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SUN GROWTH VARIABLE ANNUITY FUND, INC.
ANNUAL REPORT
DECEMBER 31, 1995
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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
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
SAMUEL ADAMS Geoffrey L. Kurinsky +
Partner, Warner & Stackpole,
Boston, Massachusetts CUSTODIAN
State Street Bank and Trust Company
GEOFFREY CROFTS 225 Franklin Street, Boston, MA 02110-2875
Professor Emeritus, University of Hartford,
Hartford, Connecticut AUDITORS
Deloitte & Touche LLP
DAVID D. HORN * 125 Summer Street, Boston, MA 02110-1616
Senior Vice President and General Manager,
Sun Life Assurance Company of Canada, LEGAL COUNSEL
Wellesley Hills, Massachusetts Covington & Burling
1201 Pennsylvania Avenue, N.W.
GARTH MARSTON P.O. Box 7566, Washington, D.C. 20044-7566
Chairman, Retired, The Provident Institution for Savings,
Boston, Massachusetts
DERWYN F. PHILLIPS
Vice Chairman, Retired, The Gillette Company,
Boston, Massachusetts
OFFICERS
JOHN D. MCNEIL *
President
DAVID D. HORN *
Vice President
BONNIE S. ANGUS *
Secretary
W. THOMAS LONDON +
Treasurer
JAMES O. YOST +
Assistant Treasurer
* Affiliated with the Sponsor.
+Affiliated with the Investment Adviser.
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PERFORMANCE
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The following information illustrates the historical performance of Sun Growth
Variable Annuity Fund, Inc. in comparison to various market indicators. Fund
results do not reflect the deduction of any applicable surrender charge or the
impact of separate account expenses. Benchmark comparisons are unmanaged and do
not reflect any fees or expenses. You cannot invest in an index. All results
reflect the reinvestment of all dividends and capital gains.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(Over the 10-year period ended December 31, 1995)
Sun Growth Three-Month
Variable Annuity Treasury
Days Fund, Inc. Bill Index CPI
---- ---------------- ----------- ---
1/ 1/86 0 10,000 10,000 10,000
12/31/86 365 10,483 10,615 10,113
12/31/87 730 10,968 11,242 10,559
12/31/88 1096 11,612 12,013 11,026
12/31/89 1461 12,522 13,026 11,538
12/31/90 1826 13,348 14,034 12,242
12/31/91 2191 13,953 14,804 12,618
12/31/92 2557 14,190 15,320 12,984
12/31/93 2922 14,423 15,786 13,340
12/31/94 3287 14,769 16,466 13,697
12/31/95 3652 15,386 17,397 14,045
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AVERAGE ANNUAL TOTAL RETURNS
1 year 3 years 5 years 10 years
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Sun Growth Variable Annuity Fund, Inc.
at net asset value 4.17% 2.73% 2.88% 4.40%
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Three-Month Treasury Bill Index *(1) 5.65% 4.33% 4.39% 5.69%
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Consumer Price Index +(1) 2.54% 2.65% 2.79% 3.46%
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*The Three-Month Treasury Bill Index is derived from secondary-market Treasury
Bill rates, as published by the Federal Reserve Bank in release H519.
+The Consumer Price Index is a popular measure of change in prices.
(1)Source: Lipper Analytical Services, Inc.
All results are historical and, therefore, are not an indication of future
results. The investment return and principal value of an investment in an
annuity will vary with changes in market conditions, and shares, when redeemed,
may be worth more or less than their original cost. All Fund results reflect the
expense subsidy which is explained in Note 2 to the Financial Statements. Had
the subsidy not been in effect, the results would have been less favorable.
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 - DECEMBER 31, 1995
Short-Term Obligations - 98.9%
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Principal Amount
Issuer (000 Omitted) Value
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Federal Farm Credit Bank, due 2/02/96 $ 75 $ 74,630
Federal Home Loan Bank, due 2/05/96 180 179,029
Federal Home Loan Mortgage Assn., due 1/11/96 125 124,810
Federal National Mortgage Assn., due 1/08/96 225 224,753
Tennessee Valley Authority, due 1/02/96 100 99,985
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Total Short-Term Obligations, at Amortized Cost and Value $703,207
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Other Assets, Less Liabilities - 1.1% $ 7,474
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Net Assedts - 100.0% $710,681
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See notes to financial statements
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FINANCIAL STATEMENTS
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STATEMENT OF ASSETS AND LIABILITIES
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December 31, 1995
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ASSETS:
Investments, at amortized cost and value ............. $703,207
Cash ................................................. 2,127
Receivable from investment adviser ................... 20,682
Other assets ......................................... 9
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Total assets ....................................... $726,025
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LIABILITIES:
Payable for Fund shares reacquired.................... $ 5,521
Other expenses and liabilities ....................... 9,823
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Total liabilities ................................. $ 15,344
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Net assets applicable to 175,745 shares of
common stock outstanding ............................... $710,681
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NET ASSETS CONSIST OF:
Common stock ($1.00 par value) ...................... $175,745
Paid-in capital ..................................... 504,856
Undistributed net investment income ................. 30,080
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Total ............................................. $710,681
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Net asset value per share ........................... $ 4.04
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See notes to financial statements
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FINANCIAL STATEMENTS - continued
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STATEMENT OF OPERATIONS
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Year Ended December 31, 1995
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Net investment income:
Interest income .............................................. $40,858
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Expenses -
Investment advisory fees ................................. $ 3,613
Directors' fees ......................................... 12,900
Auditing fees ............................................ 8,575
Printing expenses ........................................ 2,758
Legal fees................................................ 1,295
Custodian fees ........................................... 839
Miscellaneous............................................. 1,866
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Total expenses ....................................... $31,846
Less: Reduction of expenses by investment adviser ........ 20,711
Fees paid indirectly ............................ 296
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Net expenses ......................................... $10,839
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Net investment income ............................ $30,019
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See notes to financial statements
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FINANCIAL STATEMENTS - continued
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STATEMENT OF CHANGES IN NET ASSETS
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Year Ended December 31,
-----------------------
1995 1994
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Increase (decrease) in net assets:
Operations -
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Net investment income ...................................... $ 30,019 $ 18,611
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Distributions to shareholders from net investment income........ $(18,550) $(12,785)
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Capital share transactions -
Net asset value of shares issued to shareholders in
reinvestment of distributions ............................ $ 18,550 $ 12,785
Cost of shares reacquired .................................. (50,287) (88,185)
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Decrease in net assets from capital share transactions ..... $(31,737) $(75,400)
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Net decrease in net assets .............................. $(20,268) $(69,574)
Net assets:
Beginning of year .......................................... 730,949 800,523
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End of year (including undistributed net investment
income of $30,080 and $18,611, respectively) ............. $710,681 $730,949
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See notes to financial statements
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FINANCIAL STATEMENTS - continued
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FINANCIAL HIGHLIGHTS
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Year Ended December 31,
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1995 1994 1993 1992 1991
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Per share data (for a share outstanding throughout each year):
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Net asset value - beginning of year ............................ $3.98 $3.95 $ 3.96 $ 4.08 $4.04
----- ----- ----- ------ -----
Income from investment operations -
Net investment income ..................................... $0.17 $0.10 $ 0.06 $ 0.07 $0.18
Distributions from net investment income........................ (0.11) (0.07) (0.07) (0.19) (0.14)
----- ----- ------ ------ -----
Net asset value - end of year .................................. $4.04 $3.98 $ 3.95 $ 3.96 $4.08
===== ===== ====== ====== =====
Total return ................................................... 4.17% 2.40% 1.64% 1.70% 4.54%
Ratios (to average net assets)/Supplemental data(S):
Expenses ## ................................................... 1.50% 1.50% 1.50% 1.50% 1.50%
Net investment income ......................................... 4.17% 2.42% 1.51% 1.75% 4.35%
Net assets, end of year (000 omitted) $ 711 $731 $ 801 $ 865 $ 950
(S)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:
Net investment income (expense) $0.05 $0.01 $(0.06) $(0.19) $(0.02)
Ratios (to average net assets):
Expenses ## 4.42% 3.78% 4.30% 7.72% 6.04%
Net investment income (expense) 1.25% 0.14% (1.29)% (4.47)% (0.19)%
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid indirectly.
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See notes to financial statements
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NOTES TO FINANCIAL STATEMENTS
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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 wholly owned 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
year ended December 31, 1995, the Adviser will reimburse the Fund $20,711.
The Fund pays no compensation to its officers or directors who are officers
of the Adviser, or Sun Life (U.S.).
(3) PORTFOLIO SECURITIES
Purchases of short-term obligations for the year ended December 31, 1995
totaled $9,244,772. Sales and maturities of short-term obligations totaled
$9,290,000.
(4) CAPITAL STOCK
Transactions in capital stock for the years ended December 31, 1995 and 1994
were as follows:
Year Ended December 31,
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1995 1994
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Shares outstanding, beginning of year 183,644 202,731
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Shares issued to shareholders in reinvestment
of distributions 4,720 3,269
Shares reacquired (12,619) (22,356)
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Net decrease (7,899) (19,087)
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Shares outstanding, end of year 175,745 183,644
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This report is prepared for the general information of shareholders.
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INDEPENDENT AUDITORS' REPORT
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TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF SUN GROWTH VARIABLE ANNUITY FUND,
INC.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Sun Growth Variable Annuity Fund, Inc. as of
December 31, 1995, the related statement 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 financial highlights for each of the years in the five-year
period ended December 31, 1995. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
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 financial
highlights 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 the securities owned at
December 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by the
Fund's 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 financial highlights present
fairly, in all material respects, the financial position of the Fund at December
31, 1995, the results of its operations, the changes in its net assets, and its
financial highlights for the respective stated periods in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 2, 1996
