<PAGE>
DEAR CONTRACT OWNERS:
Rising global liquidity has underpinned international equity markets over the
past six months, and equities so far have ignored the "growth scare" that has
affected most bond markets in 1996. Low interest rates in Europe and Japan and a
growing money supply, plus signs of economic recovery and accelerating corporate
earnings in those areas, reinforced the positive message coming from the U.S.
equity market. Investors in these markets believe that the same trends are at
work as in the United States, but that the international markets are in an
earlier phase of their cycle. For the six months ended June 30, 1996, the
Standard & Poor's 500 Composite Index (the S&P 500), a popular, unmanaged index
of common stock performance, returned 10.09%.
U.S. OUTLOOK
Real (inflation-adjusted) economic growth in the first quarter of 1996 was 2.3%
on an annualized basis, and it appears that second-quarter growth could be even
stronger. Thus, real growth in gross domestic product has started the year at a
rate exceeding our expectations. While we continue to believe that growth from
quarter to quarter will be uneven, it is now our expectation that growth for all
of 1996 could exceed 2.5%. Although individual consumers appear to be carrying
an excessive debt load, the consumer sector itself, which represents two-thirds
of the economy, continues to be impressive as the auto and housing markets
remain resilient. Consumer spending has also been positively impacted by
widespread job growth. At the same time, however, the economies of Europe and
Japan continue to be in the doldrums, weakening U.S. export markets while
subduing the capital spending plans of American corporations. Finally, due to
the pickup in economic activity and increasing job growth, it appears that
inflation may accelerate slightly this year, and the Federal Reserve Board is
expected to continue its diligent anti-inflationary stance.
GLOBAL OUTLOOK
The first half of 1996 has seen a continuation of the positive performance of
global equity markets exhibited in 1995. Positive local currency returns were
generated throughout the world. The Morgan Stanley Capital International (MSCI)
Europe Index was up 10.4%, with returns ranging from 2.6% in the United Kingdom
to 20.9% in Spain; the MSCI Pacific Index was up 7.5%, with returns ranging from
- -2.2% in New Zealand to 14.3% in Malaysia. Meanwhile, the S&P 500 gained 10.1%,
and the IFC Emerging Markets Composite Index rose 13.5%. The only major negative
was the strong U.S. dollar, which gained 6% against the Japanese yen and the
German mark and ate into dollar-based returns. We believe that the equity
markets will continue to be fundamentally driven, although the economic outlook
is uncertain, with the strength of the U.S. economy unclear, Japan starting to
show more meaningful signs of recovery, and Europe's recovery still in its early
stages. Lower interest rates, particularly in Europe and Japan, have helped
support strong equity markets. While we believe that interest rates are unlikely
to fall further, a subdued global inflation outlook could mean that rates rise
little from current levels, which should help support current equity market
valuations. Therefore, for the remainder of 1996, we believe corporate earnings
growth will be the key to further stock market gains.
BOND MARKETS
In the bond markets, persistent signs of economic weakness led to decreases in
short-term interest rates by the Federal Reserve in late 1995 and early 1996.
However, should signs of
1
<PAGE>
economic growth and, particularly, of higher inflation continue, we would expect
the Federal Reserve to maintain its anti-inflationary stance. In the beginning
of the year, bond markets were trading in a narrow range, as investors shifted
between concern about the lack of a budget resolution in Washington and hopes
that sluggish economic reports and low inflation might lead to lower interest
rates. Later, fixed-income markets began reacting to conflicting signals
regarding the strength of the economy with more-volatile trading patterns marked
by an upward bias in interest rates. Interest rates may move even higher over
the coming months, but we believe the current rise in bond yields is reaching a
point where fixed-income markets are becoming attractively valued.
In world bond markets, non-U.S. bonds, measured in local currency terms,
continued to outperform U.S. bonds during the period. The best performance was
within the higher-yielding European markets (Italy, Spain, and Sweden).
Virtually all the yield curves within these markets steepened dramatically over
the period as most European central banks lowered official interest rates due to
continued slow growth and low inflation. Within the dollar bloc, Canada and
Australia also outperformed the United States, while New Zealand suffered
underperformance due to political concerns and a pickup in economic growth.
Looking forward, we believe the main issue is whether the recent trends of
rising interest rates in most markets and a stronger dollar will remain intact.
The case for a continuation of these trends rests primarily on accelerating
world growth, led by a buoyant U.S. economy. Indicators which we feel could lead
to a further rise in interest rates include the higher-than-expected growth seen
in the United States so far this year, the rebound of growth in Japan, signs of
a rebound in Germany, and strong growth among emerging economies. However, in
our view, any further rise in yield from current levels could be less dramatic
than that experienced so far this year.
STOCK MARKET
While we do not expect the U.S. stock market to match the extraordinary
performance of 1995, we continue to be positive about the equity market this
year. Although we believe the equity market represents fair value at current
levels, the expected slowdown in the growth of corporate earnings and the
increases in interest rates experienced so far this year raise near-term
concerns. Further increases in interest rates, and an acceleration of inflation
coupled with an additional slowdown in corporate earnings growth, could have a
negative effect on the stock market. However, to the extent that some earnings
disappointments are taken as a sign that the economy is not overheating, this
may prove beneficial for the longer-term health of the equity market. We
continue to believe that many of the technology-driven productivity gains that
U.S. companies have made in recent years will continue to enhance corporate
America's competitiveness and profitability. Therefore, while we have some
near-term concerns, we remain quite constructive on the long-term viability of
the equity market.
Specific information on each account's performance and our current investment
strategy are provided 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
Chairman
July 10, 1996
2
<PAGE>
CAPITAL APPRECIATION VARIABLE ACCOUNT
A number of groups added to the Account's performance during the past six
months, including lodging, transportation, and some sectors of the technology
industry. In lodging, hotel franchise companies such as HFS, Inc. and Promus
Hotel significantly outperformed the market because of the strong demand for
hotel rooms and tight supply, which have led to increasing hotel room rates. Two
areas of the Account that created a drag on performance were medical services
stocks such as health maintenance organizations, and electronic semiconductor
companies.
The Account's largest segment remains technology, which we believe could
continue to benefit from strong spending by corporations focusing on increased
productivity. Other large weightings include leisure, which includes lodging and
entertainment.
GOVERNMENT SECURITIES VARIABLE ACCOUNT
The first six months of 1996 saw rising interest rates in response to numerous
signs of a strengthening economy. Two-year Treasury yields, which stood at 5.17%
on December 31, 1995, rose to 6.12% by June 30, 1996, while yields on five-year
Treasuries rose from 5.38% to 6.47% over the same period.
The Account is currently positioned for what we expect to be a period of stable
to rising yields in the near term. The possibility of the Federal Reserve
increasing interest rates appears much greater today than most market
participants had anticipated earlier in the year. The Account's duration (a
measure of interest-rate sensitivity) is 4 years, making it 10% less sensitive
to market price movements than the appropriate index, the Lehman
Government/Mortgage Index (an unmanaged index of Treasuries, agencies and
mortgage-backed securities with more than $50 million outstanding), which has a
duration of 4.5 years. The Account is focused on securities which add
incremental yield, and its cash positions remain at approximately 5%.
About 65% of the Account is held in U.S. Treasury and agency debentures; these
issues currently yield between 6.4% and 7.6%. Issues are distributed across the
entire maturity spectrum. Agency issues typically add between 0.25% and 0.38% in
incremental yield above comparable U.S. Treasury issues.
Approximately 30% of the Account is held in mortgage-backed pass-through
certificates. Issues in the portfolio are held for both their yield
characteristics and risk protection. Both 30-year and 15-year issues are
currently represented, with yields that average 1.25% above comparable Treasury
issues. Note that the principal value and interest on Treasury securities are
guaranteed by the U.S. government if held to maturity. The issues have stable
prepayment rates, which should make the certificates move in a predictable
fashion with their Treasury counterparts. Should we become more constructive on
the market, the Account will decrease its allocation to mortgage securities and
increase its allocation to five- and 10-year Treasury issues.
HIGH YIELD VARIABLE ACCOUNT
During the first six months of the year, economic growth was stronger than
generally anticipated, causing interest rates to rise. While most fixed-income
markets realized losses during this period, the high-yield market posted a
modest positive total return. Strong cash inflows into high-yield mutual funds,
along with increased crossover buying from pension funds and insurance
companies, helped to support high-yield bond prices. Overall credit fundamentals
improved due to the pickup in economic growth and, as a result, the spread
between the yield on
3
<PAGE>
high-yield bonds and Treasury securities narrowed to 3.45% from 4.20% at the
beginning of the year.
Based on our outlook for slowing economic growth, the Account began the year
defensively positioned. Throughout the period, however, we reduced our
overweighted positions in less economically sensitive industries such as media
and supermarkets. We believe this shift toward market weightings was appropriate
given the recent strength in the economy, but we continue to avoid lower-tier
credits this late in the current economic cycle.
The Account benefited from its overweighted positions in the gaming and energy
sectors. The decline in new regions legalizing gaming has sparked consolidation
in the casino industry by well-capitalized companies. The severe winter weather
caused oil and natural gas inventories to decline significantly, which has
resulted in a prolonged rally in energy prices. We reduced our exposure to the
paging industry due to slowing subscriber growth and increased competition. We
continue to look for companies with good growth potential, such as Teleport
Communications in the telecommunication sector, as well as companies which
continue to repay debt and improve their balance sheets, like USG, the largest
domestic producer of gypsum wallboard.
MANAGED SECTORS VARIABLE ACCOUNT
During the past six months, the Account's exposure to companies in the oil
services and retail industries, as well as selected technology holdings, helped
overall performance, as did investments in such companies as Promus Hotel and
Telephone & Data Systems. Some of this positive impact was offset by corrections
in a number of technology stocks, as well as in stocks like United Healthcare.
In sum, the Account's overall performance year-to-date was modestly below that
of the S&P 500.
Going forward, we believe the outlook for oil services and individual retail
holdings continues to look positive. The Account's technology weighting has been
reduced somewhat but remains a large percentage of assets, with core holdings in
Intel, Oracle, and Electronic Arts. The Account has recently increased its
positions in two previously large positions, Harrah's Entertainment and
Telephone & Data Systems, as we believe they remain attractively valued. In
addition, we have begun to buy positions in some health maintenance
organizations. Although this sector has woefully underperformed over the past
six months, with some companies reporting quarterly earnings that have been
below expectations, we believe the prospects for future growth are well above
those reflected in current valuations.
Overall, the breadth of the stock market has become decidedly narrower of late,
resulting in significantly higher volatility in share prices. Despite our
expectation of continued modest economic growth and a benign interest rate
environment, it appears that these favorable attributes have largely been
discounted by many industry sectors; thus, future gains in the stock market
could become more difficult to achieve. We continue to search for attractively
valued companies but recognize that maintaining a slightly more cautious outlook
may be the most prudent course of action over the near term.
MONEY MARKET VARIABLE ACCOUNT
Interest rates on short-term (30 days and less) debt instruments decreased
moderately during the past six months. During the same period, the Federal
Reserve lowered short-term interest rates by 25 basis points (0.25%). At the
present time, approximately 54% of the Account is invested in U.S. government or
government guaranteed issues, with the balance in corporate issues. Furthermore,
the average maturity of the Account on June 30, 1996 was 40 days, versus 46 days
on
4
<PAGE>
December 31, 1995. We continue to limit the Account's investments to securities
issued or guaranteed by the U.S. Treasury or agencies or instrumentalities of
the U.S. government, as well as to the highest-quality corporate issues, to help
provide maximum security against credit risk.
We anticipate short-term interest rates remaining stable to slightly higher over
the next several months, and we expect to maintain relatively short maturities
in the portfolio.
TOTAL RETURN VARIABLE ACCOUNT
Over the past six months the equity market benefited from several factors
including: increases in corporate profits, relatively modest inflation, a
generally favorable interest rate environment allowing valuations to rise, and
an increasing demand for equities as investors poured money into mutual funds.
The bond market, on the other hand, has been more volatile. From December 31,
1995 through June 30, 1996, the economy rebounded, while prices of many
commodities rose sharply due to supply concerns. This combination helped push
the yield on the 30-year Treasury bond from under 6% to over 7% during the
period.
The Account's mix of stocks and bonds has been fairly consistent over the past
six months. Stocks and convertibles have averaged approximately 53% to 58% of
the portfolio, while bonds have comprised approximately 30% to 35%. As of June
30, 1996, stocks and convertibles made up 57.5% of the portfolio, bonds 28.5%,
and cash 14%. This positioning is somewhat conservative because our enthusiasm
for equities continues to be tempered by high valuations. On the bond side, we
believe continued confusion about the direction of the economy may produce more
volatility.
Within the equity area, we continue to find value in certain sectors such as
energy, financial services, telephone utilities, and specialty chemicals. In all
of these areas, we believe fundamentals are solid and valuations are fair.
WORLD GOVERNMENTS VARIABLE ACCOUNT
Foreign bond markets, measured in local currency terms, continued to outperform
U.S. bonds during the first six months of 1996. The best performance was within
the higher-yielding European markets (Italy, Spain, and Sweden). Virtually all
the yield curves within these markets steepened dramatically over the period as
most European central banks lowered official interest rates due to continued
slow growth and low inflation. Within the dollar bloc, Canada and Australia also
outperformed the United States, while New Zealand suffered underperformance due
to political concerns and a pickup in economic growth.
The Account's performance has been enhanced by maintaining overweighted
positions in European bonds, particularly in Spain, Italy, and Sweden. At the
expense of being underweighted in U.S. banks, the Account has also benefited by
maintaining and even adding to overweighted Canadian and Australian bond
positions. During the beginning of the year, the Account's overall duration was
close to five years, which hindered performance as bond yields, primarily in the
dollar-bloc countries, sold off rather dramatically due to a pickup in the U.S.
economy. During the second quarter, the Account's duration was gradually reduced
to 3.8 years.
Looking forward, we anticipate that selective European markets will continue to
offer the best opportunities for capital appreciation. Efforts to meet the
fiscal austerity criteria of the proposed European Monetary Union are
reinforcing the tendency toward slower growth, and most continental central
banks appear likely to continue the
5
<PAGE>
process of cutting official interest rates. Consequently, the shorter end of the
higher-yielding markets could continue to outperform.
Meanwhile, during the first six months of the year, the U.S. dollar has
appreciated versus almost all European currencies as well as against the
Japanese yen. The dollar's strength can be attributed to the pickup in economic
growth in the United States as well as to favorable U.S. interest rate spreads.
The Account has benefited from having a positive bias toward the dollar, and we
anticipate maintaining a similar posture for the foreseeable future.
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 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. Investments in the
Account are neither guaranteed nor insured by the U.S. government.
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% and no more than 75% 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, 1996
CAPITAL APPRECIATION VARIABLE ACCOUNT -- CAVA
STOCKS -- 99.6%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. COMMON STOCKS -- 92.7%
AEROSPACE -- 3.2%
Lockheed Martin Corp....... 67,400 $ 5,661,600
McDonnell Douglas Corp..... 144,600 7,013,100
United Technologies
Corp...................... 41,500 4,772,500
-----------
$17,447,200
-----------
AGRICULTURAL PRODUCTS -- 3.8%
AGCO Corp.................. 273,900 $ 7,600,725
Case Corp.................. 153,600 7,372,800
Deere & Co., Inc........... 136,100 5,444,000
-----------
$20,417,525
-----------
AIRLINES -- 1.4%
America West Airlines,
"B"*...................... 49,800 $ 1,095,600
Southwest Airlines Co...... 232,700 6,777,387
-----------
$ 7,872,987
-----------
APPAREL AND TEXTILES -- 0.9%
Donna Karan International,
Inc.*..................... 7,800 $ 218,400
Nike, Inc., "B"............ 43,300 4,449,075
-----------
$ 4,667,475
-----------
AUTOMOTIVE -- 1.0%
APS Holding Corp., "A"*.... 121,900 $ 2,681,800
General Motors Corp........ 50,500 2,644,937
-----------
$ 5,326,737
-----------
BANKS AND CREDIT COMPANIES -- 0.4%
Fleet/Norstar Financial
Group, Inc................ 55,500 $ 2,414,250
-----------
BROADCASTING -- 1.0%
Infinity Broadcasting
Corp., "A"*............... 84,600 $ 2,538,000
Jacor Communications, Inc.,
"A"*...................... 50,200 1,549,925
LIN Television Corp.*...... 40,100 1,443,600
-----------
$ 5,531,525
-----------
BUSINESS MACHINES -- 1.2%
Sun Microsystems, Inc.*.... 112,100 $ 6,599,887
-----------
BUSINESS SERVICES -- 5.3%
ADT Ltd.*.................. 342,600 $ 6,466,575
ALCO Standard Corp......... 136,600 6,181,150
Accustaff, Inc.*........... 50,200 1,367,950
America Online, Inc.*...... 19,100 835,625
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. COMMON STOCKS -- continued
BUSINESS SERVICES -- continued
Ceridian Corp.*............ 180,900 $ 9,135,450
Corestaff, Inc.*........... 47,500 2,125,625
DST Systems, Inc.*......... 77,400 2,476,800
First USA Paymentech,
Inc.*..................... 2,100 84,000
-----------
$28,673,175
-----------
CELLULAR TELEPHONES -- 0.1%
Intercel, Inc.*............ 13,400 $ 268,000
-----------
CHEMICALS -- 0.4%
Geon Co.................... 17,000 $ 382,500
Polymer Group, Inc.*....... 35,300 617,750
Praxair, Inc............... 31,600 1,335,100
-----------
$ 2,335,350
-----------
COMPUTER SOFTWARE -- PERSONAL COMPUTERS -- 3.7%
Autodesk, Inc.............. 50,900 $ 1,520,638
Electronic Arts, Inc.*..... 206,100 5,513,175
Microsoft Corp.*........... 103,600 12,444,950
Spectrum Holobyte
Industries*............... 102,400 588,800
-----------
$20,067,563
-----------
COMPUTER SOFTWARE -- SYSTEMS -- 10.8%
Adobe Systems, Inc......... 223,300 $ 8,010,888
BMC Software, Inc.*........ 105,400 6,297,650
Cadence Design Systems,
Inc.*..................... 364,500 12,301,875
Computer Associates
International, Inc........ 107,800 7,680,750
Micros Systems, Inc.*...... 113,400 3,161,025
Oracle Systems Corp.*...... 309,750 12,215,765
Sybase, Inc.*.............. 238,400 5,632,200
Synopsys, Inc.*............ 41,200 1,637,700
System Software Associates,
Inc....................... 52,050 884,850
-----------
$57,822,703
-----------
CONSUMER GOODS AND SERVICES -- 6.6%
Philip Morris Cos., Inc.... 163,200 $16,972,800
Service Corp.
International............. 26,700 1,535,250
Tyco International Ltd..... 422,400 17,212,800
-----------
$35,720,850
-----------
</TABLE>
7
<PAGE>
PORTFOLIO OF INVESTMENTS -- continued
STOCKS -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. COMMON STOCKS -- continued
DEFENSE ELECTRONICS -- 1.3%
Loral Space and
Communications*........... 527,600 $ 7,188,550
-----------
ELECTRICAL EQUIPMENT -- 0.4%
UCAR International,
Inc.*..................... 46,600 $ 1,939,725
-----------
ELECTRONICS -- 6.1%
Altera Corp.*.............. 108,600 $ 4,126,800
Analog Devices, Inc.*...... 184,850 4,713,675
ESS Technology, Inc.*...... 46,600 862,100
Intel Corp................. 165,500 12,153,906
LSI Logic Corp.*........... 231,700 6,024,200
Maxim Integrated Products,
Inc.*..................... 47,600 1,300,075
Xilinx, Inc.*.............. 110,000 3,492,500
-----------
$32,673,256
-----------
ENTERTAINMENT -- 4.1%
Harrah's Entertainment,
Inc.*..................... 408,700 $11,545,775
Mirage Resorts, Inc.*...... 98,600 5,324,400
Trump Hotels & Casino
Resorts, Inc.*............ 175,200 4,993,200
-----------
$21,863,375
-----------
FINANCIAL INSTITUTIONS -- 4.4%
Associates First Capital
Corp., A*................. 25,000 $ 940,625
Federal Home Loan Mortgage
Corp...................... 87,000 7,438,500
Financial Federal Corp.*... 100,900 1,576,563
Finova Group, Inc.......... 65,100 3,173,625
Green Tree Financial
Corp...................... 100,400 3,137,500
Schwab (Charles) Corp...... 301,200 7,379,400
-----------
$23,646,213
-----------
INSURANCE -- 0.4%
Amerin Corp.*.............. 47,900 $ 1,281,325
Penncorp Financial Group,
Inc....................... 30,900 981,075
-----------
$ 2,262,400
-----------
MACHINERY -- 0.5%
IDEX Corp.................. 72,400 $ 2,751,200
-----------
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. COMMON STOCKS -- continued
MEDICAL AND HEALTH PRODUCTS -- 1.8%
Johnson & Johnson.......... 167,600 $ 8,296,200
Omnicare, Inc.............. 42,200 1,118,300
-----------
$ 9,414,500
-----------
MEDICAL AND HEALTH TECHNOLOGY AND SERVICES -- 4.8%
Foundation Health Corp.*... 76,200 $ 2,733,675
Healthsource, Inc. *....... 299,700 5,244,750
Health Care & Retirement
Corp.*.................... 46,500 1,104,375
Living Centers of
America*.................. 84,200 2,894,375
Oxford Health Plans,
Inc.*..................... 83,000 3,413,375
Schein (Henry), Inc.*...... 3,800 145,350
United Healthcare Corp..... 200,100 10,105,050
-----------
$25,640,950
-----------
METALS AND MINERALS -- 2.3%
Minerals Technologies,
Inc....................... 72,100 $ 2,469,425
Nucor Corp................. 96,700 4,895,438
Phelps Dodge Corp.......... 54,200 3,380,725
RMI Titanium Co.*.......... 60,500 1,421,750
-----------
$12,167,338
-----------
OILS -- 1.0%
Mobil Corp................. 49,400 $ 5,538,975
-----------
PHOTOGRAPHIC PRODUCTS -- 1.3%
Eastman Kodak Co........... 87,300 $ 6,787,575
-----------
PRINTING AND PUBLISHING -- 0.3%
Gannett Co., Inc........... 20,100....... $ 1,422,075
-----------
RAILROADS -- 3.0%
Burlington Northern Santa
Fe........................ 31,100 $ 2,515,213
Wisconsin Central
Transportation Corp.*..... 420,900 13,679,250
-----------
$16,194,463
-----------
RESTAURANTS AND LODGING -- 5.9%
HFS, Inc.*................. 264,900 $18,543,000
Promus Hotel Corp.*........ 362,950 10,752,393
Renaissance Hotel Group
N.V.*..................... 107,900 2,319,850
-----------
$31,615,243
-----------
</TABLE>
8
<PAGE>
STOCKS -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. COMMON STOCKS -- continued
SPECIAL PRODUCTS AND SERVICES -- 0.6%
Compuserve Corp.*.......... 10,400 $ 219,700
Loewen Group, Inc.......... 95,100 2,876,775
-----------
$ 3,096,475
-----------
STORES -- 6.0%
Corporate Express, Inc.*... 53,400 $ 2,136,000
Duty Free International,
Inc....................... 25,000 381,250
Federated Department
Stores, Inc.*............. 230,800 7,876,050
General Nutrition Cos.,
Inc.*..................... 283,100 4,954,250
Micro Warehouse, Inc.*..... 160,200 3,204,000
Office Depot, Inc.*........ 326,500 6,652,438
Officemax, Inc.*........... 182,500 4,357,188
Sears, Roebuck & Co........ 53,200 2,586,850
-----------
$32,148,026
-----------
SUPERMARKETS -- 1.0%
Safeway, Inc.*............. 155,600 $ 5,134,800
-----------
TELECOMMUNICATIONS -- 7.7%
Cabletron Systems, Inc.*... 124,400 $ 8,536,950
Cisco Systems, Inc.*....... 75,700 4,286,512
Glenayre Technologies,
Inc.*..................... 195,500 9,775,000
Lucent Technologies,
Inc....................... 43,600 1,651,350
Sterling Commerce, Inc.*... 5,600 207,900
Tel-Save Holdings, Inc.*... 101,700 2,161,125
Teleport Communications
Group, Inc.*.............. 78,600 1,503,225
Tellabs, Inc.*............. 60,900 4,072,687
U.S. Robotics Corp.*....... 39,500 3,377,250
Worldcom, Inc.*............ 101,400 5,615,025
-----------
$41,187,024
-----------
Total U.S. Common Stocks................... $497,837,390
-----------
FOREIGN STOCKS AND WARRANTS -- 6.9%
CANADA -- 1.0%
Canadian National Railway
Co. (Railroad)*........... 59,100 $ 1,085,963
Loewen Group, Inc. (Special
Products and
Services)##............... 109,400 3,335,317
<CAPTION>
Issuer Shares Value
<S> <C> <C>
FOREIGN STOCKS AND WARRANTS -- continued
CANADA -- continued
Potash Corp.
(Precious Metals and
Minerals)................. 15,000 $ 993,750
-----------
$ 5,415,030
-----------
FRANCE
Dassault Systemes SA, ADR
(Computer Software -
Systems)*................. 4,800 $ 148,800
-----------
GERMANY -- 0.3%
SGL Carbon AG, ADR
(Chemicals)*.............. 34,700 $ 1,327,275
-----------
HONG KONG -- 0.5%
Peregrine Investment
Holdings (Finance)........ 1,787,000 $ 2,574,228
Peregrine Investment
Holdings, Warrants
(Finance)................. 178,700 22,164
-----------
$ 2,596,392
-----------
ITALY -- 1.2%
Telecom Italia Mobile SpA
(Telecommunications)...... 870,700 $ 1,945,302
Telecom Italia Mobile SpA,
Saving Shares
(Telecommunications)...... 3,412,600 4,652,534
-----------
$ 6,597,836
-----------
NETHERLANDS -- 0.6%
Gucci Group Designs N.V.
(Apparel and Textiles).... 46,600 $ 3,005,700
-----------
NEW ZEALAND -- 0.3%
Sky City Ltd.
(Entertainment)*.......... 416,540 $ 1,815,018
-----------
SINGAPORE -- 0.4%
Mandarin Oriental
International, Ltd.
(Lodging)................. 1,349,000 $ 1,888,600
-----------
</TABLE>
<TABLE>
<S> <C> <C>
SOUTH KOREA -- 0.8%
Korea Mobile
Telecommunications
Corp, ADR
(Telecommunications)... 256,100 $4,385,713
----------
</TABLE>
9
<PAGE>
PORTFOLIO OF INVESTMENTS -- continued
STOCKS -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
FOREIGN STOCKS AND WARRANTS -- continued
SWEDEN -- 1.7%
ASTRA AB, B (Medical and
Health Products)....... 155,100 $6,765,872
Nobel Biocare AB
(Medical and Health
Products).............. 124,100 2,304,045
----------
$9,069,917
----------
UNITED KINGDOM -- 0.1%
Powergen PLC (Utilities
- Electric)............ 157,500 $ 804,415
----------
Total Foreign Stocks and Warrants...... $37,054,696
----------
Total Stocks and Warrants (Identified
Cost, $414,761,674).................... $534,892,086
----------
SHORT-TERM OBLIGATIONS -- 0.5%
<CAPTION>
Principal
Amount
(000 Omitted)
<S> <C> <C>
Federal Home Loan
Mortgage, due 7/01/96,
at Amortized Cost $ 2,700 $2,700,000
----------
Total Investments (Identified Cost,
$417,461,674).......................... $537,592,086
OTHER ASSETS, LESS LIABILITIES --
(0.1%).................................. (558,641)
----------
Net Assets -- 100.0%................... $537,033,445
----------
----------
</TABLE>
See portfolio footnotes and notes to financial statements
PORTFOLIO OF INVESTMENTS -- June 30, 1996
GOVERNMENT SECURITIES VARIABLE ACCOUNT -- GSVA
U.S. FEDERAL AGENCIES -- 36.4%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Federal Agricultural
Mortgage Corp., 7s,
1998...................... $ 1,800 $ 1,822,788
Federal Agricultural
Mortgage Corp., 7.25s,
1999...................... 5,000 5,104,700
Federal Agricultural
Mortgage Corp., 7.44s,
2000...................... 3,725 3,831,498
Federal Agricultural
Mortgage Corp., 8s,
2006...................... 2,000 2,149,380
Federal Home Loan Mortgage
Corp., 7.5s, 2024-2025.... 5,434 5,366,154
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Federal Home Loan Mortgage
Corp., 8.5s, 2021......... $ 29 $ 29,894
Federal Home Loan Mortgage
Corp., 9s, 2003-2007...... 4,128 4,277,580
Federal Housing Authority,
7.43s, 2022............... 9,296 9,121,503
Federal National Mortgage
Assn., 7.27s, 2005........ 3,968 3,933,328
Federal National Mortgage
Assn., 7.645s, 2020....... 1,051 1,051,635
Federal National Mortgage
Assn., 8s, 2019-2023...... 480 483,653
Federal National Mortgage
Assn., 8.5s, 2001-2007.... 2,313 2,390,523
Federal National Mortgage
Assn., 9s, 2009........... 573 594,625
Financing Corp., 9.8s,
2018...................... 11,900 15,033,032
Private Export Funding
Corp., 8.4s, 2001......... 12,000 12,820,320
Private Export Funding
Corp., 6.24s, 2002........ 3,200 3,119,456
Republic of Israel U.S.
Government Guaranteed
Notes, 5.89s, 2005........ 4,000 3,690,360
Resolution Funding Corp.,
8.875s, 2020.............. 12,700 15,097,125
U.S. Department of Veterans
Affairs, Vendee Mortgage
Trust, 7.75s, 2014........ 3,000 3,026,250
-----------
Total U.S. Federal Agencies (Identified
Cost, $87,189,870)......................... $92,943,804
-----------
GOVERNMENT GUARANTEED -- 51.7%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 24.6%
GNMA, 6.5s, 2024........... $ 7,804 $ 7,262,134
GNMA, 7s, 2023-2026........ 17,565 16,840,396
GNMA, 7.5s, 2008........... 4,791 4,840,558
GNMA, 7.5s, 2022-2026...... 23,144 22,811,137
GNMA, 8s, 2025............. 131 131,689
GNMA, 9s, 2017............. 5,233 5,526,287
GNMA, 9s, 2019............. 3,508 3,677,002
GNMA, 9s, 2022............. 614 642,814
</TABLE>
10
<PAGE>
GOVERNMENT GUARANTEED -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- continued
GNMA, 10s, 2016............ $ 9 $ 10,156
GNMA, 11s, 2010............ 856 957,428
GNMA, 12.5s, 2015.......... 111 128,553
GNMA, 13.25s, 2014......... 8 9,438
GNMA, 14s, 2014............ 71 86,110
-----------
$62,923,702
-----------
SMALL BUSINESS ADMINISTRATION -- 5.1%
SBA, 10.35s, 1996.......... $ 488 $ 504,400
SBA, 8.4s, 1998............ 484 507,737
SBA, 8.7s, 2000............ 1,574 1,674,284
SBA, 9.95s, 2000........... 926 1,024,939
SBA, 10s, 2000............. 878 975,553
SBA, 8.2s, 2005............ 1,933 1,975,384
SBA, 9.5s, 2010............ 5,821 6,371,648
-----------
$13,033,945
-----------
U.S. TREASURY OBLIGATIONS -- 22.0%
U.S. Treasury Notes,
6.125s, 1998.............. $ 2,300 $ 2,300,000
U.S. Treasury Notes, 9.25s,
1998...................... 16,500 17,492,640
U.S. Treasury Notes, 6.75s,
1999...................... 4,500 4,552,020
U.S. Treasury Notes,
9.125s, 1999.............. 9,110 9,771,933
U.S. Treasury Notes, 6.75s,
2000...................... 2,000 2,020,940
U.S. Treasury Bonds,
10.75s, 2003.............. 3,000 3,660,480
U.S. Treasury Bonds, 12s,
2013...................... 9,000 12,687,210
U.S. Treasury Bonds,,
8.75s, 2020............... 3,000 3,586,860
-----------
$56,072,083
-----------
Total Government Guaranteed (Identified
Cost, $133,133,900)........................ $132,029,730
-----------
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Goldman Sachs, LLP, dated
6/28/96, due 7/01/96,
total to be received
$12,005,450, (secured by
various U.S. Treasury and
Federal Agency obligations
in a jointly traded
account), at Amortized
Cost and Value............ $ 12,000 $12,000,000
SHORT-TERM OBLIGATIONS -- 5.8%
Federal Home Loan Bank, due
7/12/96................... $ 4,710 $ 4,702,430
Federal National Mortgage
Assn., due 7/02/96........ 10,000 9,998,542
-----------
Total Short-Term Obligations, at Amortized
Cost and Value............................. $14,700,972
-----------
Total Investments (Identified Cost,
$247,024,742).............................. $251,674,506
OTHER ASSETS, LESS LIABILITIES -- 1.4%....... 3,605,498
-----------
Net Assets -- 100.0%....................... $255,280,004
-----------
-----------
</TABLE>
See portfolio footnotes and notes to financial statements
PORTFOLIO OF INVESTMENTS -- June 30, 1996
HIGH YIELD VARIABLE ACCOUNT -- HYVA
BONDS -- 93.2%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
AIRLINES -- 1.2%
Airplane Pass-Thru Trust,
10.875s, 2019............. $ 750 $ 780,000
Continental Airlines, Inc.,
11.75s, 1999 **........... 2,050 205
MOOG, Inc., 10s, 2006##.... 1,200 1,200,000
-----------
$ 1,980,205
-----------
AUTOMOTIVE -- 3.2%
Exide Corp., 10s, 2005..... $ 1,200 $ 1,171,500
Harvard Industries, Inc.,
12s, 2004................. 1,550 1,519,000
</TABLE>
11
<PAGE>
PORTFOLIO OF INVESTMENTS -- continued
BONDS -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
AUTOMOTIVE -- continued
Harvard Industries, Inc.,
11.125s, 2005............. $ 750 $ 705,000
Hayes Wheels International,
Inc., 11s, 2006........... 750 760,313
SPX Corp., 11.75s, 2002.... 1,150 1,216,125
-----------
$ 5,371,938
-----------
BUILDING -- 5.8%
American Standard, Inc., 0s
to 1998, 10.5s to 2005.... $ 1,350 $ 1,177,875
Building Materials, 0s to
1999, 11.75s to 2004...... 1,700 1,266,500
Lone Star Industries, Inc.,
10s, 2003................. 1,250 1,260,938
Nortek, Inc., 9.875s,
2004...................... 1,850 1,757,500
Schuller International
Group, Inc., 10.875s,
2004...................... 1,800 1,926,000
USG Corp., 9.25s, 2001..... 2,450 2,511,250
UDC Homes, Inc., 14.5s,
2000...................... 2 1,332
-----------
$ 9,901,395
-----------
CELLULAR TELEPHONES -- 0.4%
Millicom International
Cellular Communications,
0s to 2000, 13.5s to
2006##.................... $ 1,400 $ 745,500
-----------
CHEMICALS -- 2.6%
Arcadian Partners L.P.,
10.75s, 2005.............. $ 400 $ 432,000
Indspec Chemical Corp.,
11.5s, 2003............... 750 646,875
NL Industries, Inc.,
11.75s, 2003.............. 2,100 2,142,000
UCC Investors Holdings,
Inc., 10.5s, 2002......... 1,050 1,102,500
UCC Investors Holdings,
Inc., 0s, 2005............ 50 41,000
-----------
$ 4,364,375
-----------
CONGLOMERATES -- 0.1%
Westinghouse Electric Co.,
6.875s, 2003.............. $ 250 $ 229,150
-----------
CONSUMER GOODS AND SERVICES -- 6.2%
Consolidated Cigar Corp.,
10.5s, 2003............... $ 1,000 $ 1,037,500
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
CONSUMER GOODS AND SERVICES -- continued
FoodBrands America, Inc.,
10.75s, 2006.............. $ 800 $ 800,000
International Semi-Tech
Microelectronics, Inc.,
0s, 2003.................. 2,300 1,316,750
Ithaca Industries, Inc.,
11.125s, 2002##........... 750 345,000
Reeves Industries, Inc.,
11s, 2002................. 1,300 1,131,000
Remington Arms, Inc., 0s,
2003**.................... 450 396,000
Revlon Consumer Product
Corp., 10.5s, 2003........ 1,500 1,507,500
Samsonite Corp., 11.125s,
2005...................... 1,200 1,218,000
Sealy Corp., 9.5s, 2003.... 900 873,000
Westpoint Stevens, Inc.,
9.375s, 2005.............. 1,925 1,857,625
-----------
$10,482,375
-----------
CONTAINERS -- 5.3%
Atlantis Group, Inc., 11s,
2003...................... $ 1,300 $ 1,241,500
Calmar, Inc., 11.5s,
2005...................... 1,650 1,608,750
Ivex Packaging Corp.,
12.5s, 2002............... 1,800 1,894,500
Owens-Illinois, Inc., 11s,
2003...................... 1,200 1,290,000
Plastic Containers, Inc.,
10.75s, 2001.............. 1,500 1,486,875
Silgan Corp., 11.75s,
2002...................... 1,500 1,522,500
-----------
$ 9,044,125
-----------
CORPORATE ASSET BACKED -- 0.4%
Merrill Lynch Mortgage
Investors, Inc., 8.227s,
2023+..................... $ 1,000 $ 739,844
-----------
ELECTRONICS -- 0.6%
Clark-Schwebel, Inc.,
10.5s, 2006##............. $ 950 $ 983,250
-----------
ENTERTAINMENT -- 3.1%
ACT III Theatres, Inc.,
11.875s, 2003............. $ 350 $ 385,000
Albritton Communications
Corp., 11.5s, 2004........ 900 913,500
American Skiing Corp. 12s,
2006##.................... 850 833,000
SCI Television, Inc., 11s,
2005...................... 2,450 2,541,875
</TABLE>
12
<PAGE>
BONDS -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
ENTERTAINMENT -- continued
United Artist Theater
Circuit, Inc, 11.5s,
2002...................... $ 500 $ 525,000
-----------
$ 5,198,375
-----------
FINANCIAL INSTITUTIONS -- 0.4%
American Life Holdings Co.,
11.25s, 2004.............. $ 600 $ 633,000
-----------
FOOD AND BEVERAGE PRODUCTS -- 3.5%
Keebler Corp., 10.75s,
2006...................... $ 450 $ 463,500
PMI Acquisition Corp.,
10.25s, 2003.............. 2,000 1,960,000
Specialty Foods Corp.,
10.25s, 2001.............. 1,950 1,813,500
Texas Bottling Group, Inc.,
9s, 2003.................. 1,750 1,697,500
-----------
$ 5,934,500
-----------
FOREST AND PAPER PRODUCTS -- 3.4%
Gaylord Container Co.,
12.75s, 2005.............. $ 2,400 $ 2,529,000
Pacific Lumber Co., 10.5s,
2003...................... 1,750 1,697,500
Stone Container Corp.,
9.875s, 2001.............. 1,150 1,115,500
Stone Container Corp.,
10.75s, 2002.............. 350 353,500
-----------
$ 5,695,500
-----------
MACHINERY -- 0.5%
AGCO Corp., 8.5s, 2006##... $ 800 $ 784,000
-----------
MEDICAL AND HEALTH TECHNOLOGY AND SERVICES -- 2.7%
Beverly Enterprises, Inc.,
9s, 2006.................. $ 1,000 $ 925,000
Quorum Health Group, Inc.,
8.75s, 2005............... 1,900 1,862,000
Tenet Healthcare Corp.,
10.125s, 2005............. 1,700 1,793,500
-----------
$ 4,580,500
-----------
METALS AND MINERALS -- 0.9%
Renco Metals, Inc., 11.5s,
2003...................... $ 600 $ 600,000
Ryerson Tull, Inc., 9.125s,
2006...................... 850 852,125
-----------
$ 1,452,125
-----------
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
OIL SERVICES -- 6.2%
Amerigas Partners L.P.,
10.125s, 2007............. $ 1,300 $ 1,339,000
Chesapeake Energy Corp.,
9.125s, 2006.............. 500 487,500
Clark USA, Inc., 10.875s,
2005...................... 1,250 1,300,000
Falcon Drilling Co.,
8.875s, 2003.............. 1,300 1,254,500
Ferrell Gas LP, 10s,
2001...................... 1,900 1,942,750
Mesa Operating Co.,
10.625s, 2006............. 600 606,750
Nobile Drilling Corp.,
9.125s, 2006.............. 850 852,125
Nuevo Energy Co., 9.5s,
2006...................... 550 541,750
PDV America, Inc. 7.875s,
2003...................... 900 873,612
Tuboscope Vetco
International, Inc.,
10.75s, 2003.............. 1,200 1,236,000
-----------
$10,433,987
-----------
OILS -- 1.5%
Gulf Canada, 9.25s, 2004... $ 1,850 $ 1,803,750
Kelley Oil & Gas Corp.,
13.5s, 1999............... 750 800,625
-----------
$ 2,604,375
-----------
PRINTING AND PUBLISHING -- 1.2%
Day International Group,
Inc., 11.125s, 2005....... $ 550 $ 562,375
Golden Books Publishing,
Inc., 7.65s, 2002......... 600 498,000
Newsquest Capital PLC, 11s,
2006##.................... 1,000 1,000,000
-----------
$ 2,060,375
-----------
RESTAURANTS AND LODGING -- 6.2%
Aztar Corp., 11s, 2002..... $ 1,300 $ 1,352,000
Ballys Grand, Inc.,
10.375s, 2003............. 1,050 1,152,375
Boomtown, Inc., 11.5s,
2003...................... 410 395,650
Boyd Gaming Corp., 10.75s,
2003...................... 900 945,000
Coast Hotels & Casino,
Inc., 13s, 2002##......... 750 813,750
</TABLE>
13
<PAGE>
PORTFOLIO OF INVESTMENTS -- continued
BONDS -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
RESTAURANTS AND LODGING -- continued
Four Seasons Hotels, Inc.,
9.125s, 2000##............ $ 650 $ 646,750
Grand Casinos, Inc.,
10.125s, 2003............. 1,250 1,281,250
Griffin Gaming &
Entertainment, 0s, 2000... 1,000 962,500
Harrahs Jazz Co., 14.25s,
2001...................... 825 412,500
Harvey's Casinos Resorts,
10.625s, 2006............. 600 609,000
Sam Houston Race Park,
Inc., 11s, 2001........... 292 116,980
Station Casinos, Inc.,
9.625s, 2003.............. 1,900 1,824,000
-----------
$10,511,755
-----------
SPECIAL PRODUCTS AND SERVICES -- 11.1%
AAF-McQuay, Inc., 8.875s,
2003...................... $ 1,500 $ 1,425,000
Fairfield Manufacturing,
11.375s, 2001............. 300 306,000
Haynes International, Inc.,
11.25s, 1998.............. 350 365,750
Howmet Corp., 10s,
2003##.................... 1,050 1,107,750
IMO Industries, Inc.,
11.75s, 2006##............ 1,950 1,989,000
Idex Corp., 9.75s, 2002.... 1,670 1,720,100
Inter-City Products Corp.,
9.75s, 2000............... 375 348,750
Interlake Corp., 12s,
2001...................... 850 892,500
Interlake Corp., 12.125s,
2002...................... 1,650 1,650,000
Interlake Revolver, "B",
5.75s, 1997##............. 252 249,447
K & F Industries, Inc.,
11.875s, 2003............. 1,050 1,123,500
Newflo Corp., 13.25s,
2002...................... 400 428,000
Polymer Group, Inc.,
12.25s, 2002.............. 834 900,720
Spreckels Industries, Inc.,
11.5s, 2000............... 1,800 1,854,000
Synthetic Industries, Inc.,
12.75s, 2002.............. 2,100 2,220,750
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
SPECIAL PRODUCTS AND SERVICES -- continued
Talley Manufacturing &
Technology, Inc., 10.75s,
2003...................... $ 1,000 $ 1,025,000
Thermadyne Industries
Holdings Corp., 10.25s,
2002...................... 1,289 1,266,443
-----------
$18,872,710
-----------
STEEL -- 2.6%
Carbide/Graphite Group,
11.5s, 2003............... $ 200 $ 213,000
Jorgensen, (Earle M.) Co.,
10.75s, 2000.............. 900 891,000
Kaiser Aluminum & Chemical
Corp., 9.875s, 2002....... 750 735,000
Republic Engineered Steel,
9.875s, 2001.............. 1,475 1,371,750
WCI Steel, Inc., 10.5s,
2002...................... 1,250 1,268,750
-----------
$ 4,479,500
-----------
STORES -- 2.1%
Finlay Enterprises, Inc.,
0s to 1998, 12s to 2005... $ 3,000 $ 2,403,750
Parisian, Inc., 9.875s,
2003...................... 1,100 1,039,500
Woodward & Lothrop, Inc.,
12s, 1999**............... 3,150 157,500
-----------
$ 3,600,750
-----------
SUPERMARKETS -- 4.1%
Carr-Gottstein Foods Co.,
12s, 2005................. $ 350 $ 358,750
Dominicks Finer Foods,
10.875s, 2005............. 700 736,750
Fleming Co., 10.625s,
2001...................... 400 362,000
Grand Union Co., 12s,
2004...................... 1,300 1,205,750
Pathmark Stores, Inc.,
9.625s, 2003.............. 1,400 1,302,000
Ralphs Grocery Co., 10.45s,
2004...................... 1,450 1,421,000
Smiths Food & Drug Centers,
11.25s, 2007.............. 1,500 1,511,250
-----------
$ 6,897,500
-----------
</TABLE>
14
<PAGE>
BONDS -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
TELECOMMUNICATIONS -- 16.3%
American Communications
Services, Inc., 12.75s,
2006...................... $ 275 $ 143,000
American Radio Systems Co.,
9s, 2006.................. 650 612,625
Bell & Howell Co., 10.75s,
2002...................... 450 477,000
Bell Cablemedia PLC, 0s,
2005...................... 1,100 668,250
Brooks Fiber Properties, 0
to 2001, 10.875s to
2006##.................... 750 399,375
Cablevision Systems Corp.,
9.25s, 2005............... 1,400 1,302,000
Charter Communications So.
East LP, 11.25s, 2006##... 1,000 985,000
Comcast Corp., 9.375s,
2005...................... 2,200 2,117,500
Diamond Cable
Communications Corp.,
11.75s, 2005.............. 1,000 587,500
Echostar Satellite
Broadcasting Corp., 0s,
2004##.................... 1,400 871,500
Echostar Communications
Corp., 0s, 2004........... 1,450 1,062,125
Falcon Holdings Group,
Inc., 11s, 2003#.......... 1,727 1,658,543
Granite Broadcasting Corp.,
10.375s, 2005............. 1,000 980,000
Intelcom Group (USA), Inc.,
0s to 2001, 12.5s to
2006##.................... 1,000 545,000
Jones Intercable, Inc.,
9.625s, 2002.............. 1,750 1,758,750
Jones Intercable, Inc.,
10.5s, 2008............... 250 261,875
MFS Communications, Inc.,
0s to 2006, 8.875s to
2006...................... 3,150 1,905,750
Marcus Cable Operating Co.,
0s to 1999, 13.5s to
2004...................... 875 625,625
Mobile Telecommunications,
13.5s, 2002............... 1,250 1,328,125
Mobilemedia Communications,
Inc., 0s to 1998, 10.5s to
2003...................... 1,450 1,029,500
Mobilemedia Communications,
Inc., 9.375s, 2007........ 850 760,750
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
TELECOMMUNICATIONS -- continued
Paging Network, Inc.,
8.875s, 2006.............. $ 2,100 $ 1,900,500
Park Broadcasting, Inc.,
11.75s, 2004##............ 750 748,125
Pronet, Inc., 11.875s,
2005...................... 1,250 1,225,000
Rifkin Acquisition Partners
LP, 11.125s, 2006......... 700 684,250
Rogers Cablesystems Ltd.,
10.125s, 2012............. 1,750 1,680,000
Teleport Communications
Group Inc., 0s to 2001,
11.125s to 2007........... 1,750 1,019,375
Videotron Holdings PLC, 0s
to 2005, 11s to 2005...... 500 318,750
-----------
$27,655,793
-----------
TRANSPORTATION -- 1.6%
CHC Helicopter Corp.,
11.5s, 2002............... $ 600 $ 567,000
Moran Transportation Co.,
11.75s, 2004.............. 500 498,750
Tiphook Finance Corp.,
7.125s, 1998.............. 1,250 893,750
Tiphook Finance Corp., 8s,
2000...................... 1,088 777,920
-----------
$ 2,737,420
-----------
Total Bonds (Identified Cost,
$159,635,050).............................. $157,974,322
-----------
</TABLE>
<TABLE>
<CAPTION>
STOCKS AND WARRANTS -- 0.5%
Shares
BUILDING
<S> <C> <C>
Atlantic Gulf
Communities Corp.*+.. 150 $ 900
---------
CONSUMER GOODS AND SERVICES
Ranger Industries,
Inc.*................ 123,210 $ 11,088
---------
ENTERTAINMENT -- 0.4%
Gillett Holdings,
Inc.*+............... 23,535 $ 611,910
---------
OIL SERVICES -- 0.1%
ICO, Inc.,
Warrants*............ 375,000 $ 243,750
---------
</TABLE>
15
<PAGE>
STOCKS AND WARRANTS -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
OILS
Crystal Oil Co.,
$0.075 Warrants*..... 1,920,847 $ --
Crystal Oil Co., $0.10
Warrants*............ 1,683,209 --
Crystal Oil Co.,
$0.125 Warrants*..... 2,000,087 --
Crystal Oil Co., $0.15
Warrants*............ 1,963,306 --
Crystal Oil Co., $0.25
Warrants*............ 1,963,306 --
---------
$ --
---------
RESTAURANTS AND LODGING
Palace Casinos, Inc.,
Warrants*............ 7,200 $ 72
Sam Houston Race Park,
Inc.*................ 82 410
---------
$ 482
---------
SPECIAL PRODUCTS AND SERVICES
Envirosource,
Inc.*+............... 1,666 $ 5,831
---------
TELECOMMUNICATIONS
American
Communications
Services, Inc.,
Warrants*............ 50 $ 5,000
---------
Total Stocks and Warrants
(Identified Cost, $3,364,096)...... $ 878,961
---------
PREFERRED STOCKS -- 3.4%
ENTERTAINMENT -- 1.1%
Time Warner, Inc., "K"
10.25s,
#, ##................ 1,900 $1,862,000
---------
PRINTING AND PUBLISHING -- 1.5%
K-III Communications
Corp., "B" 11.625s,
#.................... 24,614 2,461,407
---------
TELECOMMUNICATIONS -- 0.8%
Cablevision Systems
Corp., 11.125s, 2008,
##................... 14,199 $1,327,607
---------
Total Preferred Stocks (Identified
Cost, $5,256,967).................. $5,651,014
---------
SHORT-TERM OBLIGATIONS -- 1.2%
Principal
Amount
(000 omitted)
-------------
Federal Home Loan
Mortgage, due
7/01/96, at Amortized
Cost................. $ 2,100 $2,100,000
---------
Total Investments (Identified Cost,
$170,356,113)...................... $166,604,297
OTHER ASSETS, LESS LIABILITIES --
1.7%................................ 2,891,447
---------
Net Assets -- 100.0%............... $169,495,744
---------
---------
</TABLE>
See portfolio footnotes and notes to financial statements
PORTFOLIO OF INVESTMENTS -- June 30, 1996
MANAGED SECTORS VARIABLE ACCOUNT -- MSVA
STOCKS -- 97.7%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
ENERGY -- 10.2%
BJ Services Co.*........... 48,000 $ 1,686,000
Camco International,
Inc....................... 21,000 711,375
Cooper Cameron Corp.*...... 28,000 1,225,000
Occidental Petroleum
Corp...................... 95,000 2,351,250
Seacor Holdings, Inc.*..... 30,200 1,351,450
Weatherford Enterra,
Inc.*..................... 69,000 2,070,000
-----------
$ 9,395,075
-----------
FINANCIAL SERVICES -- 11.3%
Advanta Corp., "B"......... 29,500 $ 1,334,875
Baybanks, Inc.............. 10,500 1,131,375
CNA Financial Corp.*....... 11,200 1,153,600
Cigna Corp................. 6,500 766,187
Equitable of Iowa Cos...... 53,700 1,906,350
Federal Home Loan Mortgage
Corp...................... 18,500 1,581,750
Fleet/Norstar Financial
Group, Inc................ 31,000 1,348,500
Union Planters Corp........ 38,400 1,166,400
Wells Fargo & Co........... 1 239
-----------
$10,389,276
-----------
LEISURE -- 21.6%
Argosy Gaming Corp.*....... 80,600 $ 594,425
Harrahs Entertainment,
Inc.*..................... 150,000 4,237,500
MGM Grand, Inc.*........... 10,700 426,663
Promus Hotel Corp.*........ 52,500 1,555,313
Rogers Communications,
Inc., "B" (Canada)........ 347,000 3,209,750
Showboat, Inc.............. 39,700 1,195,962
Sky City Ltd. (New
Zealand)*................. 240,700 1,048,819
Telephone & Data Systems,
Inc....................... 168,800 7,596,000
-----------
$19,864,432
-----------
RETAIL -- 8.2%
Federated Department Store,
Inc.*..................... 43,000 $ 1,467,375
General Nutrition Cos.,
Inc.*..................... 60,600 1,060,500
Office Depot, Inc.*........ 65,000 1,324,375
Sears, Roebuck & Co........ 36,000 1,750,500
Wal-Mart Stores, Inc....... 78,000 1,979,250
-----------
$ 7,582,000
-----------
</TABLE>
16
<PAGE>
STOCKS -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
TECHNOLOGY -- 19.9%
ADT Ltd.*.................. 108,000 $ 2,038,500
Adobe Systems, Inc......... 33,000 1,183,875
Analog Devices, Inc.*...... 38,000 969,000
Cabletron Systems, Inc..... 25,000 1,715,625
Digital Equipment Corp.*... 29,000 1,305,000
Electronic Arts, Inc.*..... 74,000 1,979,500
Intel Corp................. 37,100 2,724,531
Loral Space and
Communications*........... 69,200 942,850
National Semiconductor
Corp.*.................... 118,000 1,829,000
Oracle Systems Corp.*...... 31,500 1,242,281
Spectrum Holobyte
Industries*............... 183,000 1,052,250
Sybase, Inc.*.............. 55,500 1,311,188
-----------
$18,293,600
-----------
OTHER -- 26.5%
AGCO Corp.................. 77,000 $ 2,136,750
Burlington Northern Santa
Fe........................ 10,000 808,750
Colgate-Palmolive Co....... 21,000 1,779,750
Coventry Corp.*............ 97,100 1,529,325
Ford Motor Co.............. 28,000 906,500
General Motors Corp........ 35,000 1,833,125
Goodrich (B.F.) Co......... 26,000 971,750
Gannett Co., Inc........... 12,000 849,000
Healthsource, Inc.*........ 74,900 1,310,750
Ingersoll-Rand Co.......... 30,000 1,312,500
McDonnell Douglas Co....... 32,000 1,552,000
Pacificare Health Systems,
Inc., "B"*................ 4,100 277,775
Praxair, Inc............... 26,000 1,098,500
Powergen PLC (United
Kingdom).................. 155,400 793,689
St. Jude Medical Inc.*..... 27,300 914,550
Tyco International Ltd..... 80,200 3,268,150
United Healthcare Corp..... 38,400 1,939,200
WMX Technologies, Inc...... 8,000 262,000
Wisconsin Central
Transportation Corp.*..... 23,900 776,750
-----------
$24,320,814
-----------
Total Stocks (Identified Cost,
$83,552,247)............................... $89,845,197
-----------
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Spectrum Holobyte, Inc.,
6.5s, 2002## (Identified
Cost, $120,000)........... $ 120 $ 83,400
-----------
SHORT-TERM OBLIGATIONS -- 2.1%
Federal Home Loan Mortgage,
due 7/01/96............... $ 1,955 $ 1,955,000
-----------
Total Investments (Identified Cost,
$85,627,247)............................... $91,883,597
OTHER ASSETS, LESS LIABILITIES -- 0.1%....... 29,713
-----------
Net Assets -- 100.0%....................... $91,913,310
-----------
-----------
</TABLE>
See portfolio footnotes and notes to financial statements
PORTFOLIO OF INVESTMENTS -- June 30, 1996
MONEY MARKET VARIABLE ACCOUNT -- MMVA
COMMERCIAL PAPER -- 40.5%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted)
<S> <C> <C>
American Express Credit
Corp., due 7/05/96........ $ 5,000 $ 4,995,567
Beneficial Corp., due
8/28/96................... 5,400 5,352,570
Campbell Soup Co., due
7/19/96................... 3,000 2,991,133
Coca Cola Co., due
8/20/96................... 6,000 5,953,720
Ford Motor Credit Co., due
7/01/96................... 6,000 5,998,190
General Motors Acceptance
Corp., due 7/08/96........ 5,000 4,993,300
Heinz (H.J.), due
7/30/96................... 3,475 3,458,961
Kimberly Clark Corp., due
7/09/96................... 4,230 4,223,749
Motorola, Inc., due
7/18/96................... 5,000 4,985,961
Pacific Gas and Electric,
due 7/16/96............... 5,000 4,987,297
Pepsico, due 7/01/96....... 6,500 6,498,093
Pfizer, Inc., due
7/22/96................... 5,400 5,381,715
-----------
Total Commercial Paper..................... $59,820,256
-----------
</TABLE>
17
<PAGE>
U.S. GOVERNMENT AND
AGENCY OBLIGATIONS -- 59.9%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Federal Farm Credit, due
7/15/96................... $ 4,000 $ 3,990,756
Federal Farm Credit, due
7/23/96................... 2,100 2,092,748
Federal Home Loan Bank, due
7/12/96................... 10,000 9,980,933
Federal Home Loan Bank, due
9/06/96................... 3,100 3,069,698
Federal Home Loan Bank, due
10/11/96.................. 6,900 6,796,546
Federal Home Loan Mortgage
Assn., due 7/31/96........ 3,300 3,284,541
Federal Home Loan Mortgage
Assn., due 8/05/96........ 5,400 5,370,863
Federal Home Loan Mortgage
Assn., due 8/12/96........ 7,400 7,352,155
Federal Home Loan Mortgage
Assn., due 8/23/96........ 4,000 3,967,611
Federal National Mortgage
Assn., due 7/02/96........ 3,500 3,498,591
Federal National Mortgage
Assn., due 7/03/96........ 4,600 4,597,347
Federal National Mortgage
Assn., due 7/24/96........ 7,735 7,706,692
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Federal National Mortgage
Assn., due 9/05/96........ 6,000 5,943,900
Federal National Mortgage
Assn., due 10/10/96....... 5,200 5,121,594
Federal National Mortgage
Assn., due 12/20/96....... 6,500 6,330,664
Tennessee Valley Authority,
due 7/25/96............... 2,900 2,889,570
Tennessee Valley Authority,
due 7/26/96............... 6,400 6,376,000
-----------
Total U.S. Government and Agency
Obligations................................ $88,370,209
-----------
Total Investments, at Amortized Cost....... $148,190,465
OTHER ASSETS, LESS LIABILITIES -- (0.4)%..... (579,124)
-----------
Net Assets -- 100.0%....................... $147,611,341
-----------
-----------
</TABLE>
See portfolio footnotes and notes to financial statements
PORTFOLIO OF INVESTMENTS -- June 30, 1996
TOTAL RETURN VARIABLE ACCOUNT -- TRVA
BONDS -- 28.5%
18
<PAGE>
BONDS -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
AIRLINES -- 1.5%
Continental Airlines, Inc.,
10.22s, 2014##............ $ 200 $ 223,192
Delta Air lines, Inc.,
9.75s, 2021............... 460 525,292
Delta Air lines, Inc.,
9.25s, 2022............... 200 218,856
Jet Equipment Trust, 9.41s,
2010##.................... 330 373,319
Jet Equipment Trust, 8.64s,
2012##.................... 246 261,042
Jet Equipment Trust,
11.44s, 2014##............ 300 330,483
Jet Equipment Trust,
10.69s, 2015##............ 250 290,930
Quantas Airways, Ltd.,
7.5s, 2003##.............. 700 700,294
United Airlines, Inc.,
9.75s, 2021............... 400 451,608
United Airlines, Inc.,
9.125s, 2012.............. 200 214,662
United Airlines, Inc.,
7.27s, 2013............... 500 473,390
U.S. Air, Inc., 6.76s,
2008...................... 200 189,570
-----------
$ 4,252,638
-----------
BANKS AND CREDIT COMPANIES -- 0.9%
Advanta National Bank,
6.8s, 2001................ $ 1,000 $ 980,010
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
BANKS AND CREDIT COMPANIES -- continued
Advanta National Bank,
6.82s, 2001............... 400 393,836
Capital One Bank, 6.875s,
2000...................... 300 297,453
Capital One Bank, 7s,
2001...................... 400 396,668
Riggs National Corp., 8.5s,
2006...................... 375 373,125
Sovereign Bancorp, Inc.,
6.75s, 2000............... 200 193,690
-----------
$ 2,634,782
-----------
BUILDING -- 0.2%
Owens Corning Fiberglass
Corp., 8.875s, 2002##..... $ 200 $ 213,786
Owens Corning Fiberglass
Toledo, 9.9s, 2015##...... 200 215,750
-----------
$ 429,536
-----------
CONSUMER GOODS AND SERVICES -- 0.2%
Black & Decker Corp.,
8.44s, 1999............... $ 200 $ 209,608
Philip Morris Cos., Inc.,
7.65s, 2008............... 300 304,472
-----------
$ 514,080
-----------
</TABLE>
19
<PAGE>
PORTFOLIO OF INVESTMENTS -- continued
BONDS -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
CORPORATE ASSET BACKED -- 0.1%
Merrill Lynch Mortgage
Investors, Inc., 8.9s,
2011...................... $ 379 $ 382,225
-----------
ENTERTAINMENT -- 2.0%
Time Warner, Inc., 7.45s,
1998...................... $ 3,450 $ 3,487,364
Time Warner, Inc., 8.11s,
2006...................... 1,167 1,159,695
Time Warner, Inc., 9.15s,
2023...................... 800 827,152
-----------
$ 5,474,211
-----------
FINANCIAL INSTITUTIONS -- 2.3%
Alex Brown, Inc., 7.625s,
2005...................... $ 320 $ 320,522
Auburn Hills Trust, 12s,
2020...................... 1,450 2,094,380
Bankers Trust Corp.,
7.375s, 2008.............. 725 712,972
Bear Stearns Cos., Inc.,
6.75s, 2001............... 600 593,778
Goldman Sachs Group, 7.25s,
2005##.................... 150 147,563
Lehman Brothers, Inc.,
8.5s, 2007................ 1,000 1,050,520
Lehman Brothers, Inc.,
7.625s, 2006.............. 150 149,030
RHG Finance Corp., 8.875s,
2005...................... 335 345,880
Salton Sea Funding Corp.,
8.3s, 2011................ 200 201,506
Salton Sea Funding Corp.,
7.37s, 2005............... 400 390,388
Salton Sea Funding Corp.,
7.84s, 2010............... 400 392,412
-----------
$ 6,398,951
-----------
FOOD AND BEVERAGE PRODUCTS -- 0.7%
RJR Nabisco, Inc., 8.75s,
2005...................... $ 540 $ 534,330
RJR Nabisco, Inc., 8.75s,
2007...................... 500 490,725
RJR Nabisco, Inc., 7.55s,
2015...................... 890 852,272
-----------
$ 1,877,327
-----------
FOREIGN -- U.S. DOLLARS -- 2.0%
ABN Amro Bank NV , 7.55s,
2006...................... $ 625 $ 635,238
Canadian Pacific Forest,
9.25s, 2002............... 1,000 1,059,450
City of Naples, 7.52s,
2006...................... 375 377,688
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
FOREIGN -- U.S. DOLLARS -- continued
Fairfax Financial Holdings
Ltd., 8.3s, 2026.......... $ 400 $ 397,720
Financiara Energetica
Nacional Colombia, 6.625s,
1996##.................... 420 419,789
Financiara Energetica
Nacional Colombia, 9.375s,
2006##.................... 135 135,506
Hanson Overseas BV, 6.75s,
2005...................... 625 600,637
Hidroelectrica Alicura,
8.375s, 1999##............ 500 482,500
Province of Quebec, 6.5s,
2006...................... 312 292,446
Republic of Argentina,
9.25s, 2001............... 220 212,630
Republic of Colombia,
8.75s, 1999............... 250 255,312
Republic of Colombia, 8.7s,
2016...................... 540 494,845
Oleoducto Central S.A.,
9.35s, 2005##............. 300 298,500
-----------
$ 5,662,261
-----------
FOREST AND PAPER PRODUCTS -- 0.9%
Georgia-Pacific Corp.,
9.875s, 2021.............. $ 1,150 $ 1,245,588
Georgia-Pacific Corp.,
8.125s, 2023.............. 525 502,877
James River Corp., 7.75s,
2023...................... 750 716,647
-----------
$ 2,465,112
-----------
INSURANCE -- 1.6%
Liberty Mutual Insurance
Co., 8.2s, 2007##......... $ 1,400 $ 1,464,176
Manufacturers Life
Insurance Co., 7.875s,
2005##.................... 1,250 1,261,950
Massachusetts Mutual Life
Insurance Co., 7.625s,
2023##.................... 200 193,256
Metropolitan Life Insurance
Co., 7.7s, 2015##......... 400 386,760
Nationwide Mutual Life
Insurance Co., 7.5s,
2024##.................... 750 681,082
Travelers Group, Inc.,
7.875s, 2025.............. 600 600,444
-----------
$ 4,587,668
-----------
</TABLE>
20
<PAGE>
BONDS -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
MEDICAL AND HEALTH PRODUCTS -- 0.2%
Ciba-Geigy, 6.25s,
2016##.................... $ 500 $ 504,375
-----------
METALS AND MINERALS -- 0.2%
Asarco, Inc., 8.5s 2025.... $ 378 $ 389,234
Cominco, Inc., 6.875s,
2006...................... 200 185,736
-----------
$ 574,970
-----------
OILS -- 0.5%
Mitchell Energy &
Development Corp., 8s,
1999...................... $ 250 $ 253,927
Mitchell Energy &
Development Corp., 9.25s,
2002...................... 225 235,318
Oryx Energy Co., 10s,
2001...................... 750 816,930
-----------
$ 1,306,175
-----------
POLLUTION CONTROL -- 0.1%
Laidlaw Inc., 8.75s,
2025...................... $ 350 $ 372,442
-----------
PRINTING AND PUBLISHING -- 0.2%
News America Holdings,
Inc., 7.6s, 2015.......... $ 600 $ 558,432
-----------
REAL ESTATE -- 0.1%
Rouse Co., 7.46s, 2001..... $ 400 $ 396,800
-----------
RETAIL -- 0.1%
Price/Costco, Inc., 7.125s,
2005...................... $ 250 $ 243,195
-----------
SPECIAL PRODUCTS AND SERVICES -- 0.3%
Fisher Scientific
International, Inc.,
7.125s, 2005.............. $ 400 $ 380,420
Mark IV Industries, Inc.,
7.75s, 2006##............. 400 378,000
-----------
$ 758,420
-----------
TELECOMMUNICATIONS -- 1.1%
Continental Cablevision,
8.5s, 2001................ $ 300 $ 314,088
Continental Cablevision,
8.3s, 2006................ 150 154,500
Tele-Communications, Inc.,
7.38s, 2001............... 500 499,490
Tele-Communications, Inc.,
10.125s, 2022............. 575 631,407
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
TELECOMMUNICATIONS -- continued
Tele-Communications, 9.25s,
2023...................... $ 1,127 $ 1,110,951
Viacom, Inc., 7.75s,
2005...................... 200 195,004
Viacom, Inc., 7.625s,
2016...................... 260 236,288
-----------
$ 3,141,728
-----------
U.S. FEDERAL AGENCIES -- 2.1%
Federal Home Loan Mortgage
Corp., 9s, 2020........... $ 386 $ 402,466
Federal National Mortgage
Assn., 7.5s, 2011......... 2,299 2,309,069
Federal National Mortgage
Assn., 6.5s, 2017......... 1,913 1,900,120
Federal National Mortgage
Assn., 7s, 2026........... 1,375 1,322,722
-----------
$ 5,934,377
-----------
U.S. GOVERNMENT GUARANTEED -- 0.2%
Government National
Mortgage Assn., 9s,
2019...................... $ 390 $ 408,316
-----------
U.S. TREASURY OBLIGATIONS -- 6.2%
U.S. Treasury Notes,
7.875s, 1999.............. $ 305 $ 318,582
U.S. Treasury Notes,
5.625s, 2000.............. 800 774,872
U.S. Treasury Notes, 6.25s,
2000...................... 200 198,718
U.S. Treasury Notes, 6.25s,
2000...................... 400 397,188
U.S. Treasury Notes,
5.625s, 2001.............. 800 773,128
U.S. Treasury Notes, 6.25s,
2001...................... 1,900 1,881,893
U.S. Treasury Notes, 7.5s,
2001...................... 520 542,833
U.S. Treasury Notes, 6.25s,
2003...................... 475 466,612
U.S. Treasury Notes,
7.875s, 2004.............. 400 429,936
U.S. Treasury Notes,
5.875s, 2005.............. 100 94,203
U.S. Treasury Notes, 6.5s,
2005...................... 445 438,601
U.S. Treasury Notes,
6.875s, 2006.............. 2,475 2,502,448
U.S. Treasury Bonds, 7.5s,
2024...................... 425 450,500
U.S. Treasury Bonds, 12s,
2005...................... 1,170 1,576,762
</TABLE>
21
<PAGE>
PORTFOLIO OF INVESTMENTS -- continued
BONDS -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- continued
U.S. Treasury Bonds, 12s,
2013...................... $ 705 $ 993,831
U.S. Treasury Bonds,
6.875s, 2025.............. 5,179 5,126,381
U.S. Treasury Bonds, 6s,
2026...................... 400 354,688
-----------
$17,321,176
-----------
UTILITIES -- ELECTRIC -- 3.9%
Arkansas Power & Light Co.,
8.75s, 2026............... $ 175 $ 174,871
Central Maine Power Co.,
7.45s, 1999............... 200 194,860
Cleveland Electric
Illuminating, 7.42s,
2001...................... 500 469,010
Coastal Corp., 10.25s,
2004...................... 600 698,682
Coastal Corp., 7.75s,
2035...................... 825 796,818
Commonwealth Edison Co.,
8.375s, 2023.............. 200 196,860
Connecticut Light & Power
Co., 7.875s, 2001......... 400 405,388
DQU II Funding Corp., 8.7s,
2016...................... 600 619,278
Edelnor S.A., 7.75s,
2006##.................... 190 186,913
El Paso Electric Co.,
8.25s, 2003............... 575 557,750
First PV Funding Corp.,
10.3s, 2014............... 650 689,000
First PV Funding Corp.,
10.15s, 2016.............. 750 789,375
Long Island Lighting Co.,
8.75s, 1997............... 500 506,760
Long Island Lighting Co.,
8.9s, 2019................ 480 435,533
Long Island Lighting Co.,
9.625s, 2024.............. 1,275 1,307,041
Louisiana Power & Light
Co., 10.67s, 2017......... 300 321,069
Louisiana Power & Light
Co., 10.67s, 2017......... 100 107,026
Louisiana Power & Light
Co., 8.75s, 2026.......... 87 86,239
Midland Cogeneration
Venture Corp., 10.33s,
2002...................... 501 528,436
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
UTILITIES -- ELECTRIC -- continued
Midland Funding Corp. II,
"A", 11.75s, 2005......... $ 750 $ 783,450
Pacificorp Holdings, 7.2s,
2006##.................... 680 662,762
Texas & New Mexico Power
Co., 12.5s, 1999.......... 500 541,545
-----------
$11,058,666
-----------
UTILITIES -- GAS -- 0.9%
Arkla, Inc., 9.39s, 2000... $ 400 $ 426,768
Arkla, Inc., 8.85s, 2001... 150 157,103
California Energy Co., 0s,
2004...................... 600 576,000
GGIB Funding Corp., 7.43s,
2011...................... 394 375,200
NGC Corp., 6.75s, 2005..... 850 810,211
Parker & Parsley Petroleum,
8.25s, 2007............... 125 130,360
-----------
$ 2,475,642
-----------
Total Bonds (Identified Cost,
$81,537,634)............................... $79,733,505
-----------
</TABLE>
<TABLE>
<S> <C> <C>
STOCKS -- 57.0%
U.S. COMMON STOCKS -- 52.0%
<CAPTION>
Shares
<S> <C> <C>
AEROSPACE -- 2.8%
Allied Signal, Inc.... 34,900 $1,993,662
Raytheon Co........... 35,600 1,837,850
United Technologies
Corp................. 34,600 3,979,000
---------
$7,810,512
---------
APPAREL AND TEXTILES -- 0.4%
VF Corp............... 20,500 $1,222,312
---------
AUTOMOTIVE -- 2.5%
Dana Corp............. 31,000 $ 961,000
Ford Motor Co......... 46,900 1,518,387
General Motors
Corp................. 56,000 2,933,000
Goodrich (B.F.) Co.... 44,200 1,651,975
---------
$7,064,362
---------
BANKS AND CREDIT COMPANIES -- 5.1%
Bank of New York,
Inc.................. 35,000 $1,793,750
Bank of Boston
Corp................. 44,000 2,178,000
Chase Manhattan
Corp................. 45,760 3,231,800
</TABLE>
22
<PAGE>
STOCKS -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. COMMON STOCKS -- continued
BANKS AND CREDIT COMPANIES -- continued
Comerica, Inc......... 5,000 $ 223,125
Fleet/Norstar
Financial Group,
Inc.................. 20,500 891,750
National City Corp.... 75,000 2,634,375
NationsBank Corp...... 29,500 2,437,437
Northern Trust Co..... 13,000 750,750
---------
$14,140,987
---------
BUSINESS MACHINES -- 1.0%
Digital Equipment
Corp.*............... 11,600 $ 522,000
International Business
Machines Corp........ 7,800 772,200
Texas Instruments,
Inc.................. 3,000 149,625
Xerox Corp............ 24,500 1,310,750
---------
$2,754,575
---------
CELLULAR TELEPHONES -- 0.2%
360 Communications
Co................... 1 $ 24
Telephone & Data
Systems, Inc......... 13,100 589,500
---------
$ 589,524
---------
CHEMICALS -- 2.2%
Dow Chemical Co....... 20,500 $1,558,000
Du Pont (E. I.) De
Nemours & Co......... 17,600 1,392,600
Hanna (M.A.) Co....... 10,400 217,100
Praxair, Inc.......... 24,500 1,035,125
Rohm & Haas Co........ 15,700 985,175
Witco Corp............ 29,600 1,017,500
---------
$6,205,500
---------
CONGLOMERATES -- 0.4%
Eastern Enterprises... 34,000 $1,130,500
---------
CONSUMER GOODS AND SERVICES -- 3.0%
American Brands,
Inc.................. 14,500 $ 657,937
Colgate-Palmolive
Co................... 14,000 1,186,500
Olin Corp............. 7,000 624,750
Philip Morris Cos.,
Inc.................. 46,000 4,784,000
Rubbermaid, Inc....... 28,400 773,900
Sherwin Williams
Co................... 10,900 506,850
---------
$8,533,937
---------
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. COMMON STOCKS -- continued
ELECTRICAL EQUIPMENT -- 2.4%
General Electric
Co................... 41,000 $3,546,500
Honeywell, Inc........ 56,500 3,079,250
---------
$6,625,750
---------
ELECTRONICS -- 0.1%
Analog Devices,
Inc.*................ 10,200 $ 260,100
---------
FINANCIAL INSTITUTIONS -- 1.9%
American Express
Co................... 21,700 $ 968,362
Associates First
Capital Corp.,
"A"*................. 8,700 327,337
Federal Home Loan
Mortgage Corp........ 24,200 2,069,100
Southern National
Corp................. 60,000 1,905,000
---------
$5,269,799
---------
FOOD AND BEVERAGE PRODUCTS -- 1.4%
Anheuser-Busch Cos.,
Inc.................. 9,500 $ 712,500
Dimon, Inc............ 15,000 277,500
Earthgrains Co.*...... 380 12,445
General Mills, Inc.... 29,600 1,613,200
Kellog Co............. 6,500 476,125
McCormick & Co.
Inc.................. 10,200 225,675
PepsiCo, Inc.......... 14,400 509,400
---------
$3,826,845
---------
FOREST AND PAPER PRODUCTS -- 0.3%
Weyerhaeuser Co....... 19,000 $ 807,500
---------
INSURANCE -- 2.5%
Aetna Life & Casualty
Co................... 16,300 $1,165,450
Allstate Corp......... 19,000 866,875
CIGNA Corp............ 14,000 1,650,250
St. Paul Cos., Inc.... 21,000 1,123,500
Torchmark Corp........ 36,000 1,575,000
Travelers, Inc........ 11,750 536,093
---------
$6,917,168
---------
</TABLE>
23
<PAGE>
PORTFOLIO OF INVESTMENTS -- continued
STOCKS -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. COMMON STOCKS -- continued
MACHINERY -- 1.5%
Deere & Co., Inc...... 45,400 $1,816,000
Ingersoll-Rand Co..... 24,800 1,085,000
York International
Corp................. 26,700 1,381,725
---------
$4,282,725
---------
MEDICAL AND HEALTH PRODUCTS -- 2.2%
American Home Products
Corp................. 33,200 $1,996,150
Baxter International,
Inc.................. 39,500 1,866,375
Lilly (Eli) & Co...... 29,000 1,885,000
Rhone-Poulenc Rorer,
Inc.................. 8,100 543,712
---------
$6,291,237
---------
MEDICAL AND HEALTH TECHNOLOGY AND SERVICES --
0.3%
St. Jude Medical,
Inc.................. 22,000 $ 737,000
---------
METALS AND MINERALS -- 0.5%
Aluminum Cos. of
America.............. 9,300 $ 533,587
Phelps Dodge Corp..... 15,000 935,625
---------
$1,469,212
---------
OIL SERVICES -- 0.4%
Schlumberger Ltd...... 12,800 $1,078,400
---------
OILS -- 4.6%
Amoco Corp............ 32,000 $2,316,000
Atlantic Richfield
Co................... 13,900 1,647,150
Exxon Corp............ 23,000 1,998,125
Mobil Corp............ 19,000 2,130,375
Occidental Petroleum
Corp................. 37,600 930,600
Sun, Inc.............. 28,459 864,442
USX Marathon Group.... 109,400 2,201,675
Ultramar Corp......... 25,500 739,500
---------
$12,827,867
---------
PHOTOGRAPHIC PRODUCTS -- 1.0%
Eastman Kodak Co...... 37,500 $2,915,625
---------
POLLUTION CONTROL -- 0.6%
Browning-Ferris
Industries........... 31,500 $ 913,500
WMX Technologies,
Inc.................. 26,300 861,325
---------
$1,774,825
---------
PRINTING AND PUBLISHING -- 0.6%
Dun & Bradstreet
Corp................. 6,000 $ 375,000
Tribune Co., Inc...... 17,300 1,256,412
---------
$1,631,412
---------
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. COMMON STOCKS -- continued
RAILROADS -- 1.7%
Burlington Northern
Santa Fe............. 14,000 $1,132,250
CSX Corp.............. 44,200 2,132,650
Illinois Central
Corp................. 54,450 1,545,018
---------
$4,809,918
---------
REAL ESTATE -- 1.1%
Hospitality Properties
Trust................ 41,000 $1,096,750
Meditrust Corp........ 42,100 1,405,087
National Health
Investors, Inc....... 14,900 487,975
---------
$2,989,812
---------
SPECIAL PRODUCTS AND SERVICES -- 0.4%
Stanley Works......... 35,000 $1,041,250
Transport Holdings,
Inc., "A"*........... 50 2,300
---------
$1,043,550
---------
STORES -- 1.4%
May Department Stores
Co................... 30,000 $1,312,500
Office Depot, Inc.*... 18,500 376,937
Sears, Roebuck &
Co................... 35,000 1,701,875
Wal-Mart Stores,
Inc.................. 25,800 654,675
---------
$4,045,987
---------
UTILITIES -- ELECTRIC -- 2.4%
CMS Energy Corp....... 20,000 $ 617,500
DPL, Inc.............. 20,000 487,500
FPL Group, Inc........ 45,000 2,070,000
Peco Energy Co........ 38,500 1,001,000
Pinnacle West Capital
Corp................. 26,000 789,750
Portland General
Corp................. 42,500 1,312,187
Texas Utilities Co.... 14,000 598,500
---------
$6,876,437
---------
UTILITIES -- GAS -- 2.5%
Coastal Corp.......... 39,300 $1,640,775
Pacific Enterprises... 18,000 533,250
Panenergy Corp........ 38,000 1,249,250
Sonat, Inc............ 34,000 1,530,000
UGI Corp.............. 10,000 220,000
Williams Cos., Inc.... 36,200 1,791,900
---------
$6,965,175
---------
</TABLE>
24
<PAGE>
STOCKS -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. COMMON STOCKS -- continued
UTILITIES -- TELEPHONE -- 4.6%
AT&T Co............... 70,000 $4,340,000
Ameritech Corp........ 26,100 1,549,687
BellSouth Corp........ 4,000 168,000
GTE Corp.............. 60,000 2,685,000
MCI Communications
Corp................. 73,400 1,880,875
NYNEX Corp............ 28,500 1,353,750
Sprint Corp........... 19,000 798,000
---------
$12,775,312
---------
Total U.S. Common Stocks........... $145,673,865
---------
FOREIGN STOCKS -- 5.0%
CANADA
Canadian National
Railway Co.
(Railroad)*.......... 5,600 $ 102,900
---------
FRANCE
Alcatel Alsthom
Compagnie, ADR
(Telecommunications)... 9,300 $ 163,912
---------
NETHERLANDS -- 1.3%
Royal Dutch Petroleum
Co. (Oils)........... 23,000 $3,536,250
---------
NEW ZEALAND -- 0.1%
Lion Nathan Ltd. (Food
and Beverage)........ 81,300 $ 212,552
---------
SPAIN -- 0.5%
Iberdrola S.A.
(Utilities --
Electric)............ 75,000 $ 769,906
Repsol S.A., ADR (Oil
Services)............ 17,000 590,750
---------
$1,360,656
---------
SWEDEN -- 0.3%
Volvo AB, ADR
(Automotive)......... 37,000 $ 832,500
---------
SWITZERLAND -- 0.9%
Ciba-Geigy AG (Medical
and Health
Products)............ 2,000 $2,437,075
---------
UNITED KINGDOM -- 1.9%
British Petroleum PLC,
ADR (Oils)........... 31,581 $3,375,219
<CAPTION>
Issuer Shares Value
<S> <C> <C>
FOREIGN STOCKS -- continued
UNITED KINGDOM -- continued
Smithkline Beecham
PLC, ADR
(Pharmaceuticals).... 35,500 $1,930,312
---------
$5,305,531
---------
Total Foreign Stocks............... $13,951,376
---------
Total Stocks (Identified Cost,
$121,964,165)...................... $159,625,241
---------
CONVERTIBLE PREFERRED STOCKS -- 0.5%
BANKS AND CREDIT COMPANIES -- 0.2%
Bank United, Texas,
Federal Savings Bank,
"B".................. 17,500 $ 441,875
---------
PRECIOUS METALS AND MINERALS -- 0.1%
Browning-Ferris
Industries, Inc.,
7.25s................ 9,000 $ 285,750
---------
UTILITIES -- GAS -- 0.2%
Enron Corp., 6.25s,
Exchangeable Notes... 10,000 $ 258,750
Unocal Corp., 7s##.... 6,000 336,000
---------
$ 594,750
---------
Total Preferred Stocks (Identified
Cost, $1,313,218).................. $1,322,375
---------
SHORT-TERM OBLIGATIONS -- 12.3%
<CAPTION>
Principal
Amount
(000 Omitted)
<S> <C> <C>
Federal Home Loan
Bank, due 7/11/96.... $ 2,395 $2,391,487
Federal Home Loan
Bank, due 7/18/96.... 4,800 4,788,055
Federal Home Loan
Mortgage Corp., due
7/01/96.............. 6,610 6,610,000
Federal Home Loan
Mortgage Corp., due
7/05/96.............. 5,630 5,626,703
Federal Home Loan
Mortgage Corp., due
7/08/96.............. 8,735 8,726,032
Transamerica Corp.,
due 7/03/96.......... 6,300 6,298,145
---------
Total Short-Term Obligations, at
Amortized Cost..................... $34,440,422
---------
Total Investments (Identified Cost,
$239,255,439)...................... $275,121,543
OTHER ASSETS, LESS LIABILITIES --
1.7%................................ 5,124,293
---------
Net Assets -- 100.0%............... $280,245,836
---------
---------
</TABLE>
See portfolio footnotes and notes to financial statements
25
<PAGE>
PORTFOLIO OF INVESTMENTS -- June 30, 1996
WORLD GOVERNMENTS VARIABLE ACCOUNT -- WGVA
BONDS -- 94.4%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 19.0%
U.S. Treasury Notes, 6.25s,
2001...................... $ 6,300 $ 6,239,961
-----------
FOREIGN DENOMINATED -- 75.4%
AUSTRALIA -- 7.7%
Commonwealth of Australia,
7s, 2000.................. AUD 1,340 $ 1,006,597
Commonwealth of Australia,
9.75s, 2002............... 840 693,142
Commonwealth of Australia,
9.5s, 2003................ 1,000 817,300
-----------
$ 2,517,039
-----------
BELGIUM -- 2.7%
Kingdom of Belgium, 9s,
1998...................... BEF 10,000 $ 348,808
Kingdom of Belgium, 8.75s,
2002...................... 5,000 181,540
Kingdom of Belgium, 7.25s,
2004...................... 5,000 167,252
Kingdom of Belgium, 8.5s,
2007...................... 5,000 179,560
-----------
$ 877,160
-----------
CANADA -- 10.3%
Canadian Government, 7.5s,
2001...................... CAD 1,350 $ 1,009,656
Canadian Government, 7.5s,
2003...................... 1,800 1,324,441
Canadian Government, 8.75s,
2005...................... 1,300 1,025,614
-----------
$ 3,359,711
-----------
DENMARK -- 5.2%
Kingdom of Denmark, 8s,
2001...................... DKK 9,449 $ 1,720,783
-----------
GERMANY -- 6.8%
Federal Republic of
Germany, 8.5s, 2001....... DEM 30 $ 22,044
Treuhandanstalt
Obligationen, 6.375s,
1999...................... 3,202 2,193,986
-----------
$ 2,216,030
-----------
IRELAND -- 4.1%
Republic of Ireland, 8s,
2000...................... IEP 800 $ 1,332,091
-----------
ITALY -- 9.8%
Republic of Italy, 8.5s,
1999...................... ITL 1,890,000 $ 1,240,767
Republic of Italy, 9.5s,
1999...................... 1,720,000 1,152,950
Republic of Italy, 9.5s,
2006...................... 1,230,000 815,346
-----------
$ 3,209,063
-----------
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
FOREIGN DENOMINATED -- continued
JAPAN -- 9.7%
Export-Import Bank of
Japan, 4.375s, 2003....... JPY 160,000 $ 1,579,255
World Bank Global Bonds,
4.5s, 2000................ 96,000 959,386
World Bank Global Bonds,
5.25s, 2002............... 62,000 643,663
-----------
$ 3,182,304
-----------
NETHERLANDS -- 2.0%
Netherland Government, 6s,
2006...................... NLG 1,165 $ 662,964
-----------
SPAIN -- 5.1%
Government of Spain, 8.3s,
1998...................... ESP 83,550 $ 662,791
Government of Spain, 10.1s,
2001...................... 120,600 1,013,097
-----------
$ 1,675,888
-----------
SWEDEN -- 5.1%
Kingdom of Sweden, 11s,
1999...................... SEK 2,300 $ 382,269
Kingdom of Sweden, 10.25s,
2000...................... 7,800 1,300,628
-----------
$ 1,682,897
-----------
UNITED KINGDOM -- 6.9%
United Kingdom Treasury,
9s, 2000.................. GBP 1,065 $ 1,754,058
United Kingdom Treasury,
7s, 2001.................. 340 519,075
-----------
$ 2,273,133
-----------
Total Foreign Denominated.................. $24,709,063
-----------
Total Bonds (Identified Cost,
$30,875,470)............................... $30,949,024
-----------
CALL OPTIONS PURCHASED -- 0.2%
<CAPTION>
Description/Expiration Principal Amount
Month/ of Contracts
Strike Price (000 Omitted)
<S> <C> <C>
AUSTRALIAN DOLLARS
July/0.80.................. AUD 1,940,000 $ 785
CANADIAN DOLLARS
October/1.332.............. CAD 2,764,201 4,279
</TABLE>
26
<PAGE>
CALL OPTIONS PURCHASED -- continued
<TABLE>
<CAPTION>
Description/Expiration Principal Amount
Month/ of Contracts
Strike Price (000 Omitted) Value
<S> <C> <C>
GERMAN MARKS
July/1.52.................. DEM 7,777,604 $ 45,025
SPANISH PESETAS
August/83.65............... ESP 158,935,000 1,271
-----------
Total Call Options Purchased (Premiums
Paid, $76,786)............................. $ 51,360
-----------
PUT OPTIONS PURCHASED -- 0.2%
FRENCH FRANCS/DEUTSCHE MARKS
July/3.60.................. FRF 18,339,214 $ 0
DEUTSCHE MARKS
July/1.55.................. DEM 17,844,475 428
DEUTSCHE MARKS/BRITISH POUNDS
August/2.3316.............. 5,300,532 47,800
SWISS FRANCS/DEUTSCHE MARKS
July/0.805................. CHF 1,737,468 29,426
-----------
Total Put Options Purchased (Premiums Paid,
$161,474).................................. $ 77,654
-----------
SHORT-TERM OBLIGATIONS -- 3.2%
<CAPTION>
Principal Amount
Issuer (000 Omitted)
<S> <C> <C>
Federal Home Loan Mortgage,
due 7/01/96, at Amortized
Cost...................... $ 1,045 $ 1,045,000
-----------
Total Investments (Identified Cost,
$32,158,730)............................... $32,123,038
-----------
CALL OPTIONS WRITTEN
<CAPTION>
Description/Expiration Principal Amount
Month/ of Contracts
Strike Price (000 Omitted)
<S> <C> <C>
CANADIAN DOLLARS
October/1.3858............. CAD (2,875,848) $ (5,740)
SPANISH PESETAS/DEUTSCHE MARKS
August/86.0................ ESP (163,400,000) (327)
-----------
Total Call Options Written (Premiums
Received, $14,039)......................... $ (6,067)
-----------
OTHER ASSETS, LESS LIABILITIES -- 2.0%....... $ 660,605
-----------
Net Assets -- 100.0%....................... $32,777,577
-----------
</TABLE>
See portfolio footnotes and notes to financial statements
<TABLE>
<C> <S>
PORTFOLIO FOOTNOTES:
* Non-income producing security.
** Non-income producing security -- in default.
# Payment-in-kind security.
## SEC Rule 144A restriction.
+ Restricted security.
</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 FRF = French Francs
BEF = Belgian Francs 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
</TABLE>
27
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES -- June 30, 1996
(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................... $ 417,462 $ 247,025 $ 170,356 $ 85,627 $ 148,190 $ 239,255 $ 32,159
Unrealized appreciation
(depreciation)................... 120,130 4,650 (3,752) 6,257 -- 35,867 (36)
----------- ----------- --------- ----------- --------- --------- -----------
Total value..................... $ 537,592 $ 251,675 $ 166,604 $ 91,884 $ 148,190 $ 275,122 $ 32,123
Cash................................ 66 85 84 3 131 17 3
Foreign currency, at value
(identified cost, $5).............. -- -- -- -- -- -- 5
Receivable for forward foreign
currency exchange contracts
purchased.......................... -- -- -- -- -- -- 161
Receivable for closed forward
foreign currency exchange
contracts.......................... -- -- -- -- -- -- 39
Receivable for investments sold..... 7,841 -- 4,076 1,202 -- 4,918 1,530
Receivable for units sold........... 297 44 185 88 60 10 1
Interest and dividends receivable... 416 3,986 3,279 125 -- 2,047 890
Receivable from sponsor............. -- -- 66 -- -- 277 --
Other assets........................ 11 3 2 4 2 17 --
----------- ----------- --------- ----------- --------- --------- -----------
Total assets.................... $ 546,223 $ 255,793 $ 174,296 $ 93,306 $ 148,383 $ 282,408 $ 34,752
----------- ----------- --------- ----------- --------- --------- -----------
LIABILITIES:
Payable for investments purchased... $ 8,279 $ -- $ 4,662 $ 1,223 $ -- $ 1,949 $ 1,567
Payable for units surrendered....... 110 221 51 74 639 134 59
Payable for daily variation margin
on open futures contracts.......... -- 119 -- -- -- -- --
Written options outstanding, at
value (premiums received, $14)..... -- -- -- -- -- -- 6
Payable for forward foreign currency
exchange contracts sold............ 146 -- -- -- -- -- 265
Payable to affiliates --
Investment adviser................ 31 12 11 6 -- 17 2
Sponsor........................... 505 88 -- 42 71 -- 40
Accrued expenses and other
liabilities........................ 118 73 76 48 62 62 35
----------- ----------- --------- ----------- --------- --------- -----------
Total liabilities............... $ 9,189 $ 513 $ 4,800 $ 1,393 $ 772 $ 2,162 $ 1,974
----------- ----------- --------- ----------- --------- --------- -----------
Net assets.................... $ 537,034 $ 255,280 $ 169,496 $ 91,913 $ 147,611 $ 280,246 $ 32,778
----------- ----------- --------- ----------- --------- --------- -----------
----------- ----------- --------- ----------- --------- --------- -----------
</TABLE>
See notes to financial statements
27
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES -- June 30, 1996 -- 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................... 9,370 $42.2444 $ 395,892
Compass 3................... 4,182 28.0901 117,510
Compass 3 - Level 2......... 1,620 11.5458 18,695
Government Securities
Variable Account --
Compass 2................... 8,415 $24.7690 $ 208,470
Compass 3................... 2,002 17.4482 34,927
Compass 3 - Level 2......... 902 10.0898 9,099
High Yield
Variable Account --
Compass 2................... 5,168 $26.9084 $139,067
Compass 3................... 1,134 19.9383 22,610
Compass 3 - Level 2......... 482 10.5375 5,082
Managed Sectors
Variable Account --
Compass 2................... 752 $33.7075 $25,344
Compass 3................... 1,750 33.5216 58,683
Compass 3 - Level 2......... 723 10.7276 7,755
Money Market
Variable Account --
Compass 2................... 5,502 $16.8057 $ 92,437
Compass 3................... 2,596 13.8827 36,020
Compass 3 - Level 2......... 1,738 10.2761 17,857
Total Return
Variable Account --
Compass 2................... 4,585 $23.1323 $106,053
Compass 3................... 6,281 22.8439 143,450
Compass 3 - Level 2......... 2,565 10.9060 27,971
World Governments
Variable Account --
Compass 2................... 642 $17.9285 $ 11,502
Compass 3................... 946 17.7041 16,758
Compass 3 - Level 2......... 420 10.2546 4,312
------------ ----------- -------- -------- -------- -------- -----------
Net assets applicable to owners of deferred
contracts...................................... $ 532,097 $ 252,496 $166,759 $91,782 $146,314 $277,474 $ 32,572
Reserve for variable annuities --
Compass 2 Contracts........................... 4,550 2,577 2,722 131 1,285 2,474 72
Compass 3 Contracts........................... 328 61 15 -- 8 289 19
Compass 3 -- Level 2 Contracts................ 59 146 -- -- 4 9 115
------------ ----------- -------- -------- -------- -------- -----------
Net assets................................ $ 537,034 $ 255,280 $169,496 $91,913 $147,611 $280,246 $ 32,778
------------ ----------- -------- -------- -------- -------- -----------
------------ ----------- -------- -------- -------- -------- -----------
</TABLE>
See notes to financial statements
28
<PAGE>
STATEMENTS OF OPERATIONS -- Six Months Ended June 30, 1996
(000 omitted)
<TABLE>
<CAPTION>
Capital Government High Managed
Appreciation Securities Yield Sectors
Variable Variable Variable Variable
Account Account Account Account
--------- -------- -------- --------
<S> <C> <C> <C> <C>
NET INVESTMENT INCOME (EXPENSE):
Income --
Interest............................................. $ 151 $ 9,361 $ 9,328 $ 71
Dividends............................................ 1,858 -- -- 395
Foreign taxes withheld............................... (29) -- -- --
--------- -------- -------- --------
Total investment income.......................... $ 1,980 $ 9,361 $ 9,328 $ 466
--------- -------- -------- --------
Expenses --
Mortality and expense risk charges................... $ 3,364 $ 1,608 $ 1,195 $ 548
Management fees...................................... 1,900 695 707 330
Custodian fees....................................... 116 58 46 20
Distribution expense charges......................... 87 26 23 43
Auditing fees........................................ 14 22 24 16
Legal fees........................................... 9 1 5 2
Boards of Managers fees and expenses................. 5 5 5 5
Printing............................................. 17 10 9 4
Miscellaneous........................................ 4 3 9 2
--------- -------- -------- --------
Total expenses................................... $ 5,516 $ 2,428 $ 2,023 $ 970
Fees paid indirectly............................. -- -- -- --
--------- -------- -------- --------
Net expenses................................... 5,516 2,428 2,023 970
--------- -------- -------- --------
Net investment income (expense)................ $ (3,536) $ 6,933 $ 7,305 $ (504)
--------- -------- -------- --------
--------- -------- -------- --------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Realized gains (losses)(identified cost basis) --
Investment transactions.......................... $ 48,824 $ 245 $ 1,449 $ 7,803
Written option transactions...................... -- -- -- --
Foreign currency transactions.................... 56 -- -- (4)
Futures contract................................. -- (46) -- --
--------- -------- -------- --------
Net realized gains (losses) on investments..... $ 48,880 $ 199 $ 1,449 $ 7,799
--------- -------- -------- --------
Change in unrealized appreciation
(depreciation) --
Investments........................................ $ 15,564 $(14,811) $(2,824) $(1,283)
Written options.................................... -- -- -- --
Translation of assets and liabilities in foreign
currencies........................................ (89) -- -- 2
Futures contracts.................................. -- (279) -- --
--------- -------- -------- --------
Net unrealized gains (losses) on investments..... $ 15,475 $(15,090) $(2,824) $(1,281)
--------- -------- -------- --------
Net realized and unrealized gains (losses) on
investments................................... $ 64,355 $(14,891) $(1,375) $ 6,518
--------- -------- -------- --------
Increase (decrease) in net assets from
operations.................................. $ 60,819 $(7,958) $ 5,930 $ 6,014
--------- -------- -------- --------
--------- -------- -------- --------
<CAPTION>
Money Total World
Market Return Governments
Variable Variable Variable
Account Account Account
-------- -------- --------
<S> <C> <C> <C>
NET INVESTMENT INCOME (EXPENSE):
Income --
Interest............................................. $ 4,013 $ 4,143 $ 1,186
Dividends............................................ -- 2,422 --
Foreign taxes withheld............................... -- (37) --
-------- -------- --------
Total investment income.......................... $ 4,013 $ 6,528 $ 1,186
-------- -------- --------
Expenses --
Mortality and expense risk charges................... $ 959 $ 1,671 $ 212
Management fees...................................... 374 1,016 129
Custodian fees....................................... 37 61 16
Distribution expense charges......................... 30 105 13
Auditing fees........................................ 17 17 17
Legal fees........................................... 1 1 1
Boards of Managers fees and expenses................. 5 5 4
Printing............................................. 7 9 2
Miscellaneous........................................ 2 4 1
-------- -------- --------
Total expenses................................... $ 1,432 $ 2,889 $ 395
Fees paid indirectly............................. (1) -- --
-------- -------- --------
Net expenses................................... 1,431 2,889 395
-------- -------- --------
Net investment income (expense)................ $ 2,582 $ 3,639 $ 791
-------- -------- --------
-------- -------- --------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Realized gains (losses)(identified cost basis) --
Investment transactions.......................... $ -- $ 13,749 $ (521)
Written option transactions...................... -- -- 176
Foreign currency transactions.................... -- (1) (237)
Futures contract................................. -- -- --
-------- -------- --------
Net realized gains (losses) on investments..... $ -- $ 13,748 $ (582)
-------- -------- --------
Change in unrealized appreciation
(depreciation) --
Investments........................................ $ -- $ (7,080) $ (779)
Written options.................................... -- -- (23)
Translation of assets and liabilities in foreign
currencies........................................ -- -- 193
Futures contracts.................................. -- -- --
-------- -------- --------
Net unrealized gains (losses) on investments..... $ -- $ (7,080) $ (609)
-------- -------- --------
Net realized and unrealized gains (losses) on
investments................................... $ -- $ 6,668 $(1,191)
-------- -------- --------
Increase (decrease) in net assets from
operations.................................. $ 2,582 $ 10,307 $ (400)
-------- -------- --------
-------- -------- --------
</TABLE>
See notes to financial statements
29
<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,
1996 1995 1996 1995 1996 1995
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM:
OPERATIONS:
Net investment income
(expense)................ $ (3,536) $ (4,739) $ 6,933 $ 15,090 $ 7,305 $ 15,430
Net realized gains
(losses) on investments
and foreign currency
transactions............. 48,880 70,307 199 (1,546) 1,449 (8,850)
Net unrealized gains
(losses) on investments
and foreign currency
translation.............. 15,475 70,403 (15,090) 27,975 (2,824) 21,177
------------ ------------ ------------ ------------ ------------ ------------
Increase (decrease) in
net assets from
operations............. $ 60,819 $ 135,971 $ (7,958) $ 41,519 $ 5,930 $ 27,757
------------ ------------ ------------ ------------ ------------ ------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments
received................. $ 11,307 $ 19,308 $ 3,494 $ 6,994 $ 2,538 $ 5,092
Net transfers between
variable and fixed
accumulation accounts.... (3,278) 5,813 22,598 (42,552) (27,544) 4,042
Withdrawals, surrenders,
annuitizations and
contract charges......... (30,803) (69,281) (19,974) (45,443) (12,842) (26,006)
------------ ------------ ------------ ------------ ------------ ------------
Net accumulation
activity............... $ (22,774) $ (44,160) $ 6,118 $ (81,001) $ (37,848) $ (16,872)
------------ ------------ ------------ ------------ ------------ ------------
Annuitization activity:
Annuitizations............ $ 247 $ 375 $ 153 $ 538 $ 100 $ 584
Annuity payments and
contract charges......... (370) (622) (210) (466) (222) (406)
Net transfers among
accounts for annuity
reserves................. 18 12 (22) 6 -- --
Adjustments to annuity
reserves................. (119) (139) (34) 87 11 49
------------ ------------ ------------ ------------ ------------ ------------
Net annuitization
activity............... $ (224) $ (374) $ (113) $ 165 $ (111) $ 227
------------ ------------ ------------ ------------ ------------ ------------
Increase (decrease) in net
assets from participant
transactions............. $ (22,998) $ (44,534) $ 6,005 $ (80,836) $ (37,959) $ (16,645)
------------ ------------ ------------ ------------ ------------ ------------
Total increase
(decrease) in net
assets................. $ 37,821 $ 91,437 $ (1,953) $ (39,317) $ (32,029) $ 11,112
NET ASSETS:
At beginning of period...... 499,213 407,776 257,233 296,550 201,525 190,413
------------ ------------ ------------ ------------ ------------ ------------
At end of period............ $ 537,034 $ 499,213 $ 255,280 $ 257,233 $ 169,496 $ 201,525
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
See notes to financial statements
30
<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,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income (expense).................... $ (504) $ (809) $ 2,582 $ 7,005
Net realized gains on investments and foreign
currency transactions............................. 7,799 15,458 -- --
Net unrealized gains (losses) on investments and
foreign currency translation...................... (1,281) 4,877 -- --
------------ ------------ ------------ ------------
Increase in net assets from operations........... $ 6,014 $19,526 $ 2,582 $ 7,005
------------ ------------ ------------ ------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received......................... $ 4,688 $ 6,862 $ 3,622 $ 7,259
Net transfers between variable and fixed
accumulation accounts............................. 3,890 3,581 (7,822) 22,474
Withdrawals, surrenders, annuitizations and
contract charges.................................. (5,697) (9,312) (18,710) (39,085)
------------ ------------ ------------ ------------
Net accumulation activity........................ $ 2,881 $ 1,131 $(22,910) $ (9,352)
------------ ------------ ------------ ------------
Annuitization activity:
Annuitizations..................................... $ 72 $-- $ 90 $ 91
Annuity payments and contract charges.............. (3) (9) (125) (230)
Net transfers among accounts for annuity
reserves.......................................... 17 -- -- (18)
Adjustments to annuity reserves.................... (14) (7) (2) (41)
------------ ------------ ------------ ------------
Net annuitization activity....................... $ 72 $ (16) $ (37) $ (198)
------------ ------------ ------------ ------------
Increase (decrease) in net assets from participant
transactions...................................... $ 2,953 $ 1,115 $(22,947) $ (9,550)
------------ ------------ ------------ ------------
Total increase (decrease) in net assets.......... $ 8,967 $20,641 $(20,365) $ (2,545)
NET ASSETS:
At beginning of period............................... 82,946 62,305 167,976 170,521
------------ ------------ ------------ ------------
At end of period..................................... $91,913 $82,946 $147,611 $167,976
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
See notes to financial statements
31
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS -- continued
(000 omitted)
<TABLE>
<CAPTION>
Total Return World Governments
Variable Account Variable Account
--------------------------- ---------------------------
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, December 31, June 30, December 31,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income.............................. $ 3,639 $ 7,294 $ 791 $ 1,965
Net realized gains (losses) on investments and
foreign currency transactions..................... 13,748 26,520 (582) 1,672
Net unrealized gains (losses) on investments and
foreign currency translation...................... (7,080) 24,712 (609) 1,327
------------ ------------ ------------ ------------
Increase (decrease) in net assets from
operations...................................... $ 10,307 $ 58,526 $ (400) $ 4,964
------------ ------------ ------------ ------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received......................... $ 9,020 $ 15,564 $ 1,060 $ 2,063
Net transfers between variable and fixed
accumulation accounts............................. 13,063 540 (2,671) (1,733)
Withdrawals, surrenders, annuitizations and
contract charges.................................. (17,865) (32,616) (1,884) (5,080)
------------ ------------ ------------ ------------
Net accumulation activity........................ $ 4,218 $(16,512) $(3,495) $(4,750)
------------ ------------ ------------ ------------
Annuitization activity:
Annuitizations..................................... $ 82 $ 270 $-- $ 190
Annuity payments and contract charges.............. (214) (376) (11) (62)
Net transfers among accounts for annuity
reserves.......................................... (11) -- (2) --
Adjustments to annuity reserves.................... 24 183 (30) (5)
------------ ------------ ------------ ------------
Net annuitization activity....................... $ (119) $ 77 $ (43) $ 123
------------ ------------ ------------ ------------
Increase (decrease) in net assets from participant
transactions...................................... $ 4,099 $(16,435) $(3,538) $(4,627)
------------ ------------ ------------ ------------
Total increase (decrease) in net assets.......... $ 14,406 $ 42,091 $(3,938) $ 337
NET ASSETS:
At beginning of period............................... 265,840 223,749 36,716 36,379
------------ ------------ ------------ ------------
At end of period..................................... $280,246 $265,840 $32,778 $36,716
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
See notes to financial statements
32
<PAGE>
PER UNIT AND OTHER DATA
<TABLE>
<CAPTION>
Capital Appreciation Variable Account
----------------------------------------------------------
Compass 2
----------------------------------------------------------
Six
Months
Ended Year Ended December 31,
June 30, ------------------------------------------------
1996 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of period.................. $37.7151 $28.0107 $32.9053 $29.2712 $26.6401 $19.8801
-------- -------- -------- -------- -------- --------
Investment income........... 0.1527 $0.3624 $0.4277 $0.3914 $0.2670 $0.4256
Expenses.................... 0.4206 0.6989 0.6325 0.6436 0.5467 0.4756
-------- -------- -------- -------- -------- --------
Net investment expense.... $(0.2679) $(0.3365) $(0.2048) $(0.2522) $(0.2797) $(0.0500)
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... 4.7972 10.0409 (4.6898) 3.8863 2.9108 6.8100
-------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $4.5293 $9.7044 $(4.8946) $3.6341 $2.6311 $6.7600
-------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
period..................... $42.2444 $37.7151 $28.0107 $32.9053 $29.2712 $26.6401
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+##................. 0.78 %** 0.80 % 0.79 % 0.78 % 0.80 % 0.79 %
Net investment income
(expense).................. (1.34)%** (1.02)% (0.69)% (0.83)% (1.08)% (0.23)%
PORTFOLIO TURNOVER............ 40 % 96 % 95 % 56 % 34 % 62 %
AVERAGE COMMISSION RATE###.... $0.0301 -- -- -- -- --
NUMBER OF UNITS OUTSTANDING AT
END OF PERIOD (000
OMITTED)..................... 9,370 10,014 11,310 13,833 14,914 16,570
</TABLE>
<TABLE>
<CAPTION>
Capital Appreciation Variable Account
------------------------------------------------------------------------------
Compass 3 - Level
Compass 3 2
---------------------------------------------------------- ------------------
Six Six Period
Months Months Ended
Ended Year Ended December 31, Ended December
June 30, ------------------------------------------------ June 30, 31,
1996 1995 1994 1993 1992 1991 1996 1995#
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of period.................. $25.0907 $18.6531 $21.9341 $19.5311 $17.7928 $13.2912 $10.3053 $10.0000
-------- -------- -------- -------- -------- -------- -------- --------
Investment income $0.1004 $0.2402 $0.2870 $0.2617 $0.1919 $0.2748 $0.0436 $0.0196
Expenses.................... 0.2918 0.4847 0.4421 0.4498 0.4131 0.3323 0.1158 0.0517
-------- -------- -------- -------- -------- -------- -------- --------
Net investment expense.... $(0.1914) $(0.2445) $(0.1551) $(0.1881) $(0.2212) $(0.0575) $(0.0722) $(0.0321)
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... 3.1908 6.6821 (3.1259) 2.5911 1.9595 4.5591 1.3127 0.3374
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $2.9994 $6.4376 $(3.2810) $2.4030 $1.7383 $4.5016 $1.2405 $0.3053
-------- -------- -------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
period..................... $28.0901 $25.0907 $18.6531 $21.9341 $19.5311 $17.7928 $11.5458 $10.3053
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+##................. 0.78 %** 0.80 % 0.79 % 0.78 % 0.80 % 0.79 % 0.78 %** 0.80 %
Net investment income
(expense).................. (1.34)%** (1.02)% (0.69)% (0.83)% (1.08)% (0.23)% (1.34)%** (1.02)%
PORTFOLIO TURNOVER............ 40 % 96 % 95 % 56 % 34 % 62 % 40 % 96 %
AVERAGE COMMISSION RATE###.... $0.0301 -- -- -- -- -- $0.0301 --
NUMBER OF UNITS OUTSTANDING AT
END OF PERIOD (000
OMITTED)..................... 4,182 4,272 4,686 4,899 4,401 3,742 1,620 955
<FN>
*Per unit data is based on the average number of units outstanding during
each period.
**Annualized.
+Excluding mortality and expense risk charges and distribution expense
charges.
#For the period from May 1, 1995 (commencement of Level 2 Units) to December
31, 1995.
##For years ending on or after December 31, 1995, expenses are calculated
without reduction for fees paid indirectly.
###Average commission rate is calculated for funds with fiscal years beginning
on or after September 1, 1995.
</TABLE>
See notes to financial statements
33
<PAGE>
PER UNIT AND OTHER DATA -- continued
<TABLE>
<CAPTION>
Government Securities Variable Account
----------------------------------------------------------
Compass 2
----------------------------------------------------------
Six
Months
Ended Year Ended December 31,
June 30, ------------------------------------------------
1996 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of period.................. $25.5791 $22.0031 $22.7120 $21.1172 $19.9842 $17.4276
-------- -------- -------- -------- -------- --------
Investment income........... $0.9337 $1.7836 $1.5648 $1.5732 $1.4340 $1.5470
Expenses.................... 0.2405 0.4564 0.4229 0.4238 0.3672 0.3476
-------- -------- -------- -------- -------- --------
Net investment income..... $0.6932 $1.3272 $1.1419 $1.1494 $1.0668 $1.1994
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... (1.5033) 2.2488 (1.8508) 0.4454 0.0662 1.3572
-------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $(0.8101) $3.5760 $(0.7089) $1.5948 $1.1330 $2.5566
-------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
period..................... $24.7690 $25.5791 $22.0031 $22.7120 $21.1172 $19.9842
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+##................. 0.63 %** 0.63 % 0.61 % 0.61 % 0.62 % 0.60 %
Net investment income....... 5.49 %** 5.51 % 5.09 % 5.11 % 5.51 % 6.50 %
PORTFOLIO TURNOVER............ 32 % 80 % 41 % 81 % 175 % 149 %
NUMBER OF UNITS OUTSTANDING AT
END OF PERIOD (000
OMITTED)..................... 8,415 8,361 11,308 12,679 15,059 17,986
</TABLE>
<TABLE>
<CAPTION>
Government Securities Variable Account
------------------------------------------------------------------------------
Compass 3 - Level
Compass 3 2
---------------------------------------------------------- ------------------
Six Six Period
Months Months Ended
Ended Year Ended December 31, Ended December
June 30, ------------------------------------------------ June 30, 31,
1996 1995 1994 1993 1992 1991 1996 1995#
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of period.................. $18.0278 $15.5227 $16.0387 $14.9267 $14.1396 $12.3433 $10.4172 $10.0000
-------- -------- -------- -------- -------- -------- -------- --------
Investment income........... $0.6533 $1.2529 $1.1028 $1.1064 $1.0851 $1.0935 $0.3856 $0.1868
Expenses.................... 0.1778 0.3385 0.3146 0.3154 0.2950 0.2604 0.0961 0.0478
-------- -------- -------- -------- -------- -------- -------- --------
Net investment income..... $0.4755 $0.9144 $0.7882 $0.7910 $0.7901 $0.8331 $0.2895 $0.1390
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... (1.0551) 1.5907 (1.3042) 0.3210 (0.0030) 0.9632 (0.6169) 0.2782
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $(0.5796) $2.5051 $(0.5160) $1.1120 $0.7871 $1.7963 $(0.3274) $0.4172
-------- -------- -------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
period..................... $17.4482 $18.0278 $15.5227 $16.0387 $14.9267 $14.1396 $10.0898 $10.4172
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+##................. 0.63 %** 0.63 % 0.61 % 0.61 % 0.62 % 0.60 % 0.63 %** 0.63 %
Net investment income....... 5.49 %** 5.51 % 5.09 % 5.11 % 5.51 % 6.50 % 5.49 %** 5.51 %
PORTFOLIO TURNOVER............ 32 % 80 % 41 % 81 % 175 % 149 % 32 % 80 %
NUMBER OF UNITS OUTSTANDING AT
END OF PERIOD (000
OMITTED)..................... 2,002 1,888 2,922 2,697 2,722 2,327 902 608
<FN>
*Per unit data is based on the average number of units outstanding during each
period.
**Annualized.
+Excluding mortality and expense risk charges and distribution expense
charges.
#For the period from May 1, 1995 (commencement of Level 2 Units) to December
31, 1995.
##For years ending on or after December 31, 1995, expenses are calculated
without reduction for fees paid indirectly.
</TABLE>
See notes to financial statements
34
<PAGE>
PER UNIT AND OTHER DATA -- continued
<TABLE>
<CAPTION>
High Yield Variable Account
----------------------------------------------------------
Compass 2
----------------------------------------------------------
Six
Months
Ended Year Ended December 31,
June 30, ------------------------------------------------
1996 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of period.................. $26.1493 $22.6776 $23.3591 $19.7156 $17.3208 $11.7862
-------- -------- -------- -------- -------- --------
Investment income........... $1.3403 $2.5137 $2.2324 $2.0867 $2.0657 $1.9834
Expenses.................... 0.2875 0.5356 0.5062 0.4797 0.4061 0.3287
-------- -------- -------- -------- -------- --------
Net investment income..... $1.0528 $1.9781 $1.7262 $1.6070 $1.6596 $1.6547
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... (0.2937) 1.4936 (2.4077) 2.0365 0.7352 3.8799
-------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $0.7591 $3.4717 $(0.6815) $3.6435 $2.3948 $5.5346
-------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
period..................... $26.9084 $26.1493 $22.6776 $23.3591 $19.7156 $17.3208
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+##................. 0.85 %** 0.88 % 0.91 % 0.86 % 0.93 % 0.87 %
Net investment income....... 7.74 %** 7.91 % 7.41 % 6.97 % 9.03 % 10.85 %
PORTFOLIO TURNOVER............ 49 % 88 % 77 % 67 % 61 % 38 %
NUMBER OF UNITS OUTSTANDING AT
END OF PERIOD (000
OMITTED)..................... 5,168 5,649 6,433 7,564 8,218 9,376
</TABLE>
<TABLE>
<CAPTION>
High Yield Variable Account
------------------------------------------------------------------------------
Compass 3 - Level
Compass 3 2
---------------------------------------------------------- ------------------
Six Six Period
Months Months Ended
Ended Year Ended December 31, Ended December
June 30, ------------------------------------------------ June 30, 31,
1996 1995 1994 1993 1992 1991 1996 1995#
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of period.................. $19.3854 $16.8283 $17.3543 $14.6589 $12.8923 $8.7799 $10.2377 $10.0000
-------- -------- -------- -------- -------- -------- -------- --------
Investment income........... $0.9555 $1.8912 $1.5336 $1.5179 $1.5969 $1.5178 $0.5056 $0.3803
Expenses.................... 0.2187 0.4253 0.3711 0.3671 0.3340 0.2582 0.1090 0.0765
-------- -------- -------- -------- -------- -------- -------- --------
Net investment income..... $0.7368 $1.4659 $1.1625 $1.1508 $1.2629 $1.2596 $0.3966 $0.3038
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... (0.1839) 1.0912 (1.6885) 1.5446 0.5037 2.8528 (0.0968) (0.0661)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $0.5529 $2.5571 $(0.5260) $2.6954 $1.7666 $4.1124 $0.2998 $0.2377
-------- -------- -------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
period..................... $19.9383 $19.3854 $16.8283 $17.3543 $14.6589 $12.8923 $10.5375 $10.2377
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+##................. 0.85 %** 0.88 % 0.91 % 0.86 % 0.93 % 0.87 % 0.85 %** 0.88 %
Net investment income....... 7.74 %** 7.91 % 7.41 % 6.97 % 9.03 % 10.85 % 7.74 %** 7.91 %
PORTFOLIO TURNOVER............ 49 % 88 % 77 % 67 % 61 % 38 % 49 % 88 %
NUMBER OF UNITS OUTSTANDING AT
END OF PERIOD (000
OMITTED)..................... 1,134 1,913 2,506 2,577 2,345 1,823 482 1,368
<FN>
*Per unit data is based on the average number of units outstanding during each
period.
**Annualized.
+Excluding mortality and expense risk charges and distribution expense
charges.
#For the period from May 1, 1995 (commencement of Level 2 Units) to December
31, 1995.
##For years ending on or after December 31, 1995, expenses are calculated
without reduction for fees paid indirectly.
</TABLE>
See notes to financial statements
35
<PAGE>
PER UNIT AND OTHER DATA -- continued
<TABLE>
<CAPTION>
Managed Sectors Variable Account
----------------------------------------------------------
Compass 2
----------------------------------------------------------
Six
Months
Ended Year Ended December 31,
June 30, ------------------------------------------------
1996 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of period.................. $31.3870 $23.9044 $24.7295 $23.8070 $22.6652 $13.9677
-------- -------- -------- -------- -------- --------
Investment income........... $0.1740 $0.3277 $0.3066 $0.1822 $0.1121 $0.2357
Expenses.................... 0.3477 0.6066 0.5155 0.4994 0.4782 0.3848
-------- -------- -------- -------- -------- --------
Net investment expense.... $(0.1737) $(0.2789) $(0.2089) $(0.3172) $(0.3661) $(0.1491)
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... 2.4942 7.7615 (0.6162) 1.2397 1.5079 8.8466
-------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $2.3205 $7.4826 $(0.8251) $0.9225 $1.1418 $8.6975
-------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
period..................... $33.7075 $31.3870 $23.9044 $24.7295 $23.8070 $22.6652
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+##................. 0.86 %** 0.87 % 0.90 % 0.91 % 0.92 % 0.98 %
Net investment income
(expense).................. (1.14)%** (1.07)% (0.97)% (1.49)% (1.75)% (0.97)%
PORTFOLIO TURNOVER............ 64 % 115 % 111 % 122 % 34 % 52 %
AVERAGE COMMISSION RATE###.... $0.0378 -- -- -- -- --
NUMBER OF UNITS OUTSTANDING AT
END OF PERIOD (000
OMITTED)..................... 752 788 800 878 1,041 899
</TABLE>
<TABLE>
<CAPTION>
Managed Sectors Variable Account
------------------------------------------------------------------------------
Compass 3 - Level
Compass 3 2
---------------------------------------------------------- ------------------
Six Six Period
Months Months Ended
Ended Year Ended December 31, Ended December
June 30, ------------------------------------------------ June 30, 31,
1996 1995 1994 1993 1992 1991 1996 1995#
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of period.................. $31.2371 $23.8258 $24.6849 $23.8007 $22.6927 $14.0049 $9.9892 $10.0000
-------- -------- -------- -------- -------- -------- -------- --------
Investment income........... $0.1735 $0.3259 $0.3031 $0.1817 $0.1156 $0.2307 $0.0589 $0.0231
Expenses.................... 0.3697 0.6452 0.5452 0.5313 0.5325 0.4141 0.1137 0.0539
-------- -------- -------- -------- -------- -------- -------- --------
Net investment income
(expense)................ $(0.1962) $(0.3193) $(0.2421) $(0.3496) $(0.4169) $(0.1834) $(0.0548) $(0.0308)
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... 2.4807 7.7306 (0.6170) 1.2338 1.5249 8.8712 0.7932 0.0200
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $2.2845 $7.4113 $(0.8591) $0.8842 $1.1080 $8.6878 $0.7384 $(0.0108)
-------- -------- -------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
period..................... $33.5216 $31.2371 $23.8258 $24.6849 $23.8007 $22.6927 $10.7276 $9.9892
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+##................. 0.86 %** 0.87 % 0.90 % 0.91 % 0.92 % 0.98 % 0.86 %** 0.87 %
Net investment income
(expense).................. (1.14)%** (1.07)% (0.97)% (1.49)% (1.75)% (0.97)% (1.14)%** (1.07)%
PORTFOLIO TURNOVER............ 64 % 115 % 111 % 122 % 34 % 52 % 64 % 115 %
AVERAGE COMMISSION RATE###.... $0.0378 -- -- -- -- -- $0.0378 --
NUMBER OF UNITS OUTSTANDING AT
END OF PERIOD (000
OMITTED)..................... 1,750 1,729 1,810 1,819 1,728 1,276 723 418
<FN>
*Per unit data is based on the average number of units outstanding during
each period.
**Annualized.
+Excluding mortality and expense risk charges and distribution expense
charges.
#For the period from May 1, 1995 (commencement of Level 2 Units) to December
31, 1995.
##For years ending on or after December 31, 1995, expenses are calculated
without reduction for fees paid indirectly.
###Average commission rate is calculated for funds with fiscal years beginning
on or after September 1, 1995.
</TABLE>
See notes to financial statements
36
<PAGE>
PER UNIT AND OTHER DATA -- continued
<TABLE>
<CAPTION>
Money Market Variable Account
----------------------------------------------------------
Compass 2
----------------------------------------------------------
Six
Months
Ended Year Ended December 31,
June 30, ------------------------------------------------
1996 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of period.................. $16.5213 $15.8699 $15.5003 $15.2976 $14.9945 $14.3507
-------- -------- -------- -------- -------- --------
Investment income........... $0.4409 $0.9560 $0.6615 $0.4864 $0.5772 $0.9108
Expenses.................... 0.1565 0.3046 0.2919 0.2837 0.2741 0.2670
-------- -------- -------- -------- -------- --------
Net investment income..... $0.2844 $0.6514 $0.3696 $0.2027 $0.3031 $0.6438
-------- -------- -------- -------- -------- --------
Net increase in unit
value...................... $0.2844 $0.6514 $0.3696 $0.2027 $0.3031 $0.6438
-------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
period..................... $16.8057 $16.5213 $15.8699 $15.5003 $15.2976 $14.9945
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+##................. 0.58 %** 0.58 % 0.58 % 0.36 % 0.59 % 0.58 %
Net investment income....... 3.41 %** 4.00 % 2.37 % 1.30 % 2.03 % 4.46 %
NUMBER OF UNITS OUTSTANDING AT
END OF PERIOD (000
OMITTED)..................... 5,502 6,501 6,851 6,418 8,026 12,023
</TABLE>
<TABLE>
<CAPTION>
Money Market Variable Account
------------------------------------------------------------------------------
Compass 3 - Level
Compass 3 2
---------------------------------------------------------- ------------------
Six Six Period
Months Months Ended
Ended Year Ended December 31, Ended December
June 30, ------------------------------------------------ June 30, 31,
1996 1995 1994 1993 1992 1991 1996 1995#
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of period.................. $13.6545 $13.1291 $12.8359 $12.6806 $12.4415 $11.9182 $10.0997 $10.0000
-------- -------- -------- -------- -------- -------- -------- --------
Investment income........... $0.3636 $0.7885 $0.5688 $0.4065 $0.4888 $0.7619 $0.2747 $0.1358
Expenses.................... 0.1354 0.2631 0.2756 0.2512 0.2497 0.2386 0.0983 0.0361
-------- -------- -------- -------- -------- -------- -------- --------
Net investment income..... $0.2282 $0.5254 $0.2932 $0.1553 $0.2391 $0.5233 $0.1764 $0.0997
-------- -------- -------- -------- -------- -------- -------- --------
Net increase in unit
value...................... $0.2282 $0.5254 $0.2932 $0.1553 $0.2391 $0.5233 $0.1764 $0.0997
-------- -------- -------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
period..................... $13.8827 $13.6545 $13.1291 $12.8359 $12.6806 $12.4415 $10.2761 $10.0997
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+##................. 0.58 %** 0.58 % 0.58 % 0.36 % 0.59 % 0.58 % 0.58 %** 0.58 %
Net investment income....... 3.41 %** 4.00 % 2.37 % 1.30 % 2.03 % 4.46 % 3.41 %** 4.00 %
NUMBER OF UNITS OUTSTANDING AT
END OF PERIOD (000
OMITTED)..................... 2,596 3,929 4,599 3,823 3,704 3,228 1,738 561
<FN>
*Per unit data is based on the average number of units outstanding during each
period.
**Annualized.
+Excluding mortality and expense risk charges and distribution expense
charges.
#For the period from May 1, 1995 (commencement of Level 2 Units) to December
31, 1995.
##For years ending on or after December 31, 1995, expenses are calculated
without reduction for fees paid indirectly.
</TABLE>
See notes to financial statements
37
<PAGE>
PER UNIT AND OTHER DATA -- continued
<TABLE>
<CAPTION>
Total Return Variable Account
----------------------------------------------------------
Compass 2
----------------------------------------------------------
Six
Months
Ended Year Ended December 31,
June 30, ------------------------------------------------
1996 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of period.................. $22.2577 $17.4729 $18.0043 $15.9891 $14.6451 $12.0634
-------- -------- -------- -------- -------- --------
Investment income........... $0.5557 $1.0394 $0.8583 $0.8513 $0.9191 $0.9092
Expenses.................... 0.2355 0.4118 0.3704 0.3616 0.3303 0.2828
-------- -------- -------- -------- -------- --------
Net investment income..... $0.3202 $0.6276 $0.4879 $0.4897 $0.5888 $0.6264
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... 0.5544 4.1572 (1.0193) 1.5255 0.7552 1.9553
-------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $0.8746 $4.7848 $(0.5314) $2.0152 $1.3440 $2.5817
-------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
period..................... $23.1323 $22.2577 $17.4729 $18.0043 $15.9891 $14.6451
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+##................. 0.82 %** 0.83 % 0.82 % 0.76 % 0.86 % 0.84 %
Net investment income....... 2.69 %** 2.99 % 2.60 % 2.43 % 3.63 % 4.52 %
PORTFOLIO TURNOVER............ 71 % 105 % 63 % 89 % 94 % 80 %
AVERAGE COMMISSION RATE###.... $0.0587 -- -- -- -- --
NUMBER OF UNITS OUTSTANDING AT
END OF PERIOD (000
OMITTED)..................... 4,585 4,801 5,410 5,889 5,732 5,215
</TABLE>
<TABLE>
<CAPTION>
Total Return Variable Account
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Compass 3 - Level
Compass 3 2
---------------------------------------------------------- ------------------
<CAPTION>
Six Six Period
Months Months Ended
Ended Year Ended December 31, Ended December
June 30, ------------------------------------------------ June 30, 31,
1996 1995 1994 1993 1992 1991 1996 1995#
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of period.................. $21.9966 $17.2937 $17.8462 $15.8723 $14.5600 $12.0108 $10.4938 $10.0000
-------- -------- -------- -------- -------- -------- -------- --------
Investment income........... $0.5367 $1.0122 $0.8371 $0.8304 $0.9284 $0.8989 $0.2639 $0.1247
Expenses.................... 0.2465 0.4358 0.3904 0.3829 0.3607 0.3002 0.1128 0.0525
-------- -------- -------- -------- -------- -------- -------- --------
Net investment income..... $0.2902 $0.5764 $0.4467 $0.4475 $0.5677 $0.5987 $0.1511 $0.0722
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... 0.5571 4.1265 (0.9992) 1.5264 0.7446 1.9505 0.2611 0.4216
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $0.8473 $4.7029 $(0.5525) $1.9739 $1.3123 $2.5492 $0.4122 $0.4938
-------- -------- -------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
period..................... $22.8439 $21.9966 $17.2937 $17.8462 $15.8723 $14.5600 $10.9060 $10.4938
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+##................. 0.82 %** 0.83 % 0.82 % 0.76 % 0.86 % 0.84 % 0.82 %** 0.83 %
Net investment income....... 2.69 %** 2.99 % 2.60 % 2.43 % 3.63 % 4.52 % 2.69 %** 2.99 %
PORTFOLIO TURNOVER............ 71 % 105 % 63 % 89 % 94 % 80 % 71 % 105 %
AVERAGE COMMISSION RATE###.... $0.0587 -- -- -- -- -- $0.0587 --
NUMBER OF UNITS OUTSTANDING AT
END OF PERIOD (000
OMITTED)..................... 6,281 6,322 7,349 7,013 5,721 4,752 2,565 1,637
<FN>
*Per unit data is based on the average number of units outstanding during
each period.
**Annualized.
+Excluding mortality and expense risk charges and distribution expense
charges.
#For the period from May 1, 1995 (commencement of Level 2 Units) to December
31, 1995.
##For years ending on or after December 31, 1995, expenses are calculated
without reduction for fees paid indirectly.
###Average commission rate is calculated for funds with fiscal years beginning
on or after September 1, 1995.
</TABLE>
See notes to financial statements
38
<PAGE>
PER UNIT AND OTHER DATA -- continued
<TABLE>
<CAPTION>
World Governments Variable Account
----------------------------------------------------------
Compass 2
----------------------------------------------------------
Six
Months
Ended Year Ended December 31,
June 30, ------------------------------------------------
1996 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of period.................. $18.1095 $15.8337 $16.9056 $14.4420 $14.5806 $12.9852
-------- -------- -------- -------- -------- --------
Investment income........... $0.6198 $1.3112 $1.0805 $1.1460 $1.2892 $1.1907
Expenses.................... 0.2000 0.3863 0.3565 0.3704 0.3624 0.3190
-------- -------- -------- -------- -------- --------
Net investment income..... $0.4198 $0.9249 $0.7240 $0.7756 $0.9268 $0.8717
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... (0.6008) 1.3509 (1.7959) 1.6880 (1.0654) 0.7237
-------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $(0.1810) $2.2758 $(1.0719) $2.4636 $(0.1386) $1.5954
-------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
period..................... $17.9285 $18.1095 $15.8337 $16.9056 $14.4420 $14.5806
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+##................. 1.00 %** 1.00 % 1.00 % 0.94 % 1.15 % 1.18 %
Net investment income....... 4.61 %** 5.25 % 4.45 % 4.12 % 6.03 % 6.51 %
PORTFOLIO TURNOVER............ 250 % 330 % 256 % 202 % 133 % 229 %
NUMBER OF UNITS OUTSTANDING AT
END OF PERIOD (000
OMITTED)..................... 642 824 983 1,092 949 884
</TABLE>
<TABLE>
<CAPTION>
World Governments Variable Account
------------------------------------------------------------------------------
Compass 3 - Level
Compass 3 2
---------------------------------------------------------- ------------------
Six Six Period
Months Months Ended
Ended Year Ended December 31, Ended December
June 30, ------------------------------------------------ June 30, 31,
1996 1995 1994 1993 1992 1991 1996 1995#
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of period.................. $17.8962 $15.6705 $16.7563 $14.3365 $14.4961 $12.9291 $10.3582 $10.0000
-------- -------- -------- -------- -------- -------- -------- --------
Investment income........... $0.6130 $1.3045 $1.0666 $1.1293 $1.2979 $1.1961 $0.3576 $0.1819
Expenses.................... 0.2108 0.4086 0.3760 0.3890 0.3876 0.3380 0.1154 0.0554
-------- -------- -------- -------- -------- -------- -------- --------
Net investment income..... $0.4022 $0.8959 $0.6906 $0.7403 $0.9103 $0.8581 $0.2422 $0.1265
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... (0.5943) 1.3298 (1.7764) 1.6795 (1.0699) 0.7089 (0.3458) 0.2317
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $(0.1921) $2.2257 $(1.0858) $2.4198 $(0.1596) $1.5670 $(0.1036) $0.3582
-------- -------- -------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
period..................... $17.7041 $17.8962 $15.6705 $16.7563 $14.3365 $14.4961 $10.2546 $10.3582
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+##................. 1.00 %** 1.00 % 1.00 % 0.94 % 1.15 % 1.18 % 1.00 %** 1.00 %
Net investment income....... 4.61 %** 5.25 % 4.45 % 4.12 % 6.03 % 6.51 % 4.61 %** 5.25 %
PORTFOLIO TURNOVER............ 250 % 330 % 256 % 202 % 133 % 229 % 250 % 330 %
NUMBER OF UNITS OUTSTANDING AT
END OF PERIOD (000
OMITTED)..................... 946 1,021 1,321 1,363 1,176 995 420 316
<FN>
*Per unit data is based on the average number of units outstanding during each
period.
**Annualized.
+Excluding mortality and expense risk charges and distribution expense
charges.
#For the period from May 1, 1995 (commencement of Level 2 Units) to December
31, 1995.
##For years ending on or after December 31, 1995, expenses are calculated
without reduction for fees paid indirectly.
</TABLE>
See notes to financial statements
39
<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 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 open-end, diversified
management investment companies and High Yield Variable Account, Managed Sectors
Variable Account and World Governments Variable Account operate as open-end,
non-diversified management investment companies as those terms are defined in
the Investment Company Act of 1940, as amended.
(2) SIGNIFICANT ACCOUNT POLICIES
GENERAL
The preparation of financial statements in conformity with general accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Investments in foreign
securities are vulnerable to the effects of changes in the relative values of
the local currency and the U.S. dollar and to the effects of changes in each
country's legal, political and economic environment.
INVESTMENT VALUATIONS
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.
40
<PAGE>
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. The Variable
Accounts, along with other affiliated entities of Massachusetts Financial
Services Company (MFS), may utilize a joint trading account for the purpose of
entering into one or more repurchase agreements.
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
security or currency purchased. The writer of an option may have no control over
whether the underlying security may be sold (call) or purchased (put) and, as a
result, bears the market risk of an unfavorable change in the price of the
security or exchange rate underlying the written option. In general, written
call options may serve as a partial hedge against decreases in value of the
underlying security or exchange rate to the extent of the premium received.
Written options may also be used as part of an income producing strategy
reflecting the view of the Variable Account's management on the direction of
interest and exchange rates.
FUTURES CONTRACTS
Certain Variable Accounts may enter into futures contracts for the delayed
delivery of securities, currency or contracts based on financial indices at a
fixed price on a future date. In entering such contracts, the Variable Account
is required to deposit either in cash or securities an amount equal to a
41
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
certain percentage of the contract amount. Subsequent payments are made or
received by the Variable Account each day, depending on the daily fluctuations
in the value of the underlying security, and are recorded for financial
statement purposes as unrealized gains or losses by the Account. The Variable
Account's investment in futures contracts is designed to hedge against
anticipated future changes in interest or exchange rates or securities prices.
Should interest or exchange rates or securities prices move unexpectedly, the
Variable Accounts may not achieve the anticipated benefits of the futures
contracts and may realize a loss.
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 into these contracts from
the potential inability of counterparties to meet the terms of their contracts
and from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar. Forward contracts will be entered into for hedging purposes as
well as for non-hedging purposes. For hedging purposes, certain Variable
Accounts may enter into contracts to deliver or receive foreign currency they
will receive from or require for their normal investment activities. They 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 forward
exchange rate of the underlying currency and any gains or losses are recorded
for financial statement purposes as unrealized until the contract settlement
date.
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.
42
<PAGE>
As appropriate, based on its 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.
FEES PAID INDIRECTLY
The Variable Accounts' custodian bank calculates its fees based on the Accounts'
average daily net assets. The fee is reduced according to a fee arrangement
which provides for custody fees to be reduced based on a formula developed to
measure the value of cash deposited with the custodian by the Accounts. This
amount is shown as a reduction of expenses on the Statement of Operations.
(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 average net 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 years at an effective annual rate
of 0.15% of the net assets of the Variable Accounts attributable to such
contracts. Contracts are transferred from Compass 3 to Compass 3--Level 2 in the
month following the seventh contract anniversary. 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 to 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
43
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
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>
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.
44
<PAGE>
(6) PORTFOLIO SECURITIES
For the six months ended June 30, 1996, 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............. $211,002,190 $233,494,541
High Yield Variable Account....................... 88,788,702 112,870,321
Managed Sectors Variable Account.................. 56,237,041 54,982,918
Money Market Variable Account*.................... 703,323,546 697,880,000
Total Return Variable Account..................... 114,152,100 115,402,544
World Governments Variable Account................ 52,038,995 49,710,270
</TABLE>
For the six months ended June 30, 1996, 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>
Government Securities Variable Account.......... $ 77,410,676 $ 86,420,178
Money Market Variable Account*.................. 1,061,178,957 1,087,156,444
Total Return Variable Account................... 59,292,213 66,494,190
World Governments Variable Account.............. 31,390,413 31,083,626
<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 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 and forward foreign
currency exchange contracts. The notional or contractual amounts of these
instruments represent the investment the Variable Accounts have in particular
classes of financial instruments and do 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, 1996, is as follows:
45
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
WRITTEN OPTION TRANSACTIONS
World Governments Variable Account
<TABLE>
<CAPTION>
1996 Calls 1996 Puts
------------------------------ ------------------------------
Principal Amounts Principal Amounts
of Contracts of Contracts
(000 Omitted) Premiums (000 Omitted) Premiums
----------------- ---------- ----------------- ----------
<S> <C> <C> <C> <C>
Outstanding, beginning of period:
Australian Dollars.................... -- $ -- 981 $ 12,572
Deutsche Marks/British Pounds......... 3,415 15,181 -- --
Italian Lire/Deutsche Marks........... 5,191,550 86,037 5,191,550 191,159
Japanese Yen.......................... -- -- 152,500 19,888
Options written --
Australian Dollars.................... 919 4,978 -- --
New Zealand Dollars................... -- -- 2,497 3,713
Canadian Dollars...................... 3,131 3,214 4,526 13,654
Deutsche Marks........................ 20,395 110,967 -- --
Deutsche Marks/British Pounds......... 5,090 15,456 -- --
Italian Lire/Deutsche Marks........... 4,140,601 30,098 -- --
Japanese Yen.......................... 214,215 2,691 432,282 28,163
Spanish Pesetas/Deutsche Marks........ -- -- 345,239 8,535
Options terminated in closing
transactions --
Australian Dollars.................... (919) (4,978) -- --
New Zealand Dollars................... -- -- (2,497) (3,713)
Deutsche Marks........................ (20,395) (110,967) -- --
Deutsche Marks/British Pounds......... (6,798) (23,046) -- --
Italian Lire/Deutsche Marks........... (9,332,151) (116,135) (5,191,550) (191,159)
Japanese Yen.......................... (214,215) (2,691) (398,500) (36,993)
Options expired --
Canadian Dollars...................... (3,131) (3,214) (1,650) (3,693)
Japanese Yen.......................... -- -- (186,282) (11,058)
Spanish Pesetas/Deutsche Marks........ -- -- (181,839) (4,399)
Australian Dollars.................... -- -- (981) (12,572)
Deutsche Marks/British Pounds......... (1,707) (7,591) -- --
----------------- ---------- ----------------- ----------
Outstanding, end of period.............. -- $ -- 166,276 $ 14,097
----------------- ---------- ----------------- ----------
----------------- ---------- ----------------- ----------
Options outstanding at end of period
consist of:
Canadian Dollars...................... -- $ -- 2,876 $ 9,961
Spanish Pesetas/Deutsche Marks........ -- -- 163,400 4,136
----------------- ---------- ----------------- ----------
----------------- ---------- ----------------- ----------
Outstanding, end of period.............. -- $ -- 166,276 $ 14,097
----------------- ---------- ----------------- ----------
----------------- ---------- ----------------- ----------
</TABLE>
At June 30, 1996, the World Governments Variable Account had sufficient cash
and/or securities at least equal to the value of the written options.
46
<PAGE>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
<TABLE>
<CAPTION>
Contracts Net
Contracts to In Exchange at Unrealized
Account Transaction Settlement Date Deliver/Receive for Value Depreciation
- ----------------------------- --------- ------------------ ------------------------ ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Capital Appreciation Variable
Account Sales 8/09/96 GBP 2,800,000 $ 4,228,658 $4,345,255 $ (116,597)
8/02/96 SEK 6,781,700 993,656 1,023,332 (29,676)
------------- ---------- ------------
$ 5,222,314 $5,368,587 $ (146,273)
------------- ---------- ------------
------------- ---------- ------------
World Governments Variable
Account Sales 8/20/96 AUD 1,375,000 $ 1,095,490 $1,079,111 $ 16,379
8/22/96 BEF 28,597,928 912,797 915,906 (3,109)
8/30/96 - 11/01/96 CAD 4,889,623 3,581,879 3,590,345 (8,466)
8/14/96 CHF 4,892,309 3,943,306 3,922,947 20,359
7/05/96 - 4/28/97 DEM 62,152,944 40,853,671 40,993,577 (139,906)
9/09/96 DKK 10,446,479 1,768,791 1,786,776 (17,985)
8/13/96 ESP 412,440,502 3,202,305 3,212,912 (10,607)
8/02/96 FIM 7,733,520 1,601,839 1,671,569 (69,730)
9/09/96 FRF 6,096,723 1,175,000 1,188,343 (13,343)
8/09/96 GBP 3,839,698 5,885,582 5,958,739 (73,157)
8/22/96 - 9/23/96 IEP 1,870,222 2,942,583 2,985,800 (43,217)
7/24/96 - 4/28/97 ITL 15,062,914,254 9,595,439 9,773,988 (178,549)
7/25/96 - 8/29/96 JPY 1,293,345,579 12,176,876 11,865,902 310,974
8/01/96 NLG 1,158,670 679,054 680,482 (1,428)
10/18/96 NZD 1,907,762 1,283,453 1,291,937 (8,484)
8/02/96 SEK 12,735,766 1,877,430 1,921,776 (44,346)
------------- ---------- ------------
$92,575,495 $92,840,110 $ (264,615)
------------- ---------- ------------
------------- ---------- ------------
Purchases 8/30/96 CAD 1,422,157 $ 1,043,000 $1,043,546 $ 546
8/14/96 CHF 4,583,728 3,653,506 3,675,508 22,002
7/05/96 - 4/28/97 DEM 61,984,539 40,772,500 40,899,291 126,791
8/13/96 ESP 218,816,750 1,700,187 1,704,582 4,395
8/02/96 FIM 7,778,041 1,650,502 1,681,192 30,690
9/09/96 FRF 12,889,815 2,491,267 2,512,418 21,151
8/09/96 GBP 2,524,997 3,848,186 3,918,485 70,299
9/23/96 IEP 998,177 1,560,610 1,593,799 33,189
7/24/96 - 4/28/97 ITL 15,565,122,558 9,988,101 10,094,441 106,340
7/25/96 - 8/29/96 JPY 1,160,801,668 10,914,443 10,654,229 (260,214)
10/18/96 NZD 475,000 321,029 321,670 641
8/02/96 SEK 4,907,520 735,314 740,525 5,211
------------- ---------- ------------
$78,678,645 $78,839,686 $ 161,041
------------- ---------- ------------
------------- ---------- ------------
</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 $38,664 at
June 30, 1996.
47
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
At June 30, 1996, 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 26 for an explanation of abbreviations used to indicate amounts shown
in currencies other than the U.S. dollar.
FUTURES CONTRACTS
<TABLE>
<CAPTION>
Unrealized
Account Description Expiration Contracts Position Depreciation
- ------------------------------------------------------------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
U.S.
Government Securities Variable Account Treasury Sept. 96 127 Short $ (179,714)
U.S.
Treasury Sept. 96 25 Short (99,439)
-----------
$ (279,153)
-----------
-----------
</TABLE>
At June 30, 1996, the Account had sufficient cash and/or securities to cover
margin requirements on open futures contracts.
(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, 1996, High Yield
Variable Account owned the following restricted securities (consisting of 0.8%,
of the Account's net assets) which may not be publicly sold without registration
under the Securities Act of 1933. 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.
<TABLE>
<CAPTION>
Date of Share
Account Description Acquistion Amount Cost Value
---------------------------------------- ------------------------- --------------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C>
Atlantic Gulf Communities
High Yield Variable Account Corp. 9/25/95 150 $ -- $ 900
Envirosource, Inc. 5/15/94 1,666 7,288 5,831
Gillett Holdings, Inc. 10/08/92 23,535 224,000 611,910
Merrill Lynch Mortgage
Investors, Inc., 8.227s,
2023 6/22/94 1,000,000 693,125 739,844
------- ----------
$924,413 $1,358,485
------- ----------
------- ----------
</TABLE>
48
<PAGE>
(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, 1996 (000 Omitted)
---------------------------------------------------------------------------------------------------
Transfers Between Withdrawals,
Variable Accounts Surrenders,
Purchase 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........ 102 $ 4,153 (177) $ (7,864) (569) $ (22,959) (644) $ (26,670) $(191) $(26,861)
Compass 3
Contracts........ 280 7,154 664 4,586 (369) (7,844) 575 3,896 (33) 3,863
------- --------- --------- --------- ----- ----------
$11,307 $ (3,278) $ (30,803) $ (22,774) $(224) $(22,998)
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
Government
Securities Variable
Account
Compass 2
Contracts........ 62 $ 1,553 688 $ 16,953 (696) $ (17,359) 54 $ 1,147 $ (53) $ 1,094
Compass 3
Contracts........ 115 1,941 472 5,645 (178) (2,615) 409 4,971 (60) 4,911
------- --------- --------- --------- ----- ----------
$ 3,494 $ 22,598 $ (19,974) $ 6,118 $(113) $ 6,005
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
High Yield Variable
Account
Compass 2
Contracts........ 49 $ 1,320 (160) $ (4,319) (370) $ (9,878) (481) $ (12,877) $(110) $(12,987)
Compass 3
Contracts........ 64 1,218 (1,561) (23,225) (168) (2,964) (1,665) (24,971) (1) (24,972)
------- --------- --------- --------- ----- ----------
$ 2,538 $ (27,544) $ (12,842) $ (37,848) $(111) $(37,959)
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
Managed Sectors
Variable Account
Compass 2
Contracts........ 15 $ 500 1 $ 190 (51) $ (1,703) (35) $ (1,013) $ 72 $ (941)
Compass 3
Contracts........ 136 4,188 347 3,700 (157) (3,994) 326 3,894 -- 3,894
------- --------- --------- --------- ----- ----------
$ 4,688 $ 3,890 $ (5,697) $ 2,881 $ 72 $ 2,953
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
Money Market
Variable Account
Compass 2
Contracts........ 48 $ 807 (298) $ (4,958) (749) $ (12,492) (999) $ (16,643) $ (32) $(16,675)
Compass 3
Contracts........ 206 2,815 151 (2,864) (512) (6,218) (156) ((6,267) (5) (6,272)
------- --------- --------- --------- ----- ----------
$ 3,622 $ (7,822) $ (18,710) $ (22,910) $ (37) $(22,947)
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
Total Return
Variable Account
Compass 2
Contracts........ 57 $ 1,298 63 $ 1,444 (336) $ (7,640) (216) $ (4,898) $(127) $ (5,025)
Compass 3
Contracts........ 360 7,722 1,084 11,619 (557) (10,225) 887 9,116 8 9,124
------- --------- --------- --------- ----- ----------
$ 9,020 $ 13,063 $ (17,865) $ 4,218 $(119) $ 4,099
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
World Governments
Variable Account
Compass 2
Contracts........ 8 $ 142 (137) $ (2,445) (53) $ (949) (182) $ (3,252) $ (4) $ (3,256)
Compass 3
Contracts........ 53 918 38 (226) (62) (935) 29 (243) (39) (282)
------- --------- --------- --------- ----- ----------
$ 1,060 $ (2,671) $ (1,884) $ (3,495) $ (43) $ (3,538)
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
</TABLE>
49
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Year Ended December 31, 1995 (000 Omitted)
---------------------------------------------------------------------------------------------------
Transfers Between Withdrawals,
Variable Accounts Surrenders,
Purchase 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........ 237 $ 7,828 84 $ 3,030 (1,617) $ (53,462) (1,296) $ (42,604) $(459) $(43,063)
Compass 3
Contracts........ 523 11,480 797 2,783 (779) (15,819) 541 (1,556) 85 (1,471)
------- --------- --------- --------- ----- ----------
$19,308 $ 5,813 $ (69,281) $ (44,160) $(374) $(44,534)
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
Government
Securities Variable
Account
Compass 2
Contracts........ 141 $ 3,360 (1,455) $ (34,220) (1,633) $ (38,734) (2,947) $ (69,594) $ 9 $(69,585)
Compass 3
Contracts........ 217 3,634 (223) (8,332) (420) (6,709) (426) (11,407) 156 (11,251)
------- --------- --------- --------- ----- ----------
$ 6,994 $ (42,552) $ (45,443) $ (81,001) $ 165 $(80,836)
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
High Yield Variable
Account
Compass 2
Contracts........ 106 $ 2,618 (3) $ (225) (897) $ (22,116) (794) $ (19,723) $ 226 $(19,497)
Compass 3
Contracts........ 136 2,474 865 4,267 (226) (3,890) 775 2,851 1 2,852
------- --------- --------- --------- ----- ----------
$ 5,092 $ 4,042 $ (26,006) $ (16,872) $ 227 $(16,645)
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
Managed Sectors
Variable Account
Compass 2
Contracts........ 28 $ 795 101 $ 2,867 (141) $ (4,009) (12) $ (347) $ (16) $ (363)
Compass 3
Contracts........ 215 6,067 316 714 (194) (5,303) 337 1,478 -- 1,478
------- --------- --------- --------- ----- ----------
$ 6,862 $ 3,581 $ (9,312) $ 1,131 $ (16) $ 1,115
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
Money Market
Variable Account
Compass 2
Contracts........ 113 $ 1,833 1,275 $ 20,487 (1,738) $ (28,147) (350) $ (5,827) $(165) $ (5,992)
Compass 3
Contracts........ 408 5,426 325 1,987 (842) (10,938) (109) (3,525) (33) (3,558)
------- --------- --------- --------- ----- ----------
$ 7,259 $ 22,474 $ (39,085) $ (9,352) $(198) $ (9,550)
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
Total Return
Variable Account
Compass 2
Contracts........ 127 $ 2,491 153 $ 3,187 (889) $ (17,489) (609) $ (11,811) $ 153 $(11,658)
Compass 3
Contracts........ 698 13,073 760 (2,647) (848) (15,127) 610 (4,701) (76) (4,777)
------- --------- --------- --------- ----- ----------
$15,564 $ 540 $ (32,616) $ (16,512) $ 77 $(16,435)
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
World Governments
Variable Account
Compass 2
Contracts........ 20 $ 341 (41) $ (720) (138) $ (2,396) (159) $ (2,775) $ (8) $ (2,783)
Compass 3
Contracts........ 102 1,722 80 (1,013) (166) (2,684) 16 (1,975) 131 (1,844)
------- --------- --------- --------- ----- ----------
$ 2,063 $ (1,733) $ (5,080) $ (4,750) $ 123 $ (4,627)
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
</TABLE>
50
<PAGE>
(10) DETAILED STATEMENT OF OPERATIONS -- Six Months Ended June 30, 1996 (000
omitted)
<TABLE>
<CAPTION>
Capital Appreciation Variable Account
---------------------------------------------------------------------------------------
Compass 2 Compass 3 Compass 3 - Level 2
------------------------ ------------------------ --------------------------
Accumulation Annuitization Accumulation Annuitization Accumulation Annuitization Total
----------- ------------ ----------- ------------ ------------ ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Interest.............................. $ 113 $ 1 $ 33 $ 1 $ 3 $-- $ 151
Dividends (net of foreign taxes
withheld)............................ 1,359 16 400 1 53 -- 1,829
----------- ------ ----------- --- ------ --- ----------
Total investment income............. $ 1,472 $ 17 $ 433 $ 2 $ 56 $-- $ 1,980
Expenses................................ 4,085 19 1,261 2 149 -- 5,516
----------- ------ ----------- --- ------ --- ----------
Net investment expense................ $ (2,613) $ (2) $ (828) $-- $ (93) $-- $ (3,536)
----------- ------ ----------- --- ------ --- ----------
Realized and unrealized gains (losses)
on investments:
Net realized gains.................... $ 36,318 $ 440 $10,701 $38 $ 1,382 $1 $ 48,880
Net unrealized gains (losses)......... 11,219 129 3,731 12 386 (2) 15,475
----------- ------ ----------- --- ------ --- ----------
Net realized and unrealized gains
(losses) on investments................ $ 47,537 $ 569 $14,432 $50 $ 1,768 $(1) $ 64,355
----------- ------ ----------- --- ------ --- ----------
Increase (decrease) in net assets from
operations............................. $ 44,924 $ 567 $13,604 $50 $ 1,675 $(1) $ 60,819
----------- ------ ----------- --- ------ --- ----------
----------- ------ ----------- --- ------ --- ----------
</TABLE>
<TABLE>
<CAPTION>
Government Securities Variable Account
----------------------------------------------------------------------------------------
Compass 2 Compass 3 Compass 3 - Level 2
-------------------------- -------------------------- -------------------------
Accumulation Annuitization Accumulation Annuitization Accumulation Annuitization Total
------------ ------------- ------------ ------------- ----------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Interest.............................. $ 7,691 $ 98 $ 1,291 $ 5 $ 272 $4 $ 9,361
Dividends (net of foreign taxes
withheld)............................ -- -- -- -- -- -- --
------------ ----- ------------ ----- ----------- --- --------
Total investment income............. $ 7,691 $ 98 $ 1,291 $ 5 $ 272 $4 $ 9,361
Expenses................................ 1,998 8 352 -- 69 1 2,428
------------ ----- ------------ ----- ----------- --- --------
Net investment income................. $ 5,693 $ 90 $ 939 $ 5 $ 203 $3 $ 6,933
------------ ----- ------------ ----- ----------- --- --------
Realized and unrealized gains (losses)
on investments:
Net realized gains.................... $ 165 $ 2 $ 26 $-- $ 6 $-- $ 199
Net unrealized (losses)............... (12,438) (161) (2,082) (7) (397) (5) (15,090)
------------ ----- ------------ ----- ----------- --- --------
Net realized and unrealized losses on
investments............................ $(12,273) $(159) $(2,056) $(7) $ (391) $(5) $(14,891)
------------ ----- ------------ ----- ----------- --- --------
Decrease in net assets from
operations............................. $ (6,580) $ (69) $(1,117) $(2) $ (188) $(2) $ (7,958)
------------ ----- ------------ ----- ----------- --- --------
------------ ----- ------------ ----- ----------- --- --------
</TABLE>
51
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
DETAILED STATEMENT OF OPERATIONS -- continued
<TABLE>
<CAPTION>
High Yield Variable Account
---------------------------------------------------------------------------------------
Compass 2 Compass 3 Compass 3 - Level 2
------------------------ ------------------------- -------------------------
Accumulation Annuitization Accumulation Annuitization Accumulation Annuitization Total
----------- ------------ ------------ ------------ ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Interest.............................. $ 7,094 $ 130 $ 1,485 $ 1 $ 618 $-- $ 9,328
Dividends (net of foreign taxes
withheld)............................ -- -- -- -- -- -- --
----------- --- ------ --- ----- --- ----------
Total investment income............. $ 7,094 $ 130 $ 1,485 $ 1 $ 618 $-- $ 9,328
Expenses................................ 1,539 11 340 -- 133 -- 2,023
----------- --- ------ --- ----- --- ----------
Net investment income................. $ 5,555 $ 119 $ 1,145 $ 1 $ 485 $-- $ 7,305
----------- --- ------ --- ----- --- ----------
Realized and unrealized gains (losses)
on investments:
Net realized gains.................... $ 1,147 $ 21 $ 220 $-- $ 61 $-- $ 1,449
Net unrealized (losses)............... (2,455) (46) (276) -- (47) -- (2,824)
----------- --- ------ --- ----- --- ----------
Net realized and unrealized gains
(losses) on investments................ $ (1,308) $ (25) $ (56) $-- $ 14 $-- $ (1,375)
----------- --- ------ --- ----- --- ----------
Increase in net assets from
operations............................. $ 4,247 $ 94 $ 1,089 $ 1 $ 499 $-- $ 5,930
----------- --- ------ --- ----- --- ----------
----------- --- ------ --- ----- --- ----------
</TABLE>
<TABLE>
<CAPTION>
Managed Sectors Variable Account
-----------------------------------------------------------------------------------
Compass 2 Compass 3 Compass 3 - Level 2
---------------------- ------------------------- ------------------------
Accumulation Annuitization Accumulation Annuitization Accumulation Annuitization Total
---------- ----------- ------------ ------------ ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Interest.............................. $ 20 $-- $ 46 $-- $ 5 $-- $ 71
Dividends (net of foreign taxes
withheld)............................ 110 -- 257 -- 28 -- 395
--
---------- ------ --- ----- --- ---------
Total investment income............. $ 130 $-- $ 303 $-- $ 33 $-- $ 466
Expenses................................ 260 -- 647 -- 63 -- 970
--
---------- ------ --- ----- --- ---------
Net investment expense................ $ (130) $-- $ (344) $-- $ (30) $-- $ (504)
--
---------- ------ --- ----- --- ---------
Realized and unrealized gains on
investments:
Net realized gains.................... $2,201 $ 9 $ 5,088 $-- $ 501 $-- $ 7,799
Net unrealized (losses)............... (433) (3) (733) -- (112) -- (1,281)
--
---------- ------ --- ----- --- ---------
Net realized and unrealized gains on
investments............................ $1,768 $ 6 $ 4,355 $-- $ 389 $-- $ 6,518
--
---------- ------ --- ----- --- ---------
Increase in net assets from
operations............................. $1,638 $ 6 $ 4,011 $-- $ 359 $-- $ 6,014
--
--
---------- ------ --- ----- --- ---------
---------- ------ --- ----- --- ---------
</TABLE>
52
<PAGE>
DETAILED STATEMENT OF OPERATIONS -- continued
<TABLE>
<CAPTION>
Money Market Variable Account
-----------------------------------------------------------------------------------------
Compass 2 Compass 3 Compass 3 - Level 2
-------------------------- --------------------------- --------------------------
Accumulation Annuitization Accumulation Annuitization Accumulation Annuitization Total
------------ ------------- ------------- ------------- ------------ ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Interest.............................. $2,639 $35 $ 1,086 $1 $ 252 $-- $ 4,013
Dividends (net of foreign taxes
withheld)............................ -- -- -- -- -- -- --
------------ --- ------------- --- ------ --- -------
Total investment income............. $2,639 $35 $ 1,086 $1 $ 252 $-- $ 4,013
Expenses................................ 936 4 405 -- 86 -- 1,431
------------ --- ------------- --- ------ --- -------
Net investment income................. $1,703 $31 $ 681 $1 $ 166 $-- $ 2,582
------------ --- ------------- --- ------ --- -------
Realized and unrealized gains (losses)
on investments......................... $ -- $-- $ -- $-- $ -- $-- $ --
------------ --- ------------- --- ------ --- -------
Increase in net assets from
operations............................. $1,703 $31 $ 681 $1 $ 166 $-- $ 2,582
------------ --- ------------- --- ------ --- -------
------------ --- ------------- --- ------ --- -------
</TABLE>
<TABLE>
<CAPTION>
Total Return Variable Account
-------------------------------------------------------------------------------------
Compass 2 Compass 3 Compass 3 - Level 2
------------------------ ------------------------- ------------------------
Accumulation Annuitization Accumulation Annuitization Accumulation Annuitization Total
----------- ------------ ------------ ------------ ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Interest.............................. $ 1,628 $ 33 $ 2,137 $ 5 $ 340 $-- $ 4,143
Dividends (net of foreign taxes
withheld)............................ 935 19 1,230 3 198 -- 2,385
----------- --- ------------ --- ------ --- ---------
Total investment income............. $ 2,563 $ 52 $ 3,367 $ 8 $ 538 $-- $ 6,528
Expenses................................ 1,100 9 1,548 1 231 -- 2,889
----------- --- ------------ --- ------ --- ---------
Net investment income................. $ 1,463 $ 43 $ 1,819 $ 7 $ 307 $-- $ 3,639
----------- --- ------------ --- ------ --- ---------
Realized and unrealized gains (losses)
on investments:
Net realized gains.................... $ 5,432 $111 $ 7,115 $15 $ 1,074 $1 $ 13,748
Net unrealized gains (losses)......... (2,785) (56) (3,678) (9) (552) -- (7,080)
----------- --- ------------ --- ------ --- ---------
Net realized and unrealized gains on
investments............................ $ 2,647 $ 55 $ 3,437 $ 6 $ 522 $1 $ 6,668
----------- --- ------------ --- ------ --- ---------
Increase in net assets from
operations............................. $ 4,110 $ 98 $ 5,256 $13 $ 829 $1 $ 10,307
----------- --- ------------ --- ------ --- ---------
----------- --- ------------ --- ------ --- ---------
</TABLE>
53
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
DETAILED STATEMENT OF OPERATIONS -- continued
<TABLE>
<CAPTION>
World Governments Variable Account
---------------------------------------------------------------------------------------
Compass 2 Compass 3 Compass 3 - Level 2
-------------------------- -------------------------- ------------------------
Accumulation Annuitization Accumulation Annuitization Accumulation Annuitization Total
------------ ------------- ------------ ------------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Interest.............................. $ 440 $ 3 $ 608 $ 6 $ 128 $1 $ 1,186
Dividends (net of foreign taxes
withheld)............................ -- -- -- -- -- -- --
--
----- ----- --- ----- --- --------
Total investment income............. $ 440 $ 3 $ 608 $ 6 $ 128 $1 $ 1,186
Expenses................................ 143 -- 210 1 41 -- 395
--
----- ----- --- ----- --- --------
Net investment income................. $ 297 $ 3 $ 398 $ 5 $ 87 $1 $ 791
--
----- ----- --- ----- --- --------
Realized and unrealized gains (losses)
on investments:
Net realized (losses)................. $ (193) $(1) $ (316) $(1) $ (69) $(2) $ (582)
Net unrealized gains (losses)......... (275) (1) (288) (5) (42) 2 (609)
--
----- ----- --- ----- --- --------
Net realized and unrealized (losses) on
investments............................ $ (468) $(2) $ (604) $(6) $ (111) $-- $ (1,191)
--
----- ----- --- ----- --- --------
Increase (decrease) in net assets from
operations............................. $ (171) $ 1 $ (206) $(1) $ (24) $1 $ (400)
--
--
----- ----- --- ----- --- --------
----- ----- --- ----- --- --------
</TABLE>
54
<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, 1996, the related statements of operations for the six months then
ended, the statements of changes in net assets for the six months ended June 30,
1996 and the year ended December 31, 1995 and the per unit and other data for
the six months ended June 30, 1996 and for each of the years in the five-year
period ended December 31, 1995. 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,
1996 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, 1996, 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 2, 1996
----------------------------------------
This Compass semiannual 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.
55
<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, MA 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
*Affiliated with the Investment Adviser
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 8/96 72M
[LOGO]
PROFESSIONALLY MANAGED COMBINATION
FIXED/VARIABLE ANNUITIES
FOR PERSONAL INVESTMENTS AND
QUALIFIED RETIREMENT PLANS
SEMIANNUAL REPORT - JUNE 30, 1996
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
<PAGE>
CAPITAL APPRECIATION VARIABLE ACCOUNT
500 BOYLSTON STREET - BOSTON - MASSACHUSETTS 02116-3741
617 - 954-5000
August 22, 1996
VIA EDGAR
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, DC 20549
Re: CAPITAL APPRECIATION VARIABLE ACCOUNT (THE "ACCOUNT")
(FILE NO. 811-3561)
-----------------------------------------------------------------
Ladies and Gentlemen:
On behalf of the Account, pursuant to the requirements of Section 30(b) of
the Investment Company Act of 1940 and Rule 30b2-1 thereunder, we hereby file a
copy of the following:
1) Compass Semiannual Report to Shareholders dated June 30, 1996.
Very truly yours,
APRIL ANDERSON
April Anderson
Senior Production Editor
/aa
