<PAGE>
TOTAL RETURN VARIABLE ACCOUNT
500 BOYLSTON STREET - BOSTON - MASSACHUSETTS 02116-3741
617 - 954-5000
February 23, 1996
VIA EDGAR
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, DC 20549
Re: TOTAL RETURN VARIABLE ACCOUNT (THE "ACCOUNT") (FILE NO. 811-5448)
-----------------------------------------------------------------
Ladies and Gentlemen:
On behalf of the Account, pursuant to the requirements of Section 30(b) of
the Investment Company Act of 1940 and Rule 30b2-1 thereunder, we hereby file a
copy of the following:
1) Compass Annual Report to Shareholders dated December 31, 1995.
Very truly yours,
JOHN MCNAMARA
John McNamara
Production Editor
/jm
<PAGE>
DEAR CONTRACT OWNERS:
An environment of declining interest rates and a favorable outlook for inflation
helped establish a pattern of positive performance in both fixed-income and
equity markets around the world during the past 12 months. Yields on many fixed-
income securities continued to decline throughout the year, and as bond prices
rose in response to these declines, all of the fixed-income Accounts available
under your contract experienced positive total returns. At the same time, lower
interest rates and strong corporate earnings reports through most of the year
helped the prices of many stocks to rise over the period, producing strong
returns. For the 12 months ended December 31, 1995, the market, as measured by
the Standard & Poor's 500 Composite Index (the S&P 500), a popular, unmanaged
index of common stock performance, returned +37.53%. All of the equity Accounts
available under your contract achieved positive results.
U.S. OUTLOOK
Moderate but sustainable growth was the hallmark of the economic expansion's
fifth year, although some signs of sluggishness were seen late in the year.
Recent retail sales, for example, have been disappointing, in part because of
rising levels of consumer debt. Growth is not expected to get much help from the
manufacturing sector, either, as order flows from manufacturers have moderated.
Export activity, meanwhile, is also expected to remain modest as continued
weakness abroad limits demand for many U.S. goods. However, the Federal Reserve
Board's consistent and, so far, successful efforts to fight inflation seem to be
giving consumers and businesses enough longer-term confidence to help maintain
modest growth in real (adjusted for inflation) gross domestic product into 1996.
GLOBAL OUTLOOK
A pattern of slow to moderate growth and low and controlled inflation remains a
dominant theme in major industrialized countries, including the United States.
While the recent recovery of the dollar against the German mark and the Japanese
yen has added some strength to the economies of Europe and Japan, the outlook is
for sluggish economic growth in the near term. Although moves by central banks
in Germany and Japan to lower interest rates have helped stimulate domestic
demand, many industrial companies in these countries are still struggling to
compete in a global marketplace in which the prices of their products are less
competitively priced. On the positive side, this does mean little to no
inflationary pressure in these countries, and we believe that this, combined
with potential further reductions in interest rates, should help provide a
foundation for stronger economic growth in the long run. Also, it appears that
many of the cost-cutting measures taken by companies in these countries over the
past few years will ultimately provide earnings leverage when economic growth
improves. Inflation in most overseas economies remains in a downward trend,
providing fixed-income investors with opportunities for relatively attractive
real rates of interest, possibly accompanied by moderate price appreciation.
While the dollar continues to represent a sound store of long-term value, its
relative strength in the near term is being restrained by the persistent U.S.
current-account deficit.
BOND MARKETS
Prospects for the Federal Reserve to lower short-term interest rates appear
favorable as the economy continues to be in a slow-growth mode. Long-term
yields, meanwhile, moved noticeably downward in the latter months of 1995 in
anticipation of more modest fourth-quarter growth with
1
<PAGE>
continued low inflation. While there were some increases in commodity prices
early in the year, companies found it difficult to pass these on at the consumer
level as they continue to fight for market share. Additionally, unit labor costs
remain under control and seem to be growing at a pace that is near or below the
ongoing inflation rate. Thus, with long-term U.S. government bonds yielding
approximately 6% in an environment of 2% to 3% inflation, real rates of return
in the fixed-income markets remain relatively attractive.
In world bond markets, slowing economic growth, low inflation, and declining
official interest rates helped result in solid performance during the past year.
European governments are engaged in multi-year programs to reduce their budget
deficits and debt levels. These programs are positive for bonds, in that lower
government spending tends to reduce inflationary pressures and lower issuance of
government debt reduces supply pressures on the bond market. In the Japanese
market, powerful deflationary forces have supported a drop in yields to
historically low levels. We now feel this process may be drawing to an end,
given a reversal of priorities at the central bank from fighting inflation,
which is now non-existent, to offsetting the downward spiral of deflation.
Meanwhile, the high returns of the U.S. bond market have been echoed in other
U.S. dollar-bloc markets, including Australia, New Zealand, and Canada, all of
which saw positive performance over the last 12 months. The Australian market
currently offers significantly higher yields than the U.S. market and represents
good value. As long as the outlook for U.S. bonds remains positive, these
related markets should demonstrate relatively good performance.
STOCK MARKETS
After some volatility late in the third quarter, the stock market continued to
strengthen. Although many companies reported solid third-quarter results, there
was some weakness in the earnings of retail, financial services and even some
technology companies. However, a slowdown in earnings may be a positive
development if it is an indication that the economy is not overheating and
inflation is under control. While we see a deceleration of corporate earnings as
the inevitable consequence of traditional business cycles, we remain encouraged
by the high absolute level of profitability among U.S. companies. Also, many
companies' increasing emphasis on cost containment and the growing use of
technology have helped keep them highly competitive and reasonably profitable.
Looking ahead, we believe that a stabilizing interest rate environment, coupled
with reasonable earnings reports, could justify current market valuations.
Specific information on each Account's performance and our current investment
strategy are provided below and on the following pages. We appreciate your
support and welcome any questions or comments you may have.
On behalf of the
Board of Managers,
John D. McNeil
January 12, 1996 Chairman
CAPITAL APPRECIATION VARIABLE ACCOUNT
During the fiscal year ended December 31, 1995, the Account's performance was
moderately below that of the S&P 500. Performance benefited from a significant
weighting in the technology sector, which had strong results from stocks related
to personal computer companies such as Intel and Microsoft. Lodging stocks such
as HFS, Inc., a franchiser of hotels and real estate companies, and health care
stocks such as United Healthcare
2
<PAGE>
helped performance in the second half as investors' confidence in their earnings
improved. Performance was negatively impacted by the underweighting in consumer
staples such as food and household products, and in financial services. These
sectors outperformed the S&P 500 during the second half of the year as investors
became more concerned about a moderation in economic growth.
The Account continues to seek companies the portfolio manager believes possess
five key factors: 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 primary 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 entertainment and medical services, as well as a number of
agricultural-equipment holdings that should benefit from a continuing strong
farm economy over the coming year. The foreign weighting is low, but it is
likely to increase as growth accelerates overseas during the coming year.
GOVERNMENT SECURITIES VARIABLE ACCOUNT
The year 1995 was a very good one for financial markets, and the U.S. bond
market was no exception. The yield of 30-year U.S. Treasury bonds fell by more
than 190 basis points (1.9%), while the yield of 5-year U.S. Treasury notes fell
by more than 240 basis points (2.4%). Short-term Treasury rates fell more than
long-term rates as the market anticipated that the Federal Reserve would cut
money market rates, which it did on July 6 and finally on December 19, 1995,
when it moved the federal funds' rate to 5.5% from 5.75%. As the year
progressed, the economic data continued to show that neither growth nor
inflation would accelerate. For the year, the Account slightly underperformed
the +17.82% return for the Lehman Brothers Government/ Mortgage Index (the
Index), an unmanaged index comprised of Treasuries, agencies, and agency
mortgages (FNMA, FHLMC, and GNMA). The difference in performance was due
primarily to the Account's shorter duration at the beginning of the year.
Currently, the Account is positioned slightly longer than the Index, and more
than 35% of its assets are invested in mortgage-backed securities. The Account
is long in order to take advantage of any further moves by the Federal Reserve.
However, given the relatively low level of existing rates and the excellent
returns achieved in 1995, we are carefully monitoring the portfolio. In
addition, the turmoil caused by the political debate over the budget and the
debt ceiling will continue to resonate through the bond markets. If interest
rates remain around their current levels, the additional yield provided by
mortgages could boost the Account's total return.
HIGH YIELD VARIABLE ACCOUNT
High-yield bond prices firmed during 1995, primarily due to the decline in
interest rates. Strong market technicals helped fuel the rally as the supply of
new high-yield bonds declined slightly from the previous year while demand
increased due to higher net cash flows into high-yield mutual funds. During
1995, the spread between the yield on Treasury securities and high-yield bonds
widened to about 425 basis points (4.25%) from a low of 350 basis points
(3.50%), reflecting investors' concern over the rise in the default rate
(although principal value and interest on Treasury securities are guaranteed by
the U.S. government if held to maturity). We do not expect credit losses to
increase materially in 1996 because we
3
<PAGE>
believe that lower interest rates will enable the economy to continue to grow,
albeit at a slower pace than in 1995.
During the past 12 months, the Account underperformed the +22.25% return of the
Lehman Brothers Corporate Bond Index (the Lehman Index). The Lehman Index
contains investment-grade bonds which have longer durations than high-yield
bonds and, therefore, experienced greater price appreciation as rates fell last
year.
In response to weak economic data throughout the year, our investment strategy
became progressively more defensive. We reduced our positions in the steel,
chemical and paper sectors because we believed that the softness in commodity
prices during the second half of the year signaled the beginning of a cyclical
downturn and was not simply due to a temporary inventory correction. We
continued to increase the Account's weightings in less economically sensitive
industries such as cable television, paging and supermarkets. The Account
remains under-
weighted in the bonds of retailers because we believe that overcapacity will
cause weakness in this sector well into 1996. Given our outlook for slow
economic growth and low inflation, we expect the Federal Reserve to further
reduce interest rates in 1996. Therefore, our investment strategy remains
focused on bonds in the upper-credit-quality tier of the high-yield market.
These high-yield bonds could benefit the most from a drop in interest rates
because their returns are the most closely correlated with shifts in interest
rates.
MANAGED SECTORS VARIABLE ACCOUNT
Overall stock market performance in 1995 was very strong, with all major indices
posting robust gains. The strength of the market over the first nine months was
quite broad, with particular strength in technology-related issues. Over the
last three months, overall advances were significantly harder to come by as the
breadth of the market was decidedly narrower. Investors looked to lock in
profits in many of the better-performing areas and rotated into more defensive
sectors such as consumer staples, health care, utilities, and energy. Except for
energy, the Account had below-market weightings in these groups. In addition,
despite the fact that we reduced our weighting in the technology sector from
over 28% of Account assets in mid-summer to under 17% by the beginning of the
fourth quarter, corrections in this area were quite severe and broad-based, a
combination that negatively affected overall performance. As a result, while
performance during the fourth quarter was positive, it trailed that of the major
indices.
The Account has recently begun to selectively buy individual technology stocks,
given both their recent correction and still-positive prospects for earnings
growth. The weighting in the retail sector has been modestly decreased following
disappointing Christmas sales and relatively gloomy prospects going forward.
Energy, financial services and leisure weightings have remained basically intact
despite some changes in individual positions.
Given the strong market advances in 1995, many valuations appear to be
approaching reasonable levels. Over the near term, investors are likely to
continue to rotate in and out of individual groups, a pattern exhibited in the
fourth quarter, resulting in a more volatile market and one that may find it
more difficult to make overall headway. We continue to search for attractively
valued companies but are maintaining a slightly more cautious outlook over the
near term.
MONEY MARKET VARIABLE ACCOUNT
Short-term interest rates fell approximately 30 basis points (0.30%) during
1995. While the Federal Reserve raised short-term interest rates
4
<PAGE>
50 basis points (0.50%) on February 1, 1995, it subsequently lowered them by 25
basis points (0.25%) on July 6 and by another 25 basis points on December 19.
Anticipating lower interest rates, we maintained average maturities between 45
and 55 days in the portfolio throughout the year. We continue to limit the
Account's investments to securities issued or guaranteed by the U.S. Treasury or
agencies or instrumentalities of the U.S. government, as well as to the
highest-quality corporate issues, in order to help provide maximum protection
against credit risk. At the present time, approximately 61% of the portfolio is
invested in U.S. government or government-guaranteed issues, with the balance in
corporate issues.
We expect that the Federal Reserve may continue to lower short-term interest
rates over the next several months, given the sluggishness of the economy and
the absence of inflationary pressures. Consequently, we will continue to target
relatively long maturities in the portfolio.
TOTAL RETURN VARIABLE ACCOUNT
We believe the current environment continues to warrant a conservative
investment posture. Economies in both the United States and Europe remain
sluggish and revenue growth for many major corporations has slowed. Earnings
growth, a key driver to stock prices, also has slowed over the past few
quarters. In addition, valuations are on the high side, especially with the S&P
500 dividend yield at just 2.4%.
Therefore, we continue to carry a below-normal equity allocation. Common stocks
have represented approximately 55% of the portfolio over the past several
months. Our major concentrations remain in the energy and financial services
sectors, where fundamentals and valuations appear sound. We are also finding
some good values in the telephone, electric and defense/ aerospace industries.
The bond portion has ranged close to 35% of the portfolio, while cash has been
approximately 10%. Our duration remains around six years, and corporate bonds
make up the majority of the portfolio. However, we have recently been adding
more Treasury securities.
WORLD GOVERNMENTS VARIABLE ACCOUNT
Fueled by sluggish world economic growth, stable to lower inflation, and
monetary easing by most central banks, all international bond markets registered
positive returns for the year. In many instances these returns equalled or
surpassed U.S. results when measured in local currency terms.
Two of the best-performing markets were found within the U.S. dollar bloc,
notably in Canada (+20.03%) and Australia (+19.72%). Both countries continue to
possess lower inflation than the U.S. market, as well as higher real interest
rates and attractive nominal yield spreads. The portfolio's performance was
enhanced by an overweighted position in both of these markets. However, overall
performance was negatively impacted due to shorter durations in the U.S. bonds
held during the first half of the year.
In the European bloc, the best-performing markets were those of Sweden (+20.2%)
and Spain (+19.34%). Following interest rate cuts throughout western Europe, the
portfolio benefited from overweighted European bond positions. More
specifically, the core markets, such as Germany and the Netherlands, continued
to provide solid returns against a backdrop of slow growth, low inflation, and
declining interest rates. Other markets, such as Denmark's, offered a
combination of higher yields with moderate growth and low inflation. The
higher-yielding European markets have recovered during the past six months, and
the portfolio has benefited by increasing the weighting and lengthening the
duration in both Spanish and Italian issues.
5
<PAGE>
In addition to these economic developments, many European governments are
entering into multi-year programs to reduce their budget deficits and debt
levels, which are quite similar to those of the United States. These programs
are positive for bonds, in that lower government spending tends to reduce
inflationary pressures and lower issuance of government debt reduces the supply
pressures in the bond market.
In currency terms, the dollar did recover some ground lost during the first half
of the year. The Japanese yen was especially strong over the first half but gave
back almost all these gains versus the dollar by year-end. Due in part to
falling German inflation compared to stable U.S. inflation, the German mark
appreciated 7.7% over the dollar for the year. However, with the likelihood of a
budget resolution in the United States, combined with favorable U.S. short-term
interest rate spreads, the dollar consolidated at year-end and now appears
relatively attractive.
INVESTMENT OBJECTIVES AND POLICIES
CAPITAL APPRECIATION VARIABLE ACCOUNT (CAVA) seeks capital appreciation by
investing in securities of all types with a major emphasis on common stocks.
GOVERNMENT SECURITIES VARIABLE ACCOUNT (GSVA) seeks current income and
preservation
of capital by investing in U.S. government and government-related securities.
HIGH YIELD VARIABLE ACCOUNT (HYVA) seeks high current income and capital
appreciation by investing primarily in fixed-income securities of United States
and foreign issuers which may be in the lower-rated categories or unrated and
may include equity features.
MANAGED SECTORS VARIABLE ACCOUNT (MSVA) seeks capital appreciation by varying
the weighting of its portfolio of common stocks among certain industry sectors.
Dividend income, if any, is incidental to its objective of capital appreciation.
MONEY MARKET VARIABLE ACCOUNT (MMVA) seeks maximum current income to the extent
that it is consistent with stability of principal by investing exclusively in
money market instruments maturing in less than 13 months. Investments in the
Account are neither guaranteed nor insured by the U.S. government.
TOTAL RETURN VARIABLE ACCOUNT (TRVA) seeks primarily to obtain above-average
income (compared to a portfolio entirely invested in equity securities)
consistent with prudent employment of capital; its secondary objective is to
take advantage of opportunities for growth of capital and income. Assets will be
allocated and reallocated from time to time between money market, fixed-income
and equity securities. Generally, at least 40% 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, 1995*
<TABLE>
<CAPTION>
Compass 2 Compass 3
(U.S.) (U.S.)
<S> <C> <C>
Capital Appreciation
Variable Account +34.65% +34.51%
Government Securities
Variable Account +16.25% +16.14%
High Yield Variable
Account +15.31% +15.20%
Managed Sectors
Variable Account +31.30% +31.11%
Money Market Variable
Account +4.10% +4.00%
Total Return Variable
Account +27.38% +27.19%
World Governments
Variable Account +14.37% +14.20%
</TABLE>
*These performance results do not reflect any applicable contract or surrender
charges. Past performance is no guarantee of future results.
6
<PAGE>
PORTFOLIO OF INVESTMENTS -- December 31, 1995
CAPITAL APPRECIATION VARIABLE ACCOUNT -- CAVA
COMMON STOCKS -- 98.1%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. COMMON STOCKS -- 92.2%
AEROSPACE -- 3.2%
General Dynamic Corp....... 39,700 $ 2,347,263
Lockheed Martin Corp....... 70,900 5,601,100
McDonnell Douglas Corp..... 87,900 8,086,800
-----------
$16,035,163
-----------
AGRICULTURAL PRODUCTS -- 4.1%
AGCO Corp.................. 173,700 $ 8,858,700
Case Corp.................. 102,500 4,689,375
Deere & Co., Inc........... 196,200 6,916,050
-----------
$20,464,125
-----------
AIRLINES -- 1.6%
Southwest Airlines Co...... 341,000 $ 7,928,250
-----------
APPAREL AND TEXTILES -- 1.0%
Nike, Inc., "B"............ 70,400 $ 4,901,600
-----------
AUTOMOTIVE -- 3.4%
APS Holding Corp., "A"*.... 169,700 $ 3,818,250
General Motors Corp........ 115,000 6,080,625
Harley-Davidson, Inc....... 173,400 4,985,250
Varity Corp.*.............. 56,400 2,093,850
-----------
$16,977,975
-----------
BROADCASTING -- 0.6%
Infinity Broadcasting
Corp., "A"*............... 85,000 $ 3,166,250
-----------
BUSINESS SERVICES -- 3.9%
ADT Ltd.*.................. 319,800 $ 4,797,000
ALCO Standard Corp......... 124,400 5,675,750
Ceridian Corp.*............ 153,400 6,327,750
Corestaff, Inc.*........... 7,400 270,100
Policy Management Systems
Corp.*.................... 44,300 2,109,788
-----------
$19,180,388
-----------
CELLULAR TELEPHONES -- 0.4%
AirTouch Communications,
Inc.*..................... 74,300 $ 2,098,975
-----------
CHEMICALS -- 0.7%
Geon Co.................... 151,800 $ 3,700,125
-----------
COMPUTER SOFTWARE -- PERSONAL COMPUTERS -- 4.8%
Arbor Software Corp.*...... 1,500 $ 70,875
Autodesk, Inc.............. 112,800 3,863,400
Electronic Arts, Inc.*..... 287,600 7,513,550
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. COMMON STOCKS -- continued
COMPUTER SOFTWARE -- PERSONAL COMPUTERS -- continued
Microsoft Corp.*........... 135,400 $11,881,350
Spectrum Holobyte,
Industries*............... 120,900 785,850
-----------
$24,115,025
-----------
COMPUTER SOFTWARE -- SYSTEMS -- 12.4%
Adobe Systems, Inc......... 123,100 $ 7,632,200
BMC Software, Inc.*........ 232,700 9,947,925
Cadence Design Systems,
Inc.*..................... 231,400 9,718,800
Computer Associates
International, Inc........ 135,800 7,723,625
DST Systems, Inc.*......... 81,600 2,325,600
General Motors Corp.,
"E"....................... 69,500 3,614,000
MicrosSystems, Inc.*....... 98,600 4,856,050
Oracle Systems Corp.*...... 171,500 7,267,313
Sybase, Inc.*.............. 233,000 8,388,000
System Software Associates,
Inc....................... 15,450 336,038
-----------
$61,809,551
-----------
CONSUMER GOODS AND SERVICES -- 7.2%
Kimberly-Clark Corp........ 62,200 $ 5,147,050
Philip Morris Cos., Inc.... 153,100 13,855,550
Service Corp.
International............. 28,200 1,240,800
Tyco International Ltd..... 447,400 15,938,625
-----------
$36,182,025
-----------
DEFENSE ELECTRONICS -- 1.1%
Loral Corp................. 161,900 $ 5,727,213
-----------
ELECTRONICS -- 5.3%
Altera Corp.*.............. 12,000 $ 597,000
Analog Devices, Inc.*...... 73,900 2,614,213
ESS Technology, Inc.*...... 17,500 402,500
Intel Corp................. 204,900 11,628,075
LSI Logic Corp.*........... 217,700 7,129,675
National Semiconductor
Corp.*.................... 53,900 1,199,275
Xilinx, Inc.*.............. 87,400 2,665,700
-----------
$26,236,438
-----------
ENTERTAINMENT -- 3.5%
Argosy Gaming Corp.*....... 52,200 $ 398,025
Harrahs Entertainment,
Inc.*..................... 514,700 12,481,475
Mirage Resorts, Inc.*...... 126,500 4,364,250
-----------
$17,243,750
-----------
</TABLE>
7
<PAGE>
PORTFOLIO OF INVESTMENTS -- continued
COMMON STOCKS -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. COMMON STOCKS -- continued
FINANCIAL INSTITUTIONS -- 4.1%
Federal Home Loan Mortgage
Corp...................... 103,500 $ 8,642,250
Financial Federal Corp.*... 65,200 1,458,850
Finova Group, Inc.......... 70,400 3,396,800
Schwab (Charles) Corp...... 350,100 7,045,763
-----------
$20,543,663
-----------
FOOD AND BEVERAGE PRODUCTS -- 2.1%
General Mills, Inc......... 85,300 $ 4,926,075
Universal Foods Corp....... 135,900 5,452,988
-----------
$10,379,063
-----------
INSURANCE -- 1.3%
Amerin Corp.*.............. 78,100 $ 2,089,175
Lasalle Re Holdings
Ltd.*..................... 40,100 917,288
Prudential Reinsurance
Holdings, Inc............. 142,000 3,319,250
-----------
$ 6,325,713
-----------
MACHINERY -- 0.2%
IDEX Corp.................. 23,600 $ 961,700
-----------
MEDICAL AND HEALTH PRODUCTS -- 1.5%
Johnson & Johnson.......... 75,200 $ 6,439,000
Sofamor Danek Group,
Inc.*..................... 38,900 1,103,788
-----------
$ 7,542,788
-----------
MEDICAL AND HEALTH TECHNOLOGY AND SERVICES -- 6.8%
Community Health Systems,
Inc.*..................... 32,700 $ 1,164,938
Foundation Health Corp.*... 100,900 4,338,700
Genesis Health Ventures,
Inc.*..................... 72,700 2,653,550
Health Care & Retirement
Corp.*.................... 82,800 2,898,000
Living Centers of
America*.................. 70,600 2,471,000
Manor Care, Inc............ 142,500 4,987,500
Schein (Henry), Inc.*...... 4,300 126,850
United Healthcare Corp..... 234,300 15,346,650
-----------
$33,987,188
-----------
METALS AND MINERALS -- 2.9%
J&L Specialty Steel,
Inc....................... 105,700 $ 1,981,875
Minerals Technologies,
Inc....................... 54,000 1,971,000
Nucor Corp................. 121,500 6,940,688
Phelps Dodge Corp.......... 58,300 3,629,175
-----------
$14,522,738
-----------
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. COMMON STOCKS -- continued
OILS -- 1.6%
Enron Oil & Gas Co......... 60,400 $ 1,449,600
Mobil Corp................. 54,000 6,048,000
Union Pacific Resources,
Inc....................... 22,100 560,788
-----------
$ 8,058,388
-----------
PHOTOGRAPHIC PRODUCTS -- 1.0%
Eastman Kodak Co........... 75,800 $ 5,078,600
-----------
RAILROADS -- 1.2%
Wisconsin Central
Transportation Corp.*..... 94,800 $ 6,233,100
-----------
RESTAURANTS AND LODGING -- 4.6%
Felcor Suite Hotels,
Inc....................... 45,400 $ 1,259,850
HFS, Inc.*................. 124,800 10,202,400
Promus Hotel Corp.*........ 380,150 8,458,338
Renaissance Hotel Group
N.V....................... 117,000 2,983,500
-----------
$22,904,088
-----------
STORES -- 5.7%
Circuit City Stores,
Inc....................... 138,900 $ 3,837,113
Corporate Express, Inc.*... 55,800 1,680,975
Duty Free International,
Inc....................... 29,800 476,800
Federated Department
Stores, Inc.*............. 249,100 6,850,250
Intelligent Electronics,
Inc....................... 266,100 1,596,600
Micro Warehouse, Inc.*..... 59,400 2,569,050
Office Depot, Inc.*........ 353,400 6,979,650
Officemax, Inc.*........... 194,100 4,342,988
-----------
$28,333,426
-----------
TELECOMMUNICATIONS -- 5.8%
3Com Corp.*................ 134,370 $ 6,265,001
Cabletron Systems, Inc.*... 77,600 6,285,600
Novell, Inc.*.............. 283,100 4,034,175
Tel-Save Holdings, Inc.*... 68,200 946,275
Tellabs, Inc.*............. 123,200 4,558,400
U.S. Robotics Corp.*....... 31,900 2,799,225
Worldcom, Inc.*............ 112,000 3,948,000
-----------
$28,836,676
-----------
UTILITIES -- TELEPHONE -- 0.2%
MCI Communications Corp.... 32,000 $ 836,000
-----------
Total U.S. Common Stocks................. $460,309,984
-----------
</TABLE>
8
<PAGE>
COMMON STOCKS -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
FOREIGN STOCKS -- 5.9%
AUSTRALIA -- 0.9%
Sydney Harbour Casino
Holdings Ltd., Preferred
(Entertainment)*.......... 3,416,251 $ 4,311,001
-----------
CANADA -- 0.3%
Canadian National Railway
Co. (Railroad)*........... 11,100 $ 166,500
Potash Corp. of
Saskatchewan, Inc.
(Precious Metals and
Minerals)................. 17,000 1,204,875
-----------
$ 1,371,375
-----------
HONG KONG -- 0.3%
Peregrine Investment
Holdings (Finance)........ 1,200,000 $ 1,551,992
-----------
ITALY -- 1.4%
Telecom Italia Mobile
(Telecommunications)...... 990,300 $ 1,744,100
Telecom Italia Mobile,
Saving Shares
(Telecommunications)...... 5,128,000 5,396,189
-----------
$ 7,140,289
-----------
NEW ZEALAND -- 0.4%
Sky City Ltd.
(Entertainment)*.......... 96,000 $ 1,989,734
-----------
SWEDEN -- 1.4%
ASTRA AB, "B" (Medical and
Health Products).......... 167,400 $ 6,626,061
TV 4 AB (Broadcasting)..... 14,300 247,502
-----------
$ 6,873,563
-----------
UNITED KINGDOM -- 1.2%
PowerGen PLC, ADR
(Utilities-- Electric).... 742,000 $ 2,545,822
Reuters Holdings PLC, ADR
(Printing and
Publishing)............... 66,700 3,676,838
-----------
$ 6,222,660
-----------
Total Foreign Stocks..................... $29,460,614
-----------
Total Common Stocks (Identified Cost,
$385,047,136)............................ $489,770,598
-----------
CONVERTIBLE BONDS -- 0.1%
<CAPTION>
Principal
Amount
(000 Omitted)
<S> <C> <C>
Spectrum Holobyte, Inc.,
6.5s, 2002## (Identified
Cost, $580,000)........... $ 580 $ 423,400
-----------
SHORT-TERM OBLIGATIONS -- 2.3%
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Federal Home Loan Mortgage,
due 1/05/96............... $ 9,200 $ 9,194,276
Ford Motor Credit Corp.,
due 1/02/96............... 2,500 2,499,583
Transamerica Co., due
1/02/96................... 5 4,999
-----------
Total Short-Term Obligations, at
Amortized Cost........................... $11,698,858
-----------
Total Investments (Identified Cost,
$397,325,994)............................ $501,892,856
OTHER ASSETS, LESS LIABILITIES -- (0.5)%... (2,679,805)
-----------
Net Assets -- 100.0%..................... $499,213,051
-----------
-----------
</TABLE>
See portfolio footnotes and notes to financial statements
PORTFOLIO OF INVESTMENTS -- December 31, 1995
GOVERNMENT SECURITIES VARIABLE
ACCOUNT -- GSVA
U.S. FEDERAL AGENCIES -- 38.7%
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Federal Agricultural
Mortgage Corp., 7.02s,
1998...................... $ 1,800 $ 1,857,366
Federal Agricultural
Mortgage Corp., 7.25s,
1999...................... 5,000 5,246,850
Federal Agricultural
Mortgage Corp., 7.44s,
2000...................... 3,725 3,993,908
Federal Agricultural
Mortgage Corp., 8.07s,
2006...................... 2,000 2,335,320
Federal Home Loan Mortgage
Corp., 7.5s, 2024-2025.... 5,762 5,907,611
Federal Home Loan Mortgage
Corp., 8.5s, 2021......... 34 35,275
Federal Home Loan Mortgage
Corp., 9s, 2003-2007...... 4,725 4,969,857
Federal Housing Authority,
7.43s, 2002............... 9,352 10,335,322
Federal National Mortgage
Assn., 7.27s, 2005........ 3,984 4,172,986
Federal National Mortgage
Assn., 7.645s, 2020....... 1,348 1,372,741
Federal National Mortgage
Assn., 8s, 2019-2023...... 506 524,474
</TABLE>
9
<PAGE>
PORTFOLIO OF INVESTMENTS -- continued
U.S. FEDERAL AGENCIES -- continued
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Federal National Mortgage
Assn., 8.5s, 2001-2007.... $ 2,731 $ 2,849,909
Federal National Mortgage
Assn., 9s, 2007........... 636 669,644
Financing Corp., 9.8s,
2018...................... 11,900 16,715,811
Private Export Funding
Corp., 8.4s, 2001......... 12,000 13,516,800
Republic of Israel U.S.
Government Guaranteed
Notes, 6s, 1999........... 5,000 5,075,000
Resolution Funding Corp.,
8.875s, 2020.............. 12,700 16,835,374
U.S. Department of Veterans
Affairs, Vendee Mortgage
Trust, 7.75s, 2014........ 3,000 3,133,110
-----------
Total U.S. Federal Agencies (Identified
Cost, $86,811,562)........................ $99,547,358
-----------
GOVERNMENT GUARANTEED -- 59.9%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 25.6%
GNMA, 6.5s, 2023-2025...... $ 8,080 $ 8,014,305
GNMA, 7.s, 2023-2025....... 15,510 15,694,256
GNMA, 7.5s, 2008-2025...... 21,771 22,423,559
GNMA, 8s, 2025............. 5,709 5,948,031
GNMA, 9s, 2004-2024........ 11,669 12,405,420
GNMA, 10s, 2016............ 11 11,897
GNMA, 11s, 2010-2019....... 1,045 1,183,453
GNMA, 12.5s, 2015.......... 129 149,452
GNMA, 13.25s, 2014-2015.... 13 15,129
GNMA, 14s, 2014-2015....... 79 95,810
-----------
$65,941,312
-----------
SMALL BUSINESS ADMINISTRATION -- 5.6%
SBA, 10.35s, 1997.......... $ 488 $ 516,519
SBA, 8.2s, 2005............ 2,000 2,151,875
SBA, 8.4s, 2007............ 501 550,565
SBA, 9.95s, 2008........... 1,006 1,177,208
SBA, 8.7s, 2009............ 1,618 1,821,619
SBA, 10.05s, 2009.......... 953 1,119,311
SBA, 9.5s, 2010............ 6,091 7,063,094
-----------
$14,400,191
-----------
GOVERNMENT GUARANTEED -- continued
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 28.7%
U.S. Treasury Notes, 8.5s,
1997...................... $ 4,250 $ 4,420,680
U.S. Treasury Notes, 5.25s,
1998...................... 18,000 18,005,580
U.S. Treasury Notes,
7.875s, 1998.............. 6,000 6,304,680
U.S. Treasury Notes, 6.75s,
1999...................... 4,500 4,705,290
U.S. Treasury Notes,
9.125s, 1999.............. 4,500 5,021,730
U.S. Treasury Notes, 6.75s,
2000...................... 2,000 2,104,680
U.S. Treasury Notes, 7.25s,
2004...................... 15,000 16,650,000
U.S. Treasury Notes, 7.25s,
2004...................... 2,000 2,224,060
U.S. Treasury Notes,
7.875s, 2004.............. 1,000 1,157,500
U.S. Treasury Bonds,
10.75s, 2003.............. 3,000 3,914,520
U.S. Treasury Bonds, 8.75s,
2020...................... 7,000 9,375,590
-----------
$73,884,310
-----------
Total Government Guaranteed (Identified
Cost, $147,501,012)....................... $154,225,813
-----------
Total Investments (Identified Cost,
$234,312,574)............................. $253,773,171
OTHER ASSETS, LESS LIABILITIES -- 1.4%...... 3,459,666
-----------
Net Assets -- 100.0%...................... $257,232,837
-----------
-----------
</TABLE>
See portfolio footnotes and notes to financial statements
PORTFOLIO OF INVESTMENTS -- December 31, 1995
HIGH YIELD VARIABLE ACCOUNT -- HYVA
BONDS -- 92.4%
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
AIRLINES
Continental Airlines, Inc.,
11.75s, 1999**............ $ 2,050 $ 205
-----------
AUTOMOTIVE -- 2.3%
Exide Corp., 10s, 2005..... $ 1,200 $ 1,302,000
Harvard Industries, Inc.,
12s, 2004................. 1,550 1,631,375
Harvard Industries, Inc.,
11.125s, 2005............. 600 600,000
</TABLE>
10
<PAGE>
BONDS -- continued
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
AUTOMOTIVE -- continued
SPX Corp., 11.75s, 2002.... $ 1,150 $ 1,219,000
-----------
$ 4,752,375
-----------
BUILDING -- 5.8%
American Standard, Inc.,
10.5s, 2005............... $ 4,550 $ 3,901,625
Atlantic Gulf Communities
Corp., 12s, 1996##........ 224 197,498
Atlantic Gulf Communities
Corp., 13s, 1998##........ 241 125,256
Lone Star Industries, Inc.,
10s, 2003................. 1,250 1,262,500
Nortek, Inc., 9.875s,
2004...................... 1,850 1,729,750
Schuller International
Group, Inc., 10.875s,
2004...................... 1,800 2,020,500
USG Corp., 9.25s, 2001..... 2,250 2,407,500
-----------
$11,644,629
-----------
CHEMICALS -- 3.6%
Arcadian Partners L.P.,
10.75s, 2005.............. $ 1,400 $ 1,547,000
Indspec Chemical Corp.,
11.5s, 2003............... 750 600,000
NL Industries, Inc.,
11.75s, 2003.............. 2,100 2,241,750
Rexene Corp., 11.75s,
2004...................... 900 942,750
UCC Investors Holdings,
Inc., 10.5s, 2002......... 50 51,500
UCC Investors Holdings,
Inc., 0s, 2005............ 2,550 1,938,000
-----------
$ 7,321,000
-----------
CONGLOMERATE -- 0.5%
Westinghouse Electric Co.,
6.875s, 2003.............. $ 1,050 $ 995,799
-----------
CONSUMER GOODS AND SERVICES -- 7.0%
ADT Operations, Inc.,
9.25s, 2003............... $ 1,250 $ 1,340,625
Consolidated Cigar Corp.,
10.5s, 2003............... 1,000 1,025,000
Fieldcrest Cannon, Inc.,
11.25s, 2004.............. 1,200 1,092,000
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
CONSUMER GOODS AND SERVICES -- continued
International Semi-Tech
Microelectronics, Inc.,
0s, 2003.................. $ 2,300 $ 1,233,375
Ithaca Industries, Inc.,
11.125s, 2002............. 750 255,000
Reeves Industries, Inc.,
11s, 2002................. 1,200 1,026,000
Remington Arms, Inc., 9.5s,
2003##.................... 450 373,500
Revlon, Inc., 10.5s,
2003...................... 1,500 1,530,000
Samsonite Corp., 11.125s,
2005...................... 1,200 1,152,000
Sealy Corp., 9.5s, 2003.... 1,650 1,658,250
Westpoint Stevens, Inc.,
9.375s, 2005.............. 3,400 3,357,500
-----------
$14,043,250
-----------
CONTAINERS -- 5.8%
Atlantis Group, Inc., 11s,
2003...................... $ 1,300 $ 1,137,500
Calmar, Inc., 11.5s,
2005##.................... 1,650 1,670,625
Ivex Packaging Corp.,
12.5s, 2002............... 1,200 1,272,000
Owens-Illinois, Inc., 11s,
2003...................... 3,900 4,407,000
Plastic Containers, Inc.,
10.75s, 2001.............. 1,500 1,545,000
Silgan Corp., 11.75s,
2002...................... 1,500 1,605,000
-----------
$11,637,125
-----------
CORPORATE ASSET BACKED -- 0.4%
Merrill Lynch Mortgage
Investors, 8.227s,
2023+..................... $ 1,000 $ 778,125
-----------
ENTERTAINMENT -- 3.5%
ACT III Broadcasting,
9.625s, 2003.............. $ 500 $ 520,000
ACT III Theatres, Inc.,
11.875s, 2003............. 350 379,750
Allbritton Communications
Corp., 11.5s, 2004........ 900 945,000
Gillett Holdings, Inc.,
12.25s, 2002.............. 1,426 1,497,070
SCI Television, Inc., 11s,
2005...................... 2,450 2,590,875
United Artist Theater
Circuit, Inc., 11.5s,
2002...................... 1,000 1,075,000
-----------
$ 7,007,695
-----------
</TABLE>
11
<PAGE>
PORTFOLIO OF INVESTMENTS -- continued
BONDS -- continued
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
FINANCIAL INSTITUTIONS -- 1.7%
American Annuity Group,
Inc., 11.125s, 2003....... $ 1,500 $ 1,627,500
American Life Holdings Co.,
11.25s, 2004.............. 600 630,000
Americo Life, Inc., 9.25s,
2005...................... 1,150 1,092,500
-----------
$ 3,350,000
-----------
FOOD AND BEVERAGE PRODUCTS -- 2.8%
PMI Acquisition Corp.,
10.25s, 2003.............. $ 2,000 $ 2,055,000
Specialty Foods Corp.,
10.25s, 2001.............. 1,950 1,833,000
Texas Bottling Group, Inc.,
9s, 2003.................. 1,750 1,732,500
-----------
$ 5,620,500
-----------
FOREST AND PAPER PRODUCTS -- 4.9%
Container Corp. of America,
10.75s, 2002.............. $ 750 $ 761,250
Fort Howard Corp., 9.25s,
2001...................... 750 761,250
Gaylord Container Co., 0s,
2005...................... 1,850 1,822,250
Pacific Lumber Co., 10.5s,
2003...................... 1,750 1,658,125
Repap New Brunswick, Inc.,
10.625s, 2005............. 1,400 1,372,000
SD Warren Co., 12s, 2004... 1,500 1,653,750
Stone Consolidated Corp.,
10.25s, 2000.............. 1,250 1,337,500
Stone Container Corp.,
9.875s, 2001.............. 550 534,875
-----------
$ 9,901,000
-----------
MEDICAL AND HEALTH TECHNOLOGY AND SERVICES -- 5.7%
Community Health System,
10.25s, 2003.............. $ 2,100 $ 2,268,000
Integrated Health Services,
Inc., 10.75s, 2004........ 1,550 1,677,875
OrNda Healthcorp, 12.25s,
2002...................... 2,255 2,480,500
Quorum Health Group, Inc.,
8.75s, 2005............... 1,900 1,966,500
Tenet Healthcare Corp.,
10.125s, 2005............. 2,750 3,059,375
-----------
$11,452,250
-----------
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
OIL SERVICES -- 3.4%
Amerigas Partners L.P.,
10.125s, 2007............. $ 1,300 $ 1,404,000
Ferrell Gas L.P., 10s,
2001...................... 1,900 2,033,000
Noble Drilling Corp.,
9.25s, 2003............... 1,250 1,312,500
PDV America, Inc., 7.875s,
2003...................... 900 879,075
Tuboscope Vetco
International, Inc.,
10.75s, 2003.............. 1,200 1,194,000
-----------
$ 6,822,575
-----------
OILS -- 1.2%
Gulf Canada, 9.25s, 2004... $ 1,850 $ 1,914,750
Kelley Oil & Gas Corp.,
13.5s, 1999............... 550 440,000
-----------
$ 2,354,750
-----------
PRINTING AND PUBLISHING -- 0.5%
Day International Group,
Inc., 11.125s, 2005....... $ 550 $ 561,000
Western Publishing Group,
7.65s, 2002............... 600 420,000
-----------
$ 981,000
-----------
RESTAURANTS AND LODGING -- 4.8%
Bally's Grand, Inc.,
10.375s, 2003............. $ 1,850 $ 1,887,000
Boomtown, Inc., 11.5s,
2003...................... 750 615,000
Boyd Gaming Corp., 10.75s,
2003...................... 2,150 2,268,250
Four Seasons Hotels, Inc.,
9.125s, 2000##............ 650 646,750
Griffin Gaming &
Entertainment, 8.15s,
2000...................... 1,000 930,000
Grand Casinos, Inc.,
10.125s, 2003............. 1,250 1,306,250
Maritime Group Ltd., 13.5s,
1997**.................... 663 119,481
Sam Houston Race Park,
Inc., 11s, 2001........... 275 110,000
Station Casinos, Inc.,
9.625s, 2003.............. 1,900 1,885,750
-----------
$ 9,768,481
-----------
</TABLE>
12
<PAGE>
BONDS -- continued
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
SPECIAL PRODUCTS AND SERVICES -- 9.1%
Buckeye Cellulose Corp.,
8.5s, 2005................ $ 500 $ 516,250
Eagle Industries, Inc., 0s,
2003...................... 2,000 1,675,000
Fairfield Manufacturing,
11.375s, 2001............. 300 292,500
Haynes International, Inc.,
11.25s, 1998.............. 350 332,500
Howmet Corp., 10s,
2003##.................... 300 313,500
IMO Industries, Inc., 12s,
2001...................... 1,750 1,785,000
Idex Corp., 9.75s, 2002.... 1,670 1,770,200
Interlake Corp., 12s,
2001...................... 850 858,500
Interlake Corp., 12.125s,
2002...................... 1,650 1,567,500
Interlake Revolver, "B",
5.75s, 1997##............. 252 250,934
K & F Industries, Inc.,
11.875s, 2003............. 1,050 1,128,750
Newflo Corp., 13.25s,
2002...................... 400 416,000
Polymer Group, Inc.,
12.25s, 2002.............. 1,500 1,545,000
Spreckels Industries, Inc.,
11.5s, 2000............... 1,800 1,764,000
Synthetic Industries, Inc.,
12.75s, 2002.............. 2,100 2,058,000
Talley Manufacturing &
Technology, Inc., 10.75s,
2003...................... 1,000 1,002,500
Thermadyne Industries
Holdings Corp., 10.25s,
2002...................... 1,089 1,083,555
-----------
$18,359,689
-----------
STEEL -- 4.0%
AK Steel Holdings Corp.,
10.75s, 2004.............. $ 3,250 $ 3,607,500
Armco, Inc., 11.375s,
1999...................... 550 572,000
Jorgensen (Earle M.) Co.,
10.75s, 2000.............. 500 458,750
Kaiser Aluminum & Chemical
Corp., 9.875s, 2002....... 750 770,625
Sheffield Steel Corp., 12s,
2001...................... 500 425,000
UCAR Global Enterprises,
Inc., 12s, 2005........... 1,280 1,478,400
WCI Steel, Inc., 10.5s,
2002...................... 700 680,750
-----------
$ 7,993,025
-----------
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
STORES -- 2.2%
Finlay Enterprises, Inc.,
0s, 2005.................. $ 3,000 $ 1,980,000
Parisian, Inc., 9.875s,
2003...................... 1,100 924,000
Woodward & Lothrop, Inc.,
14.75s, 1999.............. 3,150 1,543,500
-----------
$ 4,447,500
-----------
SUPERMARKETS -- 5.1%
Brunos, Inc., 10.5s,
2005...................... $ 950 $ 940,500
Dominicks Finer Foods,
10.875s, 2005............. 1,900 2,018,750
Grand Union Co., 12s,
2004...................... 1,300 1,124,500
Pathmark Stores, Inc.,
11.625s, 2002............. 600 601,500
Pathmark Stores, Inc.,
9.625s, 2003.............. 800 778,000
Ralphs Grocery Co., 10.45s,
2004...................... 1,000 1,015,000
Ralphs Grocery Co., 11s,
2005...................... 2,250 2,227,500
Stop & Shop Cos., Inc.,
9.75s, 2002............... 1,500 1,653,750
-----------
$10,359,500
-----------
TELECOMMUNICATIONS -- 16.5%
American Communications
Services, Inc., 0s,
2005##.................... $ 250 $ 134,375
Bell Cablemedia PLC,
11.875s, 2005##........... 1,100 687,500
Bell & Howell Co. 10.75s,
2002...................... 900 954,000
Cablevision Systems Corp.,
10.75s, 2004.............. 1,250 1,318,750
Cablevision Systems Corp.,
9.25s, 2005............... 1,400 1,463,000
Century Communication
Corp., 9.5s, 2005......... 1,850 1,910,125
Comcast Corp., 9.375s,
2005...................... 2,200 2,326,500
Continental Cablevision,
Inc., 8.875s, 2005........ 1,750 1,833,125
Diamond Cable
Communications Corp.,
11.75s, 2005.............. 1,000 587,500
Echostar Communications
Corp., 12.875s, 2004...... 1,700 1,105,000
Falcon Holdings Group L.P.,
11s, 2003#................ 2,348 2,231,059
</TABLE>
13
<PAGE>
PORTFOLIO OF INVESTMENTS -- continued
BONDS -- continued
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
TELECOMMUNICATIONS -- continued
Jones Intercable, Inc.,
9.625s, 2002.............. $ 750 $ 806,250
Jones Intercable, Inc.,
11.5s, 2004............... 1,225 1,359,750
Jones Intercable, Inc.,
10.5s, 2008............... 250 273,750
MFS Communications, Inc.,
0s, 2004.................. 2,700 2,180,250
Marcus Cable Operating Co.,
0s, 2004.................. 875 658,437
Metrocall, Inc., 10.375s,
2007...................... 600 636,000
Mobile Telecommunications,
13.5s, 2002............... 250 278,750
Mobilemedia Communications,
Inc., 0s, 2003............ 2,500 1,950,000
Paging Network, Inc.,
8.875s, 2006.............. 3,500 3,587,500
Pronet, Inc., 11.875s,
2005...................... 1,250 1,375,000
Rogers Cablesystems Ltd.,
10.125s, 2012............. 1,750 1,841,875
USA Mobile Communication,
9.5s, 2004................ 950 940,500
Videotron Holdings PLC,
11s, 2005................. 2,500 1,550,000
Videotron Ltd., 10.25s,
2002...................... 1,200 1,266,000
-----------
$33,254,996
-----------
TRANSPORTATION -- 1.3%
CHC Helicopter Corp.,
11.5s, 2002............... $ 600 $ 529,500
Moran Transportation Co.,
11.75s, 2004.............. 500 470,000
Tiphook Finance Corp.,
7.125s, 1998.............. 1,250 896,875
Tiphook Finance Corp., 8s,
2000 1,088 756,160
-----------
$ 2,652,535
-----------
UTILITIES -- ELECTRIC -- 0.3%
Kenetech Corp., 12.75s,
2002...................... $ 520 $ 192,400
Midland Funding Corp. II,
"A", 11.75s, 2005......... 500 523,845
-----------
$ 716,245
-----------
Total Bonds (Identified Cost,
$191,532,526)............................ $186,214,249
-----------
</TABLE>
COMMON STOCKS AND WARRANTS -- 0.4%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
BUILDING
Atlantic Gulf Communities
Corp.*.................... 150 $ 1,013
Atlantic Gulf Communities
Corp., Warrants*.......... 1,714 54
-----------
$ 1,067
-----------
CONSUMER GOODS AND SERVICES
Ranger Industries, Inc.*... 123,210 $ 12,321
-----------
ENTERTAINMENT -- 0.3%
Gillett Holdings, Inc.*+... 23,535 $ 494,235
-----------
OIL SERVICES -- 0.1%
Digicon, Inc., Warrants*... 8,940 $ 559
ICO, Inc., Warrants*....... 375,000 243,750
-----------
$ 244,309
-----------
OILS
Crystal Oil Co., $0.075
Warrants*................. 1,920,847 $ --
Crystal Oil Co., $0.10
Warrants*................. 1,683,209 --
Crystal Oil Co., $0.125
Warrants*................. 2,000,087 --
Crystal Oil Co., $0.15
Warrants*................. 1,963,306 --
Crystal Oil Co., $0.25
Warrants*................. 1,963,306 --
-----------
$ --
-----------
RESTAURANTS AND LODGING
Palace Casinos, Inc.,
Warrant*.................. 7,200 $ 72
Sam Houston Race Park,
Inc.*..................... 82 410
Sam Houston Race Park,
Inc., Warrants*........... 2,200 --
-----------
$ 482
-----------
SPECIAL PRODUCTS AND SERVICES
Envirosource, Inc.*+....... 1,666 $ 4,998
-----------
Total Common Stocks and Warrants
(Identified Cost, $3,412,705)............ $ 757,412
-----------
PREFERRED STOCKS -- 1.2%
BUILDING
UDC Homes, Inc., $1.68,
Cv.*...................... 2,664 $ 3,996
-----------
PRINTING AND PUBLISHING -- 1.2%
K-III Communications Corp.,
11.625s, "B"#............. 23,243 $ 2,312,685
-----------
Total Preferred Stocks (Identified Cost,
$1,969,731).............................. $ 2,316,681
-----------
</TABLE>
14
<PAGE>
SHORT-TERM OBLIGATIONS -- 3.3%
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Ford Motor Credit Co., due
1/02/96, at Amortized
Cost...................... $ 6,700 $ 6,698,883
-----------
Total Investments (Identified Cost,
$196,914,962)............................ $195,987,225
OTHER ASSETS, LESS LIABILITIES -- 2.7%..... 5,538,216
-----------
Net Assets -- 100.0%..................... $201,525,441
-----------
-----------
</TABLE>
See portfolio footnotes and notes to financial statements
PORTFOLIO OF INVESTMENTS -- December 31, 1995
MANAGED SECTORS VARIABLE ACCOUNTS -- MSVA
COMMON STOCKS -- 98.9%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
ENERGY -- 13.8%
BJ Services Co.*............ 34,000 $ 986,000
Occidental Petroleum
Corp....................... 113,000 2,415,375
Potash Corp. of
Saskatchewan, Inc.
(Canada)................... 3,800 269,325
Schlumberger Ltd............ 16,000 1,108,000
Seacor Holdings, Inc.*...... 10,200 275,400
Seagull Energy Corp.*....... 55,000 1,223,750
Snyder Oil Corp............. 170,000 2,061,250
Tidewater, Inc.............. 37,000 1,165,500
Weatherford
International*............. 68,500 1,977,937
----------
$11,482,537
----------
FINANCIAL SERVICES -- 10.8%
Advanta Corp., "B".......... 25,000 $ 909,375
Equitable of Iowa Cos....... 50,000 1,606,250
Federal Home Loan Mortgage
Corp....................... 20,500 1,711,750
First Interstate Bancorp.... 16,000 2,184,000
Fleet Financial Group,
Inc........................ 10,900 444,175
Travelers Group, Inc........ 33,500 2,106,313
----------
$8,961,863
----------
LEISURE -- 23.1%
Argosy Gaming Corp.*........ 80,600 $ 614,575
Brinker International,
Inc.*...................... 72,300 1,093,538
Harrahs Entertainment, Inc.* 142,000 3,443,500
Manor Care, Inc............. 3,300 115,500
Promus Hotel Corp.*......... 52,500 1,168,125
COMMON STOCKS -- continued
<CAPTION>
Issuer Shares Value
<S> <C> <C>
LEISURE -- continued
Rogers Communications, Inc.,
"B" (Canada)............... 335,000 $3,744,045
Showboat, Inc............... 39,700 1,047,087
Sky City Ltd. (New
Zealand)*.................. 50,000 1,036,319
Sydney Harbor Casino
Holdings Ltd., Preferred
(Australia)*............... 600,000 757,146
Telecom Italia Mobile,
Savings Shares (Italy)..... 418,800 440,703
Telephone & Data Systems,
Inc........................ 145,300 5,739,350
----------
$19,199,888
----------
RETAIL -- 8.5%
Circuit City Stores, Inc.... 41,900 $1,157,488
Federated Department Stores,
Inc.*...................... 80,000 2,200,000
Gymboree Corp.*............. 60,000 1,237,500
Sears, Roebuck & Co......... 31,000 1,209,000
Wal-Mart Stores, Inc........ 55,000 1,230,625
----------
$7,034,613
----------
TECHNOLOGY -- 23.0%
ADT Ltd.*................... 123,000 $1,845,000
Acclaim Entertainment,
Inc.*...................... 48,800 603,900
Adobe Systems, Inc.......... 11,500 713,000
Autodesk, Inc............... 25,500 873,375
BMC Software, Inc.*......... 39,000 1,667,250
Electronic Arts, Inc.*...... 99,000 2,586,375
Intel Corp.................. 45,500 2,582,125
International Business
Machines Corp.............. 11,500 1,055,125
LSI Logic Corp.*............ 55,500 1,817,625
National Semiconductor
Corp.*..................... 84,000 1,869,000
Oracle Systems Corp.*....... 26,500 1,122,938
Silicon Graphics, Inc.*..... 11,100 305,250
Spectrum Holobyte
Industries*................ 178,900 1,162,850
Sybase, Inc.*............... 24,500 882,000
----------
$19,085,813
----------
OTHER -- 19.7%
AGCO Corp................... 47,500 $2,422,500
Colgate-Palmolive Co........ 19,000 1,334,750
General Motors Corp......... 48,000 2,538,000
Ingersoll-Rand Co........... 30,000 1,053,750
James River Corp. of
Virginia................... 7,200 173,700
</TABLE>
15
<PAGE>
PORTFOLIO OF INVESTMENTS -- continued
COMMON STOCKS -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
OTHER -- continued
Loral Corp.................. 62,500 $2,210,938
McDonnell Douglas Corp...... 16,000 1,472,000
Rubbermaid, Inc............. 17,600 448,800
Tyco International Ltd...... 68,000 2,422,500
United Healthcare Corp...... 34,000 2,227,000
----------
$16,303,938
----------
Total Common Stocks (Identified Cost,
$74,496,778).......................... $82,068,652
----------
CONVERTIBLE BONDS -- 0.1%
Principal Amount
(000 Omitted)
Spectrum Holobyte, Inc.
6.5s, 2002## (Identified
Cost, $120,000)............ $ 120 $ 87,600
----------
Total Investments (Identified Cost,
$74,616,778).............................. $82,156,252
OTHER ASSETS, LESS LIABILITIES -- 1.0%...... 789,765
----------
Net Assets -- 100.0%...................... $82,946,017
----------
----------
</TABLE>
See portfolio footnotes and notes to financial statements
PORTFOLIO OF INVESTMENTS -- December 31, 1995
MONEY MARKET VARIABLE ACCOUNT -- MMVA
COMMERCIAL PAPER -- 36.9%
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
AT&T Co., due 1/25/96...... $ 6,200 $ 6,176,481
Ford Motor Credit Corp.,
due 2/26/96............... 3,000 2,974,007
GTE South, due 2/14/96..... 6,200 6,157,034
Hewlett Packard, due
3/19/96................... 3,000 2,964,900
Knight Ridder, due
2/23/96................... 4,000 3,966,845
Knight Ridder, due
3/11/96................... 2,400 2,374,660
Motorola, Inc., due
1/26/96................... 2,100 2,091,906
Procter & Gamble, due
2/16/96................... 1,800 1,787,235
Proctor & Gamble, due
3/07/96................... 5,400 5,344,956
Raytheon Co., due
1/08/96................... 2,800 2,796,788
Transamerica Co., due
1/08/96................... 6,000 5,993,327
Tennessee Valley Authority,
due 1/10/96............... 1,500 1,497,904
COMMERCIAL PAPER -- continued
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Tennessee Valley Authority,
due 1/23/96............... $ 3,500 $ 3,488,044
Tennessee Valley Authority,
due 1/24/96............... 6,000 5,978,572
Tennessee Valley Authority,
due 2/08/96............... 5,000 4,970,814
Warner Lambert, due
4/08/96................... 3,400 3,348,817
-----------
Total Commercial Paper.................... $61,912,290
-----------
</TABLE>
<TABLE>
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 61.2%
Federal Farm Credit, due
1/12/96 - 3/06/96...... $ 6,900 $6,864,465
Federal Home Loan Bank,
due 1/09/96 -
5/17/96................ 46,700 46,340,562
Federal Home Loan
Mortgage Corp., due
1/02/96 - 2/22/96...... 17,200 17,100,160
Federal National
Mortgage Assn., due
1/04/96 - 3/13/96...... 32,700 32,493,551
----------
Total U.S. Government and Agency
Obligations.......................... $102,798,738
----------
Total Investments, at Amortized
Cost................................. $164,711,028
OTHER ASSETS, LESS LIABILITIES --
1.9%.................................. 3,264,879
----------
Net Assets -- 100.0%................. $167,975,907
----------
----------
</TABLE>
See portfolio footnotes and notes to financial statements
PORTFOLIO OF INVESTMENTS -- December 31, 1995
TOTAL RETURN VARIABLE ACCOUNT -- TRVA
BONDS -- 33.9%
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000 omitted) Value
<S> <C> <C>
AEROSPACE -- 0.3%
Loral Corp., 8.375s,
2024...................... $ 400 $ 459,332
Raytheon Co., 7.375s,
2025...................... 275 286,426
-----------
$ 745,758
-----------
AIRLINES -- 1.1%
Jet Equipment Trust,
10.91s, 2006##............ $ 300 $ 347,651
Jet Equipment Trust,
10.69s, 2015##............ 250 293,275
</TABLE>
16
<PAGE>
BONDS -- continued
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000 omitted) Value
<S> <C> <C>
AIRLINES -- continued
NWA Trust, 9.25s, 2014..... $ 307 $ 373,445
Qantas Airways, Ltd., 7.5s,
2003##.................... 700 733,621
United Airlines, Inc.,
9.125s 2012............... 200 223,500
United Airlines, Inc.,
9.75s 2021................ 400 479,828
United Airlines, Inc.,
10.25s, 2021.............. 480 600,629
-----------
$ 3,051,949
-----------
AUTOMOTIVE -- 0.3%
Ford Motor Co., 7.125s,
2025...................... $ 400 $ 415,540
Ford Motor Co., 7.75s,
2043...................... 400 445,572
-----------
$ 861,112
-----------
BANKS AND CREDIT COMPANIES -- 1.2%
Bankers Trust Corp. of New
York, 7.5s, 2015.......... $ 1,200 $ 1,242,036
Banponce Financial Corp.,
7.72s, 2000............... 1,000 1,056,750
Riggs National Corp., 8.5s,
2006...................... 750 802,500
Sovereign Bancorp, 6.75s,
2000...................... 200 201,000
-----------
$ 3,302,286
-----------
CONSUMER GOODS AND SERVICES -- 0.1%
Black & Decker Corp.,
8.44s, 1999............... $ 200 $ 217,458
-----------
CONTAINERS -- 0.1%
Owens Corning Fiberglass
Co., 9.9s 2015##.......... $ 200 $ 225,875
-----------
CORPORATE ASSET BACKED -- 0.4%
Chase Manhattan Corp.,
8.8s, 2000................ $ 400 $ 413,032
Merrill Lynch Mortgage
Investors, Inc., 8.9s,
2011...................... 410 430,857
Merrilll Lynch Mortgage
Investors, Inc., 9.3s,
2016+..................... 337 350,779
-----------
$ 1,194,668
-----------
ENTERTAINMENT -- 0.5%
Time Warner, Inc., 7.75s,
2005...................... $ 367 $ 382,058
Time Warner, Inc., 9.125s,
2013...................... 800 901,560
-----------
$ 1,283,618
-----------
</TABLE>
<TABLE>
<S> <C> <C>
FINANCIAL INSTITUTIONS -- 1.5%
Associates Corp. of
North America, 6.375s,
2005................... $ 650 $ 661,882
<CAPTION>
Principal
Amount
(000
Issuer omitted) Value
<S> <C> <C>
FINANCIAL INSTITUTIONS -- continued
Alex Brown, Inc.,
7.625s, 2005........... $ 500 $ 531,455
Goldman Sachs Group,
6.2s, 2000##........... 200 199,500
Goldman Sachs Group,
7.25s, 2005##.......... 150 155,625
Lehman Brothers, Inc.,
7.125s, 2002........... 400 413,552
Lehman Brothers, Inc.,
7.375s, 2007........... 600 629,622
Leucadia National Corp.,
8.25s, 2005............ 150 157,773
RHG Finance Corp.,
8.875s, 2005........... 400 417,660
Salton Sea Funding
Corp., 7.37s, 2005##... 400 414,296
Salton Sea Funding
Corp., 7.84s, 2010##... 400 420,704
----------
$4,002,069
----------
FOOD AND BEVERAGE PRODUCTS -- 1.2%
Borden, Inc., 9.2s,
2021................... $ 810 $ 859,742
RJR Nabisco, Inc., 8s,
2000................... 190 193,304
RJR Nabisco, Inc.,
8.75s, 2007............ 1,175 1,198,477
RJR Nabisco, Inc.,
7.55s, 2015............ 890 926,285
----------
$3,177,808
----------
FOREIGN -- U.S. DOLLAR DENOMINATED -- 2.4%
Banco Central
Hispanoamericano,
8.25s, 2004............ $ 600 $ 659,040
Banco Santander, 7.875s,
2005................... 600 662,256
Canadian Pacific Forest
Products, Inc., 9.25s,
2002................... 1,000 1,120,830
Financiara Energetica
Nacional Colombia,
6.625s, 1996##......... 420 418,425
Hanson Overseas BV,
6.75s, 2005............ 625 647,206
Hidroelectrica Alicura,
8.375s, 1999##......... 500 460,000
Korea Electric Power
Corp., 7.75s, 2013..... 1,200 1,283,136
Oleoducto Central S.A.,
9.35s, 2005##.......... 300 304,500
Province of Ontario, 7s,
2005................... 500 528,075
Republic of Colombia,
8.75s, 1999............ 250 264,280
</TABLE>
17
<PAGE>
PORTFOLIO OF INVESTMENTS -- continued
BONDS -- continued
<TABLE>
<CAPTION>
Principal
Amount
(000
Issuer omitted) Value
<S> <C> <C>
FOREIGN -- U.S. DOLLAR DENOMINATED -- continued
Republic of Colombia,
7.25s, 2004............ $ 160 $ 153,478
----------
$6,501,226
----------
FOREST AND PAPER PRODUCTS -- 1.2%
Georgia-Pacific Corp.,
9.875s, 2021........... $ 1,150 $1,331,872
Georgia-Pacific Corp.,
8.125s, 2023........... 525 549,134
Georgia-Pacific Corp.,
8.625s, 2025........... 200 220,168
Noranda Forest, Inc.,
6.875s, 2005........... 950 971,793
----------
$3,072,967
----------
INSURANCE -- 0.5%
CCP Insurance, Inc.,
10.5s, 2004............ $ 240 $ 261,468
Metropolitan Life
Insurance, Inc., 7.7s,
2015##................. 400 415,376
Travelers Group, Inc.,
7.875s, 2025........... 600 671,670
----------
$1,348,514
----------
METALS AND MINERALS -- 0.3%
Asarco, Inc., 8.5s,
2025................... $ 600 $ 682,644
----------
OILS -- 1.2%
Oryx Energy Co., 9.3s,
1996................... $ 1,980 $1,999,265
Oryx Energy Co., 10s,
2001................... 600 666,036
Tenneco, Inc., 6.5s,
2005................... 400 399,000
----------
$3,064,301
----------
POLLUTION CONTROL -- 0.2%
Laidlaw, Inc., 8.75s,
2025................... $ 350 $ 417,365
----------
PRINTING AND PUBLISHING -- 0.8%
News America Holdings,
Inc., 7.5s, 2000....... $ 700 $ 736,225
News America Holdings,
Inc., 7.6s, 2015....... 600 613,650
News America Holdings,
Inc., 7.75s, 2045...... 400 405,176
Valassis Inserts, Inc.,
9.375s, 1999........... 415 418,826
----------
$2,173,877
----------
<CAPTION>
Principal
Amount
(000
Issuer omitted) Value
<S> <C> <C>
REAL ESTATE -- 0.3%
Rouse Co., 8.5s, 2003... $ 400 $ 436,920
Rouse Co., 8.55s,
2005................... 400 462,060
----------
$ 898,980
----------
SPECIAL PRODUCTS AND SERVICES -- 0.3%
Fisher Scientific
International, Inc.,
7.125s, 2005........... $ 400 $ 400,632
ITT Corp., 6.75s,
2005................... 400 407,800
----------
$ 808,432
----------
STORES -- 0.2%
Dayton-Hudson Corp., 9s,
2021................... $ 500 $ 598,095
----------
TELECOMMUNICATIONS -- 1.4%
TCI Communications,
Inc., 8.75s, 2015...... $ 604 $ 669,637
Tele-Communications,
Inc., 7.38s, 2001...... 500 523,590
Tele-Communications,
Inc., 10.125s, 2022.... 575 720,406
Tele-Communications,
Inc., 9.25s, 2023...... 1,471 1,605,714
Viacom, Inc., 7.75s,
2005................... 260 276,112
----------
$3,795,459
----------
U.S FEDERAL AGENCIES -- 1.2%
Federal Home Loan
Mortgage Corp., 9s,
2020................... $ 445 $ 465,366
Federal National
Mortgage Assn., 7.5s,
2009................... 2,600 2,673,918
----------
$3,139,284
----------
U.S. GOVERNMENT GUARANTEED -- 1.0%
Government National
Mortgage Assn., 7.5s,
2025................... $ 1,484 $1,526,395
Government National
Mortgage Assn., 9s,
2017................... 626 667,478
Government National
Mortgage Assn., 9s,
2018................... 434 459,996
----------
$2,653,869
----------
U.S. TREASURY OBLIGATIONS -- 10.3%
U.S. Treasury Notes,
7.25s, 1996............ $ 1,300 $1,315,847
</TABLE>
18
<PAGE>
BONDS -- continued
<TABLE>
<CAPTION>
Principal
Amount
(000
Issuer omitted) Value
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- continued
U.S. Treasury Notes,
7.25s, 1996............ $ 2,000 $2,034,060
U.S. Treasury Notes,
5.625s, 1997........... 5,000 5,036,700
U.S. Treasury Notes,
7.5s, 1999............. 365 391,860
U.S. Treasury Notes,
7.875s, 1999........... 305 331,593
U.S. Treasury Notes,
6.125s, 2000........... 520 535,600
U.S. Treasury Notes,
6.25s, 2000............ 400 413,812
U.S. Treasury Notes,
7.25s, 2004............ 4,900 5,448,947
U.S. Treasury Notes,
7.875s, 2004........... 4,620 5,347,650
U.S. Treasury Notes,
5.875s, 2005........... 1,000 1,022,500
U.S. Treasury Notes,
6.5s, 2005............. 300 319,593
U.S. Treasury Notes,
7.5s, 2024............. 425 510,863
U.S. Treasury Bonds,
6.875s, 2025........... 4,100 4,624,021
----------
$27,333,046
----------
UTILITIES -- ELECTRIC -- 4.7%
Beaver Valley Power
Station II Funding
Corp., 8.33s, 2007..... $ 134 $ 134,134
Central Maine Power Co.,
7.45s, 1999............ 200 210,516
Cleveland Electric
Illuminating, 9.5s,
2005................... 1,000 1,035,000
Coastal Bancorp, Inc.,
10s, 2002.............. 100 101,000
Coastal Corp., 10.375s,
2000................... 200 233,736
Coastal Corp., 10.25s,
2004................... 600 744,780
Coastal Corp., 7.75s,
2035................... 1,350 1,401,570
Commonwealth Edison Co.,
8.375s, 2023........... 800 860,976
First PV Funding Corp.,
10.3s, 2014............ 650 680,063
First PV Funding Corp.,
10.15s, 2016........... 750 766,875
Gulf States Utilities
Co., 8.25s, 2004....... 500 539,125
Illinois Power Co.,
8.75s, 2021............ 600 653,466
<CAPTION>
Principal
Amount
(000
Issuer omitted) Value
<S> <C> <C>
UTILITIES -- ELECTRIC -- continued
Long Island Lighting
Co., 8.75s, 1997....... $ 500 $ 514,555
Long Island Lighting
Co., 8.9s, 2019........ 1,660 1,675,919
Long Island Ltg Co.,
9.625s, 2024........... 250 254,490
Louisiana Power & Light
Co., 10.67s, 2017...... 400 430,292
Midland Cogeneration
Venture Corp., 10.33s,
2002................... 523 543,566
Midland Funding Corp.
II, "A", 11.75s,
2005................... 750 785,768
Ohio Edison Co., 7.375s,
2002................... 225 236,520
Texas & New Mexico Power
Co., 12.5s, 1999....... 225 253,125
Texas & New Mexico Power
Co., 9.25s, 2000....... 350 374,910
----------
$12,430,386
----------
UTILITIES -- GAS -- 1.0%
ANR Pipeline Co., 7s,
2025................... $ 550 $ 577,990
California Energy Co.,
0s, 2004............... 600 567,000
Noram Energy Corp.,
7.5s, 2000............. 380 389,929
Northwest Pipeline Co.,
9s, 2022............... 125 138,723
Panhandle Eastern Corp.,
8.625s, 2025........... 300 334,015
Southern Union Co.,
7.6s, 2024............. 555 578,266
----------
$2,585,923
----------
UTILITIES -- TELEPHONE -- 0.2%
Century Telephone
Enterprises, Inc.,
8.25s, 2024............ $ 600 $ 655,218
----------
Total Bonds (Identified Cost,
$90,729,986)........................ $90,222,187
----------
CONVERTIBLE BONDS -- 0.2%
SPECIAL PRODUCTS AND SERVICES
Ciba-Geigy, 6.25s,
2016## (Identified
Cost, $728,000)........ $ 500 $ 511,250
----------
</TABLE>
19
<PAGE>
PORTFOLIO OF INVESTMENTS -- continued
COMMON STOCKS -- 55.8%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. COMMON STOCKS -- 50.9%
AEROSPACE -- 2.0%
Allied Signal, Inc......... 11,500 $ 546,250
Loral Corp................. 32,100 1,135,538
Raytheon Co................ 16,300 770,175
United Technologies
Corp...................... 29,100 2,760,863
-----------
$ 5,212,826
-----------
AUTOMOTIVE -- 1.7%
Dana Corp.................. 18,000 $ 526,500
Ford Motor Co.............. 41,900 1,215,100
General Motors Corp........ 56,000 2,961,000
-----------
$ 4,702,600
-----------
BANKS AND CREDIT COMPANIES -- 5.2%
Bank of Boston Corp........ 44,000 $ 2,035,000
Bank of New York, Inc...... 23,000 1,121,250
Chase Manhattan Corp....... 35,000 2,121,875
Citicorp................... 2,000 134,500
Comerica, Inc.............. 10,000 401,250
Fleet Financial Group,
Inc....................... 6,500 264,875
Morgan (J.P.) & Co......... 20,000 1,605,000
National City Corp......... 68,000 2,252,500
NationsBank Corp........... 37,000 2,576,125
Northern Trust Co.......... 22,500 1,260,000
-----------
$13,772,375
-----------
BUSINESS MACHINES -- 0.7%
Texas Instruments, Inc..... 7,000 $ 362,250
Xerox Corp................. 10,000 1,370,000
-----------
$ 1,732,250
-----------
CHEMICALS -- 1.0%
Dow Chemical Co............ 20,000 $ 1,407,500
Du Pont (E. I.) De Nemours
& Co...................... 16,800 1,173,900
Grace (W.R.) & Co.......... 1,600 94,600
-----------
$ 2,676,000
-----------
CONGLOMERATES -- 1.0%
Eastern Enterprises........ 50,000 $ 1,762,500
Textron, Inc............... 13,400 904,500
-----------
$ 2,667,000
-----------
CONSUMER GOODS AND SERVICES -- 2.9%
Colgate-Palmolive Co....... 42,000 $ 2,950,500
<CAPTION>
Issuer Shares Value
<S> <C> <C>
CONSUMER GOODS AND SERVICES -- continued
Philip Morris Cos., Inc.... 50,000 $ 4,525,000
Rubbermaid, Inc............ 11,500 293,250
-----------
$ 7,768,750
-----------
ELECTRICAL EQUIPMENT -- 2.1%
General Electric Co........ 33,500 $ 2,412,000
Honeywell, Inc............. 64,000 3,112,000
-----------
$ 5,524,000
-----------
FINANCIAL INSTITUTIONS -- 0.5%
Federal Home Loan Mortgage
Corp...................... 15,500 $ 1,294,250
-----------
FOOD AND BEVERAGE PRODUCTS -- 2.0%
Anheuser-Busch Cos.,
Inc....................... 9,500 $ 635,313
Campbell Soup Co........... 4,000 240,000
CPC International, Inc..... 18,300 1,255,838
General Mills, Inc......... 19,500 1,126,125
Kellog Co.................. 8,100 625,725
McCormick & Co. Inc........ 10,200 246,075
PepsiCo, Inc............... 19,500 1,089,563
-----------
$ 5,218,639
-----------
FOREST AND PAPER PRODUCTS -- 0.5%
Weyerhaeuser Co............ 33,000 $ 1,427,250
-----------
INSURANCE -- 4.9%
Aetna Life & Casualty
Co........................ 27,900 $ 1,932,075
Allstate Corp.............. 10,081 414,581
American General Corp...... 50,000 1,743,750
CIGNA Corp................. 14,400 1,486,800
MBIA, Inc.................. 30,000 2,250,000
Prudential Reinsurance
Holdings, Inc............. 19,300 451,138
Reliastar Financial
Corp...................... 19,000 843,125
St. Paul Cos., Inc......... 11,000 611,875
Torchmark Corp............. 27,500 1,244,375
Travelers Group, Inc....... 17,000 1,068,875
UNUM Corp.................. 20,000 1,100,000
-----------
$13,146,594
-----------
</TABLE>
20
<PAGE>
COMMON STOCKS -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
U.S. COMMON STOCKS -- continued
<S> <C> <C>
MACHINERY -- 0.8%
Deere & Co., Inc........ 26,400 $ 930,600
Ingersoll-Rand Co....... 19,800 695,475
York International
Corp................... 9,000 423,000
----------
$2,049,075
----------
MEDICAL AND HEALTH PRODUCTS -- 2.6%
American Home Products
Corp................... 22,000 $2,134,000
Baxter International,
Inc.................... 30,200 1,264,625
Lilly (Eli) & Co........ 63,000 3,543,750
----------
$6,942,375
----------
METALS AND MINERALS -- 0.7%
Cyprus Amax Minerals
Co..................... 25,000 $ 653,125
Phelps Dodge Corp....... 20,000 1,245,000
----------
$1,898,125
----------
OIL SERVICES -- 0.5%
Schlumberger Ltd........ 18,100 $1,253,425
----------
OILS -- 5.8%
Amoco Corp.............. 36,000 $2,587,500
Exxon Corp.............. 41,000 3,285,125
Mobil Corp.............. 28,000 3,136,000
Occidental Petroleum
Corp................... 142,600 3,048,075
Sun, Inc................ 20,459 560,065
USX Marathon Group...... 81,900 1,597,050
Ultramar Corp........... 42,000 1,081,500
Union Pacific Res Group,
Inc.................... 7,900 200,462
----------
$15,495,777
----------
PHOTOGRAPHIC PRODUCTS -- 1.5%
Eastman Kodak Co........ 60,000 $4,020,000
----------
POLLUTION CONTROL -- 0.2%
WMX Technologies,
Inc.................... 18,000 $ 537,750
----------
PRINTING AND PUBLISHING -- 0.1%
Dun & Bradstreet
Corp................... 5,500 $ 356,125
----------
RAILROAD -- 0.6%
CSX Corp................ 36,000 $1,642,500
----------
REAL ESTATE INVESTMENT TRUST -- 1.1%
Hospitality Properties
Trust.................. 36,000 $ 963,000
<CAPTION>
Issuer Shares Value
<S> <C> <C>
REAL ESTATE INVESTMENT TRUST -- continued
Meditrust Corp.......... 42,100 $1,468,238
National Health
Investors, Inc......... 17,000 563,125
----------
$2,994,363
----------
SPECIAL PRODUCTS AND SERVICES -- 0.6%
Minnesota Mining &
Manufacturing Co....... 13,000 $ 861,250
Stanley Works........... 12,300 633,450
Transport Holdings, Inc.
"A"*................... 50 2,038
----------
$1,496,738
----------
STORES -- 1.4%
Dayton-Hudson Corp...... 7,000 $ 525,000
May Department Stores
Co..................... 40,000 1,690,000
Sears, Roebuck & Co..... 40,000 1,560,000
----------
$3,775,000
----------
UTILITIES -- ELECTRIC -- 2.4%
CMS Energy Corp......... 25,000 $ 746,875
FPL Group, Inc.......... 45,000 2,086,875
PECO Energy Co.......... 37,500 1,129,687
Pacific Gas & Electric
Co..................... 15,500 439,812
Pinnacle West Capital
Corp................... 7,000 201,250
Portland Gen Corp....... 37,500 1,092,187
Unicom Corp............. 19,700 645,175
----------
$6,341,861
----------
UTILITIES -- GAS -- 3.2%
Coastal Corp............ 23,000 $ 856,750
Enron Corp.............. 14,000 533,750
Pacific Enterprises..... 110,000 3,107,500
Sonat, Inc.............. 50,000 1,781,250
Williams Cos., Inc...... 48,200 2,114,775
----------
$8,394,025
----------
UTILITIES -- TELEPHONE -- 4.9%
AT&T Co................. 70,000 $4,532,500
Ameritech Corp. 14,000 826,000
Frontier Corp........... 20,200 606,000
GTE Corp................ 60,000 2,640,000
MCI Communications
Corp................... 46,500 1,214,813
NYNEX Corp.............. 27,000 1,458,000
</TABLE>
21
<PAGE>
PORTFOLIO OF INVESTMENTS -- continued
COMMON STOCKS -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
UTILITIES -- TELEPHONE -- continued
Sprint Corp............. 42,000 $1,674,750
----------
$12,952,063
----------
Total U.S. Common Stocks............. $135,291,736
----------
</TABLE>
<TABLE>
<S> <C> <C>
FOREIGN STOCKS -- 4.9%
ARGENTINA -- 0.1%
YPF S.A., ADR (Oils).... 19,000 $ 410,875
----------
CANADA
Canadian National
Railway Co.
(Railroad)*............ 5,600 $ 84,000
----------
FRANCE -- 0.8%
Alcatel Alsthom
Compagnie, ADR
(Telecommunications)... 34,800 $ 609,000
Total S.A., ADR
(Oils)................. 43,000 1,462,000
----------
$2,071,000
----------
GERMANY -- 0.2%
Daimler-Benz AG, ADR
(Automotive)........... 9,300 $ 473,138
----------
NETHERLANDS -- 1.2%
Royal Dutch Petroleum
Co. (Oils)............. 22,500 $3,175,312
----------
SPAIN -- 0.3%
Iberdrola S.A.
(Utilities --
Electric).............. 75,000 $ 684,509
----------
UNITED KINGDOM -- 2.3%
British Gas PLC, ADR
(Utilities -- Gas)..... 7,000 $ 273,875
British Petroleum PLC,
ADR (Oils)............. 41,581 4,246,460
National Power PLC
(Utilities --
Electric).............. 20,100 48,056
SmithKline Beecham PLC,
ADR (Medical and Health
Products).............. 26,300 1,459,650
----------
$6,028,041
----------
Total Foreign Stocks................. $12,926,875
----------
Total Common Stocks (Identified Cost,
$104,559,350)........................ $148,218,611
----------
PREFERRED STOCKS -- 0.2%
BANKS AND CREDIT COMPANIES
Bank United, Texas,
Federal Savings Bank,
"B".................... 20,000 $ 530,000
----------
(Identified Cost, $500,000)..........
<CAPTION>
Issuer Shares Value
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS -- 0.1%
ENVIRONMENTAL CONTROL
Browning-Ferris
Industries, Inc. 7.25s,
1998................... 9,000 $ 282,375
----------
(Identified Cost $301,118)...........
<CAPTION>
Principal
Amount
(000 Omitted)
<S> <C> <C>
SHORT-TERM OBLIGATIONS -- 9.4%
Federal National
Mortgage Assn., due
1/11/96................ $ 4,735 $4,727,833
Ford Motor Credt Co.,
due 1/02/96............ 8,605 8,603,566
Motorola, Inc., due
1/08/96................ 11,800 11,787,266
----------
Total Short-Term Obligations, at
Amortized Cost....................... $25,118,665
----------
Total Investments (Identified Cost,
$221,937,119)........................ $264,883,088
OTHER ASSETS, LESS LIABILITIES --
0.4%.................................. 957,272
----------
Net Assets -- 100.0%................. $265,840,360
----------
----------
See portfolio footnotes and notes to financial
statements
</TABLE>
PORTFOLIO OF INVESTMENTS -- December 31, 1995
WORLD GOVERNMENTS VARIABLE ACCOUNT -- WGVA
BONDS -- 80.3%
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 17.6%
U.S. Treasury Notes, 5.875s,
2005....................... $ 1,850 $1,891,625
U.S. Treasury Bonds, 8.875s,
2017....................... 3,415 4,573,948
----------
Total U.S. Treasury Obligations........... $6,465,573
----------
FOREIGN DENOMINATED -- 62.7%
AUSTRALIA -- 7.6%
Commonwealth of Australia,
9.75s, 2002................ AUD 2,270 $1,831,618
Commonwealth of Australia,
9.5s, 2003................. 1,200 961,130
----------
$2,792,748
----------
CANADA -- 3.2%
Canadian Government, 8.75s,
2005....................... CAD 1,440 $1,179,333
----------
</TABLE>
22
<PAGE>
BONDS -- continued
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
FOREIGN DENOMINATED -- continued
DENMARK -- 5.8%
Kingdom of Denmark, 9s,
1998....................... DKK 3,528 $ 691,704
Kingdom of Denmark, 9s,
2000....................... 4,460 892,000
Kingdom of Denmark, 8s,
2001....................... 2,742 528,673
----------
$2,112,377
----------
FRANCE -- 7.6%
Government of France, 7s,
1999....................... FRF 5,240 $1,117,247
Government of France, 7.75s,
2000....................... 7,660 1,674,624
----------
$2,791,871
----------
GERMANY -- 5.7%
Deutschland Republic, 6.5s,
2003....................... DEM 1,215 $ 880,907
Deutschland Republic,
6.875s, 2005............... 1,600 1,179,534
German Unity Fund, 8.5s,
2001....................... 30 23,944
----------
$2,084,385
----------
ITALY -- 6.1%
Republic of Italy, 8.5s,
1999....................... ITL 2,165,000 $1,312,369
Republic of Italy, 9.5s,
1999....................... 620,000 381,689
Republic of Italy, 8.5s,
2004....................... 940,000 526,566
----------
$2,220,624
----------
NEW ZEALAND DOLLARS -- 3.0%
New Zealand Government, 10s,
2002....................... NZD 1,500 $1,106,006
----------
NETHERLANDS -- 5.0%
Netherlands Government,
8.25s, 2007................ NLG 2,565 $1,851,525
----------
SPAIN -- 11.5%
Spanish Government, 10.5s,
2003....................... ESP 337,750 $2,897,341
Spanish Government, 10.9s,
2003....................... 152,000 1,329,031
----------
$4,226,372
----------
UNITED KINGDOM -- 7.2%
United Kingdom Treasury, 8s,
2000....................... GBP 675 $1,099,025
United Kingdom Treasury, 7s,
2001....................... 1,000 1,553,960
----------
$2,652,985
----------
Total Foreign Denominated................. $23,018,226
----------
Total Bonds (Identified Cost,
$28,651,896).............................. $29,483,799
----------
<CAPTION>
CALL OPTIONS PURCHASED -- 0.1%
Principal
Description/Expiration Amount
Month/ of Contracts
Strike Price (000 Omitted) Value
<S> <C> <C>
ITALIAN LIRE/DEUTSCHE MARK
January/1085................ ITL 1,811,950 $ 1,812
JAPANESE BONDS
March/107.489............... JPY 73,500 5,218
March/112.796............... 79,000 3,239
March/115.828............... 309,000 6,489
JAPANESE YEN
January/97.5................ 423,041 423
SWEDISH KRONOR/DEUTSCHE MARK
February/4.535 SEK 22,979 20,175
----------
Total Call Options Purchased (Premiums
Paid, $110,369)........................... $ 37,356
----------
PUT OPTIONS PURCHASED -- 0.1%
AUSTRALIAN DOLLARS
January/0.745............... AUD 981 $ 8,165
DEUTSCHE MARK
February/1.46............... DEM 5,035 27,368
DEUTSCHE MARK/BRITISH POUNDS
March/2.265................. 3,601 16,383
----------
Total Put Options Purchased (Premiums
Paid, $67,601)............................ $ 51,916
----------
SHORT-TERM OBLIGATIONS -- 19.8%
<CAPTION>
Principal
Amount
Issuer (000 Omitted)
<S> <C> <C>
Federal Home Loan Mortgage,
due 1/02/96................ $ 3,585 $3,584,427
Federal Home Loan Mortgage,
due 1/04/96................ 2,170 2,168,987
Federal National Mortgage
Assn., due 1/03/96......... 1,500 1,499,538
----------
Total Short-Term Obligations, at Amortized
Cost...................................... $7,252,952
----------
Total Investments (Identified Cost,
$36,082,818).............................. $36,826,023
----------
</TABLE>
23
<PAGE>
PORTFOLIO OF INVESTMENTS -- continued
CALL OPTIONS WRITTEN -- (0.3)%
<TABLE>
<CAPTION>
Principal
Description/Expiration Amount
Month/ of Contracts
Strike Price (000 Omitted) Value
<S> <C> <C>
DEUTSCHE MARK/BRITISH POUNDS
March/2.1476................ DEM 3,415 $ (9,657)
ITALIAN LIRE/DEUTSCHE MARK
August/1125 ITL 5,191,550 (88,256)
----------
Total Call Options Written (Premiums
Received, $101,218)....................... $ (97,913)
----------
PUT OPTIONS WRITTEN -- (0.5)%
AUSTRALIAN DOLLARS
January/0.745............... AUD 981 $ (8,165)
ITALIAN LIRE
August/1125................. ITL 5,191,550 (155,747)
JAPANESE BONDS
March/107.489............... JPY 73,500 (13,083)
March/112.796............... 79,000 (19,276)
----------
Total Put Options Written (Premiums
Received, $223,619)....................... $ (196,271)
----------
OTHER ASSETS, LESS LIABILITIES -- 0.5%...... $ 184,005
----------
Net Assets -- 100.0%...................... $36,715,844
----------
----------
</TABLE>
<TABLE>
<C> <S>
PORTFOLIO FOOTNOTES:
* Non-income producing security.
** Non-income producing security -- in default.
# Payment-in-kind security.
## SEC Rule 144A restriction.
+ Restricted security.
</TABLE>
Abbreviations have been used throughout this report to indicate amounts shown in
currencies other than the U.S. dollar. A list of abbreviations is shown below.
<TABLE>
<S> <C> <C> <C> <C> <C>
Australian
AUD = Dollars GBP = British Pounds
Canadian
CAD = Dollars ITL = Italian Lire
CHF = Swiss Francs JPY = Japanese Yen
DEM = Deutsche Marks NLG = Dutch Guilders
New Zealand
DKK = Danish Kroner NZD = Dollars
Spanish
ESP = Pesetas SEK = Swedish Kronor
FRF = French Francs
</TABLE>
24
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES -- December 31, 1995
(000 omitted)
<TABLE>
<CAPTION>
Capital Government High Managed Money Total World
Appreciation Securities Yield Sectors Market Return Governments
Variable Variable Variable Variable Variable Variable Variable
ASSETS: Account Account Account Account Account Account Account
----------- ----------- --------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investments --
Identified cost................... $ 397,326 $ 234,313 $ 196,915 $ 74,617 $ 164,711 $ 221,937 $ 36,083
Unrealized appreciation
(depreciation)................... 104,567 19,461 (928) 7,539 -- 42,946 743
----------- ----------- --------- ----------- --------- --------- -----------
Total value..................... $ 501,893 $ 253,774 $ 195,987 $ 82,156 $ 164,711 $ 264,883 $ 36,826
Cash................................ 33 50 211 16 2,129 116 152
Foreign currency, at value
(identified cost $7)............... -- -- -- -- -- -- 8
Receivable for forward foreign
currency exchange contracts sold... -- -- -- -- -- -- 160
Receivable for investments sold..... 2,507 -- 1,432 1,222 -- 3,141 --
Receivable for units sold........... 1,031 862 1,270 598 1,586 3,168 574
Interest and dividends receivable... 380 3,902 3,933 81 -- 2,116 738
Receivable from sponsor............. -- -- 55 -- -- 253 --
Other assets........................ 11 4 19 2 3 3 1
----------- ----------- --------- ----------- --------- --------- -----------
Total assets.................... $ 505,855 $ 258,592 $ 202,907 $ 84,075 $ 168,429 $ 273,680 $ 38,459
----------- ----------- --------- ----------- --------- --------- -----------
LIABILITIES:
Payable for investments purchased... $ 3,367 $ -- $ -- $ 360 $ -- $ 4,597 $ 538
Payable for units surrendered....... 2,754 1,264 1,355 721 348 3,204 463
Written options outstanding, at
value (premiums received, $324).... -- -- -- -- -- -- 294
Payable for forward foreign currency
exchange contracts sold............ 58 -- -- -- -- -- --
Payable for forward foreign currency
exchange contracts purchased....... -- -- -- -- -- -- 397
Payable for closed forward foreign
currency exchange contracts........ -- -- -- -- -- -- 22
Payable to affiliates --
Investment adviser................ 29 12 12 5 -- 16 2
Sponsor........................... 386 55 -- 27 70 -- 10
Accrued expenses and other
liabilities........................ 48 28 15 16 35 23 17
----------- ----------- --------- ----------- --------- --------- -----------
Total liabilities............... $ 6,642 $ 1,359 $ 1,382 $ 1,129 $ 453 $ 7,840 $ 1,743
----------- ----------- --------- ----------- --------- --------- -----------
Net assets.................... $ 499,213 $ 257,233 $ 201,525 $ 82,946 $ 167,976 $ 265,840 $ 36,716
----------- ----------- --------- ----------- --------- --------- -----------
----------- ----------- --------- ----------- --------- --------- -----------
</TABLE>
See notes to financial statements
25
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES -- December 31, 1995 -- continued
(000 omitted except for unit values)
<TABLE>
<CAPTION>
Capital Government High Managed Money Total World
Appreciation Securities Yield Sectors Market Return Governments
Unit Variable Variable Variable Variable Variable Variable Variable
Units Value Account Account Account Account Account Account Account
------ -------- ------------ ----------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net assets applicable to contract owners:
Capital Appreciation
Variable Account --
Compass 2................... 10,014 $37.7151 $ 377,638
Compass 3................... 4,272 25.0907 107,192
Compass 3 - Level 2......... 955 10.3053 9,838
Government Securities
Variable Account --
Compass 2................... 8,361 $25.5791 $ 213,903
Compass 3................... 1,888 18.0278 34,030
Compass 3 - Level 2......... 608 10.4172 6,329
High Yield
Variable Account --
Compass 2................... 5,649 $26.1493 $147,695
Compass 3................... 1,913 19.3854 37,074
Compass 3 - Level 2......... 1,368 10.2377 14,002
Managed Sectors
Variable Account --
Compass 2................... 788 $31.3870 $24,720
Compass 3................... 1,729 31.2371 54,001
Compass 3 - Level 2......... 418 9.9892 4,172
Money Market
Variable Account --
Compass 2................... 6,501 $16.5213 $107,378
Compass 3................... 3,929 13.6545 53,633
Compass 3 - Level 2......... 561 10.0997 5,663
Total Return
Variable Account --
Compass 2................... 4,801 $22.2577 $106,839
Compass 3................... 6,322 21.9966 139,044
Compass 3 - Level 2......... 1,637 10.4938 17,177
World Governments
Variable Account --
Compass 2................... 824 $18.1095 $ 14,922
Compass 3................... 1,021 17.8962 18,267
Compass 3 - Level 2......... 316 10.3582 3,277
------------ ----------- -------- -------- -------- -------- -----------
Net assets applicable to owners of deferred
contracts...................................... $ 494,668 $ 254,262 $198,771 $82,893 $166,674 $263,060 $ 36,466
Reserve for variable annuities --
Compass 2 Contracts........................... 4,173 2,700 2,738 53 1,286 2,504 76
Compass 3 Contracts........................... 372 271 16 -- 16 276 174
------------ ----------- -------- -------- -------- -------- -----------
Net assets................................ $ 499,213 $ 257,233 $201,525 $82,946 $167,976 $265,840 $ 36,716
------------ ----------- -------- -------- -------- -------- -----------
------------ ----------- -------- -------- -------- -------- -----------
</TABLE>
See notes to financial statements
26
<PAGE>
STATEMENTS OF OPERATIONS -- Year Ended December 31, 1995
(000 omitted)
<TABLE>
<CAPTION>
Capital Government High Managed
Appreciation Securities Yield Sectors
Variable Variable Variable Variable
Account Account Account Account
--------- -------- -------- --------
<S> <C> <C> <C> <C>
NET INVESTMENT INCOME (EXPENSE):
Income --
Interest............................................. $ 711 $20,338 $ 19,667 $ 135
Dividends............................................ 4,277 -- -- 726
Foreign taxes withheld............................... (3) -- -- (3)
--------- -------- -------- --------
Total investment income.......................... $ 4,985 $20,338 $ 19,667 $ 858
--------- -------- -------- --------
Expenses --
Mortality and expense risk charges................... $ 5,868 $ 3,471 $ 2,461 $ 936
Management fees...................................... 3,367 1,511 1,467 569
Custodian fees....................................... 226 126 88 34
Distribution expense charges......................... 155 61 61 77
Auditing fees........................................ 38 44 43 25
Legal fees........................................... 21 1 4 3
Boards of Managers fees and expenses................. 11 11 11 11
Printing............................................. 38 22 18 9
Miscellaneous........................................ 6 5 85 5
--------- -------- -------- --------
Total expenses................................... $ 9,730 $ 5,252 $ 4,238 $ 1,669
Fees paid indirectly................................. (6) (4) (1) (2)
--------- -------- -------- --------
Net expenses..................................... $ 9,724 $ 5,248 $ 4,237 $ 1,667
--------- -------- -------- --------
Net investment income (expense)................ $ (4,739) $15,090 $ 15,430 $ (809)
--------- -------- -------- --------
--------- -------- -------- --------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Realized gains (losses)(identified cost basis) --
Investment transactions.......................... $ 70,813 $(1,546) $ (8,851) $15,470
Written option transactions...................... -- -- -- --
Foreign currency transactions.................... (506) -- 1 (12)
--------- -------- -------- --------
Net realized gains (losses) on investments..... $ 70,307 $(1,546) $ (8,850) $15,458
--------- -------- -------- --------
Change in unrealized appreciation
(depreciation) --
Investments........................................ $ 70,363 $27,975 $ 21,191 $ 4,877
Written options.................................... -- -- -- --
Translation of assets and liabilities in foreign
currencies........................................ 40 -- (14) --
--------- -------- -------- --------
Net unrealized gains on investments.............. $ 70,403 $27,975 $ 21,177 $ 4,877
--------- -------- -------- --------
Net realized and unrealized gains on
investments................................... $140,710 $26,429 $ 12,327 $20,335
--------- -------- -------- --------
Increase in net assets from operations....... $135,971 $41,519 $ 27,757 $19,526
--------- -------- -------- --------
--------- -------- -------- --------
<CAPTION>
Money Total World
Market Return Governments
Variable Variable Variable
Account Account Account
-------- -------- --------
<S> <C> <C> <C>
NET INVESTMENT INCOME (EXPENSE):
Income --
Interest............................................. $ 10,327 $ 7,470 $ 2,828
Dividends............................................ -- 5,059 --
Foreign taxes withheld............................... -- (39) --
-------- -------- --------
Total investment income.......................... $ 10,327 $ 12,490 $ 2,828
-------- -------- --------
Expenses --
Mortality and expense risk charges................... $ 2,216 $ 2,992 $ 462
Management fees...................................... 878 1,834 282
Custodian fees....................................... 77 113 37
Distribution expense charges......................... 91 206 31
Auditing fees........................................ 34 37 36
Legal fees........................................... 1 1 1
Boards of Managers fees and expenses................. 11 11 11
Printing............................................. 16 16 4
Miscellaneous........................................ -- 3 2
-------- -------- --------
Total expenses................................... $ 3,324 $ 5,213 $ 866
Fees paid indirectly................................. (2) (17) (3)
-------- -------- --------
Net expenses..................................... $ 3,322 $ 5,196 $ 863
-------- -------- --------
Net investment income (expense)................ $ 7,005 $ 7,294 $ 1,965
-------- -------- --------
-------- -------- --------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Realized gains (losses)(identified cost basis) --
Investment transactions.......................... $ -- $ 26,523 $ 3,384
Written option transactions...................... -- -- 149
Foreign currency transactions.................... -- (3) (1,861)
-------- -------- --------
Net realized gains (losses) on investments..... $ -- $ 26,520 $ 1,672
-------- -------- --------
Change in unrealized appreciation
(depreciation) --
Investments........................................ $ -- $ 24,712 $ 1,280
Written options.................................... -- -- (14)
Translation of assets and liabilities in foreign
currencies........................................ -- -- 61
-------- -------- --------
Net unrealized gains on investments.............. $ -- $ 24,712 $ 1,327
-------- -------- --------
Net realized and unrealized gains on
investments................................... $ -- $ 51,232 $ 2,999
-------- -------- --------
Increase in net assets from operations....... $ 7,005 $ 58,526 $ 4,964
-------- -------- --------
-------- -------- --------
</TABLE>
See notes to financial statements
27
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
(000 omitted)
<TABLE>
<CAPTION>
Capital Appreciation Government Securities High Yield
Variable Account Variable Account Variable Account
-------------------------- -------------------------- --------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31, December 31,
1995 1994 1995 1994 1995 1994
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM:
OPERATIONS:
Net investment income
(expense)................ $ (4,739) $ (3,294) $ 15,090 $ 16,490 $ 15,430 $ 13,839
Net realized gains
(losses) on investments
and foreign currency
transactions............. 70,307 65,369 (1,546) (3,837) (8,850) (13,619)
Net unrealized gains
(losses) on investments
and foreign currency
translation.............. 70,403 (138,416) 27,975 (23,235) 21,177 (4,411)
------------ ------------ ------------ ------------ ------------ ------------
Increase (decrease) in
net assets from
operations............. $ 135,971 $ (76,341) $ 41,519 $ (10,582) $ 27,757 $ (4,191)
------------ ------------ ------------ ------------ ------------ ------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments
received................. $ 19,308 $ 25,691 $ 6,994 $ 10,810 $ 5,092 $ 6,243
Net transfers between
variable and fixed
accumulation accounts.... 5,813 (51,442) (42,552) 16,110 4,042 (12,187)
Withdrawals, surrenders,
annuitizations and
contract charges......... (69,281) (56,940) (45,443) (53,455) (26,006) (22,878)
------------ ------------ ------------ ------------ ------------ ------------
Net accumulation
activity............... $ (44,160) $ (82,691) $ (81,001) $ (26,535) $ (16,872) $ (28,822)
------------ ------------ ------------ ------------ ------------ ------------
Annuitization activity:
Annuitizations............ $ 375 $ 412 $ 538 $ 267 $ 584 $ 154
Annuity payments and
contract charges......... (622) (571) (466) (480) (406) (367)
Net transfers among
accounts for annuity
reserves................. 12 73 6 (11) -- 32
Adjustments to annuity
reserves................. (139) 53 87 8 49 5
------------ ------------ ------------ ------------ ------------ ------------
Net annuitization
activity............... $ (374) $ (33) $ 165 $ (216) $ 227 $ (176)
------------ ------------ ------------ ------------ ------------ ------------
Decrease in net assets
from participant
transactions............. $ (44,534) $ (82,724) $ (80,836) $ (26,751) $ (16,645) $ (28,998)
------------ ------------ ------------ ------------ ------------ ------------
Total increase
(decrease) in net
assets................. $ 91,437 $(159,065) $ (39,317) $ (37,333) $ 11,112 $ (33,189)
NET ASSETS:
At beginning of year........ 407,776 566,841 296,550 333,883 190,413 223,602
------------ ------------ ------------ ------------ ------------ ------------
At end of year.............. $ 499,213 $ 407,776 $ 257,233 $ 296,550 $ 201,525 $ 190,413
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
See notes to financial statements
28
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS -- continued
(000 omitted)
<TABLE>
<CAPTION>
Managed Sectors Money Market
Variable Account Variable Account
--------------------------- ---------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income (expense).................... $ (809) $ (596) $ 7,005 $ 4,189
Net realized gains on investments and foreign
currency transactions............................. 15,458 2,824 -- --
Net unrealized gains (losses) on investments and
foreign currency translation...................... 4,877 (4,364) -- --
------------ ------------ ------------ ------------
Increase (decrease) in net assets from
operations...................................... $19,526 $(2,136) $ 7,005 $ 4,189
------------ ------------ ------------ ------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received......................... $ 6,862 $ 7,547 $ 7,259 $ 9,422
Net transfers between variable and fixed
accumulation accounts............................. 3,581 (2,890) 22,474 43,402
Withdrawals, surrenders, annuitizations and
contract charges.................................. (9,312) (6,857) (39,085) (36,315)
------------ ------------ ------------ ------------
Net accumulation activity........................ $ 1,131 $(2,200) $ (9,352) $ 16,509
------------ ------------ ------------ ------------
Annuitization activity:
Annuitizations..................................... $-- $ 19 $ 91 $ 212
Annuity payments and contract charges.............. (9) (23) (230) (218)
Net transfers among accounts for annuity
reserves.......................................... -- (9) (18) (73)
Adjustments to annuity reserves.................... (7) 2 (41) (36)
------------ ------------ ------------ ------------
Net annuitization activity....................... $ (16) $ (11) $ (198) $ (115)
------------ ------------ ------------ ------------
Increase (decrease) in net assets from participant
transactions...................................... $ 1,115 $(2,211) $ (9,550) $ 16,394
------------ ------------ ------------ ------------
Total increase (decrease) in net assets.......... $20,641 $(4,347) $ (2,545) $ 20,583
NET ASSETS:
At beginning of year................................. 62,305 66,652 170,521 149,938
------------ ------------ ------------ ------------
At end of year....................................... $82,946 $62,305 $167,976 $170,521
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
See notes to financial statements
29
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS -- continued
(000 omitted)
<TABLE>
<CAPTION>
Total Return
Variable Account
---------------------------
Year Ended Year Ended
December 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM:
OPERATIONS:
Net investment income.......... $ 7,294 $ 6,004
Net realized gains (losses) on
investments and foreign
currency transactions......... 26,520 3,921
Net unrealized gains (losses)
on investments and foreign
currency translation.......... 24,712 (16,953)
------------ ------------
Increase (decrease) in net
assets from operations...... $ 58,526 $ (7,028)
------------ ------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received..... $ 15,564 $ 22,168
Net transfers between variable
and fixed accumulation
accounts...................... 540 2,947
Withdrawals, surrenders,
annuitizations and contract
charges....................... (32,616) (27,706)
------------ ------------
Net accumulation activity.... $(16,512) $ (2,591)
------------ ------------
Annuitization activity:
Annuitizations................. $ 270 $ 364
Annuity payments and contract
charges....................... (376) (380)
Net transfers among accounts
for annuity reserves.......... -- (16)
Adjustments to annuity
reserves...................... 183 (18)
------------ ------------
Net annuitization activity... $ 77 $ (50)
------------ ------------
Decrease in net assets from
participant transactions...... $(16,435) $ (2,641)
------------ ------------
Total increase (decrease) in
net assets.................. $ 42,091 $ (9,669)
NET ASSETS:
At beginning of year............. 223,749 233,418
------------ ------------
At end of year................... $265,840 $223,749
------------ ------------
------------ ------------
<CAPTION>
World Governments
Variable Account
---------------------------
Year Ended Year Ended
December 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM:
OPERATIONS:
Net investment income.......... $ 1,965 $ 1,723
Net realized gains (losses) on
investments and foreign
currency transactions......... 1,672 (4,475)
Net unrealized gains (losses)
on investments and foreign
currency translation.......... 1,327 (63)
------------ ------------
Increase (decrease) in net
assets from operations...... $ 4,964 $(2,815)
------------ ------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received..... $ 2,063 $ 3,409
Net transfers between variable
and fixed accumulation
accounts...................... (1,733) (1,594)
Withdrawals, surrenders,
annuitizations and contract
charges....................... (5,080) (4,058)
------------ ------------
Net accumulation activity.... $(4,750) $(2,243)
------------ ------------
Annuitization activity:
Annuitizations................. $ 190 $--
Annuity payments and contract
charges....................... (62) (20)
Net transfers among accounts
for annuity reserves.......... -- 4
Adjustments to annuity
reserves...................... (5) (1)
------------ ------------
Net annuitization activity... $ 123 $ (17)
------------ ------------
Decrease in net assets from
participant transactions...... $(4,627) $(2,260)
------------ ------------
Total increase (decrease) in
net assets.................. $ 337 $(5,075)
NET ASSETS:
At beginning of year............. 36,379 41,454
------------ ------------
At end of year................... $36,716 $36,379
------------ ------------
------------ ------------
</TABLE>
See notes to financial statements
30
<PAGE>
PER UNIT AND OTHER DATA
<TABLE>
<CAPTION>
Capital Appreciation Variable Account
------------------------------------------------
Compass 2
------------------------------------------------
Year Ended December 31,
------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of year.................... $28.0107 $32.9053 $29.2712 $26.6401 $19.8801
-------- -------- -------- -------- --------
Investment income........... $0.3624 $0.4277 $0.3914 $0.2670 $0.4256
Expenses.................... 0.6989 0.6325 0.6436 0.5467 0.4756
-------- -------- -------- -------- --------
Net investment expense.... $(0.3365) $(0.2048) $(0.2522) $(0.2797) $(0.0500)
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... 10.0409 (4.6898) 3.8863 2.9108 6.8100
-------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $9.7044 $(4.8946) $3.6341 $2.6311 $6.7600
-------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
year....................... $37.7151 $28.0107 $32.9053 $29.2712 $26.6401
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+##................. 0.80 % 0.79 % 0.78 % 0.80 % 0.79 %
Net investment income
(expense).................. (1.02)% (0.69)% (0.83)% (1.08)% (0.23)%
PORTFOLIO TURNOVER............ 96 % 95 % 56 % 34 % 62 %
NUMBER OF UNITS OUTSTANDING AT
END OF YEAR (000 OMITTED).... 10,014 11,310 13,833 14,914 16,570
</TABLE>
<TABLE>
<CAPTION>
Capital Appreciation Variable Account
----------------------------------------------------------
Compass
3 -
Level 2
-------- Compass 3
Period ------------------------------------------------
Ended
December Year Ended December 31,
31, ------------------------------------------------
1995# 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of year.................... $10.0000 $18.6531 $21.9341 $19.5311 $17.7928 $13.2912
-------- -------- -------- -------- -------- --------
Investment income........... $0.0196 $0.2402 $0.2870 $0.2617 $0.1919 $0.2748
Expenses.................... 0.0517 0.4847 0.4421 0.4498 0.4131 0.3323
-------- -------- -------- -------- -------- --------
Net investment expense.... $(0.0321) $(0.2445) $(0.1551) $(0.1881) $(0.2212) $(0.0575)
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... 0.3374 6.6821 (3.1259) 2.5911 1.9595 4.5591
-------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $0.3053 $6.4376 $(3.2810) $2.4030 $1.7383 $4.5016
-------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
year....................... $10.3053 $25.0907 $18.6531 $21.9341 $19.5311 $17.7928
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+##................. 0.80 % 0.80 % 0.79 % 0.78 % 0.80 % 0.79 %
Net investment income
(expense).................. (1.02)% (1.02)% (0.69)% (0.83)% (1.08)% (0.23)%
PORTFOLIO TURNOVER............ 96 % 96 % 95 % 56 % 34 % 62 %
NUMBER OF UNITS OUTSTANDING AT
END OF YEAR (000 OMITTED).... 955 4,272 4,686 4,899 4,401 3,742
<FN>
*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
31
<PAGE>
PER UNIT AND OTHER DATA -- continued
<TABLE>
<CAPTION>
Government Securities Variable Account
------------------------------------------------
Compass 2
------------------------------------------------
Year Ended December 31,
------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of year.................... $22.0031 $22.7120 $21.1172 $19.9842 $17.4276
-------- -------- -------- -------- --------
Investment income........... $1.7836 $1.5648 $1.5732 $1.4340 $1.5470
Expenses.................... 0.4564 0.4229 0.4238 0.3672 0.3476
-------- -------- -------- -------- --------
Net investment income..... $1.3272 $1.1419 $1.1494 $1.0668 $1.1994
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... 2.2488 (1.8508) 0.4454 0.0662 1.3572
-------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $3.5760 $(0.7089) $1.5948 $1.1330 $2.5566
-------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
year....................... $25.5791 $22.0031 $22.7120 $21.1172 $19.9842
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+##................. 0.63 % 0.61 % 0.61 % 0.62 % 0.60 %
Net investment income....... 5.51 % 5.09 % 5.11 % 5.51 % 6.50 %
PORTFOLIO TURNOVER............ 80 % 41 % 81 % 175 % 149 %
NUMBER OF UNITS OUTSTANDING AT
END OF YEAR (000 OMITTED).... 8,361 11,308 12,679 15,059 17,986
</TABLE>
<TABLE>
<CAPTION>
Government Securities Variable Account
----------------------------------------------------------
Compass
3 -
Level 2
-------- Compass 3
Period ------------------------------------------------
Ended
December Year Ended December 31,
31, ------------------------------------------------
1995# 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of year.................... $10.0000 $15.5227 $16.0387 $14.9267 $14.1396 $12.3433
-------- -------- -------- -------- -------- --------
Investment income........... $0.1868 $1.2529 $1.1028 $1.1064 $1.0851 $1.0935
Expenses.................... 0.0478 0.3385 0.3146 0.3154 0.2950 0.2604
-------- -------- -------- -------- -------- --------
Net investment income..... $0.1390 $0.9144 $0.7882 $0.7910 $0.7901 $0.8331
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... 0.2782 1.5907 (1.3042) 0.3210 (0.0030) 0.9632
-------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $0.4172 $2.5051 $(0.5160) $1.1120 $0.7871 $1.7963
-------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
year....................... $10.4172 $18.0278 $15.5227 $16.0387 $14.9267 $14.1396
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+##................. 0.63 % 0.63 % 0.61 % 0.61 % 0.62 % 0.60 %
Net investment income....... 5.51 % 5.51 % 5.09 % 5.11 % 5.51 % 6.50 %
PORTFOLIO TURNOVER............ 80 % 80 % 41 % 81 % 175 % 149 %
NUMBER OF UNITS OUTSTANDING AT
END OF YEAR (000 OMITTED).... 608 1,888 2,922 2,697 2,722 2,327
<FN>
*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
32
<PAGE>
PER UNIT AND OTHER DATA -- continued
<TABLE>
<CAPTION>
High Yield Variable Account
------------------------------------------------
Compass 2
------------------------------------------------
Year Ended December 31,
------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of year.................... $22.6776 $23.3591 $19.7156 $17.3208 $11.7862
-------- -------- -------- -------- --------
Investment income........... $2.5137 $2.2324 $2.0867 $2.0657 $1.9834
Expenses.................... 0.5356 0.5062 0.4797 0.4061 0.3287
-------- -------- -------- -------- --------
Net investment income..... $1.9781 $1.7262 $1.6070 $1.6596 $1.6547
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... 1.4936 (2.4077) 2.0365 0.7352 3.8799
-------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $3.4717 $(0.6815) $3.6435 $2.3948 $5.5346
-------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
year....................... $26.1493 $22.6776 $23.3591 $19.7156 $17.3208
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+##................. 0.88 % 0.91 % 0.86 % 0.93 % 0.87 %
Net investment income....... 7.91 % 7.41 % 6.97 % 9.03 % 10.85 %
PORTFOLIO TURNOVER............ 88 % 77 % 67 % 61 % 38 %
NUMBER OF UNITS OUTSTANDING AT
END OF YEAR (000 OMITTED).... 5,649 6,433 7,564 8,218 9,376
</TABLE>
<TABLE>
<CAPTION>
High Yield Variable Account
----------------------------------------------------------
Compass
3 -
Level 2
-------- Compass 3
Period ------------------------------------------------
Ended
December Year Ended December 31,
31, ------------------------------------------------
1995# 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of year.................... $10.0000 $16.8283 $17.3543 $14.6589 $12.8923 $8.7799
-------- -------- -------- -------- -------- --------
Investment income........... $0.3803 $1.8912 $1.5336 $1.5179 $1.5969 $1.5178
Expenses.................... 0.0765 0.4253 0.3711 0.3671 0.3340 0.2582
-------- -------- -------- -------- -------- --------
Net investment income..... $0.3038 $1.4659 $1.1625 $1.1508 $1.2629 $1.2596
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... (0.0661) 1.0912 (1.6885) 1.5446 0.5037 2.8528
-------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $0.2377 $2.5571 $(0.5260) $2.6954 $1.7666 $4.1124
-------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
year....................... $10.2377 $19.3854 $16.8283 $17.3543 $14.6589 $12.8923
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+##................. 0.88 % 0.88 % 0.91 % 0.86 % 0.93 % 0.87 %
Net investment income....... 7.91 % 7.91 % 7.41 % 6.97 % 9.03 % 10.85 %
PORTFOLIO TURNOVER............ 88 % 88 % 77 % 67 % 61 % 38 %
NUMBER OF UNITS OUTSTANDING AT
END OF YEAR (000 OMITTED).... 1,368 1,913 2,506 2,577 2,345 1,823
<FN>
*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
33
<PAGE>
PER UNIT AND OTHER DATA -- continued
<TABLE>
<CAPTION>
Managed Sectors Variable Account
------------------------------------------------
Compass 2
------------------------------------------------
Year Ended December 31,
------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of year.................... $23.9044 $24.7295 $23.8070 $22.6652 $13.9677
-------- -------- -------- -------- --------
Investment income........... $0.3277 $0.3066 $0.1822 $0.1121 $0.2357
Expenses.................... 0.6066 0.5155 0.4994 0.4782 0.3848
-------- -------- -------- -------- --------
Net investment expense.... $(0.2789) $(0.2089) $(0.3172) $(0.3661) $(0.1491)
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... 7.7615 (0.6162) 1.2397 1.5079 8.8466
-------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $7.4826 $(0.8251) $0.9225 $1.1418 $8.6975
-------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
year....................... $31.3870 $23.9044 $24.7295 $23.8070 $22.6652
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+##................. 0.87 % 0.90 % 0.91 % 0.92 % 0.98 %
Net investment income
(expense).................. (1.07)% (0.97)% (1.49)% (1.75)% (0.97)%
PORTFOLIO TURNOVER............ 115 % 111 % 122 % 34 % 52 %
NUMBER OF UNITS OUTSTANDING AT
END OF YEAR (000 OMITTED).... 788 800 878 1,041 899
</TABLE>
<TABLE>
<CAPTION>
Managed Sectors Variable Account
----------------------------------------------------------
Compass
3 -
Level 2
-------- Compass 3
Period ------------------------------------------------
Ended
December Year Ended December 31,
31, ------------------------------------------------
1995# 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of year.................... $10.0000 $23.8258 $24.6849 $23.8007 $22.6927 $14.0049
-------- -------- -------- -------- -------- --------
Investment income........... $0.0231 $0.3259 $0.3031 $0.1817 $0.1156 $0.2307
Expenses.................... 0.0539 0.6452 0.5452 0.5313 0.5325 0.4141
-------- -------- -------- -------- -------- --------
Net investment income
(expense)................ $(0.0308) $(0.3193) $(0.2421) $(0.3496) $(0.4169) $(0.1834)
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... 0.0200 7.7306 (0.6170) 1.2338 1.5249 8.8712
-------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $(0.0108) $7.4113 $(0.8591) $0.8842 $1.1080 $8.6878
-------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
year....................... $9.9892 $31.2371 $23.8258 $24.6849 $23.8007 $22.6927
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+##................. 0.87 % 0.87 % 0.90 % 0.91 % 0.92 % 0.98 %
Net investment income
(expense).................. (1.07)% (1.07)% (0.97)% (1.49)% (1.75)% (0.97)%
PORTFOLIO TURNOVER............ 115 % 115 % 111 % 122 % 34 % 52 %
NUMBER OF UNITS OUTSTANDING AT
END OF YEAR (000 OMITTED).... 418 1,729 1,810 1,819 1,728 1,276
<FN>
*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
34
<PAGE>
PER UNIT AND OTHER DATA -- continued
<TABLE>
<CAPTION>
Money Market Variable Account
------------------------------------------------
Compass 2
------------------------------------------------
Year Ended December 31,
------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of year.................... $15.8699 $15.5003 $15.2976 $14.9945 $14.3507
-------- -------- -------- -------- --------
Investment income........... $0.9560 $0.6615 $0.4864 $0.5772 $0.9108
Expenses.................... 0.3046 0.2919 0.2837 0.2741 0.2670
-------- -------- -------- -------- --------
Net investment income..... $0.6514 $0.3696 $0.2027 $0.3031 $0.6438
-------- -------- -------- -------- --------
Net increase in unit
value...................... $0.6514 $0.3696 $0.2027 $0.3031 $0.6438
-------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
year....................... $16.5213 $15.8699 $15.5003 $15.2976 $14.9945
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+##................. 0.58 % 0.58 % 0.36 % 0.59 % 0.58 %
Net investment income....... 4.00 % 2.37 % 1.30 % 2.03 % 4.46 %
NUMBER OF UNITS OUTSTANDING AT
END OF YEAR (000 OMITTED).... 6,501 6,851 6,418 8,026 12,023
</TABLE>
<TABLE>
<CAPTION>
Money Market Variable Account
----------------------------------------------------------
Compass
3 -
Level 2
-------- Compass 3
Period ------------------------------------------------
Ended
December Year Ended December 31,
31, ------------------------------------------------
1995# 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of year.................... $10.0000 $13.1291 $12.8359 $12.6806 $12.4415 $11.9182
-------- -------- -------- -------- -------- --------
Investment income........... $0.1358 $0.7885 $0.5688 $0.4065 $0.4888 $0.7619
Expenses.................... 0.0361 0.2631 0.2756 0.2512 0.2497 0.2386
-------- -------- -------- -------- -------- --------
Net investment income..... $0.0997 $0.5254 $0.2932 $0.1553 $0.2391 $0.5233
-------- -------- -------- -------- -------- --------
Net increase in unit
value...................... $0.0997 $0.5254 $0.2932 $0.1553 $0.2391 $0.5233
-------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
year....................... $10.0997 $13.6545 $13.1291 $12.8359 $12.6806 $12.4415
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+##................. 0.58 % 0.58 % 0.58 % 0.36 % 0.59 % 0.58 %
Net investment income....... 4.00 % 4.00 % 2.37 % 1.30 % 2.03 % 4.46 %
NUMBER OF UNITS OUTSTANDING AT
END OF YEAR (000 OMITTED).... 561 3,929 4,599 3,823 3,704 3,228
<FN>
*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>
PER UNIT AND OTHER DATA -- continued
<TABLE>
<CAPTION>
Total Return Variable Account
------------------------------------------------
Compass 2
------------------------------------------------
Year Ended December 31,
------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of year.................... $17.4729 $18.0043 $15.9891 $14.6451 $12.0634
-------- -------- -------- -------- --------
Investment income........... $1.0394 $0.8583 $0.8513 $0.9191 $0.9092
Expenses.................... 0.4118 0.3704 0.3616 0.3303 0.2828
-------- -------- -------- -------- --------
Net investment income..... $0.6276 $0.4879 $0.4897 $0.5888 $0.6264
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... 4.1572 (1.0193) 1.5255 0.7552 1.9553
-------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $4.7848 $(0.5314) $2.0152 $1.3440 $2.5817
-------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
year....................... $22.2577 $17.4729 $18.0043 $15.9891 $14.6451
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+##................. 0.83 % 0.82 % 0.76 % 0.86 % 0.84 %
Net investment income....... 2.99 % 2.60 % 2.43 % 3.63 % 4.52 %
PORTFOLIO TURNOVER............ 105 % 63 % 89 % 94 % 80 %
NUMBER OF UNITS OUTSTANDING AT
END OF YEAR (000 OMITTED).... 4,801 5,410 5,889 5,732 5,215
</TABLE>
<TABLE>
<CAPTION>
Total Return Variable Account
----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Compass
3 -
Level 2
-------- Compass 3
Period ------------------------------------------------
Ended
December Year Ended December 31,
31, ------------------------------------------------
1995# 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- --------
PER UNIT DATA:*
Net asset value -- beginning
of year.................... $10.0000 $17.2937 $17.8462 $15.8723 $14.5600 $12.0108
-------- -------- -------- -------- -------- --------
Investment income........... $0.1247 $1.0122 $0.8371 $0.8304 $0.9284 $0.8989
Expenses.................... 0.0525 0.4358 0.3904 0.3829 0.3607 0.3002
-------- -------- -------- -------- -------- --------
Net investment income..... $0.0722 $0.5764 $0.4467 $0.4475 $0.5677 $0.5987
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... 0.4216 4.1265 (0.9992) 1.5264 0.7446 1.9505
-------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $0.4938 $4.7029 $(0.5525) $1.9739 $1.3123 $2.5492
-------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
year....................... $10.4938 $21.9966 $17.2937 $17.8462 $15.8723 $14.5600
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+##................. 0.83 % 0.83 % 0.82 % 0.76 % 0.86 % 0.84 %
Net investment income....... 2.99 % 2.99 % 2.60 % 2.43 % 3.63 % 4.52 %
PORTFOLIO TURNOVER............ 105 % 105 % 63 % 89 % 94 % 80 %
NUMBER OF UNITS OUTSTANDING AT
END OF YEAR (000 OMITTED).... 1,637 6,322 7,349 7,013 5,721 4,752
<FN>
*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>
PER UNIT AND OTHER DATA -- continued
<TABLE>
<CAPTION>
World Governments Variable Account
------------------------------------------------
Compass 2
------------------------------------------------
Year Ended December 31,
------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of year.................... $15.8337 $16.9056 $14.4420 $14.5806 $12.9852
-------- -------- -------- -------- --------
Investment income........... $1.3112 $1.0805 $1.1460 $1.2892 $1.1907
Expenses.................... 0.3863 0.3565 0.3704 0.3624 0.3190
-------- -------- -------- -------- --------
Net investment income..... $0.9249 $0.7240 $0.7756 $0.9268 $0.8717
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... 1.3509 (1.7959) 1.6880 (1.0654) 0.7237
-------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $2.2758 $(1.0719) $2.4636 $(0.1386) $1.5954
-------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
year....................... $18.1095 $15.8337 $16.9056 $14.4420 $14.5806
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+##................. 1.00 % 1.00 % 0.94 % 1.15 % 1.18 %
Net investment income....... 5.25 % 4.45 % 4.12 % 6.03 % 6.51 %
PORTFOLIO TURNOVER............ 330 % 256 % 202 % 133 % 229 %
NUMBER OF UNITS OUTSTANDING AT
END OF YEAR (000 OMITTED).... 824 983 1,092 949 884
</TABLE>
<TABLE>
<CAPTION>
World Governments Variable Account
----------------------------------------------------------
Compass
3 -
Level 2
-------- Compass 3
Period ------------------------------------------------
Ended
December Year Ended December 31,
31, ------------------------------------------------
1995# 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:*
Net asset value -- beginning
of year.................... $10.0000 $15.6705 $16.7563 $14.3365 $14.4961 $12.9291
-------- -------- -------- -------- -------- --------
Investment income........... $0.1819 $1.3045 $1.0666 $1.1293 $1.2979 $1.1961
Expenses.................... 0.0554 0.4086 0.3760 0.3890 0.3876 0.3380
-------- -------- -------- -------- -------- --------
Net investment income..... $0.1265 $0.8959 $0.6906 $0.7403 $0.9103 $0.8581
Net realized and unrealized
gains (losses) on
investments and foreign
currency transactions...... 0.2317 1.3298 (1.7764) 1.6795 (1.0699) 0.7089
-------- -------- -------- -------- -------- --------
Net increase (decrease) in
unit value................. $0.3582 $2.2257 $(1.0858) $2.4198 $(0.1596) $1.5670
-------- -------- -------- -------- -------- --------
Unit value:
Net asset value -- end of
year....................... $10.3582 $17.8962 $15.6705 $16.7563 $14.3365 $14.4961
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses+##................. 1.00 % 1.00 % 1.00 % 0.94 % 1.15 % 1.18 %
Net investment income....... 5.25 % 5.25 % 4.45 % 4.12 % 6.03 % 6.51 %
PORTFOLIO TURNOVER............ 330 % 330 % 256 % 202 % 133 % 229 %
NUMBER OF UNITS OUTSTANDING AT
END OF YEAR (000 OMITTED).... 316 1,021 1,321 1,363 1,176 995
<FN>
*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
37
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION
Capital Appreciation Variable Account, Government Securities Variable Account,
High Yield Variable Account, Managed Sectors Variable Account, Money Market
Variable Account, Total Return Variable Account and World Governments Variable
Account are separate accounts established by Sun Life Assurance Company of
Canada (U.S.), the Sponsor, in connection with the issuance of Compass 2 and
Compass 3 combination fixed/variable annuity contracts. Capital Appreciation
Variable Account, Government Securities Variable Account, Money Market Variable
Account and Total Return Variable Account operate as open-end, diversified
management investment companies and High Yield Variable Account, Managed Sectors
Variable Account and World Governments Variable Account operate as open-end,
non-diversified management investment companies as those terms are defined in
the Investment Company Act of 1940, as amended.
(2) SIGNIFICANT ACCOUNT POLICIES
INVESTMENT VALUATIONS
Equity securities listed on securities exchanges or reported through the NASDAQ
system are valued at last sale prices. Unlisted equity securities or listed
equity securities for which last sale prices are not available are valued at
last quoted bid prices. Debt securities (other than short-term obligations which
mature in 60 days or less), including listed issues and forward contracts, are
valued on the basis of valuations furnished by dealers or by a pricing service
with consideration to factors such as institutional-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics and other market data, without exclusive reliance upon
exchange or over-the-counter prices. Short-term obligations, which mature in 60
days or less, are valued at amortized cost, which approximates market value.
Non-U.S. dollar denominated short-term obligations are valued at amortized cost
as calculated in the base currency and translated into U.S. dollars at the
closing daily exchange rate. Futures contracts, options, and options on futures
contracts listed on commodities exchanges are valued at closing settlement
prices. Over-the-counter options are valued by brokers through the use of a
pricing model which takes into account closing bond valuations, implied
volatility, and short-term repurchase rates. Securities for which there are no
such quotations or valuations are valued at fair value as determined in good
faith by or at the direction of the Boards of Managers.
REPURCHASE AGREEMENTS
Certain Variable Accounts may enter into repurchase agreements with institutions
that the Variable Account's investment adviser has determined are creditworthy.
Each repurchase agreement is recorded at cost. Such Variable Accounts require
that the securities purchased in a repurchase transaction be transferred to the
custodian in a manner sufficient to enable the Account to obtain those
securities in the event of a default under the repurchase agreement. The
investment adviser monitors, on a daily basis, the value of the securities
transferred to ensure that the value, including accrued interest, of the
securities under each repurchase agreement is greater than the amount owed to
the Variable Account under each such repurchase agreement.
38
<PAGE>
FOREIGN CURRENCY TRANSLATION
Investment valuations, other assets, and liabilities initially expressed in
foreign currencies are converted each business day into U.S. dollars based upon
current exchange rates. Purchases and sales of foreign investments, income and
expenses are converted into U.S. dollars based upon currency exchange rates
prevailing on the respective dates of such transactions. Gains and losses
attributable to foreign currency exchange rates on sales of securities are
recorded for financial statement purposes as net realized gains and losses on
investments. Gains and losses attributable to foreign exchange rate movements on
income and expenses are recorded for financial statement purposes as foreign
currency transaction gains and losses. That portion of both realized and
unrealized gains and losses on investments that results from fluctuations in
foreign currency exchange rates is not separately disclosed.
WRITTEN OPTIONS
Certain Variable Accounts may write covered call or put options for which
premiums are received and are recorded as liabilities, and are subsequently
adjusted to the current value of the options written. Premiums received from
writing options which expire are treated as realized gains. Premiums received
from writing options which are exercised or are closed are offset against the
proceeds or amount paid on the transaction to determine the realized gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
security or currency purchased. The writer of an option may have no control over
whether the underlying security may be sold (call) or purchased (put) and, as a
result, bears the market risk of an unfavorable change in the price of the
security or exchange rate underlying the written option. In general, written
call options may serve as a partial hedge against decreases in value of the
underlying security or exchange rate to the extent of the premium received.
Written options may also be used as part of an income producing strategy
reflecting the view of the Variable Account's management on the direction of
interest and exchange rates.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Certain Variable Accounts may enter into forward foreign currency exchange
contracts for the purchase or sale of a specific foreign currency at a fixed
price on a future date. Risks may arise upon entering into these contracts from
the potential inability of counterparties to meet the terms of their contracts
and from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar. Forward contracts will be entered into for hedging purposes as
well as for non-hedging purposes. For hedging purposes, certain Variable
Accounts may enter into contracts to deliver or receive foreign currency it will
receive from or require for its normal investment activities. It may also use
contracts in a manner intended to protect foreign currency denominated
securities from declines in value due to unfavorable exchange rate movements.
For non-hedging purposes, certain Variable Accounts may enter into contracts
with the intent of changing the relative exposure of the Account's portfolio of
securities to different currencies to take advantage of anticipated changes. The
forward foreign currency exchange contracts are adjusted by the daily forward
exchange rate of the underlying currency and any gains or losses are recorded
for financial statement purposes as unrealized until the contract settlement
date.
39
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
FEDERAL INCOME TAXES
The Variable Accounts are funding vehicles for individual variable annuities.
The operations of the Variable Accounts are part of the operations of Sun Life
Assurance Company of Canada (U.S.), the Sponsor, and are not taxed separately;
the Variable Accounts are not taxed as regulated investment companies. The
Sponsor qualifies for the federal income tax treatment granted to life insurance
companies under Subchapter L of the Internal Revenue Code. Accordingly, no
provision for federal income or excise tax is necessary. Foreign taxes have been
provided for on interest and dividend income earned on foreign investments in
accordance with the applicable country's tax rates and to the extent
unrecoverable are recorded as a reduction of investment income.
INVESTMENT TRANSACTIONS AND INCOME
Investment transactions are recorded on the trade date. Interest income is
recorded on the accrual basis. All premium and original issue discount are
amortized or accreted for financial statement and tax reporting purposes as
required by federal income tax regulations. Dividend income is recorded on the
ex-dividend date for dividends received in cash. Dividend and interest payments
received in additional securities are recorded on the ex-dividend or ex-interest
date in an amount equal to the value of the security on such date.
As appropriate, based on its investments, certain of the Variable Accounts use
the effective interest method for reporting interest income on payment-in-kind
(PIK) bonds, whereby interest income on PIK bonds is recorded ratably by the
Variable Account at a constant yield to maturity. Legal fees and other related
expenses incurred to preserve and protect the value of a security owned are
added to the cost of the security; other legal fees are expensed. Capital
infusions, which are generally non-recurring, incurred to protect or enhance the
value of high-yield debt securities, are reported as an addition to the cost
basis of the security. Costs that are incurred to negotiate the terms or
conditions of capital infusions or that are expected to result in a plan of
reorganization are reported as realized losses. Ongoing costs incurred to
protect or enhance an investment, or costs incurred to pursue other claims or
legal actions, are reported as operating expenses.
FEES PAID INDIRECTLY
The Variable Accounts' custodian bank calculates its fees based on the Accounts'
average daily net assets. 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
40
<PAGE>
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.
(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.
41
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
(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, 1995, purchases and sales of investments, other
than U.S. government securities, purchased option transactions and short-term
obligations, were as follows:
<TABLE>
<CAPTION>
Purchases Sales
------------ ------------
<S> <C> <C>
Capital Appreciation Variable Account............. $444,738,692 $453,526,365
High Yield Variable Account....................... 161,267,119 160,177,602
Managed Sectors Variable Account.................. 89,087,992 85,860,071
Money Market Variable Account*.................... 653,548,319 608,404,185
Total Return Variable Account..................... 148,725,636 160,421,986
World Governments Variable Account................ 51,595,938 55,171,992
</TABLE>
For the year ended December 31, 1995, purchases and sales of U.S. government
securities, other than purchased option transactions and short-term obligations,
were as follows:
<TABLE>
<CAPTION>
Purchases Sales
-------------- --------------
<S> <C> <C>
Capital Appreciation Variable Account........... $ 8,733,208 $ 11,201,851
Government Securities Variable Account.......... 206,708,910 212,943,099
Money Market Variable Account*.................. 1,050,909,109 1,112,057,215
Total Return Variable Account................... 97,147,156 94,177,718
World Governments Variable Account.............. 45,268,430 48,449,025
<FN>
* Purchases and sales of investments for Money Market Variable Account consist
solely of short-term obligations.
</TABLE>
42
<PAGE>
(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, forward foreign
currency exchange contracts, indexed securities and futures contracts. The
notional or contractual amounts of these instruments represent the investment
the Variable Accounts have in particular classes of financial instruments and 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, 1995, is as
follows:
WRITTEN OPTION TRANSACTIONS
World Governments Variable Account
<TABLE>
<CAPTION>
1995 Calls 1995 Puts
------------------------------ ------------------------------
Principal Amounts Principal Amounts
of Contracts of Contracts
(000's Omitted) Premiums (000's Omitted) Premiums
----------------- ---------- ----------------- ----------
<S> <C> <C> <C> <C>
Outstanding, beginning of year:
Canadian Dollars...................... -- $ -- 1,113 $ 5,809
Deutsche Marks........................ -- -- 6,894 58,599
Japanese Yen.......................... 91,000 12,246 182,000 19,560
Swiss Francs/Deutsche Marks........... 1,717 7,231 -- --
Options written --
Australian Dollars.................... 3,724 34,130 6,446 75,146
British Pounds........................ 1,527 26,353 1,425 26,353
Canadian Dollars...................... 2,269 4,760 4,526 17,981
Deutsche Marks........................ 42,766 159,139 26,866 155,494
Deutsche Marks/British Pounds......... 7,186 39,468 -- --
Italian Lire/Deutsche Marks........... 13,377,608 132,186 8,470,502 229,384
Japanese Yen.......................... 1,870,921 455,323 5,964,814 647,033
Japanese Yen/Deutsche Marks........... -- -- 604,754 21,560
Swedish Kronor/Deutsche Marks......... 19,700 12,725 -- --
Spanish Pesetas/Deutsche Marks........ -- -- 133,915 8,776
U.S. Treasury Bonds................... -- -- 2,200 29,047
</TABLE>
43
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
WRITTEN OPTION TRANSACTIONS -- continued
<TABLE>
<CAPTION>
1995 Calls 1995 Puts
------------------------------ ------------------------------
Principal Amounts Principal Amounts
of Contracts of Contracts
(000's Omitted) Premiums (000's Omitted) Premiums
----------------- ---------- ----------------- ----------
Options terminated in closing
transactions --
<S> <C> <C> <C> <C>
Australian Dollars.................... (3,724) (34,130) (5,465) (62,574)
British Pounds........................ (1,527) (26,353) -- --
Canadian Dollars...................... (2,269) (4,760) (5,639) (23,790)
Deutsche Marks........................ (5,358) (26,591) (23,165) (169,534)
Deutsche Marks/British Pounds......... (3,771) (24,286) -- --
Italian Lire/Deutsche Marks........... -- -- (1,018,856) (7,623)
Japanese Yen.......................... (1,653,355) (441,534) (5,826,980) (638,722)
Japanese Yen/Deutsche Marks........... -- -- (604,754) (21,560)
Spanish Pesetas/Deutsche Marks........ -- -- (133,915) (8,776)
Swedish Kronor/Deutsche Marks......... (19,700) (12,725) -- --
U.S. Treasury Bonds................... -- -- (2,200) (29,047)
Options exercised --
British Pounds........................ -- -- (1,425) (26,353)
Deutsche Marks........................ (30,979) (99,581) (10,595) (44,559)
Italian Lire/Deutsche Marks........... (8,186,058) (46,149) (23,323) (187)
Japanese Yen.......................... (308,566) (26,035) (167,334) (7,983)
Options expired --
Deutsche Marks........................ (6,429) (32,968) -- --
Italian Lire/Deutsche Marks........... -- -- (2,236,773) (30,415)
Swiss Francs/Deutsche Marks........... (1,717) (7,231) -- --
----------------- ---------- ----------------- ----------
Outstanding, end of year................ 5,194,965 $ 101,218 5,345,031 $ 223,619
----------------- ---------- ----------------- ----------
----------------- ---------- ----------------- ----------
Options outstanding at end of year
consist of:
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
----------------- ---------- ----------------- ----------
----------------- ---------- ----------------- ----------
Outstanding, end of year................ 5,194,965 $ 101,218 5,345,031 $ 223,619
----------------- ---------- ----------------- ----------
----------------- ---------- ----------------- ----------
</TABLE>
At December 31, 1995, the World Governments Variable Account had sufficient cash
and/or securities at least equal to the value of the written options.
44
<PAGE>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
<TABLE>
<CAPTION>
Net
Contracts Unrealized
Contracts to In Exchange at Appreciation/
Account Transaction Settlement Date Deliver/Receive for Value (Depreciation)
- ----------------------------- --------- ------------------ ----------------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Capital Appreciation Variable
Account Sales 1/30/96 GBP 2,800,000 $ 4,286,800 $4,344,298 $ (57,498)
3/21/96 SEK 6,781,700 1,013,934 1,014,637 (703)
------------- ---------- ------------
$ 5,300,734 $5,358,935 $ (58,201)
------------- ---------- ------------
------------- ---------- ------------
World Governments Variable
Account Sales 3/18/96 AUD 4,003,080 $ 2,953,386 $2,960,722 $ (7,336)
2/26/96 - 2/29/96 CAD 3,555,219 2,598,662 2,605,338 (6,676)
5/31/96 CHF 4,558,741 4,022,892 4,010,735 12,157
1/16/96 - 5/31/96 DEM 32,088,007 22,390,029 22,399,703 (9,674)
4/12/96 DKK 14,399,894 2,624,772 2,596,157 28,615
1/08/96 ESP 518,637,730 4,199,268 4,262,165 (62,897)
1/12/96 - 4/12/96 FRF 25,526,360 5,124,954 5,208,747 (83,793)
1/30/96 GBP 1,702,849 2,630,052 2,642,029 (11,977)
3/07/96 ITL 7,181,486,643 4,453,994 4,488,429 (34,435)
2/23/96 - 6/07/96 JPY 1,252,963,405 12,613,778 12,351,881 261,897
1/22/96 NLG 5,210,685 3,329,295 3,246,038 83,257
1/12/96 NZD 1,749,006 1,131,384 1,140,940 (9,556)
------------- ---------- ------------
$68,072,466 $67,912,884 $ 159,582
------------- ---------- ------------
------------- ---------- ------------
Purchases 3/18/96 AUD 242,500 $ 178,795 $ 179,356 $ 561
2/26/96 CAD 1,696,511 1,253,703 1,243,240 (10,463)
1/16/96 CHF 2,448,530 2,097,332 2,124,443 27,111
1/16/96 - 5/31/96 DEM 40,169,828 28,097,635 28,061,242 (36,393)
2/29/96 - 4/12/96 DKK 18,080,161 3,283,060 3,257,983 (25,077)
4/12/96 - 5/31/96 FRF 20,357,962 4,149,729 4,159,233 9,504
1/31/96 - 5/31/96 ITL 5,083,296,463 3,137,282 3,169,534 32,252
2/23/96 - 6/07/96 JPY 1,433,633,417 14,413,805 14,017,497 (396,308)
1/22/96 NLG 2,054,522 1,272,835 1,279,881 7,046
3/18/96 NZD 2,800,238 1,818,467 1,816,738 (1,729)
3/21/96 SEK 4,214,628 634,340 630,567 (3,773)
------------- ---------- ------------
$60,336,983 $59,939,714 $ (397,269)
------------- ---------- ------------
------------- ---------- ------------
</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 $22,409 at
December 31, 1995.
At December 31, 1995, the Capital Appreciation Variable Account and World
Governments Variable Account had sufficient cash and/or securities to cover any
commitments under these contracts.
45
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
See page 24 for an explanation of abbreviations used to indicate amounts shown
in currencies other than the U.S. dollar.
(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, 1995, Capital
Appreciation Variable Account, High Yield Variable Account, Managed Sectors
Variable Account and Total Return Variable Account owned the following
restricted securities (consisting of 0.1%, 2.8%, 0.1% and 2.0% of the net assets
of each Variable Account, respectively) which may not be publicly sold without
registration under the Securities Act of 1933 (the 1933 Act). No Variable
Account has the right to demand that such securities be registered. The value of
these securities is determined by valuations supplied by a pricing service or
brokers or, if not available, in good faith by or at the direction of the Boards
of Managers. Certain of these securities may be offered and sold to "qualified
institutional buyers" under Rule 144A of the 1933 Act.
<TABLE>
<CAPTION>
Date of Share/Par
Account Description Acquistion Amount Cost Value
---------------------------------------- ------------------------- --------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Spectrum Holobyte, Inc., 9/06/95 -
Capital Appreciation Variable Account 6.5s, 2002Section 9/20/95 580,000 $ 580,000 $ 423,400
----------- -----------
----------- -----------
American Communications
Services, Inc., 0s,
2005Section 11/19/95 250,000 $ 136,075 $ 134,375
High Yield Variable Account
Atlantic Gulf Communities
Corp., 12s, 1996 1/20/95 224,430 193,349 197,498
Atlantic Gulf Communities
Corp., 13s, 1998 2/01/94 240,878 133,424 125,256
Bell Cablemedia PLC,
11.875s, 2005Section 9/13/95 1,100,000 654,370 687,500
Calmar, Inc., 11.5s,
2005Section 8/03/95 1,650,000 1,650,000 1,670,625
Envirosource, Inc. 5/15/94 1,666 7,288 4,998
Four Seasons Hotels,
Inc., 9.125s,
2000Section 6/23/93 650,000 645,872 646,750
Gillett Holdings, Inc. 10/08/92 23,535 224,000 494,235
Howmet Corp., 10s,
2003Section 11/22/95 300,000 300,000 313,500
Interlake Revolver, "B",
5.75s, 1997Section 1/21/94 252,195 225,156 250,934
Merrill Lynch Mortgage
Investors, Inc., 8.227s,
2023 6/22/94 1,000,000 693,125 778,125
Remington Arms, Inc.,
9.5s, 2003Section 11/19/93 450,000 447,187 373,500
----------- -----------
$ 5,309,846 $ 5,677,296
----------- -----------
----------- -----------
Spectrum Holobyte, Inc.,
Managed Sectors Variable Account 6.5s, 2002Section 9/27/95 120,000 $ 120,000 $ 87,600
----------- -----------
----------- -----------
Ciba-Geigy Corp., 6.25s, 11/12/91 -
Total Return Variable Account 2016Section 1/22/92 500,000 $ 728,000 $ 511,250
Financiara Energetica
Nacional Colombia,
6.625s, 1996Section 3/22/95 420,000 410,502 418,425
Goldman Sachs Group,
6.2s, 2000Section 12/08/95 200,000 199,760 199,500
Goldman Sachs Group,
7.25s, 2005Section 9/22/95 150,000 149,861 155,625
Hidroelectrica Alicura,
8.375s, 1999Section 4/08/94 500,000 466,983 460,000
Jet Equipment Trust,
10.91s, 2006Section 4/07/95 300,000 317,451 347,651
Jet Equipment Trust,
10.69s, 2015Section 4/07/95 250,000 250,000 293,275
Merrill Lynch Home Equity
Loan Corp., 9.3s, 2016 12/16/92 337,093 338,357 350,779
Metropolitan Life
Insurance, Inc., 7.7s,
2015Section 11/08/95 400,000 398,608 415,376
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
Date of Share/Par
Account Description Acquistion Amount Cost Value
---------------------------------------- ------------------------- --------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total Return Variable Account -- Oleoducto Central S.A.,
continued 9.35s, 2005Section 6/21/95 300,000 $ 300,000 $ 304,500
Owens Corning Fiberglass
Co., 9.9s, 2015Section 3/07/95 200,000 200,000 225,875
Qantas Airways Ltd.,
7.5s, 2003Section 6/24/93 700,000 698,322 733,621
Salton Sea Funding Corp.,
7.37s, 2005Section 7/18/95 400,000 400,000 414,296
Salton Sea Funding Corp.,
7.84s, 2010Section 7/18/95 400,000 400,000 420,704
----------- -----------
$ 5,257,844 $ 5,250,877
----------- -----------
----------- -----------
</TABLE>
Section SEC Rule 144A restricted security.
(9) PARTICIPANT TRANSACTIONS
The changes in net assets from changes in numbers of outstanding units were as
follows:
<TABLE>
<CAPTION>
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)
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
</TABLE>
47
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
PARTICIPANT TRANSACTIONS -- continued
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>
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>
<TABLE>
<CAPTION>
Year Ended December 31, 1994 (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........ 340 $10,445 (1,329) $ (41,973) (1,534) $ (46,546) (2,523) $ (78,074) $(130) $(78,204)
Compass 3
Contracts........ 753 15,246 (446) (9,469) (520) (10,394) (213) (4,617) 45 (4,572)
------- --------- --------- --------- ----- ----------
$25,691 $ (51,442) $ (56,940) $ (82,691) $ (85) $(82,776)
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
Government
Securities Variable
Account
Compass 2
Contracts........ 218 $ 4,838 588 $ 13,109 (2,177) $ (48,044) (1,371) $ (30,097) $(252) $(30,349)
Compass 3
Contracts........ 385 5,972 190 3,001 (350) (5,411) 225 3,562 27 3,589
------- --------- --------- --------- ----- ----------
$10,810 $ 16,110 $ (53,455) $ (26,535) $(225) $(26,760)
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
High Yield Variable
Account
Compass 2
Contracts........ 140 $ 3,227 (401) $ (9,661) (860) $ (19,603) (1,121) $ (26,037) $(187) $(26,224)
Compass 3
Contracts........ 176 3,016 (55) (2,526) (192) (3,275) (71) (2,785) 7 (2,778)
------- --------- --------- --------- ----- ----------
$ 6,243 $ (12,187) $ (22,878) $ (28,822) $(180) $(29,002)
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
PARTICIPANT TRANSACTIONS -- continued
Year Ended December 31, 1994 (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>
Managed Sectors
Variable Account
Compass 2
Contracts........ 36 $ 874 (9) $ (219) (105) $ (2,532) (77) $ (1,877) $ (14) $ (1,891)
Compass 3
Contracts........ 277 6,673 (109) (2,671) (177) (4,325) (9) (323) 0 (323)
------- --------- --------- --------- ----- ----------
$ 7,547 $ (2,890) $ (6,857) $ (2,200) $ (14) $ (2,214)
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
Money Market
Variable Account
Compass 2
Contracts........ 142 $ 2,220 2,021 $ 31,491 (1,730) $ (27,010) 433 $ 6,701 $ (34) $ 6,667
Compass 3
Contracts........ 558 7,202 940 11,911 (722) (9,305) 776 9,808 (45) 9,763
------- --------- --------- --------- ----- ----------
$ 9,422 $ 43,402 $ (36,315) $ 16,509 $ (79) $ 16,430
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
Total Return
Variable Account
Compass 2
Contracts........ 183 $ 3,267 181 $ 3,279 (843) $ (15,054) (479) $ (8,508) $ 0 $ (8,508)
Compass 3
Contracts........ 1,072 18,901 (20) (332) (716) (12,652) 336 5,917 (33) 5,884
------- --------- --------- --------- ----- ----------
$22,168 $ 2,947 $ (27,706) $ (2,591) $ (33) $ (2,624)
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
World Governments
Variable Account
Compass 2
Contracts........ 33 $ 537 2 $ 157 (144) $ (2,291) (109) $ (1,597) $ (3) $ (1,600)
Compass 3
Contracts........ 184 2,872 (113) (1,751) (113) (1,767) (42) (646) (13) (659)
------- --------- --------- --------- ----- ----------
$ 3,409 $ (1,594) $ (4,058) $ (2,243) $ (16) $ (2,259)
------- --------- --------- --------- ----- ----------
------- --------- --------- --------- ----- ----------
</TABLE>
49
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
(10) DETAILED STATEMENT OF OPERATIONS -- Year Ended December 31, 1995 (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.............................. $ 542 $ 6 $ 161 $-- $ 2 $-- $ 711
Dividends............................. 3,253 38 968 3 12 -- 4,274
--
----------- ------ ----------- ----- --- ----------
Total investment income............. $ 3,795 $ 44 $ 1,129 $ 3 $ 14 $-- $ 4,985
Expenses................................ 7,370 33 2,282 2 37 -- 9,724
--
----------- ------ ----------- ----- --- ----------
Net investment income (expense)....... $ (3,575) $ 11 $(1,153) $ 1 $ (23) $-- $ (4,739)
--
----------- ------ ----------- ----- --- ----------
Realized and unrealized gains (losses)
on investments:
Net realized gains (losses)........... $ 53,376 $ 623 $15,927 $48 $ 333 $-- $ 70,307
Net unrealized gains (losses)......... 53,646 610 16,216 39 (108) -- 70,403
--
----------- ------ ----------- ----- --- ----------
Net realized and unrealized gains on
investments............................ $107,022 $1,233 $32,143 $87 $ 225 $-- $ 140,710
--
----------- ------ ----------- ----- --- ----------
Increase in net assets from
operations............................. $103,447 $1,244 $30,990 $88 $ 202 $-- $ 135,971
--
--
----------- ------ ----------- ----- --- ----------
----------- ------ ----------- ----- --- ----------
</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.............................. $16,984 $188 $ 3,069 $11 $ 85 $1 $ 20,338
Dividends............................. -- -- -- -- -- -- --
----------- --- ------------ --- ----- --- --------
Total investment income............. $16,984 $188 $ 3,069 $11 $ 85 $1 $ 20,338
Expenses................................ 4,378 16 831 1 22 -- 5,248
----------- --- ------------ --- ----- --- --------
Net investment income................. $12,606 $172 $ 2,238 $10 $ 63 $1 $ 15,090
----------- --- ------------ --- ----- --- --------
Realized and unrealized gains (losses)
on investments:
Net realized gains (losses)........... $(1,304) $ (8) $ (278) $-- $ 43 $1 $ (1,546)
Net unrealized gains.................. 23,357 249 4,271 14 84 -- 27,975
----------- --- ------------ --- ----- --- --------
Net realized and unrealized gains on
investments............................ $22,053 $241 $ 3,993 $14 $ 127 $1 $ 26,429
----------- --- ------------ --- ----- --- --------
Increase in net assets from
operations............................. $34,659 $413 $ 6,231 $24 $ 190 $2 $ 41,519
----------- --- ------------ --- ----- --- --------
----------- --- ------------ --- ----- --- --------
</TABLE>
50
<PAGE>
DETAILED STATEMENT OF OPERATIONS -- continued
<TABLE>
<CAPTION>
High Yield Variable Account
---------------------------------------------------------------------------------------
Compass 2 Compass 3 Compass 3 - Level 2
------------------------ ------------------------- -------------------------
Accumulation Annuitization Accumulation Annuitization Accumulation Annuitization Total
----------- ------------ ------------ ------------ ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Interest.............................. $ 15,130 $ 239 $ 4,107 $ 2 $ 189 $-- $ 19,667
Dividends............................. -- -- -- -- -- -- --
--
----------- ------ ------------ ----------- --- ----------
Total investment income............. $ 15,130 $ 239 $ 4,107 $ 2 $ 189 $-- $ 19,667
Expenses................................ 3,254 21 924 -- 38 -- 4,237
--
----------- ------ ------------ ----------- --- ----------
Net investment income................. $ 11,876 $ 218 $ 3,183 $ 2 $ 151 $-- $ 15,430
--
----------- ------ ------------ ----------- --- ----------
Realized and unrealized gains (losses)
on investments:
Net realized gains (losses)........... $ (6,916) $ (107) $ (1,881) $(1) $ 55 $-- $ (8,850)
Net unrealized gains (losses)......... 16,381 255 4,595 2 (56) -- 21,177
--
----------- ------ ------------ ----------- --- ----------
Net realized and unrealized gains
(losses) on investments................ $ 9,465 $ 148 $ 2,714 $ 1 $ (1) $-- $ 12,327
--
----------- ------ ------------ ----------- --- ----------
Increase in net assets from
operations............................. $ 21,341 $ 366 $ 5,897 $ 3 $ 150 $-- $ 27,757
--
--
----------- ------ ------------ ----------- --- ----------
----------- ------ ------------ ----------- --- ----------
</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.............................. $ 41 $-- $ 94 $-- $-- $-- $ 135
Dividends............................. 220 1 496 -- 6 -- 723
--
---------- ------------ --- ----------- --- ---------
Total investment income............. $ 261 $ 1 $ 590 $-- $ 6 $-- $ 858
Expenses................................ 484 1 1,168 -- 14 -- 1,667
--
---------- ------------ --- ----------- --- ---------
Net investment expense................ $ (223) --$ $ (578) $-- $ (8) $-- $ (809)
--
---------- ------------ --- ----------- --- ---------
Realized and unrealized gains on
investments:
Net realized gains.................... $4,703 $16 $10,622 $-- $ 117 $-- $ 15,458
Net unrealized gains.................. 1,380 5 3,593 -- (101) -- 4,877
--
---------- ------------ --- ----------- --- ---------
Net realized and unrealized gains on
investments............................ $6,083 $21 $14,215 $-- $ 16 $-- $ 20,335
--
---------- ------------ --- ----------- --- ---------
Increase in net assets from
operations............................. $5,860 $21 $13,637 $-- $ 8 $-- $ 19,526
--
--
---------- ------------ --- ----------- --- ---------
---------- ------------ --- ----------- --- ---------
</TABLE>
51
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
DETAILED STATEMENT OF OPERATIONS -- continued
<TABLE>
<CAPTION>
Money Market Variable Account
-----------------------------------------------------------------------------------------
Compass 2 Compass 3 Compass 3 - Level 2
-------------------------- --------------------------- --------------------------
Accumulation Annuitization Accumulation Annuitization Accumulation Annuitization Total
------------ ------------- ------------- ------------- ------------ ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Interest.............................. $6,564 $78 $ 3,613 $2 $ 70 $-- $10,327
Dividends............................. -- -- -- -- -- -- --
-- --
------ ------------- --- --- -------
Total investment income............. $6,564 $78 $ 3,613 $2 $ 70 $-- $10,327
Expenses................................ 2,085 8 1,206 -- 23 -- 3,322
-- --
------ ------------- --- --- -------
Net investment income................. $4,479 $70 $ 2,407 $2 $ 47 $-- $ 7,005
-- --
------ ------------- --- --- -------
Realized and unrealized gains (losses)
on investments......................... $-- --$ $-- $-- $-- $-- $ --
-- --
------ ------------- --- --- -------
Increase in net assets from
operations............................. $4,479 $70 $ 2,407 $2 $ 47 $-- $ 7,005
-- --
-- --
------ ------------- --- --- -------
------ ------------- --- --- -------
</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.............................. $ 3,057 $ 77 $ 4,240 $12 $ 84 $-- $ 7,470
Dividends............................. 2,060 46 2,858 7 49 -- 5,020
--
----------- --- ------------ --- --- ---------
Total investment income............. $ 5,117 $123 $ 7,098 $19 $ 133 $-- $ 12,490
Expenses................................ 2,056 20 3,061 3 56 -- 5,196
--
----------- --- ------------ --- --- ---------
Net investment income................. $ 3,061 $103 $ 4,037 $16 $ 77 $-- $ 7,294
--
----------- --- ------------ --- --- ---------
Realized and unrealized gains (losses)
on investments:
Net realized gains.................... $10,786 $211 $14,913 $31 $ 579 $-- $ 26,520
Net unrealized gains (losses)......... 10,328 75 14,368 12 (71) -- 24,712
--
----------- --- ------------ --- --- ---------
Net realized and unrealized gains on
investments............................ $21,114 $286 $29,281 $43 $ 508 $-- $ 51,232
--
----------- --- ------------ --- --- ---------
Increase in net assets from
operations............................. $24,175 $389 $33,318 $59 $ 585 $-- $ 58,526
--
--
----------- --- ------------ --- --- ---------
----------- --- ------------ --- --- ---------
</TABLE>
52
<PAGE>
DETAILED STATEMENT OF OPERATIONS -- continued
<TABLE>
<CAPTION>
World Governments Variable Account
---------------------------------------------------------------------------------------
Compass 2 Compass 3 Compass 3 - Level 2
-------------------------- -------------------------- ------------------------
Accumulation Annuitization Accumulation Annuitization Accumulation Annuitization Total
------------ ------------- ------------ ------------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Interest.............................. $ 1,199 $ 6 $ 1,571 $ 6 $ 46 -- $ $ 2,828
Dividends............................. -- -- -- -- -- -- --
--
------ ------------ --- ----------- --- --------
Total investment income............. $ 1,199 $ 6 $ 1,571 $ 6 $ 46 -- $ $ 2,828
Expenses................................ 354 1 493 1 14 -- 863
--
------ ------------ --- ----------- --- --------
Net investment income................. $ 845 $ 5 $ 1,078 $ 5 $ 32 -- $ $ 1,965
--
------ ------------ --- ----------- --- --------
Realized and unrealized gains (losses)
on investments:
Net realized gains (losses)........... $ 708 $ 3 $ 966 $(1) $ (4) -- $ $ 1,672
Net unrealized gains.................. 575 3 682 8 59 -- 1,327
--
------ ------------ --- ----------- --- --------
Net realized and unrealized gains on
investments............................ $ 1,283 $ 6 $ 1,648 $ 7 $ 55 -- $ $ 2,999
--
------ ------------ --- ----------- --- --------
Increase in net assets from
operations............................. $ 2,128 $11 $ 2,726 $12 $ 87 -- $ $ 4,964
--
--
------ ------------ --- ----------- --- --------
------ ------------ --- ----------- --- --------
</TABLE>
53
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Participants in and the Board of Managers of Capital Appreciation
Variable Account, Government Securities Variable Account, High Yield Variable
Account, Managed Sectors Variable Account, Money Market Variable Account, Total
Return Variable Account and World Governments Variable Account and the Board of
Directors of Sun Life Assurance Company of Canada (U.S.):
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Capital Appreciation Variable Account,
Government Securities Variable Account, High Yield Variable Account, Managed
Sectors Variable Account, Money Market Variable Account, Total Return Variable
Account and World Governments Variable Account (the "Variable Accounts") as of
December 31, 1995, the related statements of operations for the year then ended,
the statements of changes in net assets for the years ended December 31, 1995
and 1994 and the per unit and other data for each of the years in the five-year
period ended December 31, 1995. These financial statements and the per unit and
other data are the responsibility of the Variable Accounts' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the per unit and
other data are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at December
31, 1995 by correspondence with the custodian and brokers; where replies were
not received from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and per unit and other data present
fairly, in all material respects, the financial position of the Variable
Accounts at December 31, 1995, the results of their operations, the changes in
their net assets, and their per unit and other data for each of the respective
stated periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 2, 1996
----------------------------------------
This Compass annual report is prepared for the general information of contract
owners. It is authorized for distribution to prospective purchasers only when
preceded by an effective prospectus.
54
<PAGE>
MEMBERS OF BOARDS OF MANAGERS
AND OFFICERS
JOHN D. McNEIL*, Chairman and Member
CHAIRMAN, Sun Life Assurance Company of Canada,
Toronto, Ontario, Canada
BONNIE S. ANGUS*, Secretary
SECRETARY, Sun Life Assurance Company of Canada (U.S.),
Wellesley Hills, Massachusetts
SAMUEL ADAMS, Member
PARTNER, Warner & Stackpole,
Boston, Massachusetts
GEOFFREY CROFTS, Member
PROFESSOR EMERITUS, University of Hartford,
Hartford, Connecticut
DAVID D. HORN*, Member
SENIOR VICE PRESIDENT AND GENERAL MANAGER,
Sun Life Assurance Company of Canada,
Wellesley Hills, Massachusetts
GARTH MARSTON, Member
FORMER CHAIRMAN, The Provident Institution for Savings,
Boston, Massachusetts
DERWYN F. PHILLIPS, Member
FORMER VICE CHAIRMAN, The Gillette Company,
Boston, Massachusetts
SUN LIFE ASSURANCE COMPANY
OF CANADA (U.S.)
ANNUITY SERVICE MAILING ADDRESS
c/o Sun Life Annuity Service Center
P.O. Box 1024, Boston, MA 02103-9986
INVESTMENT MANAGER
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116-3741
DISTRIBUTOR
Clarendon Insurance Agency, Inc.
500 Boylston Street, Boston, MA 02116-3741
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110-2875
AUDITORS
Deloitte & Touche LLP
125 Summer Street, Boston, MA 02110-1616
*Affiliated with the Investment Adviser
ACCOUNT INFORMATION
For account information, please call toll free:
1-800-752-7218 anytime from a touch-tone
telephone.
To speak with a customer service representative,
please call toll free: 1-800-752-7215 any
business day from 8 a.m. to 6 p.m. Eastern time.
CO-2 2/96 67.5M
[LOGO]
PROFESSIONALLY MANAGED COMBINATION
FIXED/VARIABLE ANNUITIES
FOR PERSONAL INVESTMENTS AND
QUALIFIED RETIREMENT PLANS
ANNUAL REPORT - DECEMBER 31, 1995
CAPITAL APPRECIATION VARIABLE ACCOUNT
GOVERNMENT SECURITIES VARIABLE ACCOUNT
HIGH YIELD VARIABLE ACCOUNT
MANAGED SECTORS VARIABLE ACCOUNT
MONEY MARKET VARIABLE ACCOUNT
TOTAL RETURN VARIABLE ACCOUNT
WORLD GOVERNMENTS VARIABLE ACCOUNT
ISSUED BY
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.),
A WHOLLY-OWNED SUBSIDIARY OF
SUN LIFE ASSURANCE COMPANY OF CANADA
