<PAGE>
[Logo] M F S(R) ANNUAL REPORT
INVESTMENT MANAGEMENT DECEMBER 31, 1999
WE INVENTED THE MUTUAL FUND(R)
[graphic omitted]
A SERIES OF MFS(R) VARIABLE INSURANCE TRUST(SM)
MFS(R) LIMITED
MATURITY SERIES
<PAGE>
<TABLE>
MFS(R) LIMITED MATURITY SERIES
A SERIES OF MFS(R) VARIABLE INSURANCE TRUST(SM)
<S> <C>
TRUSTEES INVESTMENT ADVISER
Jeffrey L. Shames* Massachusetts Financial Services Company
Chairman and Chief Executive Officer, 500 Boylston Street
MFS Investment Management(R) Boston, MA 02116-3741
Nelson J. Darling, Jr.+ DISTRIBUTOR
Private investor and trustee MFS Fund Distributors, Inc.
500 Boylston Street
William R. Gutow+ Boston, MA 02116-3741
Private investor and real estate consultant;
Vice Chairman, Capitol Entertainment SHAREHOLDER SERVICE CENTER
Management Company (video franchise) MFS Service Center, Inc.
P.O. Box 2281
CHAIRMAN AND PRESIDENT Boston, MA 02107-9906
Jeffrey L. Shames*
For additional information,
PORTFOLIO MANAGER contact your financial consultant.
James J. Calmas*
CUSTODIAN
TREASURER State Street Bank and Trust Company
W. Thomas London*
AUDITORS
ASSISTANT TREASURERS Deloitte & Touche LLP
Mark E. Bradley*
Ellen Moynihan* WORLD WIDE WEB
James O. Yost* www.mfs.com
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
* MFS Investment Adviser
+ Independent Trustee
- -------------------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LETTER FROM THE CHAIRMAN
Dear Shareholders,
One could easily argue that the Internet represents the greatest technological
development most of us may see in our lifetimes. There is no disputing that this
new communication medium is changing forever the way we work, play, and shop.
One might also argue that investing in this new technology represents the
investment opportunity of a lifetime. The question for any investor is whether
and how to take advantage of it.
The popular press, it seems, would have us believe that by surfing the Web, we
can learn everything we need to know about investing. Indeed, there is no doubt
that Internet-delivered information and brokerage services enable individual
investors to be well-informed and to trade at bargain prices. But we believe the
facts argue that, for most of us, professionally managed investment portfolios
purchased through a financial consultant will continue to be one of the best
products for long-term investing in this new millennium.
Why do we believe managed portfolios plus professional advice will continue to
define the best course of action for many investors? Let's look at some of the
characteristics of a successful long-term investment approach:
o HAVING A PLAN AND STICKING TO IT: Our experience is that successful
investors -- those whose lives are enriched by the fruits of their investing
-- share two characteristics. They have a plan for reaching their monetary
goals, and they stick with that plan through up markets and down. And for
many investors, working with a financial consultant may be the best way to
develop a plan. Although the Internet abounds with calculators for
developing all sorts of investment plans, none has your consultant's high
level of experience and an understanding of your unique situation. And no
calculator can counsel you during a down market, when you may be tempted to
abandon your goals and your plan.
o DIVERSIFICATION: Few individual investors can afford to own a large number
of holdings, so poor performance of one company can potentially drag down
their entire personal portfolio. This is especially true when investing in
volatile new areas such as the Internet. On the other hand, a diversified,
professionally managed investment portfolio that owns dozens or even
hundreds of holdings is better positioned to survive a disappointment in one
or several investments.
o GOOD IN A DOWN MARKET: As we enter the tenth year of the greatest bull
market in history, it's easy to forget that market downturns are an almost
inevitable part of investing. Few investment portfolios, of course, are
going to be up when the overall market is down. But we believe diversified,
professionally managed investment portfolios may be less likely to suffer
the extreme downturns experienced by a large number of individual holdings
when the market heads south.
o MFS ORIGINAL RESEARCH(R): The Internet is one of the greatest research tools
ever invented, but it's still not the same as being eyeball to eyeball with
the management of a company and discussing their plans for their firm's
future.
o GOOD PERFORMANCE AT AN ACCEPTABLE LEVEL OF RISK: Investing in individual
stocks or bonds does indeed offer the potential of exhilarating performance
that few managed portfolios even attempt. The downside is that the most
exciting investments are also likely to be the ones that give you sleepless
nights. The diversification and professional management of investment
portfolios help make them inherently less risky than individual stock
picking, and managed portfolios are available in a wide range of risk
profiles.
We believe that now, more than ever, managed investment portfolios sold by an
investment professional may offer many investors the best way to participate
in whatever investment opportunities the new millennium may bring. The
combination of professional portfolio management and professional advice
recognizes the key reason that investors give us their money: because they
don't want to make a hobby or a second profession out of investing; they
simply want their money to work for them so they have a better likelihood of
realizing their dreams.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
January 15, 2000
Investments in variable products will fluctuate and may be worth more or less
upon redemption. Please see your financial consultant for more information.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
MANAGEMENT REVIEW AND OUTLOOK
Dear Shareholders, For the 12 months ended December 31, 1999, the Series
provided a total return of 2.26% (including the reinvestment of any
distributions). This compares to a 3.16% return for the Lehman Brothers One- to
Three-Year Government/Corporate Bond Index (the Lehman Index), a total return
index consisting of all U.S. government-agency, Treasury, and investment-grade
corporate debt securities with maturities of one to three years. The Series
return also compares to a 2.83% return for the average short-term
investment-grade debt portfolio tracked by Lipper Analytical Services, Inc., an
independent company that reports performance.
Over the period, corporate bonds, which represent a higher proportion of the
Series' assets than those of the index, did not perform as well as expected.
Their underperformance came mostly during August and September, when there was a
surge of bond issues from corporations. We believe that many companies at that
time were concerned about possible liquidity problems at the end of this year
and were motivated to move early to ensure adequate financing for the coming
year. This oversupply pushed down corporate bond prices and hurt performance.
At the end of the period, the portfolio's allocation was: 42.8% in high-grade
corporates, 24.7% in asset-backed securities, 9.5% in cash, 8.8% in mortgage-
backed securities, 8.3% in Yankees (many of the "AAA"-rated dollar- denominated
bonds issued in the United States by foreign governments and corporations), and
2.0% in emerging markets. Our decision to have nearly one- quarter of the
portfolio's assets in asset-backed securities, which are credit card
receivables, home equity loans, and auto loans, was based on their high
"AAA"-rated quality, attractive yields, and the diversification they offer the
portfolio. For some of these, we are getting yields similar to lower-rated bonds
without as much risk. For example, we own bonds backed by a diversified,
packaged, and credit-enhanced group of car loans issued by Ford Motor Credit
that are "AAA"-rated. These have similar yields to those issued by Ford Motor
Co. that are only "A"-rated debt.
Since the prospectus states that bonds held in the portfolio must be of
investment-grade quality, that is, "BBB"- through "AAA"-rated, when we purchase
them, we have been upgrading the overall credit quality during the past 18
months. This was in response to a gradual rise in default rates over the past
several years. Although our analysts have had no difficulty finding bonds in the
upper range of "A" to "AAA," we may consider issues of lower grades if we
believe we will be compensated for incurring the additional risk.
We continue to favor bonds issued by telecommunications companies. There has
been a lot of consolidation in the industry -- we own bonds issued by Sprint
Spectrum, for example. We try to make sure that any mergers will not hurt the
credit profile of companies that we own. We believe utilities are another
promising sector because of consolidation. Utilities are also rationalizing
their businesses, that is, making sure that their businesses make sense in terms
of their strengths and the market environment. For example, Boston Edison is
getting out of electricity generation to focus on transmission and distribution.
Since the bond markets reacted calmly to the two interest-rate increases so far
this year, we don't think any future increase should cause a major sell-off in
the bond market. We believe that the additional yield from our corporate bond
holdings may provide some cushion if rates were to rise. We think inflation has
been kept in check; therefore, we have kept the duration (which indicates a
portfolio's sensitivity to changes in interest rates) of our bonds the same as
the Lehman Index. Currently, the duration is approximately 1.7 years. We are
holding a relatively large amount of cash in order to handle any end of year
liquidity concerns. We are also holding some floating-rate securities, notes
whose interest rates are tied to a money market index, so that if interest rates
go up, these short-term issues may help provide some additional return.
Respectfully,
/s/ James J. Calmas
James J. Calmas
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and are
current only through the end of the period of the report as stated on the cover.
The manager's views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
The portfolio is actively managed, and current holdings may be different.
PORTFOLIO MANAGER'S PROFILE
James J. Calmas is Vice President of MFS Investment Management(R) and portfolio
manager of MFS(R) Intermediate Income Fund, MFS(R) Limited Maturity Fund, and
MFS(R) Limited Maturity Series (part of MFS(R) Variable Insurance Trust(SM)).
Mr. Calmas joined MFS in 1988 and was named Assistant Vice President in 1991,
Vice President in 1993, and portfolio manager in 1998. He is a graduate of
Dartmouth College and holds an M.B.A. degree from the Amos Tuck School of
Business Administration of Dartmouth College.
All portfolio managers at MFS Investment Management(R) are supported by an
investment staff of over 100 professionals utilizing MFS Original Research(R),
a global, company-oriented, bottom-up process of selecting securities.
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. A prospectus containing more information,
including all charges and expenses, for any other MFS product is available from
your financial consultant, or by calling MFS at 1-800-225-2606. Please read it
carefully before investing or sending money.
<PAGE>
SERIES FACTS
Objective: Seeks primarily to provide as high a level of current income as is
believed to be consistent with prudent investment risk, and secondarily seeks to
protect shareholders' capital.
Commencement of investment operations: August 14, 1996
Size: $2.2 million net assets as of December 31, 1999
PERFORMANCE SUMMARY
The information below illustrates the historical performance of the Series 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. (See Notes to Performance Summary.)
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the Series' investment operations,
August 14, 1996, through December 31, 1999. Index information is from August 1,
1996.)
MFS Lehman Brothers
Limited One- to Three-Year
Maturity Government/Corporate
Series Bond Index
- -------------------------------------------------------
8/96 $10,000 $10,000
12/96 10,261 10,323
12/97 10,885 11,010
12/98 11,474 11,777
12/99 11,733 12,149
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN THROUGH DECEMBER 31, 1999
1 Year 3 Years Life*
- -------------------------------------------------------------------------------
Cumulative Total Return +2.26% +14.35% +17.33%
- -------------------------------------------------------------------------------
Average Annual Total Return +2.26% + 4.57% + 4.84%
- -------------------------------------------------------------------------------
COMPARATIVE INDICES(+)
1 Year 3 Years Life*
- -------------------------------------------------------------------------------
Average short-term investment-grade
debt portfolio+ +2.83% + 4.94% + 5.27%
- -------------------------------------------------------------------------------
Lehman Brothers One- to Three-Year
Government/Corporate Bond Index# +3.16% + 5.58% + 5.86%
- -------------------------------------------------------------------------------
* For the period from the commencement of the Series' investment operations,
August 14, 1996, through December 31, 1999. Index information is from
August 1, 1996.
(+) Average annual rates of return.
+ Source: Lipper Analytical Services, Inc.
# Source: Standard & Poor's Micropal, Inc.
<PAGE>
NOTES TO PERFORMANCE SUMMARY
All results are historical and assume the reinvestment of dividends and capital
gains. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MORE RECENT
RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN. PAST PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS. Performance results reflect any applicable expense subsidies
and waivers, without which the results would have been less favorable. Subsidies
and waivers may be rescinded at any time. See the prospectus for details.
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.
<PAGE>
PORTFOLIO OF INVESTMENTS - December 31, 1999
Bonds - 94.2%
- -----------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- -----------------------------------------------------------------------------
U.S. Bonds - 86.7%
Apparel and Textiles - 1.4%
Hilfiger (Tommy) USA, Inc., 6.5s, 2003 $ 23 $ 21,811
Jones Apparel Group, Inc., 6.25s, 2001 10 9,761
----------
$ 31,572
- -----------------------------------------------------------------------------
Automotive - 1.7%
DaimlerChrysler NA Holdings Co., 6.63s, 2001 $ 38 $ 37,833
- -----------------------------------------------------------------------------
Banks and Credit Companies - 3.2%
Capital One Financial Corp., 7.25s, 2003 $ 20 $ 19,432
Fleet Boston Corp., 9.9s, 2001 28 29,095
Great Western Financial Corp., 6.375s, 2000 22 21,963
----------
$ 70,490
- -----------------------------------------------------------------------------
Conglomerates - 2.5%
Eaton Corp., 6.95s, 2004 $ 27 $ 26,407
GE Capital Corp., 6.52s, 2002 29 28,606
----------
$ 55,013
- -----------------------------------------------------------------------------
Corporate Asset Backed - 23.1%
Aames Mortgage Trust, 6.75s, 2021 $ 17 $ 16,867
Americredit Automobile Receivable Trust,
5.78s, 2003 35 34,267
Amresco Residential Securities Mortgage Loan,
5.94s, 2015 34 33,479
BankBoston Home Equity Loan Trust, 5.89s, 2013 17 16,670
Case Equipment Receivables Trust, 5.285s, 2002 30 29,323
Chase Credit Card Master Trust, 6.723s, 2004 35 35,055
Commonwealth Edison Transition Funding Trust,
5.29s, 2003 17 16,717
Discover Card Master Trust I, 5.85s, 2006 20 19,162
First Chicago Master Trust II, 6.743s, 2003 25 25,055
Fleet Credit Card Master Trust, 5.977s, 2007 35 35,076
Ford Credit Auto Owner Trust, 5.31s, 2001 6 6,456
Ford Credit Auto Owner Trust, 6.2s, 2002 33 32,876
Green Tree Financial Corp., 6.04s, 2029 12 11,737
Green Tree Financial Corp., 6.39s, 2029 17 16,714
MBNA Master Credit Card Trust II, 5.25s, 2006 25 23,602
Merrill Lynch Mortgage Investors, Inc.,
5.65s, 2030 16 15,039
Morgan Stanley Capital I, Inc., 6.01s, 2030 19 17,652
Partners First Credit Card Master Trust,
6.563s, 2027 50 49,953
Premier Auto Trust, 5.88s, 2001 20 19,913
Student Loan Trust, 5.389s, 2004 12 11,984
Student Loan Trust, 5.574s, 2009 30 29,601
Time Warner Pass-Through Asset Trust, 6.1s, 2001 19 18,623
----------
$ 515,821
- -----------------------------------------------------------------------------
Financial Institutions - 11.4%
Aristar, Inc., 7.375s, 2004 $ 19 $ 18,909
Countrywide Home Loan, Inc., 6.85s, 2004 31 30,346
Ford Motor Credit Co., 6.446s, 2002 50 50,211
General Motors Acceptance Corp., 7s, 2002 25 24,947
GS Escrow Corp., 6.75s, 2001 19 18,313
KFW International Finance, Inc., 9.4s, 2004 15 16,253
Lehman Brothers Holdings, Inc., 6.375s, 2001 23 22,806
Merrill Lynch & Co., 6.06s, 2001 40 39,420
Morgan Stanley Group, Inc., 7.125s, 2003 33 32,974
----------
$ 254,179
- -----------------------------------------------------------------------------
Food and Beverage Products - 2.8%
Seagram (Joseph E) & Sons, Inc., 5.79s, 2001 $ 38 $ 37,326
Whitman Corp., 6s, 2004 28 26,275
----------
$ 63,601
- -----------------------------------------------------------------------------
Forest and Paper Products - 0.9%
Georgia-Pacific Corp., 9.95s, 2002 $ 20 $ 21,098
- -----------------------------------------------------------------------------
Railroads - 0.9%
Union Pacific Corp., 6.34s, 2003 $ 21 $ 20,260
- -----------------------------------------------------------------------------
Supermarkets - 0.9%
Safeway, Inc., 5.875s, 2001 $ 20 $ 19,533
- -----------------------------------------------------------------------------
Telecommunications and Cable - 6.7%
Comcast Corp., 9.125s, 2006 $ 28 $ 28,514
Cox Communications, Inc., 7s, 2001 26 25,945
Sprint Spectrum LP, 11s, 2006 34 37,609
Telecomunica De Puerto Rico, 6.15s, 2002 30 29,252
United Telecommunications Co., 9.5s, 2003 26 27,642
----------
$ 148,962
- -----------------------------------------------------------------------------
Tire and Rubber - 0.4%
Cooper Tire & Rubber Co., 7.25s, 2002 8 $ 7,912
- -----------------------------------------------------------------------------
Tobacco - 1.0%
RJ Reynolds Tobacco Holdings, 7.375s, 2003 $ 23 $ 21,596
- -----------------------------------------------------------------------------
Transportation - 1.1%
Hertz Corp., 6.5s, 2000 $ 25 $ 25,020
- -----------------------------------------------------------------------------
U.S. Federal Agencies - 6.6%
Federal Home Loan Bank, 5.525s, 2000 $ 50 $ 49,742
Federal National Mortgage Assn., 7s, 2014 100 98,259
----------
$ 148,001
- -----------------------------------------------------------------------------
U.S. Treasury Obligations - 14.2%
U.S. Treasury Bonds, 5.875s, 2004 $ 10 $ 9,805
U.S. Treasury Bonds, 6s, 2004 43 42,328
U.S. Treasury Notes, 5.75s, 2000 33 32,897
U.S. Treasury Notes, 5s, 2001 100 98,719
U.S. Treasury Notes, 6.25s, 2001 10 10,008
U.S. Treasury Notes, 6.5s, 2001 65 65,243
U.S. Treasury Notes, 6.625s, 2002 30 30,206
U.S. Treasury Notes, 5.25s, 2003 30 28,927
----------
$ 318,133
- -----------------------------------------------------------------------------
Utilities - Electric - 7.0%
Boston Edison Co., 6.8s, 2000 $ 35 $ 35,013
California Infrastructure, 6.17s, 2003 26 25,878
CMS Panhandle Holding Co., 6.125s, 2004 18 16,940
Connecticut Light & Power Co., 7.875s, 2001 10 10,096
Entergy Mississippi, Inc., 6.2s, 2004 30 28,316
MidAmerican Funding LLC, 5.85s, 2001 32 31,585
Narragansett Electric Co., 7.83s, 2002 7 7,116
Salton Sea Funding Corp., 6.69s, 2000 2 2,391
----------
$ 157,335
- -----------------------------------------------------------------------------
Utilities - Gas - 0.9%
Columbia Gas Systems, Inc., 6.39s, 2000 $ 21 $ 20,847
- -----------------------------------------------------------------------------
Total U.S. Bonds $1,937,206
- -----------------------------------------------------------------------------
Foreign Bonds - 7.5%
Argentina - 1.1%
Republic of Argentina, 0s, 2001 $ 27 $ 23,963
- -----------------------------------------------------------------------------
Australia - 0.6%
Westpac Banking, 9.125s, 2001 (Banks and
Credit Cos.) $ 13 $ 13,412
- -----------------------------------------------------------------------------
Canada - 2.5%
Metronet Communications Corp., 12s, 2007
(Telecommunications) $ 22 $ 25,365
Province of Quebec, 8.8s, 2003 28 29,319
----------
$ 54,684
- -----------------------------------------------------------------------------
Germany - 1.5%
Bayerische Landesbank Girozent, 5.625s, 2001
(Banks and Credit Cos.) $ 35 $ 34,555
- -----------------------------------------------------------------------------
Grand Cayman Islands - 0.4%
Enersis SA, 6.6s, 2026 (Utilities - Electric) $ 10 $ 9,509
- -----------------------------------------------------------------------------
Iceland - 0.3%
Republic of Iceland, 6.125s, 2004 $ 8 $ 7,641
- -----------------------------------------------------------------------------
Mexico - 0.7%
Corporacion Andina de Fomento, 7.1s, 2003
(Banks and Credit Cos.) $ 17 $ 16,696
- -----------------------------------------------------------------------------
South Korea - 0.4%
Export-Import Bank Korea, 7.1s, 2007
(Banks and Credit Cos.) $ 9 $ 8,846
- -----------------------------------------------------------------------------
Total Foreign Bonds $ 169,306
- -----------------------------------------------------------------------------
Total Bonds (Identified Cost, $2,145,547) $2,106,512
- -----------------------------------------------------------------------------
Short-Term Obligation - 8.3%
- -----------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., due 1/03/00,
at Amortized Cost $ 185 $ 184,985
- -----------------------------------------------------------------------------
Total Investments (Identified Cost, $2,330,532) $2,291,497
Other Assets, Less Liabilities - (2.5)% (56,940)
- -----------------------------------------------------------------------------
Net Assets - 100.0% $2,234,557
- -----------------------------------------------------------------------------
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- ---------------------------------------------------------------------------
DECEMBER 31, 1999
- ---------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $2,330,532) $2,291,497
Cash 3,520
Interest receivable 26,594
Deferred organization expenses 2,998
----------
Total assets $2,324,609
----------
Liabilities:
Payable for Series shares reacquired $ 37,137
Payable for investments purchased 49,890
Payable to affiliate for management fee 34
Accrued expenses and other liabilities 2,991
----------
Total liabilities $ 90,052
----------
Net assets $2,234,557
==========
Net assets consist of:
Paid-in capital $2,307,622
Unrealized depreciation on investments (39,035)
Accumulated undistributed net realized loss on investments (34,030)
----------
Total $2,234,557
==========
Shares of beneficial interest outstanding 227,897
=======
Net asset value per share
(net assets / shares of beneficial interest outstanding) $9.81
=====
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
- ------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1999
- ------------------------------------------------------------------------
Net investment income:
Interest income $ 148,957
----------
Expenses -
Management fee $ 13,293
Trustees' compensation 2,431
Shareholder servicing agent fee 845
Administrative fee 312
Custodian fee 5,265
Printing 6,983
Auditing fees 24,093
Legal fees 2,349
Amortization of organization expenses 1,832
Miscellaneous 2,566
----------
Total expenses $ 59,969
Reduction of expenses by investment adviser (35,798)
----------
Net expenses $ 24,171
----------
Net investment income $ 124,786
----------
Realized and unrealized loss on investments:
Realized loss (identified cost basis) on
investment transactions $ (34,021)
Change in unrealized depreciation on investments (35,781)
----------
Net realized and unrealized loss on investments $ (69,802)
----------
Increase in net assets from operations $ 54,984
==========
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
- -----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1999 1998
- -----------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income $ 124,786 $ 64,423
Net realized gain (loss) on investments (34,021) 2,093
Net unrealized loss on investments (35,781) (3,927)
----------- -----------
Increase in net assets from operations $ 54,984 $ 62,589
----------- -----------
Distributions declared to shareholders -
From net investment income $ (124,786) $ (64,423)
From net realized gain on investments -- (1,008)
In excess of net investment income -- (384)
Paid-in capital (268) --
----------- -----------
Total distributions declared to shareholders $ (125,054) $ (65,815)
----------- -----------
Net increase in net assets from Series share
transactions $ 478,345 $ 1,128,448
----------- -----------
Total increase in net assets $ 408,275 $ 1,125,222
Net assets:
At beginning of period 1,826,282 701,060
----------- -----------
At end of period $ 2,234,557 $ 1,826,282
=========== ===========
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
- ---------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
--------------------------------------------------- DECEMBER 31,
1999 1998 1997 1996*
- ---------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C>
Net asset value - beginning of period $10.16 $10.01 $10.01 $10.00
------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.54 $ 0.55 $ 0.62 $ 0.25
Net realized and unrealized gain (loss) on
investments (0.31) (0.01) (0.01) 0.01
------ ------ ------ ------
Total from investment operations $ 0.23 $ 0.54 $ 0.61 $ 0.26
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.58) $(0.38) $(0.60) $(0.25)
From net realized gain on investments -- (0.01) (0.01) --
In excess of net investment income -- (0.00)+++ -- --
From paid-in capital (0.00)+++ -- -- --
------ ------ ------ ------
Total distributions declared to shareholders $(0.58) $(0.39) $(0.61) $(0.25)
------ ------ ------ ------
Net asset value - end of period $ 9.81 $10.16 $10.01 $10.01
====== ====== ====== ======
Total return 2.26% 5.42% 6.08% 2.61%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.00% 1.03% 1.02% 1.03%+
Net investment income 5.16% 5.34% 6.13% 6.61%+
Portfolio turnover 103% 94% 167% 109%
Net assets at end of period (000 Omitted) $2,235 $1,826 $701 $523
(S) Subject to reimbursement by the Series, MFS has voluntarily agreed under a temporary expense reimbursement agreement to pay
all of the Series' operating expenses, exclusive of management fees. In consideration, the Series pays MFS a fee not greater
than 0.45% of average daily net assets. To the extent actual expenses were over/under this limitation the net investment
income and the ratios would have been:
Net investment income $ 0.39 $ 0.38 $ 0.10 $ 0.01
Ratios (to average net assets):
Expenses## 2.48% 2.64% 6.20% 7.55%+
Net investment income 3.68% 3.73% 0.95% 0.09%+
* For the period from the commencement of the Series' investment operations, August 14, 1996, through December 31, 1996.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Limited Maturity Series (the 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 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, 1999, there were 6 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 - Debt securities (other than short-term obligations which
mature in 60 days or less), including listed issues are valued on the basis of
valuations furnished by dealers or by a pricing service with consideration to
factors such as institutional-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, trading characteristics,
and other market data, without exclusive reliance upon exchange or
over-the-counter prices. Short-term obligations, which mature in 60 days or
less, are valued at amortized cost, which approximates market value. Securities,
for which there are no such quotations or valuations, are valued in good faith,
at fair value, by the Trustees.
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. Interest payments received in additional
securities are recorded on the ex-interest date in an amount equal to the value
of the security on such date. Some securities may be purchased on a
"when-issued" or "forward delivery" basis, which means that the securities will
be delivered to the Series at a future date, usually beyond customary settlement
time.
Fees Paid Indirectly - The Series' custody fee is calculated as a percentage of
the Series' month end net assets. The fee is reduced according to an arrangement
that measures the value of cash deposited with the custodian by the Series.
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.
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 be reported in the financial statements as distributions from paid-in
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 net realized gains. During
the year ended December 31, 1999, $2 was reclassified from accumulated net
realized loss on investments to accumulated undistributed net investment income
due to differences between book and tax accounting. This change had no effect on
the net assets or net asset value per share. Additionally, the Fund had a
distribution from paid-in capital of $266.
At December 31, 1999, the Fund, for federal income tax purposes, had a capital
loss carryforward of $22,165 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, 2007.
(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 0.55% of
the Series' 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 0.45% 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, 1999, the
aggregate unreimbursed expenses amounted to $97,667.
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).
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:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
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, were as
follows:
PURCHASES SALES
- ---------------------------------------------------------------------------
U.S. government securities $ 917,962 $1,030,046
---------- ----------
Investments (non-U.S. government securities) $1,856,755 $1,124,833
========== ==========
The cost and unrealized appreciation and depreciation in value of the
investments owned by the Series, as computed on a federal income tax basis,
are as follows:
Aggregate cost $2,330,688
----------
Gross unrealized depreciation $ (39,599)
Gross unrealized appreciation 408
----------
Net unrealized depreciation $ (39,191)
==========
(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. Transactions in
Series shares were as follows:
YEAR ENDED DECEMBER YEAR ENDED DECEMBER
31, 1999 31, 1998
--------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------
Shares sold 180,166 $1,844,305 187,508 $1,935,225
Shares issued to shareholders in
reinvestment of distributions 12,742 124,999 6,486 65,828
Shares reacquired (144,715) (1,490,959) (84,291) (872,605)
-------- ---------- ------- ----------
Net increase 48,193 $ 478,345 109,703 $1,128,448
======== ========== ======= ==========
(6) Line of Credit
The Series and other affiliated funds participate in an $820 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, 1999, was $23. The Series had no
borrowings during the year.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of the MFS Variable Insurance Trust and Shareholders of MFS
Limited Maturity Series:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS Limited Maturity Series (the Series) (one
of the series constituting MFS Variable Insurance Trust) as of December 31,
1999, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the four years in the period
then ended. 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 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 securities owned at December
31, 1999 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 Limited Maturity
Series at December 31, 1999, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the four years in the
period then ended, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 3, 2000
<PAGE>
MFS' YEAR 2000 READINESS DISCLOSURE
MFS Investment Management(R), as an investment adviser and
on behalf of the MFS funds, is committed to the effective
use of technology in managing our portfolio investments,
delivering high-quality service to MFS fund shareholders, [Graphic Omitted]
retirement plan participants, and MFS' institutional
clients, and supporting the financial consultants who sell
our products.
MFS can now say that it is ready for the Year 2000. Our testing has demonstrated
that MFS' computer hardware and software will recognize "00" as the Year 2000
and will not confuse those digits with 1900. All of our critical business
applications and processes have been successfully tested, and we have adopted
companywide policies that will help us maintain our readiness through the
remainder of the year. Any new technology that is brought into the company
before the end of the year will be held to the same stringent standards as our
current technology. We have also developed a vendor readiness survey, contacted
over 700 of our vendors, and established an ongoing process to review responses,
as well as to review readiness statements of new vendors and products.
MFS recognizes that fund shareholders and institutional clients also are
concerned about whether the companies whose securities are held in their
portfolios are addressing Y2K issues. As part of the MFS Original Research(R)
process of evaluating portfolio investments, one of the many relevant factors
that MFS' portfolio managers and research analysts may consider is a company's
Y2K readiness.
Y2K readiness is an enormously complex, worldwide issue. No company or
institution can guarantee that it will be unaffected by the Y2K issue. While
MFS is taking significant steps to protect the integrity of its internal
systems, there can be no assurance that these steps will be sufficient to
avoid any adverse impact on MFS fund shareholders, retirement plan
participants, or institutional clients.
If you have further questions regarding MFS' Year 2000 Readiness Program, please
visit our Web site at www.mfs.com, call our toll-free line, 1-800-637-4406, or
write to the MFS Year 2000 Program Management Office by e-mail at [email protected] or
by letter at 500 Boylston Street, Boston, MA 02116-3741.
<PAGE>
(C) 2000 MFS Investment Management(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116
VLM-2 02/00 1M
