-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LUYt5aVpM8NRrWKjM62AOQ8BAlMrWzI4sA2mKxWkbO8gV6cQJVKaLOBGrDJuEgii K9dmfr8Wf5xrs45lfm6KUQ== 0000950156-05-000336.txt : 20050901 0000950156-05-000336.hdr.sgml : 20050901 20050901150134 ACCESSION NUMBER: 0000950156-05-000336 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050630 FILED AS OF DATE: 20050901 DATE AS OF CHANGE: 20050901 EFFECTIVENESS DATE: 20050901 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MONEY MARKET VARIABLE ACCOUNT /MA/ CENTRAL INDEX KEY: 0000706113 IRS NUMBER: 042461439 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-03563 FILM NUMBER: 051064572 BUSINESS ADDRESS: STREET 1: 500 BOYLSTON ST CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 6179545244 MAIL ADDRESS: STREET 1: 500 BOYLSTON ST CITY: BOSTON STATE: MA ZIP: 02166 FORMER COMPANY: FORMER CONFORMED NAME: COMPASS MONEY MARKET VARIABLE ACCOUNT DATE OF NAME CHANGE: 19880121 FORMER COMPANY: FORMER CONFORMED NAME: MONEY MARKET VARIABLE ACCOUNT DATE OF NAME CHANGE: 19870719 N-CSRS 1 d630725.txt COMPASS MONEY MARKET VARIABLE ACCOUNT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-3563 - ------------------------------------------------------------------------------- MONEY MARKET VARIABLE ACCOUNT - ------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 500 Boylston Street, Boston, Massachusetts 02116 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Susan S. Newton Massachusetts Financial Services Company 500 Boylston Street Boston, Massachusetts 02116 - ------------------------------------------------------------------------------- (Name and address of agents for service) Registrant's telephone number, including area code: (617) 954-5000 - ------------------------------------------------------------------------------- Date of fiscal year end: December 31 - ------------------------------------------------------------------------------- Date of reporting period: June 30, 2005 - ------------------------------------------------------------------------------- ITEM 1. REPORTS TO STOCKHOLDERS. COMPASS [logo] PROFESSIONALLY MANAGED COMBINATION FIXED/VARIABLE ANNUITIES FOR PERSONAL INVESTMENTS AND QUALIFIED RETIREMENT PLANS SEMIANNUAL REPORT o JUNE 30, 2005 Capital Appreciation Variable Account Global Governments Variable Account Government Securities Variable Account High Yield Variable Account Managed Sectors Variable Account Money Market Variable Account Total Return Variable Account Issued by Sun Life Assurance Company of Canada (U.S.), A Wholly Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc. TABLE OF CONTENTS Letter from the CEO of MFS ........................................... 1 Key Risk Considerations .............................................. 1 Performance Summary .................................................. 3 Portfolio Composition ................................................ 4 Portfolio of Investments ............................................. 11 Financial Statements ................................................. 29 Notes to Financial Statements ........................................ 49 Investment Advisor ................................................ Back Cover Custodian and Dividend Disbursing Agent ........................... Back Cover Proxy Voting Policies and Information ............................. Back Cover Quarterly Portfolio Disclosure .................................... Back Cover - ------------------------------------------------------------------------------- THIS REPORT IS PREPARED FOR THE GENERAL INFORMATION OF CONTRACT OWNERS. IT IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NOT FDIC INSURED MAY LOSE VALUE NO BANK OR CREDIT UNION GUARANTEE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF - ------------------------------------------------------------------------------- LETTER FROM THE CEO OF MFS DEAR CONTRACT OWNERS, As a professional investor for more than 20 years, I've often been asked to name the single most important factor in investment success. My answer is always the same: diversification. At MFS we talk about applying a disciplined diversification(SM) strategy to a portfolio as a three step process: allocate among the major asset classes; diversify within each asset class; and rebalance regularly to avoid unnecessary risk. Individual investors sometimes assume that the amount they're putting away is too small to allow for diversification. My response would be that a good investment plan, developed with the help of an investment professional, should provide a way to properly diversify your contributions. Remember that the purpose of diversification is to own investments that historically have not moved in sync with each other - in the hope that, in any given period, underperforming holdings will be somewhat counteracted by other outperforming holdings. If none of your asset classes did badly in the past year or so, you're probably not properly diversified. Americans today have more of their wealth tied up in the markets than in any previous period of our history, but we are not yet making the most of our opportunities. While neither asset allocation nor diversification can guarantee a profit or protect against a loss, I would voice the opinion that, to a large extent, a failure to have a plan, diversify contributions, and rebalance a portfolio annually has been behind many U.S. investors' failure to reach their long-term financial goals. For more information on how to apply a disciplined diversification(SM) strategy to your portfolio, I would urge you to contact your own investment professional. Respectfully, /s/ Robert J. Manning Robert J. Manning Chief Executive Officer and Chief Investment Officer MFS Investment Management(R) August 15, 2005 The opinions expressed in this letter are those of MFS, and no forecasts can be guaranteed. KEY RISK CONSIDERATIONS CAPITAL APPRECIATION VARIABLE ACCOUNT The value of the portfolio's domestic investments will fluctuate in response to many factors including the performance and valuation of the issuer and general market conditions. Stock markets are volatile and can decline due to adverse issuer, political, regulatory, or economic conditions. Foreign investments can be more volatile than U.S investments. GLOBAL GOVERNMENTS VARIABLE ACCOUNT The portfolio's yield and unit price change daily and are based on changes in interest rates and market conditions, and in response to other economic, political, or financial developments. In general, the value of debt securities will decline when interest rates rise and will increase when interest rates fall. Lower-quality debt securities and certain types of other securities involve greater risk of default or price changes due to changes in the credit quality of the issuer. Debt securities with longer maturity dates will be subject to greater price fluctuations than those with shorter maturities and are more affected by interest rate changes than short-term issues. Stock markets are volatile and can decline due to adverse issuer, political, regulatory, or economic conditions. Foreign investments can be more volatile than U.S investments. The portfolio may invest in lower-quality debt securities which generally offer higher yields, and carry more risk. Lower- quality debt securities involve greater risk of default on interest and principal payments or price changes due to changes in credit quality of the issuer. The value of lower-quality debt securities can be more volatile due to increased sensitivity to adverse issuer, political, regulatory, market, or economic developments. Because the portfolio is considered non-diversified, MFS may invest a significant percentage of the portfolios' assets in a single issuer. Emerging markets can be subject to greater social, economic, regulatory, and political uncertainty and can be extremely volatile. The portfolio may invest a substantial amount of its assets in issuers located in a single country or limited number of countries and therefore is susceptible to market, economic, political, or regulatory conditions and developments affecting those countries. The portfolio's performance could be more volatile than the performance of more geographically diversified portfolios. Mortgage- backed securities are subject to prepayment risk which can offer less potential for gains in a declining interest rate environment and similar or greater potential for loss in a rising interest rate environment. GOVERNMENT SECURITIES VARIABLE ACCOUNT The portfolio's yield and unit price change daily and are based on changes in interest rates and market conditions, and in response to other economic, political, or financial developments. In general, the value of debt securities will decline when interest rates rise and will increase when interest rates fall. Lower-quality debt securities and certain types of other securities involve greater risk of default or price changes due to changes in the credit quality of the issuer. Debt securities with longer maturity dates will be subject to greater price fluctuations than those with shorter maturities and are more affected by interest rate changes than short-term issues. Mortgage-backed securities are subject to prepayment risk which can offer less potential for gains in a declining interest rate environment and similar or greater potential for loss in a rising interest rate environment. HIGH YIELD VARIABLE ACCOUNT The portfolio's yield and unit price change daily and are based on changes in interest rates and market conditions, and in response to other economic, political, or financial developments. In general, the value of debt securities will decline when interest rates rise and will increase when interest rates fall. Lower-quality debt securities and certain types of other securities involve greater risk of default or price changes due to changes in the credit quality of the issuer. Debt securities with longer maturity dates will be subject to greater price fluctuations than those with shorter maturities and are more affected by interest rate changes than short-term issues. Stock markets are volatile and can decline due to adverse issuer, political, regulatory, or economic conditions. Foreign investments can be more volatile than U.S investments. The portfolio may invest in lower-quality debt securities which generally offer higher yields, and carry more risk. Lower- quality debt securities involve greater risk of default on interest and principal payments or price changes due to changes in credit quality of the issuer. The value of lower-quality debt securities can be more volatile due to increased sensitivity to adverse issuer, political, regulatory, market, or economic developments. Because the portfolio is considered non-diversified, MFS may invest a significant percentage of the portfolio's assets in a single issuer. MANAGED SECTORS VARIABLE ACCOUNT The value of the portfolio's domestic investments will fluctuate in response to many factors including the performance and valuation of the issuer and general market conditions. Stock markets are volatile and can decline due to adverse issuer, political, regulatory, or economic conditions. Foreign investments can be more volatile than U.S. investments. MONEY MARKET VARIABLE ACCOUNT The portfolio's yield and unit price change daily and are based on changes in interest rates and market conditions, and in response to other economic, political, or financial developments. In general, the value of debt securities will decline when interest rates rise and will increase when interest rates fall. Certain types of securities involve greater risk of default or price changes due to changes in the credit quality of the issuer. Debt securities with longer maturity dates will be subject to greater price fluctuations than those with shorter maturities and are more affected by interest rate changes than short-term issues. The municipal market is volatile and can be significantly affected by adverse tax, legislative or political changes and the financial condition of the issuers of municipal securities. Interest rate increases can cause the price of a debt security to decrease. Unfavorable political or economic conditions within the State can affect the credit quality of issuers located in that state. The value of the portfolio's domestic investments will fluctuate in response to many factors including the performance and valuation of the issuer and general market conditions. Stock markets are volatile and can decline due to adverse issuer, political, regulatory, or economic conditions. Foreign investments can be more volatile than U.S. investments. TOTAL RETURN VARIABLE ACCOUNT The value of the portfolio's domestic investments will fluctuate in response to many factors including the performance and valuation of the issuer and general market conditions. Stock markets are volatile and can decline due to adverse issuer, political, regulatory, or economic conditions. Foreign investments can be more volatile than U.S. investments. Value companies can continue to be undervalued for long periods of time and not realize their full value. The portfolio's yield and unit price change daily and are based on changes in interest rates and market conditions and in response to other economic, political, or financial developments. In general, the value of debt securities will decline when interest rates rise and will increase when interest rates fall. Lower-quality debt securities and certain types of other securities involve greater risk of default or price changes due to changes in the credit quality of the issuer. Debt securities with longer maturity dates will be subject to greater price fluctuations than those with shorter maturities and are more affected by interest rate changes than short-term issues. When you sell your units, they will be worth more or less than the amount you paid for them. Please see the prospectus for further information regarding these and other risks considerations. PERFORMANCE SUMMARY THESE PERFORMANCE RESULTS REFLECT ANY APPLICABLE CONTRACT OR SURRENDER CHARGES. SIX MONTH PERFORMANCE THROUGH JUNE 30, 2005 Compass 2 Compass 3 Compass 3 - (U.S.) (U.S.) Level 2 (U.S.) Capital Appreciation (2.98)% (3.03)% (2.96)% Variable Account+ Global Governments Variable (4.83)% (4.90)% (4.83)% Account Government Securities 1.69% 1.64% 1.72% Variable Account High Yield Variable Account (0.40)% (0.45)% (0.38)% Managed Sectors Variable (3.09)% (3.16)% (3.09)% Account+ Money Market 0.32% 0.27% 0.34% Variable Account Total Return 0.13% 0.05% 0.13% Variable Account VISIT SUNLIFE-USA.COM FOR THE MOST RECENT MONTH-END PERFORMANCE RESULTS. MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND MORE RECENT RETURNS MAY BE DIFFERENT FROM THOSE SHOWN. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND UNITS, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. ANY HIGH SHORT-TERM RETURNS WERE PRIMARILY ACHIEVED DURING FAVORABLE MARKET CONDITIONS, WHICH MAY NOT BE REPEATED. + The performance shown reflects a non-recurring accrual made to the variable accounts on July 28, 2004 relating to MFS' revenue sharing settlement with the Securities and Exchange Commission without which the performance would have been lower. The proceeds were paid to the variable accounts on February 16, 2005. From time to time the variable accounts may receive proceeds from litigation settlements, without which performance would be lower. See notes to financial statements. PORTFOLIO COMPOSITION -- CAPITAL APPRECIATION VARIABLE ACCOUNT PORTFOLIO STRUCTURE Stocks 96.4% Cash & Other Net Assets 3.6% TOP TEN HOLDINGS Cisco Systems, Inc. 4.0% ------------------------------------------------ Johnson & Johnson 3.7% ------------------------------------------------ Microsoft Corp. 3.2% ------------------------------------------------ Amgen, Inc. 3.1% ------------------------------------------------ Wyeth 3.0% ------------------------------------------------ Dell, Inc. 2.8% ------------------------------------------------ PepsiCo, Inc. 2.7% ------------------------------------------------ Wal-Mart Stores, Inc. 2.5% ------------------------------------------------ Oracle Corp. 2.4% ------------------------------------------------ Abbott Laboratories 2.0% ------------------------------------------------ SECTOR WEIGHTINGS Health Care 25.7% ------------------------------------------------ Technology 24.5% ------------------------------------------------ Retailing 10.8% ------------------------------------------------ Industrial Goods & Services 6.8% ------------------------------------------------ Leisure 6.3% ------------------------------------------------ Special Products & Services 4.6% ------------------------------------------------ Financial Services 4.3% ------------------------------------------------ Consumer Staples 3.8% ------------------------------------------------ Energy 3.4% ------------------------------------------------ Basic Materials 2.0% ------------------------------------------------ Autos & Housing 1.7% ------------------------------------------------ Transportation 1.4% ------------------------------------------------ Utilities & Communications 1.1% ------------------------------------------------ Percentages are based on net assets as of 6/30/05. The portfolio is actively managed and current holdings may be different. PORTFOLIO COMPOSITION -- GLOBAL GOVERNMENTS VARIABLE ACCOUNT PORTFOLIO STRUCTURE* Bonds 96.8% Cash & Other Net Assets 3.2% MARKET SECTORS* International Bonds 78.9% ------------------------------------------------ U.S. Treasury Securities 4.7% ------------------------------------------------ Commercial Mortgage-Backed Securities 4.1% ------------------------------------------------ Cash & Other Net Assets 3.2% ------------------------------------------------ U.S. Government Agencies 3.0% ------------------------------------------------ Emerging Market Bonds 2.1% ------------------------------------------------ Municipal Bonds 2.0% ------------------------------------------------ Mortgage-Backed Securities 2.0% ------------------------------------------------ CREDIT QUALITY** AAA 86.6% ------------------------------------------------ AA 8.6% ------------------------------------------------ A 3.3% ------------------------------------------------ BBB 0.9% ------------------------------------------------ BB 0.6% ------------------------------------------------ PORTFOLIO FACTS Average Duration 5.5 ------------------------------------------------ Average Life 8.0 yrs. ------------------------------------------------ Average Maturity*** 9.4 yrs. ------------------------------------------------ Average Quality**** AAA ------------------------------------------------ Average Short Term Quality A-1 ------------------------------------------------ COUNTRY WEIGHTINGS United States 21.4% ------------------------------------------------ Germany 13.7% ------------------------------------------------ Spain 7.9% ------------------------------------------------ France 7.6% ------------------------------------------------ Great Britain 7.4% ------------------------------------------------ Ireland 5.6% ------------------------------------------------ New Zealand 5.1% ------------------------------------------------ Finland 5.0% ------------------------------------------------ Canada 5.0% ------------------------------------------------ Other 21.3% ------------------------------------------------ * For purposes of this graphical presentation, the bond component includes both accrued interest on bonds and the equivalent exposure from any derivative holdings, if applicable. ** Each security is assigned a rating from Moody's Investors Service. If not rated by Moody's, the rating will be that assigned by Standard & Poor's. Likewise, if not assigned a rating by Standard & Poor's, it will be based on the rating assigned by Fitch, Inc. For those portfolios that hold a security which is not rated by any of the three agencies, the security is considered Not Rated. Holdings in U.S. Treasuries and government agency mortgage-backed securities, if any, are included in a "AAA"-rating category. Percentages are based on the total market value of investments as of 6/30/05. *** The average maturity shown is calculated using the final stated maturity on the portfolio's holdings without taking into account any holdings which have been pre-refunded to an earlier date or which have a mandatory put date prior to the stated maturity. The average life shown takes into account these earlier dates. **** The Portfolio Average Credit Quality rating is based upon a market weighted average of portfolio holdings. Percentages are based on net assets as of 6/30/05, unless otherwise noted. The portfolio is actively managed and current holdings may be different. PORTFOLIO COMPOSITION -- GOVERNMENT SECURITIES VARIABLE ACCOUNT PORTFOLIO STRUCTURE* BONDS 91.0% Cash & Other Net Assets 9.0% MARKET SECTORS* Mortgage-Backed Securities 55.4% ------------------------------------------------- U.S. Government Agencies 32.2% ------------------------------------------------- Cash & Other Net Assets 9.0% ------------------------------------------------- U.S. Treasury Securities 3.3% ------------------------------------------------- Residential Mortgage-Backed Securities 0.1% ------------------------------------------------- PORTFOLIO FACTS Average Duration 3.7 ------------------------------------------------- Average Life 6.5 yrs. ------------------------------------------------- Average Maturity** 16.1 yrs. ------------------------------------------------- Average Quality*** AAA ------------------------------------------------- Average Short Term Quality A-1 ------------------------------------------------- * For purposes of this graphical presentation, the bond component includes both accrued interest on bonds and the equivalent exposure from any derivative holdings, if applicable. ** The average maturity shown is calculated using the final stated maturity on the portfolio's holdings without taking into account any holdings which have been pre-refunded to an earlier date or which have a mandatory put date prior to the stated maturity. The average life shown takes into account these earlier dates. *** The Portfolio Average Credit Quality rating is based upon a market weighted average of portfolio holdings. Percentages are based on net assets as of 6/30/05, unless otherwise noted. The portfolio is actively managed and current holdings may be different. PORTFOLIO COMPOSITION -- HIGH YIELD VARIABLE ACCOUNT PORTFOLIO STRUCTURE* Bonds 93.3% Cash & Other Net Assets 5.0% Stocks 1.2% Convertible Preferred Stock 0.3% Preferred Stock 0.2% TOP FIVE BOND INDUSTRIES* Utilities - Electric Power 8.2% ------------------------------------------------- Gaming & Lodging 6.2% ------------------------------------------------- Telecommunication - Wireline 6.0% ------------------------------------------------- Medical & Health Technology & Services 5.2% ------------------------------------------------- Chemicals 4.8% ------------------------------------------------- CREDIT QUALITY OF BONDS** BBB 4.8% ------------------------------------------------- BB 37.6% ------------------------------------------------- B 40.2% ------------------------------------------------- CCC 14.7% ------------------------------------------------- CC 1.2% ------------------------------------------------- D 0.2% ------------------------------------------------- Not Rated 1.3% ------------------------------------------------- PORTFOLIO FACTS Average Duration 4.7 ------------------------------------------------- Average Life 8.1 yrs. ------------------------------------------------- Average Maturity*** 8.5 yrs. ------------------------------------------------- Average Quality**** B+ ------------------------------------------------- Average Short Term Quality A-1 ------------------------------------------------- * For purposes of this graphical presentation, the bond component includes both accrued interest on bonds and the equivalent exposure from any derivative holdings, if applicable. ** Each security is assigned a rating from Moody's Investors Service. If not rated by Moody's, the rating will be that assigned by Standard & Poor's. Likewise, if not assigned a rating by Standard & Poor's, it will be based on the rating assigned by Fitch, Inc. For those portfolios that hold a security which is not rated by any of the three agencies, the security is considered Not Rated. Holdings in U.S. Treasuries and government agency mortgage-backed securities, if any, are included in a "AAA"-rating category. Percentages are based on the total market value of investments as of 6/30/05. *** The average maturity shown is calculated using the final stated maturity on the portfolio's holdings without taking into account any holdings which have been pre-refunded to an earlier date or which have a mandatory put date prior to the stated maturity. The average life shown takes into account these earlier dates. **** The Portfolio Average Credit Quality rating is based upon a market weighted average of portfolio holdings. Percentages are based on net assets as of 6/30/05, unless otherwise noted. The portfolio is actively managed and current holdings may be different. PORTFOLIO COMPOSITION -- MANAGED SECTORS VARIABLE ACCOUNT PORTFOLIO STRUCTURE Stocks 96.7% Cash & Other Net Assets 3.3% TOP TEN HOLDINGS Johnson & Johnson 5.1% ------------------------------------------------- Microsoft Corp. 4.7% ------------------------------------------------- Cisco Systems, Inc. 4.1% ------------------------------------------------- Dell, Inc. 4.0% ------------------------------------------------- Wyeth 3.9% ------------------------------------------------- Abbott Laboratories 3.2% ------------------------------------------------- Oracle Corp. 2.7% ------------------------------------------------- Medtronic, Inc. 2.5% ------------------------------------------------- Genzyme Corp. 2.5% ------------------------------------------------- CVS Corp. 2.2% ------------------------------------------------- SECTOR WEIGHTINGS Health Care 30.7% ------------------------------------------------- Technology 30.4% ------------------------------------------------- Retailing 10.0% ------------------------------------------------- Financial Services 8.0% ------------------------------------------------- Leisure 7.3% ------------------------------------------------- Consumer Staples 2.9% ------------------------------------------------- Transportation 2.3% ------------------------------------------------- Industrial Goods & Services 2.3% ------------------------------------------------- Special Products & Services 2.1% ------------------------------------------------- Utilities & Communications 0.7% ------------------------------------------------- Percentages are based on net assets as of 6/30/05. The portfolio is actively managed and current holdings may be different. PORTFOLIO COMPOSITION -- MONEY MARKET VARIABLE ACCOUNT PORTFOLIO STRUCTURE* Commercial Paper 97.2% Repurchase Agreements 3.0% Other Non Short-Term Assets -0.2% MATURITY BREAKDOWN* 0 to 29 Days 59.3% ------------------------------------------------- 30 to 59 Days 21.8% ------------------------------------------------- 60 to 89 Days 19.1% ------------------------------------------------- Other non short-term assets -0.2% ------------------------------------------------- SHORT TERM CREDIT QUALITY** Average Short Term Quality A-1 ------------------------------------------------- COUNTRY WEIGHTINGS United States 71.5% ------------------------------------------------- Great Britain 6.5% ------------------------------------------------- France 6.3% ------------------------------------------------- Germany 3.3% ------------------------------------------------- Netherlands 3.3% ------------------------------------------------- Switzerland 3.2% ------------------------------------------------- Belgium 3.1% ------------------------------------------------- Sweden 2.8% ------------------------------------------------- * For purposes of this graphical presentation, the fixed income portion includes both accrued interest on bonds and the equivalent exposure from any derivative holdings, if applicable, are included in this graphical presentation. ** The Portfolio Average Credit Quality rating is based upon a market weighted average of portfolio holdings. From time to time, "Other non short-term assets" may be negative due to timing of cash receipts. Percentages are based on net assets as of 6/30/05, unless otherwise noted. The portfolio is actively managed and current holdings may be different. PORTFOLIO COMPOSITION -- TOTAL RETURN VARIABLE ACCOUNT PORTFOLIO STRUCTURE* Stocks 59.5% Bonds 38.8% Cash & Other Net Assets 1.7% TOP TEN HOLDINGS* Agency - FNMA, 30 yr, 5.5% 3.7% ------------------------------------------------- U.S. Treasury Note - 5.625%, 5/15/08 2.2% ------------------------------------------------- Spring Corp. (FON GRP) 2.2% ------------------------------------------------- Bank of America Corp. 2.0% ------------------------------------------------- U.S. Treasury Bonds - 6.25%, 8/15/23 1.9% ------------------------------------------------- FNMA - 6.625%, 11/15/10 1.8% ------------------------------------------------- Verizon Communications, Inc. 1.6% ------------------------------------------------- Citigroup, Inc. 1.4% ------------------------------------------------- J.P. Morgan Chase & Co. 1.4% ------------------------------------------------- U.S. Treasury Note - 7.0%, 7/15/06 1.4% ------------------------------------------------- MARKET SECTORS* Domestic Equities 55.7% ------------------------------------------------- Mortgage-Backed Securities 13.6% ------------------------------------------------- High Grade Corporates 9.1% ------------------------------------------------- U.S. Treasury Securities 8.6% ------------------------------------------------- U.S. Government Agencies 4.4% ------------------------------------------------- International Equities 3.8% ------------------------------------------------- Cash & Other Net Assets 1.7% ------------------------------------------------- Commercial Mortgage-Backed Securities 1.6% ------------------------------------------------- Asset-Backed Securities 0.8% ------------------------------------------------- High Yield Corporates 0.3% ------------------------------------------------- Emerging Market Bonds 0.2% ------------------------------------------------- International Bonds 0.2% ------------------------------------------------- EQUITY SECTOR WEIGHTINGS Financial Services 24.5% ------------------------------------------------- Energy 11.6% ------------------------------------------------- Utilities & Communications 11.4% ------------------------------------------------- Health Care 8.3% ------------------------------------------------- Industrial Goods & Services 7.6% ------------------------------------------------- Technology 7.3% ------------------------------------------------- Basic Materials 6.7% ------------------------------------------------- Consumer Staples 6.4% ------------------------------------------------- Leisure 6.4% ------------------------------------------------- Retailing 3.8% ------------------------------------------------- Autos & Housing 2.3% ------------------------------------------------- Special Products & Services 0.7% ------------------------------------------------- Transportation 0.4% ------------------------------------------------- * For purposes of this graphical presentation, the fixed income portion includes both accrued interest on bonds and the equivalent exposure from any derivative holdings, if applicable, are included in this graphical presentation. Percentages are based on net assets as of 6/30/05, unless otherwise noted. The portfolio is actively managed and current holdings may be different. Issuer Shares Value PORTFOLIO OF INVESTMENTS (Unaudited) -- June 30, 2005 CAPITAL APPRECIATION VARIABLE ACCOUNT STOCKS -- 96.4% Issuer Shares Value AEROSPACE -- 1.4% Lockheed Martin Corp. .......................... 45,900 $ 2,977,533 United Technologies Corp. ...................... 15,800 811,330 ------------- $ 3,788,863 ------------- APPAREL MANUFACTURERS -- 0.4% Nike, Inc., "B" ................................ 5,300 $ 458,980 Polo Ralph Lauren Corp., "A" ................... 12,900 556,119 ------------- $ 1,015,099 ------------- AUTOMOTIVE -- 1.1% Harley-Davidson, Inc. .......................... 59,800 $ 2,966,080 ------------- BANKS & CREDIT COMPANIES -- 2.0% American Express Co. ........................... 12,800 $ 681,344 Citigroup, Inc. ................................ 58,196 2,690,401 Countrywide Financial Corp. .................... 19,000 733,590 SLM Corp. ...................................... 28,800 1,463,040 ------------- $ 5,568,375 ------------- BIOTECHNOLOGY -- 4.5% Amgen, Inc.* ................................... 139,440 $ 8,430,542 Genzyme Corp.* ................................. 44,500 2,674,005 ImClone Systems, Inc.* ......................... 43,200 1,337,904 ------------- $ 12,442,451 ------------- BROADCAST & CABLE TV -- 3.3% Citadel Broadcasting Corp.* .................... 153,000 $ 1,751,850 Comcast Corp., "A"* ............................ 87,300 2,680,110 EchoStar Communications Corp., "A"* ............ 94,785 2,857,768 Univision Communications, Inc., "A"* ........... 54,200 1,493,210 XM Satellite Radio Holdings, Inc., "A"* ........ 8,200 276,012 ------------- $ 9,058,950 ------------- BROKERAGE & ASSET MANAGERS -- 0.2% Legg Mason, Inc. ............................... 4,900 $ 510,139 ------------- BUSINESS SERVICES -- 2.8% Accenture Ltd., "A"* ........................... 211,700 $ 4,799,239 Fiserv, Inc.* .................................. 65,100 2,796,045 ------------- $ 7,595,284 ------------- CHEMICALS -- 1.2% 3M Co. ......................................... 43,900 $ 3,173,970 ------------- COMPUTER SOFTWARE -- 8.7% Amdocs Ltd.* ................................... 106,300 $ 2,809,509 Microsoft Corp. ................................ 356,520 8,855,957 NAVTEQ Corp.* .................................. 7,600 282,568 Oracle Corp.* .................................. 505,500 6,672,600 Symantec Corp.* ................................ 246,600 5,361,084 ------------- $ 23,981,718 ------------- COMPUTER SOFTWARE -- SYSTEMS -- 4.6% CDW Corp. ...................................... 86,300 $ 4,926,867 Dell, Inc.* .................................... 193,720 7,653,877 ------------- $ 12,580,744 ------------- CONSTRUCTION -- 0.6% KB Home ........................................ 11,600 $ 884,268 Pulte Homes, Inc. .............................. 9,400 791,950 ------------- $ 1,676,218 ------------- CONSUMER GOODS & SERVICES -- 2.4% Apollo Group, Inc., "A"* ....................... 41,200 $ 3,222,664 Avon Products, Inc. ............................ 25,900 980,315 Career Education Corp.* ........................ 48,300 1,768,263 Fortune Brands, Inc. ........................... 6,500 577,200 ------------- $ 6,548,442 ------------- ELECTRICAL EQUIPMENT -- 2.3% Emerson Electric Co. ........................... 32,400 $ 2,029,212 Tyco International Ltd. ........................ 143,500 4,190,200 ------------- $ 6,219,412 ------------- ELECTRONICS -- 2.7% Amphenol Corp., "A" ............................ 35,700 $ 1,434,069 Analog Devices, Inc. ........................... 80,190 2,991,889 Samsung Electronics Co. Ltd., GDR .............. 2,300 550,275 Xilinx, Inc. ................................... 101,000 2,575,500 ------------- $ 7,551,733 ------------- ENERGY -- INDEPENDENT -- 0.7% Arch Coal, Inc. ................................ 17,700 $ 964,119 Massey Energy Co. .............................. 24,000 905,280 ------------- $ 1,869,399 ------------- FOOD & DRUG STORES -- 1.0% CVS Corp. ...................................... 95,520 $ 2,776,766 ------------- FOOD & NON-ALCOHOLIC BEVERAGES -- 3.2% PepsiCo, Inc. .................................. 136,420 $ 7,357,131 SYSCO Corp. .................................... 38,400 1,389,696 ------------- $ 8,746,827 ------------- GAMING & LODGING -- 0.8% Carnival Corp. ................................. 41,400 $ 2,258,370 ------------- GENERAL MERCHANDISE -- 5.6% Family Dollar Stores, Inc. ..................... 107,700 $ 2,810,970 Kohl's Corp.* .................................. 49,190 2,750,213 Target Corp. ................................... 51,460 2,799,939 Wal-Mart Stores, Inc. .......................... 142,700 6,878,140 ------------- $ 15,239,262 ------------- HEALTH MAINTENANCE ORGANIZATIONS -- 0.3% UnitedHealth Group, Inc. ....................... 13,600 $ 709,104 ------------- INSURANCE -- 2.1% American International Group, Inc. ............. 46,700 $ 2,713,270 St. Paul Travelers Cos., Inc. .................. 79,900 3,158,447 ------------- $ 5,871,717 ------------- INTERNET -- 2.5% Amazon.com, Inc.* .............................. 37,500 $ 1,240,500 eBay, Inc.* .................................... 20,700 683,307 IAC/InterActiveCorp* ........................... 144,200 3,468,010 Yahoo!, Inc.* .................................. 43,900 1,521,135 ------------- $ 6,912,952 ------------- LEISURE & TOYS -- 1.4% Electronic Arts, Inc.* ......................... 69,700 $ 3,945,717 ------------- MACHINERY & TOOLS -- 3.1% Caterpillar, Inc. .............................. 46,200 $ 4,403,322 Illinois Tool Works, Inc. ...................... 50,200 3,999,936 ------------- $ 8,403,258 ------------- MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 3.5% Caremark Rx, Inc.* ............................. 70,400 $ 3,134,208 Community Health Systems, Inc.* ................ 81,700 3,087,443 HCA, Inc. ...................................... 61,600 3,490,872 ------------- $ 9,712,523 ------------- MEDICAL EQUIPMENT -- 3.9% Boston Scientific Corp.* ....................... 44,400 $ 1,198,800 Medtronic, Inc. ................................ 104,700 5,422,413 St. Jude Medical, Inc.* ........................ 6,900 300,909 Waters Corp.* .................................. 32,700 1,215,459 Zimmer Holdings, Inc.* ......................... 32,900 2,505,993 ------------- $ 10,643,574 ------------- METALS & MINING -- 0.7% BHP Billiton Ltd., ADR ......................... 21,200 $ 578,760 Companhia Vale do Rio Doce, ADR ................ 48,300 1,414,224 ------------- $ 1,992,984 ------------- OIL SERVICES -- 2.7% BJ Services Co. ................................ 29,200 $ 1,532,416 GlobalSantaFe Corp. ............................ 41,200 1,680,960 Noble Corp. .................................... 27,400 1,685,374 Smith International, Inc. ...................... 24,600 1,567,020 Tenaris S.A., ADR .............................. 12,100 947,067 ------------- $ 7,412,837 ------------- PERSONAL COMPUTERS & PERIPHERALS -- 1.5% Lexmark International, Inc., "A"* .............. 61,700 $ 4,000,011 ------------- PHARMACEUTICALS -- 13.5% Abbott Laboratories ............................ 113,700 $ 5,572,437 Allergan, Inc. ................................. 40,100 3,418,124 Eli Lilly & Co. ................................ 93,800 5,225,598 Johnson & Johnson .............................. 156,000 10,140,000 Roche Holding AG ............................... 33,700 4,244,093 Wyeth .......................................... 187,600 8,348,200 ------------- $ 36,948,452 ------------- RESTAURANTS -- 0.8% Outback Steakhouse, Inc. ....................... 48,600 $ 2,198,664 ------------- SPECIALTY CHEMICALS -- 0.1% Praxair, Inc. .................................. 5,800 $ 270,280 ------------- SPECIALTY STORES -- 3.8% Best Buy Co., Inc. ............................. 40,100 $ 2,748,855 CarMax, Inc.* .................................. 67,200 1,790,880 Lowe's Cos., Inc. .............................. 64,600 3,761,012 PETsMART, Inc. ................................. 65,900 2,000,065 ------------- $ 10,300,812 ------------- TELECOMMUNICATIONS -- WIRELINE -- 4.5% Cisco Systems, Inc.* ........................... 573,000 $ 10,950,030 NeuStar, Inc., "A"* ............................ 1,170 29,952 QUALCOMM, Inc. ................................. 41,300 1,363,313 ------------- $ 12,343,295 ------------- TELEPHONE SERVICES -- 1.1% Sprint Corp. ................................... 119,650 $ 3,002,019 ------------- TRUCKING -- 1.4% FedEx Corp. .................................... 47,200 $ 3,823,671 ------------- Total Stocks (Identified Cost, $240,468,935) $ 264,059,972 ------------- SHORT-TERM OBLIGATION -- 3.7% Issuer Par Amount Value General Electric Capital Corp., 3.4%, due 7/01/05, at Amortized Cost< ........$10,237,000 $ 10,237,000 ------------- Total Investments (Identified Cost, $250,705,935)(+) ....... $ 274,296,972 ------------- OTHER ASSETS, LESS LIABILITIES -- (0.1)% ................... (314,858) ------------- Net Assets -- 100.0% ....................... $ 273,982,114 ============= See portfolio footnotes and notes to financial statements. PORTFOLIO OF INVESTMENTS (Unaudited) -- June 30, 2005 GLOBAL GOVERNMENTS VARIABLE ACCOUNT BONDS -- 96.5% Issuer Par Amount Value FOREIGN BONDS -- 77.0% AUSTRALIA -- 1.4% Commonwealth of Australia, 6%, 2017 .......... AUD 203,000 $ 165,803 ------------- AUSTRIA -- 2.5% Republic of Austria, 5%, 2012 ................ EUR 214,000 $ 293,769 ------------- BELGIUM -- 3.1% Kingdom of Belgium, 3.75%, 2009 .............. EUR 164,000 $ 208,286 Kingdom of Belgium, 5%, 2012 ................. EUR 111,000 152,793 ------------- $ 361,079 ------------- CANADA -- 4.9% Canada Housing Trust, 4.65%, 2009 ............ CAD 135,000 $ 115,788 Government of Canada, 5.25%, 2012 ............ CAD 75,000 67,142 Government of Canada, 4.5%, 2015 ............. CAD 113,000 96,837 Quebec Province, 1.6%, 2013 .................. JPY 31,000,000 293,690 ------------- $ 573,457 ------------- DENMARK -- 1.1% Kingdom of Denmark, 4%, 2015 ................. DKK 701,000 $ 122,664 ------------- FINLAND -- 4.9% Republic of Finland, 3%, 2008 ................ EUR 416,000 $ 514,864 Republic of Finland, 5.375%, 2013 ............ EUR 36,000 51,107 ------------- $ 565,971 ------------- FRANCE -- 7.3% Republic of France, 4.75%, 2007 .............. EUR 379,000 $ 482,544 Republic of France, 4.75%, 2012 .............. EUR 131,000 178,029 Republic of France, 6%, 2025 ................. EUR 113,000 184,035 ------------- $ 844,608 ------------- GERMANY -- 13.4% Federal Republic of Germany, 3.5%, 2008 ................................. EUR 427,000 $ 536,961 Federal Republic of Germany, 3.75%, 2015 ................................ EUR 80,000 101,910 Federal Republic of Germany, 6.25%, 2024 ................................ EUR 289,000 477,043 Federal Republic of Germany, 6.25%, 2030 ................................ EUR 253,000 434,352 ------------- $ 1,550,266 ------------- IRELAND -- 5.5% Republic of Ireland, 4.25%, 2007 ............. EUR 454,000 $ 575,360 Republic of Ireland, 4.6%, 2016 .............. EUR 45,000 61,514 ------------- $ 636,874 ------------- JAPAN -- 4.0% Development Bank of Japan, 1.4%, 2012 ................................. JPY 39,000,000 $ 368,190 Development Bank of Japan, 1.6%, 2014 ................................. JPY 10,000,000 94,792 ------------- $ 462,982 ------------- MEXICO -- 0.5% United Mexican States, 8.125%, 2019 .......... $ 51,000 $ 62,603 ------------- NETHERLANDS -- 3.8% Kingdom of Netherlands, 5.75%, 2007 .......... EUR 323,000 $ 413,688 Kingdom of Netherlands, 5%, 2012 ............. EUR 19,697 27,071 ------------- $ 440,759 ------------- NEW ZEALAND -- 5.0% Government of New Zealand, 6.5%, 2013 ................................. NZD 664,000 $ 483,800 Government of New Zealand, 6%, 2015 ................................... NZD 133,000 94,419 ------------- $ 578,219 ------------- NORWAY -- 1.0% Kingdom of Norway, 6.5%, 2013 ................ NOK 591,000 $ 109,989 ------------- QATAR -- 0.7% State of Qatar, 9.75%, 2030 .................. $ 50,000 $ 77,625 ------------- RUSSIA -- 0.9% Russian Federation, 3%, 2008 ................. $ 66,000 $ 62,271 Russian Federation, 5% to 2007, 7.5% to 2030 ............................... 38,000 42,423 ------------- $ 104,694 ------------- SPAIN -- 7.7% Kingdom of Spain, 6%, 2008 ................... EUR 401,000 $ 531,154 Kingdom of Spain, 5.35%, 2011 ................ EUR 262,000 364,674 ------------- $ 895,828 ------------- SWEDEN -- 1.9% Kingdom of Sweden, 5.25%, 2011 ............... SEK 780,000 $ 114,248 Kingdom of Sweden, 4%, 2020 .................. SEK 651,597 111,046 ------------- $ 225,294 ------------- UNITED KINGDOM -- 7.4% United Kingdom Treasury, 5.75%, 2009 ......... GBP 65,000 $ 124,413 United Kingdom Treasury, 8%, 2015 ............ GBP 307,000 728,203 ------------- $ 852,616 ============= Total Foreign Bonds ...................... $ 8,925,100 ------------- U.S. BONDS -- 19.5% ASSET BACKED & SECURITIZED -- 4.1% Commercial Mortgage Asset Trust, FRN, 1.0939%, 2032## ............................ $ 1,560,930 $ 72,050 Commercial Mortgage Pass-Through Certificate, 3.41%, 2017## ................. 59,000 58,987 Deutsche Mortgage & Asset Receiving Corp., 6.538%, 2031 ........................ 49,476 51,865 First Union National Bank Commercial Mortgage Trust, FRN, 1.206%, 2043##^^ ..... 1,731,260 76,687 J.P. Morgan Chase Commercial Mortgage Securities Corp., 3.42%, 2046 .............. 52,080 52,120 J.P. Morgan Chase Commercial Mortgage Securities Corp., FRN, 5.3839%, 2041 .............................. 55,952 58,754 Wachovia Bank Commercial Mortgage Trust, 3.51%, 2015## .............................. 22,101 22,114 Wachovia Bank Commerical Mortgage Trust, 3.46%, 2015## .............................. 83,496 83,613 ------------- $ 476,190 ------------- MORTGAGE BACKED -- 2.0% Fannie Mae, 5.5%, 2034 ....................... $ 227,002 $ 230,315 ------------- MUNICIPALS -- 2.0% Honolulu, HI, City & County Rev., "A", 5%, 2015 ................................... $ 85,000 $ 95,135 Massachusetts State Water Resources Authority, "A", 5.25%, 2015 ................ 80,000 91,282 New York, NY, City Municipal Water Finance Authority, Water & Sewer Systems Rev., "D", 5%, 2037 ................ 40,000 42,544 ------------- $ 228,961 ------------- SUPRANATIONAL -- 2.4% Inter-American Development Bank, 1.9%, 2009 ................................. JPY 29,000,000 $ 279,650 ------------- U.S. GOVERNMENT AGENCIES -- 3.0% Fannie Mae, 4.25%, 2007 ...................... $ 346,000 $ 347,118 ------------- U.S. TREASURY OBLIGATIONS -- 6.0% U.S. Treasury Bonds, 6.25%, 2030 ............. $ 181,000 $ 235,759 U.S. Treasury Notes, 4.25%, 2013 ............. 40,000 41,061 U.S. Treasury Notes, 2%, 2014 ................ 268,500 276,565 U.S. Treasury Notes, 4%, 2015 ................ 137,000 137,487 ------------- $ 690,872 ------------- Total U.S. Bonds ......................... $ 2,253,106 ------------- Total Bonds (Identified Cost, $11,083,944) $ 11,178,206 ------------- CALL OPTIONS PURCHASED -- 0% Number of Contacts Issue/Strike Price/Expiration (000 Omitted) Value USD Call /KRW Put/August 1025 Call/8/10/2005 (Premiums Paid, $1,392) .................... 236,775 $ 3,315 ------------- PUT OPTIONS PURCHASED -- 0% U.S. Treasury 10yr Note Future/September 112 Put/8/26/2005 .......................... 2 $ 781 U.S. Treasury 10yr Note Future/September 113 Put/8/26/2005 .......................... 2 1,406 ------------- Total Put Options Purchased (Premiums Paid, $4,710) ................ $ 2,187 ------------- REPURCHASE AGREEMENTS -- 5.5% Issuer Par Amount Value Goldman Sachs, 3.25%, dated 6/30/05, due 7/01/05, total to be received $523,047 (secured by various U.S. Treasury and Federal Agency obligations in a jointly traded account) ............................ $ 523,000 $ 523,000 Morgan Stanley, 3.35%, dated 6/30/05, due 7/01/05, total to be received $113,011 (secured by various U.S. Treasury and Federal Agency obligations in a jointly traded account) ............................ 113,000 113,000 ------------- Total Repurchase Agreement, at Cost ...... $ 636,000 ------------- Total Investments (Identified Cost, $11,726,046) $ 11,819,708 ------------- OTHER ASSETS, LESS LIABILITIES -- (2.0)% ................. (231,493) ------------- Net Assets -- 100.0% ..................... $ 11,588,215 ============= See portfolio footnotes and notes to financial statements. PORTFOLIO OF INVESTMENTS (Unaudited) -- June 30, 2005 GOVERNMENT SECURITIES VARIABLE ACCOUNT BONDS -- 99.1% Issuer Par Amount Value AGENCY -- OTHER -- 4.4% Financing Corp., 10.35%, 2018 ..................$ 1,150,000 $ 1,810,731 Resolution Funding Corp., 8.875%, 2020 ......... 1,700,000 2,520,337 ------------- $ 4,331,068 ------------- ASSET BACKED & SECURITIZED -- 0.1% Freddie Mac, 3.108%, 2035 ......................$ 132,727 $ 131,945 ------------- MORTGAGE BACKED - 55.2% Fannie Mae, 8.5%, 2007 .........................$ 4,532 $ 4,943 Fannie Mae, 6.8%, 2011 ......................... 99,865 110,438 Fannie Mae, 4.79%, 2012 ........................ 934,169 930,749 Fannie Mae, 4.73%, 2012 ........................ 96,544 98,319 Fannie Mae, 5%, 2013 - 2019 .................... 11,000,749 11,137,625 Fannie Mae, 4.8%, 2013 ......................... 91,728 93,788 Fannie Mae, 4.845%, 2013 ....................... 266,651 273,697 Fannie Mae, 5.06%, 2013 ........................ 107,427 111,336 Fannie Mae, 4.65%, 2013 ........................ 253,261 254,828 Fannie Mae, 4.45%, 2014 ........................ 327,061 327,373 Fannie Mae, 4.771%, 2014 ....................... 653,393 669,035 Fannie Mae, 4.6%, 2014 ......................... 127,852 129,182 Fannie Mae, 4.667%, 2014 ....................... 856,692 871,370 Fannie Mae, 4.846%, 2014 ....................... 928,008 954,842 Fannie Mae, 5.1%, 2014 ......................... 139,738 145,728 Fannie Mae, 4.62%, 2015 ........................ 183,507 185,570 Fannie Mae, 4.82%, 2015 ........................ 249,673 255,953 Fannie Mae, 4.69%, 2015 ........................ 90,579 92,032 Fannie Mae, 4.85%, 2015 ........................ 90,562 93,022 Fannie Mae, 4.56%, 2015 ........................ 164,686 165,812 Fannie Mae, 4.665%, 2015 ....................... 111,064 112,641 Fannie Mae, 4.7%, 2015 ......................... 127,595 129,712 Fannie Mae, 4.89%, 2015 ........................ 89,727 92,421 Fannie Mae, 4.74%, 2015 ........................ 100,000 101,941 Fannie Mae, 4.925%, 2015 ....................... 354,101 365,997 Fannie Mae, 6%, 2016 - 2034 .................... 6,717,997 6,919,138 Fannie Mae, 6.5%, 2016 - 2032 .................. 2,361,153 2,451,250 Fannie Mae, 5.5%, 2017 - 2034 .................. 16,017,929 16,286,844 Fannie Mae, 10%, 2018 .......................... 299,582 336,323 Fannie Mae, 4.5%, 2019 ......................... 2,491,856 2,482,463 Fannie Mae, 4.88%, 2020 ........................ 98,900 101,649 Fannie Mae, 5.9958%, 2020 ...................... 5,977 5,962 Fannie Mae, 7.5%, 2022 - 2031 .................. 320,990 343,227 Freddie Mac, 4.375%, 2015 ...................... 782,009 782,450 Freddie Mac, 5.5%, 2025 - 2034 ................. 2,090,159 2,124,305 Freddie Mac, 7.5%, 2027 ........................ 142,595 153,066 Freddie Mac, 6.5%, 2032 ........................ 1,115,261 1,156,279 Freddie Mac, 6%, 2034 .......................... 1,824,463 1,872,020 Ginnie Mae, 5.5%, 2033 ......................... 2,193,107 2,242,136 ------------- $ 54,965,466 ------------- U.S. GOVERNMENT AGENCIES -- 27.4% Aid to Israel, 6.6%, 2008 ......................$ 762,191 $ 780,417 Aid to Israel, 5.5%, 2023 ...................... 1,097,000 1,229,026 Aid to Israel, 0%, 2024 ........................ 1,442,000 596,565 Aid to Peru, 9.98%, 2008 ....................... 636,918 690,712 Empresa Energetica Cornito Ltd., 6.07%, 2010 .................................. 2,325,000 2,417,814 Fannie Mae, 3.41%, 2007 ........................ 1,060,000 1,048,151 Fannie Mae, 4.25%, 2009 ........................ 1,073,000 1,084,606 Fannie Mae, 4.625%, 2014 ....................... 761,000 780,462 Freddie Mac, 5.625%, 2011 ...................... 3,664,000 3,956,032 Freddie Mac, 5.05%, 2015 ....................... 956,000 967,692 Overseas Private Investment Corp., 0%, 2007 ..................................... 163,996 164,928 Small Business Administration, 8.4%, 2007 ................................... 6,418 6,541 Small Business Administration, 10.05%, 2009 ................................. 16,402 17,379 Small Business Administration, 8.7%, 2009 ................................... 81,124 85,592 Small Business Administration, 6.34%, 2021 .................................. 727,521 780,199 Small Business Administration, 6.44%, 2021 .................................. 692,672 745,828 Small Business Administration, 6.625%, 2021 ................................. 756,202 823,186 Small Business Administration, 6.07%, 2022 .................................. 550,140 585,629 Small Business Administration, 4.98%, 2023 .................................. 268,148 274,472 Small Business Administration, 4.89%, 2023 .................................. 700,263 713,780 Small Business Administration, 4.72%, 2024 .................................. 715,549 723,592 Small Business Administration, 4.34%, 2024 .................................. 388,554 385,097 Small Business Administration, 4.77%, 2024 .................................. 665,134 673,950 Small Business Administration, 5.52%, 2024 .................................. 363,831 381,683 Small Business Administration, 4.99%, 2024 .................................. 447,067 457,605 Small Business Administration, 4.86%, 2024 .................................. 343,619 349,448 Small Business Administration, 4.88%, 2024 .................................. 313,318 318,909 Small Business Administration, 4.87%, 2024 .................................. 409,602 416,652 Small Business Administration, 5.11%, 2025 .................................. 356,000 366,335 Tennessee Valley Authority, 4.375%, 2015 ................................. 991,000 998,215 Tennessee Valley Authority STRIPS, 0%, 2042^^ .................................. 2,250,000 1,766,543 U.S. Department of Housing & Urban Development, 6.36%, 2016 ..................... 500,000 556,248 U.S. Department of Housing & Urban Development, 6.59%, 2016 ..................... 2,045,000 2,186,508 ------------- $ 27,329,796 ------------- U.S. TREASURY OBLIGATIONS -- 12.0% U.S. Treasury Bonds, 12%, 2013 .................$ 19,000 $ 23,591 U.S. Treasury Bonds, 6%, 2026 .................. 123,000 151,549 U.S. Treasury Bonds, 5.25%, 2028 ............... 346,000 395,183 U.S. Treasury Bonds, 5.375%, 2031 .............. 956,000 1,128,080 U.S. Treasury Notes, 3.375%, 2007 .............. 2,102,319 2,169,084 U.S. Treasury Notes, 3.625%, 2008### ........... 1,981,041 2,096,266 U.S. Treasury Notes, 5.5%, 2008 ................ 2,755,000 2,882,526 U.S. Treasury Notes, 6.5%, 2010 ................ 248,000 276,762 U.S. Treasury Notes, 2%, 2014 .................. 2,044,809 2,106,234 U.S. Treasury Notes, 4%, 2014 .................. 84,000 84,505 U.S. Treasury STRIPS, 0%, 2016^^ .............. 1,030,000 659,007 ------------- $ 11,972,787 ------------- Total Bonds (Identified Cost, $96,332,224) ............ $ 98,731,062 ------------- REPURCHASE AGREEMENT - 1.4% Morgan Stanley, 3.35%, dated 6/30/05, due 7/01/05, total to be received $1,404,131 (secured by various U.S. Treasury and Federal Agency obligations in a jointly traded account), at Cost .....................$ 1,404,000 $ 1,404,000 ------------- Total Investments (Identified Cost, $97,736,224) $ 100,135,062 ------------- OTHER ASSETS, LESS LIABILITIES - (0.5)% .............................. (455,931) ------------- Net Assets - 100.0% .................................. $ 99,679,131 ============= See portfolio footnotes and notes to financial statements. PORTFOLIO OF INVESTMENTS (Unaudited) -- June 30, 2005 HIGH YIELD VARIABLE ACCOUNT BONDS -- 91.8% Issuer Par Amount Value ADVERTISING & BROADCASTING -- 4.1% Allbritton Communications Co., 7.75%, 2012 ..................................$ 275,000 $ 270,875 DIRECTV Holdings LLC, 8.375%, 2013 ............. 120,000 132,900 DIRECTV Holdings LLC, 6.375%, 2015## ............................... 145,000 144,275 Echostar DBS Corp., 6.375%, 2011 ............... 465,000 460,931 Emmis Operating Co., 6.875%, 2012 .............. 135,000 133,650 Granite Broadcasting Corp., 9.75%, 2010 ........ 260,000 241,800 Innova S. de R.L., 9.375%, 2013 ................ 200,000 225,500 Intelsat Ltd., 8.625%, 2015## .................. 205,000 216,275 Intelsat Ltd., 0% to 2010, 9.25% to 2015## ..... 280,000 186,900 Lamar Media Corp., 7.25%, 2013 ................. 135,000 142,425 Panamsat Holding Corp., 0% to 2005, 10.375% to 2014 ...................................... 315,000 216,563 Paxson Communications Corp., 0% to 2006, 12.25% to 2009 ................... 495,000 462,825 ------------- $ 2,834,919 ------------- AEROSPACE -- 0.7% Argo-Tech Corp., 9.25%, 2011 ...................$ 130,000 $ 141,050 BE Aerospace, Inc., 8.875%, 2011 ............... 125,000 130,625 TransDigm Holding Co., 8.375%, 2011 ............ 170,000 180,200 ------------- $ 451,875 ------------- AIRLINES -- 0.6% Continental Airlines, Inc., 6.9%, 2017 .........$ 73,411 $ 59,790 Continental Airlines, Inc., 6.748%, 2017 ....... 74,147 60,872 Continental Airlines, Inc., 6.795%, 2018 ....... 121,955 101,820 Continental Airlines, Inc., 7.566%, 2020 ....... 244,890 201,688 ------------- $ 424,170 ------------- APPAREL MANUFACTURERS -- 0.5% Levi Strauss & Co., 12.25%, 2012 ...............$ 150,000 $ 163,875 Levi Strauss & Co., 9.75%, 2015 ................ 180,000 178,650 ------------- $ 342,525 ------------- ASSET BACKED & SECURITIZED -- 2.2% Airplane Pass-Through Trust, 10.875%, 2019** ..............................$ 740,775 $ 2,222 ARCap, Inc., 6.1%, 2045## ...................... 165,567 155,633 Asset Securitization Corp., 8.7809%, 2029## .............................. 200,000 188,203 Asset Securitization Corp., FRN, 8.2909%, 2029 ................................ 150,000 156,487 Crest Ltd., 7%, 2040## ......................... 154,000 149,786 First Union National Bank Commercial Mortgage Corp., 6.75%, 2032 .................. 165,000 171,479 GMAC Commercial Mortgage Securities, Inc., FRN, 7.9079%, 2034## ......................... 192,000 213,107 Mortgage Capital Funding, Inc., 7.214%, 2027 ................................. 500,000 525,402 ------------- $ 1,562,319 ------------- AUTOMOTIVE -- 4.0% Affinia Group, Inc., 9%, 2014## ................$ 200,000 $ 168,000 Ford Motor Credit Co., 6.625%, 2008 ............ 208,000 205,431 Ford Motor Credit Co., 5.625%, 2008 ............ 140,000 133,417 General Motors Acceptance Corp., 6.125%, 2008 ......................................... 110,000 106,482 General Motors Acceptance Corp., 5.85%, 2009 .................................. 200,000 187,482 General Motors Acceptance Corp., 6.75%, 2014 .................................. 429,000 383,815 General Motors Corp., 8.375%, 2033 ............. 304,000 253,840 INTERMET Corp., 9.75%, 2009** .................. 160,000 69,200 Lear Corp., 8.11%, 2009 ........................ 195,000 201,638 Metaldyne Corp., 11%, 2012 ..................... 49,000 31,728 Metaldyne Corp., 10%, 2013## ................... 260,000 213,200 AUTOMOTIVE -- continued Navistar International Corp., 7.5%, 2011 .......$ 395,000 $ 402,900 TRW Automotive, Inc., 9.375%, 2013 ............. 185,000 204,888 TRW Automotive, Inc., 11%, 2013 ................ 199,000 228,850 ------------- $ 2,790,871 ------------- BASIC INDUSTRY -- 0.1% Trimas Corp., 9.875%, 2012 .....................$ 115,000 $ 96,600 ------------- BROADCAST & CABLE TV -- 3.3% Cablevision Systems Corp., 8%, 2012 ............$ 155,000 $ 151,900 CCO Holdings LLC, 8.75%, 2013 .................. 150,000 147,750 Charter Communications, Inc., 8.625%, 2009 ................................. 510,000 378,675 Charter Communications, Inc., 9.92%, 2011 .................................. 495,000 361,350 Charter Communications, Inc., 8.375%, 2014## ............................... 120,000 119,400 CSC Holdings, Inc., 8.125%, 2009 ............... 125,000 126,562 CSC Holdings, Inc., 6.75%, 2012## .............. 215,000 202,100 FrontierVision Holdings LP, 11.875%, 2007** .............................. 50,000 68,750 FrontierVision Holdings LP, "B", 11.875%, 2007** .............................. 80,000 110,000 Frontiervision Operating Partners LP, 11%, 2006** .................................. 195,000 262,275 Mediacom Broadband LLC, 9.5%, 2013 ............. 210,000 209,475 Rogers Cable, Inc., 8.75%, 2032 ................ 140,000 158,900 ------------- $ 2,297,137 ------------- BROKERAGE & ASSET MANAGERS -- 0.2% Refco Finance Holdings LLC, 9%, 2012 ...........$ 135,000 $ 143,100 ------------- BUILDING -- 0.8% Interface, Inc., 10.375%, 2010 .................$ 167,000 $ 183,700 Nortek Holdings, Inc., 8.5%, 2014 .............. 210,000 195,300 Nortek Holdings, Inc., 0% to 2009, 10.75% to 2014## ............................. 238,000 111,860 Texas Industries, Inc., 7.25%, 2013## .......... 35,000 35,875 ------------- $ 526,735 ------------- BUSINESS SERVICES -- 1.9% Iron Mountain, Inc., 8.625%, 2013 ..............$ 240,000 $ 248,400 Iron Mountain, Inc., 7.75%, 2015 ............... 5,000 5,025 Iron Mountain, Inc., 6.625%, 2016 .............. 105,000 97,125 Lucent Technologies, Inc., 5.5%, 2008 .......... 135,000 133,988 Lucent Technologies, Inc., 6.45%, 2029 ......... 160,000 143,200 Northern Telecom Corp., 6.875%, 2023 ........... 115,000 107,525 Northern Telecom Corp., 7.875%, 2026 ........... 70,000 70,000 Xerox Corp., 7.625%, 2013 ...................... 485,000 521,981 ------------- $ 1,327,244 ------------- CHEMICALS -- 4.7% ARCO Chemical Co., 9.8%, 2020 ..................$ 155,000 $ 173,600 BCP Crystal Holdings Corp., 9.625%, 2014 ....... 121,000 135,520 Crystal U.S. Holdings LLC, 0% to 2009, 10% to 2014 ...................................... 62,000 43,710 Crystal U.S. Holdings LLC, 0% to 2009, 10.5% to 2014 ...................................... 337,000 234,215 Equistar Chemicals LP, 10.625%, 2011 ........... 115,000 126,931 Hercules, Inc., 6.75%, 2029 .................... 205,000 198,850 Huntsman International LLC, 10.125%, 2009 ................................ 197,000 202,664 Huntsman International LLC, 7.375%, 2015## ............................... 215,000 212,312 IMC Global, Inc., 10.875%, 2013 ................ 110,000 128,975 KI Holdings, Inc., 0% to 2009, 9.875% to 2014## ............................. 233,000 135,140 Kronos International, Inc., 8.875%, 2009 .......EUR 15,000 19,222 Lyondell Chemical Co., 9.5%, 2008 ..............$ 130,000 138,288 Lyondell Chemical Co., 11.125%, 2012 ........... 130,000 147,550 Nalco Co., 7.75%, 2011 ......................... 110,000 117,150 Nalco Co., 8.875%, 2013 ........................ 135,000 144,788 Nova Chemicals Corp., 6.5%, 2012 ............... 340,000 329,800 Resolution Performance Products LLC, 13.5%, 2010 .................................. 130,000 139,750 Rhodia S.A., 8.875%, 2011 ...................... 430,000 413,875 Rockwood Specialties Group, Inc., 10.625%, 2011 ................................ 180,000 198,450 Rockwood Specialties Group, Inc., 7.5%, 2014## ................................. 50,000 49,625 ------------- $ 3,290,415 ------------- CONSTRUCTION -- 1.5% Beazer Homes USA, Inc., 6.875%, 2015## ...............................$ 225,000 $ 222,750 D.R. Horton, Inc., 8%, 2009 .................... 250,000 273,851 Technical Olympic USA, Inc., 9%, 2010 .......... 75,000 77,156 Technical Olympic USA, Inc., 7.5%, 2011 ........ 50,000 46,500 Technical Olympic USA, Inc., 7.5%, 2015 ........ 150,000 135,000 WCI Communities, Inc., 7.875%, 2013 ............ 210,000 210,000 WCI Communities, Inc., 6.625%, 2015 ............ 105,000 96,075 ------------- $ 1,061,332 ------------- CONSUMER GOODS & SERVICES -- 2.3% Bombardier Recreational Products, Inc., 8.375%, 2013 .................................$ 150,000 $ 159,750 Church & Dwight, Inc., 6%, 2012 ................ 135,000 136,350 Integrated Electrical Services, Inc., 9.375%, 2009 ................................. 185,000 138,287 K2, Inc., 7.375%, 2014 ......................... 65,000 68,412 Revlon Consumer Products Corp., 9.5%, 2011 ................................... 220,000 207,900 Safilo Capital International S.A., 9.625%, 2013## ...............................EUR 320,000 416,829 Samsonite Corp., 8.875%, 2011 ..................$ 210,000 223,125 Service Corp. International, 7%, 2017## ........ 215,000 220,913 ------------- $ 1,571,566 ------------- CONTAINERS -- 1.6% Crown European Holdings S.A., 9.5%, 2011 ...................................$ 170,000 $ 187,850 Greif, Inc., 8.875%, 2012 ...................... 210,000 225,750 Huntsman Packaging Corp., 13%, 2010 ............ 180,000 145,800 Owens-Brockway Glass Container, Inc., 8.25%, 2013 ......................................... 195,000 211,819 Owens-Illinois, Inc., 7.8%, 2018 ............... 150,000 157,500 Plastipak Holdings, Inc., 10.75%, 2011 ......... 145,000 159,863 Pliant Corp., 13%, 2010 ........................ 40,000 32,400 ------------- $ 1,120,982 ------------- DEFENSE ELECTRONICS -- 0.5% L-3 Communications Holdings, Inc., 6.125%, 2014 .................................$ 230,000 $ 230,000 L-3 Communications Holdings, Inc., 5.875%, 2015 ................................. 130,000 126,100 ------------- $ 356,100 ------------- ELECTRONICS -- 0.5% Flextronics International Ltd., 6.5%, 2013 .....$ 285,000 $ 294,975 Magnachip Semiconductor S.A., 8%, 2014## ................................... 30,000 28,800 ------------- $ 323,775 ------------- EMERGING MARKET QUASI-SOVEREIGN -- 0.6% Gazprom OAO, 9.625%, 2013## ....................$ 120,000 $ 147,000 Gazprom OAO, 8.625%, 2034## .................... 220,000 275,825 ------------- $ 422,825 ------------- EMERGING MARKET SOVEREIGN -- 0.8% Federal Republic of Brazil, 8%, 2014 ...........$ 18,999 $ 19,450 Federal Republic of Brazil, 8.875%, 2019 ....... 203,000 215,180 Republic of Panama, 9.375%, 2023 ............... 123,000 151,905 Republic of Panama, 9.375%, 2029 ............... 36,000 44,550 Russian Ministry of Finance, 12.75%, 2028## ............................... 84,000 151,922 ------------- $ 583,007 ------------- ENERGY -- INDEPENDENT -- 2.4% Belden & Blake Corp., 8.75%, 2012 ..............$ 160,000 $ 156,800 Chesapeake Energy Corp., 7%, 2014 .............. 254,000 269,240 Chesapeake Energy Corp., 6.375%, 2015## ............................... 120,000 123,000 Chesapeake Energy Corp., 6.875%, 2016 ................................. 205,000 213,712 Encore Acquisition Co., 8.375%, 2012 ........... 135,000 146,475 Encore Acquisition Co., 6.25%, 2014 ............ 35,000 35,437 Encore Acquisition Co., 6%, 2015 ............... 110,000 107,976 Kerr-McGee Corp., 6.95%, 2024 .................. 280,000 289,316 Newfield Exploration Co., 6.625%, 2014 ......... 140,000 146,650 Plains Exploration & Production Co., 7.125%, 2014 ......................................... 200,000 214,000 ------------- $ 1,702,606 ------------- ENERGY -- INTEGRATED -- 0.3% Amerada Hess Corp., 7.3%, 2031 .................$ 195,000 $ 235,281 ------------- ENTERTAINMENT -- 1.3% AMC Entertainment, Inc., 9.5%, 2011 ............$ 140,000 $ 137,375 AMC Entertainment, Inc., 8.625%, 2012 .......... 260,000 266,500 Intrawest Corp., 7.5%, 2013 .................... 65,000 66,706 Loews Cineplex Entertainment Corp., 9%, 2014## ................................... 215,000 208,013 Six Flags, Inc., 9.75%, 2013## ................. 225,000 212,344 ------------- $ 890,938 ------------- FOOD & NON-ALCOHOLIC BEVERAGES -- 1.2% Burns, Philp & Co. Ltd., 9.75%, 2012 ...........$ 235,000 $ 252,625 Merisant Co., 9.5%, 2013## ..................... 60,000 42,600 Michael Foods, Inc., 8%, 2013 .................. 225,000 228,938 Smithfield Foods, Inc., 7%, 2011 ............... 220,000 231,550 United Biscuits Finance PLC, 10.625%, 2011 ................................EUR 80,000 102,031 ------------- $ 857,744 ------------- FOREST & PAPER PRODUCTS -- 4.5% Abitibi-Consolidated, Inc., 8.55%, 2010 ........$ 390,000 $ 406,575 Abitibi-Consolidated, Inc., 7.75%, 2011 ........ 95,000 95,475 Buckeye Technologies, Inc., 8.5%, 2013 ......... 180,000 183,600 Corporacion Durango S.A. de C.V., 7.5%, 2012 ................................... 151,000 119,290 Georgia-Pacific Corp., 9.375%, 2013 ............ 505,000 571,281 Georgia-Pacific Corp., 7.75%, 2029 ............. 200,000 224,750 Graphic Packaging International, Inc., 9.5%, 2013 ................................... 230,000 231,725 Jefferson Smurfit Corp., 8.25%, 2012 ........... 205,000 206,025 JSG Funding LLC, 11.5%, 2015## .................EUR 293,702 281,169 MDP Acquisitions PLC, 9.625%, 2012 .............$ 205,000 205,000 Newark Group, Inc., 9.75%, 2014 ................ 145,000 133,400 NewPage Corp., 12%, 2013## ..................... 25,000 24,750 Norske Skog Canada Ltd., 8.625%, 2011 .......... 195,000 201,094 Norske Skog Canada Ltd., 7.375%, 2014 .......... 125,000 122,500 Stone Container Corp., 7.375%, 2014 ............ 140,000 131,600 ------------- $ 3,138,234 ------------- GAMING & LODGING -- 6.1% Aztar Corp., 7.875%, 2014 ......................$ 165,000 $ 174,487 Boyd Gaming Corp., 6.75%, 2014 ................. 290,000 297,250 Caesars Entertainment, Inc., 8.875%, 2008 ...... 80,000 89,300 Caesars Entertainment, Inc., 8.125%, 2011 ...... 375,000 431,250 Host Marriott LP, 7.125%, 2013 ................. 250,000 260,625 Host Marriott LP, 6.375%, 2015## ............... 140,000 138,600 Mandalay Resort Group, 9.375%, 2010 ............ 175,000 195,563 MGM Mirage, Inc., 8.5%, 2010 ................... 140,000 155,400 MGM Mirage, Inc., 8.375%, 2011 ................. 410,000 446,900 MGM Mirage, Inc., 5.875%, 2014 ................. 195,000 189,394 Penn National Gaming, Inc., 6.75%, 2015## ................................ 150,000 148,875 Pinnacle Entertainment, Inc., 8.25%, 2012 .................................. 200,000 208,000 Pinnacle Entertainment, Inc., 8.75%, 2013 .................................. 120,000 127,200 Royal Caribbean Cruises Ltd., 6.875%, 2013 ................................. 420,000 447,300 Scientific Games Corp., 6.25%, 2012## .......... 130,000 131,300 Starwood Hotels & Resorts Worldwide, Inc., 7.875%, 2012 ................................. 465,000 524,288 Station Casinos, Inc., 6.5%, 2014 .............. 140,000 142,800 Wynn Las Vegas LLC, 6.625%, 2014## ............. 155,000 150,738 ------------- $ 4,259,270 ------------- INDUSTRIAL -- 2.8% Amsted Industries, Inc., 10.25%, 2011## ........$ 325,000 $ 351,000 Da Lite Screen Co., Inc., 9.5%, 2011 ........... 210,000 223,650 JohnsonDiversey Holdings, Inc., "B", 9.625%, 2012 ................................. 255,000 258,825 JohnsonDiversey Holdings, Inc., 0% to 2007, 10.67% to 2013 ................... 485,000 344,956 Knowledge Learning Corp., 7.75%, 2015## ........ 125,000 119,375 Milacron Escrow Corp., 11.5%, 2011 ............. 280,000 294,000 Valmont Industries, Inc., 6.875%, 2014 ......... 215,000 215,000 Williams Scotsman, Inc., 9.875%, 2007 .......... 65,000 65,325 Williams Scotsman, Inc., 10%, 2008 ............. 50,000 55,257 ------------- $ 1,927,388 ------------- INSURANCE -- PROPERTY & CASUALTY -- 0.2% AXIS Capital Holdings Ltd., 5.75%, 2014 ........$ 140,000 $ 144,987 ------------- MACHINERY & TOOLS -- 2.3% Case Corp., 7.25%, 2016 ........................$ 75,000 $ 71,437 Case New Holland, Inc., 9.25%, 2011 ............ 250,000 262,500 JLG Industries, Inc., 8.25%, 2008 .............. 210,000 219,975 Manitowoc Co., Inc., 10.375%, 2011 .............EUR 115,000 153,621 Terex Corp., 10.375%, 2011 .....................$ 340,000 368,900 United Rentals, Inc., 6.5%, 2012 ............... 165,000 162,319 United Rentals, Inc., 7.75%, 2013 .............. 175,000 171,938 United Rentals, Inc., 7%, 2014 ................. 170,000 161,925 ------------- $ 1,572,615 ------------- MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 5.1% AmerisourceBergen Corp., 7.25%, 2012 ...........$ 165,000 $ 181,706 CDRV Investors, Inc., 0% to 2010, 9.625% to 2015## ............................. 350,000 171,500 DaVita, Inc., 6.625%, 2013## ................... 125,000 129,062 DaVita, Inc., 7.25%, 2015## .................... 145,000 148,987 Extendicare Health Services, Inc., 6.875%, 2014 ................................. 215,000 213,387 Fisher Scientific International, Inc., 6.75%, 2014 .................................. 45,000 47,025 Fisher Scientific International, Inc., 6.125%, 2015## ............................... 135,000 135,169 HCA, Inc., 7.875%, 2011 ........................ 410,000 451,118 HCA, Inc., 6.375%, 2015 ........................ 685,000 710,761 HealthSouth Corp., 7.625%, 2012 ................ 180,000 174,600 InSight Health Services Corp., 9.875%, 2011 ................................. 125,000 97,500 Psychiatric Solutions, Inc., 7.75%, 2015## ................................ 70,000 70,000 Select Medical Corp., 7.625%, 2015## ........... 135,000 133,650 Tenet Healthcare Corp., 6.5%, 2012 ............. 115,000 109,250 Tenet Healthcare Corp., 9.875%, 2014 ........... 195,000 209,138 Tenet Healthcare Corp., 9.25%, 2015## .......... 155,000 160,813 Triad Hospitals, Inc., 7%, 2013 ................ 195,000 200,363 U.S. Oncology, Inc., 10.75%, 2014 .............. 180,000 196,200 ------------- $ 3,540,229 ------------- MEDICAL EQUIPMENT -- 0.4% Warner Chilcott Corp., 8.75%, 2015## ...........$ 250,000 $ 243,125 ------------- METALS & MINING -- 1.3% Century Aluminum Co., 7.5%, 2014 ...............$ 240,000 $ 237,000 Doe Run Resources Corp., 11.75%, 2008# ......... 252,800 202,240 Foundation PA Coal Co., 7.25%, 2014 ............ 140,000 147,000 Peabody Energy Corp., 5.875%, 2016 ............. 140,000 140,000 Russel Metals, Inc., 6.375%, 2014 .............. 220,000 205,700 ------------- $ 931,940 ------------- NATURAL GAS -- DISTRIBUTION -- 0.2% AmeriGas Partners LP, 7.25%, 2015## ............$ 150,000 $ 156,000 ------------- NATURAL GAS -- PIPELINE -- 3.5% ANR Pipeline Co., 9.625%, 2021 .................$ 220,000 $ 278,909 Colorado Interstate Gas Co., 5.95%, 2015## ................................ 80,000 78,500 El Paso Energy Corp., 7.625%, 2010 ............. 190,000 200,583 El Paso Energy Corp., 7%, 2011 ................. 405,000 403,987 El Paso Energy Corp., 7.75%, 2013 .............. 390,000 416,325 Enterprise Products Operating LP, 6.375%, 2013 ................................. 115,000 124,611 Enterprise Products Partners LP, 5.6%, 2014 ................................... 310,000 319,006 Markwest Energy Partners LP, 6.875%, 2014## ............................... 210,000 208,950 Transcontinental Gas Pipe Line Corp., 7%, 2011 ..................................... 135,000 145,463 Williams Cos., Inc., 7.125%, 2011 .............. 187,000 201,960 Williams Cos., Inc., 7.75%, 2031 ............... 70,000 77,175 ------------- $ 2,455,469 ------------- OIL SERVICES -- 0.9% Gulfmark Offshore, Inc., 7.75%, 2014 ...........$ 180,000 $ 189,450 Hanover Compressor Co., 9%, 2014 ............... 190,000 202,350 Petroleum Geo-Services A.S.A., 10%, 2010 .................................... 200,000 224,000 ------------- $ 615,800 ------------- OILS -- 0.7% CITGO Petroleum Corp., 6%, 2011 ................$ 275,000 $ 274,312 Premcor Refining Group, Inc., 7.75%, 2012 .................................. 120,000 131,100 Premcor Refining Group, Inc., 7.5%, 2015 ................................... 85,000 93,075 ------------- $ 498,487 ------------- POLLUTION CONTROL -- 0.5% Allied Waste North America, Inc., 6.5%, 2010 ...................................$ 170,000 $ 167,450 Allied Waste North America, Inc., 7.875%, 2013 ................................. 170,000 173,825 ------------- $ 341,275 ------------- PRECIOUS METALS & MINERALS -- 0.4% Freeport-McMoRan Copper & Gold, Inc., 6.875%, 2014 .................................$ 251,000 $ 244,725 ------------- PRINTING & PUBLISHING -- 2.8% Cenveo Corp., 9.625%, 2012 .....................$ 60,000 $ 64,800 Cenveo Corp., 7.875%, 2013 ..................... 100,000 95,000 Dex Media East LLC, 12.125%, 2012 .............. 146,000 174,835 Dex Media, Inc., 0% to 2008, 9% to 2013 ................................... 635,000 511,175 Hollinger, Inc., 12.875%, 2011## ............... 99,000 108,281 Lighthouse International Co. S.A., 8%, 2014## ...................................EUR 170,000 212,192 MediaNews Group, Inc., 6.875%, 2013 ............$ 205,000 203,206 PRIMEDIA, Inc., 8.875%, 2011 ................... 330,000 345,675 WDAC Subsidiary Corp., 8.375%, 2014## ............................... 230,000 219,650 ------------- $ 1,934,814 ------------- RAILROAD & SHIPPING -- 0.8% Kansas City Southern Railway Co., 7.5%, 2009 ...................................$ 360,000 $ 371,700 TFM S.A. de C.V., 9.375%, 2012## ............... 102,000 106,080 TFM S.A. de C.V., 12.5%, 2012 .................. 51,000 59,670 ------------- $ 537,450 ------------- RESTAURANTS -- 0.3% Carrols Holdings Corp., 9%, 2013## .............$ 200,000 $ 202,500 ------------- RETAILERS -- 2.3% Buhrmann U.S., Inc., 7.875%, 2015## ............$ 205,000 $ 199,875 Couche-Tard, Inc., 7.5%, 2013 .................. 320,000 336,000 Dollar General Corp., 8.625%, 2010 ............. 230,000 262,200 Eye Care Centers of America, Inc., 10.75%, 2015## ............................... 110,000 98,450 Finlay Fine Jewelry Corp., 8.375%, 2012 ........ 305,000 274,881 J.C. Penney Corp., Inc., 8%, 2010 .............. 180,000 198,000 Rite Aid Corp., 9.25%, 2013 .................... 120,000 117,600 Rite Aid Corp., 6.875%, 2013 ................... 155,000 134,075 ------------- $ 1,621,081 ------------- SPECIALTY STORES -- 0.3% Payless ShoeSource, Inc., 8.25%, 2013 ..........$ 195,000 $ 205,725 ------------- STEEL -- 0.5% AK Steel Holding Corp., 7.75%, 2012 ............$ 285,000 $ 240,825 Chaparral Steel Co., 10%, 2013## ............... 95,000 95,712 ------------- $ 336,537 ------------- SUPERMARKETS -- 0.5% Roundy's, Inc., 8.875%, 2012 ...................$ 310,000 $ 319,300 ------------- TELECOMMUNICATIONS -- WIRELESS -- 3.9% Alamosa Holdings, Inc., 0% to 2005, 12% to 2009 ..................................$ 170,000 $ 187,425 American Tower Corp., 9.375%, 2009 ............. 18,000 18,877 American Tower Corp., 7.125%, 2012 ............. 150,000 158,625 American Towers, Inc., 7.25%, 2011 ............. 130,000 137,150 Centennial Communications Corp., 10.125%, 2013 ................................ 120,000 135,600 Dobson Cellular Systems, Inc., 9.875%, 2012 ................................. 55,000 57,887 Dolphin Telecom PLC, 11.5%, 2008** ............. 1,500,000 0 Dolphin Telecom PLC, 14%, 2009** ............... 530,000 0 IWO Escrow Co., FRN, 6.8906%, 2012## .............................. 30,000 29,775 Nextel Communications, Inc., 5.95%, 2014 .................................. 960,000 997,200 Rogers Wireless, Inc., 6.375%, 2014 ............ 250,000 254,375 Rogers Wireless, Inc., 7.5%, 2015 .............. 185,000 201,188 Rural Cellular Corp., 9.75%, 2010 .............. 145,000 134,850 Rural Cellular Corp., 9.875%, 2010 ............. 200,000 206,500 U.S. Unwired, Inc., 10%, 2012 .................. 160,000 178,000 ------------- $ 2,697,452 ------------- TELECOMMUNICATIONS -- WIRELINE -- 5.9% AT&T Corp., 7.3%, 2011 .........................$ 231,000 $ 266,227 AT&T Corp., 9.75%, 2031 ........................ 115,000 149,644 Cincinnati Bell, Inc., 8.375%, 2014 ............ 200,000 205,000 Cincinnati Bell, Inc., 8.375%, 2014## ............................... 35,000 35,875 Citizens Communications Co., 9.25%, 2011 .................................. 395,000 440,919 Citizens Communications Co., 6.25%, 2013 .................................. 170,000 164,475 Citizens Communications Co., 9%, 2031 .......... 65,000 66,625 Eircom Funding PLC, 8.25%, 2013 ................ 130,000 141,050 GCI, Inc., 7.25%, 2014 ......................... 215,000 206,400 Hawaiian Telecom Communications, Inc., 9.75%, 2013## ................................ 50,000 53,000 Hawaiian Telecom Communications, Inc., 12.5%, 2015## ................................ 30,000 31,950 MCI, Inc., 6.908%, 2007 ........................ 168,000 170,310 MCI, Inc., 7.688%, 2009 ........................ 143,000 148,899 Qwest Capital Funding, Inc., 7.25%, 2011 .................................. 240,000 229,800 Qwest Corp., 7.875%, 2011## .................... 230,000 239,775 Qwest Corp., 8.875%, 2012## .................... 405,000 440,438 Qwest Services Corp., 13.5%, 2010 .............. 695,000 802,725 Time Warner Telecom Holdings, Inc., 9.25%, 2014 ......................................... 100,000 96,500 Time Warner Telecom Holdings, Inc., 9.25%, 2014## ....................................... 190,000 183,350 ------------- $ 4,072,962 ------------- TIRE & RUBBER -- 0.4% Cooper Standard Automotive, Inc., 8.375%, 2014 .................................$ 170,000 $ 134,300 Goodyear Tire & Rubber Co., 9%, 2015## ................................... 135,000 132,637 ------------- $ 266,937 ------------- TOBACCO -- 0.5% R. J. Reynolds Tobacco Holdings, Inc., 7.25%, 2012 ..................................$ 185,000 $ 188,238 R. J. Reynolds Tobacco Holdings, Inc., 7.3%, 2015## ....................................... 155,000 155,000 ------------- $ 343,238 ------------- TRANSPORTATION -- SERVICES -- 0.6% CHC Helicopter Corp., 7.375%, 2014 .............$ 155,000 $ 154,612 Stena AB, 9.625%, 2012 ......................... 80,000 87,200 Stena AB, 7%, 2016 ............................. 171,000 158,603 Westinghouse Air Brake Technologies Corp., 6.875%, 2013 ................................. 35,000 35,875 ------------- $ 436,290 ------------- UTILITIES -- ELECTRIC POWER -- 8.0% AES Corp., 8.75%, 2013## .......................$ 345,000 $ 385,537 AES Corp., 9%, 2015## .......................... 115,000 129,087 Allegheny Energy Supply Co. LLC, 8.25%, 2012## ................................ 225,000 252,000 Calpine Corp., 8.5%, 2008 ...................... 170,000 122,400 Calpine Corp., 9.625%, 2014## .................. 75,000 75,000 CenterPoint Energy, Inc., 7.25%, 2010 .......... 134,000 148,677 CMS Energy Corp., 8.5%, 2011 ................... 260,000 289,900 DPL, Inc., 6.875%, 2011 ........................ 125,000 135,000 Dynegy Holdings, Inc., 9.875%, 2010## .......... 80,000 88,400 Dynegy Holdings, Inc., 6.875%, 2011 ............ 15,000 14,812 Dynegy Holdings, Inc., 10.125%, 2013## .............................. 105,000 118,650 Empresa Nacional de Electricidad S.A., 8.35%, 2013 .................................. 250,000 290,359 FirstEnergy Corp., 6.45%, 2011 ................. 242,000 264,415 FirstEnergy Corp., 7.375%, 2031 ................ 71,000 86,789 Midwest Generation LLC, 8.75%, 2034 ............ 345,000 386,400 Nevada Power Co., 6.5%, 2012 ................... 50,000 52,250 Nevada Power Co., 5.875%, 2015## ............... 120,000 120,600 NorthWestern Corp., 5.875%, 2014## ............. 220,000 225,500 NRG Energy, Inc., 8%, 2013## ................... 370,000 390,350 PSEG Energy Holdings LLC, 8.625%, 2008 ................................. 315,000 334,688 Reliant Energy, Inc., 6.75%, 2014 .............. 95,000 92,863 Reliant Resources, Inc., 9.25%, 2010 ........... 80,000 87,200 Reliant Resources, Inc., 9.5%, 2013 ............ 95,000 105,450 Sierra Pacific Power Co., 6.25%, 2012 .......... 105,000 107,888 Sierra Pacific Resources, 8.625%, 2014 ......... 145,000 160,225 Teco Energy, Inc., 7%, 2012 .................... 190,000 205,200 Tenaska Alabama Partners LP, 7%, 2021## ................................... 100,000 101,250 Texas Genco LLC, 6.875%, 2014## ................ 205,000 215,763 TXU Corp., 5.55%, 2014## ....................... 610,000 591,612 ------------- $ 5,578,265 ------------- Total Bonds (Identified Cost, $64,045,832) ............ $ 63,836,161 ------------- STOCKS -- 1.2% Issuer Shares Value AUTOMOTIVE -- 0.3% Magna International, Inc., "A" ................. 3,000 $ 211,020 Oxford Automotive* ............................. 53 0 ------------- $ 211,020 ------------- BROADCAST & CABLE TV -- 0.6% NTL, Inc.* ..................................... 2,203 $ 150,729 Telewest Global, Inc.* ......................... 10,166 231,581 ------------- $ 382,310 ------------- FOREST & PAPER PRODUCTS -- 0% Corporacion Durango S.A. de C.V.+* ............. 12,137 $ 9,429 ------------- PHARMACEUTICALS -- 0.2% Merck & Co., Inc. .............................. 4,500 $ 138,600 ------------- PRINTING & PUBLISHING -- 0% Golden Books Family Entertainment, Inc.* ....... 21,250 $ 0 ------------- SPECIALTY CHEMICALS -- 0% Sterling Chemicals, Inc.* ...................... 31 $ 1,085 ------------- TELECOMMUNICATIONS -- WIRELESS -- 0.1% Vodafone Group PLC, ADR ........................ 2,574 $ 62,600 ------------- TELEPHONE SERVICES -- 0% VersaTel Telecom International N.V.* ........... 7,740 $ 17,213 ------------- Total Stocks (Identified Cost, $984,450) .............. $ 822,257 ------------- CONVERTIBLE PREFERRED STOCK -- 0.3% AUTOMOTIVE -- 0.3% General Motors Corp., 5.25% (Identified Cost, $236,236) .................. 13,178 $ 244,584 ------------- PREFERRED STOCKS -- 0.2% Issuer Shares Value BROADCAST & CABLE TV -- 0.1% Paxson Communications Corp., 14.25%#* ..................................... 10 $ 64,500 ------------- CONSUMER GOODS & SERVICES -- 0% Renaissance Cosmetics, Inc., 14%* .............. 975 $ 0 ------------- PRINTING & PUBLISHING -- 0.1% PRIMEDIA, Inc., 8.625% ......................... 500 $ 49,125 ------------- REAL ESTATE -- 0% HRPT Properties Trust, "B", 8.75% .............. 200 $ 5,416 ------------- TELEPHONE SERVICES -- 0% PTV, Inc., "A", 10% * .......................... 10 $ 20 ------------- Total Preferred Stocks (Identified Cost, $12$ 119,061 ------------- WARRANTS -- 0% GT Group Telecom, Inc., $0.0, 8/01/00 (Telephone Services)* ........................ 1,050 $ 0 Knology, Inc., $0.1, 11/22/97 (Telecommunications - Wireline)##* ........... 500 0 Loral Space & Communications Ltd., $0.14, 1/28/97 (Business Services)* ................. 1,000 9 Loral Space & Communications Ltd., $0.14, 1/28/97 (Business Services)* ................. 1,100 8 Ono Finance, $0.023, 5/31/09 (Broadcast & Cable TV)* ................................... 1,225 0 Renaissance Cosmetics, Inc., $0.01, 8/08/96 (Consumer Goods & Services)* ................................... 788 0 Sterling Chemicals, Inc., $52.00, 12/31/02 (Specialty Chemicals)* ....................... 51 61 Thermadyne Holdings Corp., $20.78, 5/29/03 (Machinery & Tools)* ................. 2,705 541 XM Satellite Radio, Inc., $45.24, 9/16/00 (Broadcast & Cable TV)* ...................... 425 25,500 XO Communications, Inc., "A", $6.25, 5/27/03 (Telephone Services)* ................ 397 139 XO Communications, Inc., "B", $7.50, 5/27/03 (Telephone Services)* ................ 298 77 XO Communications, Inc., "C",$10.00, 5/27/03 (Telephone Services)* ................ 298 63 ------------- Total Warrants (Identified Cost, $203,646) ............ $ 26,398 ------------- SHORT-TERM OBLIGATION -- 4.0% Issuer Par Amount Value General Electric Capital Corp., 3.4%, due 7/01/05, at Amortized Cost< ...........................$ 2,775,000 $ 2,775,000 ------------- REPURCHASE AGREEMENT -- 1.2% Morgan Stanley, 3.35%, dated 6/30/05, due 7/ 01/05, total to be received $861,080 (secured by various U.S. Treasury and Federal Agency obligations in a jointly traded account), at Cost .....................$ 861,000 $ 861,000 ------------- Total Investments (Identified Cost, $69,235,906)....... $ 68,684,461 ------------- OTHER ASSETS, LESS LIABILITIES -- 1.3% ................................ 872,099 ------------- Net Assets -- 100.0% .................................. $ 69,556,560 ============= See portfolio footnotes and notes to financial statements. PORTFOLIO OF INVESTMENTS (Unaudited) -- June 30, 2005 MANAGED SECTORS VARIABLE ACCOUNT STOCKS -- 96.7% Issuer Shares Value AEROSPACE -- 0.7% Northrop Grumman Corp. ......................... 5,250 $ 290,062 ------------- APPAREL MANUFACTURERS -- 1.3% Nike, Inc., "B" ................................ 1,590 $ 137,694 Reebok International Ltd. ...................... 10,290 430,431 ------------- $ 568,125 ------------- BANKS & CREDIT COMPANIES -- 5.7% American Express Co. ........................... 11,910 $ 633,969 Citigroup, Inc. ................................ 20,660 955,112 Countrywide Financial Corp. .................... 24,160 932,818 ------------- $ 2,521,899 ------------- BIOTECHNOLOGY -- 6.3% Amgen, Inc.* ................................... 13,650 $ 825,279 Genentech, Inc.* ............................... 3,280 263,318 Genzyme Corp.* ................................. 18,420 1,106,858 Gilead Sciences, Inc.* ......................... 13,130 577,589 ------------- $ 2,773,044 ------------- BROADCAST & CABLE TV -- 5.1% Comcast Corp., "A"* ............................ 15,060 $ 462,342 Time Warner, Inc.* ............................. 41,610 695,303 Univision Communications, Inc., "A"* ........... 11,560 318,478 Viacom, Inc., "B" .............................. 6,990 223,820 Walt Disney Co. ................................ 22,980 578,636 ------------- $ 2,278,579 ------------- BROKERAGE & ASSET MANAGERS -- 2.3% Goldman Sachs Group, Inc. ...................... 7,160 $ 730,463 Merrill Lynch & Co., Inc. ...................... 4,960 272,850 ------------- $ 1,003,313 ------------- BUSINESS SERVICES -- 2.1% Accenture Ltd., "A"* ........................... 16,970 $ 384,710 Fiserv, Inc.* .................................. 12,340 530,003 ------------- $ 914,713 ------------- COMPUTER SOFTWARE -- 12.6% Amdocs Ltd.* ................................... 18,980 $ 501,641 Mercury Interactive Corp.* ..................... 9,230 354,063 Microsoft Corp. ................................ 84,730 2,104,693 Oracle Corp.* .................................. 89,990 1,187,868 Symantec Corp.* ................................ 28,950 629,373 VERITAS Software Corp.* ........................ 33,190 809,836 ------------- $ 5,587,474 ------------- COMPUTER SOFTWARE -- SYSTEMS -- 4.0% Dell, Inc.* .................................... 45,390 $ 1,793,359 ------------- CONSUMER GOODS & SERVICES -- 2.9% Avon Products, Inc. ............................ 8,300 $ 314,155 Procter & Gamble Co. ........................... 18,310 965,853 ------------- $ 1,280,008 ------------- ELECTRICAL EQUIPMENT -- 0.4% Tyco International Ltd. ........................ 6,810 $ 198,852 ------------- ELECTRONICS -- 5.2% Amphenol Corp., "A" ............................ 11,370 $ 456,733 Analog Devices, Inc. ........................... 17,070 636,882 KLA-Tencor Corp. ............................... 6,840 298,908 Maxim Integrated Products, Inc. ................ 6,020 230,024 Texas Instruments, Inc. ........................ 24,390 684,627 ------------- $ 2,307,174 ------------- FOOD & DRUG STORES -- 2.2% CVS Corp. ...................................... 34,040 $ 989,543 ------------- GAMING & LODGING -- 2.2% Carnival Corp. ................................. 13,850 $ 755,518 Harrah's Entertainment, Inc. ................... 3,230 232,786 ------------- $ 988,304 ------------- GENERAL MERCHANDISE -- 1.8% Target Corp. ................................... 14,250 $ 775,342 ------------- HEALTH MAINTENANCE ORGANIZATIONS -- 1.7% WellPoint, Inc.* ............................... 11,010 $ 766,736 ------------- INTERNET -- 1.7% eBay, Inc.* .................................... 15,940 $ 526,179 Yahoo!, Inc.* .................................. 7,130 247,055 ------------- $ 773,234 ------------- MACHINERY & TOOLS -- 1.2% Caterpillar, Inc. .............................. 5,370 $ 511,815 ------------- MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 3.1% Community Health Systems, Inc.* ................ 11,800 $ 445,922 HCA, Inc. ...................................... 16,180 916,921 ------------- $ 1,362,843 ------------- MEDICAL EQUIPMENT -- 5.6% Fisher Scientific International, Inc.* ......... 12,230 $ 793,727 Medtronic, Inc. ................................ 22,000 1,139,380 Waters Corp.* .................................. 14,910 554,205 ------------- $ 2,487,312 ------------- PERSONAL COMPUTERS & PERIPHERALS -- 2.2% EMC Corp.* ..................................... 38,540 $ 528,383 Network Appliance, Inc.* ....................... 15,050 425,463 ------------- $ 953,846 ------------- PHARMACEUTICALS -- 14.0% Abbott Laboratories ............................ 29,650 $ 1,453,147 Eli Lilly & Co. ................................ 12,290 684,676 Johnson & Johnson .............................. 35,390 2,300,350 Wyeth .......................................... 39,420 1,754,190 ------------- $ 6,192,363 ------------- SPECIALTY STORES -- 4.7% Abercrombie & Fitch Co., "A" ................... 3,940 $ 270,678 Best Buy Co., Inc. ............................. 7,050 483,278 Lowe's Cos., Inc. .............................. 6,810 396,478 PETsMART, Inc. ................................. 10,210 309,873 Staples, Inc. .................................. 28,940 617,001 ------------- $ 2,077,308 ------------- TELECOMMUNICATIONS -- WIRELINE -- 4.7% Cisco Systems, Inc.* ........................... 95,330 $ 1,821,756 Corning, Inc.* ................................. 15,170 252,125 ------------- $ 2,073,881 ------------- TELEPHONE SERVICES -- 0.7% Sprint Corp. ................................... 13,200 $ 331,188 ------------- TRUCKING -- 2.3% FedEx Corp. .................................... 7,220 $ 584,892 United Parcel Service, Inc., "B" ............... 6,450 446,082 ------------- $ 1,030,974 ------------- Total Investments (Identified Cost, $36,504,905)....... $ 42,831,291 ------------- OTHER ASSETS, LESS LIABILITIES -- 3.3% ................................ 1,452,768 ------------- Net Assets -- 100.0% .................................. $ 44,284,059 ============= See portfolio footnotes and notes to financial statements. PORTFOLIO OF INVESTMENTS (Unaudited) -- June 30, 2005 MONEY MARKET VARIABLE ACCOUNT COMMERCIAL PAPER< -- 97.1% Issuer Par Amount Value Abbey National North America LLC, 3%, due 7/08/05 ..............................$ 1,550,000 $ 1,549,095 American Express Credit Corp., 2.98%, due 7/05/05 ........................... 235,000 234,922 American Express Credit Corp., 3.15%, due 8/09/05 ........................... 1,265,000 1,260,683 American General Finance Corp., 3.13%, due 7/28/05 ........................... 1,435,000 1,431,631 Barton Capital LLC, 3.15%, due 7/14/05@ ........ 460,000 459,477 Blue Ridge Asset Funding, 3.24%, due 8/05/05@ .......................... 1,433,000 1,428,486 CAFCO LLC, 3.03%, due 7/05/05@ ................. 1,500,000 1,499,495 Ciesco LLC, 3.32%, due 9/13/05@ ................ 1,440,000 1,430,173 Citibank Credit Card Issuance Trust, 3.15%, due 7/26/05@ .......................... 1,435,000 1,431,861 Citigroup Funding, Inc., 3.43%, due 7/01/05 ........................... 1,362,000 1,362,000 Coca-Cola Enterprises, Inc., 3.1%, due 7/25/05@ ........................... 1,190,000 1,187,541 Depfa Bank PLC, 3.16%, due 8/08/05@ ............ 440,000 438,532 Depfa Bank PLC, 3.035%, due 7/07/05@ ........... 1,061,000 1,060,463 Dexia Delaware LLC, 3.31%, due 8/24/05 ......... 1,434,000 1,426,880 Edison Asset Securitization LLC, 3.02%, due 7/07/05@ .......................... 388,000 387,805 Edison Asset Securitization LLC, 3.1%, due 7/22/05@ ........................... 660,000 658,807 Edison Asset Securitization LLC, 3.33%, due 8/26/05@ .......................... 312,000 310,384 Falcon Asset Securitization Corp., 3.16%, due 7/14/05@ .......................... 1,425,000 1,423,374 General Electric Capital Corp., 3.12%, due 7/25/05 ........................... 725,000 723,492 General Electric Capital Corp., 3.37%, due 9/21/05 ........................... 710,000 704,550 Govco, Inc., 3.04%, due 7/12/05@ ............... 375,000 374,652 HBOS Treasury Services PLC, 3.37%, due 9/07/05 ........................... 1,440,000 1,430,834 HSBC USA, Inc., 3.39%, due 9/27/05 ............. 1,052,000 1,043,282 ING America Insurance Holdings, Inc., 3.03%, due 7/06/05 ........................... 495,000 494,792 ING America Insurance Holdings, Inc., 3.05%, due 7/08/05@ .......................... 1,000,000 999,407 Jupiter Securitization Corp., 3.2%, due 7/22/05 ............................ 1,432,000 1,429,327 Mcgraw-Hill Cos., Inc. (The), 3.03%, due 7/07/05 ........................... 40,000 39,980 MetLife Funding, Inc., 3.32%, due 8/23/05 ...... 1,000,000 995,112 MetLife Funding, Inc., 3.38%, due 9/20/05 ...... 370,000 367,186 Morgan Stanley, Inc., 3%, due 7/07/05 .......... 1,545,000 1,544,228 Natexis Banques Populaires, 3.115%, due 7/26/05 .......................... 1,455,000 1,451,853 New Center Asset Trust, 3.4%, due 7/01/05 ............................ 1,362,000 1,362,000 Preferred Receivables Funding Corp., 3.37%, due 9/20/05@ .......................... 1,438,000 1,427,096 Procter & Gamble Co., 3.04%, due 7/20/05@ ................................. 1,500,000 1,497,593 SBC Communications, Inc., 3.26%, due 8/01/05@ .......................... 1,365,000 1,361,168 Societe Generale N.A. Inc., 3.17%, due 8/05/05 ........................... 1,425,000 1,420,608 Svenska Handelsbanken, Inc., 3.2%, due 8/03/05 ............................ 2,000 1,258,298 Thunder Bay Funding, LLC, 3.33%, due 9/14/05@ .......................... 946,000 939,437 Toyota Motor Credit Corp., 3%, due 7/06/05 .............................. 1,530,000 1,529,363 UBS Finance Delaware LLC, 3.08%, due 7/13/05 ........................... 1,450,000 1,448,511 Verizon Network Funding Co., 3.36%, due 8/30/05 ........................... 1,365,000 1,357,356 ------------- Total Commercial Paper, at Amortized Cost and Value ................................ $ 44,181,734 ------------- REPURCHASE AGREEMENT - 3.1% Morgan Stanley, 3.35%, dated 6/30/05, due 7/ 01/05, total to be received $1,383,129 (secured by various U.S. Treasury and Federal Agency obligations in a jointly traded account), at Cost .....................$ 1,383,000 $ 1,383,000 ------------- Total Investments, at Amortized Cost and Value ........ $ 45,564,734 ------------- OTHER ASSETS, LESS LIABILITIES - (0.2)% ............................... (37,097) ------------- Net Assets - 100.0% ................................... $ 45,527,637 ============= See portfolio footnotes and notes to financial statements. PORTFOLIO OF INVESTMENTS (Unaudited) -- June 30, 2005 TOTAL RETURN VARIABLE ACCOUNT STOCKS -- 59.5% Issuer Shares Value AEROSPACE -- 1.7% ITT Industries, Inc. ........................... 2,200 $ 214,786 Lockheed Martin Corp. .......................... 33,130 2,149,143 Northrop Grumman Corp. ......................... 11,280 623,220 United Technologies Corp. ...................... 9,120 468,312 ------------- $ 3,455,461 ------------- ALCOHOLIC BEVERAGES -- 0.3% Diageo PLC ..................................... 36,990 $ 543,483 ------------- AUTOMOTIVE -- 0.4% SPX Corp. ...................................... 11,450 $ 526,471 Toyota Motor Corp. ............................. 6,100 218,129 ------------- $ 744,600 ------------- BANKS & CREDIT COMPANIES -- 8.6% American Express Co. ........................... 13,440 $ 715,411 Bank of America Corp. .......................... 87,922 4,010,122 Citigroup, Inc. ................................ 62,786 2,902,597 Countrywide Financial Corp. .................... 9,100 351,351 Fannie Mae ..................................... 12,200 712,480 Freddie Mac .................................... 10,520 686,220 J.P. Morgan Chase & Co. ........................ 82,068 2,898,642 MBNA Corp. ..................................... 7,450 194,892 PNC Financial Services Group, Inc. ............. 49,590 2,700,671 SunTrust Banks, Inc. ........................... 18,380 1,327,771 Wells Fargo & Co. .............................. 12,510 770,366 ------------- $ 17,270,523 ------------- BIOTECHNOLOGY -- 0.5% Amgen, Inc.* ................................... 3,000 $ 181,380 MedImmune, Inc.* ............................... 27,550 736,136 ------------- $ 917,516 ------------- BROADCAST & CABLE TV -- 2.8% Interpublic Group of Cos., Inc.* ............... 88,630 $ 1,079,513 Time Warner, Inc.* ............................. 33,820 565,132 Viacom, Inc., "B" .............................. 79,788 2,554,812 Walt Disney Co. ................................ 55,470 1,396,735 ------------- $ 5,596,192 ------------- BROKERAGE & ASSET MANAGERS -- 3.1% Franklin Resources, Inc. ....................... 6,210 $ 478,046 Goldman Sachs Group, Inc. ...................... 9,750 994,695 Lehman Brothers Holdings, Inc. ................. 4,170 413,998 Mellon Financial Corp. ......................... 78,280 2,245,853 Merrill Lynch & Co., Inc. ...................... 30,730 1,690,457 Morgan Stanley ................................. 9,720 510,008 ------------- $ 6,333,057 ------------- BUSINESS SERVICES -- 0.4% Accenture Ltd., "A"* ........................... 39,110 $ 886,624 ------------- CHEMICALS -- 1.6% 3M Co. ......................................... 4,000 $ 289,200 Dow Chemical Co. ............................... 17,950 799,314 E.I. du Pont de Nemours & Co. .................. 9,890 425,369 Nalco Holding Co.* ............................. 22,220 436,179 PPG Industries, Inc. ........................... 13,810 866,716 Syngenta AG .................................... 3,010 307,883 ------------- $ 3,124,661 ------------- COMPUTER SOFTWARE -- 1.9% Compuware Corp.* ............................... 77,720 $ 558,807 Microsoft Corp. ................................ 28,590 710,176 Oracle Corp.* .................................. 33,250 438,900 Symantec Corp.* ................................ 99,600 2,165,304 ------------- $ 3,873,187 ------------- COMPUTER SOFTWARE -- SYSTEMS -- 0.7% Hewlett-Packard Co. ............................ 5,660 $ 133,067 International Business Machines Corp. .......... 760 56,392 Sun Microsystems, Inc.* ........................ 317,920 1,185,842 ------------- $ 1,375,301 ------------- CONSTRUCTION -- 1.0% Masco Corp. .................................... 64,850 $ 2,059,636 ------------- CONSUMER GOODS & SERVICES -- 1.0% Colgate-Palmolive Co. .......................... 7,400 $ 369,334 Gillette Co. ................................... 18,340 928,554 Kimberly-Clark Corp. ........................... 12,560 786,130 ------------- $ 2,084,018 ------------- CONTAINERS -- 1.0% Owens-Illinois, Inc.* .......................... 75,790 $ 1,898,540 Smurfit-Stone Container Corp.* ................. 14,890 151,431 ------------- $ 2,049,971 ------------- ELECTRICAL EQUIPMENT -- 2.0% Cooper Industries Ltd., "A" .................... 3,500 $ 223,650 Emerson Electric Co. ........................... 4,910 307,513 General Electric Co. ........................... 40,310 1,396,742 Hubbell, Inc., "B" ............................. 3,950 174,195 Tyco International Ltd. ........................ 59,980 1,751,416 W.W. Grainger, Inc. ............................ 2,000 109,580 ------------- $ 3,963,096 ------------- ELECTRONICS -- 0.2% Analog Devices, Inc. ........................... 12,200 $ 455,182 ------------- ENERGY -- INDEPENDENT -- 1.9% Apache Corp. ................................... 3,730 $ 240,958 Devon Energy Corp. ............................. 38,330 1,942,564 EnCana Corp. ................................... 10,800 427,572 EOG Resources, Inc. ............................ 8,760 497,568 Unocal Corp. ................................... 10,080 655,704 ------------- $ 3,764,366 ------------- ENERGY -- INTEGRATED -- 3.0% Amerada Hess Corp. ............................. 1,900 $ 202,369 BP PLC, ADR .................................... 13,340 832,149 ConocoPhillips ................................. 28,160 1,618,918 Exxon Mobil Corp. .............................. 33,152 1,905,245 TOTAL S.A., ADR ................................ 13,180 1,540,083 ------------- $ 6,098,764 ------------- FOOD & NON-ALCOHOLIC BEVERAGES -- 1.5% Archer Daniels Midland Co. ..................... 17,980 $ 384,412 General Mills, Inc. ............................ 9,150 428,129 H.J. Heinz Co. ................................. 18,190 644,290 Kellogg Co. .................................... 12,520 556,389 Nestle S.A ..................................... 694 177,118 PepsiCo, Inc. .................................. 11,700 630,981 Sara Lee Corp. ................................. 14,060 278,529 ------------- $ 3,099,848 ------------- FOREST & PAPER PRODUCTS -- 0.8% Bowater, Inc. .................................. 27,010 $ 874,314 International Paper Co. ........................ 18,180 549,218 MeadWestvaco Corp. ............................. 9,800 274,792 ------------- $ 1,698,324 ------------- GAMING & LODGING -- 0.3% Cendant Corp. .................................. 24,290 $ 543,367 ------------- GENERAL MERCHANDISE -- 0.6% Family Dollar Stores, Inc. ..................... 8,420 $ 219,762 Wal-Mart Stores, Inc. .......................... 19,450 937,490 ------------- $ 1,157,252 ------------- INSURANCE -- 3.2% AFLAC, Inc. .................................... 5,480 $ 237,174 Allstate Corp. ................................. 42,390 2,532,803 Chubb Corp. .................................... 2,360 202,040 Conseco, Inc.* ................................. 48,520 1,058,706 Genworth Financial, Inc., "A" .................. 10,600 320,438 Hartford Financial Services Group, Inc. ........ 15,620 1,168,064 MetLife, Inc. .................................. 21,720 976,097 ------------- $ 6,495,322 ------------- LEISURE & TOYS -- 0.4% Hasbro, Inc. ................................... 7,240 $ 150,520 Mattel, Inc. ................................... 32,460 594,018 ------------- $ 744,538 ------------- MACHINERY & TOOLS -- 1.0% Deere & Co. .................................... 10,280 $ 673,237 Finning International, Inc.##* ................. 460 13,549 Illinois Tool Works, Inc. ...................... 8,270 658,954 Ingersoll-Rand Co. Ltd., "A" ................... 2,480 176,948 Precision Castparts Corp. ...................... 4,280 333,412 Sandvik AB ..................................... 2,740 101,354 ------------- $ 1,957,454 ------------- MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 0.6% Tenet Healthcare Corp.* ........................ 90,040 $ 1,102,090 ------------- MEDICAL EQUIPMENT -- 0.2% Baxter International, Inc. ..................... 5,360 $ 198,856 Boston Scientific Corp.* ....................... 5,700 153,900 ------------- $ 352,756 ------------- METALS & MINING -- 0.2% BHP Billiton PLC ............................... 36,350 $ 466,186 ------------- NATURAL GAS -- DISTRIBUTION -- 0.3% AGL Resources, Inc. ............................ 8,290 $ 320,409 Sempra Energy .................................. 7,500 309,825 ------------- $ 630,234 ------------- OIL SERVICES -- 2.2% BJ Services Co. ................................ 9,600 $ 503,808 Cooper Cameron Corp.* .......................... 14,470 897,864 GlobalSantaFe Corp. ............................ 35,500 1,448,400 Noble Corp. .................................... 24,375 1,499,306 ------------- $ 4,349,378 ------------- PHARMACEUTICALS -- 3.9% Abbott Laboratories ............................ 34,790 $ 1,705,058 Eli Lilly & Co. ................................ 1,600 89,136 Johnson & Johnson .............................. 13,880 902,200 Merck & Co., Inc. .............................. 66,090 2,035,572 Novartis AG .................................... 2,390 113,363 Pfizer, Inc. ................................... 4,810 132,660 Roche Holding AG ............................... 1,170 147,347 Wyeth .......................................... 60,160 2,677,120 ------------- $ 7,802,456 ------------- PRINTING & PUBLISHING -- 0.4% Reed Elsevier PLC .............................. 61,660 $ 588,626 Tribune Co. .................................... 6,730 236,761 ------------- $ 825,387 ------------- RAILROAD & SHIPPING -- 0.2% Burlington Northern Santa Fe Corp. ............. 8,090 $ 380,877 ------------- RESTAURANTS -- 0.1% McDonald's Corp. ............................... 7,440 $ 206,460 ------------- SPECIALTY CHEMICALS -- 0.5% Air Liquide S.A ................................ 500 $ 84,909 Air Products & Chemicals, Inc. ................. 12,150 732,645 Praxair, Inc. .................................. 2,480 115,568 ------------- $ 933,122 ------------- SPECIALTY STORES -- 1.7% Circuit City Stores, Inc. ...................... 24,920 $ 430,867 Gap, Inc. ...................................... 78,030 1,541,093 Lowe's Cos., Inc. .............................. 4,010 233,462 OfficeMax, Inc. ................................ 22,960 683,519 TJX Cos., Inc. ................................. 24,850 605,098 ------------- $ 3,494,039 ------------- TELECOMMUNICATIONS -- WIRELESS -- 0.5% Vodafone Group PLC, ADR ........................ 41,422 $ 1,007,383 ------------- TELECOMMUNICATIONS -- WIRELINE -- 1.7% Cisco Systems, Inc.* ........................... 8,960 $ 171,226 Nokia Corp., ADR ............................... 86,260 1,435,366 Nortel Networks Corp.* ......................... 654,570 1,708,428 ------------- $ 3,315,020 ------------- TELEPHONE SERVICES -- 4.0% SBC Communications, Inc. ....................... 22,344 $ 530,670 Sprint Corp. ................................... 176,690 4,433,152 Verizon Communications, Inc. ................... 90,666 3,132,510 ------------- $ 8,096,332 ------------- TOBACCO -- 1.0% Altria Group, Inc. ............................. 32,170 $ 2,080,112 ------------- TRUCKING -- 0% CNF, Inc. ...................................... 1,660 $ 74,534 ------------- UTILITIES -- ELECTRIC POWER -- 2.1% Calpine Corp.* ................................. 257,580 $ 875,772 Dominion Resources, Inc. ....................... 15,190 1,114,794 Entergy Corp. .................................. 11,140 841,627 Exelon Corp. ................................... 9,360 480,449 FPL Group, Inc. ................................ 1,570 66,034 PPL Corp. ...................................... 9,410 558,766 Public Service Enterprise Group, Inc. .......... 2,800 170,296 TXU Corp. ...................................... 2,550 211,880 ------------- $ 4,319,618 ------------- Total Stocks (Identified Cost, $106,139,901) .......... $ 119,727,727 ------------- BONDS -- 38.5% Issuer Par Amount Value ADVERTISING & BROADCASTING -- 0.1% News America Holdings, 8.5%, 2025 ..............$ 99,000 $ 125,620 News America, Inc., 6.2%, 2034 ................. 92,000 96,553 ------------- $ 222,173 ------------- AEROSPACE -- 0.4% Boeing Capital Corp., 6.5%, 2012 ...............$ 373,000 $ 417,236 Northrop Grumman Corp., 7.75%, 2031 ............ 226,000 305,700 ------------- $ 722,936 ------------- AIRLINES -- 0.1% Continental Airlines, Inc., 6.648%, 2017 .......$ 179,852 $ 177,473 ------------- ALCOHOLIC BEVERAGES -- 0.2% Foster's Financial Corp., 5.875%, 2035## .......$ 150,000 $ 150,753 Miller Brewing Co., 5.5%, 2013## ............... 276,000 286,022 ------------- $ 436,775 ------------- ASSET BACKED & SECURITIZED -- 2.4% AmeriCredit Automobile Receivables Trust, 2.18%, 2008 ..................................$ 236,000 $ 234,022 Bear Stearns Commercial Mortgage Securities, Inc., 6.8%, 2008 ............................. 179,042 183,773 Bear Stearns Commercial Mortgage Securities, Inc., FRN, 5.116%, 2041 ...................... 82,288 85,761 Blackrock Capital Finance LP, 7.75%, 2026## ................................ 58,829 59,565 Chase Commercial Mortgage Securities Corp., 7.543%, 2009 ................................. 94,203 99,667 Chase Commercial Mortgage Securities Corp., 6.39%, 2030 .................................. 369,000 392,671 Citibank Credit Card Issuance Trust, 6.65%, 2008 .................................. 623,000 637,142 Countrywide Asset-Backed Certificates, 4.823%, 2035 ................................. 75,000 75,754 Credit Suisse First Boston Mortgage Securities Corp., 6.38%, 2035 ................ 35,000 38,161 CRIIMI MAE CMBS Corp., 6.7%, 2008## ............ 190,000 195,227 CRIIMI MAE Commercial Mortgage Trust, 7%, 2011## ....................................... 320,000 332,800 Deutsche Mortgage & Asset Receiving Corp., FRN, 6.538%, 2031 ............................ 188,680 197,790 Falcon Franchise Loan LLC, 7.382%, 2010##^^ ............................ 52,908 55,993 First Union-Lehman Brothers Bank of America, 6.56%, 2035 .................................. 100,451 105,803 First Union-Lehman Brothers Commercial Mortgage Trust, 7.38%, 2029 .................. 49,571 51,412 First Union-Lehman Brothers Commercial Mortgage Trust, 6.65%, 2029 .................. 27,473 28,725 Goldman Sachs Mortgage Securities Corp., 6.06%, 2030 .................................. 48,006 48,098 Greenwich Capital Commercial Funding Corp., FRN, 5.317%, 2036 ............................ 60,728 64,036 Greenwich Capital Commercial Funding Corp., FRN, 4.305%, 2042 ............................ 107,385 107,353 J.P. Morgan Chase Commercial Mortgage Securities Corp., FRN, 5.3839%, 2041 ......... 39,903 41,901 J.P. Morgan Chase Commercial Mortgage Securities Corp., FRN, 5.038%, 2046 .......... 197,476 204,493 J.P. Morgan Commercial Mortgage Finance Corp., 6.613%, 2030 .......................... 175,000 183,457 Merrill Lynch Mortgage Investors, Inc., 6.39%, 2030 .................................. 64,475 67,319 Morgan Stanley Capital I, 5.168%, 2042 ......... 48,533 50,609 Morgan Stanley Capital I, Inc., FRN, 0.7546%, 2030##^^ ........................... 8,516,305 176,692 Mortgage Capital Funding, Inc., 6.337%, 2031 ................................. 314,214 329,547 Multi-Family Capital Access One, Inc., 6.65%, 2024 .................................. 53,722 56,758 Residential Asset Mortgage Products, Inc., 3.8%, 2030 ................................... 100,827 100,471 Residential Asset Mortgage Products, Inc., 4.109%, 2035 ................................. 112,691 111,911 ASSET BACKED & SECURITIZED -- continued Residential Asset Mortgage Products, Inc., FRN, 4.9708%, 2034 ...........................$ 92,000 $ 91,703 Structured Asset Securities Corp., FRN, 4.67%, 2035 .................................. 298,098 296,804 Wachovia Bank Commercial Mortgage Trust, FRN, 4.847%, 2041 ............................ 50,000 50,992 Wachovia Bank Commercial Mortgage Trust, FRN, 5.083%, 2042 ............................ 75,000 77,914 ------------- $ 4,834,324 ------------- AUTOMOTIVE -- 0.3% Ford Motor Co., 7.45%, 2031 ....................$ 74,000 $ 61,776 Ford Motor Credit Co., 7.75%, 2007 ............. 80,000 81,556 Ford Motor Credit Co., 5.7%, 2010 .............. 193,000 178,012 General Motors Acceptance Corp., 5.85%, 2009 .................................. 93,000 87,179 General Motors Acceptance Corp., 7.25%, 2011 .................................. 82,000 76,889 General Motors Corp., 8.375%, 2033 ............. 202,000 168,670 ------------- $ 654,082 ------------- BANKS & CREDIT COMPANIES -- 1.8% Abbey National Capital Trust I, 8.963% to 2030, FRN to 2049 ..................$ 179,000 $ 261,069 Bank of America Corp., 7.4%, 2011 .............. 299,000 342,199 Bank of America Corp., 5.375%, 2014 ............ 110,000 116,880 Citigroup, Inc., 5%, 2014 ...................... 250,000 255,737 Credit Suisse First Boston (USA), Inc., 4.625%, 2008 ................................. 92,000 92,994 Credit Suisse First Boston (USA), Inc., 4.125%, 2010 ................................. 215,000 213,481 DBS Capital Funding Corp., 7.657% to 2011, FRN to 2049## ................ 170,000 194,835 HBOS Capital Funding LP, 6.071% to 2014, FRN to 2049## .................................... 100,000 107,944 J.P. Morgan Chase & Co., 5.125%, 2014 .......... 150,000 153,443 Mizuho Financial Group, Inc., 5.79%, 2014## ................................ 103,000 108,340 Nordea Bank AB, 5.424% to 2015, FRN to 2049## ................................ 100,000 102,989 Popular North America, Inc., 4.25%, 2008 ....... 211,000 211,018 RBS Capital Trust II, 6.425% to 2034, FRN to 2049 .................................. 161,000 178,591 Socgen Real Estate LLC, 7.64% to 2007, FRN to 2049## .................................... 361,000 386,301 UFJ Finance Aruba AEC, 6.75%, 2013 ............. 45,000 50,184 UniCredito Italiano Capital Trust II, 9.2% to 2010, FRN to 2049## .................. 208,000 249,747 Wachovia Corp., 5.25%, 2014 .................... 175,000 182,680 Wells Fargo National Bank, 4.75%, 2015 ......... 315,000 318,792 ------------- $ 3,527,224 ------------- BROADCAST & CABLE TV -- 0.4% Cox Communications, Inc., 4.625%, 2013 .........$ 159,000 $ 154,343 TCI Communications Financing III, 9.65%, 2027 .................................. 425,000 481,585 Time Warner Entertainment Co. LP, 10.15%, 2012 ................................. 1,000 1,293 Time Warner Entertainment Co. LP, 8.375%, 2033 ................................. 75,000 99,540 ------------- $ 736,761 ------------- BROKERAGE & ASSET MANAGERS -- 0.5% Goldman Sachs Group, Inc., 5.7%, 2012 ..........$ 247,000 $ 262,813 Lehman Brothers Holdings, Inc., 8.25%, 2007 .................................. 334,000 359,749 Merrill Lynch & Co., Inc., 5.45%, 2014 ......... 127,000 134,126 Morgan Stanley Group, Inc., 6.75%, 2011 ........ 156,000 172,729 Morgan Stanley Group, Inc., 4.75%, 2014 ........ 78,000 76,843 ------------- $ 1,006,260 ------------- BUILDING -- 0.1% CRH North America, Inc., 6.95%, 2012 ...........$ 208,000 $ 234,771 ------------- CHEMICALS -- 0.1% Dow Chemical Co., 5.75%, 2008 ..................$ 162,000 $ 169,892 Dow Chemical Co., 6%, 2012 ..................... 15,000 16,438 ------------- $ 186,330 ------------- CONGLOMERATES -- 0.1% Kennametal, Inc., 7.2%, 2012 ...................$ 211,000 $ 236,047 Tyco International Group S.A., 6.75%, 2011 .................................. 40,000 44,404 ------------- $ 280,451 ------------- CONSUMER GOODS & SERVICES -- 0.1% Cendant Corp., 6.875%, 2006 ....................$ 147,000 $ 151,126 ------------- DEFENSE ELECTRONICS -- 0.2% BAE Systems Holdings, Inc., 6.4%, 2011## .................................$ 223,000 $ 242,910 Raytheon Co., 6.15%, 2008 ...................... 114,000 120,291 ------------- $ 363,201 ------------- EMERGING MARKET QUASI-SOVEREIGN -- 0% Pemex Project Funding Master Trust, 8.625%, 2022 .........................................$ 39,000 $ 48,068 ------------- EMERGING MARKET SOVEREIGN -- 0.2% State of Israel, 4.625%, 2013 ..................$ 112,000 $ 110,832 United Mexican States, 6.625%, 2015 ............ 213,000 234,407 ------------- $ 345,239 ------------- ENERGY -- INDEPENDENT -- 0.2% Devon Financing Corp. U.L.C., 6.875%, 2011 .................................$ 142,000 $ 158,893 EnCana Holdings Finance Corp., 5.8%, 2014 ................................... 98,000 105,033 Kerr-McGee Corp., 6.95%, 2024 .................. 18,000 18,599 Pioneer Natural Resource Co., 5.875%, 2016 ................................. 75,000 75,634 ------------- $ 358,159 ------------- ENERGY -- INTEGRATED -- 0% Amerada Hess Corp., 7.3%, 2031 .................$ 62,000 $ 74,807 ------------- ENTERTAINMENT -- 0.1% Walt Disney Co., 6.75%, 2006 ...................$ 69,000 $ 70,368 Walt Disney Co., 6.375%, 2012 .................. 98,000 108,377 ------------- $ 178,745 ------------- FINANCIAL INSTITUTIONS -- 0.1% General Electric Capital Corp., 8.75%, 2007 ..................................$ 130,000 $ 140,812 SLM Corp., 4%, 2009 ............................ 115,000 114,080 ------------- $ 254,892 ------------- FOOD & NON-ALCOHOLIC BEVERAGES -- 0.2% Cadbury Schweppes PLC, 5.125%, 2013## ...............................$ 270,000 $ 275,892 Kraft Foods, Inc., 6.25%, 2012 ................. 142,000 156,102 ------------- $ 431,994 ------------- FOREST & PAPER PRODUCTS -- 0.2% MeadWestvaco Corp., 6.8%, 2032 .................$ 69,000 $ 81,938 Weyerhaeuser Co., 6.75%, 2012 .................. 254,000 279,461 ------------- $ 361,399 ------------- INSURANCE -- 0.4% AIG SunAmerica Institutional Funding II, 5.75%, 2009 ..................................$ 441,000 $ 462,342 Genworth Financial, Inc., 5.75%, 2014 .......... 40,000 42,898 MetLife, Inc., 6.5%, 2032 ...................... 48,000 55,102 Prudential Financial, Inc., 5.1%, 2014 ......... 80,000 82,343 Prudential Funding Corp., 6.6%, 2008## ......... 179,000 190,844 ------------- $ 833,529 ------------- INSURANCE -- PROPERTY & CASUALTY -- 0.2% Allstate Corp., 6.125%, 2032 ...................$ 185,000 $ 208,569 Fund American Cos., Inc., 5.875%, 2013 ......... 117,000 121,862 Travelers Property Casualty Corp., 6.375%, 2033 ................................. 84,000 91,620 ------------- $ 422,051 ------------- INTERNATIONAL MARKET QUASI-SOVEREIGN -- 0.1% Hydro-Quebec, 6.3%, 2011 .......................$ 262,000 $ 289,503 ------------- MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 0.1% HCA, Inc., 8.75%, 2010 .........................$ 40,000 $ 45,460 HCA, Inc., 6.95%, 2012 ......................... 139,000 147,690 ------------- $ 193,150 ------------- METALS & MINING -- 0% Alcan, Inc., 5.75%, 2035 .......................$ 83,000 $ 84,428 ------------- MORTGAGE BACKED -- 13.6% Fannie Mae, 5.722%, 2009 .......................$ 830,000 $ 863,196 Fannie Mae, 4.01%, 2013 ........................ 19,511 19,030 Fannie Mae, 4.63%, 2014 ........................ 48,190 48,812 Fannie Mae, 4.518%, 2014 ....................... 177,955 179,275 Fannie Mae, 4.846%, 2014 ....................... 74,282 76,430 Fannie Mae, 4.925%, 2015 ....................... 270,929 280,031 Fannie Mae, 6%, 2016 - 2034 .................... 3,289,675 3,382,864 Fannie Mae, 5.5%, 2016 - 2035 .................. 8,621,873 8,763,858 Fannie Mae, 5%, 2018 - 2034 .................... 1,784,781 1,804,639 Fannie Mae, 4.5%, 2018 - 2035 .................. 964,102 959,080 Fannie Mae, 6.5%, 2028 - 2034 .................. 1,623,694 1,684,707 Fannie Mae, 7.5%, 2031 ......................... 52,904 56,530 Fannie Mae TBA, 5.5%, 2035 ..................... 82,000 83,102 Freddie Mac, 6%, 2016 - 2034 ................... 1,881,306 1,933,827 Freddie Mac, 5%, 2017 - 2033 ................... 1,460,641 1,467,778 Freddie Mac, 4.5%, 2018 - 2035 ................. 1,178,770 1,172,962 Freddie Mac, 5.5%, 2019 - 2034 ................. 1,611,720 1,637,557 Freddie Mac, 6.5%, 2034 ........................ 351,902 364,374 Ginnie Mae, 7.5%, 2023 - 2024 .................. 77,875 83,872 Ginnie Mae, 6.5%, 2028 ......................... 245,792 257,115 Ginnie Mae, 6%, 2033 - 2034 .................... 750,577 774,776 Ginnie Mae, 4.5%, 2033 - 2034 .................. 202,029 199,550 Ginnie Mae, 5.5%, 2033 ......................... 1,130,783 1,156,063 Ginnie Mae, 5%, 2034 ........................... 166,830 168,325 ------------- $ 27,417,753 ------------- NATURAL GAS -- PIPELINE -- 0.3% CenterPoint Energy Resources Corp., 7.875%, 2013 ................................$ 82,000 $ 97,402 Kinder Morgan Energy Partners LP, 6.75%, 2011 .................................. 315,000 346,428 Kinder Morgan Energy Partners LP, 7.75%, 2032 .................................. 117,000 148,528 ------------- $ 592,358 ------------- OIL SERVICES -- 0% Halliburton Co., 5.25%, 2010 ...................$ 50,000 $ 52,437 ------------- PHARMACEUTICALS -- 0.1% Wyeth, 5.5%, 2013 ..............................$ 123,000 $ 129,451 ------------- POLLUTION CONTROL -- 0.1% Waste Management, Inc., 7.375%, 2010 ...........$ 134,000 $ 149,846 ------------- RAILROAD & SHIPPING -- 0.1% CSX Corp., 6.75%, 2011 .........................$ 35,000 $ 38,639 Union Pacific Corp., 6.125%, 2012 .............. 50,000 53,966 Union Pacific Corp., 5.375%, 2014 .............. 110,000 114,713 ------------- $ 207,318 ------------- REAL ESTATE -- 0.4% Boston Properties, Inc., 5%, 2015 ..............$ 42,000 $ 41,989 EOP Operating LP, 6.8%, 2009 ................... 29,000 31,081 HRPT Properties Trust, 6.25%, 2016 ............. 115,000 124,513 Simon Property Group LP, 5.1%, 2015## .......... 193,000 192,897 Vornado Realty Trust, 5.625%, 2007 ............. 383,000 390,378 ------------- $ 780,858 ------------- RESTAURANTS -- 0% YUM! Brands, Inc., 8.875%, 2011 ................$ 35,000 $ 42,407 ------------- SUPERMARKETS -- 0.1% Kroger Co., 6.75%, 2012 ........................$ 102,000 $ 112,946 ------------- TELECOMMUNICATIONS -- WIRELESS -- 0.2% AT&T Wireless Services, Inc., 7.35%, 2006 ..................................$ 107,000 $ 109,338 AT&T Wireless Services, Inc., 8.75%, 2031 .................................. 78,000 109,328 Cingular Wireless LLC, 6.5%, 2011 .............. 35,000 38,664 Sprint Capital Corp., 6.875%, 2028 ............. 106,000 121,675 ------------- $ 379,005 ------------- TELECOMMUNICATIONS -- WIRELINE -- 0.9% BellSouth Corp., 6.55%, 2034 ...................$ 146,000 $ 166,235 Deutsche Telekom International Finance B.V., 8.75%, 2030 .................................. 161,000 217,991 France Telecom S.A., 7.75%, 2011 ............... 85,000 98,640 PCCW-HKTC Capital II Ltd., 6%, 2013## .......... 150,000 159,264 SBC Communications, Inc., 5.1%, 2014 ........... 126,000 128,830 SBC Communications, Inc., 6.15%, 2034 .......... 35,000 37,913 Telecom Italia Capital, 5.25%, 2013 ............ 60,000 60,912 Telecom Italia Capital, 6%, 2034## ............. 97,000 99,030 Telecomunicaciones de Puerto Rico, Inc., 6.65%, 2006 .................................. 270,000 275,474 Verizon New York, Inc., 6.875%, 2012 ........... 486,000 537,114 ------------- $ 1,781,403 ------------- U.S. GOVERNMENT AGENCIES -- 4.3% Fannie Mae, 3.25%, 2006 ........................$ 100,000 $ 99,437 Fannie Mae, 3%, 2007 ........................... 244,000 240,812 Fannie Mae, 5.25%, 2007 ........................ 397,000 406,732 Fannie Mae, 6.625%, 2009 - 2010 ................ 3,428,000 3,844,788 Fannie Mae, 6%, 2011 ........................... 165,000 181,466 Fannie Mae, 4.625%, 2014 ....................... 250,000 256,394 Federal Home Loan Bank, 3.25%, 2006 ............ 315,000 313,268 Federal Home Loan Bank, 3.75%, 2006 ............ 940,000 937,921 Federal Home Loan Bank, 3.9%, 2008 ............. 40,000 39,978 Freddie Mac, 3.75%, 2006 ....................... 1,405,000 1,404,076 Freddie Mac, 4.125%, 2009 ...................... 50,000 49,973 Small Business Administration, 4.35%, 2023 .................................. 48,414 48,135 Small Business Administration, 4.77%, 2024 .................................. 117,377 118,932 Small Business Administration, 5.18%, 2024 .................................. 191,002 197,295 Small Business Administration, 5.52%, 2024 .................................. 268,836 282,027 Small Business Administration, 4.99%, 2024 .................................. 153,280 156,893 Small Business Administration, 4.95%, 2025 .................................. 116,000 118,424 ------------- $ 8,696,551 ------------- U.S. TREASURY OBLIGATIONS -- 8.5% U.S. Treasury Bonds, 10.375%, 2012 .............$ 140,000 $ 161,027 U.S. Treasury Bonds, 9.875%, 2015 .............. 175,000 261,557 U.S. Treasury Bonds, 8%, 2021 .................. 37,000 53,313 U.S. Treasury Bonds, 6.25%, 2023 ............... 3,050,000 3,800,944 U.S. Treasury Bonds, 5.375%, 2031 .............. 672,000 792,960 U.S. Treasury Notes, 5.75%, 2005 ............... 665,000 670,897 U.S. Treasury Notes, 5.875%, 2005 .............. 186,000 187,729 U.S. Treasury Notes, 7%, 2006 .................. 2,545,000 2,633,179 U.S. Treasury Notes, 4.375%, 2007 .............. 146,000 147,945 U.S. Treasury Notes, 5.625%, 2008 .............. 4,210,000 4,432,010 U.S. Treasury Notes, 4.75%, 2008 ............... 942,000 973,204 U.S. Treasury Notes, 4%, 2009 .................. 23,000 23,248 U.S. Treasury Notes, 4.25%, 2010 ............... 773,625 870,569 U.S. Treasury Notes, 3%, 2012 .................. 1,207,590 1,326,367 U.S. Treasury Notes, 3.875%, 2013 .............. 199,000 199,241 U.S. Treasury Notes, 4.75%, 2014 ............... 150,000 159,164 U.S. Treasury Notes, 4.125%, 2015 .............. 400,000 405,844 ------------- $ 17,099,198 ------------- UTILITIES -- ELECTRIC POWER -- 1.3% DTE Energy Co., 7.05%, 2011 ....................$ 238,000 $ 266,473 Duke Capital Corp., 8%, 2019 ................... 113,000 139,854 Exelon Generation Co. LLC, 6.95%, 2011 ......... 77,000 86,379 FirstEnergy Corp., 6.45%, 2011 ................. 147,000 160,616 MidAmerican Energy Holdings Co., 3.5%, 2008 ................................... 118,000 114,993 MidAmerican Energy Holdings Co., 5.875%, 2012 ................................. 61,000 64,795 MidAmerican Funding LLC, 6.927%, 2029 .......... 454,000 540,685 Niagara Mohawk Power Corp., 7.75%, 2006 ........ 1,000 1,032 Northeast Utilities, 8.58%, 2006 ............... 105,897 107,896 Oncor Electric Delivery Co., 7%, 2022## ........ 202,000 236,116 Pacific Gas & Electric Co., 4.8%, 2014 ......... 125,000 125,309 PSEG Power LLC, 6.95%, 2012 .................... 71,000 79,813 PSEG Power LLC, 8.625%, 2031 ................... 91,000 125,636 System Energy Resources, Inc., 5.129%, 2014## ............................... 104,272 103,851 TXU Energy Co., 7%, 2013 ....................... 37,000 41,264 W3A Funding Corp., 8.09%, 2017 ................. 337,724 375,927 ------------- $ 2,570,639 ------------- Total Bonds (Identified Cost, $75,546,171) ............ $ 77,422,021 ------------- SHORT-TERM OBLIGATION -- 2.0% Citigroup Funding, Inc., 3.43%, due 7/01/05, at Amortized Cost< .......$ 4,000,000 $ 4,000,000 ------------- Total Investments (Identified Cost, $185,686,072)(+) .................. $ 201,149,748 ------------- OTHER ASSETS, LESS LIABILITIES ........................................ 81,887 ------------- Net Assets -- 100.0% .................................. $ 201,231,635 ============= PORTFOLIO FOOTNOTES: * Non-income producing security. ** Non-income producing security - in default. + Restricted security. # Payment-in-kind security. ## SEC Rule 144A restriction. ### All or a portion of the security has been segregated as collateral for an open futures contract. < The rate shown represents an annualized yield at time of purchase. @ Security exempt from registration under Section 4(2) of the Securities Act of 1933. ^^ Interest only security for which the variable account receives interest on notional principal (Par amount). Par amount shown is the notional principal and does not reflect the cost of the security. (+) As of June 30, 2005, the Capital Appreciation Variable Account had one security representing $4,244,093 and 1.5% of net assets that was fair valued in accordance with the policies adopted by the Board of Trustees. (+) As of June 30, 2005, the High Yield Variable Account had ten securities representing $17,213 and less than 0.1% of net assets that were fair valued in accordance with the policies adopted by the Board of Trustees. (+) As of June 30, 2005 the Total Return Variable Account had ten securities representing $2,748,398 and 1.4% of net assets that were fair valued in accordance with the policies adopted by the Board of Trustees. Abbreviations: ADR= American Depository Receipt. FRN= Floating rate note. The interest rate is the rate in effect as of period end. GDR= Global Depository Receipt. STRIPS= Separate trading of Registered Interest and Principal of Securities. TBA= To Be Announced. Abbreviations have been used throughout this report to indicate amounts shown in currencies other than the U.S. dollar. All amounts are stated in U.S. dollars unless otherwise indicated. A list of abbreviations is shown below. AUD= Australian Dollar JPY= Japanese Yen CAD= Canadian Dollar KRW= Korean Won CHF= Swiss Franc NOK= Norwegian Krone DKK= Danish Krone NZD= New Zealand Dollar EUR= Euro SEK= Swedish Krona GBP= British Pound See notes to financial statements. STATEMENTS OF ASSETS AND LIABILITIES (Unaudited) -- June 30, 2005 (000 Omitted)
Capital Global Govern- Appre- Govern- ment High Managed Money Total ciation ments Securities Yield Sectors Market Return Variable Variable Variable Variable Variable Variable Variable Account Account Account Account Account Account Account -------- -------- -------- -------- -------- -------- -------- Assets: Investments -- Investments, cost ....................... $250,706 $ 11,726 $ 97,736 $ 69,236 $ 36,505 $ 45,565 $185,686 Unrealized appreciation (depreciation) .. 23,591 94 2,399 (552) 6,326 -- 15,464 -------- -------- -------- -------- -------- -------- -------- Total investments, at value ........... $274,297 $ 11,820 $100,135 $ 68,684 $ 42,831 $ 45,565 $201,150 Cash ...................................... $ 1 $ 3 $ 1 $ 3 $-- $ 0* $ 0* Receivable for forward foreign currency exchange contracts ...................... -- 54 -- 16 -- -- -- Receivable for forward currency exchange contracts subject to master netting agreements ............... -- 6 -- -- -- -- -- Receivable for investments sold ........... 1,962 -- -- 198 3,065 -- 287 Receivable for units sold ................. 56 7 60 129 3 4 251 Interest and dividends receivable ......... 116 196 894 1,144 7 0* 969 Receivable from sponsor ................... -- 0* -- 7 -- 1 2 Other assets .............................. 4 0* 2 1 1 0* 2 -------- -------- -------- -------- -------- -------- -------- Total assets .......................... $276,436 $ 12,086 $101,092 $ 70,182 $ 45,907 $ 45,570 $202,661 ======== ======== ======== ======== ======== ======== ======== Liabilities: Payable to custodian ...................... $ -- $ -- $ -- $ -- $ 1,074 $ -- $ -- Payable for forward foreign currency exchange contracts....................... -- 186 -- 2 -- -- -- Payable for daily variation margin on open futures contracts .................. -- -- 6 -- -- -- -- Payable for investments purchased ......... 2,070 212 1,221 518 -- -- 1,029 Payable for TBA purchase commitments ...... -- -- -- -- -- -- 83 Payable for units surrendered ............. 329 78 138 68 512 23 274 Payable to affiliates -- Investment Adviser ...................... 6 0* 2 1 1 1 4 Administrative services fee ............. 0* 0* 0* 0* 0* 0* 0* Sponsor ................................. 9 -- 13 -- 10 -- -- Accrued expenses and other liabilities .... 40 22 33 36 26 18 39 -------- -------- -------- -------- -------- -------- -------- Total liabilities ..................... $ 2,454 $ 498 $ 1,413 $ 625 $ 1,623 $ 42 $ 1,429 -------- -------- -------- -------- -------- -------- -------- Net assets .......................... $273,982 $ 11,588 $ 99,679 $ 69,557 $ 44,284 $ 45,528 $201,232 ======== ======== ======== ======== ======== ======== ======== * Amount less than $500. See notes to financial statements.
STATEMENTS OF ASSETS AND LIABILITIES (Unaudited) -- June 30, 2005 -- continued (000 Omitted except for unit values)
Governme Capital Global nt Appreciat Governme Securiti High Managed Money Total ion nts es Yield Sectors Market Return Unit Variable Variable Variable Variable Variable Variable Variable Unit Value Account Account Account Account Account Account Account ------ -------- --------- -------- -------- -------- -------- -------- -------- Net assets applicable to contract owners: Capital Appreciation Variable Account -- Compass 2 .............................. 3,303 $53.968 $178,246 Compass 3 .............................. 309 35.568 10,982 Compass 3 - Level 2 .................... 5,513 14.816 81,681 Global Governments Variable Account -- Compass 2 .............................. 135 $25.925 $3,505 Compass 3 .............................. 29 25.260 741 Compass 3 - Level 2 .................... 491 14.828 7,279 Government Securities Variable Account -- Compass 2 .............................. 1,970 $37.969 $74,807 Compass 3 .............................. 85 26.510 2,250 Compass 3 - Level 2 .................... 1,368 15.536 21,257 High Yield Variable Account -- Compass 2 .............................. 1,454 $36.522 $53,080 Compass 3 .............................. 53 26.822 1,432 Compass 3 - Level 2 .................... 975 14.366 14,008 Managed Sectors Variable Account -- Compass 2 .............................. 221 $42.357 $9,383 Compass 3 .............................. 100 41.564 4,175 Compass 3 - Level 2 .................... 2,267 13.480 30,566 Money Market Variable Account -- Compass 2 .............................. 972 $20.136 $19,621 Compass 3 .............................. 85 16.487 1,406 Compass 3 - Level 2 .................... 1,938 12.368 23,971 Total Return Variable Account -- Compass 2 .............................. 1,432 $45.788 $65,560 Compass 3 .............................. 266 44.616 11,856 Compass 3 - Level 2 .................... 5,646 21.587 121,879 --------- -------- -------- -------- -------- -------- -------- Net assets applicable to owners of deferred contracts ...... 270,909 11,525 98,314 68,520 44,124 44,998 199,295 Reserve for variable annuities -- Compass 2 Contracts .................................... 2,797 16 1,316 990 66 457 1,228 Compass 3 Contracts .................................... 1 40 -- 1 13 7 83 Compass 3 - Level 2 Contracts .......................... 275 7 49 46 81 66 626 --------- -------- -------- -------- -------- -------- -------- Net assets ........................................... $273,982 $11,588 $99,679 $69,557 $44,284 $45,528 $201,232 ======== ======= ======= ======= ======= ======= ======== See notes to financial statements.
STATEMENTS OF OPERATIONS (Unaudited) -- Six Months Ended June 30, 2005 (000 Omitted)
Capital Global Government High Managed Money Total Appreciation Governments Securities Yield Sectors Market Return Variable Variable Variable Variable Variable Variable Variable Account Account Account Account Account Account Account -------- ------- -------- -------- -------- -------- ------- Net investment income (loss): Income -- Interest ...................................... $ 171 $ 209 $ 2,544 $ 2,669 $ 9 $ 689 $ 1,982 Dividends ..................................... 1,359 -- -- 15 244 -- 1,254 -------- ------- -------- -------- -------- -------- ------- Total investment income ..................... $ 1,530 $ 209 $ 2,544 $ 2,684 $ 253 $ 689 $ 3,236 -------- ------- -------- -------- -------- -------- ------- Expenses -- Mortality and expense risk charges ............ $ 1,774 $ 72 $ 635 $ 432 $ 349 $ 310 $ 1,215 Management fee ................................ 1,059 44 278 258 212 124 743 Boards of Managers fees ....................... 15 1 5 4 3 3 10 Distribution fee .............................. 9 1 2 1 4 1 9 Administrative services fee ................... 22 1 8 5 4 4 15 Custodian fee ................................. 53 12 23 26 11 11 41 Printing ...................................... 17 4 9 9 8 4 11 Auditing fees ................................. 17 21 20 22 2 11 23 Legal fees .................................... 10 2 3 3 31 4 3 Miscellaneous ................................. 15 2 8 5 6 12 8 -------- ------- -------- -------- -------- -------- ------- Total expenses .............................. $ 2,991 $ 160 $ 991 $ 765 $ 630 $ 484 $ 2,078 Fees paid indirectly .......................... (4) (0)* (3) (1) (1) (0)* (2) Reduction of expenses by investment adviser ... -- (15) -- -- -- -- -- -------- ------- -------- -------- -------- -------- ------- Net expenses ................................ $ 2,987 $ 145 $ 988 $ 764 $ 629 $ 484 $ 2,076 -------- ------- -------- -------- -------- -------- ------- Net investment income (loss) ...................... $ (1,457) $ 64 $ 1,556 $ 1,920 $ (376) $ 205 $ 1,160 -------- ------- -------- -------- -------- -------- ------- Realized and unrealized gain (loss) on investments: Realized gain (loss) (identified cost basis) -- Investment transactions ....................... $ 9,750 $ 404 $ (54) $ 622 $ 1,227 $-- $ 5,304 Futures contracts ............................. -- -- (28) -- -- -- -- Foreign currency transactions ................. (6) 36 -- 68 -- -- 6 -------- ------- -------- -------- -------- -------- ------- Net realized gain (loss) on investments and foreign currency transactions ............. $ 9,744 $ 440 $ (82) $ 690 $ 1,227 $-- $ 5,310 -------- ------- -------- -------- -------- -------- ------- Change in unrealized appreciation (depreciation) -- Investments ................................ $(17,434) $ (946) $ 186 $ (2,923) $ (2,800) $-- $(6,340) Futures contracts ............................. -- -- 49 -- -- -- -- Translation of assets and liabilities in foreign currency ......................... (4) (136) -- 84 0* -- (10) -------- ------- -------- -------- -------- -------- ------- Net unrealized gain (loss) on investments and foreign currency translation ........... $(17,438) $(1,082) $ 235 $ (2,839) $ (2,800) $-- $(6,350) -------- ------- -------- -------- -------- -------- ------- Net realized and unrealized gain (loss) on investments and foreign currency .......... $ (7,694) $ (642) $ 153 $ (2,149) $ (1,573) $-- $(1,040) -------- ------- -------- -------- -------- -------- ------- Change in net assets from operations .............. $ (9,151) $ (578) $ 1,709 $ (229) $ (1,949) $ 205 $ 120 ======== ======= ======== ======== ======== ======== ======= * Amount less than $500. See notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS (000 Omitted)
Capital Appreciation Global Governments Government Securities Variable Account Variable Account Variable Account ---------------------- ----------------------- ---------------------- Six Months Six Months Six Months Ended Year Ended Ended Year Ended Ended Year Ended June 30, December 31, June 30, December 31, June 30, December 31, 2005 2004 2005 2004 2005 2004 (Unaudited) (Unaudited) (Unaudited) --------- --------- --------- --------- --------- --------- Change in net assets: From operations: Net investment income (loss) ................... $ (1,457) $ (2,078) $ 64 $ 113 $ 1,556 $ 3,252 Net realized gain (loss) on investments and foreign currency transactions ............ 9,744 16,588 440 1,023 (82) 1,187 Net unrealized gain (loss) on investments and foreign currency translation ............. (17,438) 12,496 (1,082) (227) 235 (1,846) --------- --------- --------- --------- --------- --------- Change in net assets from operations ......... $ (9,151) $ 27,006 $ (578) $ 909 $ 1,709 $ 2,593 --------- --------- --------- --------- --------- --------- Participant transactions: Accumulation activity: Purchase payments received ..................... $ 3,145 $ 7,120 $ 186 $ 375 $ 834 $ 1,762 Net transfers between variable and fixed accumulation accounts ........................ (2,681) (2,841) 1,059 (604) 341 (4,683) Withdrawals, surrenders, annuitizations, and contract charges ............................. (21,444) (41,093) (1,169) (1,777) (7,498) (12,905) --------- --------- --------- --------- --------- --------- Net accumulation activity .................... $ (20,980) $ (36,814) $ 76 $ (2,006) $ (6,323) $ (15,826) --------- --------- --------- --------- --------- --------- Annuitization activity: Annuitizations ................................... $ 84 $ 261 $ 0* $ 0* $ 89 $ (5) Annuity payments and contract charges ............ (230) (513) (4) (6) (155) (308) Net transfers among accounts for annuity reserves -- -- -- -- 5 (87) Adjustments to annuity reserves .................. 37 (44) 0* 0* (5) (13) --------- --------- --------- --------- --------- --------- Net annuitization activity ..................... $ (109) $ (296) $ (4) $ (6) $ (66) $ (413) --------- --------- --------- --------- --------- --------- Change in net assets from participations transactions ................................... $ (21,089) $ (37,110) $ 72 $ (2,012) $ (6,389) $ (16,239) --------- --------- --------- --------- --------- --------- Total change in net assets ..................... $ (30,240) $ (10,104) $ (506) $ (1,103) $ (4,680) $ (13,646) Net assets: At beginning of period ........................... 304,222 314,326 12,094 13,197 104,359 118,005 --------- --------- --------- --------- --------- --------- At end of period ................................. $ 273,982 $ 304,222 $ 11,588 $ 12,094 $ 99,679 $ 104,359 ========= ========= ========= ========= ========= ========= * Amount less than $500. See notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS -- continued (000 Omitted)
High Yield Managed Sectors Variable Account Variable Account ---------------------- ---------------------- Six Months Six Months Ended Ended June 30, Year Ended June 30, Year Ended 2005 December 31, 2005 December 31, (Unaudited) 2004 (Unaudited) 2004 --------- --------- --------- --------- Change in net assets: From operations: Net investment income (loss) ............................................. $ 1,920 $ 4,654 $ (376) $ (542) Net realized gain (loss) on investments and foreign currency transactions 690 (1,716) 1,227 4,523 Net unrealized gain (loss) on investments and foreign currency translation (2,839) 2,313 (2,800) (902) --------- --------- --------- --------- Change in net assets from operations ................................... $ (229) $ 5,251 $ (1,949) $ 3,079 --------- --------- --------- --------- Participant transactions: Accumulation activity: Purchase payments received ............................................... $ 591 $ 999 $ 1,219 $ 2,607 Net transfers between variable and fixed accumulation accounts ........... 365 (22,124) (11,472) (653) Withdrawals, surrenders, annuitizations, and contract charges ............ (6,697) (9,829) (6,818) (9,735) --------- --------- --------- --------- Net accumulation activity .............................................. $ (5,741) $ (30,954) $ (17,071) $ (7,781) --------- --------- --------- --------- Annuitization activity: Annuitizations ............................................................. $ (81) $ 100 $ 7 $ (1) Annuity payments and contract charges ...................................... (89) (207) (20) (36) Adjustments to annuity reserves ............................................ (71) 77 (8) (2) --------- --------- --------- --------- Net annuitization activity ............................................... $ (241) $ (30) $ (21) $ (39) --------- --------- --------- --------- Change in net assets from participations transactions ...................... $ (5,982) $ (30,984) $ (17,092) $ (7,820) --------- --------- --------- --------- Total change in net assets ............................................... $ (6,211) $ (25,733) $ (19,041) $ (4,741) Net assets: At beginning of period ..................................................... 75,768 101,501 63,325 68,066 --------- --------- --------- --------- At end of period ........................................................... $ 69,557 $ 75,768 $ 44,284 $ 63,325 ========= ========= ========= ========= See notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS -- continued (000 Omitted)
Money Market Total Return Variable Account Variable Account ---------------------- ---------------------- Six Months Six Months Ended Ended June 30, Year Ended June 30, Year Ended 2005 December 31, 2005 December 31, (Unaudited) 2004 (Unaudited) 2004 --------- --------- --------- --------- Change in net assets: From operations: Net investment income (loss) ............................................. $ 205 $ (269) $ 1,160 $ 2,485 Net realized gain (loss) on investments and foreign currency transactions -- -- 5,310 13,823 Net unrealized gain (loss) on investments and foreign currency translation -- -- (6,350) 2,965 --------- --------- --------- --------- Change in net assets from operations ................................... $ 205 $ (269) $ 120 $ 19,273 --------- --------- --------- --------- Participant transactions: Accumulation activity: Purchase payments received ............................................... $ 716 $ 1,576 $ 2,967 $ 5,581 Net transfers between variable and fixed accumulation accounts ........... 2,237 22,089 7,846 4,317 Withdrawals, surrenders, annuitizations, and contract charges ............ (7,754) (11,007) (16,484) (29,151) --------- --------- --------- --------- Net accumulation activity .............................................. $ (4,801) $ 12,658 $ (5,671) $ (19,253) --------- --------- --------- --------- Annuitization activity: Annuitizations ............................................................. $ 18 $ 96 $ (6) $ 102 Annuity payments and contract charges ...................................... (78) (179) (245) (432) Net transfers among accounts for annuity reserves .......................... (10) 82 5 4 Adjustments to annuity reserves ............................................ 17 (19) (49) 49 --------- --------- --------- --------- Net annuitization activity ............................................... $ (53) $ (20) $ (295) $ (277) --------- --------- --------- --------- Change in net assets from participations transactions ...................... $ (4,854) $ 12,638 $ (5,966) $ (19,530) --------- --------- --------- --------- Total change in net assets ............................................... $ (4,649) $ 12,369 $ (5,846) $ (257) Net assets: At beginning of period ..................................................... 50,177 37,808 207,078 207,335 --------- --------- --------- --------- At end of period ........................................................... $ 45,528 $ 50,177 $ 201,232 $ 207,078 ========= ========= ========= ========= See notes to financial statements.
FINANCIAL HIGHLIGHTS The financial highlights tables are intended to help you understand the variable accounts' financial performance for the semiannual period and the past 5 years. Certain information reflects financial results for a single unit value. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the variable account held for the entire period. Capital Appreciation Variable Account ------------------------------------------------------------------------------------ Compass 2 ------------------------------------------------------------------------------------ Six Months Ended Years Ended December 31, June 30, 2005 ------------------------------------------------------------------- (Unaudited) 2004 2003 2002 2001 2000 ---------- ---------- ---------- ---------- ---------- ---------- Per unit data:* Net asset value -- beginning of period ... $ 55.625 $ 50.814 $ 39.859 $ 59.446 $ 80.578 $ 92.242 ---------- ---------- ---------- ---------- ---------- ---------- Investment income ........................ $ 0.295 $ 0.744 $ 0.402 $ 0.369 $ 0.598 $ 0.907 Expenses ................................. (0.577) (1.109) (0.951) (1.002) (1.401) (1.920) ---------- ---------- ---------- ---------- ---------- ---------- Net investment loss .................. $ (0.282) $ (0.365) $ (0.549) $ (0.633) $ (0.803) $ (1.013) Net realized and unrealized gain (loss) on investments and foreign currency transactions ........................... (1.375) 5.176 11.504 (18.954) (20.329) (10.651) ---------- ---------- ---------- ---------- ---------- ---------- Change in unit value ..................... $ (1.657) $ 4.811 $ 10.955 $ (19.587) $ 21.132) $ (11.664) ---------- ---------- ---------- ---------- ---------- ---------- Unit value: Net asset value -- end of period ......... $ 53.968 $ 55.625 $ 50.814 $ 39.859 $ 59.446 $ 80.578 ========== ========== ========== ========== ========== ========== Total Return (%)(+)& ..................... (2.98)++ 9.47+ 27.48^ (32.95) (26.22) -- Ratios (%) (to average net assets): Expenses## ............................... 2.16+ 2.14 2.12 2.12 0.79# 0.76# Net investment loss ...................... (1.04)+ (0.70) (1.20) (1.36) (1.19)# (1.08)# Portfolio turnover (%) ..................... 37 65 104 80 123 140 Number of units outstanding at end of period (000 Omitted) ............................ 3,303 3,544 4,040 4,521 5,340 5,818 Capital Appreciation Variable Account ------------------------------------------------------------------------------------ Compass 3 ------------------------------------------------------------------------------------ Six Months Ended Years Ended December 31, June 30, 2005 ------------------------------------------------------------------- (Unaudited) 2004 2003 2002 2001 2000 ---------- ---------- ---------- ---------- ---------- ---------- Per unit data:* Net asset value -- beginning of period ... $ 36.678 $ 33.539 $ 26.334 $ 39.314 $ 53.342 $ 61.123 ---------- ---------- ---------- ---------- ---------- ---------- Investment income ........................ $ 0.189 $ 0.458 $ 0.260 $ 0.240 $ 0.417 $ 0.591 Expenses ................................. (0.391) (0.753) (0.648) (0.688) (1.025) (1.317) ---------- ---------- ---------- ---------- ---------- ---------- Net investment loss .................. $ (0.202) $ (0.295) $ (0.388) $ (0.448) $ (0.608) $ (0.736) Net realized and unrealized gain (loss) on investments and foreign currency transactions ........................... (0.908) 3.434 7.593 (12.532) (13.420) (7.045) ---------- ---------- ---------- ---------- ---------- ---------- Change in unit value ..................... $ (1.110) $ 3.139 $ 7.205 $ (12.980) $ (14.028) $ (7.781) ---------- ---------- ---------- ---------- ---------- ---------- Unit value: Net asset value -- end of period ......... $ 35.568 $ 36.678 $ 33.539 $ 26.334 $ 39.314 $ 53.342 ========== ========== ========== ========== ========== ========== Total Return (%)(+)& ..................... (3.03)++ 9.36+ 27.36^ (33.02) (26.30) -- Ratios (%) (to average net assets): Expenses## ............................... 2.26+ 2.24 2.22 2.22 0.79# 0.76# Net investment loss ...................... (1.16)+ (0.87) (1.31) (1.42) (1.19)# (1.08)# Portfolio turnover (%) ..................... 37 65 104 80 123 140 Number of units outstanding at end of period (000 Omitted) ............................ 309 413 621 812 999 1,327
FINANCIAL HIGHLIGHTS -- continued
Capital Appreciation Variable Account ------------------------------------------------------------------------------------ Compass 3 - Level 2 ------------------------------------------------------------------------------------ Six Months Ended Years Ended December 31, June 30, 2005 ------------------------------------------------------------------- (Unaudited) 2004 2003 2002 2001 2000 ---------- ---------- ---------- ---------- ---------- ---------- Per unit data:* Net asset value -- beginning of period ... $ 15.267 $ 13.940 $ 10.929 $ 16.292 $ 22.072 $ 25.255 ---------- ---------- ---------- ---------- ---------- ---------- Investment income ........................ $ 0.080 $ 0.205 $ 0.109 $ 0.100 $ 0.154 $ 0.247 Expenses ................................. (0.154) (0.297) (0.254) (0.260) (0.357) (0.513) ---------- ---------- ---------- ---------- ---------- ---------- Net investment loss .................. $ (0.074) $ (0.092) $ (0.145) $ (0.160) $ (0.203) $ (0.266) Net realized and unrealized gain (loss) on investments and foreign currency transactions ........................... (0.377) 1.419 3.156 (5.203) (5.577) (2.917) ---------- ---------- ---------- ---------- ---------- ---------- Change in unit value ..................... $ (0.451) $ 1.327 $ 3.011 $ (5.363) $ (5.780) $ (3.183) ---------- ---------- ---------- ---------- ---------- ---------- Unit value: Net asset value -- end of period ......... $ 14.816 $ 15.267 $ 13.940 $ 10.929 $ 16.292 $ 22.072 ========== ========== ========== ========== ========== ========== Total Return (%)(+)& ..................... (2.96)++ 9.52+ 27.55^ (32.92) (26.19) -- Ratios (%) (to average net assets): Expenses## ............................... 2.11+ 2.09 2.07 2.07 0.79# 0.76# Net investment loss ...................... (1.00)+ (0.65) (1.17) (1.32) (1.19)# (1.08)# Portfolio turnover (%) ..................... 37 65 104 80 123 140 Number of units outstanding at end of period (000 Omitted) ............................ 5,513 5,798 6,086 6,148 6,705 6,283 * Per unit data are based on average number of units outstanding during each year. + Annualized. ++ Not annualized. # Excluding mortality and expense risk charges and distribution expense charges. ## Ratios do not reflect reductions from fees paid indirectly. ^ The accounts' net asset value and total return calculation include proceeds received on March 26, 2003 for the partial payment of a non- recurring litigation settlement from Cendant Corporation, recorded as a realized gain on investment transactions. The proceeds resulted in an increase in the net asset value of $0.900, $0.594, and $0.247 per unit for Compass 2, Compass 3, and Compass 3 - Level 2, respectively, based on units outstanding on the day the proceeds were received. Excluding the effect of this payment from the ending net asset value per unit, the Compass 2, Compass 3, and Compass 3 - Level 2 total return per unit value for the year ended December 31, 2003 would have been lower by approximately 2.24%, 2.24%, and 2.25%, respectively. + The accounts' net asset value and total return calculation include a non-recurring accrual recorded as a result of an administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund sales. The non-recurring accrual resulted in an increase in the net asset value of $0.039, $0.026, and $0.010 per unit for Compass 2, Compass 3, and Compass 3 - Level 2, respectively, based on units outstanding on the day the proceeds were recorded. (+) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown. & From time to time the variable account may receive proceeds from litigation settlements, without which performance would be lower. See notes to financial statements.
FINANCIAL HIGHLIGHTS -- continued The financial highlights tables are intended to help you understand the variable accounts' financial performance for the semiannual period and the past 5 years. Certain information reflects financial results for a single unit value. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the variable account held for the entire period.
Global Governments Variable Account ------------------------------------------------------------------------------------ Compass 2 ------------------------------------------------------------------------------------ Six Months Ended Years Ended December 31, June 30, 2005 ------------------------------------------------------------------- (Unaudited) 2004 2003 2002 2001 2000 ---------- ---------- ---------- ---------- ---------- ---------- Per unit data:* Net asset value -- beginning of period ... $ 27.240 $ 25.169 $ 22.125 $ 18.653 $ 19.378 $ 19.459 ---------- ---------- ---------- ---------- ---------- ---------- Investment income(S) ..................... $ 0.475 $ 0.872 $ 0.877 $ 0.861 $ 0.946 $ 1.144 Expenses ................................. (0.329) (0.633) (0.584) (0.486) (0.500) (0.471) ---------- ---------- ---------- ---------- ---------- ---------- Net investment income ................ $ 0.146 $ 0.239 $ 0.293 $ 0.375 $ 0.446 $ 0.673 Net realized and unrealized gain (loss) on investments and foreign currency transactions ........................... (1.461) 1.832 2.751 3.097 (1.171) (0.754) ---------- ---------- ---------- ---------- ---------- ---------- Change in unit value ..................... $ (1.315) $ 2.071 $ 3.044 $ 3.472 $ (0.725) $ (0.081) ---------- ---------- ---------- ---------- ---------- ---------- Unit value: Net asset value -- end of period ......... $ 25.925 $ 27.240 $ 25.169 $ 22.125 $ 18.653 $ 19.378 ========== ========== ========== ========== ========== ========== Total Return (%)(+) ...................... (4.83)++*** 8.23*** 13.76 18.61 (3.74)*** -- Ratios (%) (to average net assets): Expenses before expense reductions## ..... 2.75+ 2.67 2.47 2.44 1.39# 1.25# Expenses after expense reductions## ...... 2.50+ 2.50 2.47 2.50^^ 1.28# 1.25# Net investment income(S) ................. 1.10+ 0.94 1.23 1.73 2.23# 3.50# Portfolio turnover (%) ..................... 73 128 130 126 72 130 Number of units outstanding at end of period (000 Omitted) ............................ 135 128 161 160 134 167 Global Governments Variable Account ------------------------------------------------------------------------------------ Compass 3 ------------------------------------------------------------------------------------ Six Months Ended Years Ended December 31, June 30, 2005 ------------------------------------------------------------------- (Unaudited) 2004 2003 2002 2001 2000 ---------- ---------- ---------- ---------- ---------- ---------- Per unit data:* Net asset value -- beginning of period ... $ 26.561 $ 24.578 $ 21.638 $ 18.269 $ 19.007 $ 19.115 ---------- ---------- ---------- ---------- ---------- ---------- Investment income(S) ..................... $ 0.492 $ 0.883 $ 0.869 $ 0.846 $ 1.063 $ 1.103 Expenses ................................. (0.350) (0.662) (0.600) (0.511) (0.579) (0.480) ---------- ---------- ---------- ---------- ---------- ---------- Net investment income ................ $ 0.142 $ 0.221 $ 0.269 $ 0.335 $ 0.484 $ 0.623 Net realized and unrealized gain (loss) on investments and foreign currency transactions ........................... (1.443) 1.762 2.671 3.034 (1.222) (0.731) ---------- ---------- ---------- ---------- ---------- ---------- Change in unit value ..................... $ (1.301) $ 1.983 $ 2.940 $ 3.369 $ (0.738) $ (0.108) ---------- ---------- ---------- ---------- ---------- ---------- Unit value: Net asset value -- end of period ......... $ 25.260 $ 26.561 $ 24.578 $ 21.638 $ 18.269 $ 19.007 ========== ========== ========== ========== ========== ========== Total Return (%)(+) ...................... (4.90)++*** 8.07*** 13.59 18.44 (3.88)*** -- Ratios (%) (to average net assets)(S): Expenses before expense reductions## ..... 2.90+ 2.82 2.62 2.56 1.39# 1.25# Expenses after expense reductions## ...... 2.65+ 2.65 2.62 2.65^^ 1.28# 1.25# Net investment income(S) ................. 1.04+ 0.85 1.15 1.77 2.23# 3.50# Portfolio turnover (%) ..................... 73 128 130 126 72 130 Number of units outstanding at end of period (000 Omitted) ............................ 29 28 41 58 68 108
FINANCIAL HIGHLIGHTS -- continued Global Governments Variable Account ------------------------------------------------------------------------------------ Compass 3 - Level 2 ------------------------------------------------------------------------------------ Six Months Ended Years Ended December 31, June 30, 2005 ------------------------------------------------------------------- (Unaudited) 2004 2003 2002 2001 2000 ---------- ---------- ---------- ---------- ---------- ---------- Per unit data:* Net asset value -- beginning of period ... $ 15.580 $ 14.396 $ 12.655 $ 10.669 $ 11.083 $ 11.130 ---------- ---------- ---------- ---------- ---------- ---------- Investment income(S) ..................... $ 0.271 $ 0.497 $ 0.494 $ 0.499 $ 0.520 $ 0.654 Expenses ................................. (0.188) (0.361) (0.331) (0.281) (0.274) (0.270) ---------- ---------- ---------- ---------- ---------- ---------- Net investment income ................ $ 0.083 $ 0.136 $ 0.163 $ 0.218 $ 0.246 $ 0.384 Net realized and unrealized gain (loss) on investments and foreign currency transactions ........................... (0.835) 1.048 1.578 1.768 (0.660) (0.431) ---------- ---------- ---------- ---------- ---------- ---------- Change in unit value ..................... $ (0.752) $ 1.184 $ 1.741 $ 1.986 $ (0.414) $ (0.047) ---------- ---------- ---------- ---------- ---------- ---------- Unit value: Net asset value -- end of period ......... $ 14.828 $ 15.580 $ 14.396 $ 12.655 $ 10.669 $ 11.083 ========== ========== ========== ========== ========== ========== Total Return (%)(+) ...................... (4.83)++*** 8.23*** 13.76 18.61 (3.74)*** -- Ratios (%) (to average net assets): Expenses before expense reductions## ..... 2.75+ 2.67 2.47 2.42 1.40# 1.25# Expenses after expense reductions## ...... 2.50+ 2.50 2.47 2.50^^ 1.28# 1.25# Net investment income(S) ................. 1.10+ 0.94 1.21 1.70 2.23# 3.50# Portfolio turnover (%) ..................... 73 128 130 126 72 130 Number of units outstanding at end of period (000 Omitted) ............................. 491 500 559 568 574 619 (S) Effective January 1, 2001, the variable account adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing and accreting all premiums and discounts on debt securities. Per unit data and ratios for periods prior to J anuary 1, 2001 have not been restated to reflect this change. * Per unit data are based on the average number of units outstanding during each year. *** Certain expenses have been reduced without which performance would have been lower. + Annualized. ++ Not annualized. # Excluding mortality and expense risk charges and distribution expense charges. ## Ratios do not reflect reductions from fees paid indirectly. ^^ Ratio includes a reimbursement fee for expenses borne by MFS in prior years under the then existing expense reimbursement agr eement. (+) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown. See notes to financial statements.
FINANCIAL HIGHLIGHTS -- continued The financial highlights tables are intended to help you understand the variable accounts' financial performance for the semiannual period and the past 5 years. Certain information reflects financial results for a single unit value. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the variable account held for the entire period. Government Securities Variable Account ------------------------------------------------------------------------------------ Compass 2 ------------------------------------------------------------------------------------ Six Months Ended Years Ended December 31, June 30, 2005 ------------------------------------------------------------------- (Unaudited) 2004 2003 2002 2001 2000 ---------- ---------- ---------- ---------- ---------- ---------- Per unit data:* Net asset value -- beginning of period ... $ 37.338 $ 36.470 $ 36.124 $ 33.448 $ 31.520 $ 28.523 ---------- ---------- ---------- ---------- ---------- ---------- Investment income(S) ..................... $ 0.957 $ 1.834 $ 1.482 $ 1.862 $ 2.183 $ 2.169 Expenses ................................. (0.372) (0.726) (0.711) (0.677) (0.661) (0.572) ---------- ---------- ---------- ---------- ---------- ---------- Net investment income ................ $ 0.585 $ 1.108 $ 0.771 $ 1.185 $ 1.522 $ 1.597 Net realized and unrealized gain (loss) on investments and foreign currency transactions ........................... 0.046 (0.240) (0.425) 1.491 0.406 1.400 ---------- ---------- ---------- ---------- ---------- ---------- Change in unit value ..................... $ 0.631 $ 0.868 $ 0.346 $ 2.676 $ 1.928 $ 2.997 ---------- ---------- ---------- ---------- ---------- ---------- Unit value: Net asset value -- end of period ......... $ 37.969 $ 37.338 $ 36.470 $ 36.124 $ 33.448 $ 31,520 ========== ========== ========== ========== ========== ========== Total Return (%)(+) ...................... 1.69++ 2.38 0.96 8.00 6.12 -- Ratios (%) (to average net assets): Expenses## ............................... 2.00+ 1.97 1.95 1.94 0.66# 0.64# Net investment income(S) ................. 3.09+ 2.96 2.08 3.19 4.42# 5.28# Portfolio turnover (%) ..................... 29 89 138 139 89 51 Number of units outstanding at end of period (000 Omitted) ............................ 1,970 2,125 2,447 2,759 3,043 3,210 Government Securities Variable Account ------------------------------------------------------------------------------------ Compass 3 ------------------------------------------------------------------------------------ Six Months Ended Years Ended December 31, June 30, 2005 ------------------------------------------------------------------- (Unaudited) 2004 2003 2002 2001 2000 ---------- ---------- ---------- ---------- ---------- ---------- Per unit data:* Net asset value -- beginning of period ... $ 26.082 $ 25.501 $ 25.284 $ 23.434 $ 22.105 $ 20.023 ---------- ---------- ---------- ---------- ---------- ---------- Investment income(S) ..................... $ 0.650 $ 1.244 $ 1.045 $ 1.300 $ 1.590 $ 1.476 Expenses ................................. (0.269) (0.525) (0.514) (0.495) (0.510) (0.412) ---------- ---------- ---------- ---------- ---------- ---------- Net investment income ................ $ 0.381 $ 0.719 $ 0.531 $ 0.805 $ 1.080 $ 1.064 Net realized and unrealized gain (loss) on investments and foreign currency transactions ........................... 0.047 (0.138) (0.314) 1.045 0.249 1.018 ---------- ---------- ---------- ---------- ---------- ---------- Change in unit value ..................... $ 0.428 $ 0.581 $ 0.217 $ 1.850 $ 1.329 $ 2.082 ---------- ---------- ---------- ---------- ---------- ---------- Unit value: Net asset value -- end of period ......... $ 26.510 $ 26.082 $ 25.501 $ 25.284 $ 23.434 $ 22.105 ========== ========== ========== ========== ========== ========== Total Return (%)(+) ...................... 1.64++ 2.28 0.86 7.89 6.01 -- Ratios (%) (to average net assets): Expenses## ............................... 2.10+ 2.07 2.05 2.04 0.66# 0.64# Net investment income(S) ................. 2.96+ 2.82 2.08 3.36 4.42# 5.28# Portfolio turnover (%) ..................... 29 89 138 139 89 51 Number of units outstanding at end of period (000 Omitted) ............................ 85 100 147 205 254 398
FINANCIAL HIGHLIGHTS -- continued Government Securities Variable Account ------------------------------------------------------------------------------------ Compass 3 - Level 2 ------------------------------------------------------------------------------------ Six Months Ended Years Ended December 31, June 30, 2005 ------------------------------------------------------------------- (Unaudited) 2004 2003 2002 2001 2000 ---------- ---------- ---------- ---------- ---------- ---------- Per unit data:* Net asset value -- beginning of period ... $ 15.274 $ 14.912 $ 14.763 $ 13.663 $ 12.868 $ 11.639 ---------- ---------- ---------- ---------- ---------- ---------- Investment income(S) ..................... $ 0.385 $ 0.742 $ 0.597 $ 0.732 $ 0.826 $ 0.876 Expenses ................................. (0.148) (0.289) (0.282) (0.267) (0.248) (0.228) ---------- ---------- ---------- ---------- ---------- ---------- Net investment income ................ $ 0.237 $ 0.453 $ 0.315 $ 0.465 $ 0.578 $ 0.648 Net realized and unrealized gain (loss) on investments and foreign currency transactions ........................... 0.025 (0.091) (0.166) 0.635 0.217 0.581 ---------- ---------- ---------- ---------- ---------- ---------- Change in unit value ..................... $ 0.262 $ 0.362 $ 0.149 $ 1.100 $ 0.795 $ 1.229 ---------- ---------- ---------- ---------- ---------- ---------- Unit value: Net asset value -- end of period ......... $ 15.536 $ 15.274 $ 14.912 $ 14.763 $ 13.663 $ 12.868 ========== ========== ========== ========== ========== ========== Total Return (%)(+) ...................... 1.72++ 2.43 1.01 8.05 6.17 -- Ratios (%) (to average net assets): Expenses## ............................... 1.95+ 1.92 1.90 1.89 0.66# 0.64# Net investment income(S) ................. 3.11+ 2.99 2.10 3.17 4.42# 5.28# Portfolio turnover (%) ..................... 29 89 138 139 89 51 Number of units outstanding at end of period (000 Omitted) ............................ 1,368 1,377 1,562 1,692 1,617 1,542 (S) Effective January 1, 2001, the variable account adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing and accreting all premiums and discounts on debt securities. Per unit data and ratios for periods prior to J anuary 1, 2001 have not been restated to reflect this change. * Per unit data are based on the average number of units outstanding during each year. + Annualized. ++ Not annualized. # Excluding mortality and expense risk charges and distribution expense charges. ## Ratios do not reflect reductions from fees paid indirectly. (+) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown. See notes to financial statements.
FINANCIAL HIGHLIGHTS -- continued The financial highlights tables are intended to help you understand the variable accounts' financial performance for the semiannual period and the past 5 years. Certain information reflects financial results for a single unit value. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the variable account held for the entire period.
High Yield Variable Account ------------------------------------------------------------------------------------ Compass 2 ------------------------------------------------------------------------------------ Six Months Ended Years Ended December 31, June 30, 2005 ------------------------------------------------------------------- (Unaudited) 2004 2003 2002 2001 2000 ---------- ---------- ---------- ---------- ---------- ---------- Per unit data:* Net asset value -- beginning of period ... $ 36.669 $ 34.056 $ 28.505 $ 28.969 $ 29.882 $ 33.630 ---------- ---------- ---------- ---------- ---------- ---------- Investment income(S) ..................... $ 1.429 $ 2.857 $ 2.769 $ 3.015 $ 3.684 $ 3.786 Expenses ................................. (0.407) (0.770) (0.689) (0.617) (0.699) (0.725) ---------- ---------- ---------- ---------- ---------- ---------- Net investment income ................ $ 1.022 $ 2.087 $ 2.080 $ 2.398 $ 2.985 $ 3.061 Net realized and unrealized gain (loss) on investments and foreign currency transactions ........................... (1.169) 0.526 3.471 (2.862) (3.898) (6.809) ---------- ---------- ---------- ---------- ---------- ---------- Change in unit value ..................... $ (0.147) $ 2.613 $ 5.551 $ (0.464) $ (0.913) $ (3.748) ---------- ---------- ---------- ---------- ---------- ---------- Unit value: Net asset value -- end of period ......... $ 36.522 $ 36.669 $ 34.056 $ 28.505 $ 28.969 $ 29.882 ========== ========== ========== ========== ========== ========== Total Return (%)(+)& ..................... (0.40)++ 7.67 19.47 (1.60) (3.05) -- Ratios (%) (to average net assets): Expenses## ............................... 2.27+ 2.21 2.20 2.18 0.90# 0.89# Net investment income(S) ................. 5.60+ 5.91 6.53 7.84 9.16# 9.00# Portfolio turnover (%) ..................... 32 81 164 172 103 109 Number of units outstanding at end of period (000 Omitted) ............................ 1,454 1,601 1,827 2,069 2,328 2,677 High Yield Variable Account ------------------------------------------------------------------------------------ Compass 3 ------------------------------------------------------------------------------------ Six Months Ended Years Ended December 31, June 30, 2005 ------------------------------------------------------------------- (Unaudited) 2004 2003 2002 2001 2000 ---------- ---------- ---------- ---------- ---------- ---------- Per unit data:* Net asset value -- beginning of period ... $ 26.943 $ 25.048 $ 20.986 $ 21.349 $ 22.043 $ 24.832 ---------- ---------- ---------- ---------- ---------- ---------- Investment income(S) ..................... $ 1.035 $ 2.021 $ 1.964 $ 2.141 $ 3.188 $ 2.730 Expenses ................................. (0.310) (0.576) (0.514) (0.469) (0.643) (0.557) ---------- ---------- ---------- ---------- ---------- ---------- Net investment income ................ $ 0.725 $ 1.445 $ 1.450 $ 1.672 $ 2.545 $ 2.173 Net realized and unrealized gain (loss) on investments and foreign currency transactions ........................... (0.846) 0.450 2.612 (2.035) (3.239) (4.962) ---------- ---------- ---------- ---------- ---------- ---------- Change in unit value ..................... $ (0.121) $ 1.895 $ 4.062 $ (0.363) $ (0.694) $ (2.789) ---------- ---------- ---------- ---------- ---------- ---------- Unit value: Net asset value -- end of period ......... $ 26.822 $ 26.943 $ 25.048 $ 20.986 $ 21.349 $ 22.043 ========== ========== ========== ========== ========== ========== Total Return (%)(+)& ..................... (0.45)++ 7.57 19.35 (1.70) (3.15) -- Ratios (%) (to average net assets): Expenses## ............................... 2.37+ 2.31 2.30 2.28 0.90# 0.89# Net investment income(S) ................. 5.51+ 5.75 6.41 8.45 9.16# 9.00# Portfolio turnover (%) ..................... 32 81 164 172 103 109 Number of units outstanding at end of period (000 Omitted) ............................ 53 67 115 178 231 297
FINANCIAL HIGHLIGHTS -- continued
High Yield Variable Account ------------------------------------------------------------------------------------ Compass 3 - Level 2 ------------------------------------------------------------------------------------ Six Months Ended Years Ended December 31, June 30, 2005 ------------------------------------------------------------------- (Unaudited) 2004 2003 2002 2001 2000 ---------- ---------- ---------- ---------- ---------- ---------- Per unit data:* Net asset value -- beginning of period ... $ 14.421 $ 13.386 $ 11.199 $ 11.376 $ 11.728 $ 13.193 ---------- ---------- ---------- ---------- ---------- ---------- Investment income(S) ..................... $ 0.545 $ 1.019 $ 1.161 $ 1.220 $ 0.784 $ 1.527 Expenses ................................. (0.154) (0.275) (0.286) (0.257) (0.151) (0.290) ---------- ---------- ---------- ---------- ---------- ---------- Net investment income ................ $ 0.391 $ 0.744 $ 0.875 $ 0.963 $ 0.633 $ 1.237 Net realized and unrealized gain (loss) on investments and foreign currency transactions ........................... (0.446) 0.291 1.312 (1.140) (0.985) (2.702) ---------- ---------- ---------- ---------- ---------- ---------- Change in unit value ..................... $ (0.055) $ 1.035 $ 2.187 $ (0.177) $ (0.352) $ (1.465) ---------- ---------- ---------- ---------- ---------- ---------- Unit value: Net asset value -- end of period ......... $ 14.366 $ 14.421 $ 13.386 $ 11.199 $ 11.376 $ 11.728 ========== ========== ========== ========== ========== ========== Total Return (%)(+)& ..................... (0.38)++ 7.73 19.53 (1.55) (3.01) -- Ratios (%) (to average net assets): Expenses## ............................... 2.22+ 2.16 2.15 2.13 0.90# 0.89# Net investment income(S) ................. 5.60+ 5.77 6.57 6.08 9.16# 9.00# Portfolio turnover (%) ..................... 32 81 164 172 103 109 Number of units outstanding at end of period (000 Omitted) ............................ 975 971 2,631 2,684 1,131 2,619 (S) Effective January 1, 2001, the variable account adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing and accreting all premiums and discounts on debt securities. Per unit data and ratios for periods prior to J anuary 1, 2001 have not been restated to reflect this change. * Per unit data are based on the average number of units outstanding during each year. + Annualized. ++ Not annualized. # Excluding mortality and expense risk charges and distribution expense charges. ## Ratios do not reflect reductions from fees paid indirectly. (+) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown. & From time to time the variable account may receive proceeds from litigation settlements, without which performance would be l ower. See notes to financial statements.
FINANCIAL HIGHLIGHTS -- continued The financial highlights tables are intended to help you understand the variable accounts' financial performance for the semiannual period and the past 5 years. Certain information reflects financial results for a single unit value. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the variable account held for the entire period.
Managed Sectors Variable Account ------------------------------------------------------------------------------------ Compass 2 ------------------------------------------------------------------------------------ Six Months Ended Years Ended December 31, June 30, 2005 ------------------------------------------------------------------- (Unaudited) 2004 2003 2002 2001 2000 ---------- ---------- ---------- ---------- ---------- ---------- Per unit data:* Net asset value -- beginning of period ... $ 43.708 $ 41.525 $ 33.716 $ 46.116 $ 72.313 $ 92.865 ---------- ---------- ---------- ---------- ---------- ---------- Investment income ........................ $ 0.193 $ 0.549 $ 0.333 $ 0.270 $ 0.465 $ 0.633 Expenses ................................. (0.472) (0.894) (0.788) (0.810) (1.179) (1.817) ---------- ---------- ---------- ---------- ---------- ---------- Net investment loss .................. $ (0.279) $ (0.345) $ (0.455) $ (0.540) $ (0.714) $ (1.184) Net realized and unrealized gain (loss) on investments and foreign currency transactions ........................... (1.072) 2.528 8.264 (11.860) (25.483) (19.368) ---------- ---------- ---------- ---------- ---------- ---------- Change in unit value ..................... $ (1.351) $ 2.183 $ 7.809 $ (12.400) $ (26.197) $ (20.552) ---------- ---------- ---------- ---------- ---------- ---------- Unit value: Net asset value -- end of period ......... $ 42.357 $ 43.708 $ 41.525 $ 33.716 $ 46.116 $ 72.313 ========== ========== ========== ========== ========== ========== Total Return (%)(+)& ..................... (3.09)++ 5.26+ 23.16^ (26.89) (36.23) -- Ratios (%) (to average net assets): Expenses## ............................... 2.23+ 2.17 2.12 2.10 0.88# 0.83# Net investment loss ...................... (1.31)+ (0.83) (1.22) (1.45) (1.32)# (1.39)# Portfolio turnover (%) ..................... 16 93 80 264 295 447 Number of units outstanding at end of period (000 Omitted) ............................ 221 345 409 455 573 697 Managed Sectors Variable Account ------------------------------------------------------------------------------------ Compass 3 ------------------------------------------------------------------------------------ Six Months Ended Years Ended December 31, June 30, 2005 ------------------------------------------------------------------- (Unaudited) 2004 2003 2002 2001 2000 ---------- ---------- ---------- ---------- ---------- ---------- Per unit data:* Net asset value -- beginning of period ... $ 42.920 $ 40.837 $ 33.207 $ 45.487 $ 71.434 $ 91.870 ---------- ---------- ---------- ---------- ---------- ---------- Investment income ........................ $ 0.183 $ 0.515 $ 0.321 $ 0.251 $ 0.487 $ 0.602 Expenses ................................. (0.484) (0.933) (0.817) (0.852) (1.297) (1.908) ---------- ---------- ---------- ---------- ---------- ---------- Net investment loss .................. $ (0.301) $ (0.418) $ (0.496) $ (0.601) $ (0.810) $ (1.306) Net realized and unrealized gain (loss) on investments and foreign currency transactions ........................... (1.055) 2.501 8.126 (11.679) (25.137) (19.130) ---------- ---------- ---------- ---------- ---------- ---------- Change in unit value ..................... $ (1.356) $ 2.083 $ 7.630 $ (12.280) $ (25.947) $ (20.436) ---------- ---------- ---------- ---------- ---------- ---------- Unit value: Net asset value -- end of period ......... $ 41.564 $ 42.920 $ 40.837 $ 33.207 $ 45.487 $ 71.434 ========== ========== ========== ========== ========== ========== Total Return (%)(+)& ..................... (3.16)++ 5.10+ 22.98^ (27.00) (36.32) -- Ratios (%) (to average net assets): Expenses## ............................... 2.38+ 2.32 2.27 2.25 0.88# 0.83# Net investment loss ...................... (1.47)+ (1.03) (1.37) (1.56) (1.32)# (1.39)# Portfolio turnover (%) ..................... 16 93 80 264 295 447 Number of units outstanding at end of period (000 Omitted) ............................ 100 141 202 296 390 576
FINANCIAL HIGHLIGHTS -- continued
Managed Sectors Variable Account ------------------------------------------------------------------------------------ Compass 3 - Level 2 ------------------------------------------------------------------------------------ Six Months Ended Years Ended December 31, June 30, 2005 ------------------------------------------------------------------- (Unaudited) 2004 2003 2002 2001 2000 ---------- ---------- ---------- ---------- ---------- ---------- Per unit data:* Net asset value -- beginning of period ... $ 13.910 $ 13.215 $ 10.730 $ 14.676 $ 23.014 $ 29.554 ---------- ---------- ---------- ---------- ---------- ---------- Investment income ........................ $ 0.061 $ 0.177 $ 0.106 $ 0.083 $ 0.136 $ 0.201 Expenses ................................. (0.150) (0.285) (0.252) (0.259) (0.350) (0.578) ---------- ---------- ---------- ---------- ---------- ---------- Net investment loss .................. $ (0.089) $ (0.108) $ (0.146) $ (0.176) $ (0.214) $ (0.377) Net realized and unrealized gain (loss) on investments and foreign currency transactions ........................... (0.341) 0.803 2.631 (3.770) (8.124) (6.163) ---------- ---------- ---------- ---------- ---------- ---------- Change in unit value ..................... $ (0.430) $ 0.695 $ 2.485 $ (3.946) $ (8.338) $ (6.540) ---------- ---------- ---------- ---------- ---------- ---------- Unit value: Net asset value -- end of period ......... $ 13.480 $ 13.910 $ 13.215 $ 10.730 $ 14.676 $ 23.014 ========== ========== ========== ========== ========== ========== Total Return (%)(+)& ..................... (3.09)++ 5.26+ 23.16^ (26.89) (36.23) -- Ratios (%) (to average net assets): Expenses## ............................... 2.23+ 2.17 2.12 2.10 0.88# 0.83# Net investment loss ...................... (1.32)+ (0.82) (1.22) (1.46) (1.32)# (1.39)# Portfolio turnover (%) ..................... 16 93 80 264 295 447 Number of units outstanding at end of period (000 Omitted) ............................. 2,267 3,020 3,228 3,173 3,559 3,548 * Per unit data are based on the average number of units outstanding during each year. + Annualized. ++ Not annualized. # Excluding mortality and expense risk charges and distribution expense charges. ## Ratios do not reflect reductions from fees paid indirectly. ^ The accounts' net asset value and total return calculation include proceeds received on March 26, 2003 for the partial paymen t of a non-recurring litigation settlement from Cendant Corporation, recorded as a realized gain on investment transactions. The proceed s resulted in an increase in the net asset value of $0.083, $0.081, and $0.026 per unit for Compass 2, Compass 3, and Compass 3 - Level 2, res pectively, based on units outstanding on the day the proceeds were received. Excluding the effect of this payment from the ending net asset va lue per unit, the Compass 2, Compass 3, and Compass 3 - Level 2 total return per unit value for the year ended December 31, 2003 would have been lower by approximately 0.24%, 0.25%, and 0.24%, respectively. + The account's net asset value and total return calculation include a non-recurring accrual recorded as a result of an adminis trative proceeding regarding disclosure of brokerage allocation practices in connection with fund sales. The non-recurring accrual re sulted in an increase in the net asset value of $0.041, $0.040, and $0.013 per unit for Compass 2, Compass 3, and Compass 3 - Level 2, res pectively, based on units outstanding on the day the proceeds were recorded. (+) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown. & From time to time the variable account may receive proceeds from litigation settlements, without which performance would be lower. See notes to financial statements.
FINANCIAL HIGHLIGHTS -- continued The financial highlights tables are intended to help you understand the variable accounts' financial performance for the semiannual period and the past 5 years. Certain information reflects financial results for a single unit value. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the variable account held for the entire period.
Money Market Variable Account ------------------------------------------------------------------------------------ Compass 2 ------------------------------------------------------------------------------------ Six Months Ended Years Ended December 31, June 30, 2005 ------------------------------------------------------------------- (Unaudited) 2004 2003 2002 2001 2000 ---------- ---------- ---------- ---------- ---------- ---------- Per unit data:* Net asset value -- beginning of period ... $ 20.073 $ 20.188 $ 20.322 $ 20.341 $ 19.862 $ 18.997 ---------- ---------- ---------- ---------- ---------- ---------- Investment income ........................ $ 0.262 $ 0.281 $ 0.247 $ 0.382 $ 0.950 $ 1.232 Expenses ................................. (0.199) (0.396) (0.381) (0.401) (0.471) (0.367) ---------- ---------- ---------- ---------- ---------- ---------- Change in unit value ....................... $ 0.063 $ (0.115) $ (0.134) $ (0.019) $ 0.479 $ 0.865 ---------- ---------- ---------- ---------- ---------- ---------- Unit value: Net asset value -- end of period ......... $ 20.136 $ 20.073 $ 20.188 $ 20.322 $ 20.341 $ 19.862 ========== ========== ========== ========== ========== ========== Total Return (%)(+) ...................... 0.32++ (0.57) (0.66) (0.09) 2.41 -- Ratios (%) (to average net assets): Expenses## ............................... 1.99+ 1.96 1.87 1.96 0.65# 0.60# Net investment income (loss) ............. 0.83+ (0.56) (0.63) (0.12) 2.51# 4.45# Number of units outstanding at end of period (000 Omitted) ............................ 972 1,009 1,172 1,626 1,986 3,304 Money Market Variable Account ------------------------------------------------------------------------------------ Compass 3 ------------------------------------------------------------------------------------ Six Months Ended Years Ended December 31, June 30, 2005 ------------------------------------------------------------------- (Unaudited) 2004 2003 2002 2001 2000 ---------- ---------- ---------- ---------- ---------- ---------- Per unit data:* Net asset value -- beginning of period ... $ 16.443 $ 16.553 $ 16.680 $ 16.712 $ 16.334 $ 15.638 ---------- ---------- ---------- ---------- ---------- ---------- Investment income ........................ $ 0.217 $ 0.229 $ 0.198 $ 0.318 $ 0.784 $ 1.002 Expenses ................................. (0.173) (0.339) (0.325) (0.350) (0.406) (0.306) ---------- ---------- ---------- ---------- ---------- ---------- Change in unit value ....................... $ 0.044 $ (0.110) $ (0.127) $ (0.032) $ 0.378 $ 0.696 ---------- ---------- ---------- ---------- ---------- ---------- Unit value: Net asset value -- end of period ......... $ 16.487 $ 16.443 $ 16.553 $ 16.680 $ 16.712 $ 16.334 ========== ========== ========== ========== ========== ========== Total Return (%)(+) ...................... 0.27++ (0.67) (0.76) (0.19) 2.31 -- Ratios (%) (to average net assets): Expenses## ............................... 2.09+ 2.06 1.97 2.06 0.65# 0.60# Net investment income (loss) ............. 0.68+ (0.71) (0.74) (0.14) 2.51# 4.45# Number of units outstanding at end of period (000 Omitted) ............................ 85 97 155 186 222 468
FINANCIAL HIGHLIGHTS -- continued
Money Market Variable Account ------------------------------------------------------------------------------------ Compass 3 - Level 2 ------------------------------------------------------------------------------------ Six Months Ended Years Ended December 31, June 30, 2005 ------------------------------------------------------------------- (Unaudited) 2004 2003 2002 2001 2000 ---------- ---------- ---------- ---------- ---------- ---------- Per unit data:* Net asset value -- beginning of period ... $ 12.326 $ 12.390 $ 12.466 $ 12.472 $ 12.172 $ 11.636 ---------- ---------- ---------- ---------- ---------- ---------- Investment income ........................ $ 0.162 $ 0.181 $ 0.131 $ 0.223 $ 0.710 $ 0.747 Expenses ................................. (0.120) (0.245) (0.207) (0.229) (0.410) (0.211) ---------- ---------- ---------- ---------- ---------- ---------- Change in unit value ..................... $ 0.042 $ (0.064) $ (0.076) $ (0.006) $ 0.300) $ 0.536 ---------- ---------- ---------- ---------- ---------- ---------- Unit value: Net asset value -- end of period ......... $ 12.368 $ 12.326 $ 12.390 $ 12.466 $ 12.472 $ 12.172 ========== ========== ========== ========== ========== ========== Total Return (%)(+) ...................... 0.34++ (0.52) (0.61) (0.04) 2.46 -- Ratios (%) (to average net assets): Expenses## ............................... 1.94+ 1.91 1.82 1.91 0.65# 0.60# Net investment income (loss) ............. 0.84+ (0.48) (0.61) (0.01) 2.51# 4.45# Number of units outstanding at end of period (000 Omitted) ............................ 1,938 2,259 896 1,113 2,835 1,562 * Per unit data are based on the average number of units outstanding during each year. + Annualized. ++ Not annualized. # Excluding mortality and expense risk charges and distribution expense charges. ## Ratios do not reflect reductions from fees paid indirectly. (+) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown. See notes to financial statements.
FINANCIAL HIGHLIGHTS -- continued The financial highlights tables are intended to help you understand the variable accounts' financial performance for the semiannual period and the past 5 years. Certain information reflects financial results for a single unit value. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the variable account held for the entire period.
Total Return Variable Account ------------------------------------------------------------------------------------ Compass 2 ------------------------------------------------------------------------------------ Six Months Ended Years Ended December 31, June 30, 2005 ------------------------------------------------------------------- (Unaudited) 2004 2003 2002 2001 2000 ---------- ---------- ---------- ---------- ---------- ---------- Per unit data:* Net asset value -- beginning of period ... $ 45.729 $ 41.571 $ 35.950 $ 38.562 $ 39.126 $ 33.728 ---------- ---------- ---------- ---------- ---------- ---------- Investment income(S) ..................... $ 0.746 $ 1.450 $ 1.237 $ 1.407 $ 1.513 $ 1.464 Expenses ................................. (0.474) (0.905) (0.800) (0.777) (0.830) (0.727) ---------- ---------- ---------- ---------- ---------- ---------- Net investment income ................ $ 0.272 $ 0.545 $ 0.437 $ 0.630 $ 0.683 $ 0.737 Net realized and unrealized gain (loss) on investments and foreign currency transactions ........................... (0.213) 3.613 5.184 (3.242) (1.247) 4.661 ---------- ---------- ---------- ---------- ---------- ---------- Change in unit value ..................... $ 0.059 $ 4.158 $ 5.621 $ (2.612) $ (0.564) $ 5.398 ---------- ---------- ---------- ---------- ---------- ---------- Unit value: Net asset value -- end of period ......... $ 45.788 $ 45.729 $ 41.571 $ 35.950 $ 38.562 $ 39.126 ========== ========== ========== ========== ========== ========== Total Return (%)(+)& ..................... 0.13++ 10.00+ 15.64 (6.77) (1.44) -- Ratios (%) (to average net assets): Expenses## ............................... 2.11+ 2.11 2.10 2.08 0.85# 0.83# Net investment income(S) ................. 1.19+ 1.25 1.13 1.43 1.67# 2.02# Portfolio turnover (%) ..................... 27 64 62 76 104 105 Number of units outstanding at end of period (000 Omitted) ............................ 1,432 1,511 1,688 1,871 2,080 2,240 Total Return Variable Account ------------------------------------------------------------------------------------ Compass 3 ------------------------------------------------------------------------------------ Six Months Ended Years Ended December 31, June 30, 2005 ------------------------------------------------------------------- (Unaudited) 2004 2003 2002 2001 2000 ---------- ---------- ---------- ---------- ---------- ---------- Per unit data:* Net asset value -- beginning of period ... $ 44.592 $ 40.597 $ 35.160 $ 37.771 $ 38.380 $ 33.134 ---------- ---------- ---------- ---------- ---------- ---------- Investment income(S) ..................... $ 0.715 $ 1.375 $ 1.200 $ 1.360 $ 1.599 $ 1.395 Expenses ................................. (0.488) (0.929) (0.823) (0.804) (0.939) (0.749) ---------- ---------- ---------- ---------- ---------- ---------- Net investment income ................ $ 0.227 $ 0.446 $ 0.377 $ 0.556 $ 0.660 $ 0.646 Net realized and unrealized gain (loss) on investments and foreign currency transactions ........................... (0.203) 3.549 5.060 (3.167) (1.269) 4.600 ---------- ---------- ---------- ---------- ---------- ---------- Change in unit value ..................... $ 0.024 $ 3.995 $ 5.437 $ (2.611) $ (0.609) $ 5.246 ---------- ---------- ---------- ---------- ---------- ---------- Unit value: Net asset value -- end of period ......... $ 44.616 $ 44.592 $ 40.597 $ 35.160 $ 37.771 $ 38.380 ========== ========== ========== ========== ========== ========== Total Return (%)(+)& ..................... 0.05++ 9.84+ 15.46 (6.91) (1.59) -- Ratios (%) (to average net assets): Expenses## ............................... 2.26+ 2.26 2.25 2.23 0.85# 0.83# Net investment income(S) ................. 1.04+ 1.07 1.01 1.61 1.67# 2.02# Portfolio turnover (%) ..................... 27 64 62 76 104 105 Number of units outstanding at end of period (000 Omitted) ............................ 266 315 453 634 838 1,253
FINANCIAL HIGHLIGHTS -- continued
Total Return Variable Account ------------------------------------------------------------------------------------ Compass 3 - Level 2 ------------------------------------------------------------------------------------ Six Months Ended Years Ended December 31, June 30, 2005 ------------------------------------------------------------------- (Unaudited) 2004 2003 2002 2001 2000 ---------- ---------- ---------- ---------- ---------- ---------- Per unit data:* Net asset value -- beginning of period ... $ 21.559 $ 19.599 $ 16.949 $ 18.180 $ 18.446 $ 15.901 ---------- ---------- ---------- ---------- ---------- ---------- Investment income(S) ..................... $ 0.349 $ 0.676 $ 0.575 $ 0.658 $ 0.687 $ 0.683 Expenses ................................. (0.224) (0.425) (0.376) (0.367) (0.382) (0.343) ---------- ---------- ---------- ---------- ---------- ---------- Net investment income ................ $ 0.125 $ 0.251 $ 0.199 $ 0.291 $ 0.305 $ 0.340 Net realized and unrealized gain (loss) on investments and foreign currency transactions ........................... (0.097) 1.709 2.451 (1.522) (0.571) 2.205 ---------- ---------- ---------- ---------- ---------- ---------- Change in unit value ..................... $ 0.028 $ 1.960 $ 2.650 $ (1.231) $ (0.266) $ 2.545 ---------- ---------- ---------- ---------- ---------- ---------- Unit value: Net asset value -- end of period ......... $ 21.587 $ 21.559 $ 19.599 $ 16.949 $ 18.180 $ 18.446 ========== ========== ========== ========== ========== ========== Total Return (%)(+)& ..................... 0.13++ 10.00+ 15.64 (6.77) (1.44) -- Ratios (%) (to average net assets): Expenses## ............................... 2.11+ 2.11 2.10 2.08 0.85# 0.83# Net investment income(S) ................. 1.18+ 1.24 1.11 1.55 1.67# 2.02# Portfolio turnover (%) ..................... 27 64 62 76 104 105 Number of units outstanding at end of period (000 Omitted) ............................ 5,646 5,646 5,946 6,236 6,537 6,382 (S) Effective January 1, 2001, the variable account adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing and accreting all premiums and discounts on debt securities. Per unit data and ratios for periods prior to J anuary 1, 2001 have not been restated to reflect this change. * Per unit data are based on the average number of units outstanding during each year. + Annualized. ++ Not annualized. # Excluding mortality and expense risk charges and distribution expense charges. ## Ratios do not reflect reductions from fees paid indirectly. + The account's net asset value and total return calculation include a non-recurring accrual recorded as a result of an administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund sales. The non-recurring accrual did not have a material impact on the net asset value per unit based on the units outstanding on the day the proceeds were recorded. (+) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown. & From time to time the variable account may receive proceeds from litigation settlements, without which performance would be lower. See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS (Unaudited) (1) BUSINESS AND ORGANIZATION Capital Appreciation Variable Account, Global Governments Variable Account, Government Securities Variable Account, High Yield Variable Account, Managed Sectors Variable Account, Money Market Variable Account, and Total Return Variable Account (the variable account(s)) 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 Global Governments Variable Account, High Yield Variable Account, and Managed Sectors 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. Effective July 18, 2005, the Managed Sectors Variable Account terminated operations. (2) SIGNIFICANT ACCOUNTING POLICIES General - The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The High Yield Variable Account can invest up to 100% of its portfolio in high- yield securities rated below investment grade. 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. The Capital Appreciation Variable Account, Global Governments Variable Account, High Yield Variable Account, Managed Sectors Variable Account, and Total Return Variable Account can invest in foreign securities. Investments in foreign securities are vulnerable to the effects of changes in the relative values of the local currency and the U.S. dollar and to the effects of changes in each country's legal, political, and economic environment. Investment Valuations - Equity securities in the variable accounts' portfolio for which market quotations are available are valued at the last sale or official closing price as reported by an independent pricing service on the primary market or exchange on which they are primarily traded, or at the last quoted bid price for securities in which there were no sales during the day. Equity securities traded over the counter are valued at the last sales price traded each day as reported by an independent pricing service, or to the extent there are no sales reported, such securities are valued on the basis of quotations obtained from brokers and dealers. Bonds and other fixed income securities (other than short-term obligations) in the variable accounts' portfolio are valued at an evaluated bid price as reported by an independent pricing service, or to the extent a valuation is not reported by a pricing service, such securities are valued on the basis of quotes from brokers and dealers. Prices obtained from pricing services utilize both dealer-supplied valuations and electronic data processing techniques which take into account appropriate 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 quoted prices or exchange or over-the-counter prices, since such valuations are believed to reflect more accurately the fair value of such securities. Foreign currency options are valued by Massachusetts Financial Services Company (MFS) using an external pricing model approved by the Board of Managers that uses market data from an independent pricing source. Futures contracts are valued at the settlement price as reported by an independent pricing service on the primary exchange on which they are traded. Forward foreign currency contracts are valued using spot rates and forward points as reported by an independent pricing source. Short-term obligations with a remaining maturity in excess of 60 days will be valued upon dealer-supplied valuations. All other short-term obligations in the variable accounts' portfolio are valued at amortized cost, which approximates market value as determined by the Board of Managers. Money market instruments are valued at amortized cost, which the Managers have determined in good faith approximates market value. The variable accounts' use of amortized cost is subject to the variable accounts' compliance with certain conditions as specified under Rule 2a-7 of the Investment Company Act of 1940. 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. When pricing service information or market quotations are not readily available, securities are priced at fair value as determined under the direction of the Board of Managers. For example, significant events (such as movement in the U.S. securities market, or other regional and local developments) may occur between the time that foreign markets close (where the security is principally traded) and the time that the variable accounts calculates its net asset value (generally, the close of the NYSE) that may impact the value of securities traded in these foreign markets. In these cases, the variable accounts may utilize information from an external vendor or other sources to adjust closing market quotations of foreign equity securities to reflect what it believes to be the fair value of the securities as of the variable accounts' valuation time. Because the frequency of significant events is not predictable, fair valuation of foreign equity securities may occur on a frequent basis. Repurchase Agreements - Certain variable accounts may enter into repurchase agreements with institutions that the variable accounts' investment adviser has determined are creditworthy. Each repurchase agreement is recorded at cost. The variable accounts require that the securities collateral in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the variable accounts to obtain those securities in the event of a default under the repurchase agreement. The variable accounts monitor, on a daily basis, the value of the collateral to ensure that its value, including accrued interest, is greater than amounts owed to the variable accounts under each such repurchase agreement. The variable accounts, along with other affiliated entities of MFS, may utilize a joint trading account for the purpose of entering into one or more repurchase agreements. Foreign Currency Translation - 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 call or put options in exchange for a premium. The premium is initially recorded as a liability, which is subsequently adjusted to the current value of the option contract. When a written option expires, the variable accounts realize a gain equal to the amount of the premium received. When a written call option is exercised or closed, the premium received is offset against the proceeds to determine the realized gain or loss. When a written put option is exercised, the premium reduces the cost basis of the security purchased by the variable accounts. The variable accounts, as writer of an option, may have no control over whether the underlying securities may be sold (call) or purchased (put) and, as a result, bears the market risk of an unfavorable change in the price of the securities underlying the written option. In general, written call options may serve as a partial hedge against decreases in value in the underlying securities 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 accounts' management on the direction of interest rates. Futures Contracts - Certain variable accounts may enter into futures contracts for the delayed delivery of securities or currency, or contracts based on financial indices at a fixed price on a future date. In entering such contracts, the variable accounts are required to deposit with the broker, either in cash or securities, an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by the variable accounts each day, depending on the daily fluctuations in the value of the contract, and are recorded for financial statement purposes as unrealized gains or losses by the variable accounts. The variable accounts' investment in futures contracts is designed to hedge against anticipated future changes in interest or securities prices. Investments in interest rate futures for purposes other than hedging may be made to modify the duration of the portfolio without incurring the additional transaction costs involved in buying and selling the underlying securities. Investments in equity index contracts or contracts on related options for purposes other than hedging, may be made when the variable account has cash on hand and wishes to participate in anticipated market appreciation while the cash is being invested. Should interest rates or securities prices move unexpectedly, the variable accounts may not achieve the anticipated benefits of the futures contracts and may realize a loss. Forward Foreign Currency Exchange Contracts - Certain variable accounts may enter into forward foreign currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. The variable accounts may enter into forward foreign currency exchange contracts for hedging purposes as well as for non-hedging purposes. For hedging purposes, the variable accounts may enter into contracts to deliver or receive foreign currency it will receive from or require for its normal investment activities. The variable accounts 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, the variable accounts may enter into contracts with the intent of changing the relative exposure of the variable accounts' portfolio of securities to different currencies to take advantage of anticipated changes. The forward foreign currency exchange contracts are adjusted by the daily exchange rate of the underlying currency and any gains or losses are recorded as unrealized until the contract settlement date. On contract settlement date, the gains or losses are recorded as realized gains or losses on foreign currency transactions. Dollar Roll Transactions - The Government Securities Variable Account may enter into dollar roll transactions, with respect to mortgage backed securities issued by Ginnie Mae, Fannie Mae, and Freddie Mac, in which the variable accounts sells mortgage backed securities to financial institutions and simultaneously agrees to accept substantially similar (same type, coupon, and maturity) securities at a later date at an agreed-upon price. During the period between the sale and repurchase in a dollar roll transaction the variable account will not be entitled to receive interest and principal payments on the securities sold but is compensated by interest earned on the proceeds of the initial sale and by a lower purchase price on the securities to be repurchased which enhances the variable account's total return. The variable account accounts for dollar roll transactions as purchases and sales. If certain criteria are met these dollar roll transactions may be considered a financing transaction whereby the difference in the sales price and the future purchase price is recorded as an adjustment to interest income. Investment Transactions and Income - Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. All premium and discount is amortized or accreted for financial statement purposes in accordance with U.S. generally accepted accounting principles. For the Money Market Variable Account, all premium and discount is amortized and accreted for financial statement purposes and tax reporting purposes in accordance with generally accepted accounting principles and federal tax regulations, respectively. Dividends received in cash are recorded on the ex-dividend date. 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. The variable accounts may receive proceeds from litigation settlements involving its portfolio holdings. Any proceeds received are reflected in realized gain/loss in the Statement of Operations, or in unrealized gain/loss if the security is still held by the variable accounts. The Capital Appreciation Variable Account was a participation in a class action lawsuit against Cendant Corporation. On March 19, 2004, the variable account received a cash settlement in the amount of $622,626. Certain variable accounts may enter into "TBA" (to be announced) purchase commitments to purchase securities for a fixed unit price at a future date. Although the unit price has been established, the principal value has not been finalized. However, the principal amount of the commitments will not fluctuate more than 0.01%. The variable accounts hold, and maintain until settlement date, cash or high-grade debt obligations in an amount sufficient to meet the purchase price, or the variable accounts may enter into offsetting contracts for the forward sale of other securities it owns. Income on the securities will not be earned until settlement date. TBA purchase commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to settlement date, which is in addition to the risk of decline in the value of the variable accounts' other assets. Unsettled TBA purchase commitments are valued at the current market value of the underlying securities. Certain variable accounts may enter into "TBA" (to be announced) sale commitments to hedge its portfolio positions or to sell mortgage-backed securities it owns under delayed delivery arrangements. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA sale commitment is outstanding, equivalent deliverable securities, or an offsetting TBA purchase commitment deliverable on or before the sale commitment date, are held as "cover" for the transaction. 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 made directly to the security issuer, which are generally non-recurring, incurred to protect or enhance the value of high-yield debt securities, are reported as additions 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 expensed. Fees Paid Indirectly - The variable accounts' custody fee is reduced according to an arrangement that measures the value of cash deposited with the custodian by the variable accounts. During the six months ended June 30, 2005, each variable accounts' custodian fees were reduced under this arrangement. The variable accounts have entered into a commission recapture agreement, under which certain brokers will credit the variable accounts a portion of the commissions generated, to offset certain expenses of the variable accounts. For the six months ended June 30, 2005, the variable accounts' miscellaneous expenses were reduced under this agreement. These amounts are shown as a reduction of total expenses on the Statement of Operations.
Capital Global Government High Managed Money Total Appreciation Governments Securities Yield Sectors Market Return Variable Variable Variable Variable Variable Variable Variable Account Account Account Account Account Account Account - ------------------------------------------------------------------------------------------------------------------------------------ Balance credits ................................. $ 2,678 $ 199 $ 2,945 $ 1,322 $ 532 $ 373 $2,000 Commission recapture credits .................... 1,410 -- -- 61 742 -- -- -------- -------- -------- -------- -------- -------- ------ Total ........................................... $ 4,088 $ 199 $ 2,945 $ 1,383 $ 1,274 $ 373 $2,000 ======== ======== ======== ======== ======== ======== ======
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. (3) CONTRACT CHARGES The Sponsor makes a deduction from the variable accounts at the end of each valuation period, during both the accumulation period and after annuity payments begin, for assuming the mortality and expense risks under the contracts. The rate of the deduction may be changed annually but in no event may it exceed 1.25% of the average net assets of each variable account attributable to Compass 3 contracts, or, with respect to Compass 2 contracts, 1.30% of the assets of Capital Appreciation Variable Account, Government Securities Variable Account, High Yield Variable Account, and Money Market Variable Account, or 1.25% of the assets of Global Governments Variable Account, Managed Sectors Variable Account, and Total Return 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 between February 1, 1987 and December 31, 1998 have been calculated using the 1983 Individual Annuitant Mortality Table. Annuity reserves for contracts with annuity commencement dates on or after January 1, 1999 have been calculated using the Annuity Mortality 2000 table. Annuity reserves for contracts in payment period are calculated using an assumed interest rate of 4%. Required adjustments are accomplished by transfers to or from the Sponsor. (5) TRANSACTIONS WITH AFFILIATES Investment Adviser - Each variable account has an investment advisory agreement with MFS to provide overall investment advisory and administrative services, and general office facilities. The management fee is computed daily and paid monthly at the following annual rate based on a percentage of each variable account's average daily net assets:
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 - --------------------------------------------------------------------------------------------------------------- Capital Appreciation Variable Account ....... 0.75% 0.675% Global Governments 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%* 0.50%* Total Return Variable Account ............... 0.75% 0.675% * The management fee for the Money Market Variable Account is reduced to 0.45% of the average daily net assets in excess of $500 million.
The investment adviser has agreed to pay a portion of certain variable accounts' operating expenses, exclusive of taxes, extraordinary expenses, brokerage and transaction costs, mortality and expense risk charges, and contract maintenance charges, such that the operating expenses of the variable accounts do not exceed the expense limitations indicated below, based on the average daily net assets of such variable accounts. This is reflected as a reduction of total expenses in the Statements of Operations for these variable accounts. Effective management fees and expense limitations are as follows:
Compass 3 - Effective Compass 2 Compass 3 Level 2 Management Expense Expense Expense Fees Limitations Limitations Limitations - --------------------------------------------------------------------------------------------------------------------------------- Capital Appreciation Variable Account ..... 0.75% 1.10% 1.25% 1.10% Global Governments Variable Account ....... 0.75% 1.10% 1.25% 1.10% Government Securities Variable Account .... 0.55% 1.10% 1.25% 1.10% High Yield Variable Account ............... 0.75% 1.10% 1.25% 1.10% Managed Sectors Variable Account .......... 0.75% 1.10% 1.25% 1.10% Money Market Variable Account ............. 0.50% 1.10% 1.25% 1.10% Total Return Variable Account ............. 0.75% 1.10% 1.25% 1.10%
Administrator - MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to certain funds for which MFS acts as investment adviser. Under an administrative services agreement, the variable accounts may partially reimburse MFS the costs incurred to provide these services, subject to review and approval by the Board of Managers. Each variable account is allocated a portion of these administrative costs based on its size and relative average net assets. The administrative services fee incurred for the six months ended June 30, 2005 was equivalent to the following annual effective rate of the variable accounts' average daily net assets:
Capital Global Government High Managed Money Total Appreciation Governments Securities Yield Sectors Market Return Variable Variable Variable Variable Variable Variable Variable Account Account Account Account Account Account Account - ------------------------------------------------------------------------------------------------------------------------------------ Percent of average daily net assets .......... 0.0156% 0.0156% 0.0156% 0.0156% 0.0154% 0.0155% 0.0156% ====== ====== ====== ====== ====== ====== ======
Managers' and Officers' Compensation - Each variable account pays compensation to Independent Managers in the form of a retainer, attendance fees, and additional compensation to the Board chairperson. Each variable account does not pay compensation directly to officers or members of the Board of Managers who are affiliated with the Investment Advisor or the Sponsor. Certain officers and Managers of the variable accounts are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD), and MFS Service Center, Inc. (MFSC). Other - These variable accounts and certain other MFS funds (the funds) have entered into a services agreement (the Agreement) which provides for payment of fees by the funds to Tarantino LLC in return for the provision of services of an Independent Chief Compliance Officer (ICCO) for the funds. The ICCO is an officer of the funds and the sole member of Tarantino LLC. MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ICCO. The funds can terminate the Agreement with Tarantino LLC at any time under the terms of the Agreement. For the six months ended June 30, 2005, payments made by the variable accounts to Tarantino LLC amounted to the following: ICCO Fee - ---------------------------------------------------------------------------- Capital Appreciation Variable Account .......................... $656 Global Governments Variable Account ............................ 27 Government Securities Variable Account ......................... 240 High Yield Variable Account .................................... 157 Managed Sectors Variable Account ............................... 135 Money Market Variable Account .................................. 118 Total Return Variable Account .................................. 473 The variable accounts' investment adviser, MFS, has been the subject of an administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund sales. On July 28, 2004, certain variable accounts accrued an estimate of the amount to be received pursuant to this matter, which resulted in an increase in net asset value of per unit based on the shares outstanding on the day the proceeds were recorded.
Capital Managed Appreciation Sectors Variable Variable Account Account - ------------------------------------------------------------------------------------------------------------------------------ Cash Settlement ............................................................................... $227,161 $63,230 Increase in net asset value per unit Compass 2 Contracts ....................................................................... $ 0.039 $ 0.041 Compass 3 Contracts ....................................................................... $ 0.026 $ 0.040 Compass 3 -- Level 2 Contracts ............................................................ $ 0.010 $ 0.013 The proceeds were paid to the variable accounts on February 16, 2005. (6) PORTFOLIO SECURITIES Purchases and sales of investments, other than U.S. government securities, purchased option transactions, and short-term obligations were as follows: Purchases Sales - ------------------------------------------------------------------------------------------------------------------------------ Capital Appreciation Variable Account ..................................................... $ 1,642,861 $19,781,128 Global Governments Variable Account ....................................................... 5,817,479 5,882,462 Government Securities Variable Account .................................................... 981,744 380,180 High Yield Variable Account ............................................................... 20,935,226 26,529,286 Managed Sectors Variable Account .......................................................... 8,711,765 26,391,900 Total Return Variable Account ............................................................. 18,437,727 14,529,081 Purchases and sales of U.S. government securities, other than purchased option transactions and short-term obligations, were as follows: Purchases Sales - ------------------------------------------------------------------------------------------------------------------------------ Global Governments Variable Account ....................................................... $ 2,514,223 $ 1,997,413 Government Securities Variable Account .................................................... 26,984,613 31,244,835 Total Return Variable Account ............................................................. 34,987,828 43,627,271 Purchases and sales of investments for Money Market Variable Account, which consist solely of short-term obligations, amounted to $287,796,846 and $292,997,380, respectively, excluding repurchase agreements. (7) PARTICIPANT TRANSACTIONS The changes in net assets from changes in numbers of outstanding units were as follows: Six Months Ended June 30, 2005 (000 Omitted) --------------------------------------------------------------------------------------- Transfers Between Variable Withdrawals, 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 ----- ------- ----- ------- ----- ------------- ------- ------- ------- Capital Appreciation Variable Account Compass 2 Contracts ...................... 17 $965 (22) $ (1,209) (236) $(12,867) (241) $(13,111) $ (74) $(13,185) Compass 3 Contracts ...................... 22 781 (92) (3,280) (34) (1,209) (104) (3,708) (9) (3,717) Compass 3 -- Level 2 Contracts ........... 95 1,399 120 1,808 (500) (7,368) (285) (4,161) (26) (4,187) ------ -------- -------- -------- ----- -------- $3,145 $ (2,681) $(21,444) $(20,980) $(109) $(21,089) ====== ======== ======== ======== ===== ======== Global Governments Variable Account Compass 2 Contracts ...................... 1 $ 24 18 $ 475 (12) $ (313) 7 $186 $(2) $184 Compass 3 Contracts ...................... 2 57 2 50 (3) (79) 1 28 (2) 26 Compass 3 -- Level 2 Contracts ........... 7 105 35 534 (51) (777) (9) (138) 0* (138) ------ -------- -------- -------- ----- -------- $ 186 $ 1,059 $ (1,169) $ 76 $ (4) $ 72 ====== ======== ======== ======== ===== ======== Government Securities Variable Account Compass 2 Contracts ...................... 9 $ 370 (9) $ (355) (155) $ (5,829) (155) $ (5,814) $ (60) $ (5,874) Compass 3 Contracts ...................... 7 202 (14) (363) (8) (218) (15) (379) -- (379) Compass 3 -- Level 2 Contracts ........... 17 262 69 1,059 (95) (1,451) (9) (130) (6) (136) ------ -------- -------- -------- ----- -------- $ 834 $ 341 $ (7,498) $ (6,323) $ (66) $ (6,389) ====== ======== ======== ======== ===== ======== High Yield Variable Account Compass 2 Contracts ...................... 7 $ 269 (8) $ (328) (146) $ (5,329) (147) $ (5,388) $(221) $ (5,609) Compass 3 Contracts ...................... 5 147 (11) (286) (8) (218) (14) (357) (8) (365) Compass 3 -- Level 2 Contracts ........... 12 175 73 979 (81) (1,150) 4 4 (12) (8) ------ -------- -------- -------- ----- -------- $ 591 $ 365 $ (6,697) $ (5,741) $(241) $ (5,982) ====== ======== ======== ======== ===== ======== Managed Sectors Variable Account Compass 2 Contracts ...................... 2 $ 101 (91) $ (3,863) (35) $(1,499) (124) $(5,261) $(12) $(5,273) Compass 3 Contracts ...................... 8 365 (40) (1,659) (9) (377) (41) (1,671) (7) (1,678) Compass 3 -- Level 2 Contracts ........... 56 753 (438) (5,950) (371) (4,942) (753) (10,139) (2) (10,141) ------ -------- -------- -------- ----- -------- $1,219 $(11,472) $(6,818) $(17,071) $ (21) $(17,092) ====== ======== ======= ======== ===== ======== Money Market Variable Account Compass 2 Contracts .......... 4 $ 163 43 $ 871 (84) $ (1,701) (37) $ (667) $ (33) $ (700) Compass 3 Contracts .......... 16 289 (4) (64) (24) (399) (12) (174) (5) (179) Compass 3 -- Level 2 Contracts 20 264 116 1,430 (457) (5,654) (321) (3,960) (15) (3,975) ------ -------- -------- -------- ----- ------- $ 716 2,237 $ (7,754) $ (4,801) $ (53) $(4,854) ====== ======== ======== ======== ===== ======= Total Return Variable Account Compass 2 Contracts .......... 6 $ 282 63 $ 2,875 (148) $ (6,719) 1 $ (3,562) $(147) $(3,709) Compass 3 Contracts .......... 17 780 (49) (2,155) (18) (778) (50) (2,153) (46) (2,199) Compass 3 -- Level 2 Contracts 89 1,905 331 7,126 (420) (8,987) -- 44 (102) (58) ------ -------- -------- -------- ----- ------- $2,967 $ 7,846 $(16,484) $ (5,671) $(295) $(5,966) ====== ======== ======== ======== ===== ======= *Amount less than $500. Year Ended December 31, 2004 (000 Omitted) --------------------------------------------------------------------------------------- Transfers Between Variable Withdrawals, 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 ----- ------- ----- ------- ----- -------- ----- ------- ------- ------- Capital Appreciation Variable Account Compass 2 Contracts ...................... 38 $ 1,960 (30) $ (1,561) (504) $(26,042) (496) $(25,643) $(264) $(25,907) Compass 3 Contracts ...................... 72 2,460 (201) (6,881) (79) (2,675) (208) (7,096) 1 (7,095) Compass 3 -- Level 2 Contracts ........... 190 2,700 393 5,601 (871) (12,376) (288) (4,075) (33) (4,108) ------- -------- -------- -------- ----- -------- $ 7,120 $ (2,841) $(41,093) $(36,814) (296) $(37,110) ======= ======== ======== ======== ===== ======== Global Governments Variable Account Compass 2 Contracts ...................... 2 $ 45 (16) $ (379) (19) $ (487) (33) $ (821) $ (2) $ (823) Compass 3 Contracts ...................... 5 130 (15) (380) (3) (78) (13) (328) (3) (331) Compass 3 -- Level 2 Contracts ........... 14 200 11 155 (84) (1,212) (59) (857) (1) (858) ------- -------- -------- -------- ----- -------- $375 $(604) $(1,777) $(2,006) $(6) $ (2,012) ======= ======== ======== ======== ===== ======== Government Securities Variable Account Compass 2 Contracts ...................... 21 $ 777 (100) $ (3,640) (243) $ (8,929) (322) $(11,792) $(382) $(12,174) Compass 3 Contracts ...................... 18 461 (44) (1,132) (21) (559) (47) (1,230) -- (1,230) Compass 3 -- Level 2 Contracts ........... 35 524 6 89 (226) (3,417) (185) (2,804) (31) (2,835) ------- -------- -------- -------- ----- -------- $ 1,762 $ (4,683) $(12,905) $(15,826) $(413) $(16,239) ======= ======== ======== ======== ===== ======== High Yield Variable Account Compass 2 Contracts ...................... 11 $ 378 (31) $ (1,003) (206) $ (7,129) (226) $ (7,754) $ (49) $ (7,803) Compass 3 Contracts ...................... 12 301 (48) (1,217) (12) (289) (48) (1,205) (0)* (1,205) Compass 3 -- Level 2 Contracts ........... 24 320 (1,507) (19,904) (177) (2,411)(1,660) (21,995) 19 (21,976) ------- -------- -------- -------- ----- -------- $ 999 $(22,124) $ (9,829) $(30,954) $ (30) $(30,984) ======= ======== ======== ======== ===== ======== Managed Sectors Variable Account Compass 2 Contracts ...................... 5 $ 237 (5) $ (186) (64) $ (2,652) (64) $ (2,601) $ (19) $ (2,620) Compass 3 Contracts ...................... 24 982 (64) (2,603) (21) (848) (61) (2,469) (7) (2,476) Compass 3 -- Level 2 Contracts ........... 105 1,388 160 2,136 (473) (6,235) (208) (2,711) (13) (2,724) ------- -------- -------- -------- ----- -------- $ 2,607 $ (653) $ (9,735) $ (7,781) $ (39) $ (7,820) ======= ======== ======== ======== ===== ======== Money Market Variable Account Compass 2 Contracts ...................... 13 $ 262 125 $ 2,531 (301) $ (6,058) (163) $ (3,265) $ 13 $ (3,252) Compass 3 Contracts ...................... 54 896 (78) (1,291) (34) (556) (58) (951) (10) (961) Compass 3 -- Level 2 Contracts ........... 34 418 1,685 20,849 (356) (4,393) 1,363 16,874 (23) 16,851 ------- -------- -------- -------- ----- -------- $ 1,576 $ 22,089 $(11,007) $ 12,658 $ (20) $ 12,638 ======= ======== ======== ======== ===== ======== Total Return Variable Account Compass 2 Contracts ...................... 14 $ 590 54 $ 2,308 (245) $(10,438) (177) $ (7,540) $(149) $ (7,689) Compass 3 Contracts ...................... 52 2,180 (136) (5,641) (54) (2,231) (138) (5,692) (88) (5,780) Compass 3 -- Level 2 Contracts ........... 139 2,811 379 7,650 (818) (16,482) (300) (6,021) (40) (6,061) ------- -------- -------- -------- ----- -------- $ 5,581 $ 4,317 $(29,151) $(19,253) $(277) $(19,530) ======= ======== ======== ======== ===== ======== *Amount less than $500.
(8) LINE OF CREDIT The variable accounts and other affiliated funds participate in a $1 billion unsecured line of credit provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each variable account, based on its borrowings, at a rate equal to the Federal Reserve funds rate plus 0.35%. In addition, a commitment fee, based on the average daily, unused portion of the line of credit, is allocated among the participating variable accounts at the end of each calendar quarter. The commitment fee allocated to each variable account for the six months ended June 30, 2005 is included in miscellaneous expense and was as follows: Commitment fee - ------------------------------------------------------------------------ Capital Appreciation Variable Account ............ $1,004 Global Governments Variable Account .............. 346 Government Securities Variable Account ........... 219 High Yield Variable Account ...................... 169 Managed Sectors Variable Account ................. 214 Money Market Variable Account .................... 732 Total Return Variable Account .................... 42 The variable accounts had no significant borrowings during the six months ended June 30, 2005. (9) FINANCIAL INSTRUMENTS The variable accounts trade financial instruments with off-balance-sheet risk in the normal course of its investing activities in order to manage exposure to market risks such as interest rates and foreign currency exchange rates. These financial instruments include forward foreign currency exchange contracts 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 does 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. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS Sales and purchases in the table below are netted by currency.
Net Unrealized Settlement Contracts to In Exchange Contracts Appreciation Date Deliver/Receive For at Value (Depreciation) - ----------------------------------------------------------------------------------------------------------------------------------- Global Governments Variable Account ........ Sales 8/08/05 AUD 278,063 $ 208,548 $ 211,148 $ (2,600) 7/15/05 CAD 21,893 17,489 17,844 (355) 8/15/05 DKK 590,864 96,339 95,989 350 8/08/05-8/24/05 EUR 1,885,066 2,292,102 2,282,927 9,175 7/05/05-9/06/05 GBP 385,720 712,641 690,301 22,340 8/08/05 JPY 42,466,369 393,518 384,357 9,161 7/07/05 NOK 542,100 84,642 82,877 1,765 7/07/05-8/08/05 NZD 940,708 654,938 652,321 2,617 8/15/2005 SEK 1,769,870 234,771 227,083 7,688 ---------- ---------- --------- $4,694,988 $4,644,847 $50,141 ========== ========== ========= Purchases 7/06/05 AUD 62,509 $ 47,073 $ 47,561 $ 488 9/07/05 CHF 284,033 227,810 222,499 (5,311) 7/11/05 DKK 415,512 72,391 67,418 (4,973) 8/08/05-8/24/05 EUR 578,767 706,351 700,781 (5,570) 7/06/05 GBP 211,186 379,700 378,254 (1,446) 8/08/05-8/09/05 JPY 300,364,342 2,882,955 2,718,564 (164,391) 7/07/05 NOK 413,236 64,005 63,176 (829) 8/08/05 NZD 101,269 70,577 70,218 (359) ---------- ---------- --------- $4,450,862 $4,268,471 $(182,391) ========== ========== ========= High Yield Variable Account ................ Sales 8/08/05-8/24/05 EUR 1,536,000 $1,876,190 $1,859,629 $16,561 ========== ========== ========= Purchases 8/08/05-8/24/05 EUR 511,784 $ 621,929 $ 619,860 $ (2,069) 8/15/05 SEK 76,260 10,116 9,785 (331) ---------- ---------- --------- $ 632,045 $ 629,645 $ (2,400) ========== ========== =========
At June 30, 2005, forward foreign currency purchases and sales under master netting agreements excluded above amounted to a net payable/receivable of $1,668 with Goldman Sachs & Co. and $4,792 with Merrill Lynch International for the Global Governments Variable Account. See page 28 for an explanation of abbreviations used to indicate amounts shown in currencies other than U.S. Dollar. At June 30, 2005, the variable accounts had sufficient cash and/or securities to cover any commitments under these contracts. FUTURES CONTRACTS Government Securities Variable Account
Unrealized Appreciation Description Expiration Contracts Position (Depreciation) - ------------------------------------------------------------------------------------------------------------- U.S. Treasury Notes 2 Year ....... September 2005 24 Short $ 276 U.S. Treasury Notes 5 Year ....... September 2005 14 Short (2,026) U.S. Treasury Notes 10 Year ...... September 2005 21 Short (3,783) ------- $(5,533) =======
At June 30, 2005, the variable account had sufficient cash and/or securities to cover any margin requirements under these contracts. (10) RESTRICTED SECURITIES At June 30, 2005, the High Yield Variable Account owned the following restricted securities which are subject to legal or contractual restrictions on resale, excluding securities issued under Rule 144A, constituting 0.01% of net assets which may not be publicly sold without registration under the Securities Act of 1933. The variable account does not have the right to demand that such securities be registered. The value of these securities is determined by valuations furnished by dealers or by a pricing service, or if not available, in good faith at the direction of the Managers. High Yield Variable Account
Date of Description Acquisition Shares Cost Value - --------------------------------------------------------------------------------------------------------------------- Corporacion Durango S.A. de C.V. .. 6/18/02 12,137 $0 $9,429
(11) SUBSEQUENT EVENT On April 28, 2005, the Board of Managers approved the termination of the Managed Sectors Variable Account. The account terminated operations effective July 18, 2005. INVESTMENT ADVISER Massachusetts Financial Services Company 500 Boylston Street, Boston, MA 02116-3741 CUSTODIAN AND DIVIDEND DISBURSING AGENT State Street Bank and Trust Company 225 Franklin Street, Boston, MA 02110-2875 BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT A discussion regarding the Board's most recent review and renewal of the accounts' Investment Advisory Agreement with MFS will be available on or before December 1, 2005 by clicking on "Sun Life Annuities" in the "Products and Performance" section of the MFS website (mfs.com). PROXY VOTING POLICIES AND INFORMATION A general description of the accounts' proxy voting policies and procedures is available without charge, upon request, by calling 1-800-225-2606, by visiting the Proxy Voting section of mfs.com or by visiting the SEC's website at http://www.sec.gov. Information regarding how the accounts voted proxies relating to portfolio securities during the most recent twelve month period ended June 30 is available without charge by visiting the Proxy Voting section of mfs.com or by visiting the SEC's website at http://www.sec.gov. QUARTERLY PORTFOLIO DISCLOSURE The accounts will file a complete schedule of portfolio holdings with the Securities and Exchange Commission (the Commission) for the first and third quarters of each fiscal year on Form N-Q. The accounts' Form N-Q may be reviewed and copied at the: Public Reference Room Securities and Exchange Commission Washington, D.C. 20549 0102 Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. The accounts' Form N-Q is available on the EDGAR database on the Commission's Internet website at http://www.sec.gov, and copies of this information may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfor@sec.gov or by writing the Public Reference Section at the above address. (C)2005 Sun Life Financial Distributors Inc. ITEM 2. CODE OF ETHICS. The Registrant has amended its Code of Ethics to reflect that the Registrant's Principal Financial Officer has changed. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable for semi-annual reports. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable for semi-annual reports. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable to the Registrant. ITEM 6. SCHEDULE OF INVESTMENTS A schedule of investments for each series of the Registrant is included as part of the report to shareholders of such series under Item 1 of this Form N-CSR. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable to the Registrant. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable to the Registrant. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable to the Registrant. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There were no material changes to the procedures by which shareholders may send recommendations to the Board for nominees to the Registrant's Board since the Registrant last provided disclosure as to such procedures in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A or this Item. ITEM 11. CONTROLS AND PROCEDURES. (a) Based upon their evaluation of the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act) as conducted within 90 days of the filing date of this Form N-CSR, the registrant's principal financial officer and principal executive officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no changes in the registrant's internal controls over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter covered by the report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a) File the exhibits listed below as part of this Form. Letter or number the exhibits in the sequence indicated. (1) Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit: Code of Ethics attached hereto. (2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2 under the Act (17 CFR 270.30a-2): Attached hereto. (b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act, provide the certifications required by Rule 30a-2(b) under the Act (17 CFR 270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR 240.13a-14(b) or 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished pursuant to this paragraph will not be deemed "filed" for the purposes of Section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference: Attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) MONEY MARKET VARIABLE ACCOUNT ------------------------------------------------------------------ By (Signature and Title)* ROBERT J. MANNING ------------------------------------------------------ Robert J. Manning, President Date: August 23, 2005 --------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* ROBERT J. MANNING ----------------------------------------------------- Robert J. Manning, President (Principal Executive Officer) Date: August 23, 2005 --------------- By (Signature and Title)* MARIA F. DWYER ----------------------------------------------------- Maria F. Dwyer, Treasurer (Principal Financial Officer and Accounting Officer) Date: August 23, 2005 --------------- * Print name and title of each signing officer under his or her signature. EX-99.CODE ETH 2 ex99_ethics-630725.txt CODE OF ETHICS EXHIBIT 12(a)(1) SEPTEMBER 2003 (AS REVISED FEBRUARY, 2004 AND MAY, 2005) CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND PRINCIPAL FINANCIAL OFFICERS I. COVERED OFFICERS/PURPOSE OF THE CODE This code of ethics (this "Code") has been adopted by the funds (collectively, "Funds" and each, "Fund") under supervision of the MFS Funds Board and Compass Board of Trustees/Managers (the "Boards") and applies to the Funds' Principal Executive Officer and Principal Financial Officer (the "Covered Officers" each of whom is set forth in Exhibit A) for the purpose of promoting: o honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o full, fair, accurate, timely and understandable disclosure in reports and documents that the Funds file with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Funds; o compliance by the Funds with applicable laws and governmental rules and regulations; o the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and o accountability for adherence to the Code. II. CONDUCT GUIDELINES Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. In addition, each Covered Officer should not place his or her personal interests ahead of the Funds' interests and should endeavor to act honestly and ethically. In furtherance of the foregoing, each Covered Officer must: o not use his or her personal influence or personal relationships improperly to influence investment decisions or financial reporting for any Fund whereby the Covered Officer would benefit personally to the detriment of the Fund; and o not cause a Fund to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit the Fund. The following activities, which could create the appearance of a conflict of interest, are permitted only with the approval of the Funds' Chief Legal Officer ("CLO"): o service as a director on the board of any "for profit" company; o running for political office; o the receipt of any Fund business-related gift in excess of $300; o the receipt of any entertainment from any company with which a Fund has current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; o any material ownership interest in, or any consulting or employment relationship with, any Fund service providers (e.g., custodian banks, audit firms), other than the Funds' investment adviser, principal underwriter, administrator or any affiliated person thereof; o a direct or indirect financial interest in commissions, transaction charges or spreads paid by a Fund for effecting portfolio transactions or for selling or redeeming shares, other than an interest arising from the Covered Officer's employment or securities ownership. III. DISCLOSURE AND COMPLIANCE o Each Covered Officer should familiarize himself or herself with the disclosure requirements generally applicable to the Funds; o each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about a Fund to others, whether within or outside the Fund, including to the Fund's trustees and auditors, and to governmental regulators and self-regulatory organizations; o each Covered Officer should, to the extent appropriate within his or her area of Fund responsibility, consult with other officers and employees of the Funds and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and o it is the responsibility of each Covered Officer to promote compliance within his or her area of Fund responsibility with the standards and restrictions imposed by applicable laws, rules and regulations. IV. REPORTING AND ACCOUNTABILITY Each Covered Officer must: o upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Boards that he or she has received, read, and understands the Code; o annually thereafter affirm to the Boards that he or she has complied with the requirements of the Code; o annually report to the CLO affiliations and relationships which are or may raise the appearance of a conflict of interest with the Covered Officer's duties to the Funds, as identified in the annual Trustee and Officer Questionnaire; o not retaliate against any other Covered Officer or any officer or employee of the Funds or their affiliated persons for reports of potential violations that are made in good faith; and o notify the CLO promptly if he or she knows of any violation of this Code. Failure to do so is itself a violation of this Code. The CLO is responsible for applying this Code to specific situations in which questions are presented under it, granting waivers upon consultation with the appropriate Board or its designee, investigating violations, and has the authority to interpret this Code in any particular situation. The CLO will report requests for waivers to the appropriate Board (or a designee thereof) promptly upon receipt of a waiver request and will periodically report to the appropriate Board any approvals granted since the last report. The CLO will take all appropriate action to investigate any potential violations reported to him or her and to report any violations to the appropriate Board. If the Board concurs that a violation has occurred, it will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer. Any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. V. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds, the Funds' adviser, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Funds' and their investment adviser's codes of ethics under Rule 17j-1 under the Investment Company Act and any other codes or policies or procedures adopted by the Funds or their investment adviser or other service providers are separate requirements and are not part of this Code. VI. AMENDMENTS Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of each Board, including a majority of independent trustees. VII. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code and under the direction of the CLO will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the appropriate Funds' Board, its counsel, counsel to the Board's independent trustees and senior management and the board of directors of the Fund's investment adviser and its counsel. VIII. INTERNAL USE The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Fund, as to any fact, circumstance, or legal conclusion. EXHIBIT A PERSONS COVERED BY THIS CODE OF ETHICS Funds' Principal Executive Officer: Robert J. Manning Funds' Principal Financial Officer: Maria F. Dwyer EX-99.CERT 3 ex99_cert-630725.txt CERTIFICATION EX-99.CERT MONEY MARKET VARIABLE ACCOUNT CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT I, Maria F. Dwyer, certify that: 1. I have reviewed this report on Form N-CSR of Money Market Variable Account; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of a date within 90 days prior to the filing date of this report based on such evaluation; and d. disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by the report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 23, 2005 MARIA F. DWYER --------------- --------------------------------------- Maria F. Dwyer Treasurer (Principal Financial Officer and Accounting Officer) EX-99.CERT MONEY MARKET VARIABLE ACCOUNT CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT I, Robert J. Manning, certify that: 1. I have reviewed this report on Form N-CSR of Money Market Variable Account; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of a date within 90 days prior to the filing date of this report based on such evaluation; and d. disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by the report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 23, 2005 ROBERT J. MANNING --------------- --------------------------------------- Robert J. Manning President (Principal Executive Officer) EX-99.906CERT MONEY MARKET VARIABLE ACCOUNT CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT I, Maria F. Dwyer, certify that, to my knowledge: 1. The Form N-CSR (the "Report") of Money Market Variable Account (the "Registrant") fully complies for the period covered by the Report with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: August 23, 2005 MARIA F. DWYER --------------- --------------------------------------- Maria F. Dwyer Treasurer (Principal Financial Officer and Accounting Officer) A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906 HAS BEEN PROVIDED TO THE REGISTRANT AND WILL BE RETAINED BY THE REGISTRANT AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST. EX-99.906CERT MONEY MARKET VARIABLE ACCOUNT CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT I, Robert J. Manning, certify that, to my knowledge: 1. The Form N-CSR (the "Report") of Money Market Variable Account (the "Registrant") fully complies for the period covered by the Report with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: August 23, 2005 ROBERT J. MANNING --------------- --------------------------------------- Robert J. Manning President (Principal Executive Officer) A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906 HAS BEEN PROVIDED TO THE REGISTRANT AND WILL BE RETAINED BY THE REGISTRANT AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST. -----END PRIVACY-ENHANCED MESSAGE-----