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SUN GROWTH VARIABLE ANNUITY FUND, INC.
SEMIANNUAL REPORT
JUNE 30, 1996
(UNAUDITED)
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SUN GROWTH VARIABLE ANNUITY FUND, INC.
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
Telephone: (617) 237-6030
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DIRECTORS INVESTMENT ADVISER
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JOHN D. McNEIL* Massachusetts Financial Services Company
CHAIRMAN, Sun Life Assurance Company of Canada, 500 Boylston Street, Boston, MA 02116-3741
Toronto, Ontario, Canada
PORTFOLIO MANAGER
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SAMUEL ADAMS Geoffrey L. Kurinsky +
PARTNER, Warner & Stackpole,
Boston, Massachusetts CUSTODIAN
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State Street Bank and Trust Company
GEOFFREY CROFTS 225 Franklin Street, Boston, MA 02110-2875
PROFESSOR EMERITUS, University of Hartford,
Hartford, Connecticut LEGAL COUNSEL
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Covington & Burling
DAVID D. HORN* 1201 Pennsylvania Avenue, N.W.
SENIOR VICE PRESIDENT AND GENERAL MANAGER, P.O. Box 7566, Washington, D.C. 20044-7566
Sun Life Assurance Company of Canada,
Wellesley Hills, Massachusetts
GARTH MARSTON
CHAIRMAN, RETIRED, The Provident Institution
for Savings,
Boston, Massachusetts
DERWYN F. PHILLIPS
VICE CHAIRMAN, RETIRED, The Gillette Company,
Boston, Massachusetts
OFFICERS
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JOHN D. McNEIL*
President
DAVID D. HORN*
Vice President
BONNIE S. ANGUS*
Secretary
W. THOMAS LONDON +
Treasurer
JAMES O. YOST +
Assistant Treasurer
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* Affiliated with the Sponsor.
+Affiliated with the Investment Adviser.
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PORTFOLIO MANAGER PROFILE
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Geoffrey Kurinsky began his career at MFS in 1987 in the Fixed Income
Department. A graduate of the University of Massachusetts and Boston
University's Graduate School of Management, he was named Assistant Vice
President in 1988, Vice President in 1989 and Senior Vice President in 1993.
In 1992, he became Portfolio Manager of Sun Growth Variable Annuity Fund, Inc.
PORTFOLIO OF INVESTMENTS (UNAUDITED) - JUNE 30, 1996
Short-Term Obligations - 97.7%
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PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
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Federal Farm Credit Bank, due 7/11/96 $ 75 $ 74,892
Federal Home Loan Bank, due 7/05/96-7/24/96 150 149,730
Federal Home Loan Mortgage Corp., due 7/17/96 125 124,711
Federal National Mortgage Assn., due 7/08/96 220 219,775
Tennessee Valley Authority, due 7/25/96 100 99,668
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TOTAL SHORT-TERM OBLIGATIONS, AT AMORTIZED COST AND VALUE $ 668,776
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Other Assets, Less Liabilities - 2.3% $ 15,989
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NET ASSETS - 100.00% $ 684,765
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SEE NOTES TO FINANCIAL STATEMENTS
1
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FINANCIAL STATEMENTS
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STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
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JUNE 30, 1996
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ASSETS:
Investments, at amortized cost and value........................ $ 668,776
Cash............................................................ 24,119
Receivable from investment adviser.............................. 10,842
Other assets.................................................... 7
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Total assets................................................... $ 703,744
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LIABILITIES:
Payable for Fund shares reacquired............................... $ 5,344
Other expenses and liabilities.................................. 13,635
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Total liabilities.............................................. $ 18,979
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Net assets applicable to 173,828 shares of common stock
outstanding..................................................... $ 684,765
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NET ASSETS CONSIST OF:
Common stock ($1.00 par value).................................. $ 173,828
Paid-in capital................................................. 498,152
Undistributed net investment income............................. 12,785
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Total.......................................................... $ 684,765
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Net asset value per share....................................... $ 3.94
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SEE NOTES TO FINANCIAL STATEMENTS
2
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FINANCIAL STATEMENTS - CONTINUED
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STATEMENT OF OPERATIONS (UNAUDITED)
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SIX MONTHS ENDED JUNE 30, 1996
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NET INVESTMENT INCOME:
Interest income................................................ $ 17,926
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Expenses -
Investment advisory fees.................................... $ 1,728
Directors' fees............................................. 6,450
Auditing fees............................................... 5,800
Printing expenses........................................... 950
Legal fees.................................................. 650
Custodian fees.............................................. 538
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Total expenses............................................ $ 16,116
Less: Preliminary reimbursement of expenses by investment
adviser................................................... 10,842
Fees paid indirectly.................................. 72
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Net expenses.............................................. $ 5,202
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Net investment income................................... $ 12,724
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SEE NOTES TO FINANCIAL STATEMENTS
3
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FINANCIAL STATEMENTS - CONTINUED
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STATEMENTS OF CHANGES IN NET ASSETS
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SIX MONTHS ENDED
JUNE 30, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995
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INCREASE (DECREASE) IN NET ASSETS:
Operations -
Net investment income........................ $ 12,724 $ 30,019
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Distributions to shareholders from net investment income........ $ (30,019) $ (18,550)
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Capital share transactions -
Net asset value of shares issued to shareholders in
reinvestment of distributions................................ $ 30,019 $ 18,550
Cost of shares reacquired...................................... (38,640) (50,287)
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Decrease in net assets from capital share transactions........ $ (8,621) $ (31,737)
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Net decrease in net assets................................... $ (25,916) $ (20,268)
NET ASSETS:
Beginning of period.......................................... 710,681 730,949
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End of period (including undistributed net investment
income of $12,785 and $30,080, respectively)............... $ 684,765 $ 710,681
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SEE NOTES TO FINANCIAL STATEMENTS
4
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FINANCIAL STATEMENTS - CONTINUED
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FINANCIAL HIGHLIGHTS
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SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1996 -------------------------------------------------
(UNAUDITED) 1995 1994 1993 1992 1991
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PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value - beginning of period........... $4.04 $3.98 $3.95 $3.96 $4.08 $4.04
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Income from investment operations -
Net investment income........................ $0.08 $0.16 $0.09 $0.06 $0.07 $0.18
Less distributions declared to shareholders -
From net investment income.................... (0.18) (0.10) (0.06) (0.07) (0.19) (0.14)
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Net asset value - end of period................. $3.94 $4.04 $3.98 $3.95 $3.96 $4.08
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TOTAL RETURN.................................... 1.98% ++ 4.17% 2.40% 1.64% 1.70% 4.54%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA Section:
Expenses........................................ 1.50% + 1.50% 1.50% 1.50% 1.50% 1.50%
Net investment income........................... 3.67% + 4.17% 2.42% 1.51% 1.75% 4.35%
NET ASSETS, END OF PERIOD (000 OMITTED) $685 $711 $731 $801 $865 $950
</TABLE>
+ Annualized.
++ Not annualized.
## For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
Section The investment adviser did not impose a portion of its fee for all
periods shown. If these fees had been incurred by the Fund, the net
investment income per share and the ratios would have been:
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Net investment income (expense) $0.01 $0.08 $0.01 $(0.06) $(0.19) $(0.02)
RATIOS (TO AVERAGE NET ASSETS):
Expenses ## 4.65% + 4.42% 3.78% 4.30% 7.72% 6.04%
Net investment income (expense) 0.52% + 1.25% 0.14% (1.29)% (4.47)% (0.19)%
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SEE NOTES TO FINANCIAL STATEMENTS
5
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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(1) SIGNIFICANT ACCOUNTING POLICIES
Sun Growth Variable Annuity Fund, Inc. (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. Shares of the Fund are sold only to variable
accounts established by Sun Life Assurance Company of Canada (U.S.) (Sun Life
(U.S.)) to fund benefits under variable contracts issued by the company. The
following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
A. Investment Valuations -- Short-term obligations, which mature in 60
days or less, are valued at amortized cost, which approximates value.
B. Fees Paid Indirectly -- The Fund's custodian bank calculates its fee
based on the Fund's average daily net assets. The fee is reduced
according to a fee arrangement, which provides for custody fees to be
reduced based on a formula developed to measure the value of cash
deposited with the custodian by the Fund. This amount is shown as a
reduction of expenses on the Statement of Operations.
C. Tax Matters and Distributions -- The Fund's policy is to comply with
the provisions of the Internal Revenue Code applicable to regulated
investment companies and to distribute to shareholders all of its
taxable income. Accordingly, no provision for federal income or excise
tax is necessary.
The Fund distinguishes between distributions on a tax basis and
financial reporting basis and requires that only distributions in excess
of tax basis earnings and profits be reported in the financial
statements as a return of capital. Differences in the recognition or
classification of income between the financial statements and tax
earnings and profits which result in temporary over-distributions for
financial statement purposes, are classified as distributions in excess
of net investment income or accumulated net realized gains.
D. Other -- Security transactions are accounted for on the trade date.
Interest income is recorded on the accrual basis. Distributions to
shareholders are recorded on the ex-dividend date.
(2) TRANSACTIONS WITH AFFILIATE
The Fund has an investment advisory agreement with Massachusetts Financial
Services Company (the Adviser), a subsidiary of Sun Life (U.S.), to provide
overall investment advisory and administrative services. The agreement
provides that the Fund will pay the Adviser a fee computed and paid monthly
at an annual rate of 0.5% of the Fund's average daily net assets. The
agreement also provides that the Adviser will pay certain Fund expenses in
excess of 1 1/2% of the first $30,000,000 of the average daily net assets
plus 1% of the remaining average daily net assets of the Fund for any
calendar year. For the period ended June 30, 1996, the Adviser will reimburse
the Fund $10,842.
The Fund pays no compensation to its officers or directors who are
officers of the Adviser, or Sun Life (U.S.).
6
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
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(3) PORTFOLIO SECURITIES
Purchases of short-term obligations for the six months ended June 30, 1996
totaled $3,637,644. Sales and maturities of short-term obligations totaled
$3,690,000.
(4) CAPITAL STOCK
Transactions in capital stock for the period ended June 30, 1996 and for the
years ended December 31, 1995 and 1994, were as follows:
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SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1996 ------------------------
(UNAUDITED) 1995 1994
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Shares outstanding, beginning of period 175,745 183,644 202,731
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Shares issued to shareholders in
reinvestment of distributions 7,658 4,720 3,269
Shares reacquired (9,575) (12,619) (22,356)
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Net decrease (1,917) (7,899) (19,087)
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Shares outstanding, end of period 173,828 175,745 183,644
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This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
7
