<PAGE> 1
DEAR CONTRACT OWNERS:
The pattern of slow but sustainable growth seen in most of the world in 1996
seems likely to continue in 1997. While it appears that U.S. growth in 1997 will
slow modestly relative to 1996, there is evidence that the European economies
and, to a lesser degree, Japan, are continuing to recover from recession. At the
same time, companies in many emerging markets are reporting robust increases in
earnings as these economies benefit from higher-than-average growth and open
market reforms, which should continue to provide more opportunities for
development and trade.
U.S. OUTLOOK
After more than six years of expansion, the U.S. economy appears headed toward
another year of at least moderate growth in 1997, although a few signs point to
the possibility of a modest rise in inflation during the year. On the positive
side, the pattern of moderate growth and subdued inflation experienced over the
past few years now seems fairly well entrenched and appears to have enough
momentum to continue on track for some time. Also, recent gains in such
important sectors as housing, automobiles, industrial production, and exports
indicate a fair amount of underlying strength in the economy. However, some
reason for caution can be seen in the continuing high levels of consumer debt
and the attendant rise in personal bankruptcies, as well as the modestly
disappointing levels of holiday sales. Also, the ongoing tightness in labor
markets, and price rises in such important sectors as energy, could add some
inflationary pressures to the economy. Given these somewhat conflicting
indicators, we expect real (inflation-adjusted) growth to revolve around 2% in
1997, which would represent a modest decline from 1996.
GLOBAL OUTLOOK
Internationally, the environment of moderate growth, benign inflation, and
fairly steady interest rates is also providing support for investment markets
and should help sustain valuation levels in the coming year. Throughout the
world, the key to stock market performance in 1997 will be corporate earnings
growth. While U.S. earnings growth is slowing but still expected to be fairly
healthy, we anticipate that a number of European countries will see an
acceleration in earnings growth and improved valuations in 1997. Despite this
environment, many European stock markets trade at discounts to the United
States. In particular, we see opportunities in some of the multinationals and in
businesses with the ability to generate steady earnings growth. In Japan, a
recovery appears to be taking place, but at a very modest rate, with valuations
still at high levels. In the emerging markets, the long-term economic growth
story remains intact and, although selectivity is even more critical in these
markets, an increasing number of companies are benefiting from this economic
expansion while trading at below-average global valuations.
BOND MARKETS
Conflicting signals over the strength of the economy have created near-term
volatility in U.S. bond markets. Comments by Federal Reserve Chairman Alan
Greenspan late in 1996 have created some uncertainty over the Federal Reserve
Board's next move. However, we expect the Fed to maintain its anti-inflationary
stance should signs of more rapid economic growth and, particularly, higher
inflation resurface. While inflationary forces largely remained in check in
1996, the continued strength in labor markets and rising energy prices mean that
some pickup in inflation is still possible. However, the U.S. budget deficit
continues to decline
1
<PAGE> 2
and, as a percentage of gross domestic product, is now less than 2%, which we
consider a positive development for the bond markets. Although interest rates
may move higher over the coming months, we believe that, at current levels,
fixed-income markets remain fairly valued.
STOCK MARKET
While U.S. equity returns of the past two years have been impressive, we would
anticipate returns in 1997 to be closer to historical levels. Just as the
slowdown in corporate earnings growth and increases in interest rates in 1996
raised some near-term concerns, further interest rate increases and an
acceleration of inflation could negatively affect the stock market in 1997.
However, to the extent that some slowdown in earnings means that the economy is
not overheating, this may be beneficial for the equity market in the long run.
Also, we believe 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 reasonably positive that the equity market will produce
satisfactory long-term returns.
Specific information on each Account's performance and our current investment
strategy are provided on the following pages. The performance figures provided
in the discussion do not reflect the deduction of separate account charges.
Results would have been lower had these charges been deducted. We appreciate
your support and welcome any questions or comments you may have.
On behalf of the
Board of Managers,
/s/ John D. McNeil
---------------------
John D. McNeil
January 12, 1997 Chairman
CAPITAL APPRECIATION VARIABLE ACCOUNT
For the year ended December 31, 1996, the Account provided a total return of
21.99%, compared to a return of 22.95% for the Standard & Poor's 500 Composite
Index (the S&P 500), a popular, unmanaged index of common stock performance. The
Account's performance benefited from a significant weighting in the technology
sector, in particular Intel and Microsoft, both of which have strong market
positions related to the personal computer business. Lodging stocks such as HFS,
Inc., a hotel franchiser, also contributed significantly to performance. Other
significant contributors included Tyco International, a fire control and health
care products manufacturer, and Wisconsin Central, a railroad company.
Performance was negatively impacted by the underweighting in oil and oil
services, which benefited from rising oil prices, and financial services, which
performed well despite generally flat interest rates. Both of these sectors
outperformed the S&P 500 during the year.
The Account continues to seek companies possessing five key ingredients:
earnings momentum, reasonable valuations, good management, a strong balance
sheet, and positive secular trends. Given that current price/earnings multiples
are reasonable, earnings momentum is the focus to achieving further stock price
appreciation. Our largest concentration remains in the technology area, which is
seeing strong spending by corporations focused on improving their productivity.
Other large weightings are in lodging and in industrial goods such as
agricultural equipment, which should benefit from a continuing strong farm
economy.
GOVERNMENT SECURITIES VARIABLE ACCOUNT
For the year ended December 31, 1996, the Account provided a total return of
1.65%, com-
2
<PAGE> 3
pared to a 3.68% return for the Lehman Brothers Government/Mortgage Index (the
Lehman Index), an unmanaged index of U.S. Treasury, government-agency, and
mortgage-backed securities. Nearly half of the portfolio is held in U.S.
Treasury securities, U.S. agency debentures, and Small Business Association
loans. These issues currently yield between 6.0% and 7.4%. Issue maturities are
distributed across the entire maturity spectrum but vary from the Lehman Index,
with an overweighting in shorter maturities and an underweighting in longer
maturities. The agency issues add between 0.20% and 1.10% incremental yield
above comparable U.S. Treasury issues. (Principal value and interest on Treasury
securities are guaranteed by the U.S. government if held to maturity.)
The remainder of the portfolio is in U.S. agency mortgage-backed pass-through
certificates. These issues are held for both their yield characteristics and
extension-risk protection. Both 30- and 15-year issues are currently
represented, with yields that average 1.00% greater than comparable Treasury
issues. These issues have stable prepayment rates, which should make them move
in a predictable fashion with their Treasury counterparts. Should we become more
constructive on the market, we will decrease the portfolio's allocation to
mortgage-backed securities and increase its allocation to five- and 10-year
Treasury issues.
HIGH YIELD VARIABLE ACCOUNT
For the year ended December 31, 1996, the Account posted a total return of
12.6%, compared to a return of 11.4% for the Lehman Brothers High Yield Bond
Index. The Account benefited as the credit quality of its typical high-yield
investment improved throughout the year. In addition, a number of companies in
the portfolio were acquired and their high-yield debt retired at premiums to
secondary-market prices. Performance was negatively impacted by the
overweighting of defensive industries such as supermarkets and media earlier in
the year.
The high-yield market was the best performing domestic fixed-income market in
1996. The economy was stronger than generally forecast, and most high-yield
issuers fared well. The improvement in credit quality more than compensated for
the rise in interest rates. Favorable technical factors reinforced these
positive credit fundamentals. The demand for high-yield bonds outpaced supply
due to strong cash inflows into high-yield mutual funds and increased buying
interest from traditional investment-grade accounts. These favorable credit and
technical factors caused the spread between the yield on high-yield bonds and
Treasury securities to narrow, which led to higher bond prices. (Principal value
and interest on Treasury securities are guaranteed by the U.S. government if
held to maturity.) The high-yield market currently offers approximately 3.25
percentage points more yield than the Treasury bond market. We would not expect
this spread to widen significantly given our outlook for continued modest
economic growth and the prospects for further credit improvements. While this
spread is near the lower end of its historic range, it represents a 50% premium
to the yields currently available on Treasury securities, and we believe it is
adequate compensation for the credit risk associated with the high-yield market.
Recently, we have selectively added to the metals sector by buying bonds of
specialty steel manufacturers. Despite longer-term concerns regarding capacity
additions, steel prices have been firm, reflecting continued strong demand. We
have balanced this cyclical exposure with an
3
<PAGE> 4
overweighted position in such name-brand consumer products companies as
Westpoint Stevens, Sealy, Samsonite, and Revlon Cosmetics. The Account continues
to emphasize telecommunication credits in such high-growth areas as wireless
personal communication services. The Account is underweighted in the cable
television sector due to increased competition from alternative media sources.
We continue to seek companies which have improving credit quality and whose
high-yield bonds offer attractive expected returns.
MANAGED SECTORS VARIABLE ACCOUNT
For the year ended December 31, 1996, the Account provided a total return of
18.03%, compared to a return of 22.95% for the S&P 500. Weakness in the
technology sector hindered performance in the first several months of 1996.
Also, weakness in the Account's gaming positions and continued softness in
stocks of health maintenance organizations (HMOs), recent additions to the
Account, have hurt results. This was offset to some degree by good performances
in the Account's energy holdings as well as by strong individual performance in
names such as First Interstate, Freddie Mac, Intel, BMC Software, Promus Hotels,
Tyco International, and ADT Ltd.
The Account has recently narrowed its sector focus to four areas. The technology
weighting has been increased as dramatic price corrections in many of that
industry's segments have presented what we believe is an opportunity to buy
high-quality companies at relative valuations well below both the market and
historic averages, despite our expectations of above-average earnings growth.
Energy weightings (primarily oil services companies) have been modestly
increased as the prospect for consolidation-driven cost savings and enhanced
operating leverage in a favorable overall environment for energy continues to
bode well for superior earnings growth in natural gas and oil. The Account's
allocation to the leisure sector, primarily gaming and cellular, has remained
approximately the same. The health care sector was added during the year and
consists primarily of HMOs. Stocks in this area suffered major corrections as
earnings growth slowed, primarily due to weaker-than-expected pricing. We still
believe the prospects for unit growth are very positive and pricing expectations
have improved, and we expect earnings for HMOs to reaccelerate in 1997 and
beyond, well above the current consensus. Finally, the "other" category, which
consists of prospective future sectors and/or individual ideas we believe the
Account is better off owning than not, has been concentrated to reduce the
number of holdings and increase weightings in stocks we believe represent
attractive values. Names such as Tyco International, ADT Ltd., Wisconsin
Central, Loral Space and Communications, Office Depot, McDonnell Douglas, Sears,
and Equitable of Iowa are examples of the above.
Looking ahead, we believe the best course of action for the Account is to
concentrate holdings in companies led by strong management teams and which have
visible earnings growth and attractive relative valuations.
MONEY MARKET VARIABLE ACCOUNT
Interest rates on short-term (30 days and less) debt instruments remained
relatively stable during the past 12 months. The Federal Reserve Board lowered
short-term interest rates on January 31, 1996 by 25 basis points (0.25%), from
5.50% to 5.25%. The federal funds' rate remained at 5.25% for the rest of 1996.
Because
4
<PAGE> 5
of this, we maintained average maturities between 40 and 50 days.
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 and bank issues, in an
effort to provide maximum security against credit risk. At the present time,
approximately 64% of the portfolio is invested in U.S. government or
government-guaranteed issues, and the balance is in corporate and bank issues.
The Account is neither insured nor guaranteed by the U.S. government, and there
can be no assurance that it will be able to maintain a stable net asset value of
$1.00 per share.
TOTAL RETURN VARIABLE ACCOUNT
For the year ended December 31, 1996, the Account provided a total return of
13.92%, compared to returns of 22.95% for the S&P 500 and 2.90% for the Lehman
Brothers Government Corporate Bond Index (the Lehman Index), an unmanaged,
market-value-weighted index of U.S. Treasury and government-agency securities,
excluding mortgage-backed securities. Over the past year, the Account held about
55% of its assets in common stocks, preferred stocks, and convertible bonds.
This allocation provided the bulk of the Account's return as a whole, as the
U.S. stock market continued its trend of 1995, posting spectacular gains. The
remainder of the Account was invested in a blend of corporate bonds and U.S.
Treasury bonds, with an overall duration between five and six years. The fixed-
income sector also provided positive returns; however, their magnitude was far
less than that of the Account's stock portion.
The Account's stock investment strategy has focused on companies that, in our
view, have earnings prospects or asset values equal to or higher than the
overall market as measured by the S&P 500. Two sectors that we believe fit our
investment criteria are the energy and financial services sectors. Bank stocks
have done particularly well because earnings have risen steadily and an increase
in merger activity has made nearly all banks more valuable. We also favor the
health care sector, where strong earnings and industry consolidation have
improved the outlook for the stocks of many of these companies. In addition, we
currently favor the aerospace industry, which we believe will benefit from a
cyclical increase in the number of aircraft being built over the next three
years. During the period covered by this report, we avoided the technology
sector because, in our view, while many of these stocks have high growth
prospects, they also have high valuations, which means they often carry greater
risk. The Account is also underweighted in consumer companies because of their
inability to raise prices as the U.S. consumer continues to demand more value at
lower prices.
Given where equity valuations are today, we feel comfortable with our current
asset allocation. However, should the stock market experience a meaningful
correction, we would be looking to increase our stock allocation.
WORLD GOVERNMENTS VARIABLE ACCOUNT
For the year ended December 31, 1996, the Account provided a total return of
4.47%, compared to a 3.62% return for the Salomon Brothers World Government Bond
Index (the Salomon Index), an unmanaged index consisting of complete universes
of government bonds with remaining maturities of at least five years. The first
half of 1996 witnessed concerns about accelerating U.S. growth and its potential
boost to other
5
<PAGE> 6
major economies, which set off a rise in interest rates based on fears of higher
inflation and potential rate hikes by the Federal Reserve Board. However, during
the year's second half, these concerns proved unwarranted as the U.S. economy
slowed, inflation fears receded, and rates aggressively declined. During this
second half most central banks, with the exception of the United States, lowered
official interest rates.
By the end of the year, as measured in local currency returns and by the Salomon
Index, all markets registered positive returns but with significant differences.
For example, the core markets -- the United States, Japan, and Germany -- were
the worst performers, while the higher-yielding markets of Australia, Canada,
Japan, and Italy were among the better performers. The Account benefited by
being overweighted in these higher-yielding markets for most of the year.
In preparation for the monetary union due to commence in January 1999, almost
all European countries announced tight fiscal budgets, while at the same time
cutting interest rates due to slow growth and low inflation. Within Europe, a
dramatic narrowing of yield spread differentials, or outperformance, began in
earnest during the third quarter, with Spain, Italy, and Sweden being the main
beneficiaries. Although a good part of this convergence has now taken place, we
anticipate these markets will continue to outperform as European monetary union
approaches.
Meanwhile, in the dollar bloc, both Canada and Australia continue to benefit
from low inflation, slow growth, and tight fiscal budgets. The Account benefited
by being overweighted in both these markets for most of the year. Looking ahead,
while there still is no immediate threat of higher inflation in Canada, economic
growth is finally picking up and, therefore, we expect the Bank of Canada to be
accommodative in 1997. While an underweighted position in U.S. bonds has been
beneficial for the year, the Account's performance was hindered during the third
quarter as the U.S. position's duration (a measure of interest rate sensitivity)
was low in anticipation of a pickup in U.S. economic growth that never
materialized.
In regards to the Japanese bond market, the Account was underweighted for most
of the year because we felt other markets offered better value. However, the
Japanese bond market was helped by continued depressed real estate and banking
sectors, as well as by weak consumer spending. Our outlook calls for a
continuation of slow, choppy growth with a modest increase in inflation.
For the year, the overall rise in U.S. interest rates, coinciding with
reductions in short-term rates in Europe, has enabled the dollar to appreciate
against the German mark. In addition, the dollar also benefited from yield
convergence within Europe. The dollar has continued to strengthen versus the
Japanese yen, based primarily on Japan's low interest rates and the government's
policy of engineering a weaker currency in order to stimulate its beleaguered
economy. Looking forward, we anticipate modest but further central bank lowering
of interest rates in many European countries as well as in Australia and New
Zealand, an environment that we believe could continue to be positive for bonds.
However, some caution is warranted as, ultimately, the effect of lower rates in
these countries will result in a pickup in economic growth and, possibly,
inflation. Moreover, with the U.S. currency benefiting from positive interest
rate differentials, renewed hope for a
6
<PAGE> 7
balanced budget, and movement toward an inclusive, single European currency, the
prospects for a stable dollar remain favorable.
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 U.S. 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
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. Under normal market conditions, at least 25% of the
Account's assets will be invested in fixed-income securities, and 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.
ONE-YEAR PERFORMANCE THROUGH
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Compass 2 (U.S.) Compass 3 (U.S.)
<S> <C> <C>
Capital Appreciation
Variable Account 20.41% 20.28%
Government Securities
Variable Account 0.36% 0.26%
High Yield Variable
Account 11.15% 11.04%
Managed Sectors Variable
Account 16.58% 16.40%
Money Market Variable
Account 3.57% 3.47%
Total Return Variable
Account 12.52% 12.35%
World Governments Variable
Account 3.14% 2.99%
</TABLE>
These performance results reflect any applicable contract or surrender charges.
Past performance is no guarantee of future results.
7
<PAGE> 8
PORTFOLIO OF INVESTMENTS -- December 31, 1996
CAPITAL APPRECIATION VARIABLE ACCOUNT -- CAVA
<TABLE>
<CAPTION>
STOCKS -- 98.9%
Issuer Shares Value
<S> <C> <C>
U.S. COMMON STOCKS -- 92.9%
ADVERTISING -- 0.2%
TMP Worldwide, Inc. ............... 18,600 $ 237,150
Universal Outdoor Holdings,
Inc.*............................ 36,700 862,450
------------
$ 1,099,600
------------
AEROSPACE -- 3.6%
Lockheed Martin Corp. ............. 57,800 $ 5,288,700
McDonnell-Douglas Corp. ........... 145,300 9,299,200
United Technologies Corp. ......... 82,800 5,464,800
------------
$ 20,052,700
------------
AGRICULTURAL PRODUCTS -- 2.3%
AGCO Corp. ........................ 150,400 $ 4,305,200
Case Corp. ........................ 157,700 8,594,650
------------
$ 12,899,850
------------
AIRLINES -- 0.9%
America West Airlines, "B"*........ 99,200 $ 1,574,800
Southwest Airlines Co. ............ 162,700 3,599,737
------------
$ 5,174,537
------------
AUTOMOTIVE -- 0.6%
APS Holding Corp., "A"*............ 57,300 $ 888,150
Goodrich (B.F.) Co. ............... 64,100 2,596,050
------------
$ 3,484,200
------------
BANKS AND CREDIT COMPANIES -- 0.7%
Fleet/Norstar Financial Group,
Inc. ............................ 77,900 $ 3,885,263
------------
BUSINESS MACHINES -- 0.8%
Sun Microsystems, Inc.*............ 165,800 $ 4,258,988
------------
BUSINESS SERVICES -- 5.9%
AccuStaff, Inc.*................... 67,200 $ 1,419,600
ADT Ltd.*.......................... 339,200 7,759,200
ALCO Standard Corp. ............... 164,400 8,487,150
Ceridian Corp.*.................... 101,900 4,126,950
Corestaff, Inc.*................... 61,050 1,446,122
DST Systems, Inc.*................. 167,800 5,264,725
Loewen Group, Inc. ................ 82,900 3,243,462
Sabre Group Holding, Inc., "A"*.... 50,600 1,410,475
------------
$ 33,157,684
------------
CHEMICALS -- 0.6%
Betzdearborn, Inc. ................ 15,000 877,500
Praxair, Inc. ..................... 56,000 2,583,000
------------
$ 3,460,500
------------
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. COMMON STOCKS -- continued
COMPUTER SOFTWARE -- PERSONAL COMPUTERS -- 4.1%
Electronic Arts, Inc.*............. 95,300 $ 2,853,044
First Data Corp. .................. 98,800 3,606,200
Microsoft Corp.*................... 197,000 16,277,125
------------
$ 22,736,369
------------
COMPUTER SOFTWARE -- SYSTEMS -- 8.8%
Adobe Systems, Inc. ............... 198,100 $ 7,403,987
BMC Software, Inc.*................ 25,100 1,038,513
Cadence Design Systems, Inc.*...... 378,200 15,033,450
Computer Associates International,
Inc. ............................ 119,700 5,955,075
Micros Systems, Inc.*.............. 102,400 3,148,800
Oracle Systems Corp.*.............. 298,650 12,468,638
Sybase, Inc.*...................... 121,500 2,027,531
Synopsys, Inc.*.................... 47,000 2,173,750
------------
$ 49,249,744
------------
CONSUMER GOODS AND SERVICES -- 7.8%
Colgate-Palmolive Co. ............. 53,500 $ 4,935,375
Gillette Co. ...................... 19,500 1,516,125
Philip Morris Cos., Inc. .......... 166,300 18,729,537
Tyco International Ltd. ........... 347,100 18,352,913
------------
$ 43,533,950
------------
DEFENSE ELECTRONICS -- 1.7%
Loral Space & Communications
Corp.*........................... 510,300 $ 9,376,762
------------
ELECTRICAL EQUIPMENT -- 1.0%
General Electric Co. .............. 58,600 $ 5,794,075
------------
ELECTRONICS -- 8.9%
Altera Corp.*...................... 118,100 $ 8,584,394
Analog Devices, Inc.*.............. 192,150 6,509,081
Intel Corp. ....................... 192,400 25,192,375
LSI Logic Corp.*................... 153,100 4,095,425
Maxim Integrated Products, Inc.*... 44,000 1,903,000
Xilinx, Inc.*...................... 84,800 3,121,700
------------
$ 49,405,975
------------
</TABLE>
8
<PAGE> 9
STOCKS -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. COMMON STOCKS -- continued
ENTERTAINMENT -- 4.3%
Clear Channel Communications,
Inc.*............................ 57,100 $ 2,062,738
Cox Radio, Inc., "A"*.............. 4,900 85,750
Harrah's Entertainment, Inc.*...... 392,200 7,794,975
Infinity Broadcasting Corp.,
"A"*............................. 44,800 1,506,400
Jacor Communications, Inc.*........ 154,900 4,240,387
LIN Television Corp.*.............. 88,500 3,739,125
Mirage Resorts, Inc.*.............. 214,600 4,640,725
Univision Communications, Inc.,
"A"*............................. 3,300 122,100
------------
$ 24,192,200
------------
FINANCIAL INSTITUTIONS -- 5.9%
Associates First Capital Corp.,
"A".............................. 23,700 $ 1,045,762
Federal Home Loan Mortgage
Corp. ........................... 63,500 6,992,938
Financial Federal Corp.*........... 92,500 1,549,375
Finova Group, Inc. ................ 79,600 5,114,300
Franklin ReSources, Inc. .......... 40,200 2,748,675
Green Tree Financial Corp. ........ 137,000 5,291,625
Schwab (Charles) Corp. ............ 311,900 9,980,800
------------
$ 32,723,475
------------
FOOD AND BEVERAGE PRODUCTS -- 0.8%
PepsiCo, Inc. ..................... 144,600 $ 4,229,550
------------
INSURANCE -- 0.7%
Amerin Corp.*...................... 37,400 $ 963,050
Chubb Corp. ....................... 52,400 2,816,500
------------
$ 3,779,550
------------
MACHINERY -- 1.4%
Deere & Co., Inc. ................. 114,900 $ 4,667,812
IDEX Corp. ........................ 81,100 3,233,863
------------
$ 7,901,675
------------
MEDICAL AND HEALTH PRODUCTS -- 1.7%
Johnson & Johnson.................. 160,300 $ 7,974,925
Omnicare, Inc. .................... 40,000 1,285,000
------------
$ 9,259,925
------------
MEDICAL AND HEALTH TECHNOLOGY AND SERVICES -- 4.1%
HealthSource, Inc.*................ 275,900 3,621,188
HealthSouth Corp.*................. 142,300 5,496,337
Oxford Health Plans, Inc.*......... 75,200 4,403,900
United Healthcare Corp. ........... 208,900 9,400,500
------------
$ 22,921,925
------------
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. COMMON STOCKS -- continued
METALS AND MINERALS -- 0.5%
Minerals Technologies, Inc. ....... 65,300 $ 2,677,300
------------
OILS -- 1.1%
Mobil Corp. ....................... 49,400 $ 6,039,150
Titan Exploration, Inc.*........... 15,400 184,800
------------
$ 6,223,950
------------
PHOTOGRAPHIC PRODUCTS -- 1.5%
Eastman Kodak Co. ................. 102,000 $ 8,185,500
------------
RAILROADS -- 3.0%
Burlington Northern Santa Fe
Railway Co. ...................... 29,400 $ 2,539,425
Wisconsin Central Transportation
Corp.*........................... 363,200 14,391,800
------------
$ 16,931,225
------------
RESTAURANTS AND LODGING -- 6.5%
HFS, Inc.*......................... 381,500 $ 22,794,625
Promus Hotel Corp.*................ 364,150 10,787,944
Renaissance Hotel Group N.V.*...... 102,200 2,401,700
------------
$ 35,984,269
------------
STORES -- 5.2%
Ann Taylor Stores Corp.*........... 116,500 $ 2,038,750
Corporate Express, Inc.*........... 38,300 1,127,456
Duty Free International, Inc. ..... 17,500 253,750
Federated Department Stores,
Inc.*............................ 170,600 5,821,725
General Nutrition Cos., Inc.*...... 264,900 4,470,187
Linens N Things, Inc.*............. 21,200 416,050
Micro Warehouse, Inc.*............. 158,500 1,862,375
Office Depot, Inc.*................ 313,500 5,564,625
Officemax, Inc.*................... 149,900 1,592,688
Sears, Roebuck & Co. .............. 71,000 3,274,875
Staples, Inc.*..................... 129,100 2,331,869
------------
$ 28,754,350
------------
</TABLE>
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS -- continued
STOCKS -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. COMMON STOCKS -- continued
SUPERMARKETS -- 1.4%
Safeway, Inc.*..................... 187,800 $ 8,028,450
------------
TELECOMMUNICATIONS -- 6.9%
Ascend Communications, Inc.*....... 41,700 $ 2,590,613
Cisco Systems, Inc.*............... 176,500 11,229,812
Glenayre Technologies, Inc.*....... 358,600 7,732,312
Lucent Technologies, Inc. ......... 31,600 1,461,500
MFS Communications Co., Inc.*...... 18,800 1,024,600
Tel-Save Holdings, Inc.*........... 40,700 1,180,300
Telco Communications Group*........ 27,100 474,250
Teleport Communications Group,
Inc.,"A"*......................... 72,800 2,220,400
Tellabs, Inc.*..................... 70,800 2,663,850
WorldCom, Inc.*.................... 301,200 7,850,025
------------
$ 38,427,662
------------
Total U.S. Common Stocks................... $517,791,203
============
FOREIGN STOCKS -- 6.0%
CANADA -- 0.8%
Canadian National Railway Co.
(Railroads)*...................... 50,900 $ 1,934,200
Loewen Group, Inc. (Business
Services)##....................... 67,000 2,615,851
------------
$ 4,550,051
------------
GERMANY -- 0.7%
Sap AG, Preferred (Computer
Software -- Systems).............. 29,000 $ 4,052,648
------------
HONG KONG -- 0.4%
Peregrine Investment Holdings
(Finance)......................... 1,120,000 $ 1,918,800
------------
ITALY -- 1.5%
Gucci Group Designs N.V. (Apparel
and Textiles)..................... 25,400 $ 1,622,425
Telecom Italia S.p.A., Saving
Shares (Telecommunications)....... 3,255,700 4,642,576
Telecom Italia S.p.A.
(Telecommunications).............. 824,200 2,081,875
------------
$ 8,346,876
------------
<CAPTION>
Issuer Shares Value
<S> <C> <C>
FOREIGN STOCKS -- continued
SINGAPORE -- 0.3%
Mandarin Oriental International
Ltd. (Restaurants and Lodging).... 1,310,990 $ 1,848,496
------------
SOUTH KOREA -- 0.7%
Korea Mobile Telecom, ADR
(Telecommunications).............. 308,794 $ 3,975,723
------------
SWEDEN -- 1.6%
Astra AB, Free Shares, "B"
(Pharmaceuticals)................. 165,300 $ 7,980,000
Nobel Biocare AB (Medical and
Health Products).................. 62,800 1,105,796
------------
$ 9,085,796
------------
Total Foreign Stocks....................... $ 33,778,390
------------
Total Stocks (Identified Cost,
$414,717,285).............................. $551,569,593
------------
WARRANTS
Peregrine Investment Holdings
(Identified Cost, $22,163)....... 179 $ 57,187
============
Total Investments (Identified Cost,
$414,739,449).............................. $551,626,780
OTHER ASSETS, LESS LIABILITIES -- 1.1%....... 5,748,607
------------
Net Assets -- 100.0%....................... $557,375,387
============
See portfolio footnotes and notes to financial statements
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS -- December 31, 1996
GOVERNMENT SECURITIES VARIABLE ACCOUNT -- GSVA
<TABLE>
<CAPTION>
BONDS -- 92.9% GOVERNMENT GUARANTEED -- 56.0%
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 32.3%
GNMA, 6.5s, 2023 - 2025........ $ 7,645 $ 7,291,737
GNMA, 7s, 2022 - 2026.......... 13,568 13,270,856
GNMA, 7.5s, 2008 - 2026........ 26,982 27,070,654
GNMA, 8s, 2025 - 2026.......... 15,751 16,066,012
GNMA, 9s, 2004 - 2022.......... 8,614 9,062,318
GNMA, 10s, 2016................ 9 9,346
GNMA, 11s, 2010 - 2019......... 731 833,227
GNMA, 12.5s, 2015 - 2015....... 105 123,526
GNMA, 13.25s, 2014............. 3 2,942
GNMA, 14s, 2014 - 2015......... 65 79,853
------------
$ 73,810,471
------------
SMALL BUSINESS ADMINISTRATION -- 5.4%
SBA, 10.35s, 1997.............. $ 188 $ 192,288
SBA, 8.2s, 2005................ 1,902 2,002,863
SBA, 8.4s, 2007................ 424 447,124
SBA, 9.95s, 2008............... 861 955,970
SBA, 8.7s, 2009................ 1,533 1,645,200
SBA, 10.05s, 2009.............. 861 960,886
SBA, 9.5s, 2010................ 5,584 6,152,646
------------
$ 12,356,977
------------
U.S. TREASURY OBLIGATIONS -- 18.3%
U.S. Treasury Notes, 6.125s,
1998.......................... $ 1,300 $ 1,306,292
U.S. Treasury Notes, 9.25s,
1998.......................... 11,500 12,098,345
U.S. Treasury Notes, 9.125s,
1999.......................... 9,110 9,734,855
U.S. Treasury Notes, 6.75s,
2000.......................... 2,000 2,037,820
U.S. Treasury Bonds, 12s,
2013.......................... 9,000 12,874,230
U.S. Treasury Bonds, 8.75s,
2020.......................... 3,000 3,693,270
------------
$ 41,744,812
------------
Total Government Guaranteed (Identified Cost,
$127,784,223)................................ $127,912,260
------------
U.S. FEDERAL AGENCIES -- 36.9%
Federal Agricultural Mortgage
Corp., 7.02s, 1998............ $ 1,800 $ 1,821,654
Federal Agricultural Mortgage
Corp., 7.25s, 1999............ 5,000 5,115,600
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. FEDERAL AGENCIES -- continued
Federal Agricultural Mortgage
Corp., 7.44s, 2000............ $ 3,725 $ 3,859,435
Federal Agricultural Mortgage
Corp., 8.07s, 2006............ 2,000 2,184,680
Federal Home Loan Mortgage
Corp., 8.5s, 2021............. 27 27,521
Federal Home Loan Mortgage
Corp., 9s, 2002 - 2007........ 3,705 3,862,107
Federal Housing Authority,
7.43s, 2022................... 9,238 9,460,709
Federal National Mortgage
Assn., 7.27s, 2005............ 3,951 3,921,431
Federal National Mortgage
Assn., 7.654s, 2020........... 755 755,793
Federal National Mortgage
Assn., 8s, 2019 - 2023........ 461 469,756
Federal National Mortgage
Assn., 8.5s, 2001 - 2007...... 2,068 2,152,091
Federal National Mortgage
Assn., 9s, 2009............... 503 525,053
Financing Corp., 9.8s, 2018.... 9,000 11,692,980
Private Export Funding Corp.,
8.4s, 2001.................... 12,000 12,937,920
Private Export Funding Corp.,
6.24s, 2002................... 3,200 3,166,592
Republic of Israel, U.S.
Government Guaranteed Notes,
5.89s, 2005................... 4,000 3,796,800
Resolution Funding Corp.,
8.875s, 2020.................. 12,700 15,458,313
U.S. Department of Veterans
Affairs, Vendee Mortgage
Trust, 7.75s, 2014............ 3,000 2,986,860
------------
Total U.S. Federal Agencies (Identified Cost,
$77,603,676).................................. $ 84,195,295
------------
Total Bonds (Identified Cost, $205,387,899)... $212,107,555
------------
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
<CAPTION>
REPURCHASE AGREEMENT -- 5.6%
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Investments in repurchase
agreements with Goldman
Sachs, in a joint trading
account
($5,784,000 par), dated
12/31/96, due 1/01/97, total
to
be received $5,786,121,
collateralized by various U.S.
Treasury and federal agency
obligations (with $65,939,000
par and valued at
$65,464,808),
at Cost....................... $ 12,878 $ 12,878,000
------------
Total Investments (Identified Cost,
$218,265,899)................................. $224,985,555
OTHER ASSETS, LESS LIABILITIES -- 1.5% 3,295,425
------------
Net Assets -- 100.0%.......................... $228,280,980
===========
See portfolio footnotes and notes to financial statements
PORTFOLIO OF INVESTMENTS -- December 31, 1996
HIGH YIELD VARIABLE ACCOUNT -- HYVA
<CAPTION>
BONDS -- 90.9%
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
AEROSPACE -- 0.8%
BE Aerospace, Inc., 9.875s,
2006.......................... $ 900 $ 945,000
CHC Helicopter Corp., 11.5s,
2002.......................... 700 714,000
------------
$ 1,659,000
------------
AIRLINES -- 1.0%
Airplane Pass-Thru Trust,
10.875s, 2019................. $ 750 $ 823,125
Continental Airlines, Inc.,
11.75s, 1995**................ 2,050 205
MOOG, Inc., 10s, 2006.......... 1,200 1,260,000
------------
$ 2,083,330
------------
AUTOMOTIVE -- 1.7%
Harvard Industries, Inc., 12s,
2004.......................... $ 325 $ 281,125
Harvard Industries, Inc.,
11.125s, 2005................. 750 622,500
<CAPTION>
BONDS -- continued
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
AUTOMOTIVE -- continued
Hayes Wheels International,
Inc., 11s, 2006............... $ 1,950 $ 2,127,938
Lear Corp., 9.5s, 2006......... 400 432,000
------------
$ 3,463,563
------------
BUILDING -- 5.0%
American Standard, Inc., 0s to
1998, 10.5s to 2005........... 2,480 2,306,400
Building Materials Corp., 0s to
1999, 11.75s to 2004.......... 2,400 2,076,000
Building Materials Corp.,
8.625s, 2006##................ 200 199,500
Lone Star Industries, Inc.,
10s, 2003..................... 1,250 1,270,313
Nortek, Inc., 9.875s, 2004..... 2,000 2,020,000
UDC Homes, Inc., 14.5s, 2000... 3 1,465
USG Corp., 9.25s, 2001......... 1,950 2,076,750
------------
$ 9,950,428
------------
CELLULAR TELEPHONES -- 0.6%
Millicom International Cellular
Communications, 0s to 2000,
13.5s to 2006................. $ 1,900 $ 1,178,000
------------
CHEMICALS -- 2.8%
Harris Chemical North America,
Inc., 10.25s, 2001............ $ 1,000 $ 1,038,750
Indspec Chemical Corp., 0s to
1998, 11.5s to 2003........... 750 676,875
NL Industries, Inc., 11.75s,
2003.......................... 1,800 1,908,000
UCC Investors Holdings, Inc.,
0s to 1998, 12s to 2005....... 50 43,000
UCC Investors Holdings, Inc.,
10.5s, 2002................... 1,800 1,962,000
------------
$ 5,628,625
------------
CONGLOMERATES -- 1.0%
E & S Holdings Corp., 10.375s,
2006##........................ $ 1,900 $ 1,971,250
------------
CONSUMER GOODS AND SERVICES -- 9.7%
Consolidated Cigar Corp.,
10.5s, 2003................... $ 1,000 $ 1,045,000
FoodBrands America, Inc.,
10.75s, 2006.................. 1,300 1,365,000
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
BONDS -- continued
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
CONSUMER GOODS AND SERVICES -- continued
International Semi-Tech
Microelectronics, Inc., 0s to
2000, 11.5s to 2003........... $ 1,850 $ 1,193,250
Iron Mountain, Inc., 10.125s,
2006.......................... 1,450 1,537,000
Pierce Leahy Corp., 11.125s,
2006.......................... 1,450 1,584,125
Reeves Industries, Inc., 11s,
2002.......................... 1,350 1,289,250
Remington Arms, Inc., 10s,
2003**##...................... 950 800,375
Revlon, Inc., 10.5s, 2003...... 1,900 1,995,000
Samsonite Corp., 11.125s,
2005.......................... 2,300 2,518,500
Sealy Corp., 9.5s, 2003........ 2,205 2,227,050
Westpoint Stevens, Inc.,
9.375s, 2005.................. 3,575 3,682,250
------------
$ 19,236,800
------------
CONTAINERS -- 5.2%
Atlantis Group, Inc., 11s,
2003.......................... $ 1,300 $ 1,319,500
Calmar, Inc., 11.5s, 2005...... 1,650 1,709,812
Ivex Packaging Corp., 12.5s,
2002.......................... 1,800 1,948,500
Owens-Illinois, Inc., 11s,
2003.......................... 1,500 1,668,750
Owens-Illinois, Inc., 9.95s,
2004.......................... 1,000 1,060,000
Silgan Corp., 11.75s, 2002..... 1,500 1,597,500
U.S. Can Corp., 10.125s,
2006##........................ 1,000 1,051,250
------------
$ 10,355,312
------------
CORPORATE ASSET-BACKED -- 0.4%
Merrill Lynch Mortgage
Investors, Inc., 8.083s,
2023+......................... $ 1,000 $ 840,625
------------
ELECTRONICS -- 0.5%
Clark Schwebel, Inc., 10.5s,
2006.......................... $ 950 $ 1,007,000
------------
ENTERTAINMENT -- 1.6%
Albritton Communications Corp.,
11.5s, 2004................... $ 900 $ 954,000
Cinemark USA, Inc., 9.625s,
2008.......................... 1,500 1,500,000
Lodgenet Entertainment Corp.,
10.25s, 2006##................ 500 500,000
Marvel Holdings, Inc., 0s,
1998.......................... 1,425 213,750
------------
$ 3,167,750
------------
FOOD AND BEVERAGE PRODUCTS -- 3.8%
Delta Beverage Group, Inc.,
9.75s, 2003##................. $ 575 $ 589,375
Keebler Corp., 10.75s,
2006##........................ 1,200 1,311,000
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
FOOD AND BEVERAGE PRODUCTS -- continued
PMI Acquisition Corp., 10.25s,
2003.......................... $ 2,000 $ 2,040,000
Specialty Foods Corp., 10.25s,
2001.......................... 1,950 1,803,750
Texas Bottling Group, Inc., 9s,
2003.......................... 1,750 1,771,875
------------
$ 7,516,000
------------
FOREST AND PAPER PRODUCTS -- 3.2%
Gaylord Container Corp.,
12.75s, 2005.................. $ 3,000 $ 3,315,000
Pacific Lumber Co., 10.5s,
2003.......................... 1,750 1,776,250
Specialty Paperboard, Inc.,
9.375s, 2006##................ 450 451,125
Stone Container Corp., 10.75s,
2002.......................... 850 895,687
------------
$ 6,438,062
------------
MACHINERY -- 0.4%
AGCO Corp., 8.5s, 2006......... $ 800 $ 821,000
------------
MEDICAL AND HEALTH PRODUCTS -- 0.3%
Quest Diagnosis, Inc., 10.75s,
2006.......................... $ 500 $ 525,000
------------
MEDICAL AND HEALTH TECHNOLOGY AND SERVICES -- 4.4%
Beverly Enterprises, Inc., 9s,
2006.......................... $ 2,000 $ 2,010,000
Genesis Health Ventures, 9.75s,
2005.......................... 1,000 1,050,000
Quorum Health Group, Inc.,
8.75s, 2005................... 1,900 1,947,500
Tenet Healthcare Corp.,
10.125s, 2005................. 3,200 3,544,000
Unilab Corp., 11s, 2006........ 325 219,375
------------
$ 8,770,875
------------
OIL SERVICES -- 3.3%
AmeriGas Partners LP, 10.125s,
2007.......................... $ 1,300 $ 1,369,875
Clark USA, Inc., 10.875s,
2005.......................... 1,350 1,397,250
Falcon Drilling, Inc., 8.875s,
2003.......................... 1,300 1,326,000
Ferrell Gas LP, 10s, 2001...... 900 940,500
Mesa Operating Co., 10.625s,
2006.......................... 1,400 1,519,000
------------
$ 6,552,625
------------
</TABLE>
13
<PAGE> 14
PORTFOLIO OF INVESTMENTS -- continued
<TABLE>
<CAPTION>
BONDS -- continued
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
OILS -- 0.5%
Gulf Canada, 9.25s, 2004....... $ 850 $ 898,875
------------
PRINTING AND PUBLISHING -- 1.3%
Day International Group, Inc.,
11.125s, 2005................. $ 750 $ 791,250
Golden Books Publishing, Inc.,
7.65s, 2002................... 600 522,000
Newsquest Capital PLC, 11s,
2006##........................ 1,250 1,293,750
------------
$ 2,607,000
------------
RESTAURANTS AND LODGING -- 6.7%
Aztar Corp., 11s, 2002......... $ 1,250 $ 1,209,375
Boomtown, Inc., 11.5s, 2003.... 410 431,525
Coast Hotels & Casinos, Inc.,
13s, 2002..................... 750 827,813
Eldorado Resorts LLC, 10.5s,
2006##........................ 1,800 1,901,250
Four Seasons Hotels, Inc.,
9.125s, 2000##................ 650 667,875
Grand Casinos, Inc., 10.125s,
2003.......................... 1,850 1,859,250
Griffin Gaming & Entertainment,
Inc., 0s, 2000................ 1,000 980,000
Harrah's Jazz Co., 14.25s,
2001.......................... 825 405,281
Harvey's Casinos Resorts,
10.625s, 2006................. 750 802,500
Red Roof Inns, Inc., 9.625s,
2003.......................... 1,650 1,650,000
Sam Houston Race Park, Inc.,
11s, 2001..................... 309 123,414
Santa Fe Hotel, Inc., 11s,
2000.......................... 775 569,625
Station Casinos, Inc., 9.625s,
2003.......................... 1,850 1,840,750
------------
$ 13,268,658
------------
SPECIAL PRODUCTS AND SERVICES -- 10.0%
AAP-Mcquay, Inc., 8.875s,
2003.......................... $ 1,500 $ 1,496,250
Buckeye Cellulose Corp., 8.5s,
2005.......................... 1,650 1,650,000
Fairfield Manufacturing Corp.,
11.375s, 2001................. 300 313,500
Genmar Holdings, Inc., 13.5s,
2001.......................... 500 485,000
Haynes International, Inc.,
11.625s, 2004................. 1,550 1,635,250
Howmet Corp., 10s, 2003........ 1,050 1,155,000
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
SPECIAL PRODUCTS AND SERVICES -- continued
IMO Industries, Inc., 11.75s,
2006.......................... $ 2,050 $ 1,906,500
Interlake Corp., 12s, 2001..... 850 909,500
Interlake Corp., 12.125s,
2002.......................... 1,650 1,707,750
Interlake Revolver, "B", 5.75s,
1997##........................ 172 170,303
International Knife & Saw,
Inc., 11.375s, 2006##......... 1,000 1,032,500
K & F Industries, Inc.,
10.375s, 2004................. 1,370 1,445,350
Mettler Toledo, Inc., 9.75s,
2006.......................... 335 351,750
Motors & Gears, Inc., 10.75s,
2006##........................ 625 643,750
Polymer Group, Inc., 12.25s,
2002.......................... 834 911,145
Synthetic Industries, Inc.,
12.75s, 2002.................. 2,100 2,315,250
Thermadyne Holdings Corp.,
10.25s, 2002.................. 1,289 1,321,225
Thermadyne Holdings Corp.,
10.75s, 2003.................. 300 309,000
------------
$ 19,759,023
------------
STEEL -- 4.2%
Alaska Steel Corp., 9.125s,
2006##........................ $ 500 $ 513,750
Algoma Steel, Inc., 12.375s,
2005.......................... 1,500 1,620,000
Carbide/Graphite Group, Inc.,
11.5s, 2003................... 200 217,000
Commonwealth Aluminum Corp.,
10.75s, 2006.................. 1,100 1,133,000
Gulf States Steel, Inc., 13.5s,
2003.......................... 225 213,750
Jorgensen (Earl M.) Co.,
10.75s, 2000.................. 900 918,000
Kaiser Aluminum & Chemical
Corp., 9.875s, 2002........... 1,125 1,153,125
Kaiser Aluminum & Chemical
Corp., 12.75s, 2003........... 425 456,875
WCI Steel, Inc., 10s, 2004##... 2,000 2,040,000
------------
$ 8,265,500
------------
STORES -- 1.9%
Finlay Enterprises, Inc., 0s to
1998, 12s to 2005............. $ 3,000 $ 2,565,000
Parisian, Inc., 9.875s, 2003... 1,100 1,111,000
------------
$ 3,676,000
------------
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
BONDS -- continued
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
SUPERMARKETS -- 4.7%
Carr-Gottstein Foods Co., 12s,
2005.......................... $ 350 $ 373,625
Dominick's Finer Foods Co.,
10.875s, 2005................. 500 553,750
Fleming Cos., Inc., 10.625s,
2001.......................... 400 406,000
Grand Union Co., 12s, 2004..... 1,400 1,477,000
Jitney Jungle Stores of
America, Inc., 12s, 2006...... 1,750 1,850,625
Pathmark Stores, Inc., 9.625s,
2003.......................... 1,400 1,340,500
Ralph's Grocery Co., 10.45s,
2004.......................... 1,450 1,542,437
Smith's Food & Drug Centers,
11.25s, 2007.................. 1,500 1,657,500
Star Market, Inc., 13s, 2004... 50 56,250
------------
$ 9,257,687
------------
TELECOMMUNICATIONS -- 15.0%
American Radio Systems Corp.,
9s, 2006...................... $ 1,700 $ 1,666,000
Bell Cablemedia PLC, 0s to
2000, 11.875s to 2005......... 1,250 1,003,125
Brooks Fiber Properties, Inc.,
0s to 2001, 10.875s to 2006... 750 480,000
Brooks Fiber Properties, Inc.,
0s to 2001, 11.875s to
2006##........................ 1,250 796,875
Cablevision Systems Corp.,
9.25s, 2005................... 1,300 1,287,000
Charter Communications
Southeast LP, 11.25s, 2006.... 200 209,000
Colt Telecom Group PLC, 0s to
2001, 12s to 2006............. 1,350 799,875
Comeast Corp., 9.375s, 2005.... 850 881,875
Diamond Cable Communications
Corp., 0s to 2000, 11.75s to
2005.......................... 1,400 1,008,000
Echostar Communications Corp.,
0s to 1999, 12.875s to 2004... 975 801,937
Echostar Satellite Broadcasting
Corp., 0s to 2000, 13.125s to
2004.......................... 1,400 1,060,500
Falcon Holdings Group, Inc.,
11s, 2003..................... 1,123 1,004,791
Granite Broadcasting Corp.,
10.375s, 2005................. 1,000 1,025,000
ICG Holdings, Inc., 0s to 2001,
12.5s to 2006................. 1,650 1,068,375
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
TELECOMMUNICATIONS -- continued
Intermedia Capital Partners LP,
11.25s, 2006##................ $ 175 $ 182,875
Jones Intercable, Inc., 9.625s,
2002.......................... 500 525,000
Jones Intercable, Inc., 10.5s,
2008.......................... 200 216,000
Marcus Cable Operating Co., 0s
to 1999, 13.5s to 2004........ 875 717,500
MFS Communications, Inc., 0s to
2006, 8.875s to 2006.......... 3,150 2,291,625
Mobile Telecommunication
Technologies Corp., 13.5s,
2002.......................... 600 600,000
Mobilemedia Communications,
Inc., 0s to 1998, 10.5s to
2003**........................ 700 147,000
Mobilemedia Communications,
Inc., 9.375s, 2007............ 850 229,500
Paging Network, Inc., 8.875s,
2006.......................... 1,700 1,619,250
Park Broadcasting, Inc.,
11.75s, 2004.................. 750 881,250
Rifkin Acquisition Partners LP,
11.125s, 2006................. 200 208,500
Rogers Cablesystems, Inc.,
10.125s, 2012................. 1,750 1,815,625
Sprint Spectrum LP, 11s,
2006.......................... 1,100 1,190,750
Sprint Spectrum LP, 0s to 2001,
12.5s to 2006................. 1,750 1,194,375
Sygnet Wireless, Inc., 11.5s,
2006.......................... 875 896,875
Teleport Communications Group,
Inc., 0s to 2001, 11.125s to
2007.......................... 3,650 2,500,250
Videotron Holdings PLC, 0s to
2000, 11s to 2005............. 500 402,500
Western Wireless Corp., "A",
10.5s, 2007................... 1,000 1,048,750
------------
$ 29,759,978
------------
TRANSPORTATION -- 0.9%
Central Transport Rental
Finance Corp., 9.5s, 2003..... $ 1,332 $ 1,258,696
Moran Transportation Co.,
11.75s, 2004.................. 500 540,000
------------
$ 1,798,696
------------
Total Bonds (Identified Cost, $176,878,574)... $180,456,662
------------
</TABLE>
15
<PAGE> 16
PORTFOLIO OF INVESTMENTS -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
<CAPTION>
STOCKS -- 0.8%
Issuer Shares Value
<S> <C> <C>
APPAREL AND TEXTILES -- 0.2%
Ithaca Industries, Inc......... 60,000 $ 480,000
------------
BUILDING
Atlantic Gulf Communities
Corp.*........................ 150 $ 647
------------
CONSUMER GOODS AND SERVICES
Ranger Industries, Inc.*....... 123,210 $ 34,499
------------
ENTERTAINMENT -- 0.5%
Gillett Holdings, Inc.+*....... 23,535 $ 894,330
------------
RESTAURANTS AND LODGING
Sam Houston Race Park, Inc.*... 82 $ 410
------------
SPECIAL PRODUCTS AND SERVICES -- 0.1%
Central Transport Rental Group
PLC, ADR (United Kingdom)..... 653,938 $ 245,227
Envirosource, Inc.+*........... 1,666 4,477
------------
$ 249,704
------------
Total Stocks (Identified Cost, $4,492,331).... $ 1,659,590
------------
PREFERRED STOCKS -- 3.4%
CONSUMER GOODS AND SERVICES -- 0.3%
Renaissance Cosmetics, Inc.,
14s+#......................... 600 $ 606,000
------------
ENTERTAINMENT -- 1.1%
Time Warner, Inc., "K",
10.25s........................ 1,991 $ 2,160,235
------------
<CAPTION>
PREFERRED STOCKS -- continued
Issuer Shares Value
<S> <C> <C>
SPECIAL PRODUCTS AND SERVICES -- 1.3%
K-III Communications Corp.,
"B", 11.625s#................. 26,065 $ 2,632,572
------------
TELECOMMUNICATIONS -- 0.7%
Cablevision Systems Corp.,
11.125s, 2008#................ 14,998 1,346,071
------------
Total Preferred Stocks (Identified Cost,
$5,272,448)................................... $ 6,744,878
------------
WARRANTS
OIL SERVICES
ICO, Inc.,*.................... 375,000 $ 243,750
------------
OILS
Crystal Oil Co., $0.075*....... 1,920,847 $ --
Crystal Oil Co., $0.10*........ 1,683,209 --
Crystal Oil Co., $0.125*....... 2,000,087 --
Crystal Oil Co., $0.15*........ 1,963,306 --
Crystal Oil Co., $0.25*........ 1,963,306 --
------------
$ --
------------
Total Warrants (Identified Cost, $178,993).... $ 243,750
------------
SHORT-TERM OBLIGATION -- 2.8%
<CAPTION>
Principal Amount
(000 Omitted)
<S> <C> <C>
Ford Motor Credit Corp., due
1/02/97....................... $ 5,475 $ 5,473,920
------------
Total Investments (Identified Cost,
$192,296,266)................................. $194,578,800
OTHER ASSETS, LESS LIABILITIES -- 2.0% 3,883,219
------------
Net Assets -- 100.0%............................ $198,462,019
===========
See portfolio footnotes and notes to financial statements
</TABLE>
16
<PAGE> 17
PORTFOLIO OF INVESTMENTS -- December 31, 1996
MANAGED SECTORS VARIABLE ACCOUNT -- MSVA
<TABLE>
<CAPTION>
STOCKS -- 99.1%
Issuer Shares Value
<S> <C> <C>
ENERGY -- 9.9%
BJ Services Co.*............... $ 27,400 $ 1,397,400
Camco International, Inc. ..... 27,500 1,268,438
Cooper Cameron Corp.*.......... 26,000 1,989,000
Occidental Petroleum Corp. .... 105,000 2,454,375
Tidewater, Inc. ............... 32,000 1,448,000
Weatherford Enterra, Inc.*..... 36,200 1,086,000
-----------
$ 9,643,213
-----------
FINANCIAL SERVICES -- 3.7%
Advanta Corp., "B"............. 31,500 $ 1,287,563
Equitable of Iowa Cos.......... 51,000 2,339,625
-----------
$ 3,627,188
-----------
LEISURE -- 19.0%
American Radio Systems Corp.,
"A"*.......................... 14,500 $ 395,125
Argosy Gaming Corp............. 34,400 159,100
Harrah's Entertainment,
Inc.*........................ 159,100 3,162,112
HFS, Inc.*..................... 13,000 776,750
Host Marriot Corp.............. 88,200 1,411,200
LIN Television Corp.*.......... 19,600 828,100
Louisiana Quinta Inns, Inc..... 40,000 765,000
MGM Grand, Inc.*............... 25,200 878,850
Promus Hotel Corp.*............ 52,700 1,561,238
Showboat, Inc.................. 42,000 724,500
Telephone & Data Systems,
Inc.......................... 216,500 7,848,125
-----------
$ 18,510,100
-----------
RETAIL -- 4.2%
Gymboree Corp.................. 1,400 $ 32,025
Office Depot, Inc.*............ 111,000 1,970,250
Sears, Roebuck & Co............ 41,500 1,914,187
Staples, Inc.*................. 6,600 119,213
-----------
$ 4,035,675
-----------
TECHNOLOGY -- 37.1%
ADT Ltd.*...................... 149,500 $ 3,419,812
Aerial Communications, Inc..... 72,000 585,000
AirTouch Communications,
Inc.*........................ 28,700 724,675
Analog Devices, Inc.*.......... 32,400 1,097,550
Atmel Corp..................... 59,000 1,954,375
Cabletron Systems, Inc.*....... 55,700 1,852,025
Cisco Systems, Inc.*........... 8,000 509,000
<CAPTION>
Issuer Shares Value
<S> <C> <C>
TECHNOLOGY -- continued
Computer Associates
International, Inc............ $ 31,600 $ 1,572,100
Digital Equipment Corp......... 65,000 2,364,375
Electronic Arts, Inc.*......... 64,100 1,918,994
Glenayre Technologies, Inc.*... 60,600 1,306,687
Intel Corp..................... 43,600 5,708,875
Loral Space and Communications
Corp.......................... 80,000 1,470,000
MCI Communications Corp........ 32,600 1,065,613
Microsoft Corp.*............... 14,500 1,198,062
National Semiconductor Corp.... 83,400 2,032,875
Oracle Systems Corp.*.......... 16,000 668,000
Spectrum Holobyte, Inc......... 212,000 1,590,000
Sun Microsystems, Inc.*........ 118,000 3,031,125
Sybase, Inc.*.................. 44,000 734,250
VLSI Technology, Inc........... 51,500 1,229,563
-----------
$ 36,032,956
-----------
OTHER -- 25.2%
AGCO Corp...................... 60,000 $ 1,717,500
Colgate-Palmolive Co........... 14,500 1,337,625
Coventry Corp.*................ 180,000 1,667,812
Genesis Health Ventures,
Inc.......................... 26,400 821,700
HBO & Co....................... 8,500 504,688
HealthSource, Inc.*............ 125,000 1,640,625
HealthSouth Corp.*............. 36,000 1,390,500
McDonnell Douglas Corp......... 23,000 1,472,000
Pacificare Health Systems,
Inc., "B"..................... 20,500 1,747,625
Pharmacia & Upjohn, Inc........ 38,000 1,505,750
PowerGen PLC (United
Kingdom)..................... 165,893 1,625,669
Rhone-Poulenc Rorer, Inc....... 10,000 781,250
St. Jude Medical, Inc.*........ 30,000 1,278,750
Tyco International Ltd......... 51,500 2,723,063
United Healthcare Corp......... 60,700 2,731,500
Ventritex, Inc................. 12,600 310,275
Wisconsin Central
Transportation Corp.*......... 32,300 1,279,887
-----------
$ 24,536,219
-----------
Total Stocks (Identified Cost, $87,723,023)... $ 96,385,351
-----------
</TABLE>
17
<PAGE> 18
PORTFOLIO OF INVESTMENTS -- continued
<TABLE>
<CAPTION>
CONVERTIBLE BONDS -- 0.1%
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Spectrum Holobyte, Inc., 6.5s,
2002##........................ $ 120,000 $ 77,550
Ventritex, Inc., 5.75s, 2001... 30,000 47,325
-----------
Total Convertible Bonds (Identified Cost,
$150,000)..................................... $ 124,875
-----------
SHORT-TERM OBLIGATION -- 1.2%
Ford Motor Credit Corp., due
1/02/97....................... $ 1,135 $ 1,134,776
-----------
Total Investments (Identified Cost,
$89,007,799).................................. $ 97,645,002
OTHER ASSETS, LESS LIABILITIES -- (0.4)%........ (363,256)
-----------
Net Assets -- 100.0%.......................... $ 97,281,746
===========
See portfolio footnotes and notes to financial statements
PORTFOLIO OF INVESTMENTS -- December 31, 1996
MONEY MARKET VARIABLE ACCOUNT -- MMVA
COMMERCIAL PAPER -- 36.4%
Principal Amount
Issuer (000 Omitted) Value
American Telephone & Telegraph
Co., due 2/20/97.............. $ 5,200 $ 5,161,072
Bank of America, due 3/27/97... 3,000 2,962,104
Beneficial Corp., due
2/20/97....................... 3,700 3,672,301
du Pont (E.I.) de Nemours &
Co., due 1/22/97.............. 2,000 1,993,863
Ford Motor Credit Corp., due
1/24/97....................... 6,000 5,979,645
General Motors Acceptance
Corp., due 1/31/97............ 4,300 4,280,507
Kimberly Clark Corp., due
2/14/97....................... 3,300 3,277,817
Knight-Ridder, Inc., due
1/28/97....................... 2,900 2,888,473
Pacific Gas and Electric Co.,
due 1/10/97................... 4,000 3,994,600
Pacific Gas and Electric Co.,
due 1/15/97................... 3,000 2,993,618
Raytheon Co., due 1/07/97...... 2,700 2,697,619
Raytheon Co., due 1/08/97...... 2,300 2,297,603
Transamerica Co., due
2/19/97....................... 4,000 3,970,600
-----------
Total Commercial Paper, at Amortized Cost..... $ 46,169,822
-----------
U.S. GOVERNMENT AND
AGENCY OBLIGATIONS -- 63.9%
Principal Amount
Issuer (000 Omitted) Value
Federal Farm Credit Bank, due
1/13/97....................... $ 6,000 $ 5,989,620
Federal Farm Credit Bank, due
2/13/97....................... 4,000 3,975,108
Federal Farm Credit Bank, due
1/06/97....................... 4,000 3,997,100
Federal Home Loan Bank, due
1/02/97....................... 3,200 3,199,533
Federal Home Loan Bank, due
1/16/97....................... 4,800 4,789,600
Federal Home Loan Bank, due
2/07/97....................... 990 984,689
Federal Home Loan Bank, due
3/24/97....................... 2,400 2,371,136
Federal Home Loan Bank, due
2/03/97....................... 2,700 2,686,907
Federal Home Loan Bank, due
1/27/97....................... 3,000 2,988,192
Federal Home Loan Mortgage
Corp., due 3/03/97............ 4,000 3,964,688
Federal Home Loan Mortgage
Corp., due 2/06/97............ 6,900 6,863,982
Federal Home Loan Mortgage
Corp., due 2/24/97............ 2,300 2,281,577
Federal Home Loan Mortgage
Corp., due 2/21/97............ 5,000 4,962,954
Federal National Mortgage
Assn., due 6/10/97............ 3,500 3,419,733
Federal National Mortgage
Assn., due 6/11/97............ 5,300 5,177,457
Federal National Mortgage
Assn., due 4/21/97............ 5,000 4,920,250
Federal National Mortgage
Assn., due 1/09/97 -
2/18/97....................... 9,000 8,966,102
Federal National Mortgage
Assn., due 1/14/97............ 2,600 2,594,836
Tennessee Valley Authority, due
1/21/97....................... 7,000 6,979,778
-----------
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
U.S. GOVERNMENT AND
AGENCY OBLIGATIONS -- continued
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Total U.S. Government and Agency Obligations, at
Amortized Cost................................ $ 81,113,242
-----------
Total Investments, at Amortized Cost.......... $127,283,064
OTHER ASSETS, LESS LIABILITIES -- (0.3)%........ (374,796)
-----------
Net Assets -- 100.0%.......................... $126,908,268
===========
See portfolio footnotes and notes to financial statements
PORTFOLIO OF INVESTMENTS -- December 31, 1996
TOTAL RETURN VARIABLE ACCOUNT -- TRVA
STOCKS -- 57.4%
Issuer Shares Value
U.S. COMMON STOCKS -- 51.9%
AEROSPACE -- 3.9%
Allied Signal, Inc. ........... 35,400 $ 2,371,800
General Dynamics Corp. ........ 13,500 951,750
Lockheed Martin Corp. ......... 10,200 933,300
Raytheon Co. .................. 42,600 2,050,125
United Technologies Corp. ..... 71,200 4,699,200
-----------
$ 11,006,175
-----------
APPAREL AND TEXTILES -- 0.5%
VF Corp........................ 22,500 $ 1,518,750
-----------
AUTOMOTIVE -- 2.0%
Dana Corp. .................... 33,000 1,076,625
Ford Motor Co. ................ 46,900 1,494,937
General Motors Corp. .......... 9,900 551,925
Goodrich (B.F.) Co. ........... 63,300 2,563,650
-----------
$ 5,687,137
-----------
BANKS AND CREDIT COMPANIES -- 5.5%
Bank of Boston Corp. .......... 25,700 $ 1,651,225
Bank of New York, Inc. ........ 54,500 1,839,375
Chase Manhattan Corp. ......... 34,760 3,102,330
Comerica, Inc. ................ 5,000 261,875
Fleet/Norstar Financial Group,
Inc. ......................... 38,200 1,905,225
<CAPTION>
STOCKS -- continued
Issuer Shares Value
U.S. COMMON STOCKS -- continued
<S> <C> <C>
BANKS AND CREDIT COMPANIES -- continued
National City Corp. ........... 53,200 $ 2,387,350
NationsBank Corp. ............. 29,500 2,883,625
Northern Trust Corp. .......... 11,400 413,250
Norwest Corp. ................. 30,800 1,339,800
-----------
$ 15,784,055
-----------
BUSINESS MACHINES -- 0.9%
Digital Equipment Corp.*....... 33,000 $ 1,200,375
International Business Machines
Corp. ........................ 8,300 1,253,300
-----------
$ 2,453,675
-----------
CELLULAR TELEPHONES -- 0.2%
Telephone & Data Systems,
Inc. ........................ 16,400 $ 594,500
-----------
CHEMICALS -- 2.2%
Air Products & Chemicals,
Inc. ........................ 3,000 $ 207,375
Dow Chemical Co. .............. 12,200 956,175
du Pont (E. I.) de Nemours &
Co., Inc. .................... 17,900 1,689,312
Praxair, Inc. ................. 19,700 908,663
Rohm & Haas Co. ............... 21,300 1,738,612
Witco Corp. ................... 29,600 902,800
-----------
$ 6,402,937
-----------
CONSUMER GOODS AND SERVICES -- 3.3%
American Brands, Inc. ......... 23,400 $ 1,161,225
Colgate-Palmolive Co. ......... 14,700 1,356,075
Olin Corp. .................... 25,200 948,150
Philip Morris Cos., Inc. ...... 34,200 3,851,775
Rubbermaid, Inc. .............. 28,400 646,100
Sherwin Williams Co. .......... 24,800 1,388,800
-----------
$ 9,352,125
-----------
ELECTRICAL EQUIPMENT -- 1.5%
General Electric Co. .......... 33,600 $ 3,322,200
Honeywell, Inc. ............... 14,400 946,800
-----------
$ 4,269,000
-----------
ELECTRONICS -- 0.1%
Analog Devices, Inc.*.......... 10,200 $ 345,525
-----------
</TABLE>
19
<PAGE> 20
PORTFOLIO OF INVESTMENTS -- continued
<TABLE>
<CAPTION>
STOCKS -- continued
Issuer Shares Value
U.S. COMMON STOCKS -- continued
<S> <C> <C>
FINANCIAL INSTITUTIONS -- 2.0%
American Express Co. .......... 35,700 $ 2,017,050
Federal Home Loan
Mortgage Corp. ................ 14,200 1,563,775
Southern National Corp. ....... 59,000 2,138,750
-----------
$ 5,719,575
-----------
FOOD AND BEVERAGE PRODUCTS -- 1.3%
Anheuser Busch Cos., Inc. ..... 9,000 $ 360,000
Dimon, Inc. ................... 30,000 693,750
General Mills, Inc. ........... 21,600 1,368,900
McCormick & Co., Inc. ......... 21,200 499,525
PepsiCo, Inc. ................. 22,400 655,200
-----------
$ 3,577,375
-----------
FOREST AND PAPER PRODUCTS -- 0.3%
Weyerhaeuser Co. .............. 21,000 $ 994,875
-----------
INSURANCE -- 3.6%
Allstate Corp. ................ 32,100 $ 1,857,787
Chubb Corp. ................... 20,400 1,096,500
Cigna Corp..................... 15,900 2,172,337
Conseco, Inc. ................. 70 4,463
St. Paul Cos., Inc. ........... 30,600 1,793,925
Torchmark Corp. ............... 36,000 1,818,000
Travelers Group, Inc. ......... 31,300 1,420,238
-----------
$ 10,163,250
-----------
MACHINERY -- 1.2%
Cooper Industries, Inc. ....... 18,000 $ 758,250
Deere & Co., Inc. ............. 48,400 1,966,250
York International Corp. ...... 14,700 821,363
-----------
$ 3,545,863
-----------
MEDICAL AND HEALTH PRODUCTS -- 1.9%
American Home Products
Corp. ....................... 32,600 $ 1,911,175
Baxter International, Inc. .... 22,100 906,100
Pharmacia & Upjohn, Inc. ...... 33,000 1,307,625
Rhone-Poulenc Rorer, Inc. ..... 18,500 1,445,313
-----------
$ 5,570,213
-----------
<CAPTION>
Issuer Shares Value
U.S. COMMON STOCKS -- continued
<S> <C> <C>
MEDICAL AND HEALTH TECHNOLOGY AND SERVICES -- 1.0%
Columbia Healthcare Corp. ..... 23,900 $ 973,925
St. Jude Medical, Inc.*........ 11,400 485,925
United Healthcare Corp. ....... 29,200 1,314,000
-----------
$ 2,773,850
-----------
METALS AND MINERALS -- 0.6%
Aluminum Cos. of America....... 21,600 $ 1,377,000
Phelps Dodge Corp. ............ 6,000 405,000
-----------
$ 1,782,000
-----------
OIL SERVICES -- 0.7%
Schlumberger Ltd. ............. 19,600 $ 1,957,550
-----------
OILS -- 4.9%
Amoco Corp. ................... 20,500 $ 1,650,250
Atlantic Richfield Co. ........ 12,500 1,656,250
Exxon Corp. ................... 20,500 2,009,000
Mobil Corp. ................... 16,000 1,956,000
Occidental Petroleum Corp. .... 76,600 1,790,525
Sun, Inc. ..................... 6,459 157,438
Texaco, Inc. .................. 19,000 1,864,375
Ultramar Diamond Shamrock...... 13,100 414,288
USX-Marathon Group............. 109,400 2,611,925
-----------
$ 14,110,051
-----------
PHOTOGRAPHIC PRODUCTS -- 1.1%
Eastman Kodak Co. ............. 37,500 $ 3,009,375
-----------
POLLUTION CONTROL -- 0.6%
Browning Ferris Industries,
Inc. ........................ 31,500 $ 826,875
WMX Technologies, Inc. ........ 26,300 858,038
-----------
$ 1,684,913
-----------
RAILROADS -- 1.5%
Burlington Northern Santa Fe
Railway Co. .................. 21,300 $ 1,839,787
CSX Corp. ..................... 16,400 692,900
Illinois Central Corp. ........ 50,450 1,614,400
-----------
$ 4,147,087
-----------
REAL ESTATE -- 1.3%
Arden Realty, Inc.............. 13,000 $ 360,750
Hospitality Properties Trust... 41,000 1,189,000
</TABLE>
20
<PAGE> 21
<TABLE>
<CAPTION>
STOCKS -- continued
Issuer Shares Value
U.S. COMMON STOCKS -- continued
<S> <C> <C>
REAL ESTATE -- continued
Meditrust Corp. ............... 42,100 $ 1,684,000
National Health Investors,
Inc. ........................ 11,400 431,775
-----------
$ 3,665,525
-----------
SPECIAL PRODUCTS AND SERVICES -- 0.4%
Stanley Works.................. 39,900 $ 1,077,300
-----------
STORES -- 1.3%
May Department Stores Co. ..... 20,000 $ 935,000
Rite Aid Corp. ................ 8,700 345,825
Sears, Roebuck & Co. .......... 33,300 1,535,963
Wal-Mart Stores, Inc. ......... 33,800 773,175
-----------
$ 3,589,963
-----------
UTILITIES -- ELECTRIC -- 3.3%
Allegheny Power Systems,
Inc.......................... 20,800 $ 631,800
CMS Energy Corp................ 20,000 672,500
Carolina Power & Light Co...... 28,700 1,047,550
Coastal Corp................... 35,300 1,725,286
DPL, Inc....................... 20,000 490,000
FPL Group, Inc................. 45,000 2,070,000
Peco Energy Co................. 20,000 505,000
Pinnacle West Capital Corp..... 27,000 857,250
Portland General Corp.......... 19,800 831,600
Texas Utilities Co............. 14,000 570,500
-----------
$ 9,401,486
-----------
UTILITIES -- GAS -- 2.0%
Eastern Enterprises............ 16,900 $ 597,838
Pacific Enterprises............ 18,000 546,750
PanEnergy Corp................. 41,000 1,845,000
Sonat, Inc..................... 15,000 772,500
UGI Corp....................... 20,000 447,500
Williams Cos., Inc............. 39,300 1,473,750
-----------
$ 5,683,338
-----------
UTILITIES -- TELEPHONE -- 2.8%
Ameritech Corp................. 16,900 $ 1,024,563
AT&T Corp...................... 7,400 321,900
BellSouth Corp................. 35,900 1,449,462
<CAPTION>
Issuer Shares Value
U.S. COMMON STOCKS -- continued
<S> <C> <C>
UTILITIES -- TELEPHONE -- continued
GTE Corp....................... 60,000 $ 2,730,000
MCI Communications Corp........ 79,600 2,601,925
-----------
$ 8,127,850
-----------
Total U.S. Common Stocks...................... $147,995,318
-----------
FOREIGN STOCKS -- 5.5%
CANADA -- 0.1%
Canadian National Railway Co.
(Railroads)................... 5,600 $ 212,800
-----------
GERMANY -- 0.4%
Henkel Kgaa, Preferred
(Consumer Goods and
Services)..................... 21,100 $ 1,060,143
-----------
NETHERLANDS -- 0.9%
Royal Dutch Petroleum Co., ADR
(Oils)........................ 15,600 $ 2,663,700
-----------
NEW ZEALAND
Lion Nathan Ltd. (Food and
Beverage Products)............ 53,800 $ 128,853
-----------
SPAIN -- 0.4%
Repsol S.A., ADR (Oil
Services).................... 27,000 $ 1,029,375
-----------
SWEDEN -- 0.5%
Astra AB, "A", ADR (Medical and
Health Products).............. 20,000 $ 980,000
Volvo AB, ADR (Automotive)..... 25,000 543,750
-----------
$ 1,523,750
-----------
SWITZERLAND -- 0.9%
Novartis AG
(Pharmaceuticals)*........... 2,133 $ 2,444,092
-----------
UNITED KINGDOM -- 2.3%
British Petroleum PLC, ADR
(Oils)........................ 28,861 $ 4,080,224
Smithkline Beecham PLC, ADR
(Medical and Health
Products)..................... 36,100 2,454,800
-----------
$ 6,535,024
-----------
Total Foreign Stocks.......................... $ 15,597,737
-----------
Total Stocks (Identified Cost,
$123,238,747)................................. $163,593,055
-----------
</TABLE>
21
<PAGE> 22
PORTFOLIO OF INVESTMENTS -- continued
<TABLE>
<CAPTION>
BONDS -- 30.5%
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. BONDS -- 21.3%
AEROSPACE -- 0.1%
Northrop Grumman Corp., 9.375s,
2024.......................... $ 225 $ 248,740
-----------
AIRLINES -- 1.7%
Continental Airlines, Inc.,
9.5s, 2001##.................. $ 625 $ 637,500
Continental Airlines Pass-Thru
Trust, 9.5s, 2013............. 150 168,562
Continental Airlines Pass-Thru
Trust, 10.22s, 2014........... 500 585,505
Delta Air Lines, Inc., 8.5s,
2002.......................... 400 423,524
Delta Air Lines, Inc.,
10.375s, 2022................. 375 472,076
Jet Equipment Trust, 9.41s,
2010##........................ 330 380,771
Jet Equipment Trust, 8.64s,
2012##........................ 243 265,481
Jet Equipment Trust, 11.44s,
2014##........................ 300 355,572
Jet Equipment Trust, 10.69s,
2015##........................ 250 304,228
Qantas Airways Ltd., 7.5s,
2003##........................ 450 460,224
United Airlines, Inc., 9.12s,
2012.......................... 200 223,336
United Airlines Pass-Thru
Trust, 7.27s, 2013............ 500 484,155
-----------
$ 4,760,934
-----------
BANKS AND CREDIT COMPANIES -- 3.0%
Advanta Capital Trust, 8.99s,
2026##........................ $ 375 $ 375,581
Advanta Corp., 7.47s, 2001..... 250 254,310
BankAmerica Capital, 8s,
2026.......................... 500 506,850
BT Institutional Capital Trust,
"A", 8.09s, 2026.............. 400 402,000
Capital One Bank, 6.75s,
2000.......................... 900 898,875
Capital One Financial Corp.,
7.25s, 2003................... 400 395,000
Contifinancial Corp., 8.375s,
2003.......................... 300 309,000
Equitable Life Assurance
Society, 7.7s, 2015........... 1,250 1,249,475
First Chicago NBD Institutional
Capital, 7.95s, 2026##........ 250 245,625
First USA Capital Trust,
9.33s, 2027................... 600 599,382
MBNA Capital, 8.278s, 2026..... 400 401,500
Mellon Capital II, 7.995s,
2027......................... 500 500,000
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
U.S. BONDS -- continued
<S> <C> <C>
BANKS AND CREDIT COMPANIES -- continued
NB Capital Trust, 7.83s,
2026......................... $ 420 $ 418,719
New York Life Insurance Co.,
7.5s, 2023.................... 300 290,676
Peoples Bank of Bridgeport,
7.2s, 2006.................... 125 122,208
State Street Bank & Trust,
7.94s, 2026................... 350 341,687
Travelers Capital III, 7.75s,
2036.......................... 985 947,137
United Cos. Financial Corp.,
7.7s, 2004.................... 200 201,000
-----------
$ 8,459,025
-----------
BUILDING -- 0.2%
Owens Corning Fiberglas Corp.,
8.875s, 2002.................. $ 200 $ 216,878
Owens Corning Fiberglas Corp.,
9.9s, 2015##.................. 200 220,500
-----------
$ 437,378
-----------
BUSINESS MACHINES -- 0.1%
International Business Machines
Corp., 7.125s, 2096........... $ 400 $ 380,332
-----------
BUSINESS SERVICES -- 0.5%
Loewen Group International,
Inc., 7.5s, 2001.............. $ 900 $ 901,125
Loewen Group International,
Inc., 7.75s, 2001##........... 400 407,000
-----------
$ 1,308,125
-----------
CELLULAR TELEPHONES -- 0.1%
360 Communications, 7.5s,
2006.......................... $ 200 $ 198,382
-----------
CONSUMER GOODS AND SERVICES -- 0.2%
Philip Morris Cos., Inc.,
7.65s, 2008................... $ 690 $ 704,676
-----------
CORPORATE ASSET BACKED -- 1.4%
AT&T Universal Card Master
Trust, 5.65s, 2003............ $ 3,500 $ 3,498,880
BCF LLC, 7.75s, 2026##......... 199 194,880
Merrill Lynch Mortgage
Investors, Inc., 8.9s, 2011... 347 366,339
-----------
$ 4,060,099
-----------
</TABLE>
22
<PAGE> 23
<TABLE>
<CAPTION>
BONDS -- continued
Principal Amount
Issuer (000 Omitted) Value
U.S. BONDS -- continued
<S> <C> <C>
ENTERTAINMENT -- 1.8%
Time Warner, Inc., 7.45s,
1998.......................... $ 3,450 $ 3,487,984
Time Warner, Inc., 7.95s,
2000.......................... 400 413,076
Time Warner, Inc., 8.375s,
2023.......................... 800 811,096
Time Warner, Inc., 9.15s,
2023.......................... 349 378,313
-----------
$ 5,090,469
-----------
FINANCIAL INSTITUTIONS -- 1.6%
Alex Brown, Inc., 7.625s,
2005.......................... $ 320 $ 326,480
Auburn Hills Trust, 12s,
2020.......................... 725 1,099,057
First Merchants Acceptance
Corp., 9.5s, 2006............. 200 196,000
Humpuss Funding Corp.,
7.72s, 2009##................. 200 197,426
Lehman Brothers, Inc., 7.125s,
2003.......................... 400 399,692
Lehman Brothers, Inc., 7.5s,
2026.......................... 1,150 1,165,973
Salton Sea Funding Corp.,
7.37s, 2005................... 400 399,428
Salton Sea Funding Corp.,
7.84s, 2010................... 400 402,188
Salton Sea Funding Corp., 8.3s,
2011.......................... 200 207,130
-----------
$ 4,393,374
-----------
FOOD AND BEVERAGE PRODUCTS -- 0.5%
RJR Nabisco, Inc., 8.75s,
2004.......................... $ 165 $ 166,528
RJR Nabisco, Inc., 8.75s,
2007.......................... 500 499,230
RJR Nabisco, Inc., 7.55s,
2015.......................... 890 882,675
-----------
$ 1,548,433
-----------
FOREST AND PAPER PRODUCTS -- 0.9%
Boise Cascade Co., 9.85s,
2002.......................... $ 600 $ 678,522
Boise Cascade Co., 7.43s,
2005.......................... 250 253,750
Champion International Corp.,
6.4s, 2026.................... 400 381,876
Georgia Pacific Corp.,
9.875s, 2021.................. 1,150 1,285,482
-----------
$ 2,599,630
-----------
INSURANCE -- 1.0%
American Realty Corp.,
7.45s, 2026##................. $ 400 $ 399,500
Liberty Mutual Insurance Co.,
8.2s, 2007##.................. 875 929,197
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
U.S. BONDS -- continued
<S> <C> <C>
INSURANCE -- continued
Liberty Mutual Insurance Co.,
7.875s, 2026##................ $ 200 $ 200,698
Metropolitan Life Insurance
Co., 7.7s, 2015##............. 400 400,996
Nationwide Mutual Life
Insurance Co., 7.5s, 2024##... 750 699,015
Travelers Group, Inc., 7.875s,
2025.......................... 275 287,235
-----------
$ 2,916,641
-----------
OIL SERVICES -- 0.2%
Transcontinental Gas Pipe Line,
7.25s, 2026................... $ 500 $ 492,500
-----------
OILS -- 0.9%
CITGO Petroleum, 7.875s,
2006.......................... $ 200 $ 203,920
Enserch Exploration, Inc.,
7.54s, 2009##................. 350 344,750
Husky Oil Ltd., 7.125s, 2006... 400 400,016
Mitchell Energy & Development
Corp., 6.75s, 2004............ 200 186,780
Oryx Energy Co., 10s, 2001..... 290 318,330
Oryx Energy Co., 8s, 2003...... 300 303,525
Oryx Energy Co., 8.375s,
2004.......................... 650 671,697
-----------
$ 2,429,018
-----------
REAL ESTATE -- 0.2%
Taubman Realty Group Ltd., 8s,
2001.......................... $ 600 $ 619,278
-----------
RESTAURANTS AND LODGING -- 0.1%
Circus Circus Enterprises,
Inc.,
6.7s, 2096.................... $ 300 $ 295,056
-----------
RETAIL -- 0.1%
Price/Costco, Inc., 7.125s,
2005.......................... $ 250 $ 250,030
-----------
SPECIAL PRODUCTS AND SERVICES -- 0.3%
Mark IV Industries, Inc.,
7.75s, 2006................... $ 550 $ 540,375
Stewart Enterprises, Inc.,
6.7s, 2003.................... 300 297,057
-----------
$ 837,432
-----------
TELECOMMUNICATIONS -- 1.6%
American Portable Telecom,
Inc., 0s, 2006##.............. $ 900 $ 405,144
</TABLE>
23
<PAGE> 24
PORTFOLIO OF INVESTMENTS -- continued
<TABLE>
<CAPTION>
BONDS -- continued
Principal Amount
Issuer (000 Omitted) Value
U.S. BONDS -- continued
<S> <C> <C>
TELECOMMUNICATIONS -- continued
Continental Cablevision, Inc.,
8.3s, 2006.................... $ 550 $ 591,938
TCI Communications, Inc.,
5.56s, 2003................... 500 497,500
Tele-Communications, Inc.,
7.38s, 2001................... 500 504,850
Tele-Communications, Inc.,
7.49s, 2003................... 800 807,432
Tele-Communications, Inc.,
10.125s, 2022................. 1,475 1,619,579
Viacom, Inc., 7.625s, 2016..... 260 238,875
-----------
$ 4,665,318
-----------
UTILITIES -- ELECTRIC -- 4.2%
Arkansas Power & Light Co.,
8.75s, 2026................... $ 75 $ 77,265
Central Maine Power Co., 7.45s,
1999.......................... 200 199,012
Cleveland Electric Illuminating
Co., 9.375s, 2017............. 700 717,927
Cleveland Electric Illuminating
Co., 9s, 2023................. 350 350,938
Coastal Corp., 7.75s, 2035..... 650 661,745
Edison Mission Energy Funding
Corp., 7.33s, 2008##.......... 100 101,373
El Paso Electric Co., 8.9s,
2006.......................... 575 599,518
First PV Funding Corp., 10.3s,
2014.......................... 474 504,810
First PV Funding Corp., 10.15s,
2016.......................... 362 384,625
Long Island Lighting Co.,
8.75s, 1997................... 500 501,305
Long Island Lighting Co., 7.5s,
2007.......................... 275 256,108
Long Island Lighting Co., 8.9s,
2019.......................... 870 887,617
Long Island Lighting Co., 9s,
2022.......................... 775 815,687
Long Island Lighting Co., 8.2s,
2023.......................... 100 98,991
Long Island Lighting Co.,
9.625s, 2024.................. 800 850,808
Louisiana Power & Light Co.,
10.67s, 2017.................. 400 428,111
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
U.S. BONDS -- continued
<S> <C> <C>
UTILITIES -- ELECTRIC -- continued
Louisiana Power & Light Co.,
8.75s, 2026................... $ 87 $ 87,544
Midland Cogeneration Venture
Corp., 10.33s, 2002........... 468 497,593
Midland Funding Corp. II, "A",
11.75s, 2005.................. 750 830,370
Montana Power Co., 7.875s,
2026.......................... 750 756,563
Niagara Mohawk Power Corp., 8s,
2004.......................... 500 480,340
Pacificorp Holdings, 7.2s,
2006##........................ 680 676,600
System Energy Resources, 7.38s,
2000.......................... 700 697,935
Texas & New Mexico Power Co.,
12.5s, 1999................... 400 434,540
-----------
$ 11,897,325
-----------
UTILITIES -- GAS -- 0.6%
California Energy, Inc.,
10.25s, 2004.................. $ 600 $ 632,250
Louis Dreyfus Natural Gas
Corp., 9.25s, 2004............ 250 262,908
NGC Corp., 7.625s, 2026........ 200 202,990
Province of Quebec, 6.5s,
2006.......................... 312 301,030
Ras Laffan Liquefied Natural
Gas, 8.294s, 2014##........... 325 325,812
Tosco Corp., 7.625s, 2006...... 355 366,509
-----------
$ 2,091,499
-----------
U.S. FEDERAL AGENCIES -- 4.9%
Federal Home Loan Mortgage
Corp., 9s, 2020 - 2020........ $ 327 $ 346,558
Federal National Mortgage
Assn., 2016................... 1,345 1,315,197
Federal National Mortgage
Assn., 7.5s, 2010 - 2011...... 2,144 2,173,418
Federal National Mortgage
Assn., 8s, 2025 - 2026........ 10,099 10,288,499
-----------
$ 14,123,672
-----------
</TABLE>
24
<PAGE> 25
<TABLE>
<CAPTION>
BONDS -- continued
Principal Amount
Issuer (000 Omitted) Value
U.S. BONDS -- continued
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 6.4%
U.S. Treasury Notes, 6.5s,
2001.......................... $ 1,300 $ 1,314,222
U.S. Treasury Notes, 6.625s,
2001.......................... 3,400 3,454,706
U.S. Treasury Notes, 7.5s,
2001.......................... 2,920 3,073,767
U.S. Treasury Notes, 5.875s,
2005.......................... 100 96,422
U.S. Treasury Notes, 6.5s,
2006.......................... 3,615 3,634,775
U.S. Treasury Notes, 6.875s,
2006.......................... 300 309,141
U.S. Treasury Bonds, 12s,
2005.......................... 2,195 2,980,393
U.S. Treasury Bonds, 12s,
2013.......................... 705 1,008,481
U.S. Treasury Bonds, 6.5s,
2026.......................... 700 686,987
U.S. Treasury Bonds, 6.75s,
2026.......................... 1,684 1,696,630
-----------
$ 18,255,524
-----------
Total U.S. Bonds.............................. $ 93,062,890
-----------
FOREIGN BONDS -- 2.8%
ARGENTINA -- 0.3%
Hidroelectrica Alicura,
8.375s, 1999##................ $ 500 $ 495,000
Republic of Argentina, 9.25s,
2001.......................... 220 223,300
-----------
$ 718,300
-----------
CANADA -- 0.6%
Canadian Pacific Forest
Products Ltd., 9.25s, 2002.... $ 800 $ 812,784
Fairfax Financial Holdings
Ltd., 8.3s, 2026.............. 400 416,640
Gulf Canada Resources Ltd.,
8.35s, 2006................... 400 411,500
-----------
$ 1,640,924
-----------
CHILE -- 0.2%
Empresa Electrica Del Norts,
7.75s, 2006##................. $ 190 $ 193,800
Enersis S.A., 6.9s, 2006....... 350 341,596
-----------
$ 535,396
-----------
COLOMBIA -- 0.5%
Financiera Energetica Nacional
Colombia, 9.375s, 2006##...... $ 135 $ 143,438
Oleoducto Centrale S.A.,
9.35s, 2005##................. 300 303,000
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
FOREIGN BONDS -- continued
<S> <C> <C>
COLOMBIA -- continued
Republic of Colombia, 8.75s,
1999.......................... $ 250 $ 261,250
Republic of Colombia, 8.66s,
2016##........................ 200 210,000
Republic of Colombia, 8.7s,
2016.......................... 540 520,835
-----------
$ 1,438,523
-----------
ITALY -- 0.1%
City of Naples, 7.52s, 2006.... $ 375 $ 386,745
-----------
MALAYSIA -- 0.1%
Petroliam Nasional Berhad,
7.625s, 2026##................ $ 400 $ 403,228
-----------
NETHERLANDS -- 0.3%
ABN Amro Bank NV, 7.3s, 2026... $ 800 $ 760,640
-----------
SOUTH AFRICA -- 0.3%
Republic of South Africa,
8.375s, 2006.................. $ 900 $ 899,982
-----------
SWITZERLAND -- 0.2%
Ciba-Geigy AG, 6.25s, 2016##... $ 500 $ 504,375
-----------
THAILAND -- 0.1%
Total Access Communication
Public, 8.375s, 2006##........ $ 400 $ 401,324
-----------
UNITED KINGDOM -- 0.1%
Crown Cork & Seal Finance PLC,
7s, 2006...................... $ 200 $ 198,272
-----------
Total Foreign Bonds............................. $ 7,887,709
-----------
Total Bonds (Identified Cost, $87,132,486).... $100,950,599
-----------
<CAPTION>
PREFERRED STOCKS -- 0.3%
Shares
<S> <C> <C>
El Paso Tennessee Pipeline Co.,
8.25s......................... 4,000 $ 204,500
Enron Corp., Cv................ 10,000 240,000
Long Island Lighting Co.,
7.95s......................... 20,000 507,500
-----------
Total Preferred Stocks (Identified Cost,
$933,000).................................... $ 952,000
-----------
</TABLE>
25
<PAGE> 26
PORTFOLIO OF INVESTMENTS -- continued
<TABLE>
<CAPTION>
PREFERRED STOCKS -- 0.3%
Shares
<S> <C> <C>
<CAPTION>
SHORT-TERM OBLIGATIONS -- 6.4%
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Federal Home Loan Bank, due
1/03/97....................... $ 6,000 $ 5,998,180
Ford Motor Credit Corp., due
1/02/97....................... 8,000 7,998,555
General Electric Capital Corp.,
due 1/02/97................... 4,185 4,184,175
-----------
Total Short-Term Obligations, at Amortized
Cost......................................... $ 18,180,910
-----------
Total Investments (Identified Cost,
$243,673,683)................................ $283,676,564
OTHER ASSETS, LESS LIABILITIES -- (0.5)% 1,571,614
-----------
Net Assets -- 100.0% $285,248,178
===========
See portfolio footnotes and notes to financial statements
</TABLE>
PORTFOLIO OF INVESTMENTS -- December 31, 1996
WORLD GOVERNMENTS VARIABLE ACCOUNT -- WGVA
BONDS -- 97.4%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. BONDS -- 21.1%
U.S. TREASURY OBLIGATIONS
U.S. Treasury Notes, 6.25s,
2001......................... $ 1,000 $ 1,000,940
U.S. Treasury Notes, 6.625s,
2001......................... 5,600 5,689,264
-----------
$ 6,690,204
-----------
FOREIGN BONDS -- 76.3%
AUSTRALIA -- 12.9%
Commonwealth of Australia,
8.75s, 2001.................. AUD 1,580 $ 1,336,355
Commonwealth of Australia,
9.75s, 2002.................. 1,750 1,548,902
Commonwealth of Australia,
9.5s, 2003................... 1,350 1,194,868
-----------
$ 4,080,125
-----------
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
FOREIGN BONDS -- continued
BELGIUM -- 2.8%
Kingdom of Belgium, 9s, 1998..... BEF 10,000 $ 342,256
Kingdom of Belgium, 8.75s,
2002............................ 5,000 185,994
Kingdom of Belgium, 7.25s,
2004............................ 5,000 174,124
Kingdom of Belgium, 8.5s, 2007... 5,000 187,997
-----------
$ 890,371
-----------
CANADA -- 2.9%
Government of Canada, 7s, 2006... CAD 1,200 $ 913,377
-----------
DENMARK -- 5.6%
Kingdom of Denmark, 6s, 1999..... DKK 2,003 $ 353,591
Kingdom of Denmark, 8s, 2001..... 6,587 1,241,893
Kingdom of Denmark, 7s, 2007..... 973 168,046
-----------
$ 1,763,530
-----------
GERMANY -- 13.0%
Federal Republic of Germany,
6.875s, 1999.................... DEM 1,160 $ 804,121
Federal Republic of Germany,
7.125s, 2002.................... 1,330 948,765
German Unity Fund, 8.75s, 2000... 241 178,968
Treuhandanstalt Obligationen,
6.375s, 1999.................... 3,202 2,207,163
-----------
$ 4,139,017
-----------
IRELAND -- 2.3%
Republic of Ireland, 8s, 2000.... IEP 400 $ 722,281
-----------
ITALY -- 10.8%
Republic of Italy, 8.313s,
1999............................ ITL 2,475,000 1,728,954
Republic of Italy, 8.313s,
2006............................ 2,285,000 1,705,792
-----------
$ 3,434,746
-----------
JAPAN -- 9.8%
Export Import Bank of Japan,
4.375s, 2003.................... JPY 160,000 $ 1,558,514
International Bank of
Reconstruction & Development,
4.5s, 2000...................... 96,000 922,247
International Bank of
Reconstruction & Development,
5.25s, 2002..................... 62,000 627,234
-----------
$ 3,107,995
-----------
SPAIN -- 8.2%
Government of Spain, 8.4s,
2001............................ ESP 106,820 $ 899,420
Government of Spain, 10.1s,
2001............................ 4,600 40,765
Government of Spain, 7.9s,
2002............................ 201,850 1,660,246
-----------
$ 2,600,431
-----------
</TABLE>
26
<PAGE> 27
<TABLE>
<CAPTION>
BONDS -- continued
Principal Amount
Issuer (000 Omitted) Value
FOREIGN BONDS -- continued
<S> <C> <C>
SWEDEN -- 3.1%
Kingdom of Sweden, 11s,
1999......................... SEK 2,300 $ 378,968
Kingdom of Sweden, 10.25s,
2000......................... 3,500 592,407
-----------
$ 971,375
-----------
UNITED KINGDOM -- 4.9%
United Kingdom Treasury, 9s,
2000......................... GBP 420 $ 757,320
United Kingdom Treasury, 9.75s, 2002.. 420 797,348
-----------
$ 1,554,668
-----------
Total Foreign Bonds.......................... $24,177,916
-----------
Total Bonds (Identified Cost, $30,676,134)... $30,868,120
-----------
<CAPTION>
CALL OPTIONS PURCHASED
Description/ Principal Amount
Expiration Month/ of Contracts
Strike Price (000 Omitted) Value
<S> <C> <C>
ITALIAN LIRE/DEUTSCHE MARKS
January/995 (Premium
Paid, $4,198)............... ITL 1,691,540 $8,458
-----------
PUT OPTIONS PURCHASED -- 2.1%
DEUTSCHE MARKS/BRITISH POUNDS
January/2.45.................. DEM 4,309 $ 207,248
DEUTSCHE MARKS/BRITISH POUNDS
January/2.51.................. 4,414 138,699
DEUTSCHE MARKS/BRITISH POUNDS
January/2.56.................. 4,502 85,744
SWISS FRANCS/DEUTSCHE MARKS
January/0.829................. CHF 1,704 61,087
SWISS FRANCS/DEUTSCHE MARKS
February/0.84................. 1,727 44,149
SWISS FRANCS/DEUTSCHE MARKS
February/0.84................. 2,981 76,176
SWISS FRANCS/DEUTSCHE MARKS
March/0.86.................... 4,820 52,306
-----------
Total Put Options Purchased (Premiums Paid,
$147,890).................................... $ 665,409
-----------
Total Investments (Identified Cost,
$30,828,222)................................. $31,541,987
-----------
<CAPTION>
CALL OPTIONS WRITTEN
Description/ Principal Amount
Expiration Month/ of Contracts
Strike Price (000 Omitted) Value
<S> <C> <C>
DEUTSCHE MARKS/BRITISH POUNDS
January/2.3682.................. DEM 4,165 $ --
SWISS FRANCS/DEUTSCHE MARKS
February/0.8265................. CHF 2,933 (18)
-----------
Total Call Options Written (Premiums Received,
$24,861)....................................... $ (18)
-----------
PUT OPTIONS WRITTEN -- (1.6)%
DEUTSCHE MARKS/BRITISH POUNDS
January/2.45.................... DEM 4,309 $ (206,395)
DEUTSCHE MARKS/BRITISH POUNDS
January/2.5105.................. 4,415 (138,144)
SWISS FRANCS/DEUTSCHE MARKS
January/0.829................... CHF 1,704 (61,130)
SWISS FRANCS/DEUTSCHE MARKS
February/0.84................... 4,708 (120,379)
-----------
Total Put Options Written (Premiums Received,
$214,566)...................................... $ (526,048)
-----------
OTHER ASSETS, LESS LIABILITIES -- 2.1%........... $ 668,975
-----------
Net Assets -- 100.0%........................... $31,684,896
===========
See portfolio footnotes and notes to financial statements
</TABLE>
PORTFOLIO FOOTNOTES:
* Non-income producing security.
** Non-income producing security - in default.
# Payment-in-kind security.
## SEC Rule 144A restriction.
+ Restricted security.
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>
AUD = Australian Dollars GBP = British Pounds
BEF = Belgian Francs IEP = Irish Punts
CAD = Canadian Dollars ITL = Italian Lire
CHF = Swiss Francs JPY = Japanese Yen
DEM = Deutsche Marks NZD = New Zealand Dollars
DKK = Danish Kroner NLG = Dutch Guilders
ESP = Spanish Pesetas SEK = Swedish Kronor
</TABLE>
27
<PAGE> 28
STATEMENTS OF ASSETS AND LIABILITIES -- December 31, 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......................... $414,739 $218,266 $192,296 $89,008 $127,283 $243,673 $30,828
Unrealized appreciation................. 136,887 6,720 2,283 8,637 -- 40,003 714
-------- -------- -------- ------- -------- -------- -------
Total value........................... $551,626 $224,986 $194,579 $97,645 $127,283 $283,676 $31,542
Cash...................................... 4,361 67 13 4 96 16 102
Receivable for forward foreign currency
exchange contracts sold.................. -- -- -- -- -- -- 277
Receivable for investments sold........... 1,977 -- -- 892 -- 14 --
Receivable for units sold................. 109 52 13 5 267 48 1
Interest and dividends receivable......... 485 3,468 3,927 47 1,985 902
Receivable from sponsor................... -- -- 61 -- 12 265 --
Other assets.............................. 5 3 2 1 2 13 --
-------- -------- -------- ------- -------- -------- -------
Total assets.......................... $558,563 $228,576 $198,595 $98,594 $127,660 $286,017 $32,824
-------- -------- -------- ------- -------- -------- -------
LIABILITIES:
Payable for investments purchased......... $ 170 $ $ $1,198 $ $ 532 $ --
Payable for units surrendered............. 409 122 74 35 432 177 12
Written options outstanding, at value
(premiums received, $239)................ -- -- -- -- -- -- 526
Payable for forward foreign currency
exchange contracts sold.................. -- -- -- -- -- -- 272
Payable for closed forward foreign
currency exchange contracts.............. -- -- -- -- -- -- 257
Payable to affiliates --
Investment adviser...................... 33 10 12 6 5 18 2
Sponsor................................. 521 124 -- 46 278 -- 45
Accrued expenses and other liabilities.... 55 39 47 27 37 42 25
-------- -------- -------- ------- -------- -------- -------
Total liabilities..................... $ 1,188 $ 295 $ 133 $1,312 $ 752 $ 769 $ 1,139
-------- -------- -------- ------- -------- -------- -------
Net assets.......................... $557,375 $228,281 $198,462 $97,282 $126,908 $285,248 $31,685
======== ======== ======== ======= ======== ======== =======
</TABLE>
See notes to financial statements
28
<PAGE> 29
STATEMENTS OF ASSETS AND LIABILITIES -- December 31, 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........................ 9,004 $45.4107 $408,860
Compass 3........................ 3,721 30.1803 112,326
Compass 3 - Level 2.............. 2,493 12.4143 30,948
Government Securities
Variable Account --
Compass 2........................ 7,255 $25.6724 $186,230
Compass 3........................ 1,549 18.0755 27,993
Compass 3 - Level 2.............. 1,080 10.4604 11,283
High Yield
Variable Account --
Compass 2........................ 4,956 $29.0656 $144,051
Compass 3........................ 1,438 21.5259 30,940
Compass 3 - Level 2.............. 1,819 11.3852 20,711
Managed Sectors
Variable Account --
Compass 2........................ 731 $36.5900 $26,675
Compass 3........................ 1,552 36.3604 56,421
Compass 3 - Level 2.............. 1,203 11.6449 14,020
Money Market
Variable Account --
Compass 2........................ 5,209 $17.1109 $100,240
Compass 3........................ 1,930 14.1277 15,955
Compass 3 - Level 2.............. 898 10.4654 9,389
Total Return
Variable Account --
Compass 2........................ 4,414 $25.0444 $110,531
Compass 3........................ 5,177 24.7133 127,894
Compass 3 - Level 2.............. 3,717 11.8074 43,894
World Governments
Variable Account --
Compass 2........................ 587 $18.6786 $10,961
Compass 3........................ 789 18.4308 14,536
Compass 3 - Level 2.............. 563 10.6836 6,016
-------- -------- -------- ------- -------- -------- -------
Net assets applicable to owners of deferred
contracts........................................ $552,134 $225,506 $195,702 $97,116 $125,584 $282,319 $31,513
Reserve for variable annuities --
Compass 2 Contracts.............................. 4,778 2,550 2,745 125 1,316 2,544 71
Compass 3 Contracts.............................. 325 81 15 41 5 315 14
Compass 3 - Level 2 Contracts.................. 138 144 -- -- 3 70 87
-------- -------- -------- ------- -------- -------- -------
Net assets................................... $557,375 $228,281 $198,462 $97,282 $126,908 $285,248 $31,685
======== ======== ======== ======= ======== ======== =======
</TABLE>
See notes to financial statements
29
<PAGE> 30
STATEMENTS OF OPERATIONS -- Year Ended December 31, 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
Account Account Account Account Account Account Account
------------ ---------- -------- ------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME (EXPENSE):
Income --
Interest.......................................... $ 209 $ 18,443 $18,429 $ 121 $7,897 $ 8,237 $ 2,306
Dividends......................................... 3,438 -- -- 644 -- 4,783 --
Foreign taxes withheld............................ (29) -- -- (7) -- (67) --
-------- ------- ------- ------ ------- ------
Total investment income....................... $ 3,618 $ 18,443 $18,429 $ 758 $7,897 $12,953 $ 2,306
-------- ------- ------- ------ ------- ------
Expenses --
Mortality and expense risk charges................ $ 6,793 $ 3,165 $ 2,404 $1,124 $1,874 $ 3,404 $ 418
Management fees................................... 3,818 1,361 1,416 674 734 2,059 252
Custodian fees.................................... 260 115 163 42 62 118 35
Distribution expense charges...................... 170 49 45 85 56 205 25
Auditing fees..................................... 31 43 41 31 31 35 35
Legal fees........................................ 1 1 -- -- 1 1 1
Boards of Managers fees and expenses.............. 10 10 10 10 10 10 9
Printing.......................................... 23 13 18 8 8 13 3
Miscellaneous..................................... 5 2 10 2 5 5 1
-------- ------- ------- ------ ------- ------
Total expenses................................ $ 11,111 $ 4,759 $ 4,107 $1,976 $2,781 $ 5,850 $ 779
Fees paid indirectly.............................. -- (3) (5) -- (10) (7) --
-------- ------- ------- ------ ------- ------
Net expenses.................................. $ 11,111 $ 4,756 $ 4,102 $1,976 $2,771 $ 5,843 $ 779
-------- ------- ------- ------ ------- ------
Net investment income (expense)........... $ (7,493) $ 13,687 $14,327 $(1,218) $5,126 $ 7,110 $ 1,527
======== ======= ======= ====== ======= ======
REALIZED AND UNREALIZED GAINS (LOSSES) ON
INVESTMENTS:
Realized gains (losses)(identified cost basis) --
Investment transactions......................... $ 74,029 $ (151) $ 2,950 $13,680 $-- $27,964 $ 371
Written option transactions..................... -- -- -- -- -- -- 201
Foreign currency transactions................... (98) -- -- (5) -- (4) (837)
-------- ------- ------- ------ ------- ------
Net realized gains (losses) on investments and
foreign currency transactions............... $ 73,931 $ (151) $ 2,950 $13,675 $-- $27,960 $ (265)
-------- ------- ------- ------ ------- ------
Change in unrealized appreciation
(depreciation) --
Investments..................................... $ 32,320 $(12,741) $ 3,210 $1,098 $-- $(2,943) $ (29)
Written options................................. -- -- -- -- -- -- (317)
Translation of assets and liabilities in foreign
currencies.................................... 57 -- (1) 2 -- (1) 7
-------- ------- ------- ------ ------- ------
Net unrealized gains (losses) on
investments................................. $ 32,377 $(12,741) $ 3,209 $1,100 $-- $(2,944) $ (339)
-------- ------- ------- ------ ------- ------
Net realized and unrealized gains (losses)
on investments............................ $106,308 $(12,892) $ 6,159 $14,775 $-- $25,016 $ (604)
-------- ------- ------- ------ ------- ------
Increase in net assets from operations.... $ 98,815 $ 795 $20,486 $13,557 $5,126 $32,126 $ 923
======== ======= ======= ====== ======= ======
</TABLE>
See notes to financial statements
30
<PAGE> 31
STATEMENTS OF CHANGES IN NET ASSETS
(000 Omitted)
<TABLE>
<CAPTION>
Capital Appreciation Government Securities High Yield
Variable Account Variable Account Variable Account
-------------------------- -------------------------- --------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31, 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)......... $ (7,493) $ (4,739) $ 13,687 $ 15,090 $ 14,327 $ 15,430
Net realized gains (losses) on
investments and foreign currency
transactions........................... 73,931 70,307 (151) (1,546) 2,950 (8,850)
Net unrealized gains (losses) on
investments and foreign currency
transactions........................... 32,377 70,403 (12,741) 27,975 3,209 21,177
-------- -------- -------- -------- -------- --------
Increase in net assets from
operations........................... $ 98,815 $135,971 $ 795 $ 41,519 $ 20,486 $ 27,757
-------- -------- -------- -------- -------- --------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received.............. $ 21,404 $ 19,308 $ 6,200 $ 6,994 $ 4,765 $ 5,092
Net transfers between variable and fixed
accumulation accounts.................. 554 5,813 3,800 (42,552) (2,435) 4,042
Withdrawals, surrenders, annuitizations
and contract charges................... (62,268) (69,281) (39,464) (45,443) (25,541) (26,006)
-------- -------- -------- -------- -------- --------
Net accumulation activity............. $(40,310) $(44,160) $(29,464) $(81,001) $(23,211) $(16,872)
-------- -------- -------- -------- -------- --------
Annuitization activity:
Annuitizations.......................... $ 585 $ 375 $ 317 $ 538 $ 118 $ 584
Annuity payments and contract charges... (811) (622) (480) (466) (475) (406)
Net transfers among accounts for annuity
reserves............................... 18 12 (51) 6 13 --
Adjustments to annuity reserves......... (135) (139) (69) 87 6 49
-------- -------- -------- -------- -------- --------
Net annuitization activity............ $ (343) $ (374) $ (283) $ 165 $ (338) $ 227
-------- -------- -------- -------- -------- --------
Decrease in net assets from participant
transactions........................... $(40,653) $(44,534) $(29,747) $(80,836) $(23,549) $(16,645)
-------- -------- -------- -------- -------- --------
Total increase (decrease) in net
assets.............................. $ 58,162 $ 91,437 $(28,952) $(39,317) $ (3,063) $ 11,112
NET ASSETS:
At beginning of year...................... 499,213 407,776 257,233 296,550 201,525 190,413
-------- -------- -------- -------- -------- --------
At end of year............................ $557,375 $499,213 $228,281 $257,233 $198,462 $201,525
======== ======== ======== ======== ======== ========
</TABLE>
See notes to financial statements
31
<PAGE> 32
STATEMENTS OF CHANGES IN NET ASSETS -- continued
(000 Omitted)
<TABLE>
<CAPTION>
Managed Sectors Money Market
Variable Account Variable Account
----------------------------- -----------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income (expense)........................ $ (1,218) $ (809) $ 5,126 $ 7,005
Net realized gains on investments and foreign currency
transactions.......................................... 13,675 15,458 -- --
Net unrealized gains on investments and foreign
currency transactions................................. 1,100 4,877 -- --
------- ------- -------- --------
Increase in net assets from operations............... $ 13,557 $ 19,526 $ 5,126 $ 7,005
------- ------- -------- --------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received............................. $ 8,975 $ 6,862 $ 5,979 $ 7,259
Net transfers between variable and fixed accumulation
accounts............................................. 3,625 3,581 (14,269) 22,474
Withdrawals, surrenders, annuitizations and contract
charges.............................................. (11,912) (9,312) (37,717) (39,085)
------- ------- -------- --------
Net accumulation activity............................ $ 688 $ 1,131 $(46,007) $ (9,352)
------- ------- -------- --------
Annuitization activity:
Annuitizations......................................... $ 72 $ -- $ 300 $ 91
Annuity payments and contract charges.................. (27) (9) (279) (230)
Net transfers among accounts for annuity reserves...... 65 -- -- (18)
Adjustments to annuity reserves........................ (19) (7) (208) (41)
------- ------- -------- --------
Net annuitization activity........................... $ 91 $ (16) $ (187) $ (198)
------- ------- -------- --------
Increase (decrease) in net assets from participant
transactions......................................... $ 779 $ 1,115 $(46,194) $ (9,550)
------- ------- -------- --------
Total increase (decrease) in net assets.............. $ 14,336 $ 20,641 $(41,068) $ (2,545)
NET ASSETS:
At beginning of year..................................... 82,946 62,305 167,976 170,521
------- ------- -------- --------
At end of year........................................... $ 97,282 $ 82,946 $126,908 $167,976
======= ======= ======== ========
</TABLE>
See notes to financial statements
32
<PAGE> 33
STATEMENTS OF CHANGES IN NET ASSETS -- continued
(000 Omitted)
<TABLE>
<CAPTION>
Total Return World Governments
Variable Account Variable Account
----------------------------- -----------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income.................................. $ 7,110 $ 7,294 $ 1,527 $ 1,965
Net realized gains (losses) on investments and foreign
currency transactions................................. 27,960 26,520 (265) 1,672
Net unrealized gains (losses) on investments and
foreign currency transactions......................... (2,944) 24,712 (339) 1,327
-------- -------- ------- -------
Increase in net assets from operations............... $ 32,126 $ 58,526 $ 923 $ 4,964
-------- -------- ------- -------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received............................. $ 16,989 $ 15,564 $ 1,917 $ 2,063
Net transfers between variable and fixed accumulation
accounts............................................. 7,233 540 (3,193) (1,733)
Withdrawals, surrenders, annuitizations and contract
charges.............................................. (36,762) (32,616) (4,588) (5,080)
-------- -------- ------- -------
Net accumulation activity............................ $(12,540) $(16,512) $ (5,864) $ (4,750)
-------- -------- ------- -------
Annuitization activity:
Annuitizations......................................... $ 250 $ 270 $ -- $ 190
Annuity payments and contract charges.................. (436) (376) (52) (62)
Net transfers among accounts for annuity reserves...... (4) -- (3) --
Adjustments to annuity reserves........................ 12 183 (35) (5)
-------- -------- ------- -------
Net annuitization activity........................... $ (178) $ 77 $ (90) $ 123
-------- -------- ------- -------
Decrease in net assets from participant transactions... $(12,718) $(16,435) $ (5,954) $ (4,627)
-------- -------- ------- -------
Total increase (decrease) in net assets.............. $ 19,408 $ 42,091 $ (5,031) $ 337
NET ASSETS:
At beginning of year..................................... 265,840 223,749 36,716 36,379
-------- -------- ------- -------
At end of year........................................... $285,248 $265,840 $ 31,685 $ 36,716
======== ======== ======= =======
</TABLE>
See notes to financial statements
33
<PAGE> 34
PER UNIT AND OTHER DATA
<TABLE>
<CAPTION>
Capital Appreciation Variable Account
------------------------------------------------------------
Compass 2
------------------------------------------------------------
Year Ended December 31,
------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning of year............................ $37.7151 $28.0107 $32.9053 $29.2712 $26.6401
-------- -------- -------- -------- --------
Investment income............................................... $ 0.2861 $ 0.3624 $ 0.4277 $ 0.3914 $ 0.2670
Expenses........................................................ 0.8695 0.6989 0.6325 0.6436 0.5467
-------- -------- -------- -------- --------
Net investment loss........................................... $(0.5834) $(0.3365) $(0.2048) $(0.2522) $(0.2797)
Net realized and unrealized gains (losses) on investments and
foreign currency transactions.................................. 8.2790 10.0409 (4.6898) 3.8863 2.9108
-------- -------- -------- -------- --------
Net increase (decrease) in unit value........................... $ 7.6956 $ 9.7044 $(4.8946) $ 3.6341 $ 2.6311
-------- -------- -------- -------- --------
Unit value:
Net asset value -- end of year.................................. $45.4107 $37.7151 $28.0107 $32.9053 $29.2712
========== ========== ========== ========== ==========
RATIOS (TO AVERAGE NET ASSETS):
Expenses+# #.................................................... 0.78% 0.80% 0.79% 0.78% 0.80%
Net investment loss............................................. (1.41)% (1.02)% (0.69)% (0.83)% (1.08)%
PORTFOLIO TURNOVER............................................... 66% 96% 95% 56% 34%
AVERAGE COMMISSION RATE# # #..................................... $ 0.0371 -- -- -- --
NUMBER OF UNITS OUTSTANDING AT END OF YEAR (000 OMITTED)......... 9,004 10,014 11,310 13,833 14,914
</TABLE>
<TABLE>
<CAPTION>
Capital Appreciation Variable Account
---------------------------------------------------------------------------------------------
Compass 3 - Level 2 Compass 3
---------------------------- ------------------------------------------------------------
Year Ended
December Period Ended Year Ended December 31,
31, December 31, ------------------------------------------------------------
1996 1995# 1996 1995 1994 1993 1992
----------- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning of
year......................... $ 10.3053 $10.0000 $25.0907 $18.6531 $21.9341 $19.5311 $17.7928
----------- ------------ -------- -------- -------- -------- --------
Investment income.............. $ 0.0790 $ 0.0196 $ 0.1893 $ 0.2402 $ 0.2870 $ 0.2617 $ 0.1919
Expenses....................... 0.2370 0.0517 0.6053 0.4847 0.4421 0.4498 0.4131
----------- ------------ -------- -------- -------- -------- --------
Net investment loss.......... $ (0.1580) $(0.0321) $(0.4160) $(0.2445) $(0.1551) $(0.1881) $(0.2212)
Net realized and unrealized
gains
(losses) on investments and
foreign
currency transactions......... 2.2670 0.3374 5.5056 6.6821 (3.1259) 2.5911 1.9595
----------- ------------ -------- -------- -------- -------- --------
Net increase (decrease) in unit
value........................ $ 2.109 $ 0.3053 $ 5.0896 $ 6.4376 $(3.2810) $ 2.4030 $ 1.7383
----------- ------------ -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
year......................... $ 12.4143 $10.3053 $30.1803 $25.0907 $18.6531 $21.9341 $19.5311
============== ============== ========== ========== ========== ========== ==========
RATIOS (TO AVERAGE NET ASSETS):
Expenses+# #................... 0.78% 0.80% 0.78% 0.80% 0.79% 0.78% 0.80%
Net investment loss............ (1.41)% (1.02)% (1.41)% (1.02)% (0.69)% (0.83)% (1.08)%
PORTFOLIO TURNOVER.............. 66% 96% 66% 96% 95% 56% 34%
AVERAGE COMMISSION RATE# # #.... $ 0.0371 -- $ 0.0371 -- -- -- --
NUMBER OF UNITS OUTSTANDING AT
END OF YEAR (000 OMITTED)...... 2,494 955 3,721 4,272 4,686 4,899 4,401
* Per unit data is based on the average number of units outstanding during each year.
+ 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
34
<PAGE> 35
PER UNIT AND OTHER DATA -- continued
<TABLE>
<CAPTION>
Government Securities Variable Account
----------------------------------------------------------------
Compass 2
----------------------------------------------------------------
Year Ended December 31,
----------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning of year....................... $25.5791 $22.0031 $22.7120 $21.1172 $19.9842
-------- -------- -------- -------- --------
Investment income.......................................... $ 1.9022 $ 1.7836 $ 1.5648 $ 1.5732 $ 1.4340
Expenses................................................... 0.4873 0.4564 0.4229 0.4238 0.3672
-------- -------- -------- -------- --------
Net investment income.................................... $ 1.4149 $ 1.3272 $ 1.1419 $ 1.1494 $ 1.0668
Net realized and unrealized gains (losses) on investments
and foreign currency transactions......................... (1.3216) 2.2488 (1.8508) 0.4454 0.0662
-------- -------- -------- -------- --------
Net increase (decrease) in unit value...................... $ 0.0933 $ 3.5760 $(0.7089) $ 1.5948 $ 1.1330
-------- -------- -------- -------- --------
Unit value:
Net asset value -- end of year............................. $25.6724 $25.5791 $22.0031 $22.7120 $21.1172
========== ========== ========== ========== ==========
RATIOS (TO AVERAGE NET ASSETS):
Expenses + # #............................................. 0.62% 0.63% 0.61% 0.61% 0.62%
Net investment income...................................... 5.53% 5.51% 5.09% 5.11% 5.51%
PORTFOLIO TURNOVER.......................................... 39% 80% 41% 81% 175%
NUMBER OF UNITS OUTSTANDING AT END OF YEAR (000 OMITTED).... 7,255 8,361 11,308 12,679 15,059
</TABLE>
<TABLE>
<CAPTION>
Government Securities Variable Account
---------------------------------------------------------------------------------------------
Compass 3 - Level 2 Compass 3
---------------------------- ------------------------------------------------------------
Year Ended
December Period Ended Year Ended December 31,
31, December 31, ------------------------------------------------------------
1996 1995# 1996 1995 1994 1993 1992
----------- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning of
year......................... $ 10.4172 $10.0000 $18.0278 $15.5227 $16.0387 $14.9267 $14.1396
----------- ------------ -------- -------- -------- -------- --------
Investment income.............. $ 0.7931 $ 0.1868 $ 1.3222 $ 1.2529 $ 1.1028 $ 1.1064 $ 1.0851
Expenses....................... 0.1966 0.0478 0.3586 0.3385 0.3146 0.3154 0.2950
----------- ------------ -------- -------- -------- -------- --------
Net investment income........ $ 0.5965 $ 0.1390 $ 0.9636 $ 0.9144 $ 0.7882 $ 0.7910 $ 0.7901
Net realized and unrealized
gains (losses) on investments
and foreign currency
transactions.................. (0.5533) 0.2782 (0.9159) 1.5907 (1.3042) 0.3210 (0.0030)
----------- ------------ -------- -------- -------- -------- --------
Net increase (decrease) in unit
value........................ $ 0.0432 $ 0.4172 $ 0.0477 $ 2.5051 $(0.5160) $ 1.1120 $ 0.7871
----------- ------------ -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
year......................... $ 10.4604 $10.4172 $18.0755 $18.0278 $15.5227 $16.0387 $14.9267
============== ============== ========== ========== ========== ========== ==========
RATIOS (TO AVERAGE NET ASSETS):
Expenses+##.................... 0.62% 0.63% 0.62% 0.63% 0.61% 0.61% 0.62%
Net investment income.......... 5.53% 5.51% 5.53% 5.51% 5.09% 5.11% 5.51%
PORTFOLIO TURNOVER.............. 39% 80% 39% 80% 41% 81% 175%
NUMBER OF UNITS OUTSTANDING AT
END OF YEAR (000 OMITTED)...... 1,079 608 1,549 1,888 2,922 2,697 2,722
* Per unit data is based on the average number of units outstanding during each year.
+ 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> 36
PER UNIT AND OTHER DATA -- continued
<TABLE>
<CAPTION>
High Yield Variable Account
------------------------------------------------------------
Compass 2
------------------------------------------------------------
Year Ended December 31,
------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning of year............................ $26.1493 $22.6776 $23.3591 $19.7156 $17.3208
-------- -------- -------- -------- --------
Investment income............................................... $ 2.7199 $ 2.5137 $ 2.2324 $ 2.0867 $ 2.0657
Expenses........................................................ 0.6035 0.5356 0.5062 0.4797 0.4061
-------- -------- -------- -------- --------
Net investment income......................................... $ 2.1164 $ 1.9781 $ 1.7262 $ 1.6070 $ 1.6596
Net realized and unrealized gains (losses) on investments and
foreign currency transactions.................................. 0.7999 1.4936 (2.4077) 2.0365 0.7352
-------- -------- -------- -------- --------
Net increase (decrease) in unit value........................... $ 2.9163 $ 3.4717 $(0.6815) $ 3.6435 $ 2.3948
-------- -------- -------- -------- --------
Unit value:
Net asset value -- end of year.................................. $29.0656 $26.1493 $22.6776 $23.3591 $19.7156
========== ========== ========== ========== ==========
RATIOS (TO AVERAGE NET ASSETS):
Expenses + # #.................................................. 0.88% 0.88% 0.91% 0.86% 0.93%
Net investment income........................................... 7.59% 7.91% 7.41% 6.97% 9.03%
PORTFOLIO TURNOVER............................................... 108% 88% 77% 67% 61%
NUMBER OF UNITS OUTSTANDING AT END OF YEAR (000 OMITTED)......... 4,956 5,649 6,433 7,564 8,218
</TABLE>
<TABLE>
<CAPTION>
High Yield Variable Account
---------------------------------------------------------------------------------------------
Compass 3 - Level 2 Compass 3
---------------------------- ------------------------------------------------------------
Year Ended
December Period Ended Year Ended December 31,
31, December 31, ------------------------------------------------------------
1996 1995# 1996 1995 1994 1993 1992
----------- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning of
year......................... $ 10.2377 $10.0000 $19.3854 $16.8283 $17.3543 $14.6589 $12.8923
----------- ------------ -------- -------- -------- -------- --------
Investment income.............. $ 0.9246 $ 0.3803 $ 1.9450 $ 1.8912 $ 1.5336 $ 1.5179 $ 1.5969
Expenses....................... 0.2033 0.0765 0.4432 0.4253 0.3711 0.3671 0.3340
----------- ------------ -------- -------- -------- -------- --------
Net investment income........ $ 0.7213 $ 0.3038 $ 1.5018 $ 1.4659 $ 1.1625 $ 1.1508 $ 1.2629
Net realized and unrealized
gains (losses) on investments
and foreign currency
transactions.................. 0.4262 (0.0661) 0.6387 1.0912 (1.6885) 1.5446 0.5037
----------- ------------ -------- -------- -------- -------- --------
Net increase (decrease) in unit
value........................ $ 1.1475 $ 0.2377 $ 2.1405 $ 2.5571 $(0.5260) $ 2.6954 $ 1.7666
----------- ------------ -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
year......................... $ 11.3852 $10.2377 $21.5259 $19.3854 $16.8283 $17.3543 $14.6589
============== ============== ========== ========== ========== ========== ==========
RATIOS (TO AVERAGE NET ASSETS):
Expenses + # #................. 0.88% 0.88% 0.88% 0.88% 0.91% 0.86% 0.93%
Net investment income.......... 7.59% 7.91% 7.59% 7.91% 7.41% 6.97% 9.03%
PORTFOLIO TURNOVER.............. 108% 88% 108% 88% 77% 67% 61%
NUMBER OF UNITS OUTSTANDING AT
END OF YEAR (000 OMITTED)...... 1,819 1,368 1,438 1,913 2,506 2,577 2,345
* Per unit data is based on the average number of units outstanding during each year.
+ 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
36
<PAGE> 37
PER UNIT AND OTHER DATA -- continued
<TABLE>
<CAPTION>
Managed Sectors Variable Account
----------------------------------------------------------------
Compass 2
----------------------------------------------------------------
Year Ended December 31,
----------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning of year....................... $31.3870 $23.9044 $24.7295 $23.8070 $22.6652
-------- -------- -------- -------- --------
Investment income.......................................... $ 0.2838 $ 0.3277 $ 0.3066 $ 0.1822 $ 0.1121
Expenses................................................... 0.7089 0.6066 0.5155 0.4994 0.4782
-------- -------- -------- -------- --------
Net investment loss...................................... $(0.4251) $(0.2789) $(0.2089) $(0.3172) $(0.3661)
Net realized and unrealized gains (losses) on investments
and foreign currency transactions......................... 5.6281 7.7615 (0.6162) 1.2397 1.5079
-------- -------- -------- -------- --------
Net increase (decrease) in unit value...................... $ 5.2030 $ 7.4826 $(0.8251) $ 0.9225 $ 1.1418
-------- -------- -------- -------- --------
Unit value:
Net asset value -- end of year............................. $36.5900 $31.3870 $23.9044 $24.7295 $23.8070
========== ========== ========== ========== ==========
RATIOS (TO AVERAGE NET ASSETS):
Expenses+# #............................................... 0.85% 0.87% 0.90% 0.91% 0.92%
Net investment loss........................................ (1.36)% (1.07)% (0.97)% (1.49)% (1.75)%
PORTFOLIO TURNOVER.......................................... 64% 115% 111% 122% 34%
AVERAGE COMMISSION RATE# # #................................ $ 0.0459 -- -- -- --
NUMBER OF UNITS OUTSTANDING AT END OF YEAR (000 OMITTED).... 729 788 800 878 1,041
</TABLE>
<TABLE>
<CAPTION>
Managed Sectors Variable Account
---------------------------------------------------------------------------------------------
Compass 3 - Level 2 Compass 3
---------------------------- ------------------------------------------------------------
Year Ended
December Period Ended Year Ended December 31,
31, December 31, ------------------------------------------------------------
1996 1995# 1996 1995 1994 1993 1992
----------- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning of
year......................... $ 9.9892 $10.0000 $31.2371 $23.8258 $24.6849 $23.8007 $22.6927
----------- ------------ -------- -------- -------- -------- --------
Investment income.............. $ 0.0873 $ 0.0231 $ 0.2830 $ 0.3259 $ 0.3031 $ 0.1817 $ 0.1156
Expenses....................... 0.2287 0.0539 0.7511 0.6452 0.5452 0.5313 0.5325
----------- ------------ -------- -------- -------- -------- --------
Net investment loss.......... $ (0.1414) $(0.0308) $(0.4681) $(0.3193) $(0.2421) $(0.3496) $(0.4169)
Net realized and unrealized
gains (losses) on investments
and foreign currency
transactions.................. 1.7971 0.0200 5.5914 7.7306 (0.6170) 1.2338 1.5249
----------- ------------ -------- -------- -------- -------- --------
Net increase (decrease) in unit
value........................ $ 1.6557 $(0.0108) $ 5.1233 $ 7.4113 $(0.8591) $ 0.8842 $ 1.1080
----------- ------------ -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
year......................... $ 11.6449 $ 9.9892 $36.3604 $31.2371 $23.8258 $24.6849 $23.8007
============== ============== ========== ========== ========== ========== ==========
RATIOS (TO AVERAGE NET ASSETS):
Expenses+# #................... 0.85% 0.87% 0.85% 0.87% 0.90% 0.91% 0.92%
Net investment loss............ (1.36)% (1.07)% (1.36)% (1.07)% (0.97)% (1.49)% (1.75)%
PORTFOLIO TURNOVER.............. 64% 115% 64% 115% 111% 122% 34%
AVERAGE COMMISSION RATE# # #.... $ 0.0459 -- $ 0.0459 -- -- -- --
NUMBER OF UNITS OUTSTANDING AT
END OF YEAR (000 OMITTED)...... 1,204 418 1,552 1,729 1,810 1,819 1,728
* Per unit data is based on the average number of units outstanding during each year.
+ 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
37
<PAGE> 38
PER UNIT AND OTHER DATA -- continued
<TABLE>
<CAPTION>
Money Market Variable Account
----------------------------------------------------------------
Compass 2
----------------------------------------------------------------
Year Ended December 31,
----------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning of year....................... $16.5213 $15.8699 $15.5003 $15.2976 $14.9945
-------- -------- -------- -------- --------
Investment income.......................................... $ 0.9058 $ 0.9560 $ 0.6615 $ 0.4864 $ 0.5772
Expenses................................................... 0.3162 0.3046 0.2919 0.2837 0.2741
-------- -------- -------- -------- --------
Net investment income.................................... $ 0.5896 $ 0.6514 $ 0.3696 $ 0.2027 $ 0.3031
-------- -------- -------- -------- --------
Net increase in unit value................................. $ 0.5896 $ 0.6514 $ 0.3696 $ 0.2027 $ 0.3031
-------- -------- -------- -------- --------
Unit value:
Net asset value -- end of year............................. $17.1109 $16.5213 $15.8699 $15.5003 $15.2976
========== ========== ========== ========== ==========
RATIOS (TO AVERAGE NET ASSETS):
Expenses+# #............................................... 0.58% 0.58% 0.58% 0.36% 0.59%
Net investment income...................................... 3.49% 4.00% 2.37% 1.30% 2.03%
NUMBER OF UNITS OUTSTANDING AT END OF YEAR (000 OMITTED).... 5,208 6,501 6,851 6,418 8,026
</TABLE>
<TABLE>
<CAPTION>
Money Market Variable Account
--------------------------------------------------------------------------------------------------
Compass 3 - Level 2 Compass 3
---------------------------- -----------------------------------------------------------------
Year Ended
December Period Ended Year Ended December 31,
31, December 31, -----------------------------------------------------------------
1996 1995# 1996 1995 1994 1993 1992
----------- ------------ ------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset
value -- beginning of
year..................... $ 10.0997 $10.0000 $ 13.6545 $13.1291 $12.8359 $12.6806 $12.4415
----------- ------------ ------------- -------- -------- -------- --------
Investment income......... $ 0.5993 $ 0.1358 $ 0.7437 $ 0.7885 $ 0.5688 $ 0.4065 $ 0.4888
Expenses.................. 0.2336 0.0361 0.2705 0.2631 0.2756 0.2512 0.2497
----------- ------------ ------------- -------- -------- -------- --------
Net investment income... $ 0.3657 $ 0.0997 $ 0.4732 $ 0.5254 $ 0.2932 $ 0.1553 $ 0.2391
----------- ------------ ------------- -------- -------- -------- --------
Net increase in unit
value................... $ 0.3657 $ 0.0997 $ 0.4732 $ 0.5254 $ 0.2932 $ 0.1553 $ 0.2391
----------- ------------ ------------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
year..................... $ 10.4654 $10.0997 $ 14.1277 $13.6545 $13.1291 $12.8359 $12.6806
============== ============== =============== ========== ========== ========== ==========
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+# #.............. 0.58% 0.58% 0.58% 0.58% 0.58% 0.36% 0.59%
Net investment income..... 3.49% 4.00% 3.49% 4.00% 2.37% 1.30% 2.03%
NUMBER OF UNITS OUTSTANDING
AT END OF YEAR (000
OMITTED).................. 897 561 1,930 3,929 4,599 3,823 3,704
* Per unit data is based on the average number of units outstanding during each year.
+ 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
38
<PAGE> 39
PER UNIT AND OTHER DATA -- continued
<TABLE>
<CAPTION>
Total Return Variable Account
----------------------------------------------------------------
Compass 2
----------------------------------------------------------------
Year Ended December 31,
----------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning of year....................... $22.2577 $17.4729 $18.0043 $15.9891 $14.6451
-------- -------- -------- -------- --------
Investment income.......................................... $ 1.1203 $ 1.0394 $ 0.8583 $ 0.8513 $ 0.9191
Expenses................................................... 0.4844 0.4118 0.3704 0.3616 0.3303
-------- -------- -------- -------- --------
Net investment income.................................... $ 0.6359 $ 0.6276 $ 0.4879 $ 0.4897 $ 0.5888
Net realized and unrealized gains (losses) on investments
and foreign currency transactions......................... 2.1508 4.1572 (1.0193) 1.5255 0.7552
-------- -------- -------- -------- --------
Net increase (decrease) in unit value...................... $ 2.7867 $ 4.7848 $(0.5314) $ 2.0152 $ 1.3440
-------- -------- -------- -------- --------
Unit value:
Net asset value -- end of year............................. $25.0444 $22.2577 $17.4729 $18.0043 $15.9891
======== ======== ======== ======== ========
RATIOS (TO AVERAGE NET ASSETS):
Expenses+# #............................................... 0.82% 0.83% 0.82% 0.76% 0.86%
Net investment income...................................... 2.59% 2.99% 2.60% 2.43% 3.63%
PORTFOLIO TURNOVER.......................................... 140% 105% 63% 89% 94%
AVERAGE COMMISSION RATE# # #................................ $ 0.0538 -- -- -- --
NUMBER OF UNITS OUTSTANDING AT END OF YEAR (000 OMITTED).... 4,414 4,801 5,410 5,889 5,732
</TABLE>
<TABLE>
<CAPTION>
Total Return Variable Account
---------------------------------------------------------------------------------------------
Compass 3 - Level 2 Compass 3
---------------------------- ------------------------------------------------------------
Year Ended
December Period Ended Year Ended December 31,
31, December 31, ------------------------------------------------------------
1996 1995# 1996 1995 1994 1993 1992
----------- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning of
year.......................... $ 10.4938 $10.0000 $21.9966 $17.2937 $17.8462 $15.8723 $14.5600
-------- -------- -------- -------- -------- -------- --------
Investment income.............. $ 0.5280 $ 0.1247 $ 1.0817 $ 1.0122 $ 0.8371 $ 0.8304 $ 0.9284
Expenses....................... 0.2317 0.0525 0.5068 0.4358 0.3904 0.3829 0.3607
-------- -------- -------- -------- -------- -------- --------
Net investment income........ $ 0.2963 $ 0.0722 $ 0.5749 $ 0.5764 $ 0.4467 $ 0.4475 $ 0.5677
Net realized and unrealized
gains (losses) on investments
and foreign currency
transactions.................. 1.0173 0.4216 2.1418 4.1265 (0.9992) 1.5264 0.7446
-------- -------- -------- -------- -------- -------- --------
Net increase (decrease) in unit
value......................... $ 1.3136 $ 0.4938 $ 2.7167 $ 4.7029 $(0.5525) $ 1.9739 $ 1.3123
-------- -------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
year.......................... $ 11.8074 $10.4938 $24.7133 $21.9966 $17.2937 $17.8462 $15.8723
======== ======== ======== ======== ======== ======== ========
RATIOS (TO AVERAGE NET ASSETS):
Expenses+# #................... 0.82% 0.83% 0.82% 0.83% 0.82% 0.76% 0.86%
Net investment income.......... 2.59% 2.99% 2.59% 2.99% 2.60% 2.43% 3.63%
PORTFOLIO TURNOVER.............. 140% 105% 140% 105% 63% 89% 94%
AVERAGE COMMISSION RATE# # #.... $ 0.0538 -- $ 0.0538 -- -- -- --
NUMBER OF UNITS OUTSTANDING AT
END OF YEAR (000 OMITTED)...... 3,717 1,637 5,177 6,322 7,349 7,013 5,721
* Per unit data is based on the average number of units outstanding during each year.
+ 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
39
<PAGE> 40
PER UNIT AND OTHER DATA -- continued
<TABLE>
<CAPTION>
World Governments Variable Account
----------------------------------------------------------------
Compass 2
----------------------------------------------------------------
Year Ended December 31,
----------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning of year....................... $18.1095 $15.8337 $16.9056 $14.4420 $14.5806
-------- -------- -------- -------- --------
Investment income.......................................... $ 1.2469 $ 1.3112 $ 1.0805 $ 1.1460 $ 1.2892
Expenses................................................... 0.4084 0.3863 0.3565 0.3704 0.3624
-------- -------- -------- -------- --------
Net investment income.................................... $ 0.8385 $ 0.9249 $ 0.7240 $ 0.7756 $ 0.9268
Net realized and unrealized gains (losses) on investments
and foreign currency transactions......................... (0.2694) 1.3509 (1.7959) 1.6880 (1.0654)
-------- -------- -------- -------- --------
Net increase (decrease) in unit value...................... $ 0.5691 $ 2.2758 $(1.0719) $ 2.4636 $(0.1386)
-------- -------- -------- -------- --------
Unit value:
Net asset value -- end of year............................. $18.6786 $18.1095 $15.8337 $16.9056 $14.4420
======== ======== ======== ======== ========
RATIOS (TO AVERAGE NET ASSETS):
Expenses+# #............................................... 1.00% 1.00% 1.00% 0.94% 1.15%
Net investment income...................................... 4.54% 5.25% 4.45% 4.12% 6.03%
PORTFOLIO TURNOVER.......................................... 397% 330% 256% 202% 133%
NUMBER OF UNITS OUTSTANDING AT END OF YEAR (000 OMITTED).... 588 824 983 1,092 949
</TABLE>
<TABLE>
<CAPTION>
World Governments Variable Account
---------------------------------------------------------------------------------------
Compass 3 - Level 2 Compass 3
--------------------------- --------------------------------------------------------
Year Ended
December Period Ended Year Ended December 31,
31, December 31, --------------------------------------------------------
1996 1995# 1996 1995 1994 1993 1992
----------- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning of
year................................ $ 10.3582 $10.0000 $17.8962 $15.6705 $16.7563 $14.3365 $14.4961
-------- -------- -------- -------- -------- -------- --------
Investment income..................... $ 0.7308 $ 0.1819 $ 1.2367 $ 1.3045 $ 1.0666 $ 1.1293 $ 1.2979
Expenses.............................. 0.2391 0.0554 0.4322 0.4086 0.3760 0.3890 0.3876
-------- -------- -------- -------- -------- -------- --------
Net investment income............... $ 0.4917 $ 0.1265 $ 0.8045 $ 0.8959 $ 0.6906 $ 0.7403 $ 0.9103
Net realized and unrealized gains
(losses) on investments and foreign
currency transactions................ (0.1663) 0.2317 (0.2699) 1.3298 (1.7764) 1.6795 (1.0699)
-------- -------- -------- -------- -------- -------- --------
Net increase (decrease) in unit
value............................... $ 0.3254 $ 0.3582 $ 0.5346 $ 2.2257 $(1.0858) $ 2.4198 $(0.1596)
-------- -------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of year........ $ 10.6836 $10.3582 $18.4308 $17.8962 $15.6705 $16.7563 $14.3365
======== ======== ======== ======== ======== ======== ========
RATIOS (TO AVERAGE NET ASSETS):
Expenses+# #.......................... 1.00% 1.00% 1.00% 1.00% 1.00% 0.94% 1.15%
Net investment income................. 4.54% 5.25% 4.54% 5.25% 4.45% 4.12% 6.03%
PORTFOLIO TURNOVER..................... 397% 330% 397% 330% 256% 202% 133%
NUMBER OF UNITS OUTSTANDING AT END OF
YEAR (000 OMITTED).................... 563 316 789 1,021 1,321 1,363 1,176
* Per unit data is based on the average number of units outstanding during each year.
+ 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
40
<PAGE> 41
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 ACCOUNTING POLICIES
GENERAL
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. 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.
41
<PAGE> 42
NOTES TO FINANCIAL STATEMENTS -- continued
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.
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 securities may be sold (call) or purchased (put) and, as
a result, bears the market risk of an unfavorable change in the price of the
securities underlying the written option. In general, written call options may
serve as a partial hedge against decreases in value of the underlying securities
or exchange rates 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.
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
42
<PAGE> 43
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 Accounts' portfolio of securities to different currencies to
take advantage of anticipated changes. The forward foreign currency exchange
contracts are adjusted by the daily exchange rate of the underlying currency and
any gains or losses are recorded for financial statement purposes as unrealized
until the contract settlement date.
FEDERAL INCOME TAXES
The Variable Accounts are funding vehicles for individual variable annuities.
The operations of the Variable Accounts are part of the operations of Sun Life
Assurance Company of Canada (U.S.), the Sponsor, and are not taxed separately;
the Variable Accounts are not taxed as regulated investment companies. The
Sponsor qualifies for the federal income tax treatment granted to life insurance
companies under Subchapter L of the Internal Revenue Code. Accordingly, no
provision for federal income or excise tax is necessary. Foreign taxes have been
provided for on interest and dividend income earned on foreign investments in
accordance with the applicable country's tax rates and to the extent
unrecoverable are recorded as a reduction of investment income.
INVESTMENT TRANSACTIONS AND INCOME
Investment transactions are recorded on the trade date. Interest income is
recorded on the accrual basis. All premium and original issue discount are
amortized or accreted for financial statement and tax reporting purposes as
required by federal income tax regulations. Dividend income is recorded on the
ex-dividend date for dividends received in cash. Dividend and interest payments
received in additional securities are recorded on the ex-dividend or ex-interest
date in an amount equal to the value of the security on such date.
As appropriate, based on 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.
43
<PAGE> 44
NOTES TO FINANCIAL STATEMENTS -- continued
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. A fee arrangement 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 the Sponsor to
cover administrative expenses relating to the contract. After the annuity
commencement date, the annual contract maintenance charge is deducted pro rata
from each annuity payment made during the year.
The Sponsor does not deduct a sales charge from purchase payments. However, a
withdrawal charge (contingent deferred sales charge) may be deducted to cover
certain expenses relating to the sale of the contract. In no event shall the
aggregate withdrawal charges (including the distribution expense charge
described above applicable to Compass 3 contracts) exceed 5% of the purchase
payments made under a Compass 2 contract or 9% of the purchase payments made
under a Compass 3 contract.
44
<PAGE> 45
(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.
(6) PORTFOLIO SECURITIES
For the year ended December 31, 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............................................... $ 351,265,580 $ 399,121,584
High Yield Variable Account......................................................... 194,831,049 202,891,027
Managed Sectors Variable Account.................................................... 108,583,124 95,281,867
Money Market Variable Account*...................................................... 1,247,284,805 1,254,889,000
Total Return Variable Account....................................................... 216,264,210 218,126,392
World Governments Variable Account.................................................. 55,485,700 53,742,852
</TABLE>
45
<PAGE> 46
NOTES TO FINANCIAL STATEMENTS -- continued
For the year ended December 31, 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.............................................. $ 93,253,551 $ 114,500,502
Money Market Variable Account*...................................................... 2,344,082,351 2,377,531,444
Total Return Variable Account....................................................... 128,150,534 128,084,504
World Governments Variable Account.................................................. 71,227,011 71,511,844
</TABLE>
* Purchases and sales of investments for Money Market Variable Account consist
solely of short-term obligations.
(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
December 31, 1996, is as follows:
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 year --
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
---------- --------- ---------- ---------
</TABLE>
46
<PAGE> 47
WRITTEN OPTION TRANSACTIONS -- continued
<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>
Options written --
Australian Dollars...................................... 919 $ 4,978 -- $ --
Canadian Dollars........................................ 3,131 3,214 4,526 13,654
Deutsche Marks.......................................... 28,351 148,857 3,118 8,559
Deutsche Marks/British Pounds........................... 16,071 58,944 8,724 135,374
Italian Lire/Deutsche Marks............................. 4,140,601 32,517 -- --
Japanese Yen............................................ 447,306 21,553 432,282 28,163
New Zealand Dollars..................................... -- -- 2,497 3,713
Spanish Pesetas/Deutsche Marks.......................... -- -- 345,239 8,535
Swiss Francs/Deutsche Marks............................. 2,933 8,902 6,412 79,193
Options terminated in closing transactions --
Australian Dollars...................................... (919) (4,978) -- --
Canadian Dollars........................................ -- -- -- --
Deutsche Marks.......................................... (28,351) (148,857) (3,118) (8,559)
Deutsche Marks/British Pounds........................... (6,798) (23,046) -- --
Italian Lire/Deutsche Marks............................. (9,332,151) (118,554) (5,191,550) (191,159)
Japanese Yen............................................ (447,306) (21,553) (398,500) (36,993)
New Zealand Dollars..................................... -- -- (2,497) (3,713)
Options expired --
Australian Dollars...................................... -- -- (981) (12,572)
Canadian Dollars........................................ (3,131) (3,214) (4,526) (13,654)
Deutsche Marks/British Pounds........................... (8,523) (35,120) -- --
Japanese Yen............................................ -- -- (186,282) (11,058)
Spanish Pesetas/Deutsche Marks.......................... -- -- (345,239) (8,535)
---------- --------- ---------- ---------
Outstanding, end of period................................ 7,098 $ 24,861 15,136 $ 214,567
========== ========= ========== =========
Options outstanding at end of period consist of:
Deutsche Marks/British Pounds........................... 4,165 $ 15,959 8,724 $ 135,374
Swiss Francs/Deutsche Marks............................. 2,933 8,902 6,412 79,193
---------- --------- ---------- ---------
Outstanding, end of period................................ 7,098 $ 24,861 15,136 $ 214,567
========== ========= ========== =========
</TABLE>
At December 31, 1996, the World Governments Variable Account had sufficient cash
and/or securities at least equal to the value of the written options.
47
<PAGE> 48
NOTES TO FINANCIAL STATEMENTS -- continued
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
<TABLE>
<CAPTION>
Contracts to In Exchange
Account Transaction Settlement Date Deliver/Receive for
- ----------------------------------- ------------ ------------------- ---------------------- ------------
<S> <C> <C> <C> <C> <C>
World Governments Variable Account Sales 2/07/97 CHF 3,536,316 $ 2,893,512
1/10/97 - 4/21/97 DEM 5,888,295 3,850,840
4/21/97 GBP 1,141,824 1,894,782
2/24/97 IEP 554,470 888,592
2/07/97 ITL 5,004,102,505 3,286,421
1/29/97 JPY 176,314,139 1,594,160
2/03/97 NLG 1,158,670 707,628
4/21/97 NZD 1,293,374 912,061
2/03/97 - 2/07/97 SEK 6,752,151 1,019,052
-----------
$ 17,047,048
===========
Purchases
4/21/97 AUD 1,054,000 $ 837,686
2/07/97 - 4/21/97 CHF 2,381,456 1,852,668
1/21/97 - 4/21/97 DEM 10,868,536 7,182,627
2/07/97 DKK 2,679,600 452,169
1/10/97 - 2/07/97 ITL 1,586,253,785 1,032,059
1/21/97 - 1/29/97 JPY 385,211,191 3,462,945
2/03/97 NLG 1,224,066 719,055
2/03/97 SEK 2,237,576 338,737
-----------
$ 15,877,946
===========
<CAPTION>
Net Unrealized
Contracts at Appreciation
Account Value (Depreciation)
- ----------------------------------- --------------- --------------
<S> <C> <C>
World Governments Variable Account $ 2,652,598 $ 240,914
3,837,306 13,534
1,950,715 (55,933)
939,258 (50,666)
3,287,695 (1,274)
1,529,525 64,635
672,457 35,171
908,148 3,913
992,222 26,830
----------- ---------
$16,769,924 $ 277,124
=========== =========
$ 835,742 $ (1,944)
1,791,944 (60,724)
7,100,838 (81,789)
455,923 3,754
1,042,578 10,519
3,340,097 (122,848)
710,411 (8,644)
328,774 (9,963)
----------- ---------
$15,606,307 $ (271,639)
=========== =========
</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 payable of $256,676 at
December 31, 1996.
At December 31, 1996, the World Governments Variable Account had sufficient cash
and/or securities to cover any commitments under these contracts.
See page 27 for an explanation of abbreviations used to indicate amounts shown
in currencies other than the U.S. dollar.
48
<PAGE> 49
(8) RESTRICTED SECURITIES
Certain of the Variable Accounts may invest in securities which are subject to
legal or contractual restrictions on resale. At December 31, 1996, High Yield
Variable Account owned the following restricted securities (consisting of 1.2%
of the Account's net assets) which may not be publicly sold without registration
under the Securities Act of 1933. The Variable Account does not have 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/Par
Account Description Acquisition Amount
- -------------------------------------- --------------------------------------------- ------------------ ---------
<S> <C> <C> <C>
High Yield Variable Account Atlantic Gulf Communities Corp. 9/25/95 150
Envirosource, Inc. 5/15/94 1.666
Gillett Holdings, Inc. 10/08/92 23.535
Merrill Lynch Mortgage Investors, Inc.,
8.083s, 2023 6/22/94 1,000,000
Renaissance Cosmetics, Inc. 8/15/96 600
<CAPTION>
Account Cost Value
- -------------------------------------- ---------- ----------
<S> <C> <C>
High Yield Variable Account $ -- $ 647
7,288 4,477
224,000 894,330
693,125 840,625
600,000 606,000
-------- ----------
$1,524,413 $2,346,079
======== ==========
</TABLE>
49
<PAGE> 50
NOTES TO FINANCIAL STATEMENTS -- continued
(9) PARTICIPANT TRANSACTIONS
The changes in net assets from changes in numbers of outstanding units were as
follows:
<TABLE>
<CAPTION>
Year Ended December 31, 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.... 180 $ 7,455 (91) $ (4,061) (1,099) $(45,738) (1,010) $(42,344) $(349) $(42,693)
Compass 3 Contracts.... 538 13,949 1,300 4,615 (851) (16,530) 987 2,034 6 2,040
-------- -------- -------- -------- ----- --------
$21,404 $ 554 $(62,268) $(40,310) $(343) $(40,653)
======== ======== ======== ======== ===== ========
Government Securities
Variable Account
Compass 2 Contracts.... 111 $ 2,777 88 $ 1,771 (1,305) $(32,747) (1,106) $(28,199) $(190) $(28,389)
Compass 3 Contracts.... 204 3,423 407 2,029 (478) (6,717) 133 (1,265) (93) (1,358)
-------- -------- -------- -------- ----- --------
$ 6,200 $ 3,800 $(39,464) $(29,464) $(283) $(29,747)
======== ======== ======== ======== ===== ========
High Yield Variable
Account
Compass 2 Contracts.... 84 $ 2,279 (68) $ (1,706) (709) $(19,329) (693) $(18,756) $(335) $(19,091)
Compass 3 Contracts.... 126 2,486 253 (729) (403) (6,212) (24) (4,455) (3) (4,458)
-------- -------- -------- -------- ----- --------
$ 4,765 $ (2,435) $(25,541) $(23,211) $(338) $(23,549)
======== ======== ======== ======== ===== ========
Managed Sectors Variable
Account
Compass 2 Contracts.... 27 $ 890 11 $ 569 (95) $ (3,210) (57) $ (1,751) $ 51 $ (1,700)
Compass 3 Contracts.... 265 8,085 731 3,056 (388) (8,702) 608 2,439 40 2,479
-------- -------- -------- -------- ----- --------
$ 8,975 $ 3,625 $(11,912) $ 688 $ 91 $ 779
======== ======== ======== ======== ===== ========
Money Market Variable
Account
Compass 2 Contracts.... 89 $ 1,495 (32) $ (491) (1,350) $(22,684) (1,292) $(21,680) $(175) $(21,855)
Compass 3 Contracts.... 326 4,484 (748) (13,778) (1,241) (15,033) (1,662) (24,327) (12) (24,339)
-------- -------- -------- -------- ----- --------
$ 5,979 $(14,269) $(37,717) $(46,007) $(187) $(46,194)
======== ======== ======== ======== ===== ========
Total Return Variable
Account
Compass 2 Contracts.... 96 $ 2,226 145 $ 3,421 (628) $(14,638) (387) $ (8,991) $(241) $ (9,232)
Compass 3 Contracts.... 691 14,763 1,496 3,812 (1,252) (22,124) 935 (3,549) 63 (3,486)
-------- -------- -------- -------- ----- --------
$16,989 $ 7,233 $(36,762) $(12,540) $(178) $(12,718)
======== ======== ======== ======== ===== ========
World Governments
Variable Account
Compass 2 Contracts.... 14 $ 246 (144) $ (2,559) (107) $ (1,946) (237) $ (4,259) $ (9) $ (4,268)
Compass 3 Contracts.... 98 1,671 99 (634) (182) (2,642) 15 (1,605) (81) (1,686)
-------- -------- -------- -------- ----- --------
$ 1,917 $ (3,193) $ (4,588) $ (5,864) $ (90) $ (5,954)
======== ======== ======== ======== ===== ========
</TABLE>
50
<PAGE> 51
PARTICIPANT TRANSACTIONS -- 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>
51
<PAGE> 52
NOTES TO FINANCIAL STATEMENTS -- continued
(10) DETAILED STATEMENTS OF OPERATIONS -- Year Ended December 31, 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............... $ 156 $ 2 $ 45 $ -- $ 6 $ -- $ 209
Dividends.............. 2,524 31 726 3 125 -- 3,409
------------ ----- ------------ ----- ------------ ----- ---------
Total investment
income............. $ 2,680 $ 33 $ 771 $ 3 $ 131 $ -- $ 3,618
Expenses................. 8,206 38 2,471 3 393 -- 11,111
------------ ----- ------------ ----- ------------ ----- ---------
Net investment loss.... $ (5,526) $ (5) $ (1,700) $ -- $ (262) $ -- $ (7,493)
------------ ----- ------------ ----- ------------ ----- ---------
Realized and unrealized
gains (losses) on
investments:
Net realized gains..... $ 54,788 $ 671 $ 15,914 $ 58 $ 2,496 $ 4 $ 73,931
Net unrealized gains
(losses)............. 24,305 287 6,627 26 1,134 (2) 32,377
------------ ----- ------------ ----- ------------ ----- ---------
Net realized and
unrealized gains on
investments............. $ 79,093 $ 958 $ 22,541 $ 84 $ 3,630 $ 2 $106,308
------------ ----- ------------ ----- ------------ ----- ---------
Increase in net assets
from operations........ $ 73,567 $ 953 $ 20,841 $ 84 $ 3,368 $ 2 $ 98,815
=========== ========== =========== ========== =========== ========== ========
</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............... $ 15,101 $ 196 $ 2,452 $ 9 $ 676 $ 9 $ 18,443
------------ ----- ------------ ----- ------------ ----- ---------
Total investment
income............. $ 15,101 $ 196 $ 2,452 $ 9 $ 676 $ 9 $ 18,443
Expenses................. 3,902 16 667 1 169 1 4,756
------------ ----- ------------ ----- ------------ ----- ---------
Net investment
income............... $ 11,199 $ 180 $ 1,785 $ 8 $ 507 $ 8 $ 13,687
------------ ----- ------------ ----- ------------ ----- ---------
Realized and unrealized
gains (losses) on
investments:
Net realized losses.... $ (121) $ (1) $ (20) $ -- $ (9) $ -- $ (151)
Net unrealized gains
(losses)............. (10,552) (138) (1,779) 34 (302) (4) (12,741)
------------ ----- ------------ ----- ------------ ----- ---------
Net realized and
unrealized gains
(losses) on
investments............. $(10,673) $(139) $ (1,799) $ 34 $ (311) $ (4) $(12,892)
------------ ----- ------------ ----- ------------ ----- ---------
Increase (decrease) in
net assets from
operations............. $ 526 $ 41 $ (14) $ 42 $ 196 $ 4 $ 795
=========== ========== =========== ========== =========== ========== ========
</TABLE>
52
<PAGE> 53
DETAILED STATEMENTS 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............... $ 13,924 $ 258 $ 2,885 $ 2 $ 1,360 $ -- $ 18,429
------------ ----- ------------ ----- ------------ ----- ---------
Total investment
income............. $ 13,924 $ 258 $ 2,885 $ 2 $ 1,360 $ -- $ 18,429
Expenses................. 3,123 23 657 -- 299 -- 4,102
------------ ----- ------------ ----- ------------ ----- ---------
Net investment
income............... $ 10,801 $ 235 $ 2,228 $ 2 $ 1,061 $ -- $ 14,327
------------ ----- ------------ ----- ------------ ----- ---------
Realized and unrealized
gains on investments:
Net realized gains..... $ 2,283 $ 42 $ 445 $ -- $ 180 $ -- $ 2,950
Net unrealized gains... 2,027 63 677 -- 442 -- 3,209
------------ ----- ------------ ----- ------------ ----- ---------
Net realized and
unrealized gains on
investments............. $ 4,310 $ 105 $ 1,122 $ -- $ 622 $ -- $ 6,159
------------ ----- ------------ ----- ------------ ----- ---------
Increase in net assets
from operations........ $ 15,111 $ 340 $ 3,350 $ 2 $ 1,683 $ -- $ 20,486
=========== ========== =========== ========== =========== ========== ========
</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............... $ 33 $ -- $ 77 $ -- $ 10 $ -- $ 120
Dividends.............. 176 1 405 -- 55 -- 637
------------ ----- ------------ ----- ------------ ----- ---------
Total investment
income............. $ 209 $ 1 $ 482 $ -- $ 65 $ -- $ 757
Expenses................. 524 1 1,279 -- 172 -- 1,976
------------ ----- ------------ ----- ------------ ----- ---------
Net investment loss.... $ (315) $ -- $ (797) $ -- $ (107) $ -- $ (1,219)
------------ ----- ------------ ----- ------------ ----- ---------
Realized and unrealized
gains on investments:
Net realized gains..... $ 3,813 $ 20 $ 8,605 $ 1 $ 1,237 $ -- $ 13,676
Net unrealized gains... 207 2 725 -- 166 -- 1,100
------------ ----- ------------ ----- ------------ ----- ---------
Net realized and
unrealized gains on
investments............. $ 4,020 $ 22 $ 9,330 $ 1 $ 1,403 $ -- $ 14,776
------------ ----- ------------ ----- ------------ ----- ---------
Increase in net assets
from operations........ $ 3,705 $ 22 $ 8,533 $ 1 $ 1,296 $ -- $ 13,557
=========== ========== =========== ========== =========== ========== ========
</TABLE>
53
<PAGE> 54
NOTES TO FINANCIAL STATEMENTS -- continued
DETAILED STATEMENTS 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............... $ 5,208 $ 72 $ 2,044 $ 1 $ 572 $ -- $ 7,897
------------ ----- ------------ ----- ------------ ----- ---------
Total investment
income............. $ 5,208 $ 72 $ 2,044 $ 1 $ 572 $ $ 7,897
Expenses................. 1,819 7 752 -- 193 -- 2,771
------------ ----- ------------ ----- ------------ ----- ---------
Net investment
income............... $ 3,389 $ 65 $ 1,292 $ 1 $ 379 $ -- $ 5,126
------------ ----- ------------ ----- ------------ ----- ---------
Realized and unrealized
gains (losses) on
investments............. $ 11,154 $ 141 $(11,296) $ 1 $ -- $ -- $ --
------------ ----- ------------ ----- ------------ ----- ---------
Increase (decrease) in
net assets from
operations............. $ 14,543 $ 206 $(10,004) $ 2 $ 379 $ -- $ 5,126
=========== ========== =========== ========== =========== ========== ========
</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............... $ 3,219 $ 65 $ 4,087 $ 9 $ 856 $ 1 $ 8,237
Dividends.............. 1,841 37 2,341 5 491 1 4,716
------------ ----- ------------ ----- ------------ ----- ---------
Total investment
income............. $ 5,060 $ 102 $ 6,428 $ 14 $ 1,347 $ 2 $ 12,953
Expenses................. 2,215 18 3,016 2 592 -- 5,843
------------ ----- ------------ ----- ------------ ----- ---------
Net investment
income............... $ 2,845 $ 84 $ 3,412 $ 12 $ 755 $ 2 $ 7,110
------------ ----- ------------ ----- ------------ ----- ---------
Realized and unrealized
gains (losses) on
investments:
Net realized gains..... $ 10,955 $ 221 $ 13,789 $ 31 $ 2,961 $ 3 $ 27,960
Net unrealized gains
(losses)............. (1,118) (24) (1,763) (3) (37) 1 (2,944)
------------ ----- ------------ ----- ------------ ----- ---------
Net realized and
unrealized gains on
investments............. $ 9,837 $ 197 $ 12,026 $ 28 $ 2,924 $ 4 $ 25,016
------------ ----- ------------ ----- ------------ ----- ---------
Increase in net assets
from operations........ $ 12,682 $ 281 $ 15,438 $ 40 $ 3,679 $ 6 $ 32,126
=========== ========== =========== ========== =========== ========== ========
</TABLE>
54
<PAGE> 55
DETAILED STATEMENTS 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............... $ 838 $ 5 $1,144 $ 7 $308 $ 4 $ 2,306
----- ----- ------ --- ----- --- ---------
Total investment
income............. $ 838 $ 5 $1,144 $ 7 $308 $ 4 $ 2,306
Expenses................. 275 1 401 1 101 -- 779
----- ----- ------ --- ----- --- ---------
Net investment
income............... $ 563 $ 4 $ 743 $ 6 $207 $ 4 $ 1,527
----- ----- ------ --- ----- --- ---------
Realized and unrealized
gains (losses) on
investments:
Net realized losses.... $ (82) $ -- $ (162) $ (1) $(19) $ (1) $ (265)
Net unrealized gains
(losses)............. (184) (1) (144) (5) (9) 4 (339)
----- ----- ------ --- ----- --- ---------
Net realized and
unrealized gains
(losses) on
investments............. $ (266) $ (1) $ (306) $ (6) $(28) $ 3 $ (604)
----- ----- ------ --- ----- --- ---------
Increase in net assets
from operations........ $ 297 $ 3 $ 437 $ -- $179 $ 7 $ 923
=========== ========== =========== ========== =========== ========== ========
</TABLE>
55
<PAGE> 56
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
December 31, 1996, the related statements of operations for the year then ended,
the statements of changes in net assets for the years ended December 31, 1996
and 1995 and the per unit and other data for each of the years in the five-year
period ended December 31, 1996. 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 December
31, 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 December 31, 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
February 7, 1997
------------------------------------------------
This Compass annual report is prepared for the general information of contract
owners. It is authorized for distribution to prospective purchasers only when
preceded by an effective prospectus.
56
<PAGE> 57
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.
- -------------------------------------------------------
COUS-2 2/97 72M
[COMPASS LOGO]
PROFESSIONALLY MANAGED COMBINATION
FIXED/VARIABLE ANNUITIES
FOR PERSONAL INVESTMENTS AND
QUALIFIED RETIREMENT PLANS
ANNUAL REPORT - DECEMBER 31, 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
