<PAGE>
[LOGO] M F S(SM) Annual Report
INVESTMENT MANAGEMENT for Year Ended
December 31, 1997
MFS(R) FOREIGN & COLONIAL EMERGING MARKETS EQUITY SERIES
A Series of MFS(R) Variable Insurance Trust(SM)
[Graphic Omitted]
<PAGE>
MFS(R)/FOREIGN & COLONIAL EMERGING MARKETS EQUITY SERIES
A SERIES OF MFS(R) VARIABLE INSURANCE TRUST(SM)
<TABLE>
<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
Arnab Kumar Banerji* MFS Service Center, Inc.
Jeffrey Chowdhry* P.O. Box 2281
Boston, MA 02107-9906
TREASURER
W. Thomas London* For additional information,
contact your financial adviser.
ASSISTANT TREASURERS
Mark E. Bradley* CUSTODIAN
Ellen Moynihan* State Street Bank and Trust Company
James O. Yost*
AUDITORS
SECRETARY Deloitte & Touche LLP
Stephen E. Cavan*
WORLD WIDE WEB
ASSISTANT SECRETARY www.mfs.com
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
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
<PAGE>
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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 contribution
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.
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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 economic growth in the
United States continues to be impressive, this is partially being offset by
events in the Pacific Rim. Thus, U.S. markets will most likely continue to
focus on activity by the Federal Reserve Board and its response to both U.S.
and world events.
Internationally, the second half of 1997 brought turmoil to the world's
investment markets as concerns about Asia mounted and as liquidity, which has
been high for the past few years, began to dry up. While markets in Europe,
the United States, and even Latin America performed reasonably well, the
cumulative effect of large current-account deficits, followed by the collapse
of several large financial institutions and corporations, created a situation
in Asia that could remain unstable for some time. Although the Asian crisis
affected other emerging markets, valuations in several of them have become
more attractive, and we believe the long-term case for emerging markets
remains intact. In Europe, the uncertainty over economic union appears to have
diminished somewhat. Growth has begun accelerating on the continent and may
exceed U.S. growth in 1998.
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/FOREIGN & COLONIAL EMERGING MARKETS EQUITY SERIES
The Series commenced operations on October 16, 1997, and from that date
through December 31, 1997, provided a total return of -10.00% (including the
reinvestment of any distributions but excluding the deduction of the mortality
and expense risk charges and administration fees). Following a strong start in
1997, emerging markets experienced a roller-coaster ride in the latter part of
the year, primarily due to volatility in Southeast Asia.
We remain, on the whole, positive on other emerging market countries despite
recent volatility. In Brazil, many companies are now selling at low single-
digit price-to-earnings multiples with what we regard as attractive medium-
term outlooks. We also remain positive on the smaller Latin American markets
of Colombia and Peru. In Colombia, political worries have overshadowed what we
believe to be an improving inflation environment and very attractive
valuations. In Peru, economic growth is among the best in the region, while
valuations remain among the lowest.
In other markets, Russia was among the best performing in the world for most
of 1997. Investors took profits in the latter part of the year and, in our
view, this has made the market very attractive again given that Russian
companies are severely undervalued compared to similar ones in the West. The
Egyptian economy is the strongest in the Middle East region as a result of
efforts by the current administration to introduce large-scale privatization
of state-run companies. Its stock market has also been very resilient to
volatility elsewhere due to low levels of foreign ownership and strong
macroeconomic and corporate fundamentals. Portugal has demonstrated over the
past two years that its management of its economy is among the best in Western
Europe. This has been vindicated by Morgan Stanley, which placed the
Portuguese stock market in its developed, rather than emerging, market index
series beginning in December 1997. The Portuguese market has been resilient to
the falls in security prices elsewhere, as investors have taken the view that
companies in this market are undervalued compared to competitors in the rest
of Europe.
Looking forward, we believe the general climate for emerging market assets,
notwithstanding recent volatility, remains supportive, with valuations in many
markets back to 1994 levels. The situation in Southeast Asia remains
difficult, although value is beginning to emerge, especially in Hong Kong/
China and India. We remain committed to Latin America, given that economies in
the region have fewer structural imbalances than Asia's. We believe other
emerging markets such as Russia, Poland, Hungary, Egypt, Morocco, and South
Africa should also do well in the next 12 months.
Respectfully,
/s/ Arnab Kumar Banerji /s/ Jeffrey Chowdhry
Arnab Kumar Banerji Jeffrey Chowdhry
Portfolio Manager Portfolio Manager
PORTFOLIO MANAGERS' PROFILES
Arnab Kumar Banerji is Chief Investment Officer of Foreign & Colonial
Management Ltd. Dr. Banerji earned degrees in Physiology and Medicine from
Oxford University before entering the investment management business with J.
Henry Schroder Wagg in London. He left that firm to become a research analyst
and later director of Nomura Securities. He joined Citibank initially as head
of Equity Research at Citibank Scrimgeour Vickers before moving to Citibank
Global Asset Management to set up their emerging markets operation, which he
headed until 1993, when he joined Foreign & Colonial. Dr. Banerji has managed
the Series since its inception.
Jeffrey Chowdhry is a Director and Global Funds Manager of Foreign & Colonial
Emerging Markets Ltd. Mr. Chowdhry joined Foreign & Colonial in 1994 from BZW
Investment Management in London, where he was a Director in the Emerging
Markets Division. Prior to BZW, he was a fund manager with Royal Insurance.
Mr. Chowdhry is a graduate of Brunel University and has a Master of Business
Administration degree from Kingston Business School. Mr. Chowdhry has managed
the Series since its inception.
OBJECTIVE AND POLICIES
The Series' investment objective is to seek capital appreciation.
Commencement of investment operations: October 16, 1997
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.
<PAGE>
PORTFOLIO OF INVESTMENTS - December 31, 1997
<TABLE>
<CAPTION>
Stocks - 89.4%
- ------------------------------------------------------------------------------------------------------
Issuer Shares Value
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Argentina - 6.2%
Banco de Galicia y Buenos Aires S.A. de C.V., ADR (Banks
and Credit Cos.) 1,400 $ 36,050
Telecom S.A., ADR (Telecommunications) 1,350 48,263
----------
$ 84,313
- ------------------------------------------------------------------------------------------------------
Brazil - 14.2%
Centrais Eletricas Brasileiras, ADR (Utilities -
Electric) 2,000 $ 46,750
Petroleo Brasileiro S.A. (Oils) 2,000 46,500
Telecomunicacoes Brasileiras S.A., ADR
(Telecommunications) 855 99,554
----------
$ 192,804
- ------------------------------------------------------------------------------------------------------
Chile - 3.4%
Banco Santander Chile, ADR, "A" (Banks and Credit Cos.) 3,270 $ 46,189
- ------------------------------------------------------------------------------------------------------
China - 2.1%
Huaneng Power International, Inc., ADR (Utilities -
Electric)* 1,200 $ 27,825
- ------------------------------------------------------------------------------------------------------
Egypt - 4.7%
Suez Cement Co., GDR (Construction)## 3,200 $ 64,160
- ------------------------------------------------------------------------------------------------------
Greece - 3.1%
Attica Enterprises S.A., GDR (Transportation) 3,100 $ 34,644
Hellenic Bottling (Beverages) 340 7,899
--------------
$ 42,543
- ------------------------------------------------------------------------------------------------------
Hong Kong - 6.0%
China Resources Enterprises (Real Estate Investment
Trust) 8,000 $ 17,862
Guangdong Kelon Electric Holdings (Consumer Goods and
Services) 20,000 20,520
New World Development Co. (Real Estate)* 7,000 24,211
Swire Pacific Air Ltd., "A" (Transportation) 3,500 19,197
----------
$ 81,790
- ------------------------------------------------------------------------------------------------------
Hungary - 4.8%
Gedeon Richter Ltd. (Pharmaceuticals)## 560 $ 64,540
- ------------------------------------------------------------------------------------------------------
India - 6.7%
Mahanagar Telephone Nigam Ltd. (Utilities - Telephone)*## 4,000 $ 41,500
State Bank of India, GDR (Bank and Credit Cos.)## 1,350 23,963
Videsh Sanchar Nigam Ltd., GDR (Telecommunications)## 1,850 25,345
----------
$ 90,808
- ------------------------------------------------------------------------------------------------------
Israel - 2.2%
Makteshim Chemical Works Ltd. (Chemicals) 4,000 $ 29,190
- ------------------------------------------------------------------------------------------------------
Mauritius - 2.1%
State Bank of Mauritius Ltd. (Financial Institution) 50,000 $ 28,629
- ------------------------------------------------------------------------------------------------------
Mexico - 12.5%
Grupo Carso S.A. de C.V. (Conglomerate) 2,700 $ 32,400
Grupo Financiero Banamex, "B" (Finance)* 20,000 59,918
Grupo Television S.A. de C.V., GDR (Entertainment)* 2,000 77,375
----------
$ 169,693
- ------------------------------------------------------------------------------------------------------
Pakistan - 3.0%
Hub Power Co. Ltd., GDR (Utilities - Electric)* 1,300 $ 40,300
- ------------------------------------------------------------------------------------------------------
Peru - 4.3%
Ferreyros S.A. (Construction) 54,500 $ 57,600
- ------------------------------------------------------------------------------------------------------
Poland - 3.7%
Bank Handlowy W Warszawie, GDR (Banks and Credit Cos.)*## 3,900 $ 50,700
- ------------------------------------------------------------------------------------------------------
Portugal - 4.7%
Mota e Companhia S.A. (Construction) 1,400 $ 22,235
Portugal Telecom S.A. (Utilities - Telephone) 900 41,806
----------
$ 64,041
- ------------------------------------------------------------------------------------------------------
Russia - 4.3%
Lukoil Oil Co., ADR (Oils) 350 $ 31,850
Unified Energy Systems, GDR (Utilities - Electric)* 900 27,000
----------
$ 58,850
- ------------------------------------------------------------------------------------------------------
Singapore - 1.4%
City Developments Ltd. (Real Estate) 4,000 $ 18,571
- ------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $1,354,186) $1,212,546
- ------------------------------------------------------------------------------------------------------
Short-Term Obligations - 10.3%
- ------------------------------------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- ------------------------------------------------------------------------------------------------------
Federal Home Loan Bank Corp., due 1/02/98, at Amortized Cost $140 $ 139,982
- ------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,494,168) $1,352,528
Other Assets, Less Liabilities - 0.3% 4,537
- ------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $1,357,065
- ------------------------------------------------------------------------------------------------------
*Non-income producing security.
##SEC Rule 144A restriction.
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
December 31, 1997
- --------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $1,494,168) $1,352,528
Cash 2,134
Dividends receivable 1,497
Deferred organization expenses 8,800
----------
Total assets $1,364,959
----------
Liabilities:
Payable to affiliate for management fee $ 46
Accrued expenses and other liabilities 7,848
----------
Total liabilities $ 7,894
----------
Net assets $1,357,065
==========
Net assets consist of:
Paid-in capital $1,508,600
Unrealized depreciation on investments (141,640)
Accumulated net realized loss on investments and foreign
currency transactions (10,127)
Accumulated undistributed net investment income 232
----------
Total $1,357,065
==========
Shares of beneficial interest outstanding 150,860
-------
Net asset value per share
(net assets of $1,357,065 / 150,860 shares of beneficial
interest outstanding) $9.00
=====
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
- --------------------------------------------------------------------------------
Period Ended December 31, 1997*
- --------------------------------------------------------------------------------
Net investment income:
Income -
Interest $ 2,956
Dividends 1,497
----------
Total investment income $ 4,453
----------
Expenses -
Management fee $ 3,350
Administrative fee 28
Shareholder servicing agent fee 459
Custodian fee 70
Legal fee 3,049
Auditing fee 7,650
Printing 329
Amortization of organization expenses 387
Miscellaneous 621
----------
Total expenses $ 15,943
Reduction of expenses by investment adviser (11,922)
----------
Net expenses $ 4,021
----------
Net investment income $ 432
----------
Realized and unrealized gain (loss) on investments:
Realized loss (identified cost basis) -
Investment transactions $ (10,127)
Foreign currency transactions (200)
----------
Net realized loss on investments and foreign
currency transactions $ (10,327)
----------
Change in unrealized depreciation on investments $ (141,640)
----------
Net realized and unrealized loss on investments and
foreign currency $ (151,967)
----------
Decrease in net assets from operations $ (151,535)
==========
*For the period from the commencement of the Series' investment operations,
October 16, 1997, through December 31, 1997.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
Period Ended December 31, 1997*
- --------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income $ 432
Net realized loss on investments and foreign currency
transactions (10,327)
Net unrealized loss on investments (141,640)
----------
Decrease in net assets from operations $ (151,535)
----------
Net increase in net assets from Fund share transactions $1,500,000
----------
Total increase in net assets $1,348,465
Net assets:
At beginning of period 8,600
----------
At end of period (including accumulated undistributed net
investment income of $232) $1,357,065
==========
*For the period from the commencement of the Series' investment operations,
October 16, 1997, through December 31, 1997.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights
- --------------------------------------------------------------------------------
Period Ended December 31, 1997*
- --------------------------------------------------------------------------------
Per share data (for a share outstanding throughout the period):
Net asset value - beginning of period $10.00
------
Income from investment operations# -
Net investment income(S)** $ 0.00
Net realized and unrealized gain on investments and foreign
currency transactions (1.00)
------
Total from investment operations $(1.00)
------
Net asset value - end of period $ 9.00
======
Total return (10.00)%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 1.50%+
Net investment income 0.16%+
Portfolio turnover 8%
Average commission rate $0.0210
Net assets at end of period (000 omitted) $ 1,357
*For the period from the commencement of the Series' investment operations,
October 16, 1997, through December 31, 1997.
**The net investment income per share for the period was $0.004.
+Annualized.
++Not annualized.
#Per share data are based on average shares outstanding.
(S)The investment adviser voluntarily agreed to maintain, subject to
reimbursement by the Series, the expenses of the Series at no more than 1.50%
of average daily net assets. To the extent actual expenses were over or under
these limitations, the net investment loss per share and the ratios would
have been:
Net investment loss $(0.15)
Ratios (to average net assets):
Expenses## 5.92%+
Net investment loss (4.26)%+
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Foreign & Colonial Emerging Markets Equity Series (the Series), formerly
known as MFS(R) Strategic Fixed Income Series, is a diversified series of MFS
Variable Insurance Trust (the Trust). 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 seven 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. 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
discounts are 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 payments received in additional
securities are recorded on the ex-dividend 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 Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Series' policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Series files a tax
return annually using tax accounting methods required under provisions of the
Code, which may differ from generally accepted accounting principles, the
basis on which these financial statements are prepared. Accordingly, the
amount of net investment income and net realized gain reported on these
financial statements may differ from that reported on the Series' tax return.
Distributions to shareholders are recorded on the ex-dividend date. The Series
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits are reported in the financial statements as a 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, $200 was reclassified to
accumulated undistributed net investment income from accumulated net realized
gain on investments and foreign currency transactions due to differences
between book and tax accounting for currency transactions. This change had no
effect on the net assets or net asset value per share.
At December 31, 1997, the Series, for federal income tax purposes, had a
capital loss carryforward of $10,127 which may be applied against any net
taxable realized gains of each succeeding year until the earlier of its
utilization or expiration on December 31, 2005.
(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 1.25% 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 $11,922.
Administrator - 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 annual 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 short-term obligations,
aggregated $1,457,334 and $52,871, respectively.
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Series, as computed on a federal income tax basis,
are as follows:
Aggregate cost $1,494,168
----------
Gross unrealized appreciation $ 16,416
Gross unrealized depreciation $ (158,056)
----------
Net unrealized depreciation $ (141,640)
==========
(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:
Period Ended December 31, 1997*
-------------------------------
Shares Amount
- --------------------------------------------------------------------------------
Shares sold 150,000 $1,500,000
*For the period from the commencement of the Series' investment operations,
October 16, 1997 through December 31, 1997.
(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 year ended December 31, 1997, was $0.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Variable Insurance Trust and Shareholders of
MFS/Foreign & Colonial Emerging Markets Series:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of MFS/Foreign & Colonial Emerging
Markets Equity Series (the Series) (one of the series constituting the MFS
Variable Insurance Trust) as of December 31, 1997, the related statement of
operations, the statement of changes in net assets, and the financial
highlights for the period from October 16, 1997, (commencement of investment
operations) to December 31, 1997. These financial statements and financial
highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of the
securities owned at December 31, 1997 by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS/Foreign &
Colonial Emerging Markets Equity Series at December 31, 1997, the results of
its operations, the changes in its net assets, and its financial highlights
for the respective stated period 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
VEM-2 2/98 250
