trade wars developing throughout the area. We are not convinced
that U.S. markets have escaped totally from October's volatility. Thus, not
only is the near-term outlook for profits being adjusted for the Asian crisis,
we also believe equity valuations have risen to a point where a cautious
investment approach seems warranted, with a need for particular attention to
be paid to the effect of Pacific Rim volatility on the earnings of U.S.
companies.
The U.S. government bond market has benefited from the deflationary events in
Asia, while the high-yield and emerging-debt markets have come under severe
pressure. Inflation remains under control, and the Fed will most likely take a
wait-and-see attitude toward raising interest rates. As a result, our near-
term outlook for high-grade markets is neutral to moderately positive. At the
same time, high-yield markets, having gone through a substantial correction,
could offer reasonable value but require careful selection. Overall, fixed-
income markets appear to be reasonably valued.
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/ Jeffrey L. Shames
Jeffrey L. Shames
President, MFS Investment Management
January 12, 1998
MFS TOTAL RETURN SERIES
For the year ended December 31, 1997, the Series provided a total return of
21.30% (including the reinvestment of any distributions). This compares to a
33.36% 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
9.76% 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) and investment-grade
domestic corporate debt.
Over the period, we maintained an equity weighting of between 54% and 59%.
Approximately 3% to 4% of the weighting consisted of preferred stocks,
convertible preferred stocks, and convertible bonds, which we include in our
equity calculations. We consider an equity allocation under 60% to be
conservative for a balanced fund.
Given our view that there are few cheap stocks in the market, we have
concentrated our equity positions in areas where earnings are visible,
valuations are fair, and consolidation is taking place. As a result, we have
been overweighted in financial services, energy, and utility stocks. In
addition, we continue to find value in large, multinational, franchise-type
companies overseas, such as Henkel and SmithKline-Beecham.
On the bond side, the Series is more heavily weighted in corporate bonds than
in U.S. Treasuries, with a duration (or measure of interest-rate sensitivity)
that is modestly above that of the Series' benchmark. (Principal value and
interest on Treasury securities are guaranteed by the U.S. government if held
to maturity.) Generally, we have positioned the bond portfolio for a flat to
slightly downward interest-rate environment.
We have positioned the Series in a relatively conservative manner. Should the
equity market produce a significant correction over the next several months,
we will look to shift more of our assets into stocks with better valuations.
Respectfully,
/s/ David M. Calabro
David M. Calabro
(On behalf of the MFS Total Return Series team)
PORTFOLIO MANAGER'S PROFILES
David M. Calabro, Senior Vice President; Geoffrey L. Kurinsky, Senior Vice
President; Judith Noelle Lamb, Vice President; Lisa B. Nurme, Senior Vice
President; and Maura A. Shaughnessy, Senior 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.
<PAGE>
OBJECTIVES AND POLICIES
The Series' primary investment objective is to provide above-average income
consistent with the prudent employment of capital. The secondary objective is
to provide a reasonable opportunity for capital and income.
Commencement of investment operations: January 3, 1995
PERFORMANCE SUMMARY
The information below illustrates the performance of MFS Total Return Series -
VIT shares in comparison to various market indicators. Benchmark comparisons
are unmanaged and do not reflect any fees or expenses. It is not possible to
invest directly in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from February 1, 1995, through December 31, 1997)
MFS Total S&P 500 Consumer Lehman Brothers Lipper
Return Series Composite Price Index Gov./Corp. Balanced
- VIT Index - U.S. Bond Index Fund Index
2/95 $10,000 $10,000 $10,000 $10,000 $10,300
12/95 12,700 13,400 10,200 11,700 12,300
12/96 14,500 16,500 10,600 12,000 13,900
12/97 17,578 21,990 10,779 13,214 16,735
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1997
1 Year Life of Series*
- -----------------------------------------------------------------------------
MFS Total Return Series +21.30% +20.93%
- -----------------------------------------------------------------------------
Average balanced fund** +18.93% +19.43%
- -----------------------------------------------------------------------------
Lehman Brothers Government/Corporate
Bond Index# + 9.76% +10.45%
- -----------------------------------------------------------------------------
Lipper Balanced Fund Index** +20.05% +19.31%
- -----------------------------------------------------------------------------
Standard & Poor's 500 Composite Index# +33.36% +31.22%
- -----------------------------------------------------------------------------
Consumer Price Index#+ + 2.15% + 2.67%
- -----------------------------------------------------------------------------
* For the period from the commencement of the Series' investment operations,
January 3, 1995, through December 31, 1997.
** Source: Lipper Analytical Services, Inc.
# Source: CDA/Wiesenberger.
+ The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
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.
<PAGE>
PORTFOLIO OF INVESTMENTS - December 31, 1997
Stocks - 55.4%
- --------------------------------------------------------------------------------
Issuer Shares Value
- --------------------------------------------------------------------------------
U.S. Stocks - 48.9%
Aerospace - 2.9%
Allied Signal, Inc. 17,500 $ 681,406
General Dynamics Corp. 6,100 527,269
Lockheed Martin Corp. 3,300 325,050
Raytheon Co., "A" 1,079 53,208
Raytheon Co., "B" 9,850 497,425
United Technologies Corp. 1,980 144,169
-----------
$ 2,228,527
- -------------------------------------------------------------------------------
Automotive - 1.4%
Ford Motor Co. 10,200 $ 496,613
General Motors Corp. 1,250 75,781
Goodrich (B.F.) Co. 11,250 466,172
-----------
$ 1,038,566
- --------------------------------------------------------------------------------
Banks and Credit Companies - 6.1%
Bank of New York, Inc. 10,760 $ 622,063
BankBoston Corp. 750 70,453
BB&T Corp. 3,350 214,609
Chase Manhattan Corp. 2,262 247,689
Corestates Financial Corp. 3,700 296,231
Fleet Financial Group, Inc. 2,650 198,584
National City Corp. 12,800 841,600
NationsBank Corp. 7,280 442,715
Northern Trust Corp. 7,800 544,050
Norwest Corp. 11,200 432,600
PNC Bank Corp. 11,900 679,044
-----------
$ 4,589,638
-------------------------------------------------------------------------------
Building - 0.1%
Sherwin Williams Co. 2,800 $ 77,700
-------------------------------------------------------------------------------
Business Machines - 0.9%
International Business Machines Corp. 6,520 $ 681,747
-------------------------------------------------------------------------------
Cellular Telephones - 0.2%
Telephone & Data Systems, Inc. 3,100 $ 144,344
- --------------------------------------------------------------------------------
Chemicals - 1.0%
Air Products & Chemicals, Inc. 5,000 $ 411,250
Dexter Corp. 2,500 107,969
Dow Chemical Co. 1,280 129,920
Nalco Chemical Co. 2,000 79,125
-----------
$ 728,264
- --------------------------------------------------------------------------------
Computer Hardware - Systems - 0.3%
Digital Equipment Corp.* 6,300 $ 233,100
- --------------------------------------------------------------------------------
Conglomerates - 0.1%
Eastern Enterprises 1,400 $ 63,000
- --------------------------------------------------------------------------------
Consumer Goods and Services - 2.0%
Colgate-Palmolive Co. 1,200 $ 88,200
Philip Morris Cos., Inc. 18,930 857,766
Rubbermaid, Inc. 8,110 202,750
Service Corp. International 2,657 98,143
Tyco International Ltd. 5,400 243,337
-----------
$ 1,490,196
- --------------------------------------------------------------------------------
Electrical Equipment - 1.7%
Cooper Industries, Inc. 9,100 $ 445,900
General Electric Co. 11,000 807,125
-----------
$ 1,253,025
-------------------------------------------------------------------------------
Entertainment - 0.2%
Viacom, Inc., "B"* 3,200 $ 132,600
-------------------------------------------------------------------------------
Financial Institutions - 3.1%
American Express Co. 8,290 $ 739,882
Beneficial Corp. 900 74,812
CIT Group, Inc., "A"* 2,000 64,500
Edwards (A.G.), Inc. 6,850 272,288
Federal Home Loan Mortgage Corp. 5,640 236,528
Federal National Mortgage Assn 9,600 547,800
Merrill Lynch & Co., Inc. 1,900 138,581
Morgan Stanley, Dean Witter, Discover & Co. . 4,900 289,712
-----------
$ 2,364,103
-------------------------------------------------------------------------------
Food and Beverage Products - 0.5%
General Mills, Inc. 1,350 $ 96,694
McCormick & Co., Inc. 3,000 84,000
PepsiCo., Inc. 4,800 174,900
-----------
$ 355,594
- --------------------------------------------------------------------------------
Forest and Paper Products - 0.9%
Champion International Corp. 3,600 $ 163,125
Weyerhaeuser Co. 10,100 495,531
-----------
$ 658,656
- --------------------------------------------------------------------------------
Insurance - 4.9%
Allstate Corp. 1,700 $ 154,488
Chubb Corp. 8,100 612,562
CIGNA Corp. 4,200 726,862
Lincoln National Corp. 7,300 570,313
Provident Cos., Inc. 6,800 262,650
St. Paul Cos., Inc. 5,090 417,698
Torchmark Inc. 13,600 572,050
Travelers Group, Inc. 6,849 368,990
-----------
$ 3,685,613
- --------------------------------------------------------------------------------
Machinery - 0.9%
Deere & Co., Inc. 5,850 $ 341,128
Lear Corp.* 5,900 280,250
York International Corp. 780 30,859
-----------
$ 652,237
- --------------------------------------------------------------------------------
Medical and Health Products - 2.3%
American Home Products Corp. 7,430 $ 568,395
Baxter International, Inc. 2,480 125,085
Bristol-Myers Squibb Co. 11,500 1,088,187
-----------
$ 1,781,667
- --------------------------------------------------------------------------------
Medical and Health Technology and Services - 0 2%
United Healthcare Corp. 3,400 $ 168,937
- --------------------------------------------------------------------------------
Metals and Minerals - 0.4%
Aluminum Co. of America 4,250 $ 299,094
Phelps Dodge Corp. 300 18,675
-----------
$ 317,769
- --------------------------------------------------------------------------------
Oil Services - 0.3%
Baker Hughes, Inc. 5,200 $ 226,850
- --------------------------------------------------------------------------------
Oils - 4.2%
Amoco Corp. 2,890 $ 246,011
Atlantic Richfield Co. 5,020 402,227
Chevron Corp. 2,500 192,500
Exxon Corp. 7,700 471,144
Mobil Corp. 5,460 394,144
Occidental Petroleum Corp. 8,200 240,363
Texaco, Inc. 11,900 647,062
Unocal Corp. 4,500 174,656
USX-Marathon Group 13,100 442,125
-----------
$ 3,210,232
- --------------------------------------------------------------------------------
Photographic Products - 0.4%
Eastman Kodak Co. 5,030 $ 305,887
- --------------------------------------------------------------------------------
Pollution Control - 1.2%
Browning Ferris Industries, Inc. 15,000 $ 555,000
Waste Management, Inc. 12,700 349,250
-----------
$ 904,250
- --------------------------------------------------------------------------------
Railroads - 1.0%
Burlington Northern Santa Fe Railway Co. 2,570 $ 238,849
Illinois Central Corp. 9,450 321,891
Norfolk Southern Corp. 5,800 178,712
-----------
$ 739,452
- --------------------------------------------------------------------------------
Real Estate Investment Trusts - 1.1%
Arden Realty, Inc. 6,500 $ 199,875
Boston Properties, Inc. 3,900 128,944
Hospitality Properties Trust 2,500 82,188
Meditrust 3,905 143,021
Prime Group Realty Trust 4,400 89,100
Tower Realty Trust, Inc. 1,800 44,325
TriNet Corporate Realty Trust, Inc. 4,600 177,962
-----------
$ 865,415
- --------------------------------------------------------------------------------
Restaurants and Lodging
Tricon Global Restaurants, Inc.* 600 $ 17,438
- --------------------------------------------------------------------------------
Special Products and Services
Stanley Works 500 $ 23,594
- --------------------------------------------------------------------------------
Stores - 1.8%
CVS Corp. 1,300 $ 83,281
May Department Stores Co. 950 50,053
Penney (J.C.), Inc. 6,800 410,125
Rite Aid Corp. 11,700 686,644
Sears, Roebuck & Co. 2,800 126,700
-----------
$ 1,356,803
- --------------------------------------------------------------------------------
Supermarkets - 0.5%
Meyer (Fred), Inc.* 5,000 $ 181,875
Safeway, Inc.* 3,000 189,750
-----------
$ 371,625
- --------------------------------------------------------------------------------
Telecommunications - 0.7%
AT&T Corp. 9,300 $ 569,625
- --------------------------------------------------------------------------------
Utilities - Electric - 3.5%
Carolina Power & Light Co. 6,900 $ 292,819
Cinergy Corp. 7,000 268,187
CMS Energy Corp. 5,000 220,312
DPL, Inc. 600 17,250
Duke Energy Corp. 6,173 341,830
FPL Group, Inc. 6,100 361,044
GPU, Inc. 2,700 113,738
New Century Energies, Inc. 5,000 239,687
Pacificorp 10,700 292,244
Pinnacle West Capital Corp. 9,300 394,087
Texas Utilities Co. 2,270 94,347
-----------
$ 2,635,545
- --------------------------------------------------------------------------------
Utilities - Gas - 1.6%
Coastal Corp. 9,530 $ 590,264
Keyspan Energy Corp. 3,300 121,481
Pacific Enterprises 500 18,813
UGI Corp. 5,900 172,944
Union Pacific Resources Group, Inc. 2,100 50,925
Williams Cos., Inc. 10,400 295,100
-----------
$ 1,249,527
- --------------------------------------------------------------------------------
Utilities - Telephone - 2.5%
BellSouth Corp. 6,900 $ 388,556
GTE Corp. 13,950 728,888
SBC Communications, Inc. 3,572 261,649
Sprint Corp. 8,200 480,725
-----------
$ 1,859,818
- --------------------------------------------------------------------------------
Total U.S. Stocks $36,981,344
- --------------------------------------------------------------------------------
Foreign Stocks - 6.5%
Canada - 0.3%
Canadian National Railway Co. (Railroads) 5,700 $ 269,325
- --------------------------------------------------------------------------------
France - 0.3%
Alcatel Alsthom, ADR (Telecommunications) 8,000 $ 202,500
- --------------------------------------------------------------------------------
Germany - 1.0%
Henkel Kgaa (Chemicals) 9,600 $ 606,344
Hoechst AG (Chemicals) 4,000 140,234
-----------
$ 746,578
- --------------------------------------------------------------------------------
Netherlands - 1.6%
Akzo Nobel N.V. (Chemicals) 3,800 $ 655,780
Royal Dutch Petroleum Co., ADR (Oils) 10,080 546,210
-----------
$ 1,201,990
- --------------------------------------------------------------------------------
Spain - 0.2%
Repsol S.A., ADR (Oil Services) 3,200 $ 136,200
- --------------------------------------------------------------------------------
Switzerland - 0.5%
Novartis AG (Pharmaceuticals) 220 $ 357,589
- --------------------------------------------------------------------------------
United Kingdom - 2.6%
British Petroleum PLC, ADR (Oils) 13,276 $ 1,057,931
Diageo PLC (Food and Beverages) 20,800 190,583
SmithKline-Beecham PLC, ADR (Medical and Health
Products) 14,360 738,643
-----------
$ 1,987,157
- --------------------------------------------------------------------------------
Total Foreign Stocks $ 4,901,339
- --------------------------------------------------------------------------------
Total Stocks (Identified Cost, $36,216,847) 41,882,683
- --------------------------------------------------------------------------------
Convertible Preferred Stocks - 1.3%
- --------------------------------------------------------------------------------
Aerospace - 0.1%
Loral Space & Communications Corp., 6%## 900 $ 55,125
- --------------------------------------------------------------------------------
Agricultural Products - 0.1%
Case Corp., $4.50 500 $ 72,688
- --------------------------------------------------------------------------------
Banks and Credit Companies - 0.5%
McKesson Financing Trust, 5%## 3,030 $ 231,227
WBK Strypes Trust 3,900 130,650
-----------
361,877
- --------------------------------------------------------------------------------
Consumer Goods and Services - 0.3%
Newell Financial Trust Co. *## 4,900 $ 255,412
- --------------------------------------------------------------------------------
Financial Institutions - 0.1%
Finova Finance Trust, 5.5% 600 $ 42,000
- --------------------------------------------------------------------------------
Metals and Minerals
Timet Capital Trust, 6.625%##* 700 $ 33,950
- --------------------------------------------------------------------------------
Restaurants and Lodging - 0.2%
Host Marriott Financial Trust, 6.75%## 2,400 $ 145,200
- --------------------------------------------------------------------------------
Total Convertible Preferred Stocks (Identified Cost,
$847,135) $ 966,252
- --------------------------------------------------------------------------------
Preferred Stock - 0.1%
- --------------------------------------------------------------------------------
Printing and Publishing - 0.1%
NB Capital Corp., 8.35% (Identified Cost,
100,000*## 100 $ 109,100
- --------------------------------------------------------------------------------
Bonds - 32.9%
- --------------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- --------------------------------------------------------------------------------
U.S. Bonds - 9.5%
Aerospace
Northrop Grumman Corp., 9.375s, 2024 $ 20 $ 23,195
- --------------------------------------------------------------------------------
Airlines - 0.4%
Continental Airlines, Inc., 9.5s, 2001 $ 50 $ 52,500
Continental Airlines, Inc., 9.5s, 2013 25 28,507
Delta Air Lines, Inc., 8.5s, 2002 205 218,749
United Airlines Pass-Through Trust, 7.27s, 2013 20 20,614
-----------
$ 320,370
- --------------------------------------------------------------------------------
Apparel and Textiles
Burlington Industries, Inc. New, 7.25s, 2027 $ 20 $ 21,024
- --------------------------------------------------------------------------------
Banks and Credit Companies - 0.8%
Capital One Financial Corp., 7.25s, 2003 $ 50 $ 50,442
MBNA Capital, 8.278s, 2026 270 282,431
Riggs National Corp., 8.5s, 2006 20 20,977
Washington Mutual Capital I, 8.375s, 2027 210 231,500
-----------
$ 585,350
- --------------------------------------------------------------------------------
Cellular Telephones
U.S. Cellular Corp., 7.25s, 2007 $ 20 $ 20,425
- --------------------------------------------------------------------------------
Construction Services - 0.7%
Georgia Pacific Corp., 9.5s, 2022 $ 500 $ 563,015
- --------------------------------------------------------------------------------
Consumer Goods and Services
Philip Morris Cos., Inc., 7.75s, 2027 $ 20 $ 21,599
- --------------------------------------------------------------------------------
Corporate Asset Backed - 0.6%
Beneficial Home Equity Loan Trust,
5.808s, 2037 $ 482 $ 481,399
Loewen Group, Inc. Pass-Through Ctf., 6.7s, 1999 20 19,897
-----------
$ 501,296
- --------------------------------------------------------------------------------
Entertainment - 0.8%
Circus Circus Enterprises, Inc., 7s, 2036 $ 40 $ 40,899
Hearst Argyle Television, Inc., 7.5s, 2027 99 101,990
News America Holdings, Inc., 7.75s, 2045 20 20,709
News America Holdings, Inc., 8s, 2016 20 21,466
Time Warner, Inc., 9.125s, 2013 40 47,631
Time Warner, Inc., 9.15s, 2023 10 12,321
Time Warner Pass-Through Asset Trust, 6.1s,
2001## 320 313,542
-----------
$ 558,558
- --------------------------------------------------------------------------------
Financial Institutions - 0.2%
Dynex Capital Corp., 7.875s, 2002 $ 20 $ 20,248
First Empire Capital Trust I, 8.234s, 2027 20 21,535
Lehman Brothers, Inc., 7.5s, 2026 10 10,584
MBNA Corp., 6.963s, 2002## 25 25,407
Nationwide Mutual Life Insurance Co., 7.5s,
2024## 25 25,209
Salton Sea Funding Corp., 7.84s, 2010 25 26,626
-----------
$ 129,609
- --------------------------------------------------------------------------------
Financial Services - 1.0%
Bear Stearns, Inc., 6.75s, 2007 $ 300 $ 302,358
Contifinancial Corp., 7.5s, 2002 418 409,117
-----------
$ 711,475
- --------------------------------------------------------------------------------
Forest and Paper Products - 0.2%
Boise Cascade Co., 7.43s, 2005 $ 50 $ 52,383
Boise Cascade Co., 9.85s, 2002 25 28,223
Waterford 3 Funding Corp., 8.09s, 2017 100 104,534
-----------
$ 185,140
- --------------------------------------------------------------------------------
Insurance - 0.1%
Conseco Finance Trust III, 8.796s, 2027 $ 20 $ 22,591
Safeco Capital Trust I, 8.072s, 2037 40 41,783
Travelers Capital III, 7.75s, 2036 20 20,741
-----------
$ 85,115
- --------------------------------------------------------------------------------
Medical and Health Technology and Services - 0.1%
Tenet Healthcare Corp., 8s, 2005 $ 20 $ 20,350
Tenet Healthcare Corp., 10.125s, 2005 20 21,850
-----------
$ 42,200
- --------------------------------------------------------------------------------
Oil Services
Ultramar Diamond Shamrock Corp., 7.2s, 2017 $ 20 $ 20,539
- --------------------------------------------------------------------------------
Oils - 0.4%
Chesapeake Energy Corp., 7.875s, 2004 $ 95 $ 93,337
Enserch Exploration, Inc., 7.54s, 2009## 20 20,058
Gulf Canada, 9.25s, 2004 20 21,092
Lasmo USA, Inc., 7.3s, 2027 79 80,679
Oryx Energy Co., 8.375s, 2004 50 53,922
Transocean Offshore, Inc., 8s, 2027 40 45,240
-----------
$ 314,328
- --------------------------------------------------------------------------------
Precious Metals and Minerals
Freeport McMoRan Copper & Gold, Inc., 7.5s, 2006$ 14 $ 11,904
- --------------------------------------------------------------------------------
Restaurants and Lodging - 0.1%
Hilton Hotels Corp., 7.95s, 2007 $ 15 $ 15,912
Mirage Resorts, Inc., 6.75s, 2007 20 19,938
-----------
$ 35,850
- --------------------------------------------------------------------------------
Telecommunications - 0.8%
Continental Cablevision, Inc., 8.3s, 2006 $ 20 $ 21,828
Continental Cablevision, Inc., 11s, 2007 250 277,590
TCI Communications Financing III, 9.65s, 2027 20 23,412
Tele-Communications, Inc., 7.385s, 2001 140 143,328
Tele-Communications, Inc., 8.25s, 2003 20 21,358
WorldCom, Inc., 7.75s, 2007 73 78,394
WorldCom, Inc., 7.75s, 2027 13 14,309
WorldCom, Inc., 8.875s, 2006 20 21,518
-----------
$ 601,737
- --------------------------------------------------------------------------------
Transportation - 0.4%
Federal Express Corp., 7.65s, 2014 $ 250 $ 267,143
- --------------------------------------------------------------------------------
Utilities - Electric - 1.5%
Beaver Valley II Funding Corp., 8.25s, 2003 $ 74 $ 75,997
Beaver Valley II Funding Corp., 8.625s, 2007 30 31,934
Cleveland Electric Illuminating Co., 7.88s,
2017## 40 42,228
Commonwealth Edison Co., 6.4s, 2005 100 97,934
Commonwealth Edison Co., 7.625s, 2007 20 21,108
First PV Funding Corp., 10.3s, 2014 48 51,899
Long Island Lighting Co., 8.9s, 2019 20 21,282
Long Island Lighting Co., 9s, 2022 300 334,971
Long Island Lighting Co., 9.625s, 2024 25 25,358
Midland Cogeneration Venture Corp., 10.33s, 2002 47 50,624
Niagara Mohawk Power Corp., 8.5s, 2023 50 53,484
Niagara Mohawk Power Corp., 8.77s, 2018 200 215,288
Southern Co. Capital Trust, 8.19s, 2037 9 9,514
Texas & New Mexico Power Co., 12.5s, 1999 20 21,124
Texas Utilities Electric Co., 7.17s, 2007 40 41,615
-----------
$ 1,094,360
- --------------------------------------------------------------------------------
Utilities - Gas - 1.4%
California Energy, Inc., 10.25s, 2004 $ 15 $ 16,356
Tennessee Gas Pipeline Co., 7.625s, 2037 400 431,760
Texas Gas Transmission Corp., 7.25s, 2027 600 624,282
-----------
$ 1,072,398
- --------------------------------------------------------------------------------
U.S. Federal Agencies - 1.4%
Federal National Mortgage Association, 7s, 2012 $ 1,081 $ 1,097,012
- --------------------------------------------------------------------------------
Total U.S. Federal Agencies $ 1,097,012
- --------------------------------------------------------------------------------
U.S. Government Guaranteed - 21.1%
Government National Mortgage Association - 1.8%
GNMA, 7.5s, 2026 - 2027 $ 1,227 $ 1,257,349
GNMA, 8s, 2025 100 104,375
-----------
$ 1,361,724
- --------------------------------------------------------------------------------
U.S. Treasury Obligations - 19.3%
U.S. Treasury Bonds, 9.875s, 2015 $ 30 $ 42,699
U.S. Treasury Bonds, 6.125s, 2027 20 20,553
U.S. Treasury Bonds, 6.375s, 2027 1,965 2,072,466
U.S. Treasury Bonds, 6.625s, 2027 1,281 1,390,679
U.S. Treasury Notes, 5.875s, 1998 176 176,248
U.S. Treasury Notes, 6s, 1998 400 401,124
U.S. Treasury Notes, 9.25s, 1998 35 35,760
U.S. Treasury Notes, 5.875s, 1999 880 882,746
U.S. Treasury Notes, 9.125s, 1999 40 41,794
U.S. Treasury Notes, 8.5s, 2000 260 274,461
U.S. Treasury Notes, 7.5s, 2001 300 318,048
U.S. Treasury Notes, 6.625s, 2002 3,000 3,097,020
U.S. Treasury Notes, 6.25s, 2002 2,850 2,908,339
U.S. Treasury Notes, 7.25s, 2004 220 237,428
U.S. Treasury Notes, 6.5s, 2006 1,262 1,321,352
U.S. Treasury Notes, 7s, 2006 45 48,572
U.S. Treasury Notes, 6.125s, 2007 1,265 1,299,990
-----------
$14,569,279
- --------------------------------------------------------------------------------
Total U.S. Government Guaranteed $15,931,003
- --------------------------------------------------------------------------------
Total U.S. Bonds $24,214,645
- --------------------------------------------------------------------------------
Foreign Bonds - 0.9%
Argentina - 0.3%
Hidroelectrica Arcura, 8.375s, 1999 (Utilities -
Electric)## $ 200 $ 198,000
- --------------------------------------------------------------------------------
Chile
Empresa Nacional de Electric, 7.325s, 2037
(Utilities - Electric) $ 20 $ 20,197
- --------------------------------------------------------------------------------
Finland
Upm Kymmene Corp., 7.45s, 2027 (Forest and Paper
Products)## $ 20 $ 20,162
- --------------------------------------------------------------------------------
Indonesia - 0.5%
APP International Finance Co., 10.25s, 2000
(Financial Institutions) $ 120 $ 112,800
PT Indah Kiat Pulp & Paper Corp., 8.875s, 2000
(Forest & Paper Products)## 120 106,672
PT Polysindo Eka Perkasa, 13s, 2001 (Chemicals) 100 91,000
-----------
$ 310,472
- --------------------------------------------------------------------------------
Mexico - 0.1%
Banco Commercial Sa, 8.25s, 2007 (Banks and
Credit Companies) $ 100 $ 96,870
- --------------------------------------------------------------------------------
Panama
Republic of Panama, 7.875s, 2002 (Government)## $ 20 $ 19,375
- --------------------------------------------------------------------------------
Total Foreign Bonds $ 665,076
- --------------------------------------------------------------------------------
Total Bonds (Identified Cost, $24,879,721
- --------------------------------------------------------------------------------
Convertible Bonds - 0.3%
- --------------------------------------------------------------------------------
U.S. Bonds - 0.1%
Oil Services - 0.1%
Diamond Offshore Drilling, Inc., 3.75s, 2007 $ 270 $ 119,138
- --------------------------------------------------------------------------------
Total U.S. Bonds $ 77,400
- --------------------------------------------------------------------------------
Foreign Bonds - 0.2%
Germany - 0.2%
Deutsche Fin Neth, 0s, 2017 (Automotive) $ 270 $ 119,138
- --------------------------------------------------------------------------------
Total Foreign Bonds $ 119,138
- --------------------------------------------------------------------------------
Total Convertible Bonds (Identified Cost, $178,013) $ 196,538
- --------------------------------------------------------------------------------
Short-Term Obligations - 11.9%
- --------------------------------------------------------------------------------
Federal Home Loan Bank Corp., due 1/02/98 $ 3,740 $ 3,739,491
Federal Home Loan Mortgage Corp., due 1/14/98 -
1/20/98 5,280 5,266,689
- --------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 9,006,180
- --------------------------------------------------------------------------------
Total Investments (Identified Cost, $70,839,879) $77,040,474
- --------------------------------------------------------------------------------
Other Assets, Less Liabilities - (1.9)% (1,428,344)
- --------------------------------------------------------------------------------
Net Assets - 100.0% $75,612,130
- --------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- ------------------------------------------------------------------------------
December 31, 1997
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $70,839,879) $77,040,474
Cash 32,279
Receivable for Series shares sold 471,478
Receivable for investments sold 41,271
Interest and dividends receivable 529,575
Deferred organization expenses 3,698
Other assets 169
-----------
Total assets $78,118,944
-----------
Liabilities:
Payable for Series shares reacquired $ 40,123
Payable for investments purchased 2,461,937
Payable to affiliates -
Management fee 1,551
Shareholder servicing agent fee 68
Accrued expenses and other liabilities 3,135
-----------
Total liabilities $ 2,506,814
-----------
Net assets $75,612,130
===========
Net assets consist of:
Paid-in capital $66,269,458
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 6,200,548
Accumulated undistributed net realized gain on investments
and foreign currency transactions 1,696,397
Accumulated undistributed net investment income 1,445,727
-----------
Total $75,612,130
===========
Shares of beneficial interest outstanding 4,546,608
===========
Net asset value per share
(net assets of $75,612,130 / 4,546,608 shares of beneficial
interest outstanding) $16.63
======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
- ------------------------------------------------------------------------------
Year Ended December 31, 1997
- ------------------------------------------------------------------------------
Net investment income:
Income -
Interest $1,305,329
Dividends 589,468
Foreign taxes withheld (5,474)
-----------
Total investment income $1,889,323
-----------
Expenses -
Management fee $ 331,670
Trustees' compensation 2,033
Shareholder servicing agent fee 15,656
Administrative fee 5,461
Auditing fees 44,773
Custodian fee 25,906
Printing 23,917
Legal fees
Amortization of organization expenses 1,837
Legal fees 1,514
----------
Total expenses $ 452,767
Reduction of expenses by investment adviser (9,651)
Fees paid indirectly (899)
----------
Net expenses $ 442,217
----------
Net investment income $1,447,106
----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $1,696,947
Foreign currency transactions (1,379)
----------
Net realized gain on investments and foreign currency
transactions $1,695,568
----------
Change in unrealized appreciation (depreciation) -
Investments $5,126,637
Translation of assets and liabilities in foreign
currencies (39)
----------
Net unrealized gain on investment and foreign
currency translation $5,126,598
----------
Net realized and unrealized gain on investments
and foreign currency $6,822,166
----------
Increase in net assets from operations $8,269,272
==========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------------------
Year Ended December 31,
-------------------------------------
1997 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 1,447,106 $ 289,998
Net realized gain on investments and foreign
currency transactions 1,695,568 125,166
Net unrealized gain on investments and foreign
currency translation 5,126,598 823,206
----------- -----------
Increase in net assets from operations $ 8,269,272 $ 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)
----------- -----------
Net increase in net assets from Series share
transactions $48,093,086 $15,626,450
----------- -----------
Total increase in net assets $56,362,358 $16,452,702
Net assets:
At beginning of year 19,249,772 2,797,070
----------- -----------
At end of year (including accumulated
undistributed net
investment income of $1,445,727 and $226,
respectively) $75,612,130 $19,249,772
=========== ===========
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
- -----------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Period Ended
December 31, 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) $ 0.52 $ 0.46 $ 0.41
Net realized and unrealized
gain on investments and
foreign currency
transactions 2.40 1.30 2.32
------ ------ ------
Total from investment
operations $ 2.92 $ 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 $16.63 $13.71 $12.25
====== ====== ======
Total return 21.30% 14.37% 27.34%++
Ratios (to average net assets)/
Supplemental data(S):
Expenses 1.00% 1.00% 1.00%+
Net investment income 3.25% 3.59% 3.83%+
Portfolio turnover 93% 76% 16%
Average commission rate### $0.0554 $0.0485 $ --
Net assets at end of period (000 omitted) $75,612 $19,250 $ 2,797
+ Annualized.
++ Not annualized.
* For the period from the commencement of the Series' investment operations, January 3, 1995, through
December 31, 1995.
# Per share data are based on average shares outstanding.
## For fiscal year ended after September 1, 1995, expenses are calculated without reduction for fees paid
indirectly.
### Average commission rate is calculated for Series 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 this limitation, the net investment income per
share and the ratios would have been:
Net investment income $ 0.52 $ 0.32 $ 0.22
Ratios (to average net
assets):
Expenses## 1.02% 2.10% 2.49%+
Net investment income 3.23% 2.49% 2.09%+
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFSMFS Total Return Series (the Series) is a diversified series of MFS
Variable Insurance Trust (the Trust) which is comprised of the following 12
series: MFS(R) Bond Series, MFS(R) Emerging Growth Series, MFS(R)/Foreign &
Colonial Emerging Markets Equity 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 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 December 31, 1997, there were 24 shareholders of 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 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.
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 discount
is accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. 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. The fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the Series. 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 net 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 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. During the year ended December 31, 1997, accumulated undistributed net
investment income was decreased by $1,605, accumulated undistributed net
realized gain on investments was decreased by $4,239, and paid in capital was
increased by $5,844 due to differences between book and tax accounting for
currency transactions. This change had no effect on the net assets or net
asset value per share. At December 31, 1997, accumulated undistributed net
investment income and realized gain on investments and foreign currency
transactions under book accounting were different from tax accounting due to
temporary differences in accounting for losses on wash sale transactions.
(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. The Series has a temporary expense
reimbursement agreement whereby 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 December 31, 1997, the aggregate unreimbursed expenses owed to
MFS by the Series amounted to $122,463.
Administrator - Effective March 1, 1997, the Series has an administrative
services agreement with MFS to provide the Series with certain financial,
legal, shareholder servicing, compliance, and other administrative services.
As a partial reimbursement for the cost of providing these services, the
Series pays MFS an administrative fee at the following percentages of the
Series' average daily net assets, provided that the administrative fee is not
assessed on Series assets that exceed $3 billion.
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
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, MFS Fund
Distributors, Inc. (MFD), 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 0.035%.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, aggregated $79,851,697 and $35,975,162,
respectively.
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Series, as computed on a federal income tax basis,
are as follows:
Aggregate cost $70,858,566
-----------
Gross unrealized appreciation $ 6,665,860
Gross unrealized depreciation (483,952)
-----------
Net unrealized appreciation $ 6,181,908
===========
(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>
Year Ended December 31, 1997 Year Ended December 31, 1996
------------------------------ -----------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,451,965 $52,887,638 1,341,544 $17,739,649
Shares issued to shareholders in
reinvestment of distributions -- -- 29,841 412,118
Shares reacquired (309,785) (4,794,552) (195,111) (2,525,317)
--------- ----------- --------- -----------
Net increase 3,142,080 $48,093,086 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 Series, 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 year ended December 31, 1997, was $333.
<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 December 31,
1997, the related statement of operations for the year then ended, the
statements of changes in net assets for the year then ended and December 31,
1996, and the financial highlights for each of the years in the three-year
period ended December 31, 1997. These financial statements and financial
highlights are the responsibility of the Series' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
December 31, 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 December 31, 1997, the results of its operations, the changes in its
net assets, and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 6, 1998
--------------------------------------------
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)1998 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
VTR-2 2/98 18.1M
