[MFS(RegTM) Logo
INVESTMENT MANGEMENT
We invented the mutual fund(RegTM)]
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MFS[RegTM] VARIABLE INSURANCE TRUST(SM)
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Prospectus
Initial Class
MAY 1, 2000
MFS[RegTM] EMERGING GROWTH SERIES
MFS[RegTM] CAPITAL OPPORTUNITIES SERIES
MFS[RegTM] UTILITIES SERIES
MFS[RegTM] HIGH INCOME SERIES
MFS[RegTM] GLOBAL GOVERNMENTS SERIES
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This Prospectus describes each of the five series of the MFS Variable Insurance
Trust (referred to as the trust):
1. MFS Emerging Growth Series seeks to provide long-term growth of capital
(referred to as the Emerging Growth Series).
2. MFS Capital Opportunities Series seeks capital appreciation (referred to as
the Capital Opportunities Series).
3. MFS Utilities Series seeks capital growth and current income (income above
that available from a portfolio invested entirely in equity securities)
(referred to as the Utilities Series).
4. MFS High Income Series seeks high current income by investing primarily in
a professionally managed diversified portfolio of fixed income securities,
some of which may involve equity features (referred to as the High Income
Series).
5. MFS Global Governments Series seeks income and capital appreciation
(referred to as the Global Governments Series).
The Securities and Exchange Commission has not approved the series' shares or
determined whether this prospectus is accurate or complete. Anyone who tells you
otherwise is committing a crime.
<PAGE>
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TABLE OF CONTENTS
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<TABLE>
<S> <C> <C>
Page
I Expense Summary ............................................ (1)
II Risk Return Summary ........................................ (2)
1. Emerging Growth Series ................................. (2)
2. Capital Opportunities Series ........................... (5)
3. Utilities Series ....................................... (8)
4. High Income Series ..................................... (13)
5. Global Governments Series .............................. (16)
III Certain Investment Strategies and Risks .................... (20)
IV Management of the Series ................................... (20)
V Description of Shares ...................................... (21)
VI Other Information .......................................... (21)
VII Financial Highlights ....................................... (22)
Appendix A -- Investment Techniques and Practices .......... (A-1)
</TABLE>
<PAGE>
The trust offers shares of its 16 series to separate accounts established
by insurance companies in order to serve as investment vehicles for
variable annuity and variable life insurance contracts and to qualified
pension and retirement plans. Each of these series is managed by
Massachusetts Financial Services Company (referred to as MFS or the
adviser). Five of these are described below.
--------------------
I EXPENSE SUMMARY
--------------------
(>) Expense Table
This table describes the expense that you may pay when you hold initial
class shares of the series. These fees and expenses do not take into
account the fees and expenses imposed by insurance companies through which
your investment in a series may be made.
Annual Series Operating Expenses (expenses that are deducted from a series'
assets):
<TABLE>
<CAPTION>
Emerging Capital
Growth Opportunities
Series Series
---------- ------------------
<S> <C> <C>
Management Fee ................................. 0.75% 0.75%
Other Expenses(1) .............................. 0.09% 0.27%
---- -----
Total Annual Series Operating Expenses ......... 0.84% 1.02%
Expense Reimbursement ......................... N/A (0.11)%(2)
---- -----
Net Expenses(1) ............................... 0.84% 0.91%
<CAPTION>
High Global
Utilities Income Governments
Series Series Series
----------- ------------------ ------------------
<S> <C> <C> <C>
Management Fee ................................. 0.75% 0.75% 0.75%
Other Expenses(1) .............................. 0.16% 0.22% 0.30%
---- ----- -----
Total Annual Series Operating Expenses ......... 0.91% 0.97% 1.05%
Expense Reimbursement ......................... N/A (0.06)%(2) (0.14)%(2)
---- ----- -----
Net Expenses(1) ............................... 0.91% 0.91% 0.91%
</TABLE>
---------
(1) Each series has an expense offset arrangement which reduces the
series' custodian fee based upon the amount of cash maintained by the
series with its custodian and dividend disbursing agent. Each series
may enter into other such arrangements and directed brokerage
arrangements, which would also have the effect of reducing the series'
expenses. "Other Expenses" do not take into account these expense
reductions, and are therefore higher than the actual expenses of the
series. Had these fee reductions been taken into account, "Net
Expenses" would be lower for certain series and would equal:
0.83% for Emerging Growth Series
0.90% for Capital Opportunities Series
0.90% for Utilities Series
0.90% for High Income Series
0.90% for Global Governments Series
(2) MFS has contractually agreed, subject to reimbursement, to bear
expenses for these series such that each such series' "Other Expenses"
(after taking into account the expense offset arrangement described
above), do not exceed the following percentages of the average daily
net assets of the series during the current fiscal year:
0.15% for Capital Opportunities Series
0.15% for High Income Series
0.15% for Global Governments Series
These contractual fee arrangements will continue until at least May 1,
2001, unless changed with the consent of the board of trustees which
oversees the series.
(>) Example of Expenses--Initial Class
These examples are intended to help you compare the cost of investing in
the series with the cost of investing in other mutual funds. These examples
do not take into account the fees and expenses imposed by insurance
companies through which your investment in a series may be made.
The examples assume that:
o You invest $10,000 in the series for the time periods indicated and
you redeem your shares at the end of the time periods;
o Your investment has a 5% return each year and dividends and other
distributions are reinvested; and
o The series' operating expenses remain the same, except that the
series' total operating expenses are assumed to be the series' "Net
Expenses" for the first year, and the series' "Total Annual Series
Operating Expenses" for subsequent years (see the expense table on the
previous page).
Although your actual costs may be higher or lower, under these assumptions
your costs would be:
<TABLE>
<CAPTION>
Period
---------------------------------------
Series 1 Year 3 Years 5 Years 10 Years
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Emerging Growth Series $86 $268 $466 $1,037
Capital Opportunities Series 93 314 553 1,238
Utilities Series 93 290 504 1,120
High Income Series 93 303 530 1,184
Global Governments Series 93 320 566 1,270
</TABLE>
1
<PAGE>
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II RISK RETURN SUMMARY
------------------------
Investment strategies which are common to all series are described under
the caption "Certain Investment Strategies."
1: Emerging Growth Series
...........................................................................
(>) Investment Objective
The series' investment objective is long term growth of capital. The
series' objective may be changed without shareholder approval.
(>) Principal Investment Policies
The series invests, under normal market conditions, at least 65% of its
total assets in common stocks and related securities, such as preferred
stocks, convertible securities and depositary receipts for those
securities, of emerging growth companies. Emerging growth companies are
companies which MFS believes are either:
o early in their life cycle but which have the potential to become major
enterprises, or
o major enterprises whose rates of earnings growth are expected to
accelerate because of special factors, such as rejuvenated management,
new products, changes in consumer demand, or basic changes in the
economic environment.
Emerging growth companies may be of any size, and MFS would expect these
companies to have products, technologies, management, markets and
opportunities which will facilitate earnings growth over time that is well
above the growth rate of the overall economy and the rate of inflation. The
series' investments may include securities listed on a securities exchange
or traded in the over-the-counter (OTC) markets.
MFS uses a bottom-up, as opposed to a top-down, investment style in
managing the equity-oriented funds (such as the series) it advises. This
means that securities are selected based upon fundamental analysis (such as
an analysis of earnings, cash flows, competitive position and management's
abilities) performed by the series' portfolio manager and MFS' large group
of equity research analysts.
The series may invest in foreign securities (including emerging market
securities), through which it may have exposure to foreign currencies.
The series has engaged and may engage in active and frequent trading to
achieve its principal investment strategies.
(>) Principal Risks of an Investment
The principal risks of investing in the series and the circumstances
reasonably likely to cause the value of your investment in the series to
decline are described below. The share price of the series generally
changes daily based on market conditions and other factors. Please note
that there are many circumstances which could cause the value of your
investment in the series to decline, and which could prevent the series
from achieving its objective, that are not described here.
The principal risks of investing in the series are:
o Market Risk: This is the risk that the price of a security held by the
series will fall due to changing economic, political or market
conditions or disappointing earnings results.
o Emerging Growth Risk: Prices of securities react to the economic
condition of the company that issued the security. The series' equity
investments in an issuer may rise and fall based on the issuer's
actual and anticipated earnings, changes in management and the
potential for takeovers and acquisitions. Investments in emerging
growth companies may be subject to more abrupt or erratic market
movements and may involve greater risks than investments in other
companies. Emerging growth companies often:
> have limited product lines, markets and financial resources
> are dependent on management by one or a few key individuals
> have shares which suffer steeper than average price declines
after disappointing earnings reports and are more difficult to
sell at satisfactory prices
o Over-the-Counter Risk: OTC transactions involve risks in addition to
those associated with transactions in securities traded on exchanges.
OTC-listed companies may have limited product lines, markets or
financial resources. Many OTC stocks trade less frequently and in
smaller volume than exchange-listed stocks. The values of these stocks
may be more volatile than exchange-listed stocks, and the series may
experience difficulty in establishing or closing out positions in
these stocks at prevailing market prices.
2
<PAGE>
o Foreign Securities Risk: Investments in foreign securities involve
risks relating to political, social and economic developments abroad,
as well as risks resulting from the differences between the
regulations to which U.S. and foreign issuers and markets are subject:
> These risks may include the seizure by the government of company
assets, excessive taxation, withholding taxes on dividends and
interest, limitations on the use or transfer of portfolio assets,
and political or social instability.
> Enforcing legal rights may be difficult, costly and slow in
foreign countries, and there may be special problems enforcing
claims against foreign governments.
> Foreign companies may not be subject to accounting standards or
governmental supervision comparable to U.S. companies, and there
may be less public information about their operations.
> Foreign markets may be less liquid and more volatile than U.S.
markets.
> Foreign securities often trade in currencies other than the U.S.
dollar, and the series may directly hold foreign currencies and
purchase and sell foreign currencies through forward exchange
contracts. Changes in currency exchange rates will affect the
series' net asset value, the value of dividends and interest
earned, and gains and losses realized on the sale of securities.
An increase in the strength of the U.S. dollar relative to these
other currencies may cause the value of the series to decline.
Certain foreign currencies may be particularly volatile, and
foreign governments may intervene in the currency markets,
causing a decline in value or liquidity in the series' foreign
currency holdings. By entering into forward foreign currency
exchange contracts, the series may be required to forego the
benefits of advantageous changes in exchange rates and, in the
case of forward contracts entered into for the purpose of
increasing return, the series may sustain losses which will
reduce its gross income. Forward foreign currency exchange
contracts involve the risk that the party with which the series
enters the contract may fail to perform its obligations to the
series.
o Emerging Markets Risk: Emerging markets are generally defined as
countries in the initial stages of their industrialization cycles with
low per capita income. Investments in emerging markets securities
involve all of the risks of investments in foreign securities, and
also have additional risks:
> All of the risks of investing in foreign securities are
heightened by investing in emerging markets countries.
> The markets of emerging markets countries have been more volatile
than the markets of developed countries with more mature
economies. These markets often have provided significantly higher
or lower rates of return than developed markets, and
significantly greater risks, to investors.
o Active or Frequent Trading Risk: The fund has engaged and may engage
in active and frequent trading to achieve its principal investment
strategies. This may result in the realization and distribution to
shareholders of higher capital gains as compared to a fund with less
active trading policies. Frequent trading also increases transaction
costs, which could detract from the fund's performance.
o As with any mutual fund, you could lose money on your investment in
the series.
An investment in the series is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
(>) Bar Chart and Performance Table
The bar chart and performance table below are intended to indicate some of
the risks of investing in the series by showing changes in the series'
performance over time. The performance table also shows how the series
performance over time compares with that of one or more broad measures of
market performance. The chart and table provide past performance
information based on calendar year periods. The series' past performance
does not necessarily indicate how the series will perform in the future.
The returns shown do not reflect fees and charges imposed under the
variable annuity and life insurance contracts through which an investment
may be made. If these fees and charges were included, they would reduce
these returns.
3
<PAGE>
Bar Chart
The bar chart shows changes in the annual total returns of the series'
initial class, assuming the reinvestment of distributions.
[Bar chart data]
<TABLE>
<S> <C>
1996 17.02%
1997 21.90%
1998 34.16%
1999 76.71%
</TABLE>
During the period shown in the bar chart, the highest quarterly return
was 55.05% (for the calendar quarter ended December 31, 1999) and the
lowest quarterly return was (13.11)% (for the calendar quarter ended
September 30, 1998).
Performance Table
This table shows how the average annual total returns of the series' shares
compares to a broad measure of market performance and various other market
indicators and assumes the reinvestment of distributions.
Average Annual Total Returns as of December 31, 1999
...........................................................................
<TABLE>
<CAPTION>
1 Year Life*
<S> <C> <C>
Emerging Growth Series--Initial Class 76.71% 36.44%
Russell 2000 Total Return Index**+ 21.26% 14.06%
Standard & Poor's 500 Composite Index**++ 21.04% 26.53%
</TABLE>
---------
* Series performance figures are for the period from the commencement of
the series' investment operations, July 24, 1995, through December 31,
1999. Index returns are from August 1, 1995.
** Source: Standard & Poor's Micropal, Inc.
+ The Russell 2000 Total Return Index is a broad-based, unmanaged index
comprised of 2,000 of the smallest U.S.-domiciled company common
stocks (on the basis of capitalization) that are traded in the United
States on the New York Stock Exchange (NYSE), the American Stock
Exchange (AMEX), and NASDAQ.
++ The Standard & Poor's 500 Composite Index is a broad-based, unmanaged,
but commonly used measure of common stock total return performance. It
is comprised of 500 widely held common stocks listed on the NYSE, AMEX
and over-the-counter market.
(>) Portfolio Manager
Toni Y. Shimura, a Senior Vice President of the Adviser, has been employed
in the investment management area of the Adviser since 1987. Ms. Shimura
became portfolio manager of the series on November 30, 1995. John W.
Ballen, Chief Investment Officer and President of MFS, provides general
oversight in the management of the series' portfolio.
4
<PAGE>
2: Capital Opportunities Series
...........................................................................
(>) Investment Objective
The series' investment objective is capital appreciation. The series'
objective may be changed without shareholder approval.
(>) Principal Investment Policies
The series invests, under normal market conditions, at least 65% of its
total assets in common stocks and related securities, such as preferred
stocks, convertible securities and depositary receipts for those
securities. The series focuses on companies which MFS believes have
favorable growth prospectus and attractive valuations based on current and
expected earnings or cash flow. The series' investments may include
securities listed on a securities exchange or traded in the
over-the-counter markets.
MFS uses a bottom-up, as opposed to a top-down, investment style in
managing the equity-oriented funds (such as the series) it advises. This
means that securities are selected based upon fundamental analysis (such as
an analysis of earnings, cash flows, competitive position and management's
abilities) performed by the series' portfolio manager and MFS' large group
of equity research analysts.
The series may invest in foreign securities (including emerging market
securities), through which it may have exposure to foreign currencies.
The series has engaged and may engage in active and frequent trading to
achieve its principal investment strategies.
(>) Principal Risks of an Investment
The principal risks of investing in the series and the circumstances
reasonably likely to cause the value of your investment in the series to
decline are described below. The share price of the series generally
changes daily based on market conditions and other factors. Please note
that there are many circumstances which could cause the value of your
investment in the series to decline, and which could prevent the series
from achieving its objective, that are not described here.
The principal risks of investing in the series are:
o Market Risk: This is the risk that the price of a security held by the
series will fall due to changing economic, political or market
conditions or disappointing earnings results.
o Company Risk: Prices of securities react to the economic condition of
the company that issued the security. The series' equity investments
in an issuer may rise and fall based on the issuer's actual and
anticipated earnings, changes in management and the potential for
takeovers and acquisitions.
o Over-the-Counter Risk: Over-the-counter (OTC) transactions involve
risks in addition to those associated with transactions in securities
traded on exchanges. OTC-listed companies may have limited product
lines, markets or financial resources. Many OTC stocks trade less
frequently and in smaller volume than exchange-listed stocks. The
values of these stocks may be more volatile than exchange-listed
stocks, and the series may experience difficulty in establishing or
closing out positions in these stocks at prevailing market prices.
o Foreign Securities Risk: Investments in foreign securities involve
risks relating to political, social and economic developments abroad,
as well as risks resulting from the differences between the
regulations to which U.S. and foreign issuers and markets are subject:
> These risks may include the seizure by the government of company
assets, excessive taxation, withholding taxes on dividends and
interest, limitations on the use or transfer of portfolio assets,
and political or social instability.
> Enforcing legal rights may be difficult, costly and slow in
foreign countries, and there may be special problems enforcing
claims against foreign governments.
> Foreign companies may not be subject to accounting standards or
governmental supervision comparable to U.S. companies, and there
may be less public information about their operations.
> Foreign markets may be less liquid and more volatile than U.S.
markets.
> Foreign securities often trade in currencies other than the U.S.
dollar, and the series may directly hold foreign currencies and
purchase and sell foreign currencies through forward exchange
contracts. Changes in currency exchange rates will affect the
series' net asset value, the value of dividends and interest
earned, and gains and losses realized on the sale of securities.
An increase in the strength of the U.S. dollar relative to these
other currencies may cause the value of the series to decline.
Certain foreign currencies may be particularly volatile, and
foreign governments may intervene in the currency markets,
causing a decline in value or liquidity in the series' foreign
currency holdings.
5
<PAGE>
By entering into forward foreign currency exchange contracts, the
series may be required to forego the benefits of advantageous
changes in exchange rates and, in the case of forward contracts
entered into for the purpose of increasing return, the series may
sustain losses which will reduce its gross income. Forward
foreign currency exchange contracts involve the risk that the
party with which the series enters the contract may fail to
perform its obligations to the series.
o Emerging Markets Risk: Emerging markets are generally defined as
countries in the initial stages of their industrialization cycles with
low per capita income. Investments in emerging markets securities
involve all of the risks of investments in foreign securities, and
also have additional risks:
> All of the risks of investing in foreign securities are
heightened by investing in emerging markets countries.
> The markets of emerging markets countries have been more volatile
than the markets of developed countries with more mature
economies. These markets often have provided significantly higher
or lower rates of return than developed markets, and
significantly greater risks, to investors.
o Active or Frequent Trading Risk: The series has engaged and may engage
in active and frequent trading to achieve its principal investment
strategies. This may result in the realization and distribution to
shareholders of higher capital gains as compared to a series with less
active trading policies. Frequent trading also increases transaction
costs, which could detract from the series' performance.
o As with any mutual fund, you could lose money on your investment in
the series.
An investment in the series is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
(>) Bar Chart and Performance Table
The bar chart and performance table below are intended to indicate some of
the risks of investing in the series by showing changes in the series'
performance over time. The performance table also shows how the series
performance over time compares with that of one or more broad measures of
market performance. The chart and table provide past performance
information based on calendar year periods. The series' past performance
does not necessarily indicate how the series will perform in the future.
The returns shown do not reflect fees and charges imposed under the
variable annuity and life insurance contracts through which an investment
may be made. If these fees and charges were included, they would reduce
these returns.
Bar Chart
The bar chart shows changes in the annual total returns of the series'
initial class, assuming the reinvestment of distributions.
[Bar chart data]
<TABLE>
<S> <C>
1997 26.47%
1998 26.80%
1999 47.42%
</TABLE>
During the period shown in the bar chart, the highest quarterly return
was 27.90% (for the calendar quarter ended December 31, 1999) and the
lowest quarterly return was (13.91)% (for the calendar quarter ended
September 30, 1998).
6
<PAGE>
Performance Table
This table shows how the average annual total returns of the series' shares
compares to a broad measure of market performance and various other market
indicators and assumes the reinvestment of distributions.
Average Annual Total Returns as of December 31, 1999
...........................................................................
<TABLE>
<CAPTION>
1 Year Life*
<S> <C> <C>
Capital Opportunities Series--Initial Class 47.42% 32.23%
Standard & Poor's 500 Composite Index **+++ 21.04% 29.60%
Average capital appreciation fund++ 41.65% 24.03%
</TABLE>
---------
* Series performance figures are for the period from the commencement of
the series' investment operations on August 14, 1996, through December
31, 1999. Index and Lipper average returns are from August 1, 1996.
++ Source: Lipper Inc.
+++ Source: Standard and Poor's Micropal, Inc.
** The Standard & Poor's 500 Composite Index is a broad-based, unmanaged
index of common stock total return performance. It is comprised of 500
widely held common stocks listed on the New York Stock Exchange
(NYSE), American Stock Exchange (AMEX) and over-the-counter (OTC)
market. The investment return and principal value of stocks fluctuate
with changes in market conditions. It is not possible to invest
directly in an index.
(>) Portfolio Manager
Maura A. Shaughnessy, a Senior Vice President of the Adviser, has been
employed in the investment management area of the Adviser since 1991. Ms.
Shaughnessy has been the series' portfolio manager since February 24, 1999.
7
<PAGE>
3: Utilities Series
...........................................................................
(>) Investment Objective
The series' investment objective is to seek capital growth and current
income (income above that available from a portfolio invested entirely in
equity securities). The series' objective may be changed without
shareholder approval.
(>) Principal Investment Policies
The series invests, under normal market conditions, at least 65% of its
total assets in equity and debt securities of domestic and foreign
companies (including emerging markets) in the utilities industry. MFS
considers a company to be in the utilities industry if, at the time of
investment, MFS determines that a substantial portion of the company's
assets or revenues are derived from one or more utilities. Securities in
which the series invests are not selected based upon what sector of the
utilities industry a company is in (i.e., electric, gas,
telecommunications) or upon a company's geographic region. Companies in the
utilities industry include:
o companies engaged in the manufacture, production, generation,
transmission, sale or distribution of electric, gas or other types of
energy, water or other sanitary services; and
o companies engaged in telecommunications, including telephone, cellular
telephone, telegraph, satellite, microwave, cable television and other
communications media (but not companies engaged in public
broadcasting).
The series is a non-diversified mutual fund. This means that the series may
invest a relatively high percentage of its assets in one or a few issuers.
The series has engaged and may engage in active and frequent trading to
achieve its principal investment strategies.
Equity Investments. MFS uses a bottom-up, as opposed to a top-down,
investment style in managing the equity-oriented funds (including the
equity portion of the series) it advises. This means that securities are
selected based upon fundamental analysis (such as an analysis of earnings,
cash flows, competitive position and management's abilities) performed by
the series' portfolio manager and MFS' large group of equity research
analysts. In performing this analysis and selecting securities for the
series, MFS places particular emphasis on each of the following factors:
o the current regulatory environment;
o the strength of the company's management team; and
o the company's growth prospects and valuation relative to its long-term
potential.
Equity securities purchased by the series consist of common stocks,
preferred stocks, convertible securities and depositary receipts. Equity
securities may be listed on a securities exchange or traded in the
over-the-counter markets.
As noted above, the series' investments in equity securities include
convertible securities. A convertible security is a security that may be
converted within a specified period of time into a certain amount of common
stock of the same or a different issuer. A convertible security generally
provides:
o a fixed income stream, and
o the opportunity, through its conversion feature, to participate in an
increase in the market price of the underlying common stock.
Fixed Income Investments. The series invests in securities which pay a
fixed interest rate. These securities include:
o corporate bonds, which are bonds or other debt obligations issued by
corporations or similar entities, including lower rated bonds,
commonly known as junk bonds, which are bonds assigned low credit
ratings by credit rating agencies or which are unrated and considered
by MFS to be comparable in quality to lower rated bonds;
o mortgage-backed securities and asset-backed securities, which are
securities that represent interests in a pool of assets such as
mortgage loans, car loan receivables, or credit card receivables.
These investments entitle the series to a share of the principal and
interest payments made on the underlying mortgage, car loan, or credit
card. For example, if the series invested in a pool that included your
mortgage loan, a share of the principal and interest payments on your
mortgage would pass to the series;
o U.S. government securities, which are bonds or other debt obligations
issued by, or whose principal and interest payments are guaranteed or
supported by, the U.S. government or one of its agencies or
instrumentalities; and
8
<PAGE>
o Junk bonds, which are bonds assigned low credit ratings by credit
rating agencies or which are unrated and considered by MFS to be
comparable to lower rated bonds.
In selecting fixed income investments for the series, MFS considers the
views of its large group of fixed income portfolio managers and research
analysts. This group periodically assesses the three-month total return
outlook for various segments of the fixed income markets. This three-month
"horizon" outlook is used by the portfolio manager(s) of MFS' fixed-income
oriented series (including the fixed-income portion of the series) as a
tool in making or adjusting a series' asset allocations to various segments
of the fixed income markets. In assessing the credit quality of
fixed-income securities, MFS does not rely solely on the credit ratings
assigned by credit rating agencies, but rather performs its own independent
credit analysis.
Foreign Securities. The series invests in foreign securities (including
emerging markets securities) such as:
o equity securities of foreign companies in the utilities industry,
o fixed income securities of foreign companies in the utilities
industry, and
o fixed income securities issued by foreign governments.
These investments may expose the series to foreign currencies.
(>) Principal Risks of an Investment
The principal risks of investing in the series and the circumstances
reasonably likely to cause the value of your investment in the series to
decline are described below. The share price of the series generally
changes daily based on market conditions and other factors. Please note
that there are many circumstances which could cause the value of your
investment in the series to decline, and which could prevent the series
from achieving its objective, that are not described here.
The principal risks of investing in the series are:
o Concentration: The series' investment performance will be closely tied
to the performance of utility companies. Many utility companies,
especially electric and gas and other energy related utility
companies, are subject to various uncertainties, including:
> risks of increases in fuel and other operating costs;
> restrictions on operations and increased costs and delays as a
result of environmental and nuclear safety regulations;
> coping with the general effects of energy conservation;
> technological innovations which may render existing plants,
equipment or products obsolete;
> the potential impact of natural or man-made disasters;
> difficulty obtaining adequate returns on invested capital, even
if frequent rate increases are approved by public service
commissions;
> the high cost of obtaining financing during periods of inflation;
> difficulties of the capital markets in absorbing utility debt and
equity securities; and
> increased competition.
Furthermore, there are uncertainties resulting from certain
telecommunications companies' diversification into new domestic and
international businesses as well as agreements by many such companies
linking future rate increases to inflation or other factors not
directly related to the active operating profits of the enterprise.
Because utility companies are faced with the same obstacles, issues
and regulatory burdens, their securities may react similarly and more
in unison to these or other market conditions. These price movements
may have a larger impact on the series than on a series with a more
broadly diversified portfolio.
o Regulation: The value of utility company securities may decline
because governmental regulation controlling the utilities industry can
change. This regulation may prevent or delay the utility company from
passing along cost increases to its customers. Furthermore, regulatory
authorities may not grant future rate increases. Any increases granted
may not be adequate to permit the payment of dividends on common
stocks.
o Market Risk: This is the risk that the price of a security held by the
series will fall due to changing economic, political or market
conditions or disappointing earnings results.
9
<PAGE>
o Company Risk: Prices of securities react to the economic condition of
the company that issued the security. The series' equity investments
in an issuer may rise and fall based on the issuer's actual and
anticipated earnings, changes in management and the potential for
takeovers and acquisitions.
o Interest Rate Risk: When interest rates rise, the prices of fixed
income securities in the series' portfolio will generally fall.
Conversely, when interest rates fall, the prices of fixed income
securities in the series' portfolio will generally rise.
o Convertible Securities Risk: Convertible securities, like fixed income
securities, tend to increase in value when interest rates decline and
decrease in value when interest rates rise. The market value of a
convertible security also tends to increase as the market value of the
underlying stock rises and decrease as the market value of the
underlying stock declines.
o Maturity Risk: Interest rate risk will affect the price of a fixed
income security more if the security has a longer maturity because
changes in interest rates are increasingly difficult to predict over
longer periods of time. Fixed income securities with longer maturities
will therefore be more volatile than other fixed income securities
with shorter maturities. Conversely, fixed income securities with
shorter maturities will be less volatile but generally provide lower
returns than fixed income securities with longer maturities. The
average maturity of the series' fixed income investments will affect
the volatility of the series' share price.
o Credit Risk: Credit risk is the risk that the issuer of a fixed income
security will not be able to pay principal and interest when due.
Rating agencies assign credit ratings to certain fixed income
securities to indicate their credit risk. The price of a fixed income
security will generally fall if the issuer defaults on its obligation
to pay principal or interest, the rating agencies downgrade the
issuer's credit rating or other news affects the market's perception
of the issuer's credit risk.
o Junk Bond Risk
> Higher Credit Risk: Junk bonds are subject to a substantially
higher degree of credit risk than higher rated bonds. During
recessions, a high percentage of issuers of junk bonds may
default on payments of principal and interest. The price of a
junk bond may therefore fluctuate drastically due to bad news
about the issuer or the economy in general.
> Higher Liquidity Risk: During recessions and periods of broad
market declines, junk bonds could become less liquid, meaning
that they will be harder to value or sell at a fair price.
o Mortgage-Backed and Asset-Backed Securities Risk
> Maturity Risk:
+ Mortgage-Backed Securities: A mortgage-backed security will
mature when all the mortgages in the pool mature or are
prepaid. Therefore, mortgage-backed securities do not have a
fixed maturity, and their expected maturities may vary when
interest rates rise or fall.
+ When interest rates fall, homeowners are more likely to
prepay their mortgage loans. An increased rate of
prepayments on the series' mortgage-backed securities
will result in an unforeseen loss of interest income to
the series as the series may be required to reinvest
assets at a lower interest rate. Because prepayments
increase when interest rates fall, the prices of
mortgage-backed securities do not increase as much as
other fixed income securities when interest rates fall.
+ When interest rates rise, homeowners are less likely to
prepay their mortgage loans. A decreased rate of
prepayments lengthens the expected maturity of a
mortgage-backed security. Therefore, the prices of
mortgage-backed securities may decrease more than
prices of other fixed income securities when interest
rates rise.
+ Collateralized Mortgage Obligations: The series may invest
in mortgage-backed securities called collateralized mortgage
obligations (CMOs). CMOs are issued in separate classes with
different stated maturities. As the mortgage pool
experiences prepayments, the pool pays off investors in
classes with shorter maturities first. By investing in CMOs,
the series may manage the prepayment risk of mortgage-backed
securities. However, prepayments may cause the actual
maturity of a CMO to be substantially shorter than its
stated maturity.
+ Asset-Backed Securities: Asset-backed securities have
prepayment risks similar to mortgage-backed securities.
> Credit Risk: As with any fixed income security, mortgage-backed
and asset-backed securities are subject to the risk that the
issuer will default on principal and interest payments. It may be
difficult to enforce rights against the assets underlying
mortgage-backed and asset-backed securities in the case of
default. The U.S. government or its agencies may guarantee the
payment of principal and interest on some mortgage-backed
securities. Mortgage-backed securities and asset-backed
securities issued by private lending institutions or other
financial intermediaries may be supported by insurance or other
forms of guarantees.
o Foreign Securities Risk: Investing in foreign securities involves
risks relating to political, social and economic developments abroad,
as well as risks resulting from the differences between the
regulations to which U.S. and foreign issuers and markets are subject:
10
<PAGE>
> These risks may include the seizure by the government of company
assets, excessive taxation, withholding taxes on dividends and
interest, limitations on the use or transfer of portfolio assets,
and political or social instability.
> Enforcing legal rights may be difficult, costly and slow in
foreign countries, and there may be special problems enforcing
claims against foreign governments.
> Foreign companies may not be subject to accounting standards or
governmental supervision comparable to U.S. companies, and there
may be less public information about their operations.
> Foreign markets may be less liquid and more volatile than U.S.
markets.
> Foreign securities often trade in currencies other than the U.S.
dollar, and the series may directly hold foreign currencies and
purchase and sell foreign currencies through forward exchange
contracts. Changes in currency exchange rates will affect the
series' net asset value, the value of dividends and interest
earned, and gains and losses realized on the sale of securities.
An increase in the strength of the U.S. dollar relative to these
other currencies may cause the value of the series to decline.
Certain foreign currencies may be particularly volatile, and
foreign governments may intervene in the currency markets,
causing a decline in value or liquidity in the series' foreign
currency holdings. By entering into forward foreign currency
exchange contracts, the series may be required to forego the
benefits of advantageous changes in exchange rates and, in the
case of forward contracts entered into for the purpose of
increasing return, the series may sustain losses which will
reduce its gross income. Forward foreign currency exchange
contracts involve the risk that the party with which the series
enters the contract may fail to perform its obligations to the
series.
o Emerging Markets Risk: Emerging markets are generally defined as
countries in the initial stages of their industrialization cycles with
low per capital income. Investments in emerging markets securities
involve all of the risks of investments in foreign securities, and
also have additional risks:
> All of the risks of investing in foreign securities are
heightened by investing in emerging market countries.
> The markets of emerging markets countries have been more volatile
than the markets of developed countries with more mature
economies. These markets often have provided significantly higher
or lower rates of return than developed markets, and
significantly greater risks, to investors.
o Non-Diversified Status Risk: Because the series may invest a higher
percentage of its assets in a small number of issuers, the series is
more susceptible to any single economic, political or regulatory event
affecting those issuers than is a diversified fund.
o Active or Frequent Trading Risk: The series has engaged and may engage
in active and frequent trading to achieve its principal investment
strategies. This may result in the realization and distribution to
shareholders of higher capital gains as compared to a series with less
active trading policies. Frequent trading also increases transaction
costs, which could detract from the series' performance.
o As with any mutual fund, you could lose money on your investment in
the series.
An investment in the series is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
(>) Bar Chart and Performance Table
The bar chart and performance table below are intended to indicate some of
the risks of investing in the series by showing changes in the series'
performance over time. The performance table also shows how the series
performance over time compares with that of a broad measure of market
performance. The chart and table provide past performance information based
on calendar year periods. The series' past performance does not necessarily
indicate how the series will perform in the future. The returns shown do
not reflect fees and charges imposed under the variable annuity and life
insurance contracts through which an investment may be made. If these fees
and charges were included, they would reduce these returns.
Bar Chart
The bar chart shows changes in the annual total returns of the series'
initial class, assuming the reinvestment of distributions.
11
<PAGE>
[Bar chart data]
<TABLE>
<S> <C>
1996 18.51%
1997 31.70%
1998 18.06%
1999 30.81%
</TABLE>
During the period shown in the bar chart, the highest quarterly return
was 21.53% (for the calendar quarter ended December 31, 1999) and the
lowest quarterly return was (3.79)% (for the calendar quarter ended
September 30, 1998).
Performance Table
This table shows how the average annual total returns of the series' shares
compares to a broad measure of market performance and assumes the
reinvestment of distributions.
Average Annual Total Returns as of December 31, 1999
...........................................................................
<TABLE>
<CAPTION>
1 Year Life*
<S> <C> <C>
Utilities Series--Initial Class 30.81% 24.46%
Standard & Poor's Utility Index+** (9.12)% 13.75%
</TABLE>
---------
* Series performance figures are for the period from the commencement of
the series' investment operations on January 3, 1995, through December
31, 1999. Index returns are from January 1, 1995.
+ Source: Standard & Poor's Micropal, Inc.
** The Standard & Poor's Utilities Index is a broad-based, unmanaged,
index representing the market-capitalization-weighted performance of
approximately 43 of the largest utility companies listed on the NYSE.
(>) Portfolio Manager
Maura A. Shaughnessy, a Senior Vice President of the Adviser, has been
employed in the investment management area of the Adviser since 1991. Ms.
Shaughnessy has been the series' portfolio manager since its inception.
12
<PAGE>
4: High Income Series
...........................................................................
(>) Investment Objective
The series' investment objective is to provide high current income by
investing primarily in a professionally managed diversified portfolio of
fixed income securities, some of which may involve equity features. The
series' objective may be changed without shareholder approval.
(>) Principal Investment Policies
The series invests, under normal market conditions, at least 80% of its
total assets in high income fixed income securities. Fixed income
securities offering the high current income sought by the series generally
are lower rated bonds. These bonds, commonly known as junk bonds, are
assigned lower credit ratings by credit rating agencies or are unrated and
considered by MFS to be comparable to lower rated bonds.
While the series focuses its investments on bonds issued by corporations or
similar entitles, it may invest in all types of debt securities. The series
may invest in foreign securities (including emerging markets securities),
through which it may have exposure to foreign currencies.
In selecting fixed income investments for the series, MFS considers the
views of its large group of fixed income portfolio managers and research
analysts. This group periodically assesses the three-month total return
outlook for various segments of the fixed income markets. This three-month
"horizon" outlook is used by the portfolio manager(s) of MFS' fixed income
oriented funds (including the series) as a tool in making or adjusting a
series' asset allocations to various segments of the fixed income markets.
In assessing the credit quality of fixed income securities, MFS does not
rely solely on the credit ratings assigned by credit rating agencies, but
rather performs its own independent credit analysis.
(>) Principal Risks of an Investment
The principal risks of investing in the series and the circumstances
reasonably likely to cause the value of your investment in the series to
decline are described below. The share price of the series generally
changes daily based on market conditions and other factors. Please note
that there are many circumstances which could cause the value of your
investment in the series to decline, and which could prevent the series
from achieving its objective, that are not described here.
The principal risks of investing in the series are:
o Allocation Risk: The series will allocate its investments among fixed
income markets based upon judgments made by MFS. The series could miss
attractive investment opportunities by underweighting markets where
there are significant returns, and could lose value by overweighting
markets where there are significant declines.
o Interest Rate Risk: When interest rates rise, the prices of fixed
income securities in the series' portfolio will generally fall.
Conversely, when interest rates fall, the prices of fixed income
securities in the series' portfolio will generally rise.
o Maturity Risk: Interest rate risk will generally affect the price of a
fixed income security more if the security has a longer maturity.
Fixed income securities with longer maturities will therefore be more
volatile than other fixed income securities with shorter maturities.
Conversely, fixed income securities with shorter maturities will be
less volatile but generally provide lower returns than fixed income
securities with longer maturities. The average maturity of the series'
fixed income investments will affect the volatility of the series'
share price.
o Credit Risk: Credit risk is the risk that the issuer of a fixed income
security will not be able to pay principal and interest when due.
Rating agencies assign credit ratings to certain fixed income
securities to indicate their credit risk. The price of a fixed income
security will generally fall if the issuer defaults on its obligation
to pay principal or interest, the rating agencies downgrade the
issuer's credit rating or other news affects the market's perception
of the issuer's credit risk.
o Liquidity Risk: The fixed income securities purchased by the series
may be traded in the over-the-counter market rather than on an
organized exchange and are subject to liquidity risk. This means that
they may be harder to purchase or sell at a fair price. The inability
to purchase or sell these fixed income securities at a fair price
could have a negative impact on the series' performance.
o Junk Bond Risk:
> Higher Credit Risk: Junk bonds are subject to a substantially
higher degree of credit risk than higher rated bonds. During
recessions, a high percentage of issuers of junk bonds may
default on payments of principal and interest. The price of a
junk bond may therefore fluctuate drastically due to bad news
about the issuer or the economy in general.
> Higher Liquidity Risk: During recessions and periods of broad
market declines, junk bonds could become less liquid, meaning
that they will be harder to value or sell at a fair price.
13
<PAGE>
o Foreign Securities Risk: Investments in foreign securities involve
risks relating to political, social and economic developments abroad,
as well as risks resulting from the differences between the
regulations to which U.S. and foreign issuers and markets are subject:
> These risks may include the seizure by the government of company
assets, excessive taxation, withholding taxes on dividends and
interest, limitations on the use or transfer of portfolio assets,
and political or social instability.
> Enforcing legal rights may be difficult, costly and slow in
foreign countries, and there may be special problems enforcing
claims against foreign governments.
> Foreign companies may not be subject to accounting standards or
governmental supervision comparable to U.S. companies, and there
may be less public information about their operations.
> Foreign markets may be less liquid and more volatile than U.S.
markets.
> Foreign securities often trade in currencies other than the U.S.
dollar, and the series may directly hold foreign currencies and
purchase and sell foreign currencies through forward exchange
contracts. Changes in currency exchange rates will affect the
series' net asset value, the value of dividends and interest
earned, and gains and losses realized on the sale of securities.
An increase in the strength of the U.S. dollar relative to these
other currencies may cause the value of the series to decline.
Certain foreign currencies may be particularly volatile, and
foreign governments may intervene in the currency markets,
causing a decline in value or liquidity in the series' foreign
currency holdings. By entering into forward foreign currency
exchange contracts, the series may be required to forego the
benefits of advantageous changes in exchange rates and, in the
case of forward contracts entered into for the purpose of
increasing return, the series may sustain losses which will
reduce its gross income. Forward foreign currency exchange
contracts involve the risk that the party with which the series
enters the contract may fail to perform its obligations to the
series.
o As with any mutual fund, you could lose money on your investment in
the series.
An investment in the series is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
(>) Bar Chart and Performance Table
The bar chart and performance table below are intended to indicate some of
the risks of investing in the series by showing changes in the series'
performance over time. The performance table also shows how the series
performance over time compares with that of one or more broad measures of
market performance. The chart and table provide past performance
information based on calendar year periods. The series' past performance
does not necessarily indicate how the series will perform in the future.
The returns shown do not reflect fees and charges imposed under the
variable annuity and life insurance contracts through which an investment
may be made. If these fees and charges were included, they would reduce
these returns.
Bar Chart
The bar chart shows changes in the annual total returns of the series'
initial class, assuming the reinvestment of distributions.
[Bar chart data]
<TABLE>
<S> <C>
1996 11.80%
1997 13.62%
1998 (0.18)%
1999 6.44%
</TABLE>
During the period shown in the bar chart, the highest quarterly return
was 5.57% (for the calendar quarter ended September 30, 1996) and the
lowest quarterly return was (7.28)% (for the calendar quarter ended
September 30, 1998).
14
<PAGE>
Performance Table
This table shows how the average annual total returns of the series' shares
compares to a broad measure of market performance and various other market
indicators and assumes the reinvestment of distributions.
Average Annual Total Returns as of December 31, 1999
...........................................................................
<TABLE>
<CAPTION>
1 Year Life*
<S> <C> <C>
High Income Series--Initial Class 6.44% 8.24%
Lipper High Yield Bond Index#+ 4.75% 7.82%
Lehman Brothers High Yield Bond Index##++ 2.74% 7.57%
</TABLE>
---------
* Series performance figures are for the period from the commencement of
the series' investment operations, July 26, 1995, through December 31,
1999. Index returns are from August 1, 1995.
# Source: Lipper Inc.
## Source: Standard & Poor's Micropal, Inc.
+ The Lipper High Yield Bond Index is a broad-based, unmanaged,
net-asset-value-weighted index of the largest qualifying mutual funds
in this Lipper category adjusted for the reinvestment of capital gain
distributions and income dividends.
++ The Lehman Brothers High Yield Bond Index is a broad-based, unmanaged
index of noninvestment-grade corporate debt.
(>) Portfolio Manager
Bernard Scozzafava, a Senior Vice President of the Adviser, has been
employed in the investment management area of the Adviser since 1989. Mr.
Scozzafava has been the series' portfolio manager since its inception.
15
<PAGE>
5: Global Governments Series
...........................................................................
(>) Investment Objective
The series' investment objective is to provide income and capital
appreciation. The series' objective may be changed without shareholder
approval. Prior to May 1, 1999, the series' investment objective was to
seek not only preservation but also growth of capital, together with
moderate current income.
(>) Principal Investment Policies
The series invests, under normal market conditions, at least 65% of its
total assets in:
o U.S. government securities, which are bonds or other debt obligations
issued by, or whose principal and interest payments are guaranteed or
supported by, the U.S. government or one of its agencies or
instrumentalities (including mortgage-backed securities), and
o foreign government securities, which are bonds or other debt
obligations issued by foreign governments, including emerging market
governments; these foreign government securities are either:
> issued, guaranteed or supported as to payment of principal and
interest by foreign governments, foreign government agencies,
foreign semi-governmental entities, or supra-national entities,
> interests issued by entities organized and operated for the
purpose of restructuring the investment characteristics of
foreign government securities, or
> Brady Bonds, which are long-term bonds issued as part of a
restructuring of defaulted commercial loans to emerging market
countries.
The series may also invest in:
o corporate bonds, which are bonds or other debt obligations issued by
domestic or foreign (including emerging market) corporations or other
similar entities; the series may invest in:
> investment grade bonds, which are bonds assigned higher credit
ratings by credit rating agencies or which are unrated and
considered by MFS to be comparable to higher rated bonds,
> lower rated bonds, commonly known as junk bonds, which are bonds
assigned lower credit ratings by credit rating agencies or which
are unrated and considered by MFS to be comparable to lower rated
bonds, and
> crossover bonds, which are junk bonds that MFS expects will
appreciate in value due to an anticipated upgrade in the issuer's
credit rating (thereby crossing over into investment grade
bonds), and
o mortgage-backed and asset-backed securities, which represent interests
in a pool of assets such as mortgage loans, car loan receivables, or
credit card receivables.
The series is a non-diversified mutual series. This means that the series
may invest a relatively high percentage of its assets in a small number of
issuers. The series may invest a substantial amount of its assets (i.e.,
more than 25% of its assets) in issuers located in a single country or a
limited number of countries.
In selecting fixed income investments for the series, MFS considers the
views of its large group of fixed income portfolio managers and research
analysts. This group periodically assesses the three-month total return
outlook for various segments of the fixed income markets. This three-month
"horizon" outlook is used by the portfolio manager(s) of MFS' fixed income
oriented funds (including the series) as a tool in making or adjusting a
series' asset allocations to various segments of the fixed income markets.
In assessing the credit quality of fixed income securities, MFS does not
rely solely on the credit ratings assigned by credit rating agencies, but
rather performs its own independent credit analysis.
The series may invest in derivative securities. Derivatives are securities
whose value may be based on other securities, currencies, interest rates,
or indices. Derivatives include:
o futures and forward contracts,
o options on futures contracts, foreign currencies, securities and bond
indices,
o structured notes and indexed securities, and
o swaps, caps, floors and collars.
The series has engaged and may engage in active and frequent trading to
achieve its principal investment strategies.
16
<PAGE>
(>) Principal Risks of an Investment
The principal risks of investing in the series and the circumstances
reasonably likely to cause the value of your investment in the series to
decline are described below. The share price of the series generally
changes daily based on market conditions and other factors. Please note
that there are many circumstances which could cause the value of your
investment in the series to decline, and which could prevent the series
from achieving its objective, that are not described here.
The principal risks of investing in the series are:
o Foreign Securities: Investments in foreign securities involve risks
relating to political, social and economic developments abroad, as
well as risks resulting from the differences between the regulations
to which U.S. and foreign issuers and markets are subject:
> These risks may include the seizure by the government of company
assets, excessive taxation, withholding taxes on dividends and
interest, limitations on the use or transfer of portfolio assets,
and political or social instability.
> Enforcing legal rights may be difficult, costly and slow in
foreign countries, and there may be special problems enforcing
claims against foreign governments.
> Foreign companies may not be subject to accounting standards or
governmental supervision comparable to U.S. companies, and there
may be less public information about their operations.
> Foreign markets may be less liquid and more volatile than U.S.
markets.
> Foreign securities often trade in currencies other than the U.S.
dollar, and the series may directly hold foreign currencies and
purchase and sell foreign currencies through forward exchange
contracts. Changes in currency exchange rates will affect the
series' net asset value, the value of dividends and interest
earned, and gains and losses realized on the sale of securities.
An increase in the strength of the U.S. dollar relative to these
other currencies may cause the value of the series to decline.
Certain foreign currencies may be particularly volatile, and
foreign governments may intervene in the currency markets,
causing a decline in value or liquidity in the series' foreign
currency holdings. By entering into forward foreign currency
exchange contracts, the series may be required to forego the
benefits of advantageous changes in exchange rates and, in the
case of forward contracts entered into for the purposes of
increasing return, the series may sustain losses which will
reduce its gross income. Forward foreign currency exchange
contracts involve the risk that the party with which the series
enters the contract may fail to perform its obligations to the
series.
o Emerging Markets Risk: Emerging markets are generally defined as
countries in the initial stages of their industrialization cycles with
low per capita income. Investments in emerging markets securities
involve all of the risks of investments in foreign securities, and
also have additional risks:
> All of the risks of investing in foreign securities are
heightened by investing in emerging markets countries.
> The markets of emerging markets countries have been more volatile
than the markets of developed countries with more mature
economies. These markets often have provided significantly higher
or lower rates of return than developed markets, and
significantly greater risks, to investors.
o Allocation Risk: The series will allocate its investments among
various segments of the fixed income markets based upon judgments made
by MFS. The series could miss attractive investment opportunities by
underweighting markets where there are significant returns, and could
lose value by overweighting markets where there are significant
declines.
o Interest Rate Risk: When interest rates rise, the prices of fixed
income securities in the series' portfolio will generally fall.
Conversely, when interest rates fall, the prices of fixed income
securities in the series' portfolio will generally rise.
o Maturity Risk: Interest rate risk will generally affect the price of a
fixed income security more if the security has a longer maturity.
Fixed income securities with longer maturities will therefore be more
volatile than other fixed income securities with shorter maturities.
Conversely, fixed income securities with shorter maturities will be
less volatile but generally provide lower returns than fixed income
securities with longer maturities. The average maturity of the series'
fixed income investments will affect the volatility of the series'
share price.
o Credit Risk: Credit risk is the risk that the issuer of a fixed income
security will not be able to pay principal and interest when due.
Rating agencies assign credit ratings to certain fixed income
securities to indicate their credit risk. The price of a fixed income
security will generally fall if the issuer defaults on its obligation
to pay principal or interest, the rating agencies downgrade the
issuer's credit rating or other news affects the market's perception
of the issuer's credit risk.
17
<PAGE>
o Liquidity Risk: The fixed income securities purchased by the series
may be traded in the over-the-counter market rather than on an
organized exchange and are subject to liquidity risk. This means that
they may be harder to purchase or sell at a fair price. The inability
to purchase or sell these fixed income securities at a fair price
could have a negative impact on the series' performance.
o Junk Bond Risk:
> Higher Credit Risk: Junk bonds (including crossover bonds) are
subject to a substantially higher degree of credit risk than
higher rated bonds. During recessions, a high percentage of
issuers of junk bonds may default on payments of principal and
interest. The price of a junk bond may therefore fluctuate
drastically due to bad news about the issuer or the economy in
general.
> Higher Liquidity Risk: During recessions and periods of broad
market declines, junk bonds could become less liquid, meaning
that they will be harder to value or sell at a fair price.
o Mortgage and Asset-Backed Securities:
> Maturity Risk:
+ Mortgage-Backed Securities: A mortgage-backed security will
mature when all the mortgages in the pool mature or are
prepaid. Therefore, mortgage-backed securities do not have a
fixed maturity, and their expected maturities may vary when
interest rates rise or fall.
+ When interest rates fall, homeowners are more likely to
prepay their mortgage loans. An increased rate of
prepayments on the series' mortgage-backed securities
will result in an unforeseen loss of interest income to
the series as the series may be required to reinvest
assets at a lower interest rate. Because prepayments
increase when interest rates fall, the price of
mortgage-backed securities does not increase as much as
other fixed income securities when interest rates fall.
+ When interest rates rise, homeowners are less likely to
prepay their mortgage loans. A decreased rate of
prepayments lengthens the expected maturity of a
mortgage-backed security. Therefore, the prices of
mortgage-backed securities may decrease more than
prices of other fixed income securities when interest
rates rise.
+ Collateralized Mortgage Obligations: The series may invest
in mortgage-backed securities called collateralized mortgage
obligations (CMOs). CMOs are issued in separate classes with
different stated maturities. As the mortgage pool
experiences prepayments, the pool pays off investors in
classes with shorter maturities first. By investing in CMOs,
the series may manage the prepayment risk of mortgage-backed
securities. However, prepayments may cause the actual
maturity of a CMO to be substantially shorter than its
stated maturity.
+ Asset-Backed Securities: Asset-backed securities have
prepayment risks similar to mortgage-backed securities.
> Credit Risk: As with any fixed income security, mortgage-backed
and asset-backed securities are subject to the risk that the
issuer will default on principal and interest payments. It may be
difficult to enforce rights against the assets underlying
mortgage-backed and asset-backed securities in the case of
default. The U.S. government or its agencies may guarantee the
payment of principal and interest on some mortgage-backed
securities. Mortgage-backed securities and asset-backed
securities issued by private lending institutions or other
financial intermediaries may be supported by insurance or other
forms of guarantees.
o Derivatives Risk:
> Hedging Risk: When a derivative is used as a hedge against an
opposite position that the series also holds, any loss generated
by the derivative should be substantially offset by gains on the
hedged investment, and vice versa. While hedging can reduce or
eliminate losses, it can also reduce or eliminate gains.
> Correlation Risk: When the series uses derivatives to hedge, it
takes the risk that changes in the value of the derivative will
not match those of the asset being hedged. Incomplete correlation
can result in unanticipated losses.
> Investment Risk: When the series uses derivatives as an
investment vehicle to gain market exposure, rather than for
hedging purposes, any loss on the derivative investment will not
be offset by gains on another hedged investment. The series is
therefore directly exposed to the risks of that derivative. Gains
or losses from derivative investments may be substantially
greater than the derivative's original cost.
> Availability Risk: Derivatives may not be available to the series
upon acceptable terms. As a result, the series may be unable to
use derivatives for hedging or other purposes.
> Credit Risk: When the series uses derivatives, it is subject to
the risk that the other party to the agreement will not be able
to perform.
18
<PAGE>
o Non-Diversified Status Risk: Because the series may invest a higher
percentage of its assets in a small number of issuers, the series is
more susceptible to any single economic, political or regulatory event
affecting those issuers than is a diversified fund.
o Investment Focus Risk: Because the series may invest a substantial
amount of its assets in issuers located in a single country or a
limited number of countries, economic, political and social conditions
in these countries will have a significant impact on its investment
performance.
o Active or Frequent Trading Risk: The series has engaged and may engage
in active and frequent trading to achieve its principal investment
strategies. This may result in the realization and distribution to
shareholders of higher capital gains as compared to a series with less
active trading policies. Frequent trading also increases transaction
costs, which could detract from the series' performance.
o As with any mutual fund, you could lose money on your investment in
the series.
An investment in the series is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
(>) Bar Chart and Performance Table
The bar chart and performance table below are intended to indicate some of
the risks of investing in the series by showing changes in the series'
performance over time. The performance table also shows how the series
performance over time compares with that of a broad measure of market
performance. The chart and table provide past performance information based
on calendar year periods. The series' past performance does not necessarily
indicate how the series will perform in the future. The returns shown do
not reflect fees and charges imposed under the variable annuity and life
insurance contracts through which an investment may be made. If these fees
and charges were included, they would reduce these returns.
Bar Chart
The bar chart shows changes in the annual total returns of the series'
initial class, assuming the reinvestment of distributions.
[Bar chart data]
<TABLE>
<S> <C>
1995 14.38%
1996 4.03%
1997 (1.13)%
1998 7.90%
1999 (2.50)%
</TABLE>
During the period shown in the bar chart, the highest quarterly return
was 8.35% (for the calendar quarter ended March 31, 1995) and the lowest
quarterly return was (3.21)% (for the calendar quarter ended March 31,
1997).
Performance Table
This table shows how the average annual total returns of the series' shares
compares to a broad measure of market performance and assumes the
reinvestment of distributions.
Average Annual Total Returns as of December 31, 1999
...........................................................................
<TABLE>
<CAPTION>
1 Year 5 Years Life*
<S> <C> <C> <C>
Global Governments Series--Initial Class (2.50)% 4.36% 4.07%
J.P. Morgan Global Government Bond Index#** (5.08)% 6.69% 6.51%
</TABLE>
---------
* Series performance figures are for the period from the commencement of
the series' investment operations, June 14, 1994, through December 31,
1999. Index returns are from June 1, 1994.
# Source: Standard & Poor's Micropal, Inc.
** The J.P. Morgan Global Government Bond Index is a broad-based,
aggregate index of actively traded government bonds issued by 13
countries, including the United States, with remaining maturities of
at least one year.
19
<PAGE>
(>) Portfolio Manager
James T. Swanson is the portfolio manager of the series. Mr. Swanson, a
Senior Vice President of the Adviser, has been employed in the investment
management area of the Adviser since 1985 and has been the series'
portfolio manager since August 1, 1998.
--------------------------------------------
III CERTAIN INVESTMENT STRATEGIES AND RISKS
--------------------------------------------
(>) Further Information on Investment Strategies and Risks
Each series may invest in various types of securities and engage in various
investment techniques and practices which are not the principal focus of
the series and therefore are not described in this prospectus. The types of
securities and investment techniques and practices in which a series may
engage, including the principal investment techniques and practices
described above, are identified in Appendix A to this Prospectus, and are
discussed, together with their risks, in the trust's Statement of
Additional Information (referred to as the SAI), which you may obtain by
contacting MFS Service Center, Inc. (see back cover for address and phone
number).
(>) Temporary Defensive Policies
Each series may depart from its principal investment strategies by
temporarily investing for defensive purposes when adverse market, economic
or political conditions exist. While a series invests defensively, it may
not be able to pursue its investment objective. A series defensive
investment position may not be effective in protecting its value.
(>) Active or Frequent Trading
Each series may engage in active and frequent trading to achieve its
principal investment strategies. This may result in the realization and
distribution to shareholders of higher capital gains as compared to a
series with less active trading policies. Frequent trading also increases
transaction costs, which could detract from the series' performance.
-----------------------------
IV MANAGEMENT OF THE SERIES
-----------------------------
(>) Investment Adviser
Massachusetts Financial Services Company (referred to as MFS or the
adviser) is the investment adviser to each series. MFS is America's oldest
mutual fund organization. MFS and its predecessor organizations have a
history of money management dating from 1924 and the founding of the first
mutual fund, Massachusetts Investors Trust. Net assets under the management
of the MFS organization were approximately $136.7 billion as of December
31, 1999. MFS is located at 500 Boylston Street, Boston, Massachusetts
02116.
MFS provides investment management and related administrative services and
facilities to each series, including portfolio management and trade
execution. For these services, each series pays MFS an annual management
fee as set forth in the Expense Summary.
MFS or its affiliates generally pay an administrative service fee to
insurance companies which use the series as underlying investment vehicles
for their variable annuity and variable life insurance contracts based upon
the aggregate net assets of the series attributable to these contracts.
These fees are not paid by the series, their shareholders, or by the
contract holders.
(>) Administrator
MFS provides each series with certain financial, legal, compliance,
shareholder communications and other administrative services. MFS is
reimbursed by each series for a portion of the costs it incurs in providing
these services.
(>) Distributor
MFS Fund Distributors, Inc. (referred to as MFD), a wholly owned subsidiary
of MFS, is the distributor of shares of the series.
(>) Shareholder Servicing Agent
MFS Service Center, Inc. (referred to as MFSC), a wholly owned subsidiary
of MFS, performs transfer agency and certain other services for each
series, for which it receives compensation from each series.
20
<PAGE>
--------------------------
V DESCRIPTION OF SHARES
--------------------------
The trust offers two classes of shares--initial class shares and service
class shares. Initial class shares are offered through this prospectus.
Service class shares, which bear a Rule 12b-1 distribution fee, are
available through a separate prospectus supplement. These shares are
offered to separate accounts established by insurance companies in order to
serve as investment vehicles for variable annuity and variable life
insurance contracts. The trust also offers shares of each of its series to
qualified pension and retirement plans. All purchases, redemptions and
exchanges of shares are made through these insurance company separate
accounts and plans, which are the record owner of the shares. Contract
holders and plan beneficiaries seeking to purchase, redeem or exchange
interests in the trust's shares should consult with the insurance company
which issued their contracts or their plan sponsor.
----------------------
VI OTHER INFORMATION
----------------------
(>) Pricing of Series' Shares
The price of each series' shares is based on its net asset value. The net
asset value of each series' shares is determined at the close of regular
trading each day that the New York Stock Exchange is open for trading
(generally, 4:00 p.m., Eastern time) (referred to as the valuation time).
The New York Stock Exchange is closed on most national holidays and Good
Friday. To determine net asset value, each series values its assets at
current market values, or at fair value as determined by the Adviser under
the direction of the Board of Trustees that oversees the series if current
market values are unavailable. Fair value pricing may be used by a series
when current market values are unavailable or when an event occurs after
the close of the exchange on which the series' portfolio securities are
principally traded that is likely to have changed the value of the
securities. The use of fair value pricing by a series may cause the net
asset value of its shares to differ significantly from the net asset value
that would be calculated using current market values.
Insurance companies and plan sponsors are the designees of the trust for
receipt of purchase, exchange and redemption orders from contractholders
and plan beneficiaries. An order submitted to the trust's designee by the
valuation time will receive the net asset value next calculated; provided
that the trust receives notice of the order generally by 9:30 a.m. eastern
time on the next day on which the New York Stock Exchange is open for
trading.
Certain series invest in securities which are primarily listed on foreign
exchanges that trade on weekends and other days when the series does not
price its shares. Therefore, the value of these series' shares may change
on days when you will not be able to purchase or redeem their shares.
(>) Distributions
Each series intends to pay substantially all of its net income (including
any realized net capital and net foreign currency gains) to shareholders as
dividends at least annually.
(>) Tax Considerations
The following discussion is very general. You are urged to consult your tax
adviser regarding the effect that an investment in a series may have on
your tax situation. Each series of the Trust is treated as a separate
corporation for federal tax purposes. As long as a series qualifies for
treatment as a regulated investment company (which each series has done in
the past and which each series intends to do in the future), it pays no
federal income tax on the earnings it distributes to shareholders. In
addition, each series also intends to continue to diversify its assets to
satisfy the federal diversification tax rules applicable to separate
accounts that fund variable insurance and annuity contracts.
Shares of the series are offered to insurance company separate accounts and
to qualified retirement and pension plans. You should consult with the
insurance company that issued your contract to understand the federal tax
treatment of your investment.
21
<PAGE>
(>) Right to Reject or Restrict Purchase and Exchange Orders
Purchases and exchanges should be made for investment purposes only. Each
series reserves the right to reject or restrict any specific purchase or
exchange request. Because an exchange request involves both a request to
redeem shares of one series and to purchase shares of another series, the
series consider the underlying redemption and purchase requests conditioned
upon the acceptance of each of these underlying requests. Therefore, in the
event that the series reject an exchange request, neither the redemption
nor the purchase side of the exchange will be processed. When a series
determines that the level of exchanges on any day may be harmful to its
remaining shareholders, the series may delay the payment of exchange
proceeds for up to seven days to permit cash to be raised through the
orderly liquidation of its portfolio securities to pay the redemption
proceeds. In this case, the purchase side of the exchange will be delayed
until the exchange proceeds are paid by the redeeming series.
(>) Excessive Trading Practices
The series do not permit market-timing or other excessive trading
practices. Excessive, short-term (market-timing) trading practices may
disrupt portfolio management strategies and harm series' performance. As
noted above, each series reserves the right to reject or restrict any
purchase order (including exchanges) from any investor. To minimize harm to
the series and their shareholders, the series will exercise these rights if
an investor has a history of excessive trading or if an investor's trading,
in the judgment of the series, has been or may be disruptive to a series.
In making this judgment, the series may consider trading done in multiple
accounts under common ownership or control.
(>) In-kind distributions
The series have reserved the right to pay redemption proceeds by a
distribution in-kind of portfolio securities (rather than cash). In the
event that the series makes an in-kind distribution, you could incur the
brokerage and transaction charges when converting the securities to cash.
The series do not expect to make in-kind distributions.
(>) Unique Nature of Series
MFS may serve as the investment adviser to other funds which have
investment goals and principal investment policies and risks similar to
those of the series, and which may be managed by the series' portfolio
manager(s). While a series may have many similarities to these other funds,
its investment performance will differ from their investment performance.
This is due to a number of differences between a series and these similar
products, including differences in sales charges, expense ratios and cash
flows.
(>) Potential Conflicts
Shares of the series are offered to the separate accounts of insurance
companies that may be affiliated or unaffiliated with MFS and each other
("shared funding") and may serve as the underlying investments for both
variable annuity and variable life insurance contracts ("mixed funding").
Due to differences in tax treatment or other considerations, the interests
of various contract owners might at some time be in conflict. The trust
currently does not foresee any such conflict. Nevertheless, the board of
trustees which oversees the series intends to monitor events in order to
identify any material irreconcilable conflicts which may possibly arise and
to determine what action, if any, should be taken in response. If such a
conflict were to occur, one or more separate accounts of the insurance
companies might be required to withdraw its investments in one or more
series. This might force a series to sell securities at disadvantageous
prices.
-------------------------
VII FINANCIAL HIGHLIGHTS
-------------------------
The financial highlights table is intended to help you understand the
series' financial performance for the past five years, or, if a series has
not been in operation that long, since the time it commenced investment
operations. Certain information reflects financial results for a single
series' share. The total returns in the table represent the rate by which
an investor would have earned (or lost) on an investment in a series
(assuming reinvestment of all distributions). This information has been
audited by the trust's independent auditors, whose report, together with
the trust's financial statements, are included in the trust's Annual Report
to shareholders. The series' Annual Report is available upon request by
contacting MFSC (see back cover for address and telephone number). These
financial statements are incorporated by reference into the SAI. The
trust's independent auditors are Deloitte & Touche LLP.
22
<PAGE>
1. Emerging Growth Series--Initial Class
...........................................................................
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------
1999 1998 1997 1996
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period ................... $ 21.47 $ 16.13 $ 13.24 $ 11.41
---------- -------- -------- --------
Income from investment operations# --
Net investment income (loss)[sec] ....................... $ (0.06) $ (0.05) $ (0.06) $ (0.01)
Net realized and unrealized gain on investments and
foreign currency transactions .......................... 16.53 5.55 2.95 1.95
---------- -------- -------- --------
Total from investment operations ...................... $ 16.47 $ 5.50 $ 2.89 $ 1.94
---------- -------- -------- --------
Less distributions declared to shareholders --
From net investment income .............................. $ -- $ -- $ -- $ --
From net realized gain on investments and foreign
currency transactions .................................. -- (0.05) -- (0.06)
In excess of net realized gain on investments and
foreign currency transactions .......................... -- (0.11) -- (0.05)
From paid-in capital .................................... -- -- -- --
---------- -------- -------- --------
Total distributions declared to shareholders .......... $ -- $ (0.16) $ -- $ (0.11)
--------- -------- -------- --------
Net asset value -- end of period ......................... $ 37.94 $ 21.47 $ 16.13 $ 13.24
---------- -------- -------- --------
Total return ............................................. 76.71% 34.16% 21.90% 17.02%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## .............................................. 0.84% 0.85% 0.90% 1.00%
Net investment income (loss) ............................ (0.23)% (0.29)% (0.38)% (0.08)%
Portfolio turnover ....................................... 176% 71% 112% 96%
Net assets at end of period (000 omitted) ................ $2,132,528 $908,987 $384,480 $104,956
[sec] Prior to January 1, 1998, the investment adviser voluntarily agreed to maintain, subject to reimbursement by
the Series, the expenses of the Series at not more than 1.00% of average daily net assets. To the extent
actual expenses were over or under this limitation, the net investment loss per share and the ratios would
have been:
Net investment loss .................................... $(0.05) $(0.03)
Ratios (to average net assets):
Expenses## ............................................ 0.87% 1.16%
Net investment loss ................................... (0.35)% (0.23)%
<CAPTION>
Period Ended
December 31,
1995*
-------------------------------------------------------------------------
<S> <C>
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period ................... $ 10.00
-------
Income from investment operations# --
Net investment income (loss)[sec] ....................... $ 0.01
Net realized and unrealized gain on investments and
foreign currency transactions .......................... 1.74
-------
Total from investment operations ...................... $ 1.75
-------
Less distributions declared to shareholders --
From net investment income .............................. $ (0.01)
From net realized gain on investments and foreign
currency transactions .................................. (0.26)
In excess of net realized gain on investments and
foreign currency transactions .......................... --
From paid-in capital .................................... (0.07)
-------
Total distributions declared to shareholders .......... $ (0.34)
-------
Net asset value -- end of period ......................... $ 11.41
-------
Total return ............................................. 17.41%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## .............................................. 1.00%+
Net investment income (loss) ............................ 0.10%+
Portfolio turnover ....................................... 73%
Net assets at end of period (000 omitted) ................ $ 3,869
[sec] Prior to January 1, 1998, the investment adviser voluntarily agreed
to maintain, subject to reimbursement by the Series, the expenses
of the Series at not more than 1.00% of average daily net assets.
To the extent actual expenses were over or under this limitation,
the net investment loss per share and the ratios would have been:
Net investment loss .................................... $(0.18)
Ratios (to average net assets):
Expenses## ............................................ 2.91%+
Net investment loss ................................... (1.78)%+
</TABLE>
---------
* For the period from the commencement of the Series' investment
operations, July 24, 1995, through December 31, 1995.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain offset
arrangements.
23
<PAGE>
2. Capital Opportunities Series--Initial Class
...........................................................................
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1999 1998 1997 1996*
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period .................... $ 14.79 $ 11.68 $ 10.66 $ 10.00
------- ------- ------- -------
Income from investment operations# --
Net investment income (loss)[sec] ........................ $ (0.02) $ 0.03 $ 0.12 $ 0.07
Net realized and unrealized gain on investments and
foreign currency ........................................ 7.02 3.11 2.66 0.88
------- ------- ------- -------
Total from investment operations ....................... $ 7.00 $ 3.14 $ 2.78 $ 0.95
------- ------- ------- -------
Less distributions declared to shareholders --
From net investment income ............................... $ -- $ (0.02) $ (0.09) $ (0.03)
From net realized gain on investments and foreign
currency transactions ................................... (0.05) (0.01) (1.54) (0.21)
In excess of net realized gain on investments and
foreign currency transactions ........................... -- -- -- (0.01)
From capital ............................................. -- -- (0.13) (0.04)
------- ------- ------- -------
Total distributions declared to shareholders ........... $ (0.05) $ (0.03) $ (1.76) $ (0.29)
------- ------- ------- -------
Net asset value -- end of period .......................... $ 21.74 $ 14.79 $ 11.68 $ 10.66
------- ------- ------- -------
Total return .............................................. 47.42% 26.80% 26.47% 8.78%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ............................................... 1.02% 1.02% 1.02% 1.02%+
Net investment income (loss) ............................. (0.13)% 0.21% 0.91% 1.72%+
Portfolio turnover ........................................ 152% 144% 270% 44%
Net assets at end of period (000 omitted) ................. $63,172 $23,908 $ 5,660 $ 1,351
[sec] Subject to reimbursement by the Series, MFS has voluntarily agreed under a temporary expense reimbursement
agreement to pay all the Series' operating expenses, exclusive of management fees. In consideration, the
Series pays MFS a fee not greater than 0.25% of average daily net assets. To the extent actual expenses
were over this limitation, the net investment income (loss) per share and the ratios would have been:
Net investment income (loss) ............................ $(0.02) $0.02 $(0.02) $(0.04)
Ratios (to average net assets):
Expenses## ............................................. 1.03 1.11% 2.08% 3.83%+
Net investment income (loss) ........................... (0.15)% 0.12% (0.18)% (1.11)%+
</TABLE>
---------
* For the period from the commencement of the Series' investment
operations, August 14, 1996, through December 31, 1996.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset
arrangements.
24
<PAGE>
3. Utilities Series--Initial Class
...........................................................................
<TABLE>
<CAPTION>
Year Ended December 31, Period 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 .................... $ 19.82 $ 17.99 $ 13.66 $12.57 $10.00
-------- ------- ------- ------ ------
Income from investment operations# --
Net investment income[sec] ............................... $ 0.38 $ 0.46 $ 0.44 $ 0.55 $ 0.39
Net realized and unrealized gain on investments and
foreign currency ........................................ 5.40 2.68 3.89 1.78 3.00
-------- ------- ------- ------ ------
Total from investment operations ....................... $ 5.78 $ 3.14 $ 4.33 $ 2.33 $ 3.39
-------- ------- ------- ------ ------
Less distributions declared to shareholders --
From net investment income ............................... $ (0.24) $ (0.24) $ -- $(0.35) $(0.24)
From net realized gain on investments and foreign
currency transactions ................................... (1.20) (1.07) -- (0.88) (0.58)
In excess of net realized gain on investments and
foreign currency transactions ........................... -- -- -- (0.01) --
-------- ------- ------- ------ ------
Total distributions declared to shareholders ........... $ (1.44) $ (1.31) $ -- $(1.24) $(0.82)
-------- ------- ------- ------ ------
Net asset value -- end of period .......................... $ 24.16 $ 19.82 $ 17.99 $13.66 $12.57
-------- ------- ------- ------ ------
Total return .............................................. 30.81% 18.06% 31.70% 18.51% 33.94%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ............................................... 1.01% 1.01% 1.00% 1.00% 1.00%+
Net investment income .................................... 1.88% 2.48% 2.92% 4.19% 3.66%+
Portfolio turnover ........................................ 134% 133% 69% 121% 94%
Net assets at end of period (000 omitted) ................. $182,969 $81,726 $30,147 $9,572 $2,373
[sec] 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 0.25% of average daily net assets. To the extent actual expenses were over/under this
limitation, the net investment income per share and ratios would have been:
Net investment income ................................... $0.40 $0.47 $0.41 $0.32 $0.17
Ratios (to average net assets):
Expenses## ............................................. 0.94% 0.98% 1.20% 2.75% 3.08%+
Net investment income .................................. 1.95% 2.51% 2.71% 2.44% 1.62%+
</TABLE>
---------
* For the period from the commencement of the Series' investment
operations, January 3, 1995, through December 31, 1995.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset
arrangements.
25
<PAGE>
4. High Income Series--Initial Class
...........................................................................
<TABLE>
<CAPTION>
Year Ended December 31, Period 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 .................... $ 11.53 $ 12.34 $ 10.87 $ 10.29 $10.00
------- ------- ------- ------- ------
Income from investment operations# --
Net investment income[sec] ............................... $ 1.03 $ 1.04 $ 0.95 $ 0.89 $ 0.34
Net realized and unrealized gain (loss) on investments
and foreign currency .................................... (0.28) (1.02) 0.52 0.32 0.18
------- ------- ------- ------- ------
Total from investment operations ....................... $ 0.75 $ 0.02 $ 1.47 $ 1.21 $ 0.52
------- ------- ------- ------- ------
Less distributions declared to shareholders --
From net investment income ............................... $ (0.79) $ (0.62) $ -- $ (0.53) $(0.23)
From net realized gain on investments and foreign
currency transactions ................................... -- (0.21) -- (0.10) --
In excess of net realized gain on investments and
foreign currency transactions ........................... -- (0.00)+++ -- -- --
------- ------- ------- ------- ------
Total distributions declared to shareholders ........... $ (0.79) $ (0.83) $ -- $ (0.63) $(0.23)
------- ------- ------- ------- ------
Net asset value -- end of period .......................... $ 11.49 $ 11.53 $ 12.34 $ 10.87 $10.29
------- ------- ------- ------- ------
Total return .............................................. 6.44% (0.18)% 13.62% 11.80% 5.25%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ............................................... 1.01% 1.03% 1.01% 1.01% 1.03%+
Net investment income .................................... 8.95% 8.67% 8.17% 8.18% 8.17%+
Portfolio turnover ........................................ 76% 146% 139% 135% 32%
Net assets at end of period (000 omitted) ................. $58,596 $42,890 $30,662 $12,994 $1,946
[sec] 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 0.25% of average daily net assets. To the extent actual expenses were over/under this limitation, the net
investment income per share and ratios would have been:
Net investment income ................................... $1.03 $1.05 $0.93 $0.82 $0.20
Ratios (to average net assets):
Expenses## ............................................. 0.97% 0.96% 1.15% 1.62% 4.38%+
Net investment income .................................. 8.99% 8.74% 8.03% 7.57% 4.82%+
</TABLE>
---------
* For the period from the commencement of the Series' investment
operations, July 26, 1995, through December 31, 1995.
+ 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.
26
<PAGE>
5. Global Governments Series--Initial Class
...........................................................................
<TABLE>
<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[sec] ............................... $ 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[sec]:
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 year (000 omitted) ................... $45,061 $45,966 $38,058 $26,023 $7,424
[sec] 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 0.25% of average daily net assets. To the extent actual expenses were
over/under this limitation, the net investment income per share and the ratios would have been:
Net investment income ................................... $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%
</TABLE>
---------
# 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.
27
<PAGE>
---------- ----------------------
Appendix A Emerging Growth Series
---------- ----------------------
(>) Investment Techniques and Practices
In pursuing its investment objective and investment policies, the Emerging
Growth Series may engage in the following principal and non-principal
investment techniques and practices. Investment techniques and practices
which are the principal focus of the series are also described, together
with their risks, in the Risk Return Summary of the Prospectus. Both
principal and non-principal investment techniques and practices are
described, together with their risks, in the SAI.
<TABLE>
<S> <C> <C>
Symbols X permitted -- not permitted
---------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Debt Securities
Asset-Backed Securities
Collateralized Mortgage Obligations and Multiclass
Pass-Through Securities --
Corporate Asset-Backed Securities --
Mortgage Pass-Through Securities --
Stripped Mortgage-Backed Securities --
Corporate Securities X
Loans and Other Direct Indebtedness --
Lower Rated Bonds X
Municipal Bonds --
Speculative Bonds X
U.S. Government Securities X
Variable and Floating Rate Obligations X
Zero Coupon Bonds, Deferred Interest Bonds
and PIK Bonds X
Equity Securities X
Foreign Securities Exposure
Brady Bonds --
Depositary Receipts X
Dollar-Denominated Foreign Debt Securities --
Emerging Markets X
Foreign Securities X
Forward Contracts X
Futures Contracts X
Indexed Securities/Structured Products --
Inverse Floating Rate Obligations --
</TABLE>
<TABLE>
<S> <C>
Investment in Other Investment Companies
Open-End Funds X
Closed-End Funds X
Lending of Portfolio Securities X
Leveraging Transactions
Bank Borrowings --*
Mortgage "Dollar-Roll" Transactions --*
Reverse Repurchase Agreements --*
Options
Options on Foreign Currencies X
Options on Futures Contracts X
Options on Securities X
Options on Stock Indices X
Reset Options --
"Yield Curve" Options --
Repurchase Agreements X
Restricted Securities X
Short Sales --
Short Sales Against the Box --
Short Term Instruments X
Swaps and Related Derivative Instruments --
Temporary Borrowings X
Temporary Defensive Positions X
Warrants X
"When-Issued" Securities X
</TABLE>
*May be changed only with shareholder approval.
A-1
<PAGE>
---------- ----------------------------
Appendix A Capital Opportunities Series
---------- ----------------------------
(>) Investment Techniques and Practices
In pursuing its investment objective and investment policies, the Capital
Opportunities Series may engage in the following principal and
non-principal investment techniques and practices. Investment techniques
and practices which are the principal focus of the series are also
described, together with their risks, in the Risk Return Summary of the
Prospectus. Both principal and non-principal investment techniques and
practices are described, together with their risks, in the SAI.
<TABLE>
<S> <C> <C>
Symbols X permitted -- not permitted
---------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Debt Securities
Asset-Backed Securities
Collateralized Mortgage Obligations and Multiclass
Pass-Through Securities --
Corporate Asset-Backed Securities --
Mortgage Pass-Through Securities --
Stripped Mortgage-Backed Securities --
Corporate Securities X
Loans and Other Direct Indebtedness --
Lower Rated Bonds X
Municipal Bonds --
Speculative Bonds X
U.S. Government Securities X
Variable and Floating Rate Obligations X
Zero Coupon Bonds, Deferred Interest Bonds and PIK
Bonds X
Equity Securities X
Foreign Securities Exposure
Brady Bonds X
Depositary Receipts X
Dollar-Denominated Foreign Debt Securities --
Emerging Markets X
Foreign Securities X
Forward Contracts X
Futures Contracts X
Indexed Securities/Structured Products --
Inverse Floating Rate Obligations --
</TABLE>
<TABLE>
<S> <C>
Investment in Other Investment Companies
Open-End Funds X
Closed-End Funds X
Lending of Portfolio Securities X
Leveraging Transactions
Bank Borrowings --*
Mortgage "Dollar-Roll" Transactions --*
Reverse Repurchase Agreements --*
Options
Options on Foreign Currencies X
Options on Futures Contracts X
Options on Securities X
Options on Stock Indices X
Reset Options --
"Yield Curve" Options --
Repurchase Agreements X
Restricted Securities X
Short Sales --
Short Sales Against the Box X
Short Term Instruments X
Swaps and Related Derivative Instruments --
Temporary Borrowings X
Temporary Defensive Positions X
Warrants X
"When-Issued" Securities X
</TABLE>
*May be changed only with shareholder approval.
A-2
<PAGE>
---------- ----------------
Appendix A Utilities Series
---------- ----------------
(>) Investment Techniques and Practices
In pursuing its investment objective and investment policies, the Utilities
Series may engage in the following principal and non-principal investment
techniques and practices. Investment techniques and practices which are the
principal focus of the series are also described, together with their
risks, in the Risk Return Summary of the Prospectus. Both principal and
non-principal investment techniques and practices are described, together
with their risks, in the SAI.
<TABLE>
<S> <C> <C>
Symbols X permitted -- not permitted
---------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Debt Securities
Asset-Backed Securities X
Collateralized Mortgage Obligations and Multiclass
Pass-Through Securities X
Corporate Asset-Backed Securities X
Mortgage Pass-Through Securities X
Stripped Mortgage-Backed Securities --
Corporate Securities X
Loans and Other Direct Indebtedness X
Lower Rated Bonds X
Municipal Bonds X
Speculative Bonds X
U.S. Government Securities X
Variable and Floating Rate Obligations X
Zero Coupon Bonds, Deferred Interest Bonds and PIK
Bonds X
Equity Securities X
Foreign Securities Exposure
Brady Bonds X
Depositary Receipts X
Dollar-Denominated Foreign Debt Securities X
Emerging Markets X
Foreign Securities X
Forward Contracts X
Futures Contracts X
Indexed Securities/Structured Products X
Inverse Floating Rate Obligations --
</TABLE>
<TABLE>
<S> <C>
Investment in Other Investment Companies
Open-End X
Closed-End X
Lending of Portfolio Securities X
Leveraging Transactions
Bank Borrowings --*
Mortgage "Dollar-Roll" Transactions --*
Reverse Repurchase Agreements --*
Options
Options on Foreign Currencies X
Options on Futures Contracts X
Options on Securities X
Options on Stock Indices X
Reset Options --
"Yield Curve" Options --
Repurchase Agreements X
Restricted Securities X
Short Sales --
Short Sales Against the Box --
Short Term Instruments X
Swaps and Related Derivative Instruments --
Temporary Borrowings X
Temporary Defensive Positions X
Warrants X
"When-Issued" Securities X
</TABLE>
*May be changed only with shareholder approval.
A-3
<PAGE>
---------- ------------------
Appendix A High Income Series
---------- ------------------
(>) Investment Techniques and Practices
In pursuing its investment objective and investment policies, the High
Income Series may engage in the following principal and non-principal
investment techniques and practices. Investment techniques and practices
which are the principal focus of the series are also described, together
with their risks, in the Risk Return Summary of the Prospectus. Both
principal and non-principal investment techniques and practices are
described, together with their risks, in the SAI.
<TABLE>
<S> <C> <C>
Symbols X permitted -- not permitted
---------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Debt Securities
Asset-Backed Securities
Collateralized Mortgage Obligations and Multiclass
Pass-Through Securities X
Corporate Asset-Backed Securities X
Mortgage Pass-Through Securities X
Stripped Mortgage-Backed Securities --
Corporate Securities X
Loans and Other Direct Indebtedness X
Lower Rated Bonds X
Municipal Bonds --
Speculative Bonds X
U.S. Government Securities X
Variable and Floating Rate Obligations X
Zero Coupon Bonds, Deferred Interest Bonds and PIK
Bonds X
Equity Securities X
Foreign Securities Exposure
Brady Bonds X
Depositary Receipts --
Dollar-Denominated Foreign Debt Securities X
Emerging Markets X
Foreign Securities X
Forward Contracts X
Futures Contracts X
Indexed Securities/Structured Products X
Inverse Floating Rate Obligations --
</TABLE>
<TABLE>
<S> <C>
Investment in Other Investment Companies
Open-End Funds X
Closed-End Funds X
Lending of Portfolio Securities X
Leveraging Transactions
Bank Borrowings --*
Mortgage "Dollar-Roll" Transactions --*
Reverse Repurchase Agreements --*
Options
Options on Foreign Currencies --
Options on Futures Contracts --
Options on Securities X
Options on Stock Indices X
Reset Options --
"Yield Curve" Options --
Repurchase Agreements X
Restricted Securities X
Short Sales X
Short Sales Against the Box X
Short Term Instruments X
Swaps and Related Derivative Instruments X
Temporary Borrowings X
Temporary Defensive Positions X
Warrants X
"When-Issued" Securities X
</TABLE>
*May be changed only with shareholder approval.
A-4
<PAGE>
---------- -------------------------
Appendix A Global Governments Series
---------- -------------------------
(>) Investment Techniques and Practices
In pursuing its investment objective and investment policies, the Global
Governments Series may engage in the following principal and non-principal
investment techniques and practices. Investment techniques and practices
which are the principal focus of the series are also described, together
with their risks, in the Risk Return Summary of the Prospectus. Both
principal and non-principal investment techniques and practices are
described, together with their risks, in the SAI.
<TABLE>
<S> <C> <C>
Symbols X permitted -- not permitted
---------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Debt Securities
Asset-Backed Securities
Collateralized Mortgage Obligations and Multiclass
Pass-Through Securities X
Corporate Asset-Backed Securities X
Mortgage Pass-Through Securities X
Stripped Mortgage-Backed Securities X
Corporate Securities X
Loans and Other Direct Indebtedness X
Lower Rated Bonds X
Municipal Bonds X
Speculative Bonds X
U.S. Government Securities X
Variable and Floating Rate Obligations X
Zero Coupon Bonds, Deferred Interest Bonds and PIK
Bonds X
Equity Securities --
Foreign Securities Exposure
Brady Bonds X
Depositary Receipts X
Dollar-Denominated Foreign Debt Securities X
Emerging Markets X
Foreign Securities X
Forward Contracts X
Futures Contracts X
Indexed Securities/Structured Products X
Inverse Floating Rate Obligations X
</TABLE>
<TABLE>
<S> <C>
Investment in Other Investment Companies
Open-End Funds X
Closed-End Funds X
Lending of Portfolio Securities X
Leveraging Transactions
Bank Borrowings --*
Mortgage "Dollar-Roll" Transactions --*
Reverse Repurchase Agreements --*
Options
Options on Foreign Currencies X
Options on Futures Contracts X
Options on Securities X
Options on Stock Indices X
Reset Options X
"Yield Curve" Options X
Repurchase Agreements X
Restricted Securities X
Short Sales --
Short Sales Against the Box --
Short Term Instruments X
Swaps and Related Derivative Instruments X
Temporary Borrowings X
Temporary Defensive Positions X
Warrants X
"When-Issued" Securities X
</TABLE>
*May be changed only with shareholder approval.
A-5
<PAGE>
MFS[RegTM] VARIABLE INSURANCE TRUST(SM)
If you want more information about the trust and its series, the following
documents are available free upon request:
Annual/Semiannual Reports. These reports contain information about the
series' actual investments. Annual reports discuss the effect of recent
market conditions and the series' investment strategy on the series'
performance during its last fiscal year.
Statement of Additional Information (SAI). The SAI, dated May 1, 2000,
provides more detailed information about the trust and its series and is
incorporated into this prospectus by reference.
You can get free copies of the annual/semiannual reports, the SAI and other
information about the trust and its series, and make inquiries about the
trust and its series, by contacting:
MFS Service Center, Inc.
2 Avenue de Lafayette
Boston, MA 02111-1738
Telephone: 1-800-343-2829, ext. 3500
Internet: http://www.mfs.com
Information about the trust and its series (including its prospectus, SAI
and shareholder reports) can be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
Washington, D.C., 20549-0102
Information on the operation of the Public Reference Room may be obtained
by calling the Commission at 202-942-8090. Reports and other information
about the trust and its series are available on the EDGAR Databases on the
Commission's Internet website at http://www.sec.gov, and copies of this
information may be obtained, upon payment of a duplicating fee, by
electronic request at the following E-mail address: [email protected], or
by writing the Public Reference Section at the above address.
The trust's Investment Company Act file number is 811-8326
MSG 11/98 224M 90/290/390/890
