<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT ANNUAL REPORT
We invented the mutual fund(R) DECEMBER 31, 1999
[graphic omitted]
A SERIES OF MFS(R) VARIABLE INSURANCE TRUST(SM)
MFS(R) GLOBAL
GOVERNMENTS SERIES
(FORMERLY MFS(R) WORLD GOVERNMENTS SERIES
<PAGE>
<TABLE>
MFS(R) GLOBAL GOVERNMENTS 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 T. Swanson*
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 Management
+ 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 year ended December 31, 1999, the Series provided a total return of
- -2.50% (including the reinvestment of any distributions). This compares to a
- -5.08% return for the J.P. Morgan Global Government Bond Index (the Morgan
Index), an aggregate index of actively traded government bonds issued by 13
countries, including the United States, with remaining maturities of at least
one year.
Our investments in the emerging markets, mortgages, and corporate bonds served
us very well, though corporate bonds had hurt us a bit earlier in the year.
After performing well during the first four to five months of the year,
corporate bond yields increased (and prices dropped) from June to September.
That hurt the portfolio's holdings in high-yield and investment-grade
corporate bonds. During the past few months, though, yields came back down
again and prices went up. Mortgages went through a similar cycle, helping us
earlier in the year, suffering a setback in the summer, and then coming back
nicely in the fall.
Our exposure to European currency hurt us a bit when the euro collapsed. Still,
the portfolio suffered less than the Morgan Index. What helped us was the fact
that we changed the portfolio's currency exposure to 75% dollar and 25% foreign
currency during the year, from our previous neutral position of about 40% dollar
and 60% foreign currency. The fact that more of the portfolio's assets were
denominated in dollars, rather than in foreign currency, meant it was less
susceptible to the volatility in the currency markets during the year.
Because corporate-bond yields have come down again, we have been and continue
to be optimistic about this sector. We started the year heavily invested in
high-yield corporates but we've since balanced that out with high-grade
corporate bonds. While we have a positive outlook on corporates in general,
we're a little cautious on high-yield bonds specifically, since we've seen a
rise in defaults in these bonds at a time when the economy is still pretty
robust. We do have a positive outlook for mortgages, given that we expect
these yields to come down further. We also favor European corporate bonds,
because that market is just developing, and there seems to be a strong
appetite for them. We think the demand for these bonds will continue, and we
plan to add to our investments in Europe. Finally, we still like the emerging
markets, although their yields have now dropped to a lower range.
We have overweighted our holdings in dollar-bloc countries like New Zealand
and Australia versus the index. In government bonds only, we've been somewhat
tilted toward Europe, favoring the non-EMU (European monetary union) countries
like Sweden, Denmark, Greece, and the United Kingdom.
I think Greece has been and will continue to be a very interesting market. It
is expected to join EMU at the end of next year. Greece is the last of the
high-yield markets projected to drop its bond yields toward those of current
EMU countries. That makes it an attractive market. We've been investing all
year in drachma-denominated paper and Greek government paper issued in euros.
We have also been overweighted in Sweden and Denmark. Sweden has been a bit of
a rollercoaster ride, performing very well in the first few months of the
year, selling off sharply in March and April based on changing sentiment as to
whether or not they would join EMU, and now coming back most of the way.
We have invested in some Japanese bonds this year, ranging from 7% to 12% of
the portfolio's assets and currently at 10%, because this market has been a
good diversifier. Because of weakness in the Japanese economy and lack of
inflation, they haven't suffered from the same cycles and yield pressures as
the United States and Europe. So, we feel Japan has longer-term secular
prospects of a substantial rise in yield as the recovery takes hold.
We are fairly optimistic that the emerging markets will continue to recover.
Still, though some of these markets have bounced back very vigorously, we tend
to treat that with a grain of salt. They dropped off so sharply that a similar
bounce back seems natural to us. Barring another crisis, we believe most of
the recovery in markets like Latin America and Asia is probably sustainable
for the next few years. The tough question is whether they've made enough
progress on restructuring to avoid a similar crisis five years from now.
Regarding our investments in the emerging markets, although these yields have
come down quite a bit, we feel there are positive developments that could help
move them down further. That could provide opportunities for good performance
from these markets going forward. During the year, we have invested from 5% to
15% in the emerging markets, and we're currently at about 8%. We may add to
that a bit, perhaps going up to 10%, but we're not likely to invest a lot more
in these markets at this point.
Because global growth and the threat of a pickup in inflation are keeping
upward pressure on yields, we're most cautious on duration (an indicator of
interest-rate sensitivity). We're a bit defensive and concerned that rates may
be rising here, but we're not expecting a huge sell-off. We think that
ultimately the inflation threat will be modest -- particularly with the
central banks trying to keep rates down. So, we're not basing our investments
on the idea that inflation will get out of control.
Respectfully,
/s/ James T. Swanson
James T. Swanson
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.
<PAGE>
PORTFOLIO MANAGER'S PROFILE
James T. Swanson is Senior Vice President of MFS Investment Management(R). He
is portfolio manager of MFS(R) Strategic Income Fund, MFS(R) Global
Governments Fund, MFS(R) Global Governments Series (part of MFS(R) Variable
Insurance Trust(SM)), the Strategic Income Series offered through MFS(R)/Sun
Life annuity products, and two closed-end funds, MFS(R) Charter Income Trust
and MFS(R) Multimarket Income Trust.
Mr. Swanson joined MFS in 1985 as Vice President and was named Senior Vice
President in 1989. He is a graduate of Colgate University and the Harvard
University Graduate School of Business Administration. Mr. Swanson is a
Chartered Financial Analyst.
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.
SERIES FACTS
Objective: Seeks income and capital appreciation.
Commencement of investment operations: June 14, 1994
Size: $45.1 million net assets as of December 31, 1999
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 the exchange privilege and 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>
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,
June 14, 1994, through December 31, 1999. Index information is from
June 1, 1994.)
MFS Global J.P. Morgan Global
Governments Series Government Bond Index
------------------ ---------------------
June, 1994 $10,000 $10,000
December, 1995 11,528 12,271
December, 1996 11,993 12,811
December, 1997 11,858 12,990
December, 1998 12,794 14,980
December, 1999 12,475 14,219
<TABLE>
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN THROUGH DECEMBER 31, 1999
<CAPTION>
1 Year 3 Years 5 Years Life*
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return -2.50% +4.02% +23.77% +24.75%
- ---------------------------------------------------------------------------------------------------------------------
Average Annual Total Return -2.50% +1.32% + 4.36% + 4.07%
- ---------------------------------------------------------------------------------------------------------------------
COMPARATIVE INDEX(+)
1 Year 3 Years 5 Years Life*
- ---------------------------------------------------------------------------------------------------------------------
J.P. Morgan Global Government Bond Index#(+) -5.08% +3.54% + 6.69% + 6.51%
- ---------------------------------------------------------------------------------------------------------------------
* For the period from the commencement of the Series' investment operations, June 14, 1994, through December 31, 1999.
Index information is from June 1, 1994.
(+) Average annual rates of return.
# Source: Standard & Poor's Micropal, Inc.
</TABLE>
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.
Investments in foreign securities may be favorably or unfavorably affected by
changes in interest rates and currency exchange rates, market conditions, and
the economic and political conditions of the countries where investments are
made. These securities may provide greater returns but also involve greater
risk than U.S. investments. These risks may increase share price volatility.
Please see prospectus for details.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS - December 31, 1999
Bonds - 89.0%
<CAPTION>
- -----------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Bonds - 67.0%
Automotive - 5.3%
Ford Motor Credit Co., 6.375s, 2008 $ 425 $ 392,828
Ford Motor Credit Co., 6.7s, 2004 1,250 1,223,437
General Motors Corp., 9.4s, 2021 662 768,085
-----------
$ 2,384,350
- -----------------------------------------------------------------------------------------------------
Banks and Credit Companies - 0.3%
Midland Funding Corp., 10.33s, 2002 $ 121 $ 124,150
- -----------------------------------------------------------------------------------------------------
Container, Forest and Paper Products - 2.2%
Gaylord Container Corp., 9.75s, 2007 $ 500 $ 470,000
Riverwood International Corp., 10.25s, 2006 500 507,500
-----------
$ 977,500
- -----------------------------------------------------------------------------------------------------
Entertainment - 1.0%
Time Warner Entertainment Co. LP, 8.375s, 2033 $ 427 $ 442,795
- -----------------------------------------------------------------------------------------------------
Industrial - 1.1%
Hayes Wheels International, Inc., 9.125s, 2007 $ 500 $ 483,750
- -----------------------------------------------------------------------------------------------------
Media - 3.2%
Adelphia Communications Corp., 8.375s, 2008 $ 500 $ 465,000
Chancellor Media Corp., 8.125s, 2007 500 501,250
Hollinger International Publishing, Inc., 9.25s, 2007 500 492,500
-----------
$ 1,458,750
- -----------------------------------------------------------------------------------------------------
Medical and Health Products - 0.3%
Tenet Healthcare, 0s, 2002 $ 176 $ 137,720
- -----------------------------------------------------------------------------------------------------
Metals and Minerals - 1.1%
AK Steel Holdings Corp., 9.125s, 2006 $ 500 $ 507,500
- -----------------------------------------------------------------------------------------------------
Telecommunications - 6.0%
Charter Communications Holdings, 8.25s, 2007 $ 500 $ 465,000
Nextel Communications, Inc. 0s to 2003, 9.95s to 2008 1,000 702,500
Nextlink Communications, Inc., 10.75s, 2009 500 515,000
PSINET, Inc., 11s, 2009 500 515,000
United Pan Europe, 10.875s, 2009## 500 511,250
-----------
$ 2,708,750
- -----------------------------------------------------------------------------------------------------
U.S. Federal Agencies - 7.6%
FNMA, 1.75s, 2008 JPY 50,000 $ 499,853
GNMA, 6.5s, 2027 - 2028 $ 3,141 2,947,652
---------------
$ 3,447,505
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 38.9%
U.S. Treasury Bonds, 9.875s, 2015 $ 440 $ 569,114
U.S. Treasury Bonds, 5.25s, 2028 392 322,910
U.S. Treasury Bonds, 5.25s, 2029 5,488 4,537,862
U.S. Treasury Notes, 5.5s, 2000 1,000 998,750
U.S. Treasury Notes, 6.625s, 2002 1,900 1,914,554
U.S. Treasury Notes, 5.5s, 2003 5,459 5,328,059
U.S. Treasury Notes, 6.5s, 2005 3,500 3,501,085
U.S. Treasury Notes, 6s, 2009 361 349,719
-----------
$17,522,053
- -----------------------------------------------------------------------------------------------------
Total U.S. Bonds $30,194,823
- -----------------------------------------------------------------------------------------------------
Foreign Bonds - 22.0%
Bulgaria - 1.1%
Hermes Europe Railtel BV, 10.375s, 2009
(Telecommunications) $ 500 $ 495,000
- -----------------------------------------------------------------------------------------------------
Canada - 1.1%
Government of Canada, 5s, 2004 CAD 746 $ 490,536
- -----------------------------------------------------------------------------------------------------
Denmark - 1.3%
Nykredit (Mortgage Banks), 6s, 2029 DKK 2,313 $ 291,557
Nykredit (Mortgage Banks), 7s, 2032 2,217 292,281
-----------
$ 583,838
- -----------------------------------------------------------------------------------------------------
France - 1.6%
Republic of France, 3.5s, 2004 EUR 307 $ 292,793
Republic of France, 4s, 2009 470 421,270
-----------
$ 714,063
- -----------------------------------------------------------------------------------------------------
Germany - 3.8%
Depfa Pfandbriefbank, 5.5s, 2010 (Banks and Credit Cos.) EUR 140 $ 138,104
Federal Republic of Germany, 4.5s, 2009 1,041 981,818
Treuhandanstalt, 6.625s, 2003 428 456,039
Deutschland Republic, 6.875s, 2005 31 33,858
Deutschland Republic, 6.5s, 2027 79 84,852
-----------
$ 1,694,671
- -----------------------------------------------------------------------------------------------------
Greece - 2.2%
Hellenic Republic, 8.01s, 2003 GRD 104,000 $ 339,099
Hellenic Republic, 8.7s, 2005 84,000 281,197
Hellenic Republic, 5.75s, 2008 EUR 357 357,018
-----------
$ 977,314
- -----------------------------------------------------------------------------------------------------
Italy - 1.0%
Republic of Italy, 5s, 2008 EUR 481 $ 468,865
- -----------------------------------------------------------------------------------------------------
Norway - 0.6%
Union Bank Norway, 7.35s, 2049 (Banks and Credit Cos.)## $ 300 $ 288,399
- -----------------------------------------------------------------------------------------------------
Spain - 1.9%
Government of Spain, 6s, 2008 EUR 812 $ 844,532
- -----------------------------------------------------------------------------------------------------
Sweden - 2.0%
Kingdom of Sweden, 6s, 2005 SEK 7,500 $ 903,090
- -----------------------------------------------------------------------------------------------------
United Kingdom - 5.4%
Esat Telecom Group PLC, 11.875s, 2008 (Telecommunications) $ 500 $ 556,250
United Kingdom Treasury, 7s, 2002 GBP 488 798,364
United Kingdom Treasury, 6.75s, 2004 665 1,103,499
-----------
$ 2,458,113
- -----------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 9,918,421
- -----------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $42,036,269) $40,113,244
- -----------------------------------------------------------------------------------------------------
Preferred Stock - 1.2%
- -----------------------------------------------------------------------------------------------------
SHARES
- -----------------------------------------------------------------------------------------------------
Communication Services - 1.2%
CSC Holdings, Inc., 11.125% (Telecommunications)*
(Identified Cost, $543,750) 5,139 $ 557,582
- -----------------------------------------------------------------------------------------------------
Short-Term Obligations - 7.6%
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., due 1/03/00, at
Amortized Cost $ 3,415 $ 3,414,715
- -----------------------------------------------------------------------------------------------------
Call Options Purchased - 0.3%
- -----------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
OF CONTRACTS
ISSUER/EXPIRATION MONTH/STRIKE PRICE (000 OMITTED)
- -----------------------------------------------------------------------------------------------------
Canadian Dollars/September/1.4518 CAD 3,073 $ 46,820
Japanese Yen/February/130.2 JPY 60,000 17,557
Japanese Yen/February/128 90,000 43,688
Swiss Francs/Euro/February/1.59 CHF 6,781 2,265
- -----------------------------------------------------------------------------------------------------
Total Call Options Purchased (Premiums Paid, $86,495) $ 110,330
- -----------------------------------------------------------------------------------------------------
Put Options Purchased
- -----------------------------------------------------------------------------------------------------
Euro/February/1.05 EUR 3,333 $ 12,617
Japanese Yen/January/110 JPY 6,997 2,043
Japanese Yen/February/109.75 325,148 2,601
- -----------------------------------------------------------------------------------------------------
Total Put Options Purchased (Premiums Paid, $40,123) $ 17,261
- -----------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $46,121,352) $44,213,132
- -----------------------------------------------------------------------------------------------------
Call Options Written - (0.1)%
- -----------------------------------------------------------------------------------------------------
Australian Dollars/April/.625 AUD 2,454 $ (12,396)
Canadian Dollars/September/1.4 CAD 2,963 (16,043)
British Pounds/February/1.585 GBP 3,351 (11,489)
- -----------------------------------------------------------------------------------------------------
Total Call Options Written (Premiums Received, $68,268) $ (39,928)
- -----------------------------------------------------------------------------------------------------
Put Options Written
- -----------------------------------------------------------------------------------------------------
Canadian Dollars/September/1.55 CAD 3,281 $ (2,871)
Japanese Government Bonds/February/130.2 JPY 60,000 (2,290)
Japanese Government Bonds/February/128 90,000 (1,409)
- -----------------------------------------------------------------------------------------------------
Total Call Options Written (Premiums Received, $52,793) $ (6,570)
- -----------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 2.0% 893,918
- -----------------------------------------------------------------------------------------------------
Net Assets - 100.0% $45,060,552
- -----------------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
Abbreviations have been used throughout this report to indicate amounts in currencies other than the
U.S. dollar. A list of abbreviations is shown below.
AUD = Australian Dollars GRD = Greek Drachma
CAD = Canadian Dollars HKD = Hong Kong Dollars
CHF = Swiss Francs JPY = Japanese Yen
DKK = Danish Kroner NZD = New Zealand Dollars
EUR = Euro PLN = Polish Zloty
GBP = British Pounds SEK = Swedish Kronor
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
<CAPTION>
- ------------------------------------------------------------------------------------------
DECEMBER 31, 1999
- ------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at value (identified cost, $46,121,352) $44,213,132
Cash 3,933
Net receivable for forward foreign currency exchange contracts to purchase 46,687
Net receivable for forward foreign currency exchange contracts
subject to master netting agreements 38,861
Receivable for Series shares sold 222,576
Interest receivable 790,938
Receivable from investment adviser 7,028
-----------
Total assets $45,323,155
-----------
Liabilities:
Payable for Series shares reacquired $ 207,187
Net payable for forward foreign currency exchange contracts to sell 7,676
Written options outstanding, at value (premiums received, $121,061) 46,498
Payable to affiliates -
Management fee 928
Accrued expenses and other liabilities 314
-----------
Total liabilities $ 262,603
-----------
Net assets $45,060,552
===========
Net assets consist of:
Paid-in capital $45,701,554
Unrealized depreciation on investments and translation of assets and
liabilities in foreign currencies (1,762,962)
Accumulated net realized loss on investments and foreign currency
transactions (1,037,851)
Accumulated undistributed net investment income 2,159,811
-----------
Total $45,060,552
===========
Shares of beneficial interest outstanding 4,491,731
=========
Net asset value per share
(net assets / shares of beneficial interest outstanding) $10.03
======
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statement of Operations
<CAPTION>
- ------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1999
- ------------------------------------------------------------------------------------------
<S> <C>
Net investment income:
Interest income $ 2,819,441
-----------
Expenses -
Management fee $ 341,433
Administrative fee 5,881
Trustees' compensation 2,430
Shareholder servicing agent fee 15,932
Custodian fee 28,667
Printing 46,335
Auditing fees 34,949
Amortization of organization expenses 662
Legal fees 1,981
Miscellaneous 742
-----------
Total expenses $ 479,012
Fees paid indirectly (3,557)
Reduction of expenses by investment adviser (20,210)
-----------
Net expenses $ 455,245
-----------
Net investment income $ 2,364,196
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $(1,687,127)
Written option transactions 222,646
Foreign currency transactions 824,612
-----------
Net realized loss on investments and foreign currency transactions $ (639,869)
-----------
Change in unrealized appreciation (depreciation) -
Investments $(2,878,131)
Written options 39,382
Translation of assets and liabilities in foreign currencies (23,450)
-----------
Net unrealized loss on investments and foreign currency translation $(2,862,199)
-----------
Net realized and unrealized loss on investments and foreign
currency $(3,502,068)
-----------
Decrease in net assets from operations $(1,137,872)
===========
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
<CAPTION>
- ---------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1999 1998
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 2,364,196 $ 2,130,129
Net realized loss on investments and foreign currency
transactions (639,869) (62,334)
Net unrealized gain (loss) on investments and foreign
currency translation (2,862,199) 1,161,232
----------- -----------
Increase (decrease) in net assets from operations $(1,137,872) $ 3,229,027
----------- -----------
Distributions declared to shareholders -
From net investment income $(2,491,294) $ (492,887)
----------- -----------
Net increase in net assets from Series share
transactions $ 2,724,216 $ 5,170,895
----------- -----------
Total increase (decrease) in net assets $ (904,950) $ 7,907,035
Net assets:
At beginning of year 45,965,502 38,058,467
----------- -----------
At end of year (including accumulated undistributed
net investment income of $2,159,811 and $2,027,310,
respectively) $45,060,552 $45,965,502
=========== ===========
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Financial Highlights
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $10.88 $10.21 $10.58 $10.17 $ 9.82
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.54 $ 0.53 $ 0.61 $ 0.60 $ 0.63
Net realized and unrealized gain (loss)
on investments and foreign currency (0.80) 0.27 (0.73) (0.19) 0.78
------ ------ ------ ------ ------
Total from investment operations $(0.26) $ 0.80 $(0.12) $ 0.41 $ 1.41
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.59) $(0.13) $(0.17) $ -- $(0.42)
From net realized gain on investments and
foreign currency transactions -- -- (0.08) -- --
In excess of net investment income -- -- -- -- (0.54)
In excess of net realized gain on
investments and foreign currency
transactions -- -- -- + -- --
From paid-in capital -- -- -- -- (0.10)
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.59) $(0.13) $(0.25) $ -- $(1.06)
------ ------ ------ ------ ------
Net asset value - end of period $10.03 $10.88 $10.21 $10.58 $10.17
====== ====== ====== ====== ======
Total return (2.50)% 7.90% (1.13)% 4.03% 14.38%
Ratios (to average net assets)/Supplemental
data(S):
Expenses## 1.01% 1.01% 1.00% 1.00% 1.00%
Net investment income 5.19% 5.11% 5.96% 5.84% 6.05%
Portfolio turnover 128% 270% 335% 361% 211%
Net assets at end of period (000 Omitted) $45,061 $45,966 $38,058 $26,023 $7,424
(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 of not
greater than 0.25% of 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 $ 0.54 $ 0.52 $ 0.59 $ 0.50 $ 0.53
Ratios (to average net assets):
Expenses## 1.05% 1.11% 1.15% 2.03% 1.99%
Net investment income 5.15% 5.01% 5.81% 4.81% 5.09%
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
+ Per share amount was less than $0.01 per share.
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Global Governments Series, formerly known as MFS World Government Series
(the Series), is a non-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, 1999, there were 29
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. The Series
can invest in foreign securities. 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 - Debt securities (other than short-term obligations
which mature in 60 days or less), including listed issues, forward contracts,
and swap agreements, 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. Futures contracts, options,
and options on futures contracts listed on commodities exchanges are reported
at market value using closing settlement prices. Over-the-counter currency
options are valued through the use of a pricing model which takes into account
foreign currency exchange spot and forward rates, implied volatility, and
short-term repurchase rates. Securities for which there are no such quotations
or valuations are valued in good faith by 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 results from fluctuations in foreign currency
exchange rates is not separately disclosed.
Written Options - The Series may write call or put options in exchange for a
premium. The premium is initially recorded as a liability which is
subsequently adjusted to the current value of the options contract. When a
written option expires, the Series realizes a gain equal to the amount of the
premium received. When a written call option is exercised or closed, the
premium received is offset against the proceeds to determine the realized gain
or loss. When a written put option is exercised, the premium reduces the cost
basis of the security purchased by the Series. The Series, as writer of an
option, may have no control over whether the underlying securities may be sold
(call) or purchased (put) and, as a result, bears the market risk of an
unfavorable change in the price of the securities underlying the written
option. In general, written call options may serve as a partial hedge against
decreases in value in the underlying securities to the extent of the premium
received. Written options may also be used as part of an income producing
strategy reflecting the view of the Series' management on the direction of
interest rates.
Forward Foreign Currency Exchange Contracts - The Series may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties to
meet the terms of their contracts and from unanticipated movements in the value
of a foreign currency relative to the U.S. dollar. The Series may enter into
forward contracts for hedging purposes as well as for non-hedging purposes. For
hedging purposes, the Series may enter into contracts to deliver or receive
foreign currency it will receive from or require for its normal investment
activities. The Series may also use contracts in a manner intended to protect
foreign currency-denominated securities from declines in value due to
unfavorable exchange rate movements. For non-hedging purposes, the Series may
enter into contracts with the intent of changing the relative exposure of the
Series' portfolio of securities to different currencies to take advantage of
anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains or
losses on foreign currency transactions.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
discount is amortized 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' 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. This amount is shown as a reduction of expenses on the Statement
of Operations.
Tax Matters and Distributions - The Series' policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Series files a tax
return annually using tax accounting methods required under provisions of the
code, which may differ from generally accepted accounting principles, the
basis on which these financial statements are prepared. Accordingly, the
amount of net investment income and net realized gain reported on these
financial statements may differ from that reported on the series' tax return
and, consequently, the character of distributions to shareholders reported in
the financial highlights may differ from that reported 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 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, $259,599 was reclassified from
accumulated undistributed net realized gain on investments and foreign
currency transactions to accumulated undistributed net investment income due
to differences between book and tax accounting for mortgage-backed securities
currency transactions. This change had no effect on the net assets or net
asset value per share. At December 31, 1999, accumulated undistributed net
investment income and realized gain on investments and foreign currency
transactions under book accounting were different from tax accounting due to
temporary differences in accounting for currency transactions and capital loss
carryforward.
At December 31, 1999, the Series, for federal income tax purposes, had a
capital loss carryforward of $980,034 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, ($28,643) and December 31,
2007, ($951,391).
(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 0.75%
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 0.25% of average
daily net assets. This is reflected as a reduction of expenses in the
Statement of Operations. 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, aggregate unreimbursed
expenses amounted to $365,695.
Each 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).
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 annual rate of
0.035%.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, were as follows:
PURCHASES SALES
- --------------------------------------------------------------------------------
U.S. government securities $20,880,050 $18,323,653
=========== ===========
Investments (non-U.S. government securities) $38,273,080 $35,028,707
=========== ===========
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the Series, as computed on a federal income tax basis,
are as follows:
Aggregate cost $46,208,027
===========
Gross unrealized appreciation $ 461,350
Gross unrealized depreciation (2,456,245)
-----------
Net unrealized depreciation $(1,994,895)
===========
(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:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,906,772 $ 29,919,050 3,079,990 $ 32,082,673
Shares issued to shareholders in
reinvestment of distributions 242,344 2,491,294 48,322 492,887
Shares reacquired (2,882,052) (29,686,128) (2,631,510) (27,404,665)
---------- ------------ ---------- ------------
Net increase 267,064 $ 2,724,216 496,802 $ 5,170,895
========== ============ ========== ============
</TABLE>
(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 series, based on its borrowings, at
a rate equal to the bank's base rate. In addition, a commitment fee, based on
the average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fee allocated
to the Series for the year ended December 31, 1999, was $368. The Series had
no borrowings during the period year.
(7) Financial Instruments
The Series trades financial instruments with off-balance-sheet risk in the
normal course of its investing activities in order to manage exposure to
market risks such as interest rates and foreign currency exchange rates. These
financial instruments include written options, forward foreign currency
exchange contracts, swap agreements, and futures contracts. The notional or
contractual amounts of these instruments represent the investment the Series
has in particular classes of financial instruments and does not necessarily
represent the amounts potentially subject to risk. The measurement of the
risks associated with these instruments is meaningful only when all related
and offsetting transactions are considered.
<TABLE>
Written Option Transactions
NUMBER OF
CONTRACTS PREMIUMS
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding, beginning of period 4 $106,784
Options written 49 835,100
Options terminated in closing transactions (28) (494,394)
Options exercised (18) (320,421)
Options expired (1) (6,008)
-- --------
Outstanding, end of period 6 $121,061
</TABLE>
At December 31, 1999, the Series had sufficient cash and/or securities at
least equal to the value of the written options.
<TABLE>
Forward Foreign Currency Exchange Contracts
<CAPTION>
NET UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales 3/15/00 AUD 498,347 $ 317,871 $ 326,053 $(8,182)
3/15/00 DKK 10,775,457 1,496,736 1,466,739 29,997
2/17/00 - 3/15/00 EUR 1,535,106 1,558,992 1,553,781 5,211
4/17/00 - 4/25/00 HKD 34,449,018 4,395,219 4,430,354 (35,135)
9/15/00 JPY 134,728,262 1,334,048 1,333,615 433
----------- ----------- -------
$ 9,102,866 $ 9,110,542 $(7,676)
=========== =========== =======
Purchases 3/15/00 AUD 1,486,728 $ 955,791 $ 972,720 $16,929
3/15/00 CAD 540,467 365,675 373,730 8,055
3/15/00 CHF 3,152,795 2,047,934 1,996,998 (50,936)
3/15/00 EUR 1,413,577 1,428,404 1,431,063 2,659
4/17/00 - 4/25/00 HKD 17,466,694 2,231,081 2,246,212 15,131
3/15/00 JPY 371,225,901 3,625,253 3,674,601 49,348
3/15/00 NZD 92,186 47,172 48,093 921
2/17/00 PLN 1,241,920 292,000 296,580 4,580
----------- ----------- -------
$10,993,310 $11,039,997 $46,687
=========== =========== =======
</TABLE>
At December 31, 1999, forward foreign currency purchases and sales under
master netting agreements excluded above amounted to a net receivable of
$50,357 with Deutsche Bank and $31,769 with C.S. First Boston and a net
payable of $43,265 with Merrill Lynch.
At December 31, 1999, the Series had sufficient cash and/or securities to
cover any commitments under these contracts.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Variable Insurance Trust and Shareholders of MFS Global
Governments Series:
We have audited the accompanying statement of assets and liabilities of MFS
Global Govenments Series (the Series) (one of the series constituting the 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 five 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 as of December 31, 1999, 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 audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
Global Govenments Series as of 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 five 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
VWG-2 2/00 45M
