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MFS(R) MONEY MARKET SERIES
A SERIES OF MFS(R) VARIABLE INSURANCE TRUST(SM)
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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 MANAGER INVESTOR SERVICE
Geoffrey L. Kurinsky* MFS Service Center, Inc.
P.O. Box 2281
TREASURER Boston, MA 02107-9906
W. Thomas London*
For additional information,
ASSISTANT TREASURERS contact your financial adviser.
Mark E. Bradley*
Ellen Moynihan* CUSTODIAN
James O. Yost* State Street Bank and Trust Company
SECRETARY AUDITORS
Stephen E. Cavan* Deloitte & Touche LLP
ASSISTANT SECRETARY WORLD WIDE WEB
James R. Bordewick, Jr.* www.mfs.com
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[graphic 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
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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 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.
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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, markets will most likely continue to focus on
activity by the Federal Reserve Board (the Fed) and its response to both U.S.
and world events.
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.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ Jeffrey Shames
Jeffrey L. Shames
President, MFS Investment Management
January 12, 1998
MFS MONEY MARKET SERIES
For the year ended December 31, 1997, the Series provided a total return of
4.91% (excluding the deduction of the mortality and expense risk charges and
administration fees.) The Series seeks as high a level of current income as is
considered consistent with the preservation of capital and liquidity by
investing in short-term money market securities issued or guaranteed by the
U.S. Treasury, its agencies, or instrumentalities of the U.S. government, as
well as in the highest-quality corporate issues, in order to minimize credit
risk. As of December 31, 1997, the portfolio had assets of approximately $8.7
million, and the Series' average maturity was 38 days.
We expect short-term rates to be flat to slightly lower over the next several
months.
Respectfully,
/s/ Geoffrey L. Kurinsky
Geoffrey L. Kurinsky
Portfolio Manager
OBJECTIVE AND POLICIES
The Series' investment objective is to seek as high a level of current income
as is considered consistent with the preservation of capital and liquidity.
Commencement of investment operations: January 3, 1995
PORTFOLIO MANAGER'S PROFILE
Geoffrey L. Kurinsky began his career at MFS in 1987 in the Fixed Income
Department and was named Assistant Vice President in 1988, Vice President in
1989, and Senior Vice President in 1993. A graduate of the University of
Massachusetts and the Boston University Graduate School of Management, he has
managed MFS Money Market Series since 1995.
Note to Contract Owners: Effective January 2, 1998, the Series will be managed
by Jean O. Alessandro. A graduate of the University of Connecticut, Ms.
Alessandro joined the MFS Fixed Income Department in 1985 and has worked as a
money market trader and senior money market specialist. She was named
Assistant Investment Officer in 1994 and Investment Officer in 1995.
OBJECTIVE AND POLICIES
The Series' investment objective is to seek as high a level of current income
as is considered consistent with the preservation of capital and liquidity.
Commencement of investment operations: January 3, 1995
Investments in the Series are neither insured nor guaranteed by the U.S.
government, and there is no assurance that the series will be able to maintain
a stable net asset value.
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.
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PORTFOLIO OF INVESTMENTS - December 31, 1997
U.S. Government and Agency Obligations - 99.9%
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Principal Amount
Issuer (000 Omitted) Value
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Federal Farm Credit Bank, due 1/09/98 - 2/11/98 $1,890 $1,883,648
Federal Home Loan Bank, due 1/14/98 - 3/25/98 2,369 2,079,377
Federal Home Loan Mortgage Corp.,
due 2/05/98 - 3/06/98 1,495 1,756,009
Federal National Mortgage Assn., due
1/05/98 - 3/03/98 1,735 1,728,898
Student Loan Marketing Assn., due 1/27/98 350 348,619
Tennessee Valley Authority, due 2/06/98 - 3/19/98 955 947,471
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Total Investments, at amortized cost and value $8,744,022
Other Assets, Less Liabilities - 0.1% 11,410
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Net Assets - 100.0% $8,755,432
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See notes to financial statements
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FINANCIAL STATEMENTS
Statement of Assets and Liabilities
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December 31, 1997
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Assets:
Investments, at amortized cost and value $8,744,022
Cash 26,531
Receivable for Series shares sold 1,502
Deferred organization expenses 3,698
Other assets 6
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Total assets $8,775,759
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Liabilities:
Payable for Series shares reacquired $ 16,800
Payable to affiliates -
Management fee 120
Shareholder servicing agent fee 4
Accrued expenses and other liabilities 3,403
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Total liabilities $ 20,327
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Net assets (represented by paid-in capital) $8,755,432
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Shares of beneficial interest outstanding 8,755,432
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Net asset value per share
(net assets of $8,755,432 / 8,755,432 shares of beneficial
interest outstanding) $ 1.00
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See notes to financial statements
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FINANCIAL STATEMENTS - continued
Statement of Operations
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Year Ended December 31, 1997
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Net investment income:
Interest income $ 291,723
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Expenses -
Management fee $ 26,348
Trustees' compensation 2,033
Shareholder servicing agent fee 1,838
Administrative fee 699
Auditing fees 31,001
Printing 4,631
Amortization of organization expenses 1,837
Custodian fee 1,727
Legal fees 1,335
Miscellaneous 566
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Total expenses $ 72,015
Fees paid indirectly (343)
Reduction of expenses by investment adviser (40,048)
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Net expenses $ 31,624
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Net investment income $ 260,099
Realized loss on investment transactions (24)
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Increase in net assets from operations $ 260,075
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See notes to financial statements
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FINANCIAL STATEMENTS - continued
Statements of Changes in Net Assets
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Year Ended December 31, 1997 1996
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Increase (decrease) in net assets:
From operations -
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Net investment income $ 260,099 $ 7,822
Net realized loss on investments (24) --
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Increase in net assets from operations $ 260,075 $ 7,822
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Distributions declared to shareholders from net
investment income $ (260,075) $ (7,822)
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Series share (principal) transactions at net asset value of $1.00 per share -
Net proceeds from sale of shares $15,357,398 $643,286
Net asset value of shares issued to shareholders
in reinvestment of distributions 230,346 5,947
Cost of shares reacquired (7,464,930) (196,749)
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Total increase in net assets $ 8,122,814 $452,484
Net assets:
At beginning of period 632,618 180,134
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At end of period $ 8,755,432 $632,618
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See notes to financial statements
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FINANCIAL STATEMENTS - continued
Financial Highlights
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Year Ended December 31, 1997 1996 1995*
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Per share data (for a share outstanding throughout each period):
Net asset value - beginning of
period $ 1.00 $ 1.00 $ 1.00
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Income from investment operations# -
Net investment income(S) $ 0.05 $ 0.04 $ 0.04
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Less distributions declared to
shareholders from net
investment income $(0.05) $(0.04) $(0.04)
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Net asset value - end of period $ 1.00 $ 1.00 $ 1.00
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Total return 4.91% 4.55% 4.37%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 0.60% 0.60% 0.60%+
Net investment income 4.91% 4.53% 4.54%+
Net assets at end of period
(000 omitted) $8,755 $ 633 $ 180
*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.
(S)Subject to reimbursement by the Series, the investment adviser voluntarily
agreed to maintain expenses of the Series, at not more than 0.60% of average
daily net assets. To the extent actual expenses were over/under this
limitation, the net investment income per share and the ratios would have
been:
Net investment income (loss) $ 0.04 $(0.21) $(0.14)
Ratios (to average net assets):
Expenses## 1.36% 27.74% 21.54%+
Net investment income (loss) 4.15% (22.61)% (16.37)%+
See notes to financial statements
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NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Money Market Series (the Series) is a diversified series of MFS Variable
Insurance Trust (the Trust) which is composed 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 Money Market Series, MFS(R)
Research Series, MFS(R) 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 eight 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.
Investment Valuations - Money market instruments are valued at amortized cost,
which the Trustees have determined in good faith constitutes fair value. The
Trust's use of amortized cost is subject to the Trust's compliance with
certain conditions as specified under Rule 2a-7 of the Investment Company Act
of 1940.
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 discount is amortized or accreted for financial statement and tax
reporting purposes as required by federal income tax regulations.
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 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.
At December 31, 1997, the Series, for federal income tax purposes, had a
capital loss carryforward of $24 which may be applied against any net taxable
realized gains in each succeeding year until the earlier of 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 annual rate of 0.50%
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 0.10% 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 $111,855.
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 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 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 money market investments, exclusive of securities
subject to repurchase agreements, consisted solely of U.S. government
securities and aggregated $53,939,134 and $46,102,395, respectively.
(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, $1.00 per share).
(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 fund at the end of each quarter. The commitment fee allocated to
the Series for the year ended December 31, 1997, was $36.
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INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders of MFS Money Market Series:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of MFS Money Market Series (the
Series) (one of the series constituting MFS Variable Insurance Series) as of
December 31, 1997, the related statement of operations for the year then
ended, the statement of changes in net assets for the year then ended and the
year ended December 31, 1996, and the financial highlights for the period from
January 3, 1995 (the commencement of investment operations) to 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
audit.
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. 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 Money Market
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
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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.
(C)1998 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
VMM-2 2/98 450
