<PAGE>
DEAR CONTRACT OWNERS:
A general slowdown in most major economies has resulted in favorable performance
for both stock and bond markets around the world during the past six months.
Yields on many fixed-income securities declined over the period, and as bond
prices rose in response to these declines, all of the fixed-income accounts
available under your contract experienced positive total returns. At the same
time, the decline in interest rates and strong corporate earnings reports caused
many stock prices to rise over the period, producing strong returns. For the six
months ended June 30, 1995, the market, as measured by the Standard & Poor's 500
Composite Index (the S&P 500), a popular, unmanaged index of common stock
performance, returned +20.19%. All of the equity accounts available under your
contract achieved positive results.
U.S. OUTLOOK
In response to increasing evidence of economic weakness during the second
quarter, the Federal Reserve Board has reversed policy by lowering the federal
funds rate 0.25%. This marks the first time in three years that this rate has
been lowered, and brings the Federal Reserve's 18-month monetary-tightening
initiative to at least a temporary conclusion. Although inflation at the
consumer level has been trending higher this year at a 3 1/2% annualized rate,
recent evidence suggests that these pressures are beginning to moderate,
allowing the Federal Reserve to shift its policy focus toward sustaining
economic growth. Despite the economy's apparent lackluster performance in the
second quarter, we do not anticipate that the economy will lapse into recession.
Rather, we believe it will continue to expand at a more moderate, sustainable
pace, supported by lower prevailing interest rates and a healthy export sector.
GLOBAL OUTLOOK
Economic recoveries in both Europe and Japan have been inhibited by the strength
of the yen and deutsche mark against the U.S. dollar. These export-led
expansions are struggling to compete in a global marketplace in which their
products are less competitively priced. Consumer sectors in these economies have
been impaired by relatively high unemployment rates and continued low growth in
domestic money supplies. Recently, the Bank of Japan lowered interest rates in
an effort to stimulate domestic demand as well as to arrest the strength of the
yen against the dollar. Germany's Bundesbank lowered rates in March, yet it
appears that controlled inflation and sluggish domestic demand should leave it
with further room to ease. Our view is that the global expansion remains intact,
yet at a sluggish pace, particularly in Japan. Inflation in overseas economies
remains in a downward trend, providing fixed-income investors with opportunities
for relatively attractive real (adjusted for inflation) rates of interest,
possibly accompanied by moderate price appreciation. While we view emerging
markets with caution, selected opportunities exist in both fixed-income and
equity markets, particularly at the more attractive levels resulting from
selloffs in many of those markets last year. Recently, the U.S. dollar has
stabilized in world currency markets. Although we believe that the dollar
continues to represent a sound store of value over the long term, in the near
term its relative strength will be restrained by the persistently large U.S.
current-account deficit.
BOND MARKETS
As the economy's ability to create jobs has diminished along with its use of
available productive capacity, fixed-income markets have become increasingly
convinced that inflationary pressures will remain subdued. As a result,
long-term
1
<PAGE>
U.S. Treasury bond yields have declined to 6.50% from their 7.85% level at the
beginning of the year. As bond yields continued to decline, it became apparent
that the markets had been anticipating an easing of the Federal Reserve's
policy. Now that the easing has begun, we believe that prevailing rates may
consolidate near present levels in the near term. Longer term, we feel that
continuing moderate growth should result in interest rates maintaining their
present levels or perhaps declining moderately over the balance of this year.
The general slowdown of world economies has resulted in solid performance in
world bond markets during the past six months. European markets continue to be
buoyed by slow growth, low and controlled inflation and recent interest rate
cuts from key central banks. The Japanese market also has been strong as anemic
economic growth and consumer price deflation have helped interest rates stage a
major decline. We remain positive on overseas markets because we anticipate
continued slow growth and minimal inflationary pressures.
STOCK MARKETS
The U.S. stock market has maintained its upward momentum as stock prices have
responded to the cessation of the Federal Reserve's monetary-tightening
initiative and to the belief that gains in corporate earnings may remain
substantial. Although we expect growth to remain moderate, our outlook for
corporate earnings growth remains favorable. We have been de-emphasizing many
cyclical areas such as autos and basic materials because of their less
attractive earnings outlook and have been emphasizing growth areas such as
technology, health care, consumer and household products, and financial
services.
Specific information on each Account's performance and our current investment
strategy is provided below and on the following pages. We appreciate your
support and welcome any questions or comments you may have.
On behalf of the
Board of Managers,
John D. McNeil
July 18, 1995 Chairman
CAPITAL APPRECIATION VARIABLE ACCOUNT
During the past six months, the portfolio benefited from a significant weighting
in the technology sector, which had strong results from stocks related to
personal computer businesses such as Intel, Microsoft and Compaq Computer. Our
holdings in financial institutions such as MBNA Corp., a credit card issuer,
also rose significantly as interest rates declined over the first half of the
year. Our investments in entertainment stocks such as Promus Cos. also staged a
strong rally following weak performance during 1994. The only area of the
portfolio that showed weakness was medical services, which included companies
such as United Healthcare, a health maintenance organization. These holdings
were impacted by concerns over competitive pressure which led to negative
performance in the sector.
When selecting investments for the portfolio we continue to look for companies
which, we believe, possess the following key factors: earnings momentum,
reasonable valuations, effective management, a strong balance sheet, and
positive secular trends. Given that current price/earnings multiples are
reasonable, we believe earnings momentum is necessary to achieve further stock
price appreciation. Currently, our largest concentration remains in the
technology area, where we believe strong spending by both corporations and
consumers is likely to continue into the coming
2
<PAGE>
year. Other large weightings are in entertainment, financial institutions, and a
number of industrial holdings that we believe should benefit from a continuation
of economic growth over the coming year.
GOVERNMENT SECURITIES VARIABLE ACCOUNT
The year 1995 has seen a reversal in fortune for the U.S. bond market, as the
economy has slowed down sooner and more precipitously than many had predicted.
During the first six months of this year the 10-year U.S. Treasury bond fell by
over 160 basis points (1.6%) and the 30-year U.S. Treasury bond fell by 125
basis points (1.25%). Short-term Treasury rates fell faster than long-term
yields as expectations of the eventual lowering of short-term rates by the
Federal Reserve became stronger because of a slowing economy. At the start of
this year the portfolio had less interest rate sensitivity than the Lehman
Brothers Government/Mortgage Index, an unmanaged index comprised of Treasuries,
agencies, and all agency mortgages (FNMA, Freddie Mac and GNMA), because of our
concerns about the pace of economic growth and the potential for resource
bottlenecks. However, as it became more apparent that the economy was slowing
and interest rates were falling, the portfolio's interest rate sensitivity was
increased in order to try and capitalize on any future fall in rates.
Currently, the portfolio is positioned slightly longer than the Lehman Index,
and approximately 30% of total net assets is invested in mortgage-backed
securities. As long as the Federal Reserve continues to contemplate further rate
cuts, the Account will remain positioned longer than the Lehman Index. However,
as the effect of this year's fall in rates takes hold, and as inventory levels
are worked off, we may reduce our exposure to rates. In addition, because we
continue to believe that the additional yield of mortgage-backed securities will
add to the Account's total return, we are managing these securities to position
the portfolio against the adverse effect of prepayments.
HIGH YIELD VARIABLE ACCOUNT
During the first half of 1995, high yield bond prices rose as interest rates
fell in response to the release of weaker than expected economic data. As
anticipated, the spread between high yield bonds and U.S. Treasury securities
widened due to growing concerns about the effect that the slowing economy would
have on credit quality (principal value and interest on Treasury securities are
guaranteed by the U.S. government if held to maturity). This spread is now 400
basis points (4.0%) versus approximately 360 basis points (3.6%) during 1994.
However, we believe that the improvement in the credit quality of the typical
high yield issuer over the past 10 years will limit the spread from widening
significantly further.
Given our outlook for only modest economic growth, we have begun to trim our
exposure to economically sensitive companies and have bolstered our positions in
defensive industries such as paging, cable television, health care and
supermarkets. However, we believe many cyclical companies continue to offer
attractive investment opportunities in the high yield market. For example, the
bonds of Stone Container Corp. provide above market yields, and the company
recently received a credit upgrade by Standard & Poor's, which cited improved
paper market conditions and expectations of continued debt reduction. Until the
economy begins to show signs of benefiting from the lower interest rate
environment, our investment strategy will continue to focus on the upper credit
quality tier of the high yield market.
3
<PAGE>
MANAGED SECTORS VARIABLE ACCOUNT
During the past six months, the Account's heavy concentration in the technology,
energy and financial services sectors helped overall performance to modestly
exceed the total return of the S&P 500. In technology, our holdings in companies
such as Intel, EMC, Electronic Arts, Nokia, National Semiconductor and LSI Logic
have led the way. Energy performance was keyed by Tidewater, Occidental
Petroleum, BJ Services and Western Company of North America. The financial
services sector of the portfolio benefited from holdings in Charles Schwab,
Advanta and Travelers, Inc. Finally, individual stock performance in companies
such as Promus, McDonnell Douglas and Federated Department Stores contributed
favorably to overall results.
Going forward, we believe that gains in the stock market will become more
difficult to achieve because many sectors have largely discounted both a lower
interest rate environment and an extended business cycle. We continue to search
for attractively valued companies but, given the strong market advance so far
this year, many equities appear to be approaching fair value. Thus, we are
maintaining a slightly more cautious outlook over the near term.
MONEY MARKET VARIABLE ACCOUNT
During the past six months, short-term interest rates were quite volatile. With
a slowdown in economic growth and a yield curve that started to invert in May,
30-day commercial paper rates increased 25 basis points (0.25%), while three-
month commercial paper and Treasury bill rates actually fell by 35 and 25 basis
points (0.35% and 0.25%), respectively (principal value and interest on Treasury
securities are guaranteed by the U.S. government if held to maturity).
Anticipating lower interest rates, we have lengthened maturities in the
portfolio to try to lock in the higher rates while available. We continue to
limit the Account's investments to securities issued or guaranteed by the U.S.
Treasury or its agencies, or instrumentalities of the U.S. government, as well
as to the highest quality corporate issues, in order to minimize credit risk. At
the present time, approximately 68% of the portfolio is invested in U.S.
government or government-guaranteed issues, and 32% in corporate issues. The
Account's average maturity on June 30, 1995 was 43 days.
TOTAL RETURN VARIABLE ACCOUNT
In the face of a slowing U.S. economy and decelerating earnings, the equity
market continues to produce strong returns. The 20% rise in the S&P 500
year-to-date has pushed its yield to an historical low of 2.5%. The slowing
economy has also served to keep inflation in check. The lack of inflationary
pressure has benefited the bond market, which also has produced strong
year-to-date results.
While we continue to see excellent opportunities in both the equity and bond
markets, our near-term enthusiasm is tempered by relatively high valuations. As
a result, our common stock weighting has recently been in the 45% to 50% range.
Within this portion of the portfolio, we are finding values in both the energy
and financial services sectors. We believe the retail sector and telephone
utilities are also more attractively priced. This below-normal weighting in
stocks is supported by a 10% weighting in convertibles. Government and corporate
bonds have been making up 33% of the portfolio, while cash has ranged from 10%
to 13% of total assets.
Looking forward, we believe that the Account is conservatively positioned for
the balance of the year. Should the markets correct, we would use that
opportunity to purchase stocks in order to increase the equity weighting to the
more normal 60% range.
4
<PAGE>
WORLD GOVERNMENTS VARIABLE ACCOUNT
All global bond markets have rallied significantly this year as fears of strong
world growth and runaway inflation that plagued markets last year have given way
to expectations of a much slower path of worldwide economic recovery. The best
performing bond market in local currency terms so far this year has been Japan's
(12.01%). Performing almost as well as Japan have been countries within the U.S.
dollar bloc, notably the U.S. (11.40%), Canada (10.45%), and Australia (10.02%).
As is the U.S., both Canada and Australia are enjoying lower inflation and
higher real (adjusted for inflation) interest rates. Although the Account was
underweighted in U.S. Treasury bonds (principal value and interest on Treasury
securities are guaranteed by the U.S. government if held to maturity) during the
past six months, which hurt performance, it had an overweighted position in
Australia and a neutral position in Canada, both of which contributed favorably
to results.
In Europe, the Netherlands and Germany were the better performers, returning
8.65% and 7.25%, respectively. Economic growth in Europe is slowing more quickly
than had been forecast at the beginning of the year, and thus our strategy has
been and continues to be focused on core markets such as Germany and the
Netherlands and, to a lesser extent, Denmark and France. We have generally
stayed out of the higher-yielding markets of Italy, Spain and Sweden, as these
countries have been experiencing rising inflation and political problems which
appear to preclude strong efforts at deficit reduction. With growth slowing and
inflation stable to declining, we expect an easing in monetary policy in Europe,
led by the German Bundesbank. Thus, we believe there is good capital
appreciation potential in these core markets over the next six months.
One of the factors which has contributed positively to total return this year
has been our movement out of the U.S. dollar and into the yen and a few of the
core European currencies. The decline of the U.S. dollar has been quite dramatic
and, thus, it would not be unusual to expect a period of consolidation or
stability in the foreign exchange markets. However, so far this year, both the
yen and deutsche mark have appreciated well over 10% versus the U.S. dollar.
Both Germany and Japan have already lowered interest rates, in part to curtail
the U.S. dollar's weakness as well as to stimulate their own economic
recoveries. Surprisingly, these actions, combined with the foreign central
banks' support of the dollar, have had a minimal impact in bolstering the
beleaguered currency. Until the U.S. takes strong initiatives to curtail large
budget and current-account deficits, the portfolio will be positioned to benefit
from a somewhat weaker U.S. dollar.
5
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
CAPITAL APPRECIATION VARIABLE ACCOUNT (CAVA) seeks capital appreciation by
investing in securities of all types with a major emphasis on common stocks.
GOVERNMENT SECURITIES VARIABLE ACCOUNT (GSVA) seeks current income and
preservation of capital by investing in U.S. government and government-related
securities.
HIGH YIELD VARIABLE ACCOUNT (HYVA) seeks high current income and capital
appreciation by investing primarily in fixed-income securities of United States
and foreign issuers which may be in the lower-rated categories or unrated and
may include equity features.
MANAGED SECTORS VARIABLE ACCOUNT (MSVA) seeks capital appreciation by varying
the weighting of its portfolio of common stocks among certain industry sectors.
Dividend income, if any, is incidental to its objective of capital appreciation.
MONEY MARKET VARIABLE ACCOUNT (MMVA) seeks maximum current income to the extent
that it is consistent with stability of principal by investing exclusively in
money market instruments maturing in less than 13 months.
TOTAL RETURN VARIABLE ACCOUNT (TRVA) seeks primarily to obtain above-average
income (compared to a portfolio entirely invested in equity securities)
consistent with prudent employment of capital; its secondary objective is to
take advantage of opportunities for growth of capital and income. Assets will be
allocated and reallocated from time to time between money market, fixed-income
and equity securities. Generally, at least 40% of its assets will be invested in
equity securities.
WORLD GOVERNMENTS VARIABLE ACCOUNT (WGVA) seeks moderate current income and
preservation and growth of capital by investing in a portfolio of U.S. and
foreign government securities.
6
<PAGE>
PORTFOLIO OF INVESTMENTS -- June 30, 1995
CAPITAL APPRECIATION VARIABLE ACCOUNT -- CAVA
COMMON STOCKS -- 99.0%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. COMMON STOCKS -- 94.8%
AEROSPACE -- 3.4%
Lockheed Martin Corp....... 74,900 $ 4,728,063
McDonnell Douglas Corp..... 142,100 10,906,175
-----------
$15,634,238
-----------
AGRICULTURAL PRODUCTS -- 0.9%
AGCO Corp.................. 108,300 $ 4,061,250
-----------
AIRLINES -- 1.6%
AMR Corp.*................. 15,600 $ 1,164,150
Southwest Airlines Co...... 272,200 6,498,775
-----------
$ 7,662,925
-----------
AUTOMOTIVE -- 3.4%
APS Holding Corp.*......... 200,000 $ 5,275,000
General Motors Corp........ 64,200 3,009,375
Harley-Davidson, Inc....... 199,400 4,860,375
Superior Industries
International............. 78,800 2,452,650
-----------
$15,597,400
-----------
BUSINESS MACHINES -- 2.2%
International Business
Machines Corp............. 52,600 $ 5,049,600
Motorola, Inc.............. 80,600 5,410,275
-----------
$10,459,875
-----------
BUSINESS MACHINES -- PERIPHERALS -- 0.4%
Exabyte Corp.*............. 144,400 $ 2,003,550
-----------
BUSINESS SERVICES -- 1.8%
Ceridian Corp.*............ 150,000 $ 5,531,250
Policy Management Systems
Corp.*.................... 60,500 2,783,000
-----------
$ 8,314,250
-----------
CELLULAR TELEPHONES -- 1.6%
AirTouch Communications,
Inc.*..................... 260,800 $ 7,432,800
-----------
CHEMICALS -- 1.9%
Geon Co.................... 170,200 $ 4,893,250
Union Carbide Corp. Holding
Co........................ 120,000 4,005,000
-----------
$ 8,898,250
-----------
COMPUTER SOFTWARE -- PERSONAL COMPUTERS -- 5.8%
Autodesk, Inc.............. 94,800 $ 4,076,400
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. COMMON STOCKS -- continued
COMPUTER SOFTWARE -- PERSONAL COMPUTERS -- continued
Electronic Arts, Inc.*..... 339,100 $ 9,198,088
Microsoft Corp.*........... 139,500 12,607,313
Spectrum Holobyte, Inc.*... 88,600 1,268,087
-----------
$27,149,888
-----------
COMPUTER SOFTWARE -- SYSTEMS -- 9.2%
BMC Software, Inc.*........ 91,000 $ 7,029,750
Cadence Design Systems,
Inc.*..................... 195,200 6,319,600
Compaq Computer Corp.*..... 169,500 7,691,063
Compuware Corp.*........... 125,000 3,843,750
General Motors Corp.,
"E"....................... 73,500 3,197,250
Oracle Systems Corp.*...... 185,000 7,145,625
Structural Dynamics
Research Corp.*........... 185,300 2,397,319
Sybase, Inc.*.............. 181,600 5,334,500
-----------
$42,958,857
-----------
CONSUMER GOODS AND SERVICES -- 7.8%
Colgate-Palmolive Co....... 44,800 $ 3,276,000
Duracell International,
Inc....................... 109,200 4,722,900
Philip Morris Cos., Inc.... 200,200 14,889,875
Tyco International Ltd..... 245,700 13,267,800
-----------
$36,156,575
-----------
CONTAINERS -- 0.6%
Stone Container Corp.*..... 127,600 $ 2,711,500
-----------
DEFENSE ELECTRONICS -- 0.7%
Loral Corp................. 63,700 $ 3,296,475
-----------
ELECTRONICS -- 6.5%
Applied Materials, Inc.*... 31,300 $ 2,711,363
Intel Corp................. 239,800 15,182,338
LSI Logic Corp.*........... 210,600 8,239,725
National Semiconductor
Corp.*.................... 154,800 4,295,700
-----------
$30,429,126
-----------
ENTERTAINMENT -- 5.4%
Circus Circus Enterprises,
Inc.*..................... 189,600 $ 6,683,400
Grand Casinos, Inc.*....... 42,200 1,492,825
Mirage Resorts, Inc.*...... 133,500 4,088,438
Promus Cos., Inc.*......... 449,700 12,647,813
-----------
$24,912,476
-----------
</TABLE>
7
<PAGE>
PORTFOLIO OF INVESTMENTS -- continued
COMMON STOCKS -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. COMMON STOCKS -- continued
FINANCIAL INSTITUTIONS -- 7.0%
Beneficial Corp............ 54,100 $ 2,380,400
Federal Home Loan Mortgage
Corp...................... 49,600 3,410,000
Finova Group, Inc.......... 141,200 4,942,000
First USA, Inc............. 75,900 3,368,063
Green Tree Financial
Corp...................... 100,600 4,464,125
MBNA Corp.................. 96,800 3,267,000
Schwab (Charles) Corp...... 192,100 8,332,338
United Asset Management
Co........................ 63,900 2,276,437
-----------
$32,440,363
-----------
FOOD AND BEVERAGE PRODUCTS -- 1.8%
General Mills, Inc......... 72,200 $ 3,709,275
Pioneer Hi-Bred
International............. 29,600 1,243,200
Universal Foods Corp....... 110,500 3,577,437
-----------
$ 8,529,912
-----------
FOREST AND PAPER PRODUCTS -- 1.4%
Boise Cascade Corp......... 19,300 $ 781,650
Georgia-Pacific Corp....... 65,000 5,638,750
-----------
$ 6,420,400
-----------
MACHINERY -- 3.5%
Caterpillar, Inc........... 145,100 $ 9,322,675
Deere & Co., Inc........... 78,000 6,678,750
IDEX Corp.................. 2,100 70,350
-----------
$16,071,775
-----------
MEDICAL AND HEALTH PRODUCTS -- 2.4%
Johnson & Johnson.......... 105,800 $ 7,154,725
Pfizer, Inc................ 27,900 2,577,262
Sofamor Danek Group,
Inc.*..................... 63,900 1,445,738
-----------
$11,177,725
-----------
MEDICAL AND HEALTH TECHNOLOGY AND SERVICES -- 7.2%
Foundation Health Corp.*... 139,200 $ 3,758,400
Genesis Health Ventures,
Inc.*..................... 56,000 1,659,000
Health Care & Retirement
Corp.*.................... 86,800 2,538,900
Living Centers of
America*.................. 94,600 2,566,025
Manor Care, Inc............ 250,000 7,281,250
Mariner Health Group,
Inc.*..................... 117,600 1,323,000
Medtronic, Inc............. 47,700 3,678,862
United Healthcare Corp..... 262,300 10,852,662
-----------
$33,658,099
-----------
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. COMMON STOCKS -- continued
METALS AND MINERALS -- 2.0%
Nucor Corp................. 90,200 $ 4,825,700
Phelps Dodge Corp.......... 78,300 4,619,700
-----------
$ 9,445,400
-----------
OILS -- 2.8%
Enron Oil & Gas Co......... 114,000 $ 2,479,500
Mitchell Energy &
Development Corp.......... 186,000 3,324,750
Mobil Corp................. 75,000 7,200,000
-----------
$13,004,250
-----------
PHOTOGRAPHIC PRODUCTS -- 1.0%
Eastman Kodak Co........... 72,300 $ 4,383,188
-----------
POLLUTION CONTROL -- 1.0%
Browning-Ferris
Industries................ 133,300 $ 4,815,463
-----------
RAILROADS -- 1.0%
Wisconsin Central
Transportation Corp.*..... 92,200 $ 4,517,800
-----------
RESTAURANTS AND LODGING -- 4.2%
Brinker International,
Inc.*..................... 331,800 $ 5,723,550
Darden Restaurants,
Inc.*..................... 72,200 785,175
Hospitality Franchise
System, Inc.*............. 186,000 6,440,250
Promus Hotel
Corp.*Section............. 305,150 6,713,300
-----------
$19,662,275
-----------
SPECIAL PRODUCTS AND SERVICES -- 0.5%
Stanley Works.............. 61,600 $ 2,333,100
-----------
STORES -- 4.6%
Borders Group, Inc.*....... 46,000 $ 661,250
Federated Department
Stores, Inc.*............. 362,600 9,336,950
Intelligent Electronics,
Inc....................... 352,600 4,804,175
Office Depot, Inc.*........ 227,200 6,390,000
Phar-Mor, Inc.*##++........ 45,000 45,000
-----------
$21,237,375
-----------
TELECOMMUNICATIONS -- 1.2%
Chipcom Corp.*............. 238,500 $ 5,664,375
-----------
Total U.S. Common Stocks................. $441,040,935
-----------
</TABLE>
8
<PAGE>
COMMON STOCKS -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
FOREIGN STOCKS -- 4.2%
AUSTRALIA -- 1.1%
Sydney Harbor Casino Ltd.
(Entertainment)*.......... 5,015,600 $ 5,166,465
-----------
FINLAND -- 1.0%
Nokia AB
(Telecommunications)...... 76,000 $ 4,522,008
-----------
NEW ZEALAND -- 0.3%
Sky City Ltd.
(Entertainment)*.......... 96,000 $ 1,362,516
-----------
SWEDEN -- 0.3%
TV 4 AB (Broadcasting)..... 61,600 $ 1,237,407
-----------
UNITED KINGDOM -- 1.5%
Reuters Holdings PLC, ADR
(Printing and
Publishing)............... 139,400 $ 6,987,425
-----------
Total Foreign Stocks..................... $19,275,821
-----------
Total Common Stocks (Identified Cost,
$369,559,310)............................ $460,316,756
-----------
SHORT-TERM OBLIGATIONS -- 1.7%
<CAPTION>
Principal
Amount
(000 Omitted)
<S> <C> <C>
Federal National Mortgage
Assn., due 7/05/95........ $ 3,205 $ 3,202,895
Ford Motor Credit Corp.,
due 7/03/95............... 4,920 4,918,306
-----------
Total Short-Term Obligations, at
Amortized Cost........................... $ 8,121,201
-----------
Total Investments (Identified Cost,
$377,680,511)............................ $468,437,957
OTHER ASSETS, LESS LIABILITIES -- (0.7)%... (3,563,389)
-----------
Net Assets -- 100.0%..................... $464,874,568
-----------
-----------
</TABLE>
See portfolio footnotes and notes to financial statements
PORTFOLIO OF INVESTMENTS -- June 30, 1995
GOVERNMENT SECURITIES VARIABLE
ACCOUNT -- GSVA
U.S. FEDERAL AGENCIES -- 36.1%
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Federal Agricultural
Mortgage Corp., 7s,
1998...................... $ 1,800 $ 1,841,904
Federal Agricultural
Mortgage Corp., 7.25s,
1999...................... 5,000 5,182,050
U.S. FEDERAL AGENCIES -- continued
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Federal Agricultural
Mortgage Corp., 7.44s,
2000...................... $ 3,725 $ 3,918,216
Federal Agricultural
Mortgage Corp., 8s,
2006...................... 2,000 2,248,120
Federal Home Loan Mortgage
Corp., 7.5s, 2024-2025.... 5935 5,953,916
Federal Home Loan Mortgage
Corp., 8.5s, 2021......... 39 39,835
Federal Home Loan Mortgage
Corp., 9s, 2001-2007...... 5279 5,511,956
Federal Housing Authority,
7.43s, 2022............... 9,406 9,821,753
Federal National Mortgage
Assn., 7.27s, 2005........ 4,000 4,079,368
Federal National Mortgage
Assn., 7.645s, 2020....... 1,460 1,467,540
Federal National Mortgage
Assn., 8s, 2015-2022...... 530 539,376
Federal National Mortgage
Assn., 8.5s, 2001-2009.... 3,051 3,160,807
Federal National Mortgage
Assn., 9s, 2007........... 786 820,465
Financing Corp., 9.8s,
2018...................... 11,900 15,514,625
Private Export Funding
Corp., 8.4s, 2001......... 12,000 13,168,920
Republic of Israel U.S.
Government Guaranteed
Notes, 6s, 1999........... 5,000 4,974,000
Resolution Funding Corp.,
8.875s, 2020.............. 12,700 15,704,312
U.S. Department of Veterans
Affairs, Vendee Mortgage
Trust, 7.75s, 2014........ 3,000 3,059,063
-----------
Total U.S. Federal Agencies (Identified
Cost, $86,736,504)........................ $97,006,226
-----------
GOVERNMENT GUARANTEED -- 61.3%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 18.7%
GNMA, 7s, 2023............. $ 7,906 $ 7,780,405
GNMA, 7.5s, 2008-2024...... 21,395 21,577,586
GNMA, 8s, 2021-2025........ 5,938 6,078,754
GNMA, 9s, 2017-2024........ 12,834 13,520,433
</TABLE>
9
<PAGE>
PORTFOLIO OF INVESTMENTS -- continued
GOVERNMENT GUARANTEED -- continued
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- continued
GNMA, 10s, 2016............ $ 12 $ 13,002
GNMA, 11s, 2010-2019....... 1,117 1,239,919
GNMA, 12.5s, 2015.......... 137 152,482
GNMA, 13.25s, 2014-2015.... 13 14,482
GNMA, 14s, 2014-2015....... 80 88,643
-----------
$50,465,706
-----------
SMALL BUSINESS ADMINISTRATION -- 9.8%
SBA, 10.35s, 1997.......... $ 488 $ 517,592
SBA, 8.2s, 2005............ 2,000 2,128,750
SBA, 8.4s, 2007............ 556 600,178
SBA, 9.95s, 2008........... 1,091 1,250,519
SBA, 8.7s, 2009............ 1,672 1,831,640
SBA, 10s, 2009............. 969 1,113,128
SBA, 9.45s, 2010........... 10,328 11,631,964
SBA, 9.5s, 2010............ 6,436 7,275,126
-----------
$26,348,897
-----------
U.S. TREASURY OBLIGATIONS -- 32.8%
Stripped Principal
Payments, 0s, 2021........ $ 8,500 $ 1,453,670
U.S. Treasury Notes, 8s,
1997...................... 16,000 16,500,000
U.S. Treasury Notes, 5.25s,
1998...................... 18,000 17,659,620
U.S. Treasury Notes,
7.875s, 1998.............. 6,000 6,277,500
U.S. Treasury Notes, 6.75s,
1999...................... 4,500 4,618,125
U.S. Treasury Notes, 6.75s,
1999...................... 4,500 4,616,010
U.S. Treasury Notes, 6.75s,
2000...................... 5,000 5,151,550
U.S. Treasury Notes,
7.875s, 2001.............. 1,200 1,310,064
U.S. Treasury Notes, 6.25s,
2003...................... 7,390 7,409,657
U.S. Treasury Notes,
7.875s, 2004.............. 1,000 1,113,750
U.S. Treasury Bonds,
10.75s, 2003.............. 3,000 3,820,320
U.S. Treasury Bonds, 8.75s,
2020...................... 14,675 18,208,447
-----------
$88,138,713
-----------
Total Government Guaranteed (Identified
Cost, $161,112,627)...................... $164,953,316
-----------
REPURCHASE AGREEMENT -- 3.9%
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Lehman Brothers, Inc.,
dated 6/30/95, due
7/03/95, total to be
received $10,594,453
(secured by $9,775,000
U.S. Treasury Notes,
7.75s, 2001, market value
$10,805,533), at Cost..... $ 10,589 $10,589,000
-----------
Total Investments (Identified Cost,
$258,438,131)............................. $272,548,542
OTHER ASSETS, LESS LIABILITIES -- (1.3)%.... (3,657,412)
-----------
Net Assets -- 100.0%...................... $268,891,130
-----------
-----------
</TABLE>
See portfolio footnotes and notes to financial statements
PORTFOLIO OF INVESTMENTS -- June 30, 1995
HIGH YIELD VARIABLE ACCOUNT -- HYVA
BONDS -- 92.6%
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
AIRLINES -- 0.1%
Continental Airlines, Inc.,
11.75s, 1995.............. $ 2,050 $ 158,875
-----------
AUTOMOTIVE -- 1.9%
Exide Corp., 10s, 2005##... $ 700 $ 719,250
Harvard Industries, Inc.,
12s, 2004................. 1,550 1,565,500
SPX Corp., 11.75s, 2002.... 1,150 1,198,875
-----------
$ 3,483,625
-----------
BUILDING -- 5.9%
American Standard, Inc.,
10.5s, 2005............... $ 4,300 $ 3,268,000
Atlantic Gulf Communities
Corp., 12s, 1996.......... 235 196,141
Atlantic Gulf Communities
Corp., 13s, 1998.......... 235 125,671
Congoleum Corp., 9s,
2001...................... 200 196,000
Lone Star Industries, Inc.,
10s, 2003................. 1,250 1,250,000
Nortek, Inc., 9.875s,
2004...................... 1,850 1,665,000
</TABLE>
10
<PAGE>
BONDS -- continued
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
BUILDING -- continued
Schuller International
Group, Inc., 10.875s,
2004...................... $ 1,800 $ 1,966,500
USG Corp., 9.25s, 2001..... 2,000 2,050,000
-----------
$10,717,312
-----------
CHEMICALS -- 6.3%
Arcadian Partners L.P.,
10.75s, 2005##............ $ 1,400 $ 1,410,500
Huntsman Corp., 10.625s,
2001...................... 1,750 1,846,250
Indspec Chemical Corp.,
11.5s, 2003............... 750 472,500
NL Industries, Inc.,
11.75s, 2003.............. 2,100 2,189,250
OSI Specialties, Inc.,
9.25s, 2003............... 1,000 1,010,000
OSI Specialties Holding
Co., 0s, 2004............. 1,100 770,000
Rexene Corp., 11.75s,
2004...................... 1,750 1,872,500
UCC Investors Holdings,
Inc., 10.5s, 2002......... 50 51,000
UCC Investors Holdings,
Inc., 0s, 2005............ 2,550 1,861,500
-----------
$11,483,500
-----------
CONSUMER GOODS AND SERVICES -- 8.2%
ADT Operations, Inc.,
9.25s, 2003............... $ 750 $ 774,375
Amstar Corp., 11.375ss,
1997...................... 200 204,000
Astrum International Corp.,
11.5s, 2003............... 950 997,500
Consolidated Cigar Corp.,
10.5s, 2003............... 1,000 995,000
Fieldcrest Cannon, Inc.,
11.25s, 2004.............. 1,200 1,248,000
International Semi-Tech
Microelectronics, Inc.,
0s, 2003.................. 2,300 1,138,500
Ithaca Industries, Inc.,
11.125s, 2002............. 750 712,500
Remington Arms, Inc., 9.5s,
2003##.................... 450 423,000
Revlon, Inc., 10.5s,
2003...................... 1,500 1,470,000
Sealy Corp., 9.5s, 2003.... 1,850 1,813,000
Synthetic Industries, Inc.,
12.75s, 2002.............. 2,100 2,121,000
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
CONSUMER GOODS AND SERVICES -- continued
Westpoint Stevens, Inc.,
9.375s, 2005.............. $ 3,150 $ 3,031,875
-----------
$14,928,750
-----------
CONTAINERS -- 6.1%
Atlantis Group, Inc., 11s,
2003...................... $ 1,000 $ 1,015,000
Calmar Spraying Systems,
Inc., 12s, 1997........... 800 820,000
Calmar Spraying Systems,
Inc., 14s, 1999........... 1,600 1,632,000
Envirodyne Industries,
Inc., 10.25s, 2001........ 438 348,210
Ivex Packaging Corp.,
12.5s, 2002............... 1,200 1,290,000
Owens-Illinois, Inc., 11s,
2003...................... 2,650 2,908,375
Plastic Containers, Inc.,
10.75s, 2001.............. 1,500 1,560,000
Silgan Corp., 11.75s,
2002...................... 1,500 1,567,500
-----------
$11,141,085
-----------
CORPORATE ASSET BACKED -- 0.4%
Merrill Lynch Mortgage
Investors, 8.227s,
2023+..................... $ 1,000 $ 761,900
-----------
DEFENSE ELECTRONICS -- 0.1%
Alliant Techsystems, Inc.,
11.75s, 2003##............ $ 100 $ 107,000
-----------
ENTERTAINMENT -- 4.8%
ACT III Broadcasting,
9.625s, 2003.............. $ 500 $ 507,500
ACT III Theatres, Inc.,
11.875s, 2003............. 200 214,000
AMC Entertainment, Inc.,
11.875s, 2000............. 1,250 1,362,500
Albritton Communications
Corp., 11.5s, 2004........ 900 954,000
Gillett Holdings, Inc.,
12.25s, 2002.............. 1,917 1,993,266
SCI Television, Inc., 11s,
2005...................... 2,450 2,560,250
</TABLE>
11
<PAGE>
PORTFOLIO OF INVESTMENTS -- continued
BONDS -- continued
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
ENTERTAINMENT -- continued
United Artist Theater
Circuit, Inc., 11.5s,
2002...................... $ 1,000 $ 1,082,500
-----------
$ 8,674,016
-----------
FINANCIAL INSTITUTIONS -- 2.9%
American Annuity Group,
Inc., 11.125s, 2003....... $ 1,500 $ 1,560,000
American Life Holdings Co.,
11.25s, 2004.............. 600 624,000
Americo Life, Inc., 9.25s,
2005...................... 1,350 1,248,750
Tiphook Finance Corp.,
7.175s, 1998.............. 1,250 1,012,500
Tiphook Finance Corp., 8s,
2000...................... 1,088 870,400
-----------
$ 5,315,650
-----------
FOOD AND BEVERAGE PRODUCTS -- 2.6%
PMI Acquisition Corp.,
10.25s, 2003.............. $ 2,000 $ 2,020,000
Specialty Foods Corp.,
10.25s, 2001.............. 1,500 1,440,000
Texas Bottling Group, Inc.,
9s, 2003.................. 1,250 1,231,250
-----------
$ 4,691,250
-----------
FOREIGN DENOMINATED -- 0.4%
Mexico-United Mexican
States, 16.5s, 2008....... GBP 500 $ 693,733
-----------
FOREST AND PAPER PRODUCTS -- 6.9%
Container Corp. of America,
10.75s, 2002.............. $ 750 $ 776,250
Gaylord Container Co., 0s,
2005...................... 2,250 2,205,000
Pacific Lumber Co., 10.5s,
2003...................... 1,750 1,605,625
Repap New Brunswick, Inc.,
10.625s, 2005............. 808,000
Riverwood International
Corp., 11.25s, 2002....... 1,000 1,090,000
SD Warren Co., 12s, 2004... 1,500 1,616,250
Stone Consolidated Corp.,
10.25s, 2000.............. 1,250 1,296,875
Stone Container Corp.,
9.875s, 2001.............. 3,250 3,221,563
-----------
$12,619,563
-----------
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
MEDICAL AND HEALTH TECHNOLOGY AND SERVICES -- 5.3%
Community Health System,
10.25s, 2003.............. $ 2,100 $ 2,205,000
Genesis Health Venture,
9.75s, 2005............... 1,400 1,410,500
Integrated Health Services,
Inc., 10.75s, 2004........ 1,550 1,650,750
National Medical
Enterprises, 10.125s,
2005...................... 1,750 1,848,438
OrNda Healthcorp, 12.25s,
2002...................... 2,255 2,497,413
-----------
$ 9,612,101
-----------
OIL SERVICES -- 2.2%
Amerigas Partners L.P.,
10.125s, 2007##........... $ 1,300 $ 1,365,000
Ferrell Gas L.P., 10s,
2001...................... 900 936,000
Giant Industries, Inc.,
9.75s, 2003............... 750 705,000
PDV America, Inc., 7.875s,
2003...................... 900 825,489
Tuboscope Vetco
International, Inc.,
10.75s, 2003.............. 200 204,000
-----------
$ 4,035,489
-----------
OILS -- 1.0%
Gulf Canada, 9.25s, 2004... $ 1,850 $ 1,803,750
-----------
PRINTING AND PUBLISHING -- 1.0%
Day International Group,
Inc., 11.125s, 2005##..... $ 550 $ 552,750
K-III Communications Corp.,
10.625s, 2002............. 725 768,500
World Color Press, Inc.,
9.125s, 2003.............. 500 485,000
-----------
$ 1,806,250
-----------
RESTAURANTS AND LODGING -- 4.4%
Bally's Grand, Inc.,
10.375s, 2003............. $ 1,850 $ 1,803,750
Boomtown, Inc., 11.5s,
2003...................... 750 660,000
Boyd Gaming Corp., 10.75s,
2003...................... 1,400 1,442,000
Four Seasons Hotels, Inc.,
9.125s, 2000##............ 650 639,438
</TABLE>
12
<PAGE>
BONDS -- continued
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
RESTAURANTS AND LODGING -- continued
Hacienda Resorts, Inc.,
10.25s, 1998.............. 630 598,500
Kloster, Inc., 13s, 2003... $ 1,100 $ 847,000
Maritime Group Ltd., 13.5s,
1997##**.................. 664 325,255
Resorts International,
Inc., 0s, 2000............ 1,000 860,000
Sam Houston Race Park,
Inc., 11.75s, 1999**+..... 550 137,500
Station Casinos, Inc.,
9.625s, 2003.............. 750 691,875
-----------
$ 8,005,318
-----------
SPECIAL PRODUCTS AND SERVICES -- 10.4%
Bell & Howell Co., 10.75s,
2002...................... $ 900 $ 958,500
Buckeye Cellulose Corp.,
10.25s, 2001.............. 1,400 1,393,000
Eagle Industries, Inc., 0s,
2003...................... 3,250 2,405,000
Fairfield Manufacturing,
11.375s, 2001............. 100 94,500
Haynes International, Inc.,
11.25s, 1998.............. 350 336,000
IMO Industries, Inc., 12s,
2001...................... 1,750 1,811,250
Idex Corp., 9.75s, 2002.... 1,670 1,724,275
Interlake Corp., 12s,
2001...................... 500 511,250
Interlake Corp., 12.125s,
2002...................... 2,000 1,975,000
Interlake Revolver, "B",
5.75s, 1997............... 253 250,840
K & F Industries, Inc.,
11.875s, 2003............. 1,050 1,071,000
Newflo Corp., 13.25s,
2002...................... 400 400,000
Polymer Group, Inc.,
12.75s, 2002##............ 1,500 1,515,000
Reeves Industries, Inc.,
11s, 2002................. 1,200 1,248,000
Spreckels Industries, Inc.,
11.5s, 2000............... 1,800 1,791,000
Talley Manufacturing &
Technology, Inc., 10.75s,
2003...................... 1,000 975,000
Thermadyne Industries
Holdings Corp., 10.25s,
2002...................... 400 394,000
-----------
$18,853,615
-----------
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
STEEL -- 6.0%
AK Steel Holdings Corp.,
10.75s, 2004.............. $ 2,250 $ 2,362,500
Easco Corp., 10s, 2001..... 850 850,000
Jorgensen (Earle M.) Co.,
10.75s, 2000.............. 1,000 960,000
Kaiser Aluminum & Chemical
Corp., 9.875s, 2002....... 750 729,375
Sheffield Steel Corp., 12s,
2001...................... 500 470,000
UCAR Global Enterprises,
Inc., 12s, 2005........... 2,250 2,430,000
WCI Steel, Inc., 10.5s,
2002...................... 1,050 1,029,000
Weirton Steel Corp.,
10.75s, 2005##............ 1,000 977,500
Wheeling Pittsburgh,
9.375s, 2003.............. 1,150 1,046,500
-----------
$10,854,875
-----------
STORES -- 2.0%
Finlay Enterprises, Inc.,
0s, 2005.................. $ 3,000 $ 1,980,000
Woodward & Lothrop, Inc.,
12s, 1995................. 1,001 1,101,365
Woodward & Lothrop, Inc.,
14.75s, 1995.............. 3,150 630,000
-----------
$ 3,711,365
-----------
SUPERMARKETS -- 2.2%
Dominicks Finer Foods,
10.875s, 2005##........... $ 1,150 $ 1,162,938
Eagle Food Centers, Inc.,
8.625s, 2000.............. 350 157,500
Pathmark Stores, Inc.,
11.625s, 2002............. 900 951,750
Ralphs Grocery Co., 11s,
2005...................... 1,500 1,443,750
Stop & Shop Cos., Inc.,
9.75s, 2002............... 250 270,000
-----------
$ 3,985,938
-----------
TELECOMMUNICATIONS -- 10.4%
American Telecasting Unit,
12.5s, 2004............... $ 1,300 $ 747,500
</TABLE>
13
<PAGE>
PORTFOLIO OF INVESTMENTS -- continued
BONDS -- continued
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
TELECOMMUNICATIONS -- continued
Cablevision Industries
Corp., 10.75s, 2002....... $ 1,950 $2,130,375
Cablevision Systems Corp.,
10.75s, 2004.............. 2,000 2,100,000
Century Communication
Corp., 9.5s, 2005......... 750 744,375
Comcast Corp., 9.375s,
2005...................... 400 399,000
Continental Cablevision,
Inc., 8.875s, 2005........ 400 408,000
Falcon Holdings Group L.P.,
11s, 2003#................ 2,226 2,070,226
Jones Intercable, Inc.,
11.5s, 2004............... 1,225 1,353,625
Jones Intercable, Inc.,
10.5s, 2008............... 250 265,000
MFS Communications, Inc.,
0s, 2004.................. 2,700 1,876,500
Mobilemedia Communications,
Inc., 0s, 2003............ 2,500 1,662,500
Paging Network, Inc.,
8.875s, 2006.............. 1,650 1,501,500
Pronet, Inc., 11.875s,
2005##.................... 750 753,750
Rogers Cablesystems Ltd.,
10.125s, 2012............. 2,000 2,035,000
USA Mobile Communication,
9.5s, 2004................ 950 836,000
-----------
$18,883,351
-----------
TRANSPORTATION -- 0.3%
Moran Transportation Co.,
11.75s, 2004.............. $ 500 $ 460,000
-----------
UTILITIES -- ELECTRIC -- 0.8%
Kenetech Corp., 12.75s,
2002...................... $ 520 $ 509,600
Midland Funding Corp. II,
"A", 11.75s, 2005......... 1,000 1,013,010
-----------
$ 1,522,610
-----------
Total Bonds (Identified Cost,
$168,229,715)............................ $168,310,921
-----------
</TABLE>
COMMON STOCKS AND WARRANTS -- 0.6%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
BUILDING -- 0.1%
Atlantic Gulf Communities
Corp., Warrants*.......... 1,714 $ 857
Calton, Inc.*.............. 484,200 181,575
-----------
$ 182,432
-----------
CHEMICALS
OSI Specialties, Inc.,
Warrants*................. 800 $ 1,600
-----------
CONSUMER GOODS AND SERVICES
Protection One, Inc.*...... 10,080 $ 60,480
Ranger Industries, Inc.*... 123,210 11,551
-----------
$ 72,031
-----------
ENTERTAINMENT -- 0.3%
Gillett Holdings, Inc.*.... 23,535 $ 517,770
-----------
OIL SERVICES -- 0.2%
Digicon, Inc., Warrants*... 8,940 $ 4,470
ICO, Inc., Warrants*....... 375,000 243,750
-----------
$ 248,220
-----------
OILS
Crystal Oil Co., $0.075
Warrants*................. 1,920,847 $ 19
Crystal Oil Co., $0.10
Warrants*................. 1,683,209 0
Crystal Oil Co., $0.125
Warrants*................. 2,000,087 0
Crystal Oil Co., $0.15
Warrants*................. 1,963,306 0
Crystal Oil Co., $0.25
Warrants*................. 1,963,306 0
Forest Oil Corp.,
Warrants*................. 10,665 3,333
Ironstone Group, Inc.*..... 955 191
TGX Corp.*................. 11,219 701
-----------
$ 4,244
-----------
RESTAURANTS AND LODGING
Sam Houston Race Park,
Inc., Warrants*........... 2,200 $ 0
-----------
SPECIAL PRODUCTS AND SERVICES
Envirosource, Inc.*+....... 1,666 $ 7,705
Thermadyne Industries
Holdings Corp., "B"*+..... 129,600 1,296
-----------
$ 9,001
-----------
</TABLE>
14
<PAGE>
COMMON STOCKS AND WARRANTS -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
STORES
Finlay Enterprises,
Inc.*..................... 1,667 $ 23,546
Thrifty Payless
Holdings*................. 9,500 30,875
-----------
$ 54,421
-----------
TELECOMMUNICATIONS
American Telecasting,
Warrants*................. 6,500 $ 6,500
-----------
Total Common Stocks and Warrants
(Identified Cost, $4,832,106)............ $ 1,096,219
-----------
PREFERRED STOCKS -- 1.2%
AIRLINES
Eastern Airlines, Inc.,
$2.84*.................... 57,966 $ 1,811
-----------
BUILDING
UDC Homes, Inc., $1.68,
Cv........................ 2,664 $ 3,663
-----------
PRINTING AND PUBLISHING -- 1.2%
K-III Communications Corp.,
11.625s, "B"#............. 21,948 $ 2,128,963
-----------
Total Preferred Stocks (Identified Cost,
$3,272,369).............................. $ 2,134,437
-----------
SHORT-TERM OBLIGATIONS -- 4.0%
<CAPTION>
Principal
Amount
(000 Omitted)
<S> <C> <C>
Federal National Mortgage
Assn., due 7/05/95........ $ 5,000 $ 4,996,717
Ford Motor Credit Corp.,
7/03/95................... 2,325 2,324,199
-----------
Total Short-Term Obligations, at
Amortized Cost........................... $ 7,320,916
-----------
Total Investments (Identified Cost,
$183,655,106)............................ $178,862,493
OTHER ASSETS, LESS LIABILITIES -- 1.6%..... 2,912,663
-----------
Net Assets -- 100.0%..................... $181,775,156
-----------
-----------
</TABLE>
See portfolio footnotes and notes to financial statements
PORTFOLIO OF INVESTMENTS -- June 30, 1995
MANAGED SECTORS VARIABLE ACCOUNT -- MSVA
COMMON STOCK -- 98.1%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
ENERGY -- 12.5%
BJ Services Co.*........... 62,300 $ 1,417,325
Occidental Petroleum
Corp...................... 115,000 2,630,625
Schlumberger Ltd........... 16,000 994,000
Snyder Oil Corp............ 159,300 2,011,162
Tidewater, Inc............. 81,700 2,052,712
Weatherford
International*............ 50,000 631,250
-----------
$ 9,737,074
-----------
FINANCIAL SERVICES -- 11.6%
Advanta Corp., "B"......... 27,500 $ 1,038,125
American Re Corp........... 28,000 1,043,000
Beneficial Corp............ 17,000 748,000
Equitable of Iowa Cos...... 40,000 1,315,000
First Interstate Bancorp... 11,000 882,750
Mellon Bank Corp........... 27,000 1,123,875
Torchmark Corp............. 29,000 1,094,750
Travelers, Inc............. 41,000 1,793,750
-----------
$ 9,039,250
-----------
LEISURE -- 22.1%
Argosy Gaming Corp.*....... 77,900 $ 1,002,963
Brinker International,
Inc.*..................... 83,500 1,440,375
Manor Care, Inc............ 50,000 1,456,250
Promus Cos., Inc.*......... 100,000 3,900,000
Rogers Communications,
Inc., "B" (Canada)........ 275,000 3,229,698
Showboat, Inc.............. 53,000 980,500
Sky City Ltd. (New
Zealand)*................. 50,000 709,644
Sydney Harbor Casino Ltd.
(Australia)*.............. 646,000 665,432
Telephone & Data Systems,
Inc....................... 105,000 3,819,375
-----------
$17,204,237
-----------
RETAIL -- 9.3%
AnnTaylor Stores, Inc.*.... 23,600 $ 548,700
Dayton-Hudson Corp......... 19,500 1,399,125
Dillard Department Stores,
Inc....................... 37,500 1,101,563
Federated Department
Stores, Inc.*............. 67,300 1,732,975
Gymboree Corp.*............ 12,900 374,906
Nordstrom, Inc............. 5,000 206,875
Phar-Mor, Inc.*##++........ 10,000 10,000
Wal-Mart Stores, Inc....... 45,700 1,222,475
</TABLE>
15
<PAGE>
PORTFOLIO OF INVESTMENTS -- continued
COMMON STOCKS -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
RETAIL -- continued
Warnaco Group, Inc., "A"... 30,000 $ 600,000
-----------
$ 7,196,619
-----------
TECHNOLOGY -- 23.1%
ADT Ltd.*.................. 52,200 $ 613,350
EMC Corp.*................. 51,500 1,248,875
Electronic Arts, Inc.*..... 96,000 2,604,000
Intel Corp................. 50,900 3,222,606
International Business
Machines Corp............. 8,500 816,000
LSI Logic Corp.*........... 27,000 1,056,375
Motorola, Inc.............. 21,000 1,409,625
National Semiconductor
Corp.*.................... 52,000 1,443,000
Nokia AB (Finland)......... 23,000 1,368,502
Oracle Systems Corp.*...... 31,600 1,220,550
Sierra On-Line, Inc.*...... 45,900 1,147,500
Spectrum Holobyte, Inc.*... 125,000 1,789,063
-----------
$17,939,446
-----------
OTHER -- 19.5%
AGCO Corp.................. 39,200 $ 1,470,000
Boise Cascade Corp......... 33,000 1,336,500
Duracell International,
Inc....................... 18,500 800,125
General Motors Corp........ 29,000 1,359,375
Johnson & Johnson.......... 15,000 1,014,375
Loral Corp................. 13,900 719,325
McDonnell Douglas Corp..... 18,000 1,381,500
PepsiCo, Inc............... 27,500 1,254,688
RJR Nabisco Holdings
Corp...................... 69,000 1,923,375
Tyco International Ltd..... 30,600 1,652,400
United Healthcare Corp..... 39,500 1,634,312
Western Waste
Industries*............... 29,900 601,737
-----------
$15,147,712
-----------
Total Common Stocks (Identified Cost,
$66,159,909).......................... $76,264,338
-----------
SHORT-TERM OBLIGATIONS -- 4.3%
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Federal Home Loan Mortgage
Corp., due 7/03/95........ $ 2,945 $ 2,944,002
Federal National Mortgage
Assn., due 7/07/95........ 380 379,629
-----------
Total Short-Term Obligations, at Amortized
Cost...................................... $ 3,323,631
-----------
Total Investments (Identified Cost,
$69,483,540).............................. $79,587,969
OTHER ASSETS, LESS LIABILITIES -- (2.4)%.... (1,880,189)
-----------
Net Assets -- 100.0%...................... $77,707,780
-----------
-----------
</TABLE>
See portfolio footnotes and notes to financial statements
PORTFOLIO OF INVESTMENTS -- June 30, 1995
MONEY MARKET VARIABLE ACCOUNT -- MMVA
COMMERCIAL PAPER -- 32.1%
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
AT&T Co., due 9/07/95...... $ 4,400 $ 4,351,629
AT&T Co., due 9/19/95...... 1,400 1,382,111
Beneficial Corp., due
7/07/95................... 5,000 4,995,067
Coca-Cola Co., due
8/29/95................... 6,500 6,437,788
Dow Chemical Co., due
7/28/95................... 2,100 2,090,645
Ford Motor Credit Corp.,
due 7/03/95............... 4,500 4,498,515
Ford Motor Credit Corp.,
due 7/10/95............... 3,000 2,995,538
Heinz, due 7/21/95......... 4,000 3,987,000
Heinz, due 7/31/95......... 3,000 2,985,150
Hershey Foods, due
7/19/95................... 5,000 4,985,175
Hewlett Packard, due
9/28/95................... 2,000 1,972,212
Kimberly Clark, due
7/14/95................... 3,000 2,993,565
Knight Ridder, due
7/11/95................... 6,200 6,189,770
Pacific Gas & Electric, due
7/26/95................... 7,000 6,971,076
Procter & Gamble, due
7/13/95................... 3,250 3,243,576
Toys R Us, due 7/18/95..... 3,200 3,191,054
-----------
Total Commercial Paper.................... $63,269,871
-----------
</TABLE>
16
<PAGE>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 67.7%
<TABLE>
<CAPTION>
$ Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Federal Home Loan Bank, due
7/18/95 - 9/05/95......... $ 19,600 $19,466,802
Federal Home Loan Mortgage
Corp., due 7/05/95 -
9/25/95................... 63,535 63,180,738
Federal National Mortgage
Assn., due 7/14/95 -
12/12/95.................. 51,400 50,824,073
-----------
Total U.S. Government and Agency
Obligations............................... $133,471,613
-----------
Total Investments, at Amortized Cost...... $196,741,484
OTHER ASSETS, LESS LIABILITIES -- 0.2%...... 322,080
-----------
Net Assets -- 100.0%...................... $197,063,564
-----------
-----------
</TABLE>
See portfolio footnotes and notes to financial statements
PORTFOLIO OF INVESTMENTS -- June 30, 1995
TOTAL RETURN VARIABLE ACCOUNT -- TRVA
BONDS -- 32.3%
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000 omitted) Value
<S> <C> <C>
AEROSPACE -- 0.4%
Loral Corp., 7.625s,
2025...................... $ 400 $ 388,680
McDonnell Douglas Corp.,
9.25s, 2002............... 500 564,390
-----------
$ 953,070
-----------
AIRLINES -- 0.8%
Jet Equipment Trust,
10.91s, 2006##............ $ 499 $ 549,381
Jet Equipment Trust,
10.69s, 2015##............ 250 270,218
NWA Trust, 9.25s, 2014..... 311 352,882
Qantas Airways Ltd., 7.5s,
2003##.................... 700 708,029
-----------
$ 1,880,510
-----------
BANKS AND CREDIT COMPANIES -- 2.0%
ABN AMRO Bank NV, 7.25s,
2005...................... $ 1,050 $ 1,078,403
Banponce Financial Corp.,
7.72s, 2000............... 1,000 1,033,750
Capital One Bank, 8.125s,
2000...................... 600 628,548
First USA Corp. (Bank of
Wilmington), 7.65s,
2003...................... 600 601,818
BONDS -- continued
<CAPTION>
Principal
Amount
Issuer (000 omitted) Value
<S> <C> <C>
BANKS AND CREDIT COMPANIES -- continued
Riggs National Corp., 8.5s,
2006...................... $ 750 $ 765,000
Sovereign Bancorp, 6.75s,
2000...................... 200 192,750
Standard Credit Card Trust,
6.31s, 2000............... 750 750,233
-----------
$ 5,050,502
-----------
BUILDING -- 0.1%
American Standard, Inc.,
10.5s, 2005............... $ 150 $ 114,000
-----------
CONSUMER GOODS AND SERVICES -- 1.0%
Black & Decker Corp.,
8.44s, 1999............... $ 200 $ 211,880
Nabisco, Inc., 8s, 2000.... 380 398,073
RJR Nabisco, Inc., 8.75s,
2005...................... 1575 1,616,407
Westpoint Stevens, Inc.,
9.375s, 2005.............. 200 192,500
-----------
$ 2,418,860
-----------
CONTAINERS -- 0.6%
Owens Corning Fiberglass
Co., 9.9s, 2015##......... $ 200 $ 221,937
Owens-Illinois, Inc., 11s,
2003...................... 600 658,500
Stone Container Corp.,
9.875s, 2001.............. 400 396,500
Stone Container Corp.,
10.75s, 2002.............. 150 157,125
-----------
$ 1,434,062
-----------
CORPORATE ASSET BACKED -- 0.6%
Chase Manhattan Corp.,
8.8s, 2000................ $ 400 $ 412,960
Merrill Lynch Mortgage
Investors, Inc., 8.9s,
2011...................... 444 451,474
Merrill Lynch Mortgage
Investors, Inc., 9.3s,
2016+..................... 500 507,645
-----------
$ 1,372,079
-----------
ENTERTAINMENT -- 1.3%
Time Warner, Inc., 7.75s,
2005...................... $ 2,400 $ 2,382,600
Time Warner, Inc., 9.125s,
2013...................... 800 831,432
-----------
$ 3,214,032
-----------
</TABLE>
17
<PAGE>
PORTFOLIO OF INVESTMENTS -- continued
BONDS -- continued
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000 omitted) Value
<S> <C> <C>
FINANCIAL INSTITUTIONS -- 0.9%
General Motors Acceptance
Corp., 5.95s, 1998........ $ 500 $ 490,400
Household Finance Corp.,
9.3s, 1995................ 500 505,180
K Mart Funding Corp., 8.8s,
2010...................... 525 573,274
Leucadia National Corp.,
8.25s, 2005............... 250 251,563
Paine Webber Group, Inc.,
8.25s, 2002............... 300 313,023
-----------
$ 2,133,440
-----------
FOOD AND BEVERAGE PRODUCTS -- 0.3%
Nabisco, Inc., 7.55s,
2015...................... $ 890 $ 883,645
-----------
FOREIGN -- U.S. DOLLAR DENOMINATED -- 1.9%
Banco Santander, 7.875s,
2005...................... $ 600 $ 630,312
Den Danske Bank, 7.25s,
2005...................... 400 398,000
Financiara Energetica
Nacional
Colombia, 6.65s, 1996##... 420,000 417,900
Hidroelectrica Alicura,
8.375s, 1999##............ 500,000 422,500
Korea Electric Power Corp.,
7.75s, 2013............... 1,500,000 1,482,870
Oleoducto Cent S.A., 9.35s,
2005...................... 300,000 300,000
Province of Quebec, 8.8s,
2003...................... 290 321,871
Republic of Colombia,
8.75s, 1999............... 250,000 258,750
Republic of Greece, 9.75s,
1999...................... 305,000 323,126
-----------
$ 4,555,329
-----------
FOREST AND PAPER PRODUCTS -- 1.2%
Avenor, Inc., 9.375s,
2004##.................... $ 380 $ 414,227
Ferro Corp., 8s, 2025...... 380 372,780
Georgia-Pacific Corp.,
9.875s, 2021.............. 1,150 1,299,190
Georgia-Pacific Corp.,
8.125s, 2023.............. 525 521,572
Georgia-Pacific Corp.,
8.625s, 2025.............. 200 208,212
-----------
$ 2,815,981
-----------
<CAPTION>
Principal
Amount
Issuer (000 omitted) Value
<S> <C> <C>
INSURANCE -- 0.3%
CCP Insurance, Inc., 10.5s,
2004...................... $ 400 $ 422,816
Travelers Group, Inc.,
7.875s, 2025.............. 400 406,160
-----------
$ 828,976
-----------
MEDICAL AND HEALTH TECHNOLOGY AND SERVICES -- 0.2%
FHP International Corp.,
7s, 2003.................. $ 500 $ 491,825
-----------
OILS -- 2.2%
Coastal Corp., 9.75s,
2003...................... $ 400 $ 457,260
Coastal Corp., 10.75s,
2010...................... 625 792,888
Enron Corp., 7.125s,
2007...................... 500 508,475
Gulf Canada Resources Ltd.,
9.625s, 2005.............. 200 198,000
Oryx Energy Co., 9.3s,
1996...................... 1,980 2,006,532
Oryx Energy Co., 9.5s,
1999...................... 225 235,118
USX Marathon Group, 9.125s,
2013...................... 845 895,776
Union Texas Petroleum
Holdings, Inc., 8.5s,
2007...................... 350 372,750
-----------
$ 5,466,799
-----------
POLLUTION CONTROL -- 0.2%
Laidlaw, Inc., 8.75s,
2025...................... $ 350 $ 382,942
-----------
PRECIOUS METALS AND MINERALS -- 0.2%
Santa Fe Pacific Gold
Corp., 8.375s, 2005....... $ 400 $ 399,712
-----------
PRINTING AND PUBLISHING -- 0.8%
News America Holdings,
Inc., 7.5s, 2000.......... $ 500 $ 511,950
News America Holdings,
Inc., 8.25s, 2018......... 1,000 1,026,900
Valassis Inserts, Inc.,
9.375s, 1999.............. 500 523,650
-----------
$ 2,062,500
-----------
REAL ESTATE -- 0.3%
Rouse Co., 8.5s, 2003...... $ 400 $ 423,572
Rouse Co., 8.55s, 2005..... 400 425,075
-----------
$ 848,647
-----------
</TABLE>
18
<PAGE>
BONDS -- continued
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000 omitted) Value
<S> <C> <C>
STORES -- 0.8%
K Mart Corp., 9.35s,
2020...................... $ 2,000 $ 1,995,000
-----------
SUPERMARKETS -- 0.1%
Kroger Co., 9.25s, 2005.... $ 250 $ 266,250
-----------
TELECOMMUNICATIONS -- 1.3%
TCI Communications, Inc.,
8.65s, 2004............... $ 400 $ 419,084
Tele-Communications, Inc.,
9.25s, 2023............... 1,775 1,790,158
Tele-Communications, Inc.,
9.8s, 2012................ 300 329,868
Turner Broadcasting
Systems, Inc., 8.4s,
2024...................... 330 292,581
Viacom, Inc., 7.75s,
2005...................... 480 484,627
-----------
$ 3,316,318
-----------
U.S FEDERAL AGENCIES -- 2.1%
Federal Home Loan Mortgage
Corp., 9s, 2019-2020...... $ 506 $ 523,856
Federal National Mortgage
Assn., 8.5s, 2005......... 1,500 1,615,395
Federal National Mortgage
Assn., 9.5s, 2024-2025.... 2,964 3,112,395
-----------
$ 5,251,646
-----------
U.S. GOVERNMENT GUARANTEED -- 0.5%
Government National
Mortgage Assn., 9s,
2017-2018................. $ 1,127 $ 1,187,474
-----------
U.S. TREASURY OBLIGATIONS -- 7.1%
U.S. Treasury Notes, 7.25s,
1996...................... $ 1,300 $ 1,320,514
U.S. Treasury Notes, 7.25s,
1996...................... 2,000 2,037,820
U.S. Treasury Notes,
7.125s, 1999.............. 3,200 3,332,000
U.S. Treasury Notes, 7.5s,
1999...................... 125 132,011
U.S. Treasury Notes,
7.125s, 2000.............. 760 793,843
U.S. Treasury Notes, 6.25s,
2003...................... 215 215,572
U.S. Treasury Notes, 7.25s,
2004...................... 800 854,872
U.S. Treasury Notes, 7.5s,
2024...................... 200 221,282
U.S. Treasury Bonds, 9.25s,
2016...................... 6,310 8,090,618
<CAPTION>
Principal
Amount
Issuer (000 omitted) Value
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- continued
U.S. Treasury Bonds,
7.625s, 2025.............. $ 390 $ 440,454
-----------
$17,438,986
-----------
UTILITIES -- ELECTRIC -- 3.3%
Boston Edison Co., 8.25s,
2022...................... $ 200 $ 198,888
Cleveland Electric
Illuminating, 9.5s,
2005...................... 1,000 1,002,770
Coastal Bancorp, Inc., 10s,
2002...................... 100 100,000
Commonwealth Edison Co.,
8.375s, 2023.............. 400 415,172
First PV Funding Corp.,
10.3s, 2014............... 650 669,500
First PV Funding Corp.,
10.15s, 2016.............. 750 771,562
Long Island Lighting Co.,
8.75s, 1997............... 500 515,645
Long Island Lighting Co.,
9.625s, 2024.............. 350 354,704
Louisiana Power & Light
Co., 10.67s, 2017......... 300 321,054
Midland Cogeneration
Venture Corp., 10.33s,
2002...................... 553 572,433
Midland Funding Corp. II,
"A", 11.75s, 2005......... 750 759,757
Niagara Mohawk Power Corp.,
6.875s, 2001.............. 400 393,644
Niagara Mohawk Power Corp.,
6.875s, 2003.............. 100 94,886
Niagara Mohawk Power Corp.,
8s, 2004.................. 300 309,270
Niagara Mohawk Power Corp.,
6.625s, 2005.............. 325 311,682
Niagara Mohawk Power Corp.,
9.75s, 2005............... 300 347,097
Niagara Mohawk Power Corp.,
7.75s, 2006............... 215 218,763
Niagara Mohawk Power Corp.,
8.75s, 2022............... 250 256,503
Ohio Edison Co., 7.375s,
2002...................... 225 227,450
</TABLE>
19
<PAGE>
PORTFOLIO OF INVESTMENTS -- continued
BONDS -- continued
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000 omitted) Value
<S> <C> <C>
UTILITIES -- ELECTRIC -- continued
PNPP II Funding Corp.,
9.12s, 2016............... $ 29 $ 27,255
Texas & New Mexico Power
Co., 12.5s, 1999.......... 225 251,719
-----------
$ 8,119,754
-----------
</TABLE>
<TABLE>
<S> <C> <C>
UTILITIES -- GAS -- 1.5%
ANR Pipeline Co., 7s,
2025................... $ 750 $ 751,875
California Energy Co.,
0s, 2004............... 600 510,000
GG1B Funding Corp.,
7.43s, 2011............ 750 725,370
Panhandle Eastern Corp.,
8.625s, 2025........... 300 314,292
Southern Union Co.,
7.6s, 2024............. 1,430 1,404,703
----------
$3,706,240
----------
UTILITIES -- TELEPHONE -- 0.3%
Century Telephone
Enterprises, Inc.,
8.25s, 2024............ $ 600 $ 630,270
----------
Total Bonds (Identified Cost,
$76,739,699)........................ $79,218,849
----------
CONVERTIBLE BONDS -- 0.2%
SPECIAL PRODUCTS AND SERVICES
Ciba-Geigy, 6.25s,
2016## (Identified
Cost, $728,000)........ $ 500 $ 455,000
----------
</TABLE>
COMMON STOCKS -- 59.7%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. COMMON STOCKS -- 55.1%
AEROSPACE -- 1.1%
United Technologies
Corp...................... 35,100 $ 2,742,187
-----------
AUTOMOTIVE -- 2.1%
Ford Motor Co.............. 84,900 $ 2,525,775
General Motors Corp........ 56,000 2,625,000
-----------
$ 5,150,775
-----------
BANKS AND CREDIT COMPANIES -- 5.5%
Bank of Boston Corp........ 120,000 $ 4,500,000
Citicorp................... 29,000 1,678,375
First Bank System, Inc..... 25,000 1,025,000
Morgan (J.P.) & Co......... 20,000 1,402,500
COMMON STOCKS -- continued
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. COMMON STOCKS -- continued
BANKS AND CREDIT COMPANIES -- continued
National City Corp......... $ 60,000 $ 1,762,500
NationsBank Corp........... 37,000 1,984,125
Northern Trust Co.......... 30,000 1,207,500
-----------
$13,560,000
-----------
BUSINESS MACHINES -- 2.3%
Hewlett-Packard Co......... 24,000 $ 1,788,000
Texas Instruments, Inc..... 20,000 2,677,500
Xerox Corp................. 10,000 1,172,500
-----------
$ 5,638,000
-----------
CELLULAR TELEPHONES -- 0.1%
AirTouch Communications,
Inc.*..................... 10,500 $ 299,250
-----------
CHEMICALS -- 1.4%
Dow Chemical Co............ 20,000 $ 1,437,500
Grace (W.R.) & Co.......... 33,600 2,062,200
-----------
$ 3,499,700
-----------
CONGLOMERATES -- 1.3%
Eastern Enterprises........ 50,000 $ 1,493,750
Textron, Inc............... 30,000 1,743,750
-----------
$ 3,237,500
-----------
CONSUMER GOODS AND SERVICES -- 2.8%
Colgate-Palmolive Co....... 42,000 $ 3,071,250
Philip Morris Cos., Inc.... 50,000 3,718,750
-----------
$ 6,790,000
-----------
ELECTRICAL EQUIPMENT -- 1.7%
General Electric Co........ 24,000 $ 1,353,000
Honeywell, Inc............. 64,000 2,760,000
-----------
$ 4,113,000
-----------
ELECTRONICS -- 0.8%
AMP, Inc................... 47,400 $ 2,002,650
-----------
FOOD AND BEVERAGE PRODUCTS -- 2.4%
Anheuser-Busch Cos.,
Inc....................... 23,000 $ 1,308,125
CPC International, Inc..... 50,000 3,087,500
PepsiCo, Inc............... 33,000 1,505,625
-----------
$ 5,901,250
-----------
</TABLE>
20
<PAGE>
COMMON STOCKS -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. COMMON STOCKS -- continued
FOREST AND PAPER PRODUCTS -- 3.6%
Bowater, Inc............... 40,000 $ 1,795,000
Georgia-Pacific Corp....... 20,000 1,735,000
International Paper Co..... 36,447 3,125,330
Weyerhaeuser Co............ 45,000 2,120,625
-----------
$ 8,775,955
-----------
INSURANCE -- 6.6%
Aetna Life & Casualty
Co........................ 85,000 $ 5,344,375
American General Corp...... 70,000 2,362,500
CIGNA Corp................. 19,500 1,513,688
MBIA, Inc.................. 30,000 1,995,000
Reliastar Financial
Corp...................... 55,000 2,103,750
UNUM Corp.................. 60,000 2,812,500
-----------
$16,131,813
-----------
MEDICAL AND HEALTH PRODUCTS -- 2.3%
American Home Products
Corp...................... 22,000 $ 1,702,250
Lilly (Eli) & Co........... 51,000 4,003,500
-----------
$ 5,705,750
-----------
MEDICAL AND HEALTH TECHNOLOGY AND SERVICES -- 0.8%
Meditrust.................. 42,100 $ 1,436,663
National Health Investors,
Inc....................... 17,000 463,250
-----------
$ 1,899,913
-----------
METALS AND MINERALS -- 0.8%
Cyprus Amax Minerals Co.... 25,000 $ 712,500
Phelps Dodge Corp.......... 20,000 1,180,000
-----------
$ 1,892,500
-----------
OIL SERVICES -- 0.9%
McDermott International,
Inc....................... 50,000 $ 1,206,250
Schlumberger Ltd........... 17,100 1,062,337
-----------
$ 2,268,587
-----------
OILS -- 6.2%
Amoco Corp................. 21,900 $ 1,459,088
Exxon Corp................. 41,000 2,895,625
Mobil Corp................. 28,000 2,688,000
Occidental Petroleum
Corp...................... 225,000 5,146,875
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. COMMON STOCK -- continued
OILS -- continued
Sun, Inc................... 25,000 $ 684,375
USX Marathon Group......... 66,900 1,321,275
Ultramar Corp.............. 40,000 1,010,000
-----------
$15,205,238
-----------
PHOTOGRAPHIC PRODUCTS -- 1.5%
Eastman Kodak Co........... 60,000 $ 3,637,500
-----------
PRINTING AND PUBLISHING -- 0.9%
Readers Digest Assn.,
Inc....................... 50,000 $ 2,206,250
-----------
RAILROADS -- 0.5%
CSX Corp................... 15,000 $ 1,126,875
-----------
SPECIAL PRODUCTS AND SERVICES -- 0.5%
Minnesota Mining &
Manufacturing Co.......... 20,000 $ 1,145,000
-----------
STORES -- 1.6%
May Department Stores
Co........................ 40,000 $ 1,665,000
Sears, Roebuck & Co........ 40,000 2,395,000
-----------
$ 4,060,000
-----------
UTILITIES -- ELECTRIC -- 1.3%
FPL Group, Inc............. 45,000 $ 1,738,125
PECO Energy Co............. 35,000 966,875
Pacific Gas & Electric
Co........................ 17,100 495,900
-----------
$ 3,200,900
-----------
UTILITIES -- GAS -- 3.1%
Pacific Enterprises........ 150,000 $ 3,675,000
Sonat, Inc................. 50,000 1,525,000
Williams Cos., Inc......... 67,200 2,343,600
-----------
$ 7,543,600
-----------
UTILITIES -- TELEPHONE -- 3.0%
American Telephone &
Telegraph Co.............. 70,000 $ 3,718,750
GTE Corp................... 60,000 2,047,500
Sprint Corp................ 50,000 1,681,250
-----------
$ 7,447,500
-----------
Total U.S. Common Stocks.................. $135,181,693
-----------
</TABLE>
21
<PAGE>
COMMON STOCKS -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
FOREIGN STOCKS -- 4.6%
ARGENTINA -- 1.3%
YPF S.A., ADR (Oils).... 175,000 $3,303,125
----------
FRANCE -- 0.9%
Alcatel Alsthom
Compagnie, ADR
(Telecommunications)... 34,800 $ 630,750
Assurance Generale
(Insurance)............ 10,000 320,611
Total S.A., ADR
(Oils)................. 43,000 1,300,750
----------
$2,252,111
----------
GERMANY -- 0.4%
Daimler-Benz AG, ADR
(Automotive)........... 19,800 $ 913,275
----------
SPAIN -- 0.2%
Iberdrola S.A.
(Utilities --
Electric).............. 75,000 $ 565,757
----------
UNITED KINGDOM -- 1.8%
British Gas PLC, ADR
(Utilities -- Gas)..... 10,000 $ 460,000
British Petroleum PLC,
ADR (Oils)............. 41,250 3,532,031
National Power PLC
(Utilities --
Electric).............. 83,000 228,667
Powergen PLC (Utilities
--
Electric).............. 35,000 106,737
----------
$4,327,435
----------
Total Foreign Stocks................. $11,361,703
----------
Total Common Stocks (Identified Cost,
$105,524,308)........................ $146,543,396
----------
SHORT-TERM OBLIGATIONS -- 7.5%
Federal Home Loan Bank,
due 7/07/95............ $ 4,400 $4,395,688
Federal National
Mortgage Assn., due
7/05/95................ 4,185 4,182,270
Ford Motor Credit Corp.,
due 7/03/95............ 2,950 2,948,984
Student Loan Marketing
Assn., due 7/06/95..... 6,910 6,904,347
----------
Total Short-Term Obligations, at
Amortized Cost....................... $18,431,289
----------
Total Investments (Identified Cost,
$201,423,296)........................ $244,648,534
OTHER ASSETS, LESS LIABILITIES -- 0.3% 627,241
----------
Net Assets -- 100.0%................... $245,275,775
----------
----------
See portfolio footnotes and notes to financial
statements
</TABLE>
PORTFOLIO OF INVESTMENTS -- JUNE 30, 1995
WORLD GOVERNMENTS VARIABLE ACCOUNT -- WGVA
BONDS -- 83.6%
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 28.6%
Stripped Principal
Payments, 0s, 2019........ $ 3,950 $ 778,664
U.S. Treasury Notes, 7.75s,
1999...................... 1,300 1,386,528
U.S. Treasury Notes,
6.375s, 2002.............. 3,600 3,642,732
U.S. Treasury Notes, 7.25s,
2004...................... 4,930 5,268,149
-----------
Total U.S. Treasury Obligations.......... $11,076,073
-----------
FOREIGN DENOMINATED -- 55.0%
AUSTRALIA -- 8.0%
Australian Government, 12s,
2001...................... AUD 1,100 $ 898,656
Australian Government, 10s,
2002...................... 2,950 2,205,703
-----------
$ 3,104,359
-----------
CANADA -- 3.3%
Canada Government, 9.75s,
2001...................... CAD 1,600 $ 1,283,613
-----------
DENMARK -- 5.3%
Kingdom of Denmark, 9s,
1998...................... DKK 6,270 $ 1,202,147
Kingdom of Denmark, 9s,
2000...................... 4,460 856,274
-----------
$ 2,058,421
-----------
FRANCE -- 3.2%
Government of France, 8s,
1998...................... FRF 1,900 $ 403,363
Government of France, 7s,
1999...................... 1,970 404,811
Government of France,
7.75s, 2000............... 2,000 421,910
-----------
$ 1,230,084
-----------
GERMANY -- 12.0%
Deutschland Republic, 8.5s,
2000...................... DEM 1,680 $ 1,321,389
Deutschland Republic, 6.5s,
2003...................... 535 374,926
Deutschland Republic,
6.75s, 2004............... 680 482,938
Deutschland Republic,
6.875s, 2005.............. 1,600 1,151,954
German Unity Fund, 8.5s,
2001...................... 560 440,261
Treuhandanstalt
Obligationen, 6.375s,
1999...................... 1,200 878,292
-----------
$ 4,649,760
-----------
</TABLE>
22
<PAGE>
BONDS -- continued
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
FOREIGN DENOMINATED -- continued
IRELAND -- 3.0%
Republic of Ireland, 9.75s,
1998...................... IEP 325 $ 552,721
Republic of Ireland, 8s,
2000...................... 375 599,317
-----------
$ 1,152,038
-----------
ITALY -- 3.2%
Republic of Italy, 8.5s,
1999...................... ITL 1,465,000 $ 809,776
Republic of Italy, 9.5s,
1999...................... 780,000 434,966
-----------
$ 1,244,742
-----------
NETHERLANDS -- 7.7%
Dutch State Loan, 6.25s,
1998...................... NLG 410 $ 268,772
Netherlands Government,
7.75s, 2005............... 1,810 1,227,386
Netherlands Government,
8.25s, 2007............... 2,090 1,459,837
-----------
$ 2,955,995
-----------
NEW ZEALAND -- 4.1%
Government of New Zealand,
8s, 1995.................. NZD 2,380 $ 1,583,244
-----------
SPAIN -- 3.3%
Kingdom of Spain, 12.25s,
2000...................... ESP 152,000 $ 1,280,999
-----------
UNITED KINGDOM -- 1.9%
United Kingdom Treasury,
7s, 2001.................. GBP 500 $ 743,499
-----------
Total Foreign Denominated................ $21,286,754
-----------
Total Bonds (Identified Cost,
$31,083,339)............................. $32,362,827
-----------
CALL OPTIONS PURCHASED -- 1.3%
<CAPTION>
Principal
Description/Expiration Amount
Month/ of Contracts
Strike Price (000 Omitted)
<S> <C> <C>
CANADIAN DOLLARS
August/1.34................ CAD 1,431 $ 737
DEUTSCHE MARKS
July/1.385................. DEM 5,884 35,390
ITALIAN LIRE/DEUSTCHE MARKS
September/1143.9........... ITL 21,734 87
JAPANESE BONDS
July/110.164............... JPY 154,000 80,850
CALL OPTIONS PURCHASED -- continued
<CAPTION>
Principal
Description/Expiration Amount
Month/ of Contracts
Strike Price (000 Omitted) Value
<S> <C> <C>
JAPANESE BONDS -- continued
July/112.844............... JPY 300,000 $ 66,000
August/109.274............. 206,000 110,416
August/113.763............. 206,000 22,248
September/111.15........... 236,000 75,048
September/108.577.......... 123,000 71,340
September/108.284.......... 127,000 51,816
-----------
Total Call Options Purchased (Premiums
Paid, $273,125).......................... $ 513,932
-----------
PUT OPTIONS PURCHASED -- 0.2%
BRITISH POUNDS
September/1.5305........... GBP 1,425 $ 8,255
DEUTSCHE MARKS
July/1.415................. DEM 5,882 7,458
DEUTSCHE MARKS/BRITISH POUNDS
July/2.29.................. 1,209 2
JAPANESE BONDS
August/108.985............. JPY 123,000 123
JAPANESE YEN
July/85.25................. 328,816 28,278
JAPANESE YEN/DEUTSCHE MARKS
September/63.0............. 303,034 15,152
-----------
Total Put Options Purchased (Premiums
Paid, $60,631)........................... $ 59,268
-----------
SHORT-TERM OBLIGATIONS -- 16.9%
<CAPTION>
Principal
Amount
Issuer (000 Omitted)
<S> <C> <C>
U.S. DOLLAR DENOMINATED -- 14.4%
Federal Home Loan Mortgage
Corp., due 7/03/95........ $ 2,195 $ 2,194,256
Federal National Mortgage
Assn., due 7/05/95........ 3,375 3,372,789
-----------
$ 5,567,045
FOREIGN DENOMINATED -- 2.5%
New Zealand Treasury Bills,
due 12/20/95.............. NZD 1,523 $ 974,629
-----------
Total Short-Term Obligations, at
Amortized Cost........................... $ 6,541,674
-----------
Total Investments (Identified Cost,
$37,958,769)............................. $39,477,701
-----------
</TABLE>
23
<PAGE>
PORTFOLIO OF INVESTMENTS -- continued
CALL OPTIONS WRITTEN -- (0.6)%
<TABLE>
<CAPTION>
Principal
Description/Expiration Amount
Month/ of Contracts
Strike Price (000 Omitted) Value
<S> <C> <C>
CALL OPTIONS WRITTEN --(0.6)%
JAPANESE BONDS
July/110.2................. JPY (154,000 ) $ (80,542)
August/109.3............... (206,000 ) (110,416)
JAPANESE YEN
March/78.0................. (164,885 ) (46,003)
August/80.................. (308,566 ) (9,257)
-----------
Total Call Options Written (Premiums
Received, $212,955)...................... $ (246,218)
-----------
PUT OPTIONS WRITTEN -- (0.2)%
AUSTRALIAN DOLLARS
September/.705............. AUD (1,677 ) $ (24,640)
BRITISH POUNDS
September/1.530............ GBP (1,425 ) (8,154)
DEUTSCHE MARKS
August/1.51................ DEM (3,626 ) (1,606)
September/1.465............ (6,090 ) (17,508)
September/1.49............. (3,252 ) (5,011)
ITALIAN LIRE/DEUSTCHE MARKS
September/1227.5........... ITL (23,323) (163)
JAPANESE BONDS
September/108.284.......... JPY (127,000 ) (5,207)
September/108.577.......... (123,000 ) (3,198)
JAPANESE YEN
March/93.0................. (196,594 ) (13,565)
-----------
Total Put Options Written (Premiums
Received, $198,200)...................... $ (79,052)
-----------
OTHER ASSETS, LESS LIABILITIES -- (1.2)%... $ (465,773)
-----------
Net Assets -- 100.0%..................... $38,686,658
-----------
-----------
</TABLE>
<TABLE>
<C> <S>
PORTFOLIO FOOTNOTES:
* Non-income producing security.
** Non-income producing security -- in default.
+ Restricted security.
# Payment-in-kind security.
## SEC Rule 144A restriction.
Section When-issued security. At June 30, 1995, the Account
had sufficient cash and/or securities at least equal
to the value of the when-issued security.
++ Security valued by or at the direction of the
Trustees.
</TABLE>
Abbreviations have been used throughout this report to indicate amounts shown in
currencies other than the U.S. dollar. A list of abbreviations is shown below.
<TABLE>
<S> <C> <C> <C> <C> <C>
Australian
AUD = Dollars GBP = British Pounds
Canadian
CAD = Dollars IEP = Irish Punts
CHF = Swiss Francs ITL = Italian Lire
DEM = Deutsche Marks JPY = Japanese Yen
DKK = Danish Kroner NLG = Dutch Guilders
Spanish New Zealand
ESP = Pesetas NZD = Dollars
Finnish
FIM = Markkaa SEK = Swedish Kronor
FRF = French Francs
</TABLE>
24
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES -- June 30, 1995
(000 omitted)
<TABLE>
<CAPTION>
Capital Government High Managed Money Total World
Appreciation Securities Yield Sectors Market Return Governments
Variable Variable Variable Variable Variable Variable Variable
ASSETS: Account Account Account Account Account Account Account
----------- ----------- --------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investments --
Identified cost................... $ 377,681 $ 258,438 $ 183,655 $ 69,484 $ 196,742 $ 201,423 $ 37,959
Unrealized appreciation
(depreciation)................... 90,757 14,111 (4,793) 10,104 -- 43,226 1,519
----------- ----------- --------- ----------- --------- --------- -----------
Total value..................... $ 468,438 $ 272,549 $ 178,862 $ 79,588 $ 196,742 $ 244,649 $ 39,478
Cash................................ 4 1 2 2 194 4 16
Foreign currency, at value
(identified cost, $7).............. -- -- -- -- -- -- 8
Receivable for forward foreign
currency exchange contracts
purchased.......................... -- -- -- -- -- -- 301
Receivable for closed forward
foreign currency exchange
contracts.......................... -- -- -- -- -- -- 175
Receivable for investments sold..... 1,194 8,086 2,329 267 -- 1,591 --
Receivable for units sold........... 9 18 5 19 219 1 24
Interest and dividends receivable... 557 4,666 3,677 117 -- 2,200 866
Receivable from sponsor............. -- -- 55 -- -- 105 --
Other assets........................ 10 4 3 1 2 3 2
----------- ----------- --------- ----------- --------- --------- -----------
Total assets.................... $ 470,212 $ 285,324 $ 184,933 $ 79,994 $ 197,157 $ 248,553 $ 40,870
----------- ----------- --------- ----------- --------- --------- -----------
LIABILITIES:
Payable for investments purchased... $ 3,097 $ 16,050 $ 3,059 $ 2,128 $ -- $ 2,834 $
Payable for when-issued investments
purchased.......................... 1,671 -- -- -- -- -- --
Payable for units surrendered....... 118 175 25 101 13 387 154
Written options outstanding, at
value (premiums received, $411).... -- -- -- -- -- -- 325
Payable for forward foreign currency
exchange contracts sold............ 47 -- -- -- -- -- 1,657
Payable for forward foreign currency
exchange contracts purchased....... 19 -- -- -- -- -- --
Payable to affiliates --
Investment adviser................ 9 4 4 2 3 5 1
Sponsor........................... 302 151 -- 25 32 -- 6
Accrued expenses and other
liabilities........................ 74 53 70 30 45 51 38
----------- ----------- --------- ----------- --------- --------- -----------
Total liabilities............... $ 5,337 $ 16,433 $ 3,158 $ 2,286 $ 93 $ 3,277 $ 2,183
----------- ----------- --------- ----------- --------- --------- -----------
Net assets.................... $ 464,875 $ 268,891 $ 181,775 $ 77,708 $ 197,064 $ 245,276 $ 38,687
----------- ----------- --------- ----------- --------- --------- -----------
----------- ----------- --------- ----------- --------- --------- -----------
</TABLE>
See notes to financial statements
25
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES -- June 30, 1995 -- continued
(000 omitted except for unit values)
<TABLE>
<CAPTION>
Capital Government High Managed Money Total World
Appreciation Securities Yield Sectors Market Return Governments
Unit Variable Variable Variable Variable Variable Variable Variable
Units Value Account Account Account Account Account Account Account
------ -------- ------------ ----------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net assets applicable to contract owners:
Capital Appreciation
Variable Account --
Compass 2 Contracts......... 10,526 $33.7150 $ 354,859
Compass 3 Contracts......... 4,719 22.4406 105,896
Government Securities
Variable Account --
Compass 2 Contracts......... 9,304 $24.2506 $ 225,625
Compass 3 Contracts......... 2,381 17.0999 40,708
High Yield
Variable Account --
Compass 2 Contracts......... 6,030 $24.6242 $148,482
Compass 3 Contracts......... 1,686 18.2638 30,794
Managed Sectors
Variable Account --
Compass 2 Contracts......... 809 $29.1444 $23,570
Compass 3 Contracts......... 1,863 29.0269 54,083
Money Market
Variable Account --
Compass 2 Contracts......... 7,344 $16.1987 $118,942
Compass 3 Contracts......... 5,735 13.3945 76,810
Total Return
Variable Account --
Compass 2 Contracts......... 4,996 $20.0900 $100,374
Compass 3 Contracts......... 7,177 19.8692 142,594
World Governments
Variable Account --
Compass 2 Contracts......... 928 $17.6925 $ 16,415
Compass 3 Contracts......... 1,266 17.4971 22,154
------------ ----------- -------- -------- -------- -------- -----------
Net assets applicable to owners of deferred
contracts...................................... $ 460,755 $ 266,333 $179,276 $77,653 $195,752 $242,968 $ 38,569
Reserve for variable annuities --
Compass 2 Contracts........................... 3,880 2,420 2,487 55 1,274 2,015 78
Compass 3 Contracts........................... 240 138 12 -- 38 293 40
------------ ----------- -------- -------- -------- -------- -----------
Net assets................................ $ 464,875 $ 268,891 $181,775 $77,708 $197,064 $245,276 $ 38,687
------------ ----------- -------- -------- -------- -------- -----------
------------ ----------- -------- -------- -------- -------- -----------
</TABLE>
See notes to financial statements
26
<PAGE>
STATEMENTS OF OPERATIONS -- Six Months Ended June 30, 1995
(000 omitted)
<TABLE>
<CAPTION>
Capital Government High Managed Money Total
Appreciation Securities Yield Sectors Market Return
Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account
----------- ----------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME (EXPENSE):
Income --
Interest...................................... $ 455 $ 10,678 $ 10,067 $ 82 $ 5,165 $ 3,576
Dividends..................................... 2,410 -- -- 370 -- 2,680
Foreign taxes withheld........................ (3) -- -- (3) -- (25)
----------- ----------- --------- ----------- ----------- ---------
Total investment income................... $ 2,862 $ 10,678 $ 10,067 $ 449 $ 5,165 $ 6,231
----------- ----------- --------- ----------- ----------- ---------
Expenses:
Mortality and expense risk charges............ $ 2,746 $ 1,802 $ 1,230 $ 425 $ 1,097 $ 1,437
Management fees............................... 1,568 778 727 256 431 873
Custodian fees................................ 110 61 47 17 29 45
Distribution expense charges.................. 72 33 31 36 46 100
Auditing fees................................. 17 21 24 11 14 18
Legal fees.................................... 28 1 -- 2 1 --
Boards of Managers fees and expenses.......... 5 5 5 5 -- 5
Printing...................................... 8 6 6 2 5 4
Miscellaneous................................. -- 2 81 -- 5 --
----------- ----------- --------- ----------- ----------- ---------
Total expenses............................ $ 4,554 $ 2,709 $ 2,151 $ 754 $ 1,628 $ 2,482
----------- ----------- --------- ----------- ----------- ---------
Net investment income (expense)......... $ (1,692) $ 7,969 $ 7,916 $ (305) $ 3,537 $ 3,749
----------- ----------- --------- ----------- ----------- ---------
REALIZED AND UNREALIZED GAINS (LOSSES) ON
INVESTMENTS:
Realized gains (losses)(identified cost basis)
--
Investment transactions................... $ 26,329 $ (3,083) $ (8,995) $ 6,440 $ -- $ 3,845
Written option transactions............... -- -- -- -- -- --
Foreign currency transactions............. (513) -- 2 (1) -- (2)
----------- ----------- --------- ----------- ----------- ---------
Net realized gains (losses) on
investments............................ $ 25,816 $ (3,083) $ (8,993) $ 6,439 $ -- $ 3,843
----------- ----------- --------- ----------- ----------- ---------
Change in unrealized appreciation
(depreciation) --
Investments................................. $ 56,553 $ 22,625 $ 17,326 $ 7,444 $ -- $ 24,990
Written options............................. -- -- -- -- -- --
Translation of assets and liabilities in
foreign currencies......................... 32 -- (10) -- -- --
----------- ----------- --------- ----------- ----------- ---------
Net unrealized gains on investments....... $ 56,585 $ 22,625 $ 17,316 $ 7,444 $ -- $ 24,990
----------- ----------- --------- ----------- ----------- ---------
Net realized and unrealized gains on
investments............................ $ 82,401 $ 19,542 $ 8,323 $ 13,883 $ -- $ 28,833
----------- ----------- --------- ----------- ----------- ---------
Increase in net assets from
operations........................... $ 80,709 $ 27,511 $ 16,239 $ 13,578 $ 3,537 $ 32,582
----------- ----------- --------- ----------- ----------- ---------
----------- ----------- --------- ----------- ----------- ---------
<CAPTION>
World
Governments
Variable
Account
-------------
<S> <C>
NET INVESTMENT INCOME (EXPENSE):
Income --
Interest...................................... $ 1,449
Dividends..................................... --
Foreign taxes withheld........................ --
------
Total investment income................... $ 1,449
------
Expenses:
Mortality and expense risk charges............ $ 234
Management fees............................... 141
Custodian fees................................ 14
Distribution expense charges.................. 16
Auditing fees................................. 18
Legal fees.................................... 1
Boards of Managers fees and expenses.......... --
Printing...................................... 3
Miscellaneous................................. 5
------
Total expenses............................ $ 432
------
Net investment income (expense)......... $ 1,017
------
REALIZED AND UNREALIZED GAINS (LOSSES) ON
INVESTMENTS:
Realized gains (losses)(identified cost basis)
--
Investment transactions................... $ 993
Written option transactions............... 307
Foreign currency transactions............. 530
------
Net realized gains (losses) on
investments............................ $ 1,830
------
Change in unrealized appreciation
(depreciation) --
Investments................................. $ 2,056
Written options............................. 41
Translation of assets and liabilities in
foreign currencies......................... (793)
------
Net unrealized gains on investments....... $ 1,304
------
Net realized and unrealized gains on
investments............................ $ 3,134
------
Increase in net assets from
operations........................... $ 4,151
------
------
</TABLE>
See notes to financial statements
27
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
(000 omitted)
<TABLE>
<CAPTION>
Capital Appreciation Government Securities High Yield
Variable Account Variable Account Variable Account
-------------------------- -------------------------- --------------------------
Six Months Six Months Six Months
Ended Year Ended Ended Year Ended Ended Year Ended
June 30, December 31, June 30, December 31, June 30, December 31,
1995 1994 1995 1994 1995 1994
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
FROM OPERATIONS:
Net investment income
(expense)................ $ (1,692) $ (3,294) $ 7,969 $ 16,490 $ 7,916 $ 13,839
Net realized gains
(losses) on investments
and foreign currency
transactions............. 25,816 65,369 (3,083) (3,837) (8,993) (13,619)
Net unrealized gains
(losses) on investments
and foreign currency
translations............. 56,585 (138,416) 22,625 (23,235) 17,316 (4,411)
------------ ------------ ------------ ------------ ------------ ------------
Increase (decrease) in
net assets from
operations............. $ 80,709 $ (76,341) $ 27,511 $ (10,582) $ 16,239 $ (4,191)
------------ ------------ ------------ ------------ ------------ ------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments
received................. $ 9,699 $ 25,691 $ 3,580 $ 10,810 $ 2,715 $ 6,243
Net transfers between
variable and fixed
accumulation accounts.... 2,272 (51,442) (34,436) 16,110 (15,183) (12,187)
Withdrawals, surrenders,
annuitizations and
contract charges......... (35,302) (56,940) (24,192) (53,455) (12,559) (22,878)
------------ ------------ ------------ ------------ ------------ ------------
Net accumulation
activity............... $ (23,331) (82,691) $ (55,048) $ (26,535) $ (25,027) $ (28,822)
------------ ------------ ------------ ------------ ------------ ------------
Annuitization activity:
Annuitizations............ $ 38 $ 412 $ 100 $ 267 $ 303 $ 154
Annuity payments and
contract charges......... (274) (571) (202) (480) (202) (367)
Net transfers among
accounts for annuity
reserves................. 12 73 (12) (11) -- 32
Adjustments to annuity
reserves................. (55) 53 (8) 8 49 5
------------ ------------ ------------ ------------ ------------ ------------
Net annuitization
activity............... $ (279) $ (33) $ (122) $ (216) $ 150 $ (176)
------------ ------------ ------------ ------------ ------------ ------------
Decrease in net assets
from participant
transactions............. $ (23,610) $ (82,724) $ (55,170) $ (26,751) $ (24,877) $ (28,998)
------------ ------------ ------------ ------------ ------------ ------------
Total increase
(decrease) in net
assets................. $ 57,099 $(159,065) $ (27,659) $ (37,333) $ (8,638) $ (33,189)
NET ASSETS:
At beginning of period...... 407,776 566,841 296,550 333,883 190,413 223,602
------------ ------------ ------------ ------------ ------------ ------------
At end of period............ $ 464,875 $ 407,776 $ 268,891 $ 296,550 $ 181,775 $ 190,413
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
See notes to financial statements
28
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS -- continued
(000 omitted)
<TABLE>
<CAPTION>
Managed Sectors Money Market
Variable Account Variable Account
--------------------------- ---------------------------
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, December 31, June 30, December 31,
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income
(expense)..................... $ (305) $ (596) $ 3,537 $ 4,189
Net realized gains (losses) on
investments and foreign
currency transactions......... 6,439 2,824 -- --
Net unrealized gains (losses)
on investments and foreign
currency translation.......... 7,444 (4,364) -- --
------------ ------------ ------------ ------------
Increase (decrease) in net
assets from operations...... $13,578 $(2,136) $ 3,537 $ 4,189
------------ ------------ ------------ ------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received..... $ 3,250 $ 7,547 $ 3,088 $ 9,422
Net transfers between variable
and fixed accumulation
accounts...................... 3,252 (2,890) 39,669 43,402
Withdrawals, surrenders,
annuitizations and contract
charges....................... (4,670) (6,857) (19,659) (36,315)
------------ ------------ ------------ ------------
Net accumulation activity.... $ 1,832 $(2,200) $ 23,098 $ 16,509
------------ ------------ ------------ ------------
Annuitization activity:
Annuitizations................. $-- $ 19 $ 35 $ 212
Annuity payments and contract
charges....................... (2) (23) (124) (218)
Net transfers among accounts
for annuity reserves.......... -- (9) -- (73)
Adjustments to annuity
reserves...................... (5) 2 (3) (36)
------------ ------------ ------------ ------------
Net annuitization activity... $ (7) $ (11) $ (92) $ (115)
------------ ------------ ------------ ------------
Increase (decrease) in net
assets from participant
transactions.................. $ 1,825 $(2,211) $ 23,006 $ 16,394
------------ ------------ ------------ ------------
Total increase (decrease) in
net assets.................. $15,403 $(4,347) $ 26,543 $ 20,583
NET ASSETS:
At beginning of period........... 62,305 66,652 170,521 149,938
------------ ------------ ------------ ------------
At end of period................. $77,708 $62,305 $197,064 $170,521
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
See notes to financial statements
29
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS -- continued
(000 omitted)
<TABLE>
<CAPTION>
Total Return
Variable Account
---------------------------
Six Months
Ended Year Ended
June 30, December 31,
1995 1994
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income.......... $ 3,749 $ 6,004
Net realized gains (losses) on
investments and foreign
currency transactions......... 3,843 3,921
Net unrealized gains (losses)
on investments and foreign
currency translation.......... 24,990 (16,953)
------------ ------------
Increase (decrease) in net
assets from operations...... $ 32,582 $ (7,028)
------------ ------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received..... $ 7,891 $ 22,168
Net transfers between variable
and fixed accumulation
accounts...................... (621) 2,947
Withdrawals, surrenders,
annuitizations and contract
charges....................... (18,185) (27,706)
------------ ------------
Net accumulation activity.... $(10,915) $ (2,591)
------------ ------------
Annuitization activity:
Annuitizations................. $ -- $ 364
Annuity payments and contract
charges....................... (175) (380)
Net transfers among accounts
for annuity reserves.......... -- (16)
Adjustments to annuity
reserves...................... 35 (18)
------------ ------------
Net annuitization activity... $ (140) $ (50)
------------ ------------
Decrease in net assets from
participant transactions...... $(11,055) $ (2,641)
------------ ------------
Total increase (decrease) in
net assets.................. $ 21,527 $ (9,669)
NET ASSETS:
At beginning of period........... 223,749 233,418
------------ ------------
At end of period................. $245,276 $223,749
------------ ------------
------------ ------------
<CAPTION>
World Governments
Variable Account
---------------------------
Six Months
Ended Year Ended
June 30, December 31,
1995 1994
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income.......... $ 1,017 $ 1,723
Net realized gains (losses) on
investments and foreign
currency transactions......... 1,830 (4,475)
Net unrealized gains (losses)
on investments and foreign
currency translation.......... 1,304 (63)
------------ ------------
Increase (decrease) in net
assets from operations...... $ 4,151 $(2,815)
------------ ------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received..... $ 1,069 $ 3,409
Net transfers between variable
and fixed accumulation
accounts...................... (299) (1,594)
Withdrawals, surrenders,
annuitizations and contract
charges....................... (2,601) (4,058)
------------ ------------
Net accumulation activity.... $(1,831) $(2,243)
------------ ------------
Annuitization activity:
Annuitizations................. $-- $--
Annuity payments and contract
charges....................... (10) (20)
Net transfers among accounts
for annuity reserves.......... -- 4
Adjustments to annuity
reserves...................... (2) (1)
------------ ------------
Net annuitization activity... $ (12) $ (17)
------------ ------------
Decrease in net assets from
participant transactions...... $(1,843) $(2,260)
------------ ------------
Total increase (decrease) in
net assets.................. $ 2,308 $(5,075)
NET ASSETS:
At beginning of period........... 36,379 41,454
------------ ------------
At end of period................. $38,687 $36,379
------------ ------------
------------ ------------
</TABLE>
See notes to financial statements
30
<PAGE>
PER UNIT AND OTHER DATA
<TABLE>
<CAPTION>
Capital Appreciation Variable Account
----------------------------------------------------------
Compass 2
----------------------------------------------------------
Six
Months
Ended Year Ended December 31,
June 30, ------------------------------------------------
1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of period.................. $28.0107 $32.9053 $29.2712 $26.6401 $19.8801 $21.7958
-------- -------- -------- -------- -------- --------
Investment income........... $0.2036 $0.4277 $0.3914 $0.2670 $0.4256 $0.7721
Expenses.................... 0.3205 0.6325 0.6436 0.5467 0.4756 0.4357
-------- -------- -------- -------- -------- --------
Net investment income
(expense)................ $(0.1169) $(0.2048) $(0.2522) $(0.2797) $(0.0500) $0.3364
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... 5.8212 (4.6898) 3.8863 2.9108 6.8100 (2.2521)
-------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $5.7043 $(4.8946) $3.6341 $2.6311 $6.7600 $(1.9157)
-------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
period..................... $33.7150 $28.0107 $32.9053 $29.2712 $26.6401 $19.8801
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+................... 0.81 %# 0.79 % 0.78 % 0.80 % 0.79 % 0.79 %
Net investment income
(expense).................. (0.79)%# (0.69)% (0.83)% (1.08)% (0.23)% 1.58 %
PORTFOLIO TURNOVER............ 52 % 95 % 56 % 34 % 62 % 36 %
NUMBER OF UNITS OUTSTANDING AT
END OF PERIOD (000
OMITTED)..................... 10,526 11,310 13,833 14,914 16,570 17,753
</TABLE>
<TABLE>
<CAPTION>
Capital Appreciation Variable Account
----------------------------------------------------------
Compass 3
----------------------------------------------------------
Six
Months
Ended Year Ended December 31,
June 30, ------------------------------------------------
1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of period.................. $18.6531 $21.9341 $19.5311 $17.7928 $13.2912 $14.5864
-------- -------- -------- -------- -------- --------
Investment income........... $0.1345 $0.2870 $0.2617 $0.1919 $0.2748 $0.4690
Expenses.................... 0.2222 0.4421 0.4496 0.4131 0.3323 0.3026
-------- -------- -------- -------- -------- --------
Net investment income
(expense)................ $(0.0877) $(0.1551) $(0.1881) $(0.2212) $(0.0575) $0.1664
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... 3.8752 (3.1259) 2.5911 1.9595 4.5591 (1.4616)
-------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $3.7875 $(3.2810) $2.4030 $1.7383 $4.5016 $(1.2952)
-------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
period..................... $22.4406 $18.6531 $21.9341 $19.5311 $17.7928 $13.2912
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+................... 0.81 %# 0.79 % 0.78 % 0.80 % 0.79 % 0.79 %
Net investment income
(expense).................. (0.79)%# (0.69)% (0.83)% (1.08)% (0.23)% 1.58 %
PORTFOLIO TURNOVER............ 52 % 95 % 56 % 34 % 62 % 36 %
NUMBER OF UNITS OUTSTANDING AT
END OF PERIOD (000
OMITTED)..................... 4,719 4,686 4,899 4,401 3,742 2,639
<FN>
*Per unit data is based on the average number of units outstanding during each
period.
+Excluding mortality and expense risk charges and distribution expense charges.
#Annualized.
</TABLE>
See notes to financial statements
31
<PAGE>
PER UNIT AND OTHER DATA -- continued
<TABLE>
<CAPTION>
Government Securities Variable Account
----------------------------------------------------------
Compass 2
----------------------------------------------------------
Six
Months
Ended Year Ended December 31,
June 30, ------------------------------------------------
1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of period.................. $22.0031 $22.7120 $21.1172 $19.9842 $17.4276 $16.1951
-------- -------- -------- -------- -------- --------
Investment income........... $0.8745 $1.5648 $1.5732 $1.4340 $1.5470 $1.4496
Expenses.................... 0.2199 0.4229 0.4238 0.3672 0.3476 0.3143
-------- -------- -------- -------- -------- --------
Net investment income..... $0.6546 $1.1419 $1.1494 $1.0668 $1.1994 $1.1353
Net realized and unrealized
gains (losses) on
investments for foreign
currency transactions...... 1.5929 (1.8508) 0.4454 0.0662 1.3572 0.0972
-------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $2.2475 $(0.7089) $1.5948 $1.1330 $2.5566 $1.2325
-------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
period..................... $24.2506 $22.0031 $22.7120 $21.1172 $19.9842 $17.4276
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+................... 0.62 %# 0.61 % 0.61 % 0.62 % 0.60 % 0.60 %
Net investment income....... 5.65 %# 5.09 % 5.11 % 5.51 % 6.50 % 6.81 %
PORTFOLIO TURNOVER............ 43 % 41 % 81 % 175 % 149 % 107 %
NUMBER OF UNITS OUTSTANDING AT
END OF PERIOD (000
OMITTED)..................... 9,304 11,308 12,679 15,059 17,986 20,248
</TABLE>
<TABLE>
<CAPTION>
Government Securities Variable Account
----------------------------------------------------------
Compass 3
----------------------------------------------------------
Six
Months
Ended Year Ended December 31,
June 30, ------------------------------------------------
1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of period.................. $15.5227 $16.0387 $14.9267 $14.1396 $12.3433 $11.4817
-------- -------- -------- -------- -------- --------
Investment income........... $0.6136 $1.1028 $1.1064 $1.0851 $1.0935 $1.0274
Expenses.................... 0.1629 0.3146 0.3154 0.2950 0.2604 0.2357
-------- -------- -------- -------- -------- --------
Net investment income..... $0.4507 $0.7882 $0.7910 $0.7901 $0.8331 $0.7917
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... 1.1265 (1.3042) 0.3210 (0.0030) 0.9632 0.0699
-------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $1.5772 $(0.5160) $1.1120 $0.7871 $1.7963 $0.8616
-------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
period..................... $17.0999 $15.5227 $16.0387 $14.9267 $14.1396 $12.3433
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+................... 0.62 %# 0.61 % 0.61 % 0.62 % 0.60 % 0.60 %
Net investment income....... 5.65 %# 5.09 % 5.11 % 5.51 % 6.50 % 6.81 %
PORTFOLIO TURNOVER............ 43 % 41 % 81 % 175 % 149 % 107 %
NUMBER OF UNITS OUTSTANDING AT
END OF PERIOD (000
OMITTED)..................... 2,381 2,922 2,697 2,722 2,327 1,757
<FN>
*Per unit data is based on the average number of units outstanding during each
period.
+Excluding mortality and expense risk charges and distribution expense charges.
#Annualized.
</TABLE>
See notes to financial statements
32
<PAGE>
PER UNIT AND OTHER DATA -- continued
<TABLE>
<CAPTION>
High Yield Variable Account
----------------------------------------------------------
Compass 2
----------------------------------------------------------
Six
Months
Ended Year Ended December 31,
June 30, ------------------------------------------------
1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of period.................. $22.6776 $23.3591 $19.7156 $17.3208 $11.7862 $13.7199
-------- -------- -------- -------- -------- --------
Investment income........... $1.2462 $2.2324 $2.0867 $2.0657 $1.9834 $2.0156
Expenses.................... 0.2636 0.5062 0.4797 0.4061 0.3287 0.2819
-------- -------- -------- -------- -------- --------
Net investment income..... $0.9826 $1.7262 $1.6070 $1.6596 $1.6547 $1.7337
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... 0.9640 (2.4077) 2.0365 0.7352 3.8799 (3.6674)
-------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $1.9466 $(0.6815) $3.6435 $2.3948 $5.5346 $(1.9337)
-------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
period..................... $24.6242 $22.6776 $23.3591 $19.7156 $17.3208 $11.7862
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+................... 0.92 %# 0.91 % 0.86 % 0.93 % 0.87 % 0.86 %
Net investment income....... 8.19 %# 7.41 % 6.97 % 9.03 % 10.85 % 13.14 %
PORTFOLIO TURNOVER............ 40 % 77 % 67 % 61 % 38 % 14 %
NUMBER OF UNITS OUTSTANDING AT
END OF PERIOD (000
OMITTED)..................... 6,030 6,433 7,564 8,218 9,376 11,578
</TABLE>
<TABLE>
<CAPTION>
High Yield Variable Account
----------------------------------------------------------
Compass 3
----------------------------------------------------------
Six
Months
Ended Year Ended December 31,
June 30, ------------------------------------------------
1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of period.................. $16.8283 $17.3543 $14.6589 $12.8923 $8.7799 $10.2297
-------- -------- -------- -------- -------- --------
Investment income........... $0.9225 $1.5336 $1.5179 $1.5969 $1.5178 $1.4777
Expenses.................... 0.2041 0.3711 0.3671 0.3340 0.2582 0.2229
-------- -------- -------- -------- -------- --------
Net investment income..... $0.7184 $1.1625 $1.1508 $1.2629 $1.2596 $1.2548
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... 0.7171 (1.6885) 1.5446 0.5037 2.8528 (2.7046)
-------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $1.4355 $(0.5260) $2.6954 $1.7666 $4.1124 $(1.4498)
-------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
period..................... $18.2638 $16.8283 $17.3543 $14.6589 $12.8923 $8.7799
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+................... 0.92 %# 0.91 % 0.86 % 0.93 % 0.87 % 0.86 %
Net investment income....... 8.19 %# 7.41 % 6.97 % 9.03 % 10.85 % 13.14 %
PORTFOLIO TURNOVER............ 40 % 77 % 67 % 61 % 38 % 14 %
NUMBER OF UNITS OUTSTANDING AT
END OF PERIOD (000
OMITTED)..................... 1,686 2,506 2,577 2,345 1,823 788
<FN>
*Per unit data is based on the average number of units outstanding during each
period.
+Excluding mortality and expense risk charges and distribution expense charges.
#Annualized.
</TABLE>
See notes to financial statements
33
<PAGE>
PER UNIT AND OTHER DATA -- continued
<TABLE>
<CAPTION>
Managed Sectors Variable Account
----------------------------------------------------------
Compass 2
----------------------------------------------------------
Six
Months
Ended Year Ended December 31,
June 30, ------------------------------------------------
1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of period.................. $23.9044 $24.7295 $23.8070 $22.6652 $13.9677 $16.2888
-------- -------- -------- -------- -------- --------
Investment income........... $0.1714 $0.3066 $0.1822 $0.1121 $0.2357 $0.3501
Expenses.................... 0.2760 0.5155 0.4994 0.4782 0.3848 0.3465
-------- -------- -------- -------- -------- --------
Net investment income
(expense)................ $(0.1046) $(0.2089) $(0.3172) $(0.3661) $(0.1491) $0.0036
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... 5.3446 (0.6162) 1.2397 1.5079 8.8466 (2.3247)
-------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $5.2400 $(0.8251) $0.9225 $1.1418 $8.6975 $(2.3211)
-------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
period..................... $29.1444 $23.9044 $24.7295 $23.8070 $22.6652 $13.9677
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+................... 0.86 %# 0.90 % 0.91 % 0.92 % 0.98 % 1.08 %
Net investment income
(expense).................. (0.90)%# (0.97)% (1.49)% (1.75)% (0.97)% (0.05)%
PORTFOLIO TURNOVER............ 51 % 111 % 122 % 34 % 52 % 71 %
NUMBER OF UNITS OUTSTANDING AT
END OF PERIOD (000
OMITTED)..................... 809 800 878 1,041 899 706
</TABLE>
<TABLE>
<CAPTION>
Managed Sectors Variable Account
----------------------------------------------------------
Compass 3
----------------------------------------------------------
Six
Months
Ended Year Ended December 31,
June 30, ------------------------------------------------
1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of period.................. $23.8258 $24.6849 $23.8007 $22.6927 $14.0049 $16.3563
-------- -------- -------- -------- -------- --------
Investment income........... $0.1721 $0.3031 $0.1817 $0.1156 $0.2307 $0.3473
Expenses.................... 0.2942 0.5452 0.5311 0.5325 0.4141 0.3639
-------- -------- -------- -------- -------- --------
Net investment income
(expense)................ $(0.1221) $(0.2421) $(0.3496) $(0.4169) $(0.1834) $(0.0166)
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... 5.3232 (0.6170) 1.2338 1.5249 8.8712 (2.3348)
-------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $5.2011 $(0.8591) $0.8842 $1.1080 $8.6878 $(2.3514)
-------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
period..................... $29.0269 $23.8258 $24.6849 $23.8007 $22.6927 $14.0049
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+................... 0.86 %# 0.90 % 0.91 % 0.92 % 0.98 % 1.08 %
Net investment income
(expense).................. (0.90)%# (0.97)% (1.49)% (1.75)% (0.97)% (0.05)%
PORTFOLIO TURNOVER............ 51 % 111 % 122 % 34 % 52 % 71 %
NUMBER OF UNITS OUTSTANDING AT
END OF PERIOD (000
OMITTED)..................... 1,863 1,810 1,819 1,728 1,276 887
<FN>
*Per unit data is based on the average number of units outstanding during each
period.
+Excluding mortality and expense risk charges and distribution expense charges.
#Annualized.
</TABLE>
See notes to financial statements
34
<PAGE>
PER UNIT AND OTHER DATA -- continued
<TABLE>
<CAPTION>
Money Market Variable Account
----------------------------------------------------------
Compass 2
----------------------------------------------------------
Six
Months
Ended Year Ended December 31,
June 30, ------------------------------------------------
1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of period.................. $15.8699 $15.5003 $15.2976 $14.9945 $14.3507 $13.4689
-------- -------- -------- -------- -------- --------
Investment income........... $0.4772 $0.6615 $0.4864 $0.5772 $0.9108 $1.1445
Expenses.................... 0.1484 0.2919 0.2837 0.2741 0.2670 0.2627
-------- -------- -------- -------- -------- --------
Net investment income..... $0.3288 $0.3696 $0.2027 $0.3031 $0.6438 $0.8818
-------- -------- -------- -------- -------- --------
Net increase in unit
value...................... $0.3288 $0.3696 $0.2027 $0.3031 $0.6438 $0.8818
-------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
period..................... $16.1987 $15.8699 $15.5003 $15.2976 $14.9945 $14.3507
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+................... 0.57 %# 0.58 % 0.36 % 0.59 % 0.58 % 0.57 %
Net investment income....... 4.12 %# 2.37 % 1.30 % 2.03 % 4.46 % 6.35 %
NUMBER OF UNITS OUTSTANDING AT
END OF PERIOD (000
OMITTED)..................... 7,344 6,851 6,418 8,026 12,023 20,431
</TABLE>
<TABLE>
<CAPTION>
Money Market Variable Account
----------------------------------------------------------
Compass 3
----------------------------------------------------------
Six
Months
Ended Year Ended December 31,
June 30, ------------------------------------------------
1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of period.................. $13.1291 $12.8359 $12.6806 $12.4415 $11.9182 $11.1973
-------- -------- -------- -------- -------- --------
Investment income........... $0.3936 $0.5688 $0.4065 $0.4888 $0.7619 $0.9503
Expenses.................... 0.1282 0.2756 0.2512 0.2497 0.2386 0.2294
-------- -------- -------- -------- -------- --------
Net investment income..... $0.2654 $0.2932 $0.1553 $0.2391 $0.5233 $0.7209
-------- -------- -------- -------- -------- --------
Net increase in unit
value...................... $0.2654 $0.2932 $0.1553 $0.2391 $0.5233 $0.7209
-------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
period..................... $13.3945 $13.1291 $12.8359 $12.6806 $12.4415 $11.9182
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+................... 0.57 %# 0.58 % 0.36 % 0.59 % 0.58 % 0.57 %
Net investment income....... 4.12 %# 2.37 % 1.30 % 2.03 % 4.46 % 6.35 %
NUMBER OF UNITS OUTSTANDING AT
END OF PERIOD (000
OMITTED)..................... 5,735 4,599 3,823 3,704 3,228 4,417
<FN>
*Per unit data is based on the average number of units outstanding during each
period.
+Excluding mortality and expense risk charges and distribution expense charges.
#Annualized.
</TABLE>
See notes to financial statements
35
<PAGE>
PER UNIT AND OTHER DATA -- continued
<TABLE>
<CAPTION>
Total Return Variable Account
----------------------------------------------------------
Compass 2
----------------------------------------------------------
Six
Months
Ended Year Ended December 31,
June 30, ------------------------------------------------
1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of period.................. $17.4729 $18.0043 $15.9891 $14.6451 $12.0634 $12.2435
-------- -------- -------- -------- -------- --------
Investment income........... $0.5084 $0.8583 $0.8513 $0.9191 $0.9092 $0.7861
Expenses.................... 0.1931 0.3704 0.3616 0.3303 0.2828 0.2550
-------- -------- -------- -------- -------- --------
Net investment income..... $0.3153 $0.4879 $0.4897 $0.5888 $0.6264 $0.5311
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... 2.3018 (1.0193) 1.5255 0.7552 1.9553 (0.7112)
-------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $2.6171 $(0.5314) $2.0152 $1.3440 $2.5817 $(0.1801)
-------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
period..................... $20.0900 $17.4729 $18.0043 $15.9891 $14.6451 $12.0634
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+................... 0.81 %# 0.82 % 0.76 % 0.86 % 0.84 % 0.85 %
Net investment income....... 3.23 %# 2.60 % 2.43 % 3.63 % 4.52 % 4.26 %
PORTFOLIO TURNOVER............ 46 % 63 % 89 % 94 % 80 % 53 %
NUMBER OF UNITS OUTSTANDING AT
END OF PERIOD (000
OMITTED)..................... 4,996 5,410 5,889 5,732 5,215 5,738
</TABLE>
<TABLE>
<CAPTION>
Total Return Variable Account
----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Compass 3
----------------------------------------------------------
<CAPTION>
Six
Months
Ended Year Ended December 31,
June 30, ------------------------------------------------
1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of period.................. $17.2937 $17.8462 $15.8723 $14.5600 $12.0108 $12.2086
-------- -------- -------- -------- -------- --------
Investment income........... $0.4952 $0.8371 $0.8304 $0.9284 $0.8989 $0.7763
Expenses.................... 0.2040 0.3904 0.3829 0.3607 0.3002 0.2716
-------- -------- -------- -------- -------- --------
Net investment income..... $0.2912 $0.4467 $0.4475 $0.5677 $0.5987 $0.5047
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... 2.2843 (0.9992) 1.5264 0.7446 1.9505 (0.7025)
-------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $2.5755 $(0.5525) $1.9739 $1.3123 $2.5492 $(0.1978)
-------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
period..................... $19.8692 $17.2937 $17.8462 $15.8723 $14.5600 $12.0108
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+................... 0.81 %# 0.82 % 0.76 % 0.86 % 0.84 % 0.85 %
Net investment income....... 3.23 %# 2.60 % 2.43 % 3.63 % 4.52 % 4.26 %
PORTFOLIO TURNOVER............ 46 % 63 % 89 % 94 % 80 % 53 %
NUMBER OF UNITS OUTSTANDING AT
END OF PERIOD (000
OMITTED)..................... 7,177 7,349 7,013 5,721 4,752 3,624
<FN>
*Per unit data is based on the average number of units outstanding during each
period.
+Excluding mortality and expense risk charges and distribution expense charges.
#Annualized.
</TABLE>
See notes to financial statements
36
<PAGE>
PER UNIT AND OTHER DATA -- continued
<TABLE>
<CAPTION>
World Governments Variable Account
----------------------------------------------------------
Compass 2
----------------------------------------------------------
Six
Months
Ended Year Ended December 31,
June 30, ------------------------------------------------
1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of period.................. $15.8337 $16.9056 $14.4420 $14.5806 $12.9852 $11.3504
-------- -------- -------- -------- -------- --------
Investment income........... $0.6496 $1.0805 $1.1460 $1.2892 $1.1907 $0.9632
Expenses.................... 0.1863 0.3565 0.3704 0.3624 0.3190 0.2938
-------- -------- -------- -------- -------- --------
Net investment income..... $0.4633 $0.7240 $0.7756 $0.9268 $0.8717 $0.6694
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... 1.3955 (1.7959) 1.6880 (1.0654) 0.7237 0.9654
-------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $1.8588 $(1.0719) $2.4636 $(0.1386) $1.5954 $1.6348
-------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
period..................... $17.6925 $15.8337 $16.9056 $14.4420 $14.5806 $12.9852
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+................... 0.97 %# 1.00 % 0.94 % 1.15 % 1.18 % 1.22 %
Net investment income....... 5.42 %# 4.45 % 4.12 % 6.03 % 6.51 % 5.55 %
PORTFOLIO TURNOVER............ 141 % 256 % 202 % 133 % 229 % 120 %
NUMBER OF UNITS OUTSTANDING AT
END OF PERIOD (000
OMITTED)..................... 928 983 1,092 949 884 836
</TABLE>
<TABLE>
<CAPTION>
World Governments Variable Account
----------------------------------------------------------
Compass 3
----------------------------------------------------------
Six
Months
Ended Year Ended December 31,
June 30, ------------------------------------------------
1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of period.................. $15.6705 $16.7563 $14.3365 $14.4961 $12.9291 $11.3178
-------- -------- -------- -------- -------- --------
Investment income........... $0.6404 $1.0666 $1.1293 $1.2979 $1.1961 $0.9588
Expenses.................... 0.1964 0.3760 0.3890 0.3876 0.3380 0.3103
-------- -------- -------- -------- -------- --------
Net investment income..... $0.4440 $0.6906 $0.7403 $0.9103 $0.8581 $0.6485
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... 1.3826 (1.7764) 1.6795 (1.0699) 0.7089 0.9628
-------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $1.8266 $(1.0858) $2.4198 $(0.1596) $1.5670 $1.6113
-------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
period..................... $17.4971 $15.6705 $16.7563 $14.3365 $14.4961 $12.9291
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+................... 0.97 %# 1.00 % 0.94 % 1.15 % 1.18 % 1.22 %
Net investment income....... 5.42 %# 4.45 % 4.12 % 6.03 % 6.51 % 5.55 %
PORTFOLIO TURNOVER............ 141 % 256 % 202 % 133 % 229 % 120 %
NUMBER OF UNITS OUTSTANDING AT
END OF PERIOD (000
OMITTED)..................... 1,266 1,321 1,363 1,176 995 813
<FN>
*Per unit data is based on the average number of units outstanding during each
period.
+Excluding mortality and expense risk charges and distribution expense charges.
#Annualized.
</TABLE>
See notes to financial statements
37
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION
Capital Appreciation Variable Account, Government Securities Variable Account,
High Yield Variable Account, Managed Sectors Variable Account, Money Market
Variable Account, Total Return Variable Account and World Governments Variable
Account are separate accounts established by Sun Life Assurance Company of
Canada (U.S.), the Sponsor, in connection with the issuance of Compass 2
(including Compass 2 contracts) and Compass 3 combination fixed/variable annuity
contracts. Capital Appreciation Variable Account, Government Securities Variable
Account, Money Market Variable Account and Total Return Variable Account operate
as diversified management investment companies and High Yield Variable Account,
Managed Sectors Variable Account and World Governments Variable Account operate
as non-diversified management investment companies as those terms are defined in
the Investment Company Act of 1940, as amended.
(2) SIGNIFICANT ACCOUNT POLICIES
INVESTMENT VALUATIONS
Equity securities listed on securities exchanges or reported through the NASDAQ
system are valued at last sale prices. Unlisted equity securities or listed
equity securities for which last sale prices are not available are valued at
last quoted bid prices. Debt securities (other than short-term obligations which
mature in 60 days or less), including listed issues and forward contracts, are
valued on the basis of valuations furnished by dealers or by a pricing service
with consideration to factors such as institutional-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics and other market data, without exclusive reliance upon
exchange or over-the-counter prices. Short-term obligations, which mature in 60
days or less, are valued at amortized cost, which approximates market value.
Non-U.S. dollar denominated short-term obligations are valued at amortized cost
as calculated in the base currency and translated into U.S. dollars at the
closing daily exchange rate. Futures contracts, options, and options on futures
contracts listed on commodities exchanges are valued at closing settlement
prices. Over-the-counter options are valued by brokers through the use of a
pricing model which takes into account closing bond valuations, implied
volatility, and short-term repurchase rates. Securities for which there are no
such quotations or valuations are valued at fair value as determined in good
faith by or at the direction of the Boards of Managers.
REPURCHASE AGREEMENTS
Certain Variable Accounts may enter into repurchase agreements with institutions
that the Variable Account's investment adviser has determined are creditworthy.
Each repurchase agreement is recorded at cost. Such Variable Accounts require
that the securities purchased in a repurchase transaction be transferred to the
custodian in a manner sufficient to enable the Account to obtain those
securities in the event of a default under the repurchase agreement. The
investment adviser monitors, on a daily basis, the value of the securities
transferred to ensure that the value, including accrued interest, of the
securities under each repurchase agreement is greater than the amount owed to
the Variable Account under each such repurchase agreement.
38
<PAGE>
FOREIGN CURRENCY TRANSLATION
Investment valuations, other assets, and liabilities initially expressed in
foreign currencies are converted each business day into U.S. dollars based upon
current exchange rates. Purchases and sales of foreign investments, income and
expenses are converted into U.S. dollars based upon currency exchange rates
prevailing on the respective dates of such transactions. Gains and losses
attributable to foreign currency exchange rates on sales of securities are
recorded for financial statement purposes as net realized gains and losses on
investments. Gains and losses attributable to foreign exchange rate movements on
income and expenses are recorded for financial statement purposes as foreign
currency transaction gains and losses. That portion of both realized and
unrealized gains and losses on investments that results from fluctuations in
foreign currency exchange rates is not separately disclosed.
WRITTEN OPTIONS
Certain Variable Accounts may write covered call or put options for which
premiums are received and are recorded as liabilities, and are subsequently
adjusted to the current value of the options written. Premiums received from
writing options which expire are treated as realized gains. Premiums received
from writing options which are exercised or are closed are offset against the
proceeds or amount paid on the transaction to determine the realized gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
securities purchased. The writer of an option may have no control over whether
the underlying securities may be sold (call) or purchased (put) and, as a
result, bears the market risk of an unfavorable change in the price of the
securities underlying the written option. In general, written call options may
serve as a partial hedge against decreases in value in the underlying securities
to the extent of the premium received. Written options may also be used as a
part of an income producing strategy reflecting the view of the Variable
Account's management on the direction of interest rates.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Certain Variable Accounts may enter into forward foreign currency exchange
contracts for the purchase or sale of a specific foreign currency at a fixed
price on a future date. Risks may arise upon entering these contracts from the
potential inability of counterparties to meet the terms of their contracts and
from unanticipated movements in the value of a foreign currency relative to the
U.S. dollar. Forward contracts will be entered into for hedging purposes as well
as for non-hedging purposes. Certain Variable Accounts may enter into contracts
to deliver or receive foreign currency it will receive from or require for its
normal investment activities. It may also use contracts in a manner intended to
protect foreign currency denominated securities from declines in value due to
unfavorable exchange rate movements. For non-hedging purposes, certain Variable
Accounts may enter into contracts with the intent of changing the relative
exposure of the Account's Portfolio of Securities to different currencies to
take advantage of anticipated changes. The forward foreign currency exchange
contracts are adjusted by the daily exchange rate of the underlying currency and
any gains or losses are recorded for financial statement purposes as unrealized
until the contract settlement date.
39
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
FEDERAL INCOME TAXES
The Variable Accounts are funding vehicles for individual variable annuities.
The operations of the Variable Accounts are part of the operations of Sun Life
Assurance Company of Canada (U.S.), the Sponsor, and are not taxed separately;
the Variable Accounts are not taxed as regulated investment companies. The
Sponsor qualifies for the federal income tax treatment granted to life insurance
companies under Subchapter L of the Internal Revenue Code. Accordingly, no
provision for federal income or excise tax is necessary. Foreign taxes have been
provided for on interest and dividend income earned on foreign investments in
accordance with the applicable country's tax rates and to the extent
unrecoverable are recorded as a reduction of investment income.
INVESTMENT TRANSACTIONS AND INCOME
Investment transactions are recorded on the trade date. Interest income is
recorded on the accrual basis. All premium and original issue discount are
amortized or accreted for financial statement and tax reporting purposes as
required by federal income tax regulations. Dividend income is recorded on the
ex-dividend date for dividends received in cash. Dividend and interest payments
received in additional securities are recorded on the ex-dividend or ex-interest
date in an amount equal to the value of the security on such date.
As appropriate, based on their investments, certain of the Variable Accounts use
the effective interest method for reporting interest income on payment-in-kind
(PIK) bonds, whereby interest income on PIK bonds is recorded ratably by the
Variable Account at a constant yield to maturity. Legal fees and other related
expenses incurred to preserve and protect the value of a security owned are
added to the cost of the security; other legal fees are expensed. Capital
infusions, which are generally non-recurring, incurred to protect or enhance the
value of high-yield debt securities, are reported as an addition to the cost
basis of the security. Costs that are incurred to negotiate the terms or
conditions of capital infusions or that are expected to result in a plan of
reorganization are reported as realized losses. Ongoing costs incurred to
protect or enhance an investment, or costs incurred to pursue other claims or
legal actions, are reported as operating expenses.
(3) CONTRACT CHARGES
The Sponsor makes a deduction from the Variable Accounts at the end of each
valuation period, during both the accumulation period and after annuity payments
begin, for assuming the mortality and expense risks under the contracts. The
rate of the deduction may be changed annually but in no event may it exceed
1.25% of the assets of each Variable Account attributable to Compass 3
contracts, or, with respect to Compass 2 contracts, 1.30% of the assets of
Capital Appreciation Variable Account, Government Securities Variable Account,
High Yield Variable Account and Money Market Variable Account, or 1.25% of the
assets of Managed Sectors Variable Account, Total Return Variable Account and
World Governments Variable Account attributable to such contracts.
For assuming the distribution expense risk under Compass 3 contracts, the
Sponsor makes a deduction from the Variable Accounts at the end of each
valuation period for the first seven contract
40
<PAGE>
years at an effective annual rate of 0.15% of the assets of the Variable
Accounts attributable to such contracts. No deduction is made after the seventh
contract anniversary. No deduction is made with respect to assets attributable
to Compass 2 contracts.
Each year, on the contract anniversary, a contract maintenance charge of $25
with respect to Compass 2 contracts and $30 with respect to Compass 3 contracts
is deducted from each contract's accumulation account and paid the Sponsor to
cover administrative expenses relating to the contract. After the annuity
commencement date, the annual contract maintenance charge is deducted pro rata
from each annuity payment made during the year.
The Sponsor does not deduct a sales charge from purchase payments. However, a
withdrawal charge (contingent deferred sales charge) may be deducted to cover
certain expenses relating to the sale of the contract. In no event shall the
aggregate withdrawal charges (including the distribution expense charge
described above applicable to Compass 3 contracts) exceed 5% of the purchase
payments made under a Compass 2 contract or 9% of the purchase payments made
under a Compass 3 contract.
(4) ANNUITY RESERVES
Annuity reserves for contracts with annuity commencement dates prior to February
1, 1987 have been calculated using the 1971 Individual Annuitant Mortality
Table. Annuity reserves for contracts with annuity commencement dates on or
after February 1, 1987 are calculated using the 1983 Individual Annuitant
Mortality Table. Annuity reserves for contracts in payment period are calculated
using an assumed interest rate of 4%. Required adjustments are accomplished by
transfers to or from the Sponsor.
(5) MANAGEMENT AGREEMENTS
The Management Agreements provide that the Variable Accounts will pay the
Investment Adviser, Massachusetts Financial Services Company, a wholly-owned
subsidiary of the Sponsor, a fee computed daily and paid monthly at an effective
annual rate based on a percentage of each Variable Account's average daily net
assets as follows:
<TABLE>
<CAPTION>
Annual Rate of Management Fee Annual Rate of Management Fee
Based on Average Based on Average
Daily Net Assets Daily Net Assets
Not Exceeding $300 Million in Excess of $300 Million
------------------------------ -----------------------------
<S> <C> <C>
Capital Appreciation Variable Account........................ 0.75% 0.675%
Government Securities Variable Account....................... 0.55% 0.495%
High Yield Variable Account.................................. 0.75% 0.675%
Managed Sectors Variable Account............................. 0.75% 0.675%
Money Market Variable Account................................ 0.50% 0.500%
Total Return Variable Account................................ 0.75% 0.675%
World Governments Variable Account........................... 0.75% 0.675%
</TABLE>
41
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
(5) MANAGEMENT AGREEMENTS -- continued
The agreements also provide that the Investment Adviser will pay certain
Variable Account expenses in excess of 1.25% of the average daily net assets of
each Variable Account for any calendar year. The Variable Accounts pay no
compensation directly to their officers or members of the Boards of Managers who
are affiliated with the Investment Adviser or the Sponsor.
(6) PORTFOLIO SECURITIES
For the six months ended June 30, 1995, purchases and sales of investments,
other than U.S. government securities, purchased option transactions and
short-term obligations, were as follows:
<TABLE>
<CAPTION>
Purchases Sales
------------ ------------
<S> <C> <C>
Capital Appreciation Variable Account............. $231,668,295 $208,338,732
High Yield Variable Account....................... 72,018,272 84,076,175
Managed Sectors Variable Account.................. 44,951,290 34,788,210
Money Market Variable Account*.................... 348,769,414 292,486,185
Total Return Variable Account..................... 74,868,336 67,365,883
World Governments Variable Account................ 27,341,369 31,932,704
</TABLE>
For the six months ended June 30, 1995, purchases and sales of U.S. government
securities, other than purchased option transactions and short-term obligations,
were as follows:
<TABLE>
<CAPTION>
Purchases Sales
------------ ------------
<S> <C> <C>
Capital Appreciation Variable Account........... $ 1,478,685 $ 7,570,437
Government Securities Variable Account.......... 134,356,959 113,122,992
Money Market Variable Account*.................. 577,934,624 613,029,426
Total Return Variable Account................... 35,652,424 45,929,298
World Governments Variable Account.............. 16,041,848 14,438,467
<FN>
* Purchases and sales of investments for Money Market Variable Account consist
solely of short-term obligations.
</TABLE>
(7) HIGH-YIELD SECURITIES AND FINANCIAL INSTRUMENTS
Although the High Yield Variable Account has a diversified portfolio, its
portfolio is invested in high-yield securities rated below investment grade or
which are unrated. Investments in high-yield securities involve greater degrees
of credit and market risk than investments in higher-rated securities and tend
to be more sensitive to economic conditions.
Certain Variable Accounts may trade financial instruments with off-balance sheet
risk in the normal course of their investing activities in order to manage
exposure to market risks such as interest rates and foreign currency exchange
rates. These financial instruments include written options, forward foreign
currency exchange contracts, indexed securities and futures contracts. The
notional or contractual amounts of these instruments represent the investment
the Variable Accounts have in particular classes of financial instruments and
does not necessarily represent the amounts potentially subject to risk. The
measurement of the risks associated with these instruments is meaningful only
when all related and offsetting transactions are considered. A summary of
obligations under these financial instruments at June 30, 1995, is as follows:
42
<PAGE>
WRITTEN OPTION TRANSACTIONS
World Governments Variable Account
<TABLE>
<CAPTION>
1995 Calls 1995 Puts
------------------------------ ------------------------------
Principal Amounts Principal Amounts
of Contracts of Contracts
(000's Omitted) Premiums (000's Omitted) Premiums
----------------- ---------- ----------------- ----------
<S> <C> <C> <C> <C>
Outstanding, beginning of period:
Canadian Dollars...................... -- $ -- 1,113 $ 5,809
Deutsche Marks........................ -- -- 6,894 58,599
Japanese Yen.......................... 91,000 12,246 182,000 19,560
Swiss Francs/Deutsche Marks........... 1,717 7,231 -- --
Options written --
Australian Dollars.................... 947 7,226 4,767 57,869
British Pounds........................ 1,527 26,353 1,425 26,353
Canadian Dollars...................... -- -- 3,170 13,130
Deutsche Marks........................ 34,028 129,989 14,957 94,933
Deutsche Marks/British Pounds......... 1,116 7,247 -- --
Italian Lire/Deutsche Marks........... 3,335,092 30,519 1,042,179 7,810
Japanese Yen.......................... 1,537,833 404,427 2,160,104 233,693
Spanish Pesetas/Deutsche Marks........ -- -- 133,915 8,776
U.S. Dollars.......................... -- -- 2,200 29,047
Options terminated in closing
transactions --
Australian Dollars.................... (947) (7,226) (3,090) (37,894)
British Pounds........................ (1,527) (26,353) -- --
Canadian Dollars...................... -- -- (4,283) (18,939)
Deutsche Marks........................ (5,358) (26,591) (8,883) (75,170)
Deutsche Marks/British Pounds......... (1,116) (7,247) -- --
Italian Lire/Deutsche Marks........... -- -- (1,018,856) (7,623)
Japanese Yen.......................... (795,382) (203,718) (1,895,510) (179,930)
Spanish Pesetas/Deutsche Marks........ -- -- (133,915) (8,776)
U.S. Dollars.......................... -- -- (2,200) (29,047)
Options exercised --
Deutsche Marks........................ (3,109) (9,938) -- --
Swiss Francs/Deutsche Marks........... (1,717) (7,231) -- --
Options expired --
Deutsche Marks........................ (25,561) (93,460) -- --
Italian Lire/Deutsche Marks........... (3,335,092) (30,519) -- --
----------------- ---------- ----------------- ----------
Outstanding, end of period.............. 833,451 $ 212,955 485,987 $ 198,200
----------------- ---------- ----------------- ----------
----------------- ---------- ----------------- ----------
</TABLE>
43
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
WRITTEN OPTION TRANSACTIONS -- continued
World Governments Variable Account
<TABLE>
<CAPTION>
1995 Calls 1995 Puts
------------------------------ ------------------------------
Principal Amounts Principal Amounts
of Contracts of Contracts
(000's Omitted) Premiums (000's Omitted) Premiums
----------------- ---------- ----------------- ----------
<S> <C> <C> <C> <C>
Options outstanding at end of period
consist of:
Australian Dollars.................... -- $ -- 1,677 $ 19,975
----------------- ---------- ----------------- ----------
----------------- ---------- ----------------- ----------
British Pounds........................ -- $ -- 1,425 $ 26,353
----------------- ---------- ----------------- ----------
----------------- ---------- ----------------- ----------
Deutsche Marks........................ -- $ -- 12,968 $ 78,362
----------------- ---------- ----------------- ----------
----------------- ---------- ----------------- ----------
Italian Lire/Deutsche Marks........... -- $ -- 23,323 $ 187
----------------- ---------- ----------------- ----------
----------------- ---------- ----------------- ----------
Japanese Yen.......................... 833,451 $ 212,955 446,594 $ 73,323
----------------- ---------- ----------------- ----------
----------------- ---------- ----------------- ----------
</TABLE>
At June 30, 1995, the World Governments Variable Account had sufficient cash
and/or securities at least equal to the value of the written options.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
<TABLE>
<CAPTION>
Net
Contracts Unrealized
Contract to In Exchange at Appreciation
Account Transaction Settlement Date Deliver/Receive for Value (Depreciation)
- ----------------------------- --------- ------------------ ----------------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Capital Appreciation Variable
Account Sales 7/03/95 - 10/03/95 FIM 23,841,500 $ 5,525,605 $5,584,812 $ (59,207)
9/19/95 GBP 2,800,000 4,468,800 4,451,404 17,396
7/10/95 SEK 6,781,700 927,666 932,728 (5,062)
------------- ---------- ------------
$10,922,071 $10,968,944 $ (46,873)
------------- ---------- ------------
------------- ---------- ------------
Purchases 7/03/95 FIM 11,920,750 $ 2,811,498 $2,792,460 $ (19,038)
------------- ---------- ------------
$ 2,811,498 $2,792,460 $ (19,038)
------------- ---------- ------------
------------- ---------- ------------
</TABLE>
44
<PAGE>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- continued
<TABLE>
<CAPTION>
Net
Contracts Unrealized
Contract to In Exchange at Appreciation
Account Transaction Settlement Date Deliver/Receive for Value (Depreciation)
- ----------------------------- --------- ------------------ ----------------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
World Governments Variable
Account Sales 7/05/95 - 9/27/95 AUD 6,267,457 $ 4,546,739 $4,441,717 $ 105,022
8/01/95 - 8/02/95 CAD 2,609,532 1,892,155 1,899,002 (6,847)
7/10/95 CHF 4,671 4,061 4,065 (4)
7/05/95 - 9/29/95 DEM 57,595,327 40,513,759 41,733,458 (1,219,699)
7/07/95 - 10/06/95 DKK 21,567,567 3,952,117 3,995,187 (43,070)
7/05/95 - 7/21/95 ESP 446,912,440 3,522,454 3,693,914 (171,460)
7/19/95 - 9/28/95 FRF 16,129,159 3,303,419 3,322,609 (19,190)
7/07/95 - 8/16/95 GBP 2,469,327 3,933,158 3,931,269 1,889
8/04/95 IEP 631,391 1,029,167 1,034,964 (5,797)
9/11/95 - 10/02/95 ITL 5,594,126,188 3,386,306 3,391,967 (5,661)
7/05/95 - 9/25/95 JPY 1,605,418,831 18,753,000 19,025,372 (272,372)
9/26/95 NLG 4,827,367 3,112,723 3,134,796 (22,073)
7/24/95 - 9/12/95 NZD 5,111,642 3,388,919 3,398,072 (9,153)
7/13/95 - 8/16/95 SEK 14,769,754 2,037,673 2,026,481 11,192
------------- ---------- ------------
$93,375,650 $95,032,873 $(1,657,223)
------------- ---------- ------------
------------- ---------- ------------
Purchases 7/05/95 - 8/25/95 AUD 1,670,766 $ 1,242,700 $1,185,943 $ (56,757)
8/01/95 CAD 713,410 517,305 519,172 1,867
7/10/95 CHF 4,671 4,017 4,065 48
7/05/95 - 10/06/95 DEM 59,684,894 42,978,989 43,257,079 278,090
7/07/95 - 9/28/95 DKK 22,499,814 4,148,066 4,168,799 20,733
7/05/95 ESP 238,544,583 1,879,631 1,973,002 93,371
9/29/95 FRF 6,940,918 1,416,285 1,428,948 12,663
7/07/95 - 8/25/95 GBP 2,073,641 3,276,721 3,300,308 23,587
9/11/95 - 9/14/95 ITL 3,460,943,170 2,071,606 2,100,793 29,187
7/05/95 - 9/22/95 JPY 2,243,382,190 26,728,098 26,593,223 (134,875)
9/08/95 - 9/15/95 NZD 1,711,155 1,129,897 1,136,773 6,876
7/13/95 - 8/16/95 SEK 14,769,754 2,000,256 2,026,481 26,225
------------- ---------- ------------
$87,393,571 $87,694,586 $ 301,015
------------- ---------- ------------
------------- ---------- ------------
</TABLE>
Forward foreign currency purchases and sales under master netting arrangements
and closed forward foreign currency exchange contracts for the World Governments
Variable Account, excluded above, amounted to a net receivable of $175,146 at
June 30, 1995.
At June 30, 1995, the Capital Appreciation Variable Account and World
Governments Variable Account had sufficient cash and/or securities to cover any
commitments under these contracts.
See page 25 for an explanation of abbreviations used to indicate amounts shown
in currencies other than the U.S. dollar.
45
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
INDEXED SECURITIES
Certain variable accounts may invest in indexed securities whose value may be
linked to foreign currencies, interest rates, commodities, indices or other
financial indicators. Indexed securities are fixed-income securities whose
proceeds at maturity (principal-indexed securities) or interest rates
(coupon-indexed securities) rise and fall according to the change in one or more
specified underlying instruments. Indexed securities may be more volatile than
the underlying instrument itself. The following is a summary of such securities
held at June 30, 1995:
<TABLE>
<CAPTION>
Principal
(000 Unrealized
Account Description Index omitted) Value Appreciation
- -------------------------------- --------------------------- ---------------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
High Yield Variable Account Mexico -- United Mexican Six-month Libor GBP 500 $ 693,733 $ 39,425
States,
16.5s, 2008
</TABLE>
(8) RESTRICTED SECURITIES
Certain of the Variable Accounts may invest in securities which are subject to
legal or contractual restrictions on resale. At June 30, 1995, Capital
Appreciation Variable Account, High Yield Variable Account, Managed Sectors
Variable Account and Total Return Variable Account owned the following
restricted securities (consisting of 0.01%, 6.0%, 0.01% and 1.6% of the net
assets of each Variable Account, respectively) which may not be publicly sold
without registration under the Securities Act of 1933 (the 1933 Act). No
Variable Account has the right to demand that such securities be registered. The
value of these securities is determined by valuations supplied by a pricing
service or brokers or, if not available, in good faith by or at the direction of
the Boards of Managers. Certain of these securities may be offered and sold to
"qualified institutional buyers" under Rule 144A of the 1933 Act.
<TABLE>
<CAPTION>
Date of Share/Par
Variable Account Description Acquistion Amount Cost Value
---------------------------------------- ------------------------- --------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
10/23/91 -
Capital Appreciation Variable Account Phar-Mor, Inc.Section 5/05/92 45,000 $ 1,305,000 $ 45,000
----------- -----------
----------- -----------
Alliant Techsystems, Inc.
High Yield Variable Account 11.75s, 2003Section 3/07/95 100,000 $ 100,000 $ 107,000
Amerigas Partners, L.P., 4/12/95 -
10.125s, 2007 6/26/95 1,300,000 1,322,500 1,365,000
Arcadian Partners L.P., 5/03/93 -
10.75s, 2005Section 6/04/93 1,400,000 1,367,476 1,410,500
Day International Group,
Inc., 11.125s, 5/26/95 -
2005Section 6/16/95 550,000 549,500 552,750
Dominicks Finer Foods, 4/27/95 -
10.875s, 2005Section 5/03/05 1,150,000 1,155,625 1,162,938
Envirosource, Inc. 5/15/94 1,666 7,288 7,705
Exide Corp., 10s,
2005Section 4/21/95 700,000 700,000 719,250
Four Seasons Hotels,
Inc., 9.125s,
2000Section 6/23/93 650,000 645,872 639,438
Maritime Group Ltd.,
13.5s, 1997Section 2/09/94 663,785 600,000 325,255
Merrill Lynch Mortgage
Investors, Inc., 8.227s,
2023 6/22/94 1,000,000 693,125 761,900
Polymer Group, Inc., 6/17/94 -
12.75s, 2002Section 5/16/95 1,500,000 1,510,000 1,515,000
Pronet, 11.875s,
2005Section 6/12/95 750,000 744,622 753,750
Remington Arms, Inc.,
9.5s, 2003Section 11/19/93 450,000 447,187 423,000
Sam Houston Race Park, 6/23/93 -
Inc., 11.75s, 1999 6/08/94 550,000 506,800 137,500
Thermadyne Industries
Holdings Corp. "B" 4/12/89 129,600 93,312 1,296
Weirton Steel Corp.,
10.75s, 2005Section 6/05/95 1,000,000 985,045 977,500
----------- -----------
$11,428,352 $10,859,782
----------- -----------
----------- -----------
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
Date of Share/Par
Variable Account Description Acquistion Amount Cost Value
---------------------------------------- ------------------------- --------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
10/23/91 -
Managed Sectors Variable Account Phar-Mor, Inc.Section 5/05/92 10,000 $ 290,000 $ 10,000
----------- -----------
----------- -----------
Avenor, Inc. 9.375s,
Total Return Variable Account 2004Section 7/27/94 380,000 $ 416,191 $ 414,227
Ciba-Geigy Corp., 6.25s, 11/12/91 -
2016Section 1/22/92 500,000 728,000 455,000
Financiera Energetica
Nacional Colombia,
6.625s, 1996Section 3/22/95 420,000 403,200 417,900
Hidroelectrica Alicura,
8.375s, 1999Section 4/08/94 500,000 457,500 422,500
Jet Equipment Trust,
10.91s, 2006Section 4/07/95 499,246 529,091 549,381
Jet Equipment Trust,
10.69s, 2015Section 4/07/95 250,000 250,000 270,218
Merrill Lynch Home Equity
Loan Corp., 9.3s, 2016 12/16/92 500,000 501,875 507,645
Owens Corning Fiberglass
Co., 9.9s, 2015Section 3/07/95 200,000 200,000 221,937
Qantas Airways Ltd.,
7.5s, 2003 6/24/93 700,000 698,322 708,029
----------- -----------
$ 4,184,179 $ 3,966,837
----------- -----------
----------- -----------
</TABLE>
Section SEC Rule 144A restricted security.
(9) PARTICIPANT TRANSACTIONS
The changes in net assets from changes in numbers of outstanding units were as
follows:
<TABLE>
<CAPTION>
Six Months Ended June 30, 1995 (000 Omitted)
---------------------------------------------------------------------------------------------------
Withdrawals,
Transfers Between Surrenders,
Purchase Funds and Fixed Annuitizations, Net Net Net
Payments Accumulation and Contract Accumulation Annuitization Increase
Received Account Charges Activity Activity (Decrease)
------------- ------------------ ------------------ ------------------ ------------- ----------
Units Dollars Units Dollars Units Dollars Units Dollars Dollars Dollars
----- ------- ------- --------- ------- --------- ------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Appreciation
Variable Account
Compass 2
Contracts........ 134 $ 4,092 6 $ 239 (925) $ (28,227) (785) $ (23,896) $(260) $(24,156)
Compass 3
Contracts........ 277 5,607 102 2,033 (345) (7,075) 34 565 (19) 546
------- --------- --------- --------- ----- ----------
$ 9,699 $ 2,272 $ (35,302) $ (23,331) $(279) $(23,610)
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
Government
Securities Variable
Account
Compass 2
Contracts........ 82 $ 1,896 (1,180) $ (27,271) (906) $ (20,795) (2,004) $ (46,170) $(113) $(46,283)
Compass 3
Contracts........ 104 1,684 (436) (7,165) (208) (3,397) (540) (8,878) (9) (8,887)
------- --------- --------- --------- ----- ----------
$ 3,580 $ (34,436) $ (24,192) $ (55,048) $(122) $(55,170)
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
High Yield Variable
Account
Compass 2
Contracts........ 59 $ 1,396 (21) $ (644) (451) $ (10,734) (413) $ (9,982) $ 152 $ (9,830)
Compass 3
Contracts........ 75 1,319 (791) (14,539) (104) (1,825) (820) (15,045) (2) (15,047)
------- --------- --------- --------- ----- ----------
$ 2,715 $ (15,183) $ (12,559) $ (25,027) $ 150 $(24,877)
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
</TABLE>
47
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
PARTICIPANT TRANSACTIONS -- continued
Six Months Ended June 30, 1995 (000 Omitted)
---------------------------------------------------------------------------------------------------
Withdrawals,
Transfers Between Surrenders,
Purchase Funds and Fixed Annuitizations, Net Net Net
Payments Accumulation and Contract Accumulation Annuitization Increase
Received Account Charges Activity Activity (Decrease)
------------- ------------------ ------------------ ------------------ ------------- ----------
Units Dollars Units Dollars Units Dollars Units Dollars Dollars Dollars
----- ------- ------- --------- ------- --------- ------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Managed Sectors
Variable Account
Compass 2
Contracts........ 16 $ 421 72 $ 1,941 (79) $ (2,064) 9 $ 298 $ (7) $ 291
Compass 3
Contracts........ 108 2,829 45 1,311 (100) (2,606) 53 1,534 -- 1,534
------- --------- --------- --------- ----- ----------
$ 3,250 $ 3,252 $ (4,670) $ 1,832 $ (7) $ 1,825
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
Money Market
Variable Account
Compass 2
Contracts........ 56 $ 902 1,328 $ 21,349 (892) $ (14,354) 492 $ 7,897 $ (81) $ 7,816
Compass 3
Contracts........ 168 2,186 1,371 18,320 (402) (5,305) 1,137 15,201 (11) 15,190
------- --------- --------- --------- ----- ----------
$ 3,088 $ 39,669 $ (19,659) $ 23,098 $ (92) $ 23,006
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
Total Return
Variable Account
Compass 2
Contracts........ 72 $ 1,345 26 $ 462 (511) $ (9,538) (413) $ (7,731) $(113) $ (7,844)
Compass 3
Contracts........ 381 6,546 (57) (1,083) (496) (8,647) (172) (3,184) (27) (3,211)
------- --------- --------- --------- ----- ----------
$ 7,891 $ (621) $ (18,185) $ (10,915) $(140) $(11,055)
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
World Governments
Variable Account
Compass 2
Contracts........ 10 $ 167 8 $ 143 (74) $ (1,252) (56) $ (942) $ (4) $ (946)
Compass 3
Contracts........ 54 902 (28) (442) (82) (1,349) (56) (889) (8) (897)
------- --------- --------- --------- ----- ----------
$ 1,069 $ (299) $ (2,601) $ (1,831) $ (12) $ (1,843)
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
PARTICIPANT TRANSACTIONS -- continued
Year Ended December 31, 1994 (000 Omitted)
---------------------------------------------------------------------------------------------------
Withdrawals,
Transfers Between Surrenders,
Purchase Funds and Fixed Annuitizations, Net Net Net
Payments Accumulation and Contract Accumulation Annuitization Increase
Received Account Charges Activity Activity (Decrease)
------------- ------------------ ------------------ ------------------ ------------- ----------
Units Dollars Units Dollars Units Dollars Units Dollars Dollars Dollars
----- ------- ------- --------- ------- --------- ------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Appreciation
Variable Account
Compass 2
Contracts........ 340 $10,445 (1,329) $ (41,973) (1,534) $ (46,546) (2,523) $ (78,074) $(130) $(78,204)
Compass 3
Contracts........ 753 15,246 (446) (9,469) (520) (10,394) (213) (4,617) 45 (4,572)
------- --------- --------- --------- ----- ----------
$25,691 $ (51,442) $ (56,940) $ (82,691) $ (85) $(82,776)
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
Government
Securities Variable
Account
Compass 2
Contracts........ 218 $ 4,838 588 $ 13,109 (2,177) $ (48,044) (1,371) $ (30,097) $(252) $(30,349)
Compass 3
Contracts........ 385 5,972 190 3,001 (350) (5,411) 225 3,562 27 3,589
------- --------- --------- --------- ----- ----------
$10,810 $ 16,110 $ (53,455) $ (26,535) $(225) $(26,760)
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
High Yield Variable
Account
Compass 2
Contracts........ 140 $ 3,227 (401) $ (9,661) (860) $ (19,603) (1,121) $ (26,037) $(187) $(26,224)
Compass 3
Contracts........ 176 3,016 (55) (2,526) (192) (3,275) (71) (2,785) 7 (2,778)
------- --------- --------- --------- ----- ----------
$ 6,243 $ (12,187) $ (22,878) $ (28,822) $(180) $(29,002)
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
Managed Sectors
Variable Account
Compass 2
Contracts........ 36 $ 874 (9) $ (219) (105) $ (2,532) (77) $ (1,877) $ (14) $ (1,891)
Compass 3
Contracts........ 277 6,673 (109) (2,671) (177) (4,325) (9) (323) 0 (323)
------- --------- --------- --------- ----- ----------
$ 7,547 $ (2,890) $ (6,857) $ (2,200) $ (14) $ (2,214)
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
Money Market
Variable Account
Compass 2
Contracts........ 142 $ 2,220 2,021 $ 31,491 (1,730) $ (27,010) 433 $ 6,701 $ (34) $ 6,667
Compass 3
Contracts........ 558 7,202 940 11,911 (722) (9,305) 776 9,808 (45) 9,763
------- --------- --------- --------- ----- ----------
$ 9,422 $ 43,402 $ (36,315) $ 16,509 $ (79) $ 16,430
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
Total Return
Variable Account
Compass 2
Contracts........ 183 $ 3,267 181 $ 3,279 (843) $ (15,054) (479) $ (8,508) $ 0 $ (8,508)
Compass 3
Contracts........ 1,072 18,901 (20) (332) (716) (12,652) 336 5,917 (33) 5,884
------- --------- --------- --------- ----- ----------
$22,168 $ 2,947 $ (27,706) $ (2,591) $ (33) $ (2,624)
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
World Governments
Variable Account
Compass 2
Contracts........ 33 $ 537 2 $ 157 (144) $ (2,291) (109) $ (1,597) $ (3) $ (1,600)
Compass 3
Contracts........ 184 2,872 (113) (1,751) (113) (1,767) (42) (646) (13) (659)
------- --------- --------- --------- ----- ----------
$ 3,409 $ (1,594) $ (4,058) $ (2,243) $ (16) $ (2,259)
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
</TABLE>
49
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
(10) DETAILED STATEMENT OF OPERATIONS -- Six Months Ended June 30, 1995 (000
omitted)
<TABLE>
<CAPTION>
Capital Appreciation Variable Account
----------------------------------------------------------------
Compass 2 Contracts Compass 3 Contracts
-------------------------- --------------------------
Accumulation Annuitization Accumulation Annuitization Total
------------ ------------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest.............................. $ 351 $ 4 $ 100 $ -- $ 455
Dividends............................. 1,848 21 537 1 2,407
------------ ------------- ------------ --- ----------
Total investment income............. $ 2,199 $ 25 $ 637 $ 1 $ 2,862
Expenses................................ 3,485 15 1,053 1 4,554
------------ ------------- ------------ --- ----------
Net investment income (expense)....... $ (1,286) $ 10 $ (416) $ -- $ (1,692)
Realized and unrealized gains on
investments:
Net realized gains.................... $ 19,837 $ 227 $ 5,737 $ 15 $ 25,816
Net unrealized gains.................. 43,427 496 12,629 33 56,585
------------ ------------- ------------ --- ----------
Net realized and unrealized gains on
investments............................ $ 63,264 $ 723 $ 18,366 $ 48 $ 82,401
------------ ------------- ------------ --- ----------
Increase in net assets from
operations............................. $ 61,978 $ 733 $ 17,950 $ 48 $ 80,709
------------ ------------- ------------ --- ----------
------------ ------------- ------------ --- ----------
</TABLE>
<TABLE>
<CAPTION>
Government Securities Variable Account
---------------------------------------------------------------
Compass 2 Contracts Compass 3 Contracts
-------------------------- --------------------------
Accumulation Annuitization Accumulation Annuitization Total
------------ ------------- ------------ ------------- ---------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest.............................. $ 8,924 $ 93 $ 1,656 $ 5 $ 10,678
Dividends............................. -- -- -- -- --
--
------------ ----- ------------ ---------
Total investment income............. $ 8,924 $ 93 $ 1,656 $ 5 $ 10,678
Expenses................................ 2,260 8 441 -- 2,709
--
------------ ----- ------------ ---------
Net investment income................. $ 6,664 $ 85 $ 1,215 $ 5 $ 7,969
Realized and unrealized gains (losses)
on investments:
Net realized losses................... $ (2,577) $ (25) $ (480) $(1) $ (3,083)
Net unrealized gains.................. 18,915 197 3,502 11 22,625
--
------------ ----- ------------ ---------
Net realized and unrealized gains on
investments............................ $ 16,338 $ 172 $ 3,022 $10 $ 19,542
--
------------ ----- ------------ ---------
Increase in net assets from
operations............................. $ 23,002 $ 257 $ 4,237 $15 $ 27,511
--
--
------------ ----- ------------ ---------
------------ ----- ------------ ---------
</TABLE>
50
<PAGE>
DETAILED STATEMENT OF OPERATIONS -- continued
<TABLE>
<CAPTION>
High Yield Variable Account
----------------------------------------------------------------
Compass 2 Contracts Compass 3 Contracts
-------------------------- --------------------------
Accumulation Annuitization Accumulation Annuitization Total
------------ ------------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest.............................. $ 7,758 $ 117 $ 2,191 $ 1 $ 10,067
Dividends............................. -- -- -- -- --
------------ ------------- ------------ --- ----------
Total investment income............. $ 7,758 $ 117 $ 2,191 $ 1 $ 10,067
Expenses................................ 1,656 10 485 -- 2,151
------------ ------------- ------------ --- ----------
Net investment income................. $ 6,102 $ 107 $ 1,706 $ 1 $ 7,916
------------ ------------- ------------ --- ----------
Realized and unrealized gains (losses)
on investments:
Net realized losses................... $ (7,145) $ (112) $ (1,735) $ (1) $ (8,993)
Net unrealized gains.................. 13,414 206 3,695 1 17,316
------------ ------------- ------------ --- ----------
Net realized and unrealized gains on
investments............................ $ 6,269 $ 94 $ 1,960 $ -- $ 8,323
------------ ------------- ------------ --- ----------
Increase in net assets from
operations............................. $ 12,371 $ 201 $ 3,666 $ 1 $ 16,239
------------ ------------- ------------ --- ----------
------------ ------------- ------------ --- ----------
</TABLE>
<TABLE>
<CAPTION>
Managed Sectors Variable Account
---------------------------------------------------------------
Compass 2 Contracts Compass 3 Contracts
-------------------------- --------------------------
Accumulation Annuitization Accumulation Annuitization Total
------------ ------------- ------------ ------------- ---------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest.............................. $ 25 -$- $ 57 $-- $ 82
Dividends............................. 111 -- 256 -- 367
------------ ----- ------------ --- ---------
Total investment income............. $ 136 -$- $ 313 $-- $ 449
Expenses................................ 219 -- 535 -- 754
------------ ----- ------------ --- ---------
Net investment expense................ $ (83) -$- $ (222) $-- $ (305)
------------ ----- ------------ --- ---------
Realized and unrealized gains (losses)
on investments:
Net realized gains.................... $ 1,965 $ 7 $ 4,467 $-- $ 6,439
Net unrealized gains.................. 2,264 8 5,172 -- 7,444
------------ ----- ------------ --- ---------
Net realized and unrealized gains on
investments............................ $ 4,229 $ 15 $ 9,639 $-- $ 13,883
------------ ----- ------------ --- ---------
Increase in net assets from
operations............................. $ 4,146 $ 15 $ 9,417 $-- $ 13,578
------------ ----- ------------ --- ---------
------------ ----- ------------ --- ---------
</TABLE>
51
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
DETAILED STATEMENT OF OPERATIONS -- continued
<TABLE>
<CAPTION>
Money Market Variable Account
-------------------------------------------------------------
Compass 2 Contracts Compass 3 Contracts
-------------------------- --------------------------
Accumulation Annuitization Accumulation Annuitization Total
------------ ------------- ------------ ------------- -------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest.............................. $3,280 $39 $1,845 $1 $ 5,165
Dividends............................. -- -- -- -- --
--
------ ------ --- -------
Total investment income............. $3,280 $39 $1,845 $1 $ 5,165
Expenses................................ 1,021 4 603 -- 1,628
--
------ ------ --- -------
Net investment income................. $2,259 $35 $1,242 $1 $ 3,537
--
------ ------ --- -------
Net realized and unrealized gains
(losses) on investments................ $-- $-- $-- $-- $ --
--
------ ------ --- -------
Increase in net assets from
operations............................. $2,259 $35 $1,242 $1 $ 3,537
--
--
------ ------ --- -------
------ ------ --- -------
</TABLE>
<TABLE>
<CAPTION>
Total Return Variable Account
--------------------------------------------------------------
Compass 2 Contracts Compass 3 Contracts
------------------------- --------------------------
Accumulation Annuitization Accumulation Annuitization Total
----------- ------------- ------------ ------------- ---------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest.............................. $ 1,487 $ 28 $ 2,057 $ 4 $ 3,576
Dividends............................. 1,105 21 1,526 3 2,655
----------- ----- ------------ --- ---------
Total investment income............. $ 2,592 $ 49 $ 3,583 $ 7 $ 6,231
Expenses................................ 996 7 1,478 1 2,482
----------- ----- ------------ --- ---------
Net investment income................. $ 1,596 $ 42 $ 2,105 $ 6 $ 3,749
----------- ----- ------------ --- ---------
Realized and unrealized gains (losses)
on investments:
Net realized gains.................... $ 1,602 $ 30 $ 2,207 $ 4 $ 3,843
Net unrealized gains.................. 10,383 195 14,381 31 24,990
----------- ----- ------------ --- ---------
Net realized and unrealized gains on
investments............................ $11,985 $ 225 $16,588 $ 35 $ 28,833
----------- ----- ------------ --- ---------
Increase in net assets from
operations............................. $13,581 $ 267 $18,693 $ 41 $ 32,582
----------- ----- ------------ --- ---------
----------- ----- ------------ --- ---------
</TABLE>
52
<PAGE>
DETAILED STATEMENT OF OPERATIONS -- continued
<TABLE>
<CAPTION>
World Governments Variable Account
--------------------------------------------------------------
Compass 2 Contracts Compass 3 Contracts
-------------------------- --------------------------
Accumulation Annuitization Accumulation Annuitization Total
------------ ------------- ------------ ------------- --------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest.............................. $ 621 $ 3 $ 824 $ 1 $ 1,449
Dividends............................. -- -- -- -- --
-- --
------------ ------------ --------
Total investment income............. $ 621 $ 3 $ 824 $ 1 $ 1,449
Expenses................................ 179 -- 253 -- 432
-- --
------------ ------------ --------
Net investment income................. $ 442 $ 3 $ 571 $ 1 $ 1,017
-- --
------------ ------------ --------
Realized and unrealized gains (losses)
on investments:
Net realized gains.................... $ 780 $ 4 $ 1,044 $ 2 $ 1,830
Net unrealized gains.................. 565 3 735 1 1,304
-- --
------------ ------------ --------
Net realized and unrealized gains on
investments............................ $ 1,345 $ 7 $ 1,779 $ 3 $ 3,134
-- --
------------ ------------ --------
Increase in net assets from
operations............................. $ 1,787 $10 $ 2,350 $ 4 $ 4,151
-- --
-- --
------------ ------------ --------
------------ ------------ --------
</TABLE>
53
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Participants in and the Board of Managers of Capital Appreciation
Variable Account, Government Securities Variable Account, High Yield Variable
Account, Managed Sectors Variable Account, Money Market Variable Account, Total
Return Variable Account and World Governments Variable Account and the Board of
Directors of Sun Life Assurance Company of Canada (U.S.):
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Capital Appreciation Variable Account,
Government Securities Variable Account, High Yield Variable Account, Managed
Sectors Variable Account, Money Market Variable Account, Total Return Variable
Account and World Governments Variable Account (the "Variable Accounts") as of
June 30, 1995, the related statements of operations for the six months then
ended, the statements of changes in net assets for the six months then ended and
the year ended December 31, 1994 and the per unit and other data for the six
months ended June 30, 1995 and for each of the years in the five-year period
ended December 31, 1994. These financial statements and the per unit and other
data are the responsibility of the Variable Accounts' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the per unit and
other data are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at June 30,
1995 by correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and per unit and other data present
fairly, in all material respects, the financial position of the Variable
Accounts at June 30, 1995, the results of their operations, the changes in their
net assets, and their per unit and other data for each of the respective stated
periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
August 4, 1995
----------------------------------------
This Compass annual report is prepared for the general information of contract
owners. It is authorized for distribution to prospective purchasers only when
preceded by an effective prospectus.
54
<PAGE>
MEMBERS OF BOARDS OF MANAGERS
AND OFFICERS
JOHN D. McNEIL, Chairman and Member
CHAIRMAN, Sun Life Assurance Company of Canada,
Toronto, Ontario, Canada
BONNIE S. ANGUS, Secretary
SECRETARY, Sun Life Assurance Company of Canada (U.S.),
Wellesley Hills, Massachusetts
SAMUEL ADAMS, Member
PARTNER, Warner & Stackpole,
Boston, Massachusetts
GEOFFREY CROFTS, Member
PROFESSOR EMERITUS, University of Hartford,
Hartford, Connecticut
DAVID D. HORN, Member
SENIOR VICE PRESIDENT AND GENERAL MANAGER,
Sun Life Assurance Company of Canada,
Wellesley Hills, Massachusetts
GARTH MARSTON, Member
FORMER CHAIRMAN, The Provident Institution for Savings,
Boston, Massachusetts
DERWYN F. PHILLIPS, Member
FORMER VICE CHAIRMAN, The Gillette Company
Boston, Massachusetts
SUN LIFE ASSURANCE COMPANY
OF CANADA (U.S.)
ANNUITY SERVICE MAILING ADDRESS
c/o Sun Life Annuity Service Center
P.O. Box 1024, Boston, MA 02103-9986
INVESTMENT MANAGER
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116-3741
DISTRIBUTOR
Clarendon Insurance Agency, Inc.
500 Boylston Street, Boston, Massachusetts 02116-3741
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110-2875
AUDITORS
Deloitte & Touche LLP
125 Summer Street, Boston, MA 02110-1616
ACCOUNT INFORMATION
For account information, please call toll free:
1-800-752-7218 anytime from a touch-tone
telephone.
To speak with a customer service representative,
please call toll free: 1-800-752-7215 any
business day from 8 a.m. to 6 p.m. Eastern time.
CO-3 8/95 71M
[LOGO]
PROFESSIONALLY MANAGED COMBINATION
FIXED/VARIABLE ANNUITY
FOR PERSONAL INVESTMENTS AND
QUALIFIED RETIREMENT PLANS
SEMIANNUAL REPORT - JUNE 30, 1995
CAPITAL APPRECIATION VARIABLE ACCOUNT
GOVERNMENT SECURITIES VARIABLE ACCOUNT
HIGH YIELD VARIABLE ACCOUNT
MANAGED SECTORS VARIABLE ACCOUNT
MONEY MARKET VARIABLE ACCOUNT
TOTAL RETURN VARIABLE ACCOUNT
WORLD GOVERNMENTS VARIABLE ACCOUNT
ISSUED BY
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.),
A WHOLLY-OWNED SUBSIDIARY OF
SUN LIFE ASSURANCE COMPANY OF CANADA
