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 811-5448
TOTAL RETURN 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: December 31, 2007
| ITEM 1. | REPORTS TO STOCKHOLDERS. |
]
PROFESSIONALLY MANAGED COMBINATION
FIXED/VARIABLE ANNUITIES
FOR PERSONAL INVESTMENTS AND
QUALIFIED RETIREMENT PLANS
ANNUAL REPORT Ÿ December 31, 2007
Capital Appreciation Variable Account
Global Governments Variable Account
Government Securities Variable Account
High Yield 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
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:
The past year has been a great example of why investors should keep their eyes on the long term.
In 2006 the Dow Jones Industrial Average returned 19% and was fairly stable. This year we have seen a greater level of volatility than has been experienced in recent years. The Dow hit several new highs but also experienced swift drops as a global credit crisis swept through markets, spurred by defaults on U.S. subprime loans and a liquidity crunch. Still, even with this volatility, the Dow ended the first three quarters of 2007 with a return near 13%.
U.S. Treasury bonds gained ground, especially in the third quarter as investors sought less risky asset classes. The spreads of many lower-quality debt investments widened.
In 2007 the U.S. dollar fell against the euro, oil prices hit their highest levels yet, and gold spiked to its steepest price in 28 years. Around the globe, stocks sold off as risk aversion mounted. As we have said before, markets can be volatile, and investors should make sure they have an investment plan that can carry them through the peaks and troughs.
If you are focused on a long-term investment strategy, the short-term ups and downs of the markets should not necessarily dictate portfolio action on your part. In our view, investors who remain committed to a long-term plan are more likely to achieve their financial goals.
In any market environment, we believe individual investors are best served by following a three-pronged investment strategy of allocating their holdings across the major asset classes, diversifying within each class, and regularly rebalancing their portfolios to maintain their desired allocations. Of course, these strategies cannot guarantee a profit or protect against a loss. Investing and planning for the long term require diligence and patience, two traits that in our experience are essential to capitalizing on the many opportunities the financial markets can offer — through both up and down economic cycles.
Respectfully,
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management®
February 15, 2008
The opinions expressed in this letter are subject to change, may not be relied upon for investment advice, and no forecasts can be guaranteed.
Management Reviews
The following management reviews, for the twelve months ended December 31, 2007, exclude the Money Market Variable Account.
Market Environment
Despite seemingly robust growth rates during the second and third quarters of 2007, underlying economic activity in the U.S. remained muted relative to other major economies. Overall, global economies witnessed moderate to strong growth during the reporting period as domestic demand improved and world trade accelerated.
With the strong global growth, however, concerns emerged about rising global inflation, especially as capacity became more constrained, wages rose, and energy and food prices advanced. During the reporting period, global central banks (with the exception of the U.S. Federal Reserve Board) tightened monetary conditions, which in turn pushed global bond yields to their highest levels during this economic expansion.
However, financial markets — particularly in the mortgage and structured-products areas — experienced substantial volatility in recent months. Beginning in late July, heightened uncertainty and distress concerning the subprime mortgage market caused several global credit markets to tighten up, forcing central banks to inject liquidity and to reassess their tightening biases as sovereign bond yields declined and credit spreads widened. While credit conditions improved somewhat by late October as the Federal Reserve Board cut interest rates, the level of market turbulence remained significant through year end. Increased market turmoil was also exacerbated by U.S. home foreclosures and uncertainties surrounding falling housing prices. Despite increased volatility across all asset classes and the widening in credit spreads, U.S. labor markets were resilient and wages rose modestly. More broadly, global equity markets rebounded following summer losses and generally held those gains through the end of the reporting period.
Capital Appreciation Variable Account
Summary of Results
For the twelve months ended December 31, 2007, Compass 2 provided a total return of 9.58%, Compass 3 provided a total return of 9.48%, and Compass 3 — Level 2 provided a total return of 9.64%. These compare with a return of 11.81% for the account’s benchmark, the Russell 1000 Growth Index.
Detractors from performance
Stock selection in the health care sector detracted from the account’s performance relative to the benchmark. Eye care medical products maker Advanced Medical Optics, biotechnology firm Amgen, and pharmaceutical and diagnostic company Roche Holding(aa) (Switzerland) were among the account’s largest detractors within this sector. Shares of Advanced Medical Optics suffered a steady decline during the period due to several recalls of its lens solution products, which resulted in a dramatic decrease in eye care sales. Shares of Amgen suffered, in part, due to studies that raised concerns about the safety profile of the company’s anemia drug Aranesp.
An underweighted position in the basic materials sector hindered relative returns. In particular, our positioning in strong-performing agrichemical products company Monsanto(g) was the principal negative factor in this sector.
Several individual securities in other sectors that dampened relative results included investment management and banking firm UBS(aa) (Switzerland), billing software company Amdocs, discount retailer Family Dollar Stores(g), office supply superstore operator Staples, and upscale apparel retailer Nordstrom. Our underweighted position in computer and personal electronics maker Apple also held back relative returns as this benchmark constituent turned in strong performance over the reporting period.
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Management Reviews — continued
Contributors to performance
Security selection in the retailing sector contributed to the account’s relative performance. Avoiding poor-performing home improvement retailer Home Depot aided relative results.
Our underweighted position and stock selection in the autos and housing sector boosted relative returns. No individual holdings within this sector were among the account’s top contributors.
Stock selection in the industrial goods and services sector also benefited relative performance. Aerospace metal parts manufacturer Precision Castparts was a strong contributor in this sector.
Standout performers in other sectors included financial exchange Deutsche Boerse(aa) (Germany) and global integrated energy company Hess(aa). Shares of Deutsche Boerse rose significantly during the year. The company acquired International Securities Exchange Holdings, which we believe positioned the company as a key player in the U.S. options market and in global derivatives trading. Shares of Hess surged in recent months due largely to hopes that an oil field discovery off the coast of Brazil could nearly double the company’s reserves.
Elsewhere, oil field services company Schlumberger, offshore drilling company Noble, network equipment manufacturer Juniper Networks, credit card transactions processor First Data(g), enterprise software giant Oracle, and food company Nestle(aa) (Switzerland) also boosted relative performance.
During the reporting period, currency exposure was a contributor to relative performance. All of MFS’ investment decisions are driven by the fundamentals of each individual opportunity and, as such, it is common for our portfolios to have different currency exposure than the benchmark.
Global Governments Variable Account
Summary of Results
For the twelve months ended December 31, 2007, Compass 2 provided a total return of 7.34%; Compass 3 provided a total return of 7.18%; and Compass 3 — Level 2 provided a total return of 7.34%. These compare with a return of 10.81% for the account’s benchmark, the JPMorgan Global Government Bond Index Unhedged.
Detractors from performance
The account’s U.S. yield curve(y) positioning had a negative impact on relative performance as interest rates generally declined over the reporting period.
During the latter half of the period, as swap and credit spreads widened, the account’s exposure to “AAA”(s) rated commercial mortgage-backed securities (CMBS), delegated underwriting services (DUS) pools, Small Business Association (SBA) bonds, and emerging markets debt securities detracted from relative results.
Contributors to performance
The account’s underweighted exposure to the U.S. dollar, particularly versus the Euro, modestly contributed to relative performance as the value of the dollar weakened relative to most of the world’s major currencies.
Our duration(d) positioning in European bonds also benefited investment results during the reporting period.
Security selection, particularly from some of the account’s holdings of European government bonds also helped relative performance.
Government Securities Variable Account
Summary of Results
For the twelve months ended December 31, 2007, Compass 2 provided a total return of 5.66%, Compass 3 provided a total return of 5.55%, and Compass 3 — Level 2 provided a total return of 5.71%. These compare with a return of 7.72% for the account’s benchmark, the Lehman Brothers U.S. Government/Mortgage Bond Index.
Detractors from performance
Relative to the benchmark, the account’s duration(d) positioning held back performance as interest rates generally declined over the reporting period.
Our greater exposure to government agency debt also dampened investment results as the sector lagged the returns of the benchmark.
Contributors to performance
The account’s lesser relative exposure to mortgage-backed securities added to performance as credit spreads widened dramatically during the recent subprime market crisis.
Our exposure to U.S. Treasury securities, which outperformed the benchmark over the investment period, also helped relative results.
High Yield Variable Account
Summary of Results
For the twelve months ended December 31, 2007, Compass 2 provided a total return of 0.43%, Compass 3 provided a total return of 0.33%, and Compass 3 — Level 2 provided a total return of 0.48%. These compare with a return of 1.87% for the account’s benchmark, the Lehman Brothers U.S. High-Yield Corporate Bond Index.
Detractors from performance
Over the reporting period, yield was a negative factor in performance relative to the benchmark. Our relative exposure to financial issues and to “B” rated(s) bonds, in general, also hurt.
Debt holdings that detracted from results included the bonds of General Motors Acceptance Corp. (GMAC), Tropicana Entertainment, ARCap, Harrah’s Operating Co., Realogy(g), Ford Motor Credit, Freescale Semiconductor(g), and Umbrella Acquisition(g).
Contributors to performance
Our lower exposure to industrial debt was a relative positive for the account as was overall security selection. For the reporting period, the debt of FMG Finance was among the account’s leading contributors relative to the benchmark. Additionally, our smaller exposure to lower-rated debt, particularly in “BB” and, to a lesser extent, “CCC” rated securities, helped relative performance.
Total Return Variable Account
Summary of Results
For the twelve months ended December 31, 2007, Compass 2 provided a total return of 2.60%, Compass 3 provided a total return
2
Management Reviews — continued
of 2.45%, and Compass 3—Level 2 provided a total return of 2.60%. These compare with a return of 5.49% for the account’s benchmark, the Standard & Poor’s 500 Stock Index (S&P 500 Index). The account’s other benchmark, the Lehman Brothers U.S. Aggregate Bond Index (Lehman Aggregate Index), generated a total return of 6.97%.
Detractors from performance
Within the equity portion of the account, an overweighted position in the poor-performing financial services sector held back performance relative to the S&P 500 Index. Insurance companies, Genworth Financial, Conseco(aa), and Allstate, along with mortgage lending firm Countrywide Financial(g) and electronic brokerage firm E*TRADE Financial, were among the account’s top detractors.
Stock selection and an underweighted position in the technology sector also dampened relative performance. Telecommunications equipment manufacturer Nortel Networks(aa) was a top detractor. We believe Nortel’s weaker-than-expected fundamentals and management’s inability to turn the business around contributed to the decline of the company’s stock price. Not holding strong-performing computer and personal electronics maker Apple also hurt relative results.
In the health care sector, security selection detracted from relative returns. No individual securities within this sector were among the account’s top detractors for the period.
Elsewhere, retailer Macy’s, home improvement products maker Masco, and media titan The New York Times held back relative performance. Masco’s shares were hurt by the deterioration of the housing markets and the company’s pessimistic guidance that cited decreased housing starts.
Within the fixed income portion of the account, our exposure to bonds in the financial sector and to structured products, particularly commercial mortgage-backed securities (CMBS) and asset-backed securities (ABS), held back performance relative to the Lehman Aggregate Index, as these securities suffered from the recent turmoil in the subprime market.
Credit quality, particularly holdings of lower-quality “BBB”(s) rated securities, detracted from performance as credit spreads widened over the reporting period.
Contributors to performance
Within the equity portion of the account, stock selection and an overweighted position in the strong-performing energy sector boosted performance relative to the S&P 500 Index. Global integrated energy company Hess, and oil and gas producers, Anadarko Petroleum, Devon Energy, and Apache, were all strong contributors over the reporting period. Shares of Hess surged in recent months due largely to hopes that an oil field discovery off the coast of Brazil could nearly double the company’s reserves.
A strong showing in the basic materials sector was principally due to stock selection. Packaging manufacturer Owens-Illinois(aa)(g) was a top contributor within this sector. The company reported quarterly earnings that exceeded consensus expectations. The firm attributed the positive results to better operating performance in its glass factories and improved pricing and product sales mix.
Elsewhere, agricultural equipment manufacturer Deere & Co. and global financial services provider Bank of New York Mellon were top contributors. Deere’s stock price gain was driven by strong capital management and better-than-expected results throughout
the period which pushed its shares up in excess of the market. Not holding poor-performing financial services firm Wachovia and cable services provider Comcast benefited results, while our small positioning in insurance company American International Group, which struggled during the reporting period, also helped relative returns.
During the reporting period, currency exposure was a contributor to relative performance. All of MFS’ investment decisions are driven by the fundamentals of each individual opportunity and, as such, it is common for our portfolios to have different currency exposure than the benchmark.
Within the fixed income portion of the account, our defensive positioning in shorter duration(d) corporate bond holdings, relative to the Lehman Aggregate Index, boosted relative performance as credit spreads widened.
The account generated a higher level of income than the benchmark over the reporting period which also benefited relative results.
| (aa) | Security is not a benchmark constituent. |
| (d) | Duration is a measure of how much a bond’s price is likely to fluctuate with general changes in interest rates, e.g., if rates rise 1.00%, a bond with a 5-year duration is likely to lose about 5.00% of its value. |
| (g) | Security was not held in the portfolio at period end. |
| (s) | Bonds rated “BBB”, “Baa”, or higher are considered investment grade; bonds rated “BB”, “Ba”, or below are considered non-investment grade. The primary source for bond quality ratings is Moody’s Investors Service. If not available, ratings by Standard & Poor’s are used, else ratings by Fitch, Inc. For securities which are not rated by any of the three agencies, the security is considered Not Rated. |
| (y) | A yield curve graphically depicts the yields of different maturity bonds of the same credit quality and type; a normal yield curve is upward sloping, with short-term rates lower than long-term rates. |
Index Definitions
JPMorgan Global Government Bond Index Unhedged — measures developed government bond markets around the world.
Lehman Brothers U.S. Aggregate Bond Index — a market capitalization-weighted index that measures the performance of the U.S. investment-grade, fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities with at least one year to final maturity.
Lehman Brothers U.S. Government/Mortgage Bond Index — measures debt issued by the U.S. Government, and its agencies, as well as mortgage-backed pass-through securities of Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC).
Lehman Brothers U.S. High-Yield Corporate Bond Index — a market capitalization-weighted index that measures the performance of non-investment grade, fixed rate debt. Eurobonds and debt issues from countries designated as emerging markets (e.g., Argentina, Brazil, Venezuela, etc.) are excluded.
Russell 1000 Growth Index — constructed to provide a comprehensive barometer for growth securities in the large-cap segment of the U.S. equity universe. Companies in this index generally have higher price-to-book ratios and higher forecasted growth values.
Standard & Poor's 500 Stock Index — a market capitalization-weighted index of 500 widely held equity securities, designed to measure broad U.S. equity performance.
It is not possible to invest directly in an index.
3
Performance Summary
These performance results reflect the mortality and expense risks charges but do not reflect the deduction of surrender charges or any other applicable contract fees. If surrender charges and all other contract fees were included, the results would be lower.
Performance data shown represents past performance and is no guarantee of future results. Investment return and principal value fluctuate so your units, when sold, may be worth more or less than the original cost; current performance may be lower or higher than quoted. For most recent month-end performance, please visit sunlife-usa.com. The performance shown does not reflect the deduction of taxes, if any, that a contract holder would pay on distributions or redemption of contract units.
Year end performance through December 31, 2007
| | | | | | | | | |
| | | Compass 2 | | | Compass 3 | | | Compass 3 –
Level 2 | |
Capital Appreciation
Variable Account | | 9.58 | % | | 9.48 | % | | 9.64 | % |
| | | |
Global Governments
Variable Account | | 7.34 | % | | 7.18 | % | | 7.34 | % |
| | | |
Government Securities
Variable Account | | 5.66 | % | | 5.55 | % | | 5.71 | % |
| | | |
High Yield Variable
Account | | 0.43 | % | | 0.33 | % | | 0.48 | % |
| | | |
Money Market
Variable Account | | 3.32 | % | | 3.22 | % | | 3.38 | % |
| | | |
Total Return
Variable Account | | 2.60 | % | | 2.45 | % | | 2.60 | % |
Before investing, you should consider carefully the investment objectives, risks, and charges and expenses of each investment option. All of this information is explained in the prospectus for each of the Variable Accounts. You should read the prospectus carefully before investing.
Performance results reflect any applicable expense subsidies and waivers in effect during the periods shown. Without such subsidies and waivers the accounts' performance results would be less favorable. Please see the prospectus for complete details. All results are historical and assume the reinvestment of any dividends and capital gains distributions.
Money Market Variable Account performance results reflect any applicable expense subsidies, waivers and adjustments in effect during the periods shown. Subsidies and fee waivers may be imposed to enhance a portfolio's yield during periods when the portfolio's operating expenses have a significant impact on the portfolio's yield due to lower interest rates. Without such subsidies, waivers and adjustments the results would have been less favorable. Please see the prospectus for complete details. All results are historical and assume the reinvestment of any dividends and capital gains distributions.
From time to time the variable accounts may receive proceeds from litigation settlements, without which performance would be lower.
See notes to financial statements.
4
Portfolio Composition — Capital Appreciation Variable Account
Portfolio Structure
| | |
| Top ten holdings | | |
| Microsoft Corp. | | 3.0% |
| Google, Inc., “A” | | 2.8% |
| Cisco Systems, Inc. | | 2.5% |
| Oracle Corp. | | 2.5% |
| Genzyme Corp. | | 2.2% |
| Procter & Gamble Co. | | 2.2% |
| Amdocs Ltd. | | 2.2% |
| State Street Corp. | | 2.1% |
| Medtronic, Inc. | | 2.1% |
| Roche Holding AG | | 2.0% |
| | |
| Equity sectors | | |
| Technology | | 23.8% |
| Health Care | | 18.6% |
| Financial Services | | 10.2% |
| Consumer Staples | | 9.1% |
| Retailing | | 9.0% |
| Industrial Goods & Services | | 7.0% |
| Special Products & Services | | 5.7% |
| Energy | | 5.6% |
| Leisure | | 4.7% |
| Utilities & Communications | | 1.8% |
| Transportation | | 1.2% |
| Basic Materials | | 1.1% |
| Autos & Housing | | 0.8% |
Percentages are based on net assets as of 12/31/07.
The portfolio is actively managed and current holdings may be different.
5
Portfolio Composition — Global Governments Variable Account
Portfolio Structure (i)
| | |
| Fixed income sectors (i) | | |
| Non-U.S. Government Bonds | | 67.1% |
| U.S. Treasury Securities | | 13.5% |
| Commercial Mortgage-Backed Securities | | 4.5% |
| Emerging Market Bonds | | 3.1% |
| U.S. Government Agencies | | 2.5% |
| Mortgage-Backed Securities | | 1.2% |
| Municipal Bonds | | 0.6% |
| | |
| Credit quality of bonds (r) | | |
| AAA | | 61.6% |
| AA | | 12.6% |
| A | | 22.4% |
| BBB | | 3.4% |
| |
| Portfolio facts | | |
| Average Duration (d)(i) | | 6.6 |
| Average Life (i)(m) | | 8.9 yrs. |
| Average Maturity (i)(m) | | 9.9 yrs. |
| Average Credit Quality of Rated Securities (long-term) (a) | | AA+ |
| Average Credit Quality of Rated Securities (short-term) (a) | | A-1 |
| |
| Country weightings (i) | | |
| United States | | 29.4% |
| Japan | | 23.8% |
| United Kingdom | | 10.1% |
| Germany | | 8.4% |
| France | | 5.2% |
| Belgium | | 4.2% |
| Italy | | 4.1% |
| Spain | | 4.1% |
| Netherlands | | 3.4% |
| Other Countries | | 7.3% |
| (a) | The average credit quality of rated securities is based upon a market weighted average of portfolio holdings that are rated by public rating agencies. |
| (d) | Duration is a measure of how much a bond’s price is likely to fluctuate with general changes in interest rates, e.g., if rates rise 1.00%, a bond with a 5-year duration is likely to lose about 5.00% of its value. |
| (i) | For purposes of this presentation, the bond component includes accrued interest amounts and may be positively or negatively impacted by the equivalent exposure from any derivative holdings, if applicable. |
| (m) | 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 or pre-paid 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. |
| (r) | 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 the “AAA”-rating category. Percentages are based on the total market value of investments as of 12/31/07. |
Percentages are based on net assets as of 12/31/07, unless otherwise noted.
The portfolio is actively managed and current holdings may be different.
6
Portfolio Composition — Government Securities Variable Account
Portfolio Structure (i)
| | |
| Fixed income sectors (i) | | |
| Mortgage-Backed Securities | | 56.0% |
| U.S. Treasury Securities | | 24.0% |
| U.S. Government Agencies | | 22.0% |
| Municipal Bonds | | 2.0% |
| | |
| Credit quality of bonds (r) | | |
| AAA | | 99.2% |
| AA | | 0.8% |
| |
| Portfolio facts | | |
| Average Duration (d)(i) | | 4.2 |
| Average Life (i)(m) | | 6.1 yrs. |
| Average Maturity (i)(m) | | 14.4 yrs. |
| Average Credit Quality of Rated Securities (long-term) (a) | | AAA |
| Average Credit Quality of Rated Securities (short-term) (a) | | A-1 |
| (a) | The average credit quality of rated securities is based upon a market weighted average of portfolio holdings that are rated by public rating agencies. |
| (d) | Duration is a measure of how much a bond’s price is likely to fluctuate with general changes in interest rates, e.g., if rates rise 1.00%, a bond with a 5-year duration is likely to lose about 5.00% of its value. |
| (i) | For purposes of this presentation, the bond component includes accrued interest amounts and may be positively or negatively impacted by the equivalent exposure from any derivative holdings, if applicable, which may result in the investment in a sector of less than 0%. |
| (m) | 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 or pre-paid 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. |
| (r) | 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 the “AAA”-rating category. Percentages are based on the total market value of investments as of 12/31/07. |
Percentages are based on net assets as of 12/31/07, unless otherwise noted.
The portfolio is actively managed and current holdings may be different.
7
Portfolio Composition — High Yield Variable Account
Portfolio Structure (i)
| | |
| Top five industries (i) | | |
| Medical & Health Technology & Services | | 9.0% |
| Broadcasting | | 8.0% |
| Gaming & Lodging | | 6.1% |
| Utilities — Electric Power | | 5.2% |
| Energy — Independent | | 5.2% |
| | |
| Credit quality of bonds (r) | | |
| AAA | | 1.2% |
| AA | | 0.4% |
| BBB | | 3.2% |
| BB | | 30.1% |
| B | | 50.2% |
| CCC | | 14.4% |
| Not Rated | | 0.5% |
| |
| Portfolio facts | | |
| Average Duration (d)(i) | | 4.3 |
| Average Life (i)(m) | | 6.9 yrs. |
| Average Maturity (i)(m) | | 7.5 yrs. |
| Average Credit Quality of Rated Securities (long-term) (a) | | B+ |
| Average Credit Quality of Rated Securities (short-term) (a) | | A-1 |
| (a) | The average credit quality of rated securities is based upon a market weighted average of portfolio holdings that are rated by public rating agencies. |
| (d) | Duration is a measure of how much a bond’s price is likely to fluctuate with general changes in interest rates, e.g., if rates rise 1.00%, a bond with a 5-year duration is likely to lose about 5.00% of its value. |
| (i) | For purposes of this presentation, the bond component includes accrued interest amounts and may be positively or negatively impacted by the equivalent exposure from any derivative holdings, if applicable. |
| (m) | 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 or pre-paid 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. |
| (r) | 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 the “AAA”-rating category. Percentages are based on the total market value of investments as of 12/31/07. |
Percentages are based on net assets as of 12/31/07, unless otherwise noted.
The portfolio is actively managed and current holdings may be different.
8
Portfolio Composition — Money Market Variable Account
Portfolio Structure (u)
| | |
| Short-term credit quality (q) | | |
| Average Credit Quality Short-Term Bonds (a) | | A-1 |
| All holdings are rated “A-1” | | |
| |
| Maturity breakdown (u) | | |
| 0 - 29 days | | 46.5% |
| 30 - 59 days | | 36.1% |
| 60 - 89 days | | 9.5% |
| 90 - 366 days | | 8.3% |
| Other Assets Less Liabilities | | (0.4)% |
| (a) | The average credit quality is based upon a market weighted average of portfolio holdings that are rated by public rating agencies. |
| (q) | 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. If not rated by any of the three agencies, the security is considered Not Rated. U.S. Treasuries and U.S. Agency securities are included in the “A-1”-rating category. Percentages are based on the total market value of investments as of 12/31/07. |
| (u) | For purposes of this presentation, accrued interest, where applicable, is included. |
From time to time “Other Assets Less Liabilities” may be negative due to timing of cash receipts.
Percentages are based on net assets as of 12/31/07, unless otherwise noted.
The portfolio is actively managed and current holdings may be different.
9
Portfolio Composition — Total Return Variable Account
Portfolio Structure (i)
| | |
| Top ten holdings (i) | | |
| Fannie Mae, 5.5%, 30 years | | 4.3% |
| Fannie Mae, 6.0%, 30 years | | 2.1% |
| Exxon Mobil Corp. | | 2.0% |
| U.S. Treasury Notes, 4.5%, 2009 | | 1.9% |
| Altria Group, Inc. | | 1.7% |
| U.S. Treasury Notes, 4.875%, 2009 | | 1.6% |
| Lockheed Martin Corp. | | 1.5% |
| U.S. Treasury Notes, 3.125%, 2008 | | 1.5% |
| U.S. Treasury Bonds 5.375%, 2031 | | 1.2% |
| TOTAL S.A., ADR | | 1.2% |
| | |
| Equity sectors | | |
| Financial Services | | 14.8% |
| Energy | | 8.1% |
| Utilities & Communications | | 6.3% |
| Health Care | | 5.6% |
| Consumer Staples | | 5.4% |
| Industrial Goods & Services | | 4.8% |
| Retailing | | 3.2% |
| Technology | | 2.9% |
| Basic Materials | | 1.9% |
| Leisure | | 1.8% |
| Autos & Housing | | 1.6% |
| Transportation | | 0.7% |
| Special Products & Services | | 0.4% |
| |
| Fixed income sectors (i) | | |
| Mortgage-Backed Securities | | 16.1% |
| High Grade Corporates | | 9.9% |
| U.S. Treasury Securities | | 9.3% |
| Commercial Mortgage-Backed Securities | | 2.3% |
| U.S. Government Agencies | | 2.2% |
| Non-U.S. Government Bonds | | 0.9% |
| Asset-Backed Securities | | 0.5% |
| Emerging Market Bonds | | 0.3% |
| High Yield Corporates | | 0.2% |
| Municipal Bonds | | 0.1% |
| Residential Mortgage-Backed Securities (o) | | 0.0% |
| Collateralized Debt Obligations (o) | | 0.0% |
| (i) | For purposes of this presentation, the bond component includes accrued interest amounts and may be positively or negatively impacted by the equivalent exposure from any derivative holdings, if applicable. |
Percentages are based on net assets as of 12/31/07, unless otherwise noted.
The portfolio is actively managed and current holdings may be different.
10
Portfolio of Investments — December 31, 2007
Capital Appreciation Variable Account
| | | | | |
| Issuer | | Shares/Par | | Value ($) |
| | | | | |
COMMON STOCKS - 98.6% | | | | | |
Aerospace - 2.8% | | | | | |
Precision Castparts Corp. | | 11,750 | | $ | 1,629,725 |
United Technologies Corp. | | 51,060 | | | 3,908,132 |
| | | | | |
| | | | $ | 5,537,857 |
| | | | | |
Alcoholic Beverages - 1.4% | | | | | |
Diageo PLC | | 129,200 | | $ | 2,765,585 |
| | | | | |
Apparel Manufacturers - 2.9% | | | | | |
LVMH Moet Hennessy Louis Vuitton S.A. | | 27,350 | | $ | 3,287,207 |
NIKE, Inc., “B” | | 38,010 | | | 2,441,762 |
| | | | | |
| | | | $ | 5,728,969 |
| | | | | |
Automotive - 0.8% | | | | | |
Bayerische Motoren Werke AG | | 26,150 | | $ | 1,614,791 |
| | | | | |
Biotechnology - 4.2% | | | | | |
Amgen, Inc. (a) | | 19,380 | | $ | 900,007 |
Celgene Corp. (a) | | 17,620 | | | 814,220 |
Genentech, Inc. (a) | | 13,170 | | | 883,312 |
Genzyme Corp. (a) | | 57,330 | | | 4,267,645 |
Millipore Corp. (a) | | 18,830 | | | 1,377,979 |
| | | | | |
| | | | $ | 8,243,163 |
| | | | | |
Broadcasting - 2.0% | | | | | |
News Corp., “A” | | 103,210 | | $ | 2,114,773 |
Omnicom Group, Inc. | | 39,050 | | | 1,856,047 |
| | | | | |
| | | | $ | 3,970,820 |
| | | | | |
Brokerage & Asset Managers - 3.5% | | | |
Charles Schwab Corp. | | 101,290 | | $ | 2,587,960 |
Deutsche Boerse AG | | 14,070 | | | 2,777,150 |
Franklin Resources, Inc. | | 3,150 | | | 360,455 |
ICAP PLC | | 81,980 | | | 1,179,934 |
| | | | | |
| | | | $ | 6,905,499 |
| | | | | |
Business Services - 4.5% | | | | | |
Amdocs Ltd. (a) | | 122,840 | | $ | 4,234,295 |
Automatic Data Processing, Inc. | | 29,110 | | | 1,296,268 |
Fidelity National Information Services, Inc. | | 20,770 | | | 863,824 |
Western Union Co. | | 96,830 | | | 2,351,032 |
| | | | | |
| | | | $ | 8,745,419 |
| | | | | |
Cable TV - 0.9% | | | | | |
Comcast Corp., “A” (a) | | 97,090 | | $ | 1,772,863 |
| | | | | |
Computer Software - 6.7% | | | | | |
Citrix Systems, Inc. (a) | | 33,490 | | $ | 1,272,955 |
Microsoft Corp. | | 163,560 | | | 5,822,736 |
Oracle Corp. (a) | | 216,970 | | | 4,899,183 |
VeriSign, Inc. (a) | | 30,230 | | | 1,136,950 |
| | | | | |
| | | | $ | 13,131,824 |
| | | | | |
Computer Software - Systems - 4.3% | | | |
Apple Computer, Inc. (a) | | 13,160 | | $ | 2,606,733 |
Dell, Inc. (a) | | 62,860 | | | 1,540,699 |
EMC Corp. (a) | | 88,330 | | | 1,636,755 |
International Business Machines Corp. | | 14,930 | | | 1,613,933 |
Network Appliance, Inc. (a) | | 41,780 | | | 1,042,829 |
| | | | | |
| | | | $ | 8,440,949 |
| | | | | |
Consumer Goods & Services - 4.0% | | | |
Apollo Group, Inc., “A” (a) | | 13,000 | | $ | 911,950 |
Colgate-Palmolive Co. | | 16,470 | | | 1,284,001 |
eBay, Inc. (a) | | 44,340 | | | 1,471,645 |
Procter & Gamble Co. | | 58,040 | | | 4,261,297 |
| | | | | |
| | | | $ | 7,928,893 |
| | | | | |
| | | | | |
| Issuer | | Shares/Par | | Value ($) |
| | | | | |
| | | | | |
COMMON STOCKS - continued | | | | | |
Electrical Equipment - 4.2% | | | | | |
Danaher Corp. | | 43,600 | | $ | 3,825,464 |
General Electric Co. | | 78,860 | | | 2,923,340 |
W.W. Grainger, Inc. | | 16,660 | | | 1,458,083 |
| | | | | |
| | | | $ | 8,206,887 |
| | | | | |
Electronics - 6.2% | | | | | |
Intel Corp. | | 143,950 | | $ | 3,837,707 |
Intersil Corp., “A” | | 40,190 | | | 983,851 |
KLA-Tencor Corp. | | 36,800 | | | 1,772,288 |
National Semiconductor Corp. | | 49,940 | | | 1,130,642 |
Samsung Electronics Co. Ltd., GDR | | 8,146 | | | 2,364,087 |
Taiwan Semiconductor Manufacturing
Co. Ltd., ADR | | 214,874 | | | 2,140,145 |
| | | | | |
| | | | $ | 12,228,720 |
| | | | | |
Energy - Integrated - 2.7% | | | | | |
Exxon Mobil Corp. | | 33,350 | | $ | 3,124,562 |
Hess Corp. | | 11,130 | | | 1,122,572 |
Marathon Oil Corp. | | 16,500 | | | 1,004,190 |
| | | | | |
| | | | $ | 5,251,324 |
| | | | | |
Food & Beverages - 4.3% | | | | | |
General Mills, Inc. | | 23,600 | | $ | 1,345,200 |
Nestle S.A. | | 8,124 | | | 3,722,528 |
PepsiCo, Inc. | | 44,150 | | | 3,350,985 |
| | | | | |
| | | | $ | 8,418,713 |
| | | | | |
Food & Drug Stores - 2.1% | | | | | |
CVS Caremark Corp. | | 76,729 | | $ | 3,049,978 |
Walgreen Co. | | 27,050 | | | 1,030,064 |
| | | | | |
| | | | $ | 4,080,042 |
| | | | | |
Gaming & Lodging - 1.8% | | | | | |
International Game Technology | | 29,880 | | $ | 1,312,628 |
Royal Caribbean Cruises Ltd. | | 49,550 | | | 2,102,902 |
| | | | | |
| | | | $ | 3,415,530 |
| | | | | |
General Merchandise - 0.9% | | | | | |
Target Corp. | | 33,870 | | $ | 1,693,500 |
| | | | | |
Health Maintenance Organizations - 0.8% | | | |
UnitedHealth Group, Inc. | | 27,630 | | $ | 1,608,066 |
| | | | | |
Insurance - 1.1% | | | | | |
Aflac, Inc. | | 35,440 | | $ | 2,219,607 |
| | | | | |
Internet - 3.1% | | | | | |
Google, Inc., “A” (a) | | 8,040 | | $ | 5,559,499 |
Yahoo!, Inc. (a) | | 24,800 | | | 576,848 |
| | | | | |
| | | | $ | 6,136,347 |
| | | | | |
Major Banks - 3.2% | | | | | |
Bank of New York Mellon Corp. | | 42,674 | | $ | 2,080,784 |
State Street Corp. | | 51,260 | | | 4,162,312 |
| | | | | |
| | | | $ | 6,243,096 |
| | | | | |
Medical & Health Technology & Services - 0.5% |
Cardinal Health, Inc. | | 17,770 | | $ | 1,026,217 |
| | | | | |
Medical Equipment - 4.7% | | | | | |
Advanced Medical Optics, Inc. (a) | | 66,980 | | $ | 1,643,019 |
C.R. Bard, Inc. | | 11,790 | | | 1,117,692 |
Medtronic, Inc. | | 81,830 | | | 4,113,594 |
ResMed, Inc. (a) | | 32,410 | | | 1,702,497 |
Zimmer Holdings, Inc. (a) | | 10,730 | | | 709,789 |
| | | | | |
| | | | $ | 9,286,591 |
| | | | | |
Network & Telecom - 3.5% | | | | | |
Cisco Systems, Inc. (a) | | 182,580 | | $ | 4,942,441 |
Juniper Networks, Inc. (a) | | 24,650 | | | 818,380 |
QUALCOMM, Inc. | | 28,200 | | | 1,109,670 |
| | | | | |
| | | | $ | 6,870,491 |
| | | | | |
11-CAVA
Portfolio of Investments — continued
| | | | | | | |
| Issuer | | Shares/Par | | Value ($) | |
| | | | | | | |
| | | | | | | |
COMMON STOCKS - continued | |
Oil Services - 2.9% | | | | | | | |
Halliburton Co. | | | 54,620 | | $ | 2,070,644 | |
Noble Corp. | | | 25,920 | | | 1,464,739 | |
Schlumberger Ltd. | | | 10,680 | | | 1,050,592 | |
Weatherford International Ltd. (a) | | | 17,060 | | | 1,170,316 | |
| | | | | | | |
| | | | | $ | 5,756,291 | |
| | | | | | | |
Other Banks & Diversified Financials - 2.4% | | | | |
American Express Co. | | | 48,860 | | $ | 2,541,697 | |
Moody’s Corp. | | | 22,260 | | | 794,682 | |
UBS AG | | | 29,915 | | | 1,389,235 | |
| | | | | | | |
| | | | | $ | 4,725,614 | |
| | | | | | | |
Pharmaceuticals - 8.4% | | | | | | | |
Allergan, Inc. | | | 32,640 | | $ | 2,096,794 | |
Bayer AG | | | 15,240 | | | 1,389,500 | |
Johnson & Johnson | | | 51,560 | | | 3,439,052 | |
Merck KGaA | | | 8,800 | | | 1,130,441 | |
Novartis AG, ADR | | | 29,470 | | | 1,600,516 | |
Roche Holding AG | | | 23,310 | | | 4,015,179 | |
Wyeth | | | 63,570 | | | 2,809,158 | |
| | | | | | | |
| | | | | $ | 16,480,640 | |
| | | | | | | |
Specialty Chemicals - 1.1% | | | | | | | |
Praxair, Inc. | | | 24,850 | | $ | 2,204,444 | |
| | | | | | | |
Specialty Stores - 3.1% | | | | | | | |
CarMax, Inc. (a) | | | 52,850 | | $ | 1,043,788 | |
Lowe’s Cos., Inc. | | | 42,270 | | | 956,147 | |
Nordstrom, Inc. | | | 35,750 | | | 1,313,098 | |
Staples, Inc. | | | 119,470 | | | 2,756,173 | |
| | | | | | | |
| | | | | $ | 6,069,206 | |
| | | | | | | |
Telecommunications - Wireless - 1.8% | | | | |
America Movil S.A.B. de C.V., “L”, ADR | | | 39,790 | | $ | 2,442,708 | |
Rogers Communications, Inc., “B” | | | 23,630 | | | 1,069,257 | |
| | | | | | | |
| | | | | $ | 3,511,965 | |
| | | | | | | |
Tobacco - 0.6% | | | | | | | |
Altria Group, Inc. | | | 15,790 | | $ | 1,193,408 | |
| | | | | | | |
Trucking - 1.2% | | | | | | | |
FedEx Corp. | | | 11,770 | | $ | 1,049,531 | |
United Parcel Service, Inc., “B” | | | 16,770 | | | 1,185,974 | |
| | | | | | | |
| | | | | $ | 2,235,505 | |
| | | | | | | |
Total Common Stocks
(Identified Cost, $175,030,722) | | $ | 193,648,836 | |
| | | | | | | |
SHORT-TERM OBLIGATIONS - 2.2% | | | | |
American Express Credit Corp.,
4.12%, due 1/02/08, at
Amortized Cost and Value (y) | | $ | 4,259,000 | | $ | 4,258,513 | |
| | | | | | | |
Total Investments
(Identified Cost, $179,289,235) | | $ | 197,907,349 | |
| | | | | | | |
| |
OTHER ASSETS,
LESS LIABILITIES - (0.8)% | | | (1,577,945 | ) |
| | | | | | | |
NET ASSETS - 100.0% | | $ | 196,329,404 | |
| | | | | | | |
See portfolio footnotes and notes to financial statements.
12-CAVA
Portfolio of Investments — December 31, 2007
Global Governments Variable Account
| | | | | | | |
| Issuer | | | | Shares/Par | | Value ($) |
| | | | | | | |
BONDS - 91.4% | | | | | | | |
Foreign Bonds - 69.3% | | | |
Belgium - 4.1% | | | |
Kingdom of Belgium, 5.5%, 2017 | | EUR | | 210,000 | | $ | 331,987 |
| | | | | | | |
Canada - 2.5% | | | |
Canada Housing Trust, 4.6%, 2011 | | CAD | | 51,000 | | $ | 52,488 |
Government of Canada, 4.5%, 2015 | | CAD | | 129,000 | | | 135,266 |
Government of Canada, 5.75%, 2033 | | CAD | | 13,000 | | | 16,566 |
| | | | | | | |
| | | | | | $ | 204,320 |
| | | | | | | |
Denmark - 0.6% | | | |
Kingdom of Denmark, 4%, 2015 | | DKK | | 261,000 | | $ | 49,892 |
| | | | | | | |
France - 5.1% | | | | | | | |
Republic of France, 6%, 2025 | | EUR | | 173,000 | | $ | 294,968 |
Republic of France, 4.75%, 2035 | | EUR | | 79,000 | | | 116,885 |
| | | | | | | |
| | | | | | $ | 411,853 |
| | | | | | | |
Germany - 8.1% | | | |
Federal Republic of Germany,
5.25%, 2010 | | EUR | | 168,000 | | $ | 252,320 |
Federal Republic of Germany,
3.75%, 2015 | | EUR | | 72,000 | | | 102,136 |
Federal Republic of Germany,
6.25%, 2030 | | EUR | | 168,000 | | | 299,049 |
| | | | | | | |
| | | | | | $ | 653,505 |
| | | | | | | |
Italy - 4.1% | | | |
Republic of Italy, 4.75%, 2013 | | EUR | | 220,000 | | $ | 329,213 |
| | | | | | | |
Japan - 23.8% | | | |
Development Bank of Japan,
1.4%, 2012 | | JPY | | 27,000,000 | | $ | 245,820 |
Government of Japan, 0.8%, 2010 | | JPY | | 7,000,000 | | | 62,738 |
Government of Japan, 1.3%, 2014 | | JPY | | 111,000,000 | | | 999,636 |
Government of Japan, 1.7%, 2017 | | JPY | | 23,000,000 | | | 210,440 |
Government of Japan, 2.1%, 2024 | | JPY | | 28,000,000 | | | 255,893 |
Government of Japan, 2.2%, 2027 | | JPY | | 11,000,000 | | | 100,213 |
Government of Japan, 2.4%, 2037 | | JPY | | 5,000,000 | | | 45,293 |
| | | | | | | |
| | | | | | $ | 1,920,033 |
| | | | | | | |
Malaysia - 1.6% | | | |
Petronas Capital Ltd., 7.875%, 2022 | | $ | | 100,000 | | $ | 125,055 |
| | | | | | | |
Mexico - 0.9% | | | |
United Mexican States,
5.625%, 2017 | | $ | | 6,000 | | $ | 6,081 |
United Mexican States, 6.75%, 2034 | | | | 60,000 | | | 66,270 |
| | | | | | | |
| | | | | | $ | 72,351 |
| | | | | | | |
Netherlands - 3.3% | | | |
Kingdom of Netherlands,
3.75%, 2014 | | EUR | | 190,000 | | $ | 270,264 |
| | | | | | | |
Russia - 0.6% | | | |
Gazprom International S.A.,
7.201%, 2020 | | $ | | 48,946 | | $ | 49,988 |
| | | | | | | |
Spain - 4.0% | | | |
Kingdom of Spain, 5%, 2012 | | EUR | | 215,000 | | $ | 324,789 |
| | | | | | | |
| | | | | | | |
Sweden - 0.6% | | | |
Kingdom of Sweden, 4.5%, 2015 | | SEK | | 330,000 | | $ | 51,698 |
| | | | | | | |
United Kingdom - 10.0% | | | |
United Kingdom Treasury, 9%, 2011 | | GBP | | 73,000 | | $ | 166,820 |
United Kingdom Treasury, 8%, 2015 | | GBP | | 147,000 | | | 358,648 |
United Kingdom Treasury, 8%, 2021 | | GBP | | 44,000 | | | 117,506 |
United Kingdom Treasury,
4.25%, 2036 | | GBP | | 83,000 | | | 163,320 |
| | | | | | | |
| | | | | | $ | 806,294 |
| | | | | | | |
Total Foreign Bonds | | $ | 5,601,242 |
| | | | | | | |
| | | | | | | |
| Issuer | | | | Shares/Par | | Value ($) |
BONDS - continued | | | | | | | |
| | | | | | | |
| | | | | | | |
U.S. Bonds - 22.1% | | | |
Asset Backed & Securitized - 4.5% | | | |
Bayview Commercial Asset Trust, FRN, 5.158%, 2023 (n) | | CAD | | 30,000 | | $ | 27,253 |
Commercial Mortgage Asset Trust, FRN, 0.876%, 2032 (i)(n) | | $ | | 1,362,539 | | | 42,045 |
Commercial Mortgage Pass-Through Certificates, FRN, 5.217%, 2017 (n) | | | | 59,000 | | | 58,705 |
Commercial Mortgage Pass-Through Certificates, FRN, 5.227%, 2017 (n) | | | | 100,000 | | | 97,686 |
First Union National Bank Commercial Mortgage Trust, FRN,
0.931%, 2043 (i)(n) | | | | 1,557,876 | | | 37,137 |
IMPAC CMB Trust, FRN,
5.215%, 2036 | | | | 87,824 | | | 83,856 |
Lehman Brothers Floating Rate Commercial Mortgage Trust, FRN, 5.187%, 2018 (n) | | | | 17,580 | | | 17,553 |
| | | | | | | |
| | | | | | $ | 364,235 |
| | | | | | | |
Mortgage Backed - 1.2% | | | |
Fannie Mae, 5.37%, 2013 | | $ | | 24,471 | | $ | 25,211 |
Fannie Mae, 4.78%, 2015 | | | | 24,161 | | | 24,078 |
Fannie Mae, 5.09%, 2016 | | | | 25,000 | | | 25,243 |
Fannie Mae, 5.423%, 2016 | | | | 24,468 | | | 25,287 |
| | | | | | | |
| | | | | | $ | 99,819 |
| | | | | | | |
Municipals - 0.6% | | | |
Minnesota Public Facilities Authority, Water Pollution Control Rev., “B”,
5%, 2018 | | $ | | 45,000 | | $ | 49,954 |
| | | | | | | |
U.S. Government Agencies - 2.5% | | | |
Aid-Egypt, 4.45%, 2015 | | $ | | 49,000 | | $ | 48,747 |
Small Business Administration,
4.57%, 2025 | | | | 41,159 | | | 39,701 |
Small Business Administration,
5.21%, 2026 | | | | 110,173 | | | 111,632 |
| | | | | | | |
| | | | | | $ | 200,080 |
| | | | | | | |
U.S. Treasury Obligations - 13.3% | | | | | |
U.S. Treasury Bonds, 4.75%, 2017 | | $ | | 262,000 | | $ | 276,717 |
U.S. Treasury Bonds, 8%, 2021 | | | | 52,000 | | | 71,167 |
U.S. Treasury Bonds, 4.75%, 2037 | | | | 23,000 | | | 24,071 |
U.S. Treasury Bonds, TIPS,
2.375%, 2025 | | | | 84,235 | | | 88,434 |
U.S. Treasury Notes, 3.125%, 2008 | | | | 1,000 | | | 998 |
U.S. Treasury Notes, 4%, 2010 | | | | 187,000 | | | 190,798 |
U.S. Treasury Notes, 4.75%, 2012 | | | | 43,000 | | | 45,325 |
U.S. Treasury Notes, 4%, 2015 | | | | 323,000 | | | 327,569 |
U.S. Treasury Notes, TIPS, 2%, 2014 | | | | 45,228 | | | 46,715 |
| | | | | | | |
| | | | | | $ | 1,071,794 |
| | | | | | | |
Total U.S. Bonds | | | | | | $ | 1,785,882 |
| | | | | | | |
Total Bonds
(Identified Cost, $7,269,033) | | $ | 7,387,124 |
| | | | | | | |
13 - GGVA
Portfolio of Investments — continued
| | | | | | | | |
| Issuer | | | | Shares/Par | | Value ($) |
| | | | | | | | |
| | | | | | | | |
SHORT-TERM OBLIGATIONS - 3.5% | | | |
Federal Home Loan Bank,
2.5%, due 1/02/08, at
Amortized Cost and Value (y) | | $ | 286,000 | | $ | 285,980 |
| | | | | | | | |
REPURCHASE AGREEMENTS - 4.5% | | | |
Merrill Lynch & Co., 4.5%, dated 12/31/07,
due 1/02/08, total to be received $363,091(secured by various U.S.
Treasury and Federal Agency obligations
and Mortgage Backed securities in a
jointly traded account), at Cost | | $ | 363,000 | | $ | 363,000 |
| | | | | | | | |
Total Investments
(Identified Cost, $7,918,013) (k) | | $ | 8,036,104 |
| | | | | | | | |
| |
OTHER ASSETS,
LESS LIABILITIES - 0.6% | | | 45,670 |
| | | | | | | | |
NET ASSETS - 100.0% | | $ | 8,081,774 |
| | | | | | | | |
Forward Foreign Currency Exchange Contracts at 12/31/07
| | | | | | | | | | | | | | | | | | |
| | | Type | | Currency | | Contracts
to Deliver/
Receive | | Settlement Date
Range | | In
Exchange
For | | Contracts
at Value | | Net
Unrealized
Appreciation
(Depreciation) | |
Appreciation | | | | | | | | | | | | | | | | | | |
| | BUY | | AUD | | 21,000 | | 1/16/08 | | $ | 18,352 | | $ | 18,423 | | $ | 71 | |
| | SELL | | AUD | | 6,000 | | 1/16/08 | | | 5,329 | | | 5,264 | | | 65 | |
| | SELL | | CAD | | 89,716 | | 1/09/08 | | | 91,149 | | | 90,913 | | | 236 | |
| | BUY | | DKK | | 42,612 | | 2/07/08 | | | 8,347 | | | 8,360 | | | 13 | |
| | BUY | | EUR | | 71,055 | | 2/05/08 - 2/13/08 | | | 103,186 | | | 103,950 | | | 764 | |
| | SELL | | EUR | | 404,230 | | 1/16/08 - 2/13/08 | | | 593,796 | | | 591,365 | | | 2,431 | |
| | SELL | | GBP | | 258,286 | | 2/05/08 - 2/14/08 | | | 526,692 | | | 513,525 | | | 13,167 | |
| | BUY | | IDR | | 122,438,885 | | 1/28/08 | | | 12,984 | | | 13,020 | | | 36 | |
| | BUY | | JPY | | 102,527,487 | | 1/15/08 - 2/05/08 | | | 917,639 | | | 919,795 | | | 2,156 | |
| | SELL | | JPY | | 172,744,053 | | 1/15/08 - 2/06/08 | | | 1,583,116 | | | 1,550,706 | | | 32,410 | |
| | BUY | | MYR | | 46,050 | | 1/28/08 | | | 13,829 | | | 13,936 | | | 107 | |
| | SELL | | SEK | | 177,675 | | 1/15/08 | | | 28,000 | | | 27,494 | | | 506 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | $ | 51,962 | |
| | | | | | | | | | | | | | | | | | |
Depreciation | | | | | | | | | | | | | | | | | | |
| | BUY | | AUD | | 86,094 | | 1/16/08 | | $ | 77,322 | | $ | 75,527 | | $ | (1,795 | ) |
| | SELL | | AUD | | 46,515 | | 1/16/08 | | | 40,418 | | | 40,806 | | | (388 | ) |
| | BUY | | CAD | | 40,956 | | 1/09/08 | | | 42,874 | | | 41,502 | | | (1,372 | ) |
| | SELL | | CAD | | 52,852 | | 1/09/08 | | | 52,135 | | | 53,558 | | | (1,423 | ) |
| | BUY | | CHF | | 25,667 | | 2/04/08 | | | 23,072 | | | 22,721 | | | (351 | ) |
| | BUY | | EUR | | 962,758 | | 1/16/08 - 2/13/08 | | | 1,412,318 | | | 1,408,111 | | | (4,207 | ) |
| | SELL | | EUR | | 134,957 | | 1/16/08 - 2/13/08 | | | 195,145 | | | 197,403 | | | (2,258 | ) |
| | BUY | | GBP | | 68,283 | | 2/14/08 | | | 137,320 | | | 135,754 | | | (1,566 | ) |
| | BUY | | JPY | | 158,946,633 | | 1/15/08 - 2/05/08 | | | 1,460,216 | | | 1,426,581 | | | (33,635 | ) |
| | SELL | | JPY | | 34,501,095 | | 1/15/08 - 2/05/08 | | | 307,620 | | | 309,617 | | | (1,997 | ) |
| | BUY | | NOK | | 115,161 | | 2/19/08 | | | 21,255 | | | 21,180 | | | (75 | ) |
| | BUY | | SEK | | 241,871 | | 1/15/08 | | | 38,397 | | | 37,428 | | | (969 | ) |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | $ | (50,036 | ) |
| | | | | | | | | | | | | | | | | | |
At December 31, 2007, the variable account had sufficient cash and/or other liquid securities to cover any commitments under these derivative contracts.
See portfolio footnotes and notes to financial statements.
14-GGVA
Portfolio of Investments — December 31, 2007
Government Securities Variable Account
| | | | | | |
| Issuer | | Shares/Par | | Value ($) |
| | | | | | |
BONDS - 97.4% | | | | | | |
Agency - Other - 5.2% | | | | | | |
Financing Corp., 9.4%, 2018 | | $ | 780,000 | | $ | 1,083,485 |
Financing Corp., 10.35%, 2018 | | | 1,150,000 | | | 1,699,301 |
Financing Corp., STRIPS, 0%, 2017 | | | 1,220,000 | | | 778,337 |
| | | | | | |
| | | | | $ | 3,561,123 |
| | | | | | |
Mortgage Backed - 55.9% | | | | | | |
Fannie Mae, 5.78%, 2008 | | $ | 179,644 | | $ | 179,618 |
Fannie Mae, 4.73%, 2012 | | | 92,595 | | | 93,121 |
Fannie Mae, 4.79%, 2012-2015 | | | 1,033,600 | | | 1,042,608 |
Fannie Mae, 4.845%, 2013 | | | 255,739 | | | 258,095 |
Fannie Mae, 5%, 2013-2027 | | | 2,942,207 | | | 2,951,466 |
Fannie Mae, 5.06%, 2013-2017 | | | 192,995 | | | 195,167 |
Fannie Mae, 4.547%, 2014 | | | 118,492 | | | 117,667 |
Fannie Mae, 4.6%, 2014 | | | 123,078 | | | 122,449 |
Fannie Mae, 4.621%, 2014 | | | 400,925 | | | 399,684 |
Fannie Mae, 4.77%, 2014 | | | 104,056 | | | 104,224 |
Fannie Mae, 4.839%, 2014 | | | 822,938 | | | 828,390 |
Fannie Mae, 4.871%, 2014 | | | 471,965 | | | 476,063 |
Fannie Mae, 5.1%, 2014 | | | 135,333 | | | 137,632 |
Fannie Mae, 4.56%, 2015 | | | 158,720 | | | 156,580 |
Fannie Mae, 4.62%, 2015 | | | 176,854 | | | 175,250 |
Fannie Mae, 4.665%, 2015 | | | 107,121 | | | 106,298 |
Fannie Mae, 4.7%, 2015 | | | 123,096 | | | 122,390 |
Fannie Mae, 4.74%, 2015 | | | 99,041 | | | 98,651 |
Fannie Mae, 4.81%, 2015 | | | 125,765 | | | 125,537 |
Fannie Mae, 4.815%, 2015 | | | 117,000 | | | 116,896 |
Fannie Mae, 4.82%, 2015 | | | 337,637 | | | 337,881 |
Fannie Mae, 4.89%, 2015 | | | 86,679 | | | 87,066 |
Fannie Mae, 4.925%, 2015 | | | 341,051 | | | 343,646 |
Fannie Mae, 5.471%, 2015 | | | 118,952 | | | 123,301 |
Fannie Mae, 6.5%, 2016-2036 | | | 1,490,680 | | | 1,540,327 |
Fannie Mae, 4.994%, 2017 | | | 299,887 | | | 303,112 |
Fannie Mae, 5.5%, 2017-2035 | | | 9,763,359 | | | 9,784,755 |
Fannie Mae, 6%, 2017-2037 | | | 2,700,563 | | | 2,750,159 |
Fannie Mae, 4.5%, 2019-2020 | | | 2,547,806 | | | 2,505,849 |
Fannie Mae, 4.88%, 2020 | | | 87,060 | | | 87,429 |
Fannie Mae, 5.19%, 2020 | | | 82,213 | | | 82,801 |
Fannie Mae, 7.5%, 2022-2031 | | | 155,355 | | | 166,075 |
Freddie Mac, 4.5%, 2013-2021 | | | 329,911 | | | 329,405 |
Freddie Mac, 4.375%, 2015 | | | 450,702 | | | 448,510 |
Freddie Mac, 5%, 2016-2027 | | | 3,061,424 | | | 3,067,510 |
Freddie Mac, 6%, 2021-2037 | | | 2,506,818 | | | 2,550,075 |
Freddie Mac, 5.5%, 2022-2035 | | | 4,156,947 | | | 4,167,408 |
Freddie Mac, 6.5%, 2032-2037 | | | 664,592 | | | 686,720 |
Ginnie Mae, 5.5%, 2033 | | | 1,409,763 | | | 1,420,923 |
| | | | | | |
| | | | | $ | 38,590,738 |
| | | | | | |
Municipals - 2.0% | | | | | | |
California Educational Facilities Authority Rev. (Stanford University), “T-1”,
5%, 2039 | | $ | 670,000 | | $ | 747,620 |
Clark County Nevada School District,
5%, 2017 | | | 480,000 | | | 525,749 |
Minnesota Public Facilities Authority, Water Pollution Control Rev., “B”,
5%, 2018 | | | 105,000 | | | 116,559 |
| | | | | | |
| | | | | $ | 1,389,928 |
| | | | | | |
U.S. Government Agencies - 16.4% | | | |
Aid-Egypt, 4.45%, 2015 | | $ | 473,000 | | $ | 470,536 |
Aid-Israel, 6.6%, 2008 | | | 137,559 | | | 137,814 |
Aid-Peru, 9.98%, 2008 | | | 182,081 | | | 182,866 |
Empresa Energetica Cornito Ltd.,
6.07%, 2010 | | | 1,363,000 | | | 1,418,801 |
Farmer Mac, 5.5%, 2011 (n) | | | 690,000 | | | 730,758 |
| | | | | | |
| Issuer | | Shares/Par | | Value ($) |
| | | | | | |
BONDS - continued |
U.S. Government Agencies - continued |
Federal Home Loan Bank,
4.625%, 2008 | | $ | 1,750,000 | | $ | 1,749,953 |
Federal Home Loan Bank,
5.25%, 2009 | | | 1,065,000 | | | 1,082,087 |
Small Business Administration,
8.7%, 2009 | | | 18,208 | | | 18,517 |
Small Business Administration,
10.05%, 2009 | | | 2,409 | | | 2,448 |
Small Business Administration,
6.44%, 2021 | | | 440,743 | | | 461,796 |
Small Business Administration,
6.625%, 2021 | | | 545,631 | | | 580,383 |
Small Business Administration,
4.98%, 2023 | | | 213,617 | | | 214,849 |
Small Business Administration,
4.77%, 2024 | | | 500,707 | | | 498,257 |
Small Business Administration,
4.86%, 2024 | | | 278,426 | | | 278,097 |
Small Business Administration,
4.88%, 2024 | | | 246,221 | | | 246,064 |
Small Business Administration,
4.99%, 2024 | | | 367,023 | | | 368,983 |
Small Business Administration,
5.11%, 2025 | | | 297,884 | | | 299,102 |
U.S. Department of Housing & Urban Development, 6.36%, 2016 | | | 500,000 | | | 532,335 |
U.S. Department of Housing & Urban Development, 6.59%, 2016 | | | 2,045,000 | | | 2,073,953 |
| | | | | | |
| | | | | $ | 11,347,599 |
| | | | | | |
U.S. Treasury Obligations - 17.9% | | | |
U.S. Treasury Bonds, 9.25%, 2016 | | $ | 409,000 | | $ | 558,381 |
U.S. Treasury Bonds, 7.5%, 2016 | | | 810,000 | | | 1,016,740 |
U.S. Treasury Bonds, 4.75%, 2017 | | | 500,000 | | | 528,086 |
U.S. Treasury Bonds, 7.875%, 2021 | | | 396,000 | | | 532,620 |
U.S. Treasury Bonds, 6.25%, 2023 | | | 1,009,001 | | | 1,208,032 |
U.S. Treasury Bonds, 6.75%, 2026 | | | 939,000 | | | 1,201,920 |
U.S. Treasury Bonds, 5.25%, 2028 | | | 346,000 | | | 380,681 |
U.S. Treasury Bonds, 4.5%, 2036 | | | 554,000 | | | 556,813 |
U.S. Treasury Bonds, 5%, 2037 | | | 133,000 | | | 144,960 |
U.S. Treasury Notes, 6.5%, 2010 (f) | | | 2,216,000 | | | 2,369,562 |
U.S. Treasury Notes, 5.125%, 2011 | | | 2,289,000 | | | 2,431,884 |
U.S. Treasury Notes, 4.125%, 2012 | | | 886,000 | | | 912,234 |
U.S. Treasury Notes, 12%, 2013 | | | 19,000 | | | 19,989 |
U.S. Treasury Notes, 4%, 2014 | | | 477,000 | | | 487,323 |
| | | | | | |
| | | | | $ | 12,349,225 |
| | | | | | |
Total Bonds
(Identified Cost, $66,469,009) | | $ | 67,238,613 |
| | | | | | |
REPURCHASE AGREEMENTS - 1.7% |
Merrill Lynch, 4.5%, dated 12/31/07,
due 1/02/08, total to be received $1,146,287 (secured by U.S.
Treasury and Federal Agency obligations and Mortgage Backed securities in a jointly traded account), at Cost | | $ | 1,146,000 | | $ | 1,146,000 |
| | | | | | |
Total Investments
(Identified Cost, $67,615,009) (k) | | $ | 68,384,613 |
| | | | | | |
| |
OTHER ASSETS,
LESS LIABILITIES - 0.9% | | | 610,857 |
| | | | | | |
NET ASSETS - 100.0% | | $ | 68,995,470 |
| | | | | | |
15-GSVA
Portfolio of Investments — continued
Futures contracts outstanding at 12/31/07
| | | | | | | | | | |
| Description | | Contracts | | Value | | Expiration
Date | | Unrealized
Appreciation
(Depreciation) |
U.S. Treasury Bond (Short) | | 14 | | $ | 1,629,250 | | Mar-08 | | $ | 8,373 |
U.S. Treasury Note 5 yr (Long) | | 51 | | | 5,624,344 | | Mar-08 | | | 25,228 |
| | | | | | | | | | |
| | | | | | | | | $ | 33,601 |
| | | | | | | | | | |
At December 31, 2007, the variable account had sufficient cash and/or other liquid securities to cover any commitments under these derivative contracts.
See portfolio footnotes and notes to financial statements
16-GSVA
Portfolio of Investments — December 31, 2007
High Yield Variable Account
| | | | | | |
| Issuer | | Shares/Par | | Value ($) |
| | | | | | |
BONDS - 84.8% | | | | | | |
Aerospace - 1.5% |
Bombardier, Inc., 8%, 2014 (n) | | $ | 151,000 | | $ | 157,795 |
Hawker Beechcraft Acquisition Co.,
9.75%, 2017 (n) | | | 235,000 | | | 233,825 |
TransDigm, Inc., 7.75%, 2014 | | | 100,000 | | | 101,500 |
Vought Aircraft Industries, Inc., 8%, 2011 | | | 255,000 | | | 241,613 |
| | | | | | |
| | | | | $ | 734,733 |
| | | | | | |
Airlines - 0.8% |
Continental Airlines, Inc., 6.9%, 2017 | | $ | 59,946 | | $ | 57,548 |
Continental Airlines, Inc., 6.748%, 2017 | | | 53,114 | | | 50,724 |
Continental Airlines, Inc., 6.795%, 2018 | | | 102,076 | | | 96,972 |
Continental Airlines, Inc., 7.566%, 2020 | | | 174,181 | | | 168,955 |
| | | | | | |
| | | | | $ | 374,199 |
| | | | | | |
Apparel Manufacturers - 0.1% |
Levi Strauss & Co., 9.75%, 2015 | | $ | 75,000 | | $ | 74,813 |
| | | | | | |
Asset Backed & Securitized - 2.0% |
ARCap REIT, Inc., CDO, “H”,
6.1%, 2045 (n) | | $ | 165,567 | | $ | 66,227 |
Asset Securitization Corp., FRN,
8.825%, 2029 (z) | | | 200,000 | | | 207,500 |
Crest Ltd., CDO, 7%, 2040 | | | 154,000 | | | 122,967 |
First Union National Bank Commercial Mortgage Corp., 6.75%, 2032 | | | 165,000 | | | 165,481 |
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 6.062%, 2051 | | | 110,000 | | | 102,036 |
Merrill Lynch Mortgage Trust, FRN,
5.829%, 2050 | | | 110,000 | | | 100,654 |
Wachovia Credit, CDO, FRN,
6.233%, 2026 (z) | | | 250,000 | | | 201,718 |
| | | | | | |
| | | | | $ | 966,583 |
| | | | | | |
Automotive - 3.3% |
Allison Transmission, Inc., 11%, 2015 (n) | | $ | 260,000 | | $ | 236,600 |
Ford Motor Credit Co., 8.625%, 2010 | | | 190,000 | | | 176,311 |
Ford Motor Credit Co. LLC, 9.75%, 2010 | | | 821,000 | | | 783,400 |
General Motors Corp., 8.375%, 2033 | | | 421,000 | | | 338,905 |
TRW Automotive, Inc., 7%, 2014 (n) | | | 115,000 | | | 105,800 |
| | | | | | |
| | | | | $ | 1,641,016 |
| | | | | | |
Broadcasting - 7.1% |
Allbritton Communications Co.,
7.75%, 2012 | | $ | 368,000 | | $ | 364,320 |
Bonten Media Acquisition Co.,
9%, 2015 (n)(p) | | | 135,000 | | | 117,788 |
CanWest MediaWorks LP,
9.25%, 2015 (n) | | | 230,000 | | | 225,113 |
Clear Channel Communications, Inc.,
5.5%, 2014 | | | 320,000 | | | 243,915 |
Intelsat Bermuda Ltd., 11.25%, 2016 | | | 355,000 | | | 366,538 |
Intelsat Corp., 0% to 2010,
9.25% to 2015 | | | 235,000 | | | 192,113 |
Intelsat Ltd., FRN, 10.828%, 2013 | | | 90,000 | | | 92,250 |
ION Media Networks, Inc., FRN,
11.492%, 2013 (n) | | | 240,000 | | | 236,100 |
Lamar Media Corp., 6.625%, 2015 (n) | | | 145,000 | | | 141,013 |
Lamar Media Corp., 6.625%, 2015 | | | 220,000 | | | 213,950 |
LBI Media, Inc., 8.5%, 2017 (n) | | | 150,000 | | | 144,563 |
LIN TV Corp., 6.5%, 2013 | | | 320,000 | | | 301,200 |
Local TV Finance LLC, 9.25%, 2015 (n)(p) | | | 235,000 | | | 224,425 |
Nexstar Broadcasting Group, Inc.,
7%, 2014 | | | 165,000 | | | 153,656 |
Univision Communications, Inc.,
9.75%, 2015 (n)(p) | | | 520,000 | | | 473,850 |
| | | | | | |
| | | | | $ | 3,490,794 |
| | | | | | |
| | | | | | |
| Issuer | | Shares/Par | | Value ($) |
| | | | | | |
BONDS - continued | | | | | | |
Brokerage & Asset Managers - 0.3% |
Nuveen Investments, Inc.,
10.5%, 2015 (z) | | $ | 145,000 | | $ | 144,456 |
| | | | | | |
Building - 1.2% |
Interface, Inc., 10.375%, 2010 | | $ | 167,000 | | $ | 174,933 |
Interface, Inc., 9.5%, 2014 | | | 30,000 | | | 31,350 |
Nortek Holdings, Inc., 8.5%, 2014 | | | 175,000 | | | 140,000 |
Ply Gem Industries, Inc., 9%, 2012 | | | 315,000 | | | 244,125 |
| | | | | | |
| | | | | $ | 590,408 |
| | | | | | |
Business Services - 0.8% |
SunGard Data Systems, Inc.,
10.25%, 2015 | | $ | 366,000 | | $ | 374,235 |
| | | | | | |
Cable TV - 2.6% |
CCH I Holdings LLC, 11%, 2015 | | $ | 255,000 | | $ | 207,825 |
CCO Holdings LLC, 8.75%, 2013 | | | 335,000 | | | 319,925 |
CSC Holdings, Inc., 6.75%, 2012 | | | 355,000 | | | 339,469 |
Mediacom LLC, 9.5%, 2013 | | | 150,000 | | | 139,313 |
NTL Cable PLC, 9.125%, 2016 | | | 128,000 | | | 126,720 |
Videotron Ltee, 6.875%, 2014 | | | 140,000 | | | 137,025 |
| | | | | | |
| | | | | $ | 1,270,277 |
| | | | | | |
Chemicals - 3.5% |
Innophos, Inc., 8.875%, 2014 | | $ | 265,000 | | $ | 263,675 |
Koppers Holdings, Inc.,
0% to 2009, 9.875% to 2014 | | | 348,000 | | | 292,320 |
Koppers, Inc., 9.875%, 2013 | | | 220,000 | | | 231,550 |
Momentive Performance Materials, Inc., 9.75%, 2014 (n) | | | 250,000 | | | 230,000 |
Mosaic Co., 7.875%, 2016 (n) | | | 305,000 | | | 329,400 |
Nalco Co., 7.75%, 2011 | | | 75,000 | | | 75,938 |
Nalco Co., 8.875%, 2013 | | | 300,000 | | | 312,750 |
| | | | | | |
| | | | | $ | 1,735,633 |
| | | | | | |
Computer Software - 0.4% |
First Data Corp., 9.875%, 2015 (n) | | $ | 220,000 | | $ | 204,600 |
| | | | | | |
Consumer Goods & Services - 2.7% |
Corrections Corp. of America,
6.25%, 2013 | | $ | 180,000 | | $ | 177,300 |
GEO Group, Inc., 8.25%, 2013 | | | 180,000 | | | 181,800 |
Jarden Corp., 7.5%, 2017 | | | 150,000 | | | 129,000 |
Kar Holdings, Inc., 10%, 2015 (n) | | | 170,000 | | | 151,725 |
Service Corp. International, 7.375%, 2014 | | | 115,000 | | | 116,294 |
Service Corp. International, 7%, 2017 | | | 440,000 | | | 421,300 |
Visant Holding Corp., 8.75%, 2013 | | | 134,000 | | | 134,670 |
| | | | | | |
| | | | | $ | 1,312,089 |
| | | | | | |
Containers - 1.3% |
Crown Americas LLC, 7.625%, 2013 | | $ | 150,000 | | $ | 153,375 |
Graham Packaging Co. LP,
9.875%, 2014 | | | 165,000 | | | 151,800 |
Greif, Inc., 6.75%, 2017 | | | 165,000 | | | 161,288 |
Owens-Brockway Glass Container, Inc., 8.25%, 2013 | | | 175,000 | | | 181,563 |
| | | | | | |
| | | | | $ | 648,026 |
| | | | | | |
Defense Electronics - 1.0% |
L-3 Communications Corp.,
6.125%, 2014 | | $ | 270,000 | | $ | 264,600 |
L-3 Communications Corp.,
5.875%, 2015 | | | 215,000 | | | 207,475 |
| | | | | | |
| | | | | $ | 472,075 |
| | | | | | |
17-HYVA
Portfolio of Investments — continued
| | | | | | |
| Issuer | | Shares/Par | | Value ($) |
| | | | | | |
BONDS - continued | | | | | | |
Electronics - 0.9% |
Avago Technologies Finance,
11.875%, 2015 | | $ | 120,000 | | $ | 128,250 |
Flextronics International Ltd.,
6.25%, 2014 | | | 175,000 | | | 166,688 |
Spansion LLC, 11.25%, 2016 (n) | | | 185,000 | | | 157,250 |
| | | | | | |
| | | | | $ | 452,188 |
| | | | | | |
Emerging Market Sovereign - 0.5% |
Republic of Argentina, FRN,
5.389%, 2012 | | $ | 303,750 | | $ | 270,114 |
| | | | | | |
Energy - Independent - 5.1% |
Chaparral Energy, Inc., 8.875%, 2017 (n) | | $ | 250,000 | | $ | 225,625 |
Chesapeake Energy Corp., 7%, 2014 | | | 184,000 | | | 184,920 |
Chesapeake Energy Corp.,
6.375%, 2015 | | | 305,000 | | | 295,088 |
Forest Oil Corp., 7.25%, 2019 (n) | | | 150,000 | | | 150,750 |
Hilcorp Energy I LP, 7.75%, 2015 (n) | | | 90,000 | | | 88,425 |
Hilcorp Energy I LP, 9%, 2016 (n) | | | 260,000 | | | 269,100 |
Mariner Energy, Inc., 8%, 2017 | | | 265,000 | | | 252,081 |
Newfield Exploration Co., 6.625%, 2014 | | | 250,000 | | | 247,500 |
OPTI Canada, Inc., 8.25%, 2014 (n) | | | 220,000 | | | 217,800 |
Plains Exploration & Production Co.,
7%, 2017 | | | 355,000 | | | 339,469 |
Quicksilver Resources, Inc.,
7.125%, 2016 | | | 260,000 | | | 255,450 |
| | | | | | |
| | | | | $ | 2,526,208 |
| | | | | | |
Entertainment - 0.4% |
AMC Entertainment, Inc., 11%, 2016 | | $ | 185,000 | | $ | 194,713 |
| | | | | | |
Financial Institutions - 1.5% |
General Motors Acceptance Corp.,
6.875%, 2011 | | $ | 619,000 | | $ | 529,551 |
Residential Capital LLC, 7.625%, 2008 | | | 240,000 | | | 190,800 |
Residential Capital LLC, 8%, 2012 | | | 28,000 | | | 17,220 |
| | | | | | |
| | | | | $ | 737,571 |
| | | | | | |
Food & Beverages - 1.9% |
ARAMARK Corp., 8.5%, 2015 | | $ | 420,000 | | $ | 425,250 |
B&G Foods, Inc., 8%, 2011 | | | 175,000 | | | 171,500 |
Del Monte Corp., 6.75%, 2015 | | | 185,000 | | | 174,825 |
Michael Foods, Inc., 8%, 2013 | | | 175,000 | | | 173,250 |
| | | | | | |
| | | | | $ | 944,825 |
| | | | | | |
Forest & Paper Products - 2.2% |
Buckeye Technologies, Inc., 8%, 2010 | | $ | 56,000 | | $ | 55,440 |
Buckeye Technologies, Inc., 8.5%, 2013 | | | 375,000 | | | 381,563 |
Catalyst Paper Corp., 8.625%, 2011 | | | 75,000 | | | 62,250 |
Jefferson Smurfit Corp., 8.25%, 2012 | | | 254,000 | | | 250,190 |
JSG Funding PLC, 7.75%, 2015 | | | 25,000 | | | 23,750 |
Millar Western Forest Products Ltd.,
7.75%, 2013 | | | 235,000 | | | 175,075 |
NewPage Holdings Corp., 10%, 2012 (z) | | | 150,000 | | | 150,750 |
| | | | | | |
| | | | | $ | 1,099,018 |
| | | | | | |
Gaming & Lodging - 6.0% |
Fontainebleau Las Vegas Holdings LLC, 10.25%, 2015 (n) | | $ | 200,000 | | $ | 173,500 |
Harrah’s Operating Co., Inc.,
5.375%, 2013 | | | 170,000 | | | 129,200 |
Harrah’s Operating Co., Inc.,
5.75%, 2017 | | | 500,000 | | | 338,750 |
Isle of Capri Casinos, Inc., 7%, 2014 | | | 170,000 | | | 139,400 |
Mandalay Resort Group, 9.375%, 2010 | | | 175,000 | | | 181,125 |
MGM Mirage, Inc., 8.5%, 2010 | | | 140,000 | | | 145,250 |
MGM Mirage, Inc., 8.375%, 2011 | | | 155,000 | | | 158,488 |
MGM Mirage, Inc., 6.75%, 2013 | | | 200,000 | | | 194,000 |
| | | | | | |
| Issuer | | Shares/Par | | Value ($) |
| | | | | | |
BONDS - continued | | | | | | |
Gaming & Lodging - continued | | | | | | |
MGM Mirage, Inc., 5.875%, 2014 | | $ | 195,000 | | $ | 178,425 |
MGM Mirage, Inc., 7.5%, 2016 | | | 385,000 | | | 381,150 |
Pinnacle Entertainment, Inc.,
8.25%, 2012 | | | 185,000 | | | 186,850 |
Station Casinos, Inc., 6.5%, 2014 | | | 420,000 | | | 315,000 |
Station Casinos, Inc., 6.875%, 2016 | | | 55,000 | | | 40,150 |
Tropicana Entertainment LLC,
9.625%, 2014 | | | 155,000 | | | 98,425 |
Wynn Las Vegas LLC, 6.625%, 2014 | | | 320,000 | | | 314,400 |
| | | | | | |
| | | | | $ | 2,974,113 |
| | | | | | |
Industrial - 1.5% |
Blount, Inc., 8.875%, 2012 | | $ | 205,000 | | $ | 205,513 |
JohnsonDiversey Holdings, Inc., “B”,
9.625%, 2012 | | | 470,000 | | | 480,575 |
Wesco Distribution, Inc., 7.5%, 2017 | | | 55,000 | | | 51,150 |
| | | | | | |
| | | | | $ | 737,238 |
| | | | | | |
Insurance - Health - 0.4% |
Centene Corp., 7.25%, 2014 | | $ | 180,000 | | $ | 175,500 |
| | | | | | |
Insurance - Property & Casualty - 0.3% |
USI Holdings Corp., 9.75%, 2015 (n) | | $ | 215,000 | | $ | 173,075 |
| | | | | | |
Machinery & Tools - 0.7% |
Case New Holland, Inc., 7.125%, 2014 | | $ | 350,000 | | $ | 349,125 |
| | | | | | |
Medical & Health Technology & Services - 7.6% |
Community Health Systems, Inc.,
8.875%, 2015 | | $ | 410,000 | | $ | 417,688 |
Cooper Cos., Inc., 7.125%, 2015 | | | 270,000 | | | 262,575 |
DaVita, Inc., 6.625%, 2013 | | | 125,000 | | | 124,375 |
DaVita, Inc., 7.25%, 2015 | | | 445,000 | | | 446,113 |
HCA, Inc., 6.375%, 2015 | | | 445,000 | | | 376,025 |
HCA, Inc., 9.25%, 2016 | | | 735,002 | | | 771,750 |
HealthSouth Corp., 10.75%, 2016 | | | 85,000 | | | 88,825 |
LVB Acquisition Merger Sub, Inc.,
10%, 2017 (n) | | | 240,000 | | | 244,800 |
LVB Acquisition Merger Sub, Inc.,
11.625%, 2017 (n) | | | 105,000 | | | 103,425 |
Psychiatric Solutions, Inc., 7.75%, 2015 | | | 270,000 | | | 269,325 |
U.S. Oncology, Inc., 10.75%, 2014 | | | 325,000 | | | 320,938 |
Universal Hospital Services, Inc.,
8.5%, 2015 (p) | | | 155,000 | | | 156,550 |
Universal Hospital Services, Inc., FRN,
8.287%, 2015 | | | 45,000 | | | 45,000 |
VWR Funding, Inc., 10.25%, 2015 (n)(p) | | | 135,000 | | | 128,588 |
| | | | | | |
| | | | | $ | 3,755,977 |
| | | | | | |
Metals & Mining - 4.2% |
Arch Western Finance LLC, 6.75%, 2013 | | $ | 175,000 | | $ | 169,750 |
FMG Finance Ltd., 10.625%, 2016 (n) | | | 320,000 | | | 366,400 |
Foundation PA Coal Co., 7.25%, 2014 | | | 80,000 | | | 79,000 |
Freeport-McMoRan Copper & Gold, Inc.,
8.25%, 2015 | | | 125,000 | | | 132,500 |
Freeport-McMoRan Copper & Gold, Inc.,
8.375%, 2017 | | | 505,000 | | | 541,613 |
Freeport-McMoRan Copper & Gold, Inc., FRN, 8.394%, 2015 | | | 105,000 | | | 106,575 |
Peabody Energy Corp., 5.875%, 2016 | | | 225,000 | | | 211,500 |
Peabody Energy Corp., 7.375%, 2016 | | | 175,000 | | | 179,375 |
PNA Group, Inc., 10.75%, 2016 | | | 200,000 | | | 188,000 |
Ryerson, Inc., 12%, 2015 (n) | | | 95,000 | | | 93,813 |
| | | | | | |
| | | | | $ | 2,068,526 |
| | | | | | |
Natural Gas - Distribution - 0.9% |
AmeriGas Partners LP, 7.125%, 2016 | | $ | 200,000 | | $ | 194,000 |
Inergy LP, 6.875%, 2014 | | | 235,000 | | | 228,538 |
| | | | | | |
| | | | | $ | 422,538 |
| | | | | | |
18-HYVA
Portfolio of Investments — continued
| | | | | | |
| Issuer | | Shares/Par | | Value ($) |
| | | | | | |
BONDS - continued | | | | | | |
Natural Gas - Pipeline - 3.1% |
Atlas Pipeline Partners LP, 8.125%, 2015 | | $ | 270,000 | | $ | 267,300 |
Deutsche Bank (El Paso Performance-Linked Trust, CLN), 7.75%, 2011 (n) | | | 310,000 | | | 318,131 |
El Paso Corp., 7.75%, 2032 | | | 140,000 | | | 142,111 |
Knight Energy, Inc., 7.25%, 2028 | | | 135,000 | | | 126,691 |
Transcontinental Gas Pipe Line Corp.,
7%, 2011 | | | 55,000 | | | 57,681 |
Williams Cos., Inc., 7.125%, 2011 | | | 132,000 | | | 139,425 |
Williams Cos., Inc., 8.75%, 2032 | | | 204,000 | | | 249,390 |
Williams Partners LP, 7.25%, 2017 | | | 205,000 | | | 211,150 |
| | | | | | |
| | | | | $ | 1,511,879 |
| | | | | | |
Network & Telecom - 3.6% |
Cincinnati Bell, Inc., 8.375%, 2014 | | $ | 300,000 | | $ | 292,500 |
Citizens Communications Co.,
9.25%, 2011 | | | 225,000 | | | 243,563 |
Nordic Telephone Co. Holdings,
8.875%, 2016 (n) | | | 205,000 | | | 210,125 |
Qwest Capital Funding, Inc., 7.25%, 2011 | | | 175,000 | | | 172,375 |
Qwest Corp., 7.875%, 2011 | | | 95,000 | | | 98,800 |
Qwest Corp., 8.875%, 2012 | | | 300,000 | | | 321,000 |
Time Warner Telecom Holdings, Inc.,
9.25%, 2014 | | | 105,000 | | | 107,363 |
Windstream Corp., 8.625%, 2016 | | | 335,000 | | | 351,750 |
| | | | | | |
| | | | | $ | 1,797,476 |
| | | | | | |
Oil Services - 1.1% |
Basic Energy Services, Inc.,
7.125%, 2016 | | $ | 290,000 | | $ | 272,600 |
Compagnie Generale de Geophysique - Veritas, 7.75%, 2017 | | | 140,000 | | | 141,400 |
GulfMark Offshore, Inc., 7.75%, 2014 | | | 110,000 | | | 111,100 |
| | | | | | |
| | | | | $ | 525,100 |
| | | | | | |
Printing & Publishing - 4.1% |
American Media Operations, Inc.,
10.25%, 2009 | | $ | 225,000 | | $ | 192,094 |
Dex Media, Inc., 0% to 2008, 9% to 2013 | | | 425,000 | | | 386,750 |
Dex Media, Inc., 0% to 2008, 9% to 2013 | | | 300,000 | | | 273,000 |
Idearc, Inc., 8%, 2016 | | | 670,000 | | | 614,725 |
Nielsen Finance LLC, 10%, 2014 | | | 145,000 | | | 148,263 |
Nielsen Finance LLC, 0% to 2011,
12.5% to 2016 | | | 210,000 | | | 147,525 |
R.H. Donnelley Corp., 8.875%, 2016 | | | 305,000 | | | 285,175 |
| | | | | | |
| | | | | $ | 2,047,532 |
| | | | | | |
Retailers - 1.0% |
Buhrmann U.S., Inc., 7.875%, 2015 | | $ | 195,000 | | $ | 183,788 |
Couche-Tard, Inc., 7.5%, 2013 | | | 150,000 | | | 149,625 |
Rite Aid Corp., 7.5%, 2017 | | | 155,000 | | | 136,594 |
Rite Aid Corp., 9.5%, 2017 | | | 40,000 | | | 33,100 |
| | | | | | |
| | | | | $ | 503,107 |
| | | | | | |
Specialty Stores - 0.6% |
Michaels Stores, Inc., 10%, 2014 | | $ | 150,000 | | $ | 142,500 |
Payless ShoeSource, Inc., 8.25%, 2013 | | | 160,000 | | | 150,400 |
| | | | | | |
| | | | | $ | 292,900 |
| | | | | | |
Supermarkets - 0.7% |
Stater Brothers Holdings, Inc.,
7.75%, 2015 | | $ | 165,000 | | $ | 159,225 |
SUPERVALU, Inc., 7.5%, 2014 | | | 185,000 | | | 189,625 |
| | | | | | |
| | | | | $ | 348,850 |
| | | | | | |
Telecommunications - Wireless - 1.4% |
Alltel Corp., 7%, 2012 | | $ | 211,000 | | $ | 181,988 |
American Tower Corp., 7%, 2017 (n) | | | 95,000 | | | 95,475 |
| | | | | | |
| Issuer | | Shares/Par | | Value ($) |
| | | | | | |
BONDS - continued | | | | | | |
Telecommunications - Wireless - continued |
MetroPCS Communications Wireless, Inc., 9.25%, 2014 | | $ | 160,000 | | $ | 150,400 |
Wind Acquisition Finance S.A.,
10.75%, 2015 (n) | | | 250,000 | | | 272,500 |
| | | | | | |
| | | | | $ | 700,363 |
| | | | | | |
Transportation - Services - 0.7% |
Hertz Corp., 8.875%, 2014 | | $ | 360,000 | | $ | 364,950 |
| | | | | | |
U.S. Treasury Obligations - 0.7% |
U.S. Treasury Bonds, 4.5%, 2036 | | $ | 354,000 | | $ | 355,798 |
| | | | | | |
Utilities - Electric Power - 5.1% |
AES Corp., 9.375%, 2010 | | $ | 255,000 | | $ | 267,750 |
Dynegy Holdings, Inc., 7.5%, 2015 | | | 130,000 | | | 121,550 |
Edison Mission Energy, 7%, 2017 | | | 510,000 | | | 501,075 |
Intergen N.V., 9%, 2017 (n) | | | 125,000 | | | 131,563 |
Mirant North American LLC,
7.375%, 2013 | | | 240,000 | | | 240,600 |
NRG Energy, Inc., 7.375%, 2016 | | | 750,000 | | | 731,250 |
Reliant Energy, Inc., 6.75%, 2014 | | | 75,000 | | | 75,188 |
Reliant Energy, Inc., 7.875%, 2017 | | | 355,000 | | | 351,450 |
Sierra Pacific Resources, 8.625%, 2014 | | | 115,000 | | | 122,881 |
| | | | | | |
| | | | | $ | 2,543,307 |
| | | | | | |
Total Bonds
(Identified Cost, $43,204,861) | | $ | 41,905,928 |
| | | | | | |
FLOATING RATE LOANS (g)(r) - 9.5% |
Aerospace - 0.3% |
Hawker Beechcraft Acquisition Co., Letter of Credit, 6.93%, 2014 | | $ | 6,191 | | $ | 5,871 |
Hawker Beechcraft Acquisition Co., Term Loan, 6.83%, 2014 | | | 151,343 | | | 143,524 |
| | | | | | |
| | | | | $ | 149,395 |
| | | | | | |
Automotive - 1.7% |
Allison Transmission, Inc., Term Loan B, 7.96%, 2014 | | $ | 84,582 | | $ | 78,894 |
Ford Motor Co., Term Loan B, 8%, 2013 | | | 322,333 | | | 297,800 |
Goodyear Tire & Rubber Co., Second Lien Term Loan, 6.43%, 2014 | | | 315,101 | | | 294,915 |
Mark IV Industries, Inc., Second Lien Term Loan, 10.77%, 2011 | | | 169,464 | | | 157,601 |
| | | | | | |
| | | | | $ | 829,210 |
| | | | | | |
Broadcasting - 0.8% |
Gray Television, Inc., Term Loan,
6.73%, 2014 | | $ | 128,430 | | $ | 119,280 |
Univision Communications, Inc., Term Loan B, 7.21%, 2014 (o) | | | 299,417 | | | 272,544 |
| | | | | | |
| | | | | $ | 391,824 |
| | | | | | |
Building - 0.2% |
Building Materials Corp. of America, Second Lien Term Loan, 10.69%, 2014 (o) | | $ | 164,142 | | $ | 118,387 |
| | | | | | |
Cable TV - 1.2% |
Charter Communications Operating LLC, Term Loan, 6.99%, 2013 | | $ | 262,676 | | $ | 245,184 |
CSC Holdings, Inc., Incremental Term Loan, 6.9%, 2013 | | | 196,427 | | | 185,399 |
Mediacom Illinois LLC, Term Loan A,
6.53%, 2011 | | | 177,515 | | | 164,646 |
| | | | | | |
| | | | | $ | 595,229 |
| | | | | | |
Chemicals - 0.5% |
Celanese AG, Dollar Term Loan,
6.98%, 2014 | | $ | 278,604 | | $ | 268,405 |
| | | | | | |
19-HYVA
Portfolio of Investments — continued
| | | | | | |
| Issuer | | Shares/Par | | Value ($) |
| | | | | | |
FLOATING RATE LOANS - continued | | | |
Computer Software - 0.3% |
First Data Corp., Term Loan B-1,
7.63%, 2014 | | $ | 132,043 | | $ | 125,204 |
| | | | | | |
Containers - 0.1% |
Altivity Packaging LLC, Second Lien Term Loan, 9.98%, 2013 | | $ | 14,119 | | $ | 14,128 |
Altivity Packaging LLC, Second Lien Term Loan, 9.98%, 2013 | | | 44,121 | | | 44,149 |
| | | | | | |
| | | | | $ | 58,277 |
| | | | | | |
Food & Beverages - 0.8% |
Dean Foods Co., Term Loan B,
6.58%, 2014 | | $ | 213,378 | | $ | 201,109 |
Dole Food Co., Inc., Letter of Credit,
6.99%, 2013 | | | 18,525 | | | 17,112 |
Dole Food Co., Inc., Term Loan,
7.16%, 2013 | | | 40,951 | | | 37,829 |
Dole Food Co., Inc., Term Loan C,
7.22%, 2013 | | | 136,504 | | | 126,095 |
| | | | | | |
| | | | | $ | 382,145 |
| | | | | | |
Forest & Paper Products - 0.6% |
Georgia-Pacific Corp., Term Loan,
6.87%, 2012 | | $ | 289,309 | | $ | 275,356 |
Georgia-Pacific Corp., Term Loan B-2, 6.84%, 2012 | | | 18,961 | | | 18,047 |
| | | | | | |
| | | | | $ | 293,403 |
| | | | | | |
Medical & Health Technology & Services - 1.2% |
Advanced Medical Optics, Inc., Term Loan, 6.66%, 2014 | | $ | 98,454 | | $ | 91,809 |
Community Health Systems, Inc., Term Loan B, 7.33%, 2014 | | | 154,929 | | | 148,965 |
HCA, Inc., Term Loan B, 7.08%, 2013 | | | 374,428 | | | 360,351 |
| | | | | | |
| | | | | $ | 601,125 |
| | | | | | |
Natural Gas - Pipeline - 0.2% |
Kinder Morgan, Term Loan, 6.35%, 2014 | | $ | 92,522 | | $ | 91,863 |
| | | | | | |
Pollution Control - 0.4% |
Allied Waste North America, Inc., Term Loan, 6.59%, 2012 | | $ | 121,799 | | $ | 116,352 |
Allied Waste North America, Inc., Term Loan A, Credit Linked Deposit, 6.62%, 2012 | | | 77,146 | | | 73,696 |
| | | | | | |
| | | | | $ | 190,048 |
| | | | | | |
Printing & Publishing - 0.5% |
Nielsen Finance LLC, Term Loan B,
7.28%, 2013 | | $ | 246,581 | | $ | 233,415 |
| | | | | | |
Retailers - 0.3% |
Neiman-Marcus Group, Inc., Term Loan, 2013 (o) | | $ | 163,681 | | $ | 157,196 |
| | | | | | |
Specialty Stores - 0.4% |
Michaels Stores, Inc., Term Loan B,
7.61%, 2013 | | $ | 227,747 | | $ | 208,832 |
| | | | | | |
Total Floating Rate Loans
(Identified Cost, $4,947,887) | | | | | $ | 4,693,958 |
| | | | | | |
COMMON STOCKS - 2.0% | | | | | | |
Automotive - 0.0% |
Oxford Automotive, Inc. (a) | | | 53 | | $ | 0 |
| | | | | | |
Cable TV - 0.6% |
Comcast Corp., “A” (a) | | | 11,300 | | $ | 206,338 |
Time Warner Cable, Inc. (a) | | | 2,800 | | | 77,280 |
| | | | | | |
| | | | | $ | 283,618 |
| | | | | | |
Construction - 0.3% |
Goodman Global, Inc. (a) | | | 5,600 | | $ | 137,424 |
| | | | | | |
| | | | | | |
| Issuer | | Shares/Par | | Value ($) |
| | | | | | |
COMMON STOCKS - continued | | | |
Consumer Goods & Services - 0.0% |
Central Garden & Pet Co. (a) | | | 2,300 | | $ | 13,248 |
| | | | | | |
Electronics - 0.1% |
Intel Corp. | | | 2,300 | | $ | 61,318 |
| | | | | | |
Energy - Integrated - 0.2% |
Chevron Corp. | | | 1,000 | | $ | 93,330 |
| | | | | | |
Forest & Paper Products - 0.1% |
Louisiana-Pacific Corp. | | | 2,600 | | $ | 35,568 |
| | | | | | |
Major Banks - 0.1% |
Bank of America Corp. | | | 600 | | $ | 24,756 |
JPMorgan Chase & Co. | | | 600 | | | 26,190 |
| | | | | | |
| | | | | $ | 50,946 |
| | | | | | |
Pharmaceuticals - 0.1% |
Johnson & Johnson | | | 900 | | $ | 60,030 |
| | | | | | |
Printing & Publishing - 0.0% |
Golden Books Family Entertainment,
Inc. (a) | | | 21,250 | | $ | 0 |
| | | | | | |
Real Estate - 0.2% |
Host Hotels & Resorts, Inc., REIT | | | 5,000 | | $ | 85,200 |
| | | | | | |
Telephone Services - 0.3% |
Knology, Inc. (a) | | | 116 | | $ | 1,482 |
Windstream Corp. | | | 12,000 | | | 156,223 |
| | | | | | |
| | | | | $ | 157,705 |
| | | | | | |
Total Common Stocks
(Identified Cost, $1,157,213) | | $ | 978,387 |
| | | | | | |
PREFERRED STOCKS - 0.0% | | | | | | |
Real Estate - 0.0% |
HRPT Properties Trust, “B”, REIT, 8.75% (Identified Cost, $3,200) | | | 117 | | $ | 2,920 |
| | | | | | |
SHORT-TERM OBLIGATIONS - 1.7% |
American Express Credit Corp.,
4.12%, due 1/02/08, at
Amortized Cost and Value (y) | | $ | 854,000 | | $ | 853,902 |
| | | | | | |
Total Investments
(Identified Cost, $50,167,063) (k) | | $ | 48,435,095 |
| | | | | | |
| |
OTHER ASSETS,
LESS LIABILITIES - 2.0% | | | 978,788 |
| | | | | | |
NET ASSETS - 100.0% | | $ | 49,413,883 |
| | | | | | |
20-HYVA
Portfolio of Investments — continued
Unfunded Loan Commitments
As of December 31, 2007, the variable account had the following unfunded loan commitments of $18,188 which could be extended at the option of the borrower:
| | | | | | | |
| Borrower | | Unfunded
Loan
Commitment | | Unrealized
Appreciation
(Depreciation) | |
| Community Health Systems, Inc., Delayed Draw Term Loan, 2014 | | $ | 7,792 | | $ | (300 | ) |
| Univision Communications, Inc., Delayed Draw Term Loan, 2014 | | | 10,396 | | | (125 | ) |
| | | | | | | |
| | $ | 18,188 | | $ | (425 | ) |
| | | | | | | |
At December 31, 2007, the variable account had sufficient cash and/or other liquid securities to cover any commitments under these contracts.
Swap Agreements at 12/31/07
| | | | | | | | | | | | | | |
| Expiration | | Notional Amount | | Counterparty | | Cash Flows to Receive | | Cash Flows to Pay | | Value | |
| Credit Default Swaps | |
| 6/20/09 | | USD | | 200,000 | | JPMorgan Chase Bank | | 4.10% (fixed rate) | | (1) | | $ | (13,290 | ) |
| 6/20/09 | | USD | | 100,000 | | JPMorgan Chase Bank | | 4.80% (fixed rate) | | (1) | | | (5,709 | ) |
| 6/20/12 | | USD | | 200,000 | | Morgan Stanley Capital Services, Inc. | | 3.76% (fixed rate) | | (2) | | | (38,242 | ) |
| 6/20/12 | | USD | | 100,000 | | Morgan Stanley Capital Services, Inc. | | 4.15% (fixed rate) | | (2) | | | (17,944 | ) |
| 6/20/12 | | USD | | 500,000 | | JPMorgan Chase Bank (a) | | (3) | | 4.207% (fixed rate) | | | 23,737 | |
| 9/20/12 | | USD | | 200,000 | | Goldman Sachs International | | 3.75% (fixed rate) | | (4) | | | 1,177 | |
| 3/20/17 | | USD | | 35,000 | | JPMorgan Chase Bank | | (5) | | 0.80% (fixed rate) | | | (216 | ) |
| 3/20/17 | | USD | | 35,000 | | JPMorgan Chase Bank | | (5) | | 0.78% (fixed rate) | | | (164 | ) |
| 3/20/17 | | USD | | 30,000 | | Merrill Lynch International | | (5) | | 0.81% (fixed rate) | | | (207 | ) |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | $ | (50,857 | ) |
| | | | | | | | | | | | | | |
| (1) | Variable account to pay notional amount upon a defined credit event by Abitibi-Consolidated, Inc., 8.375%, 4/01/15. |
| (2) | Variable account to pay notional amount upon a defined credit event by Bowater, Inc., 6.5%, 6/15/13. |
| (3) | Variable account to receive notional amount upon a defined credit event by a reference obligation specified in the CDX High Yield Index. |
| (4) | Variable account to pay notional amount upon a defined credit event by Allied Waste North America, Inc., 7.375%, 4/15/14. |
| (5) | Variable account to receive notional amount upon defined credit event by Waste Management, Inc., 7.375%, 8/01/10. |
| (a) | Premiums paid by the variable account amounted to $25,113. |
At December 31, 2007 the variable account had sufficient cash and/or other liquid securities to cover any commitments under these derivative contracts.
See portfolio footnotes and notes to financial statements.
21-HYVA
Portfolio of Investments — December 31, 2007
Money Market Variable Account
| | | | | | |
| Issuer | | Shares/Par | | Value ($) |
CERTIFICATES OF DEPOSIT - 14.8% | | | |
Financial Institutions - 3.0% |
Swedbank (NY), 4.88%, due 2/11/08 | | $ | 1,360,000 | | $ | 1,360,000 |
| | | | | | |
Major Banks - 5.9% |
Bank of Scotland PLC (NY),
4.845%, due 2/04/08 | | $ | 1,350,000 | | $ | 1,350,000 |
Barclays Bank PLC (NY), 4.99%, due 1/23/08 | | | 1,350,000 | | | 1,350,000 |
| | | | | | |
| | | | | $ | 2,700,000 |
| | | | | | |
Other Banks & Diversified Financials - 5.9% |
DEPFA Bank PLC (NY), 5.125%, due 1/23/08 | | $ | 1,350,000 | | $ | 1,350,000 |
Fortis Bank, NY, 4.82%, due 2/07/08 | | | 1,350,000 | | | 1,350,000 |
| | | | | | |
| | | | | $ | 2,700,000 |
| | | | | | |
Total Certificates of Deposit,
at Amortized Cost and Value | | $ | 6,760,000 |
| | | | | | |
COMMERCIAL PAPER (y) - 72.8% | | | |
Alcoholic Beverages - 2.6% |
Anheuser-Busch Co. Inc.,
4.15%, due 2/25/08 (t) | | $ | 1,213,000 | | $ | 1,205,309 |
| | | | | | |
Automotive - 3.0% |
Toyota Motor Credit Corp.,
4.27%, due 2/28/08 | | $ | 1,380,000 | | $ | 1,370,506 |
| | | | | | |
Brokerage & Asset Managers - 9.1% |
Goldman Sachs Group, Inc.,
4%, due 1/02/08 | | $ | 11,000 | | $ | 10,999 |
Goldman Sachs Group, Inc.,
4.6%, due 2/14/08 | | | 1,368,000 | | | 1,360,309 |
Merrill Lynch & Co., Inc., 5%, due 2/19/08 | | | 1,417,000 | | | 1,407,357 |
Morgan Stanley, 4.79%, due 6/13/08 | | | 1,135,000 | | | 1,110,233 |
Morgan Stanley, 4.8%, due 6/13/08 | | | 265,000 | | | 259,205 |
| | | | | | |
| | | | | $ | 4,148,103 |
| | | | | | |
Financial Institutions - 9.1% |
American Express Credit Corp.,
4.42%, due 3/20/08 | | $ | 1,387,000 | | $ | 1,373,547 |
Cargill, Inc., 5%, due 2/29/08 (t) | | | 1,384,000 | | | 1,372,659 |
General Electric Capital Corp.,
5.17%, due 1/23/08 (t) | | | 1,395,000 | | | 1,390,593 |
| | | | | | |
| | | | | $ | 4,136,799 |
| | | | | | |
Food & Beverages - 9.1% |
Archer Daniels Midland Co.,
4.28%, due 4/08/08 (t) | | $ | 1,393,000 | | $ | 1,376,770 |
Hershey Foods Corp., 4.5%, due 1/14/08 (t) | | | 1,370,000 | | | 1,367,774 |
Nestle Capital Corp., 4.71%, due 3/20/08 (t) | | | 1,419,000 | | | 1,404,333 |
| | | | | | |
| | | | | $ | 4,148,877 |
| | | | | | |
Insurance - 3.0% |
AIG Funding, Inc., 4.85%, due 2/01/08 | | $ | 1,381,000 | | $ | 1,375,232 |
| | | | | | |
Major Banks - 20.3% |
ABN Amro North America Finance, Inc.,
5.105%, due 1/10/08 | | $ | 1,382,000 | | $ | 1,380,236 |
Abbey National North America LLC,
4%, due 1/02/08 | | | 53,000 | | | 52,994 |
Abbey National North America LLC,
4.74%, due 4/11/08 | | | 1,050,000 | | | 1,036,037 |
BNP Paribas Finance, Inc.,
4.663%, due 1/14/08 | | | 1,379,000 | | | 1,376,678 |
Bank of America Corp., 4.72%, due 2/11/08 | | | 730,000 | | | 726,076 |
Bank of America Corp., 4.7%, due 3/07/08 | | | 653,000 | | | 647,373 |
JPMorgan Chase & Co.,
5.05%, due 1/04/08 | | | 764,000 | | | 763,678 |
JPMorgan Chase & Co.,
5.03%, due 1/22/08 | | | 623,000 | | | 621,172 |
Natexis Banques Populaires U.S. Financial Company LLC, 5.07%, due 2/04/08 | | | 1,372,000 | | | 1,365,430 |
| | | | | | | |
| Issuer | | Shares/Par | | Value ($) | |
COMMERCIAL PAPER (y) - continued | | | | |
Major Banks - continued | |
Societe Generale North America, Inc.,
5.155%, due 1/09/08 | | $ | 1,308,000 | | $ | 1,306,502 | |
| | | | | | | |
| | | | | $ | 9,276,176 | |
| | | | | | | |
Network & Telecom - 3.0% | |
AT&T, Inc., 3.95%, due 1/02/08 (t) | | $ | 1,371,000 | | $ | 1,370,850 | |
| | | | | | | |
Other Banks & Diversified Financials - 8.7% | |
Citigroup Funding, Inc., 4.88%, due 2/25/08 | | $ | 457,000 | | $ | 453,593 | |
Citigroup Funding, Inc., 4.9%, due 3/26/08 | | | 931,000 | | | 920,229 | |
Dexia Delaware LLC, 5.22%, due 1/14/08 | | | 345,000 | | | 344,350 | |
ING America Insurance Holdings, Inc.,
4.65%, due 2/28/08 | | | 915,000 | | | 908,145 | |
UBS Finance Delaware LLC,
4.875%, due 2/19/08 | | | 883,000 | | | 877,141 | |
UBS Financial Delaware LLC,
4.86%, due 1/02/08 | | | 490,000 | | | 489,934 | |
| | | | | | | |
| | | | | $ | 3,993,392 | |
| | | | | | | |
Specialty Chemicals - 1.9% | |
DuPont (E.I.) de Nemours & Co.,
4.2%, due 1/11/08 (t) | | $ | 870,000 | | $ | 868,985 | |
| | | | | | | |
Utilities - Electric Power - 3.0% | |
Florida Power & Light Co.,
4.27%, due 1/11/08 | | $ | 1,375,000 | | $ | 1,373,369 | |
| | | | | | | |
Total Commercial Paper,
at Amortized Cost and Value | | $ | 33,267,598 | |
| | | | | | | |
U.S. GOVERNMENT AGENCIES - 2.7% | | | | |
Federal Home Loan Bank, 2.5%, due 1/02/08, at Amortized Cost and Value (y) | | $ | 1,238,000 | | $ | 1,237,914 | |
| | | | | | | |
REPURCHASE AGREEMENTS - 10.0% | | | | |
Merrill Lynch, 4.50%, dated 12/31/07, due 1/02/08, total to be received $4,571,143 (secured by various U.S. Treasury and Federal Agency obligations and Mortgage Backed securities in a jointly traded account), at Cost | | $ | 4,570,000 | | $ | 4,570,000 | |
| | | | | | | |
Total Investments,
at Amortized Cost and Value | | $ | 45,835,512 | |
| | | | | | | |
| |
OTHER ASSETS,
LESS LIABILITIES - (0.3)% | | | (146,459 | ) |
| | | | | | | |
NET ASSETS - 100.0% | | $ | 45,689,053 | |
| | | | | | | |
See portfolio footnotes and notes to financial statements
22-MMVA
Portfolio of Investments — December 31, 2007
Total Return Variable Account
| | | | | |
| Issuer | | Shares/Par | | Value ($) |
| | | | | |
| | | | | |
COMMON STOCKS - 57.5% | | | | | |
Aerospace - 2.7% | | | | | |
Lockheed Martin Corp. | | 22,520 | | $ | 2,370,455 |
Northrop Grumman Corp. | | 6,680 | | | 525,315 |
Raytheon Co. | | 1,240 | | | 75,268 |
United Technologies Corp. | | 16,760 | | | 1,282,810 |
| | | | | |
| | | | $ | 4,253,848 |
| | | | | |
Alcoholic Beverages - 0.6% | | | | | |
Diageo PLC | | 41,766 | | $ | 894,020 |
| | | | | |
Apparel Manufacturers - 0.6% | | | | | |
NIKE, Inc., “B” | | 13,590 | | $ | 873,022 |
| | | | | |
Automotive - 0.6% | | | | | |
Bayerische Motoren Werke AG | | 2,530 | | $ | 156,230 |
Harley-Davidson, Inc. | | 4,850 | | | 226,544 |
Johnson Controls, Inc. | | 17,770 | | | 640,431 |
| | | | | |
| | | | $ | 1,023,205 |
| | | | | |
Biotechnology - 0.4% | | | | | |
Amgen, Inc. (a) | | 6,500 | | $ | 301,860 |
Genzyme Corp. (a) | | 4,590 | | | 341,680 |
| | | | | |
| | | | $ | 643,540 |
| | | | | |
Broadcasting - 0.7% | | | | | |
Citadel Broadcasting Corp. | | 365 | | $ | 752 |
E.W. Scripps Co., “A” | | 6,160 | | | 277,262 |
Omnicom Group, Inc. | | 9,120 | | | 433,474 |
Walt Disney Co. | | 7,280 | | | 234,998 |
WPP Group PLC | | 10,240 | | | 131,100 |
| | | | | |
| | | | $ | 1,077,586 |
| | | | | |
Brokerage & Asset Managers - 2.8% | | | |
Bear Stearns Cos., Inc. | | 7,430 | | $ | 655,697 |
E*TRADE Financial Corp. (a) | | 37,860 | | | 134,403 |
Franklin Resources, Inc. | | 5,260 | | | 601,902 |
Goldman Sachs Group, Inc. | | 5,720 | | | 1,230,086 |
KKR Private Equity Investments
LP, IEU (z) | | 6,600 | | | 119,856 |
KKR Private Equity Investors | | 2,630 | | | 47,854 |
Legg Mason, Inc. | | 3,190 | | | 233,349 |
Lehman Brothers Holdings, Inc. | | 12,730 | | | 833,051 |
Merrill Lynch & Co., Inc. | | 10,680 | | | 573,302 |
| | | | | |
| | | | $ | 4,429,500 |
| | | | | |
Business Services - 0.4% | | | | | |
Accenture Ltd., “A” | | 10,020 | | $ | 361,021 |
Automatic Data Processing, Inc. | | 2,030 | | | 90,396 |
Fidelity National Information Services, Inc. | | 5,300 | | | 220,427 |
| | | | | |
| | | | $ | 671,844 |
| | | | | |
Cable TV - 0.3% | | | | | |
Time Warner Cable, Inc. (a) | | 15,170 | | $ | 418,692 |
| | | | | |
Chemicals - 0.9% | | | | | |
3M Co. | | 4,050 | | $ | 341,496 |
Dow Chemical Co. | | 2,670 | | | 105,251 |
PPG Industries, Inc. | | 13,120 | | | 921,418 |
Syngenta AG | | 390 | | | 98,953 |
| | | | | |
| | | | $ | 1,467,118 |
| | | | | |
Computer Software - 0.5% | | | | | |
Oracle Corp. (a) | | 34,940 | | $ | 788,945 |
| | | | | |
Computer Software - Systems - 1.3% | | | |
Hewlett-Packard Co. | | 14,980 | | $ | 756,190 |
International Business Machines Corp. | | 11,640 | | | 1,258,284 |
| | | | | |
| | | | $ | 2,014,474 |
| | | | | |
Construction - 0.8% | | | | | |
D.R. Horton, Inc. | | 23,270 | | $ | 306,466 |
| | | | | |
| Issuer | | Shares/Par | | Value ($) |
| | | | | |
COMMON STOCKS - continued | | | | | |
Construction - continued | | | | | |
Masco Corp. | | 21,780 | | $ | 470,666 |
Sherwin-Williams Co. | | 2,340 | | | 135,814 |
Toll Brothers, Inc. (a) | | 17,700 | | | 355,062 |
| | | | | |
| | | | $ | 1,268,008 |
| | | | | |
Consumer Goods & Services - 1.1% | | | |
Clorox Co. | | 6,970 | | $ | 454,235 |
Procter & Gamble Co. | | 17,030 | | | 1,250,343 |
| | | | | |
| | | | $ | 1,704,578 |
| | | | | |
Containers - 0.0% | | | | | |
Smurfit-Stone Container Corp. (a) | | 4,980 | �� | $ | 52,589 |
| | | | | |
Electrical Equipment - 1.4% | | | | | |
General Electric Co. | | 30,320 | | $ | 1,123,962 |
Rockwell Automation, Inc. | | 3,000 | | | 206,880 |
W.W. Grainger, Inc. | | 6,720 | | | 588,134 |
WESCO International, Inc. (a) | | 8,440 | | | 334,562 |
| | | | | |
| | | | $ | 2,253,538 |
| | | | | |
Electronics - 0.8% | | | | | |
Flextronics International Ltd. (a) | | 20,840 | | $ | 251,330 |
Intel Corp. | | 34,190 | | | 911,505 |
Samsung Electronics Co. Ltd., GDR | | 509 | | | 147,719 |
| | | | | |
| | | | $ | 1,310,554 |
| | | | | |
Energy - Independent - 2.4% | | | | | |
Anadarko Petroleum Corp. | | 10,750 | | $ | 706,167 |
Apache Corp. | | 11,410 | | | 1,227,031 |
CONSOL Energy, Inc. | | 1,200 | | | 85,824 |
Devon Energy Corp. | | 11,800 | | | 1,049,138 |
EOG Resources, Inc. | | 2,740 | | | 244,545 |
Sunoco, Inc. | | 4,190 | | | 303,524 |
Ultra Petroleum Corp. (a) | | 2,130 | | | 152,295 |
| | | | | |
| | | | $ | 3,768,524 |
| | | | | |
Energy - Integrated - 5.5% | | | | | |
Chevron Corp. | | 5,875 | | $ | 548,314 |
ConocoPhillips | | 4,910 | | | 433,553 |
Exxon Mobil Corp. | | 33,522 | | | 3,140,676 |
Hess Corp. | | 18,260 | | | 1,841,704 |
Marathon Oil Corp. | | 11,630 | | | 707,802 |
Royal Dutch Shell PLC, ADR | | 2,120 | | | 178,504 |
TOTAL S.A., ADR | | 22,610 | | | 1,867,586 |
| | | | | |
| | | | $ | 8,718,139 |
| | | | | |
Food & Beverages - 2.0% | | | | | |
General Mills, Inc. | | 15,710 | | $ | 895,470 |
Kellogg Co. | | 10,870 | | | 569,914 |
Nestle S.A. | | 2,398 | | | 1,098,796 |
PepsiCo, Inc. | | 8,570 | | | 650,463 |
| | | | | |
| | | | $ | 3,214,643 |
| | | | | |
Food & Drug Stores - 1.2% | | | | | |
CVS Caremark Corp. | | 22,354 | | $ | 888,571 |
Kroger Co. | | 8,820 | | | 235,582 |
Safeway, Inc. | | 14,540 | | | 497,413 |
Walgreen Co. | | 7,660 | | | 291,693 |
| | | | | |
| | | | $ | 1,913,259 |
| | | | | |
Forest & Paper Products - 0.2% | | | | | |
AbitibiBowater, Inc. | | 4,824 | | $ | 99,423 |
MeadWestvaco Corp. | | 9,300 | | | 291,090 |
| | | | | |
| | | | $ | 390,513 |
| | | | | |
Furniture & Appliances - 0.2% | | | | | |
Jarden Corp. (a) | | 9,260 | | $ | 218,629 |
Whirlpool Corp. | | 1,870 | | | 152,648 |
| | | | | |
| | | | $ | 371,277 |
| | | | | |
23-TRVA
Portfolio of Investments — continued
| | | | | |
| Issuer | | Shares/Par | | Value ($) |
| | | | | |
COMMON STOCKS - continued | | | | | |
Gaming & Lodging - 0.6% | | | | | |
Royal Caribbean Cruises Ltd. | | 22,710 | | $ | 963,812 |
| | | | | |
General Merchandise - 0.9% | | | | | |
Macy’s, Inc. | | 46,040 | | $ | 1,191,055 |
Wal-Mart Stores, Inc. | | 6,190 | | | 294,211 |
| | | | | |
| | | | $ | 1,485,266 |
| | | | | |
Health Maintenance Organizations - 1.1% | | | |
UnitedHealth Group, Inc. | | 10,040 | | $ | 584,328 |
WellPoint, Inc. (a) | | 13,830 | | | 1,213,306 |
| | | | | |
| | | | $ | 1,797,634 |
| | | | | |
Insurance - 4.5% | | | | | |
Allstate Corp. | | 35,210 | | $ | 1,839,018 |
Ambac Financial Group, Inc. | | 5,240 | | | 135,035 |
American International Group, Inc. | | 3,360 | | | 195,888 |
Chubb Corp. | | 3,390 | | | 185,026 |
Conseco, Inc. (a) | | 26,240 | | | 329,574 |
Genworth Financial, Inc., “A” | | 55,500 | | | 1,412,475 |
Hartford Financial Services Group, Inc. | | 10,050 | | | 876,260 |
Max Capital Group Ltd. | | 8,730 | | | 244,353 |
Mbia, Inc. | | 4,340 | | | 80,854 |
MetLife, Inc. | | 16,100 | | | 992,082 |
Principal Financial Group, Inc. | | 2,470 | | | 170,035 |
Prudential Financial, Inc. | | 2,510 | | | 233,530 |
Travelers Cos., Inc. | | 7,490 | | | 402,962 |
| | | | | |
| | | | $ | 7,097,092 |
| | | | | |
Internet - 0.1% | | | | | |
Yahoo!, Inc. (a) | | 3,180 | | $ | 73,967 |
| | | | | |
Leisure & Toys - 0.1% | | | | | |
Polaris Industries, Inc. | | 3,380 | | $ | 161,463 |
| | | | | |
Machinery & Tools - 0.7% | | | | | |
Deere & Co. | | 4,260 | | $ | 396,691 |
Eaton Corp. | | 1,120 | | | 108,584 |
Kennametal, Inc. | | 4,020 | | | 152,197 |
Timken Co. | | 15,090 | | | 495,707 |
| | | | | |
| | | | $ | 1,153,179 |
| | | | | |
Major Banks - 4.7% | | | | | |
Bank of America Corp. | | 43,678 | | $ | 1,802,154 |
Bank of New York Mellon Corp. | | 37,002 | | | 1,804,217 |
Huntington Bancshares, Inc. | | 9,020 | | | 133,135 |
JPMorgan Chase & Co. | | 32,832 | | | 1,433,117 |
PNC Financial Services Group, Inc. | | 12,250 | | | 804,213 |
State Street Corp. | | 8,090 | | | 656,908 |
SunTrust Banks, Inc. | | 13,520 | | | 844,865 |
| | | | | |
| | | | $ | 7,478,609 |
| | | | | |
Medical & Health Technology & Services - 0.1% |
DaVita, Inc. (a) | | 2,720 | | $ | 153,272 |
Omnicare, Inc. | | 3,350 | | | 76,414 |
| | | | | |
| | | | $ | 229,686 |
| | | | | |
Medical Equipment - 0.5% | | | | | |
Advanced Medical Optics, Inc. (a) | | 6,500 | | $ | 159,445 |
Boston Scientific Corp. (a) | | 25,890 | | | 301,101 |
Cooper Cos., Inc. | | 2,890 | | | 109,820 |
Pall Corp. | | 4,960 | | | 199,987 |
| | | | | |
| | | | $ | 770,353 |
| | | | | |
Metals & Mining - 0.3% | | | | | |
Allegheny Technologies, Inc. | | 1,760 | | $ | 152,064 |
BHP Billiton PLC | | 6,630 | | | 204,036 |
Century Aluminum Co. (a) | | 2,950 | | | 159,123 |
| | | | | |
| | | | $ | 515,223 |
| | | | | |
| | | | | |
| Issuer | | Shares/Par | | Value ($) |
| | | | | |
COMMON STOCKS - continued | | | | | |
Natural Gas - Distribution - 0.3% | | | | | |
Sempra Energy | | 8,840 | | $ | 547,019 |
| | | | | |
Natural Gas - Pipeline - 0.4% | | | | | |
Williams Cos., Inc. | | 19,420 | | $ | 694,848 |
| | | | | |
Network & Telecom - 0.2% | | | | | |
Motorola, Inc. | | 8,400 | | $ | 134,736 |
Nortel Networks Corp. (a) | | 7,327 | | | 110,564 |
| | | | | |
| | | | $ | 245,300 |
| | | | | |
Oil Services - 0.2% | | | | | |
Halliburton Co. | | 4,240 | | $ | 160,738 |
Noble Corp. | | 3,710 | | | 209,652 |
| | | | | |
| | | | $ | 370,390 |
| | | | | |
Other Banks & Diversified Financials - 2.8% | | | |
American Express Co. | | 11,780 | | $ | 612,796 |
Citigroup, Inc. | | 43,236 | | | 1,272,868 |
Fannie Mae | | 23,300 | | | 931,534 |
Freddie Mac | | 7,270 | | | 247,689 |
New York Community Bancorp, Inc. | | 31,960 | | | 561,857 |
UBS AG | | 10,737 | | | 498,620 |
UBS AG | | 8,560 | | | 393,760 |
| | | | | |
| | | | $ | 4,519,124 |
| | | | | |
Pharmaceuticals - 3.5% | | | | | |
Abbott Laboratories | | 3,480 | | $ | 195,402 |
Eli Lilly & Co. | | 4,570 | | | 243,992 |
GlaxoSmithKline PLC | | 6,420 | | | 162,919 |
Johnson & Johnson | | 23,850 | | | 1,590,795 |
Merck & Co., Inc. | | 20,980 | | | 1,219,148 |
Merck KGaA | | 2,000 | | | 256,918 |
Pfizer, Inc. | | 6,470 | | | 147,063 |
Warner Chilcott Ltd., “A” (a) | | 6,890 | | | 122,160 |
Wyeth | | 36,660 | | | 1,620,005 |
| | | | | |
| | | | $ | 5,558,402 |
| | | | | |
Printing & Publishing - 0.1% | | | | | |
New York Times Co., “A” | | 7,090 | | $ | 124,288 |
| | | | | |
Railroad & Shipping - 0.5% | | | | | |
Burlington Northern Santa Fe Corp. | | 5,500 | | $ | 457,765 |
Norfolk Southern Corp. | | 5,340 | | | 269,350 |
| | | | | |
| | | | $ | 727,115 |
| | | | | |
Specialty Chemicals - 0.5% | | | | | |
Air Products & Chemicals, Inc. | | 5,720 | | $ | 564,164 |
Praxair, Inc. | | 1,890 | | | 167,662 |
| | | | | |
| | | | $ | 731,826 |
| | | | | |
Specialty Stores - 0.5% | | | | | |
Advance Auto Parts, Inc. | | 1,780 | | $ | 67,622 |
Lowe’s Cos., Inc. | | 2,010 | | | 45,466 |
Staples, Inc. | | 29,590 | | | 682,641 |
| | | | | |
| | | | $ | 795,729 |
| | | | | |
Telecommunications - Wireless - 0.3% | | | |
Sprint Nextel Corp. | | 14,550 | | $ | 191,042 |
Vodafone Group PLC, ADR | | 8,929 | | | 333,230 |
| | | | | |
| | | | $ | 524,272 |
| | | | | |
Telephone Services - 2.6% | | | | | |
AT&T, Inc. | | 37,364 | | $ | 1,552,848 |
Embarq Corp. | | 18,580 | | | 920,267 |
Qwest Communications International, Inc. | | 119,510 | | | 837,765 |
TELUS Corp. | | 4,630 | | | 231,934 |
TELUS Corp. (non-voting shares) | | 6,118 | | | 297,609 |
Verizon Communications, Inc. | | 7,640 | | | 333,792 |
| | | | | |
| | | | $ | 4,174,215 |
| | | | | |
24-TRVA
Portfolio of Investments — continued
| | | | | | |
| Issuer | | Shares/Par | | Value ($) |
| | | | | | |
COMMON STOCKS - continued | | | | | | |
Tobacco - 1.7% | | | | | | |
Altria Group, Inc. | | | 36,140 | | $ | 2,731,461 |
| | | | | | |
Trucking - 0.2% | | | | | | |
United Parcel Service, Inc., “B” | | | 4,460 | | $ | 315,411 |
| | | | | | |
Utilities - Electric Power - 2.7% | | | | | | |
American Electric Power Co., Inc. | | | 7,260 | | $ | 338,026 |
Dominion Resources, Inc. | | | 8,504 | | | 403,515 |
DPL, Inc. | | | 11,160 | | | 330,894 |
Entergy Corp. | | | 2,090 | | | 249,797 |
FPL Group, Inc. | | | 14,500 | | | 982,810 |
NRG Energy, Inc. (a) | | | 10,730 | | | 465,038 |
Pepco Holdings, Inc. | | | 6,560 | | | 192,405 |
PG&E Corp. | | | 10,330 | | | 445,120 |
PPL Corp. | | | 2,030 | | | 105,743 |
Public Service Enterprise Group, Inc. | | | 8,500 | | | 835,040 |
| | | | | | |
| | | | | $ | 4,348,388 |
| | | | | | |
Total Common Stocks
(Identified Cost, $83,992,773) | | $ | 91,655,488 |
| | | | | | |
BONDS - 41.5% | | | | | | |
Agency - Other - 0.0% | | | | | | |
Financing Corp., 9.65%, 2018 | | $ | 45,000 | | $ | 64,099 |
| | | | | | |
Asset Backed & Securitized - 2.8% | | | |
Banc of America Commercial Mortgage, Inc., FRN, 5.482%, 2049 | | $ | 48,384 | | $ | 47,704 |
Bayview Financial Revolving Mortgage Loan Trust, FRN, 5.6%, 2040 (z) | | | 250,000 | | | 200,000 |
BlackRock Capital Finance LP,
7.75%, 2026 (n) | | | 34,182 | | | 32,165 |
Chase Commercial Mortgage Securities Corp., 7.543%, 2032 | | | 44,584 | | | 45,029 |
Countrywide Asset-Backed Certificates, FRN, 4.823%, 2035 | | | 24,368 | | | 24,209 |
Countrywide Asset-Backed Certificates, FRN, 5.689%, 2046 | | | 90,000 | | | 83,916 |
Credit Suisse Commercial Mortgage Trust, 5.509%, 2039 | | | 128,277 | | | 126,197 |
Credit Suisse Mortgage Capital Certificate, 5.343%, 2039 | | | 98,568 | | | 95,737 |
CRIIMI MAE Commercial Mortgage Trust, CDO, 7%, 2033 (n) | | | 20,076 | | | 20,219 |
Falcon Franchise Loan LLC,
7.382%, 2010 (n) | | | 4,499 | | | 4,450 |
GE Commercial Mortgage Corp., FRN,
5.339%, 2044 | | | 130,000 | | | 128,084 |
GMAC Mortgage Corp. Loan Trust, FRN, 5.805%, 2036 | | | 115,000 | | | 93,777 |
Greenwich Capital Commercial Funding Corp., 4.305%, 2042 | | | 107,385 | | | 106,053 |
Greenwich Capital Commercial Funding Corp., FRN, 5.317%, 2036 | | | 60,728 | | | 61,801 |
JPMorgan Chase Commercial Mortgage Securities Corp., 4.78%, 2042 | | | 152,000 | | | 143,042 |
JPMorgan Chase Commercial Mortgage Securities Corp., 5.552%, 2045 | | | 97,000 | | | 98,422 |
JPMorgan Chase Commercial Mortgage Securities Corp., 5.372%, 2047 | | | 170,000 | | | 165,929 |
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 5.21%, 2041 | | | 39,903 | | | 40,553 |
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 5.475%, 2043 | | | 210,000 | | | 212,364 |
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 5.855%, 2043 | | | 200,000 | | | 202,443 |
| | | | | | |
| Issuer | | Shares/Par | | Value ($) |
| | | | | | |
BONDS - continued | | | | | | |
Asset Backed & Securitized - continued | | | |
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 5.875%, 2045 | | $ | 210,000 | | $ | 218,497 |
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 5.038%, 2046 | | | 197,476 | | | 191,927 |
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 5.532%, 2047 | | | 78,278 | | | 64,349 |
Merrill Lynch Mortgage Trust, FRN, 5.829%, 2017 | | | 84,000 | | | 75,281 |
Morgan Stanley Capital I, Inc.,
5.168%, 2042 | | | 48,533 | | | 47,601 |
Morgan Stanley Capital I, Inc., FRN, 0.522%, 2030 (i)(n) | | | 6,279,593 | | | 53,144 |
Multi-Family Capital Access One, Inc., 6.65%, 2024 | | | 26,312 | | | 26,395 |
Nomura Asset Securities Corp., FRN, 9.779%, 2027 (z) | | | 210,628 | | | 234,800 |
Residential Asset Mortgage Products, Inc., 4.109%, 2035 | | | 51,374 | | | 50,950 |
Residential Asset Mortgage Products, Inc., FRN, 4.97%, 2034 | | | 92,000 | | | 87,951 |
Residential Funding Mortgage Securities, Inc., FRN, 5.32%, 2035 | | | 129,000 | | | 118,410 |
Spirit Master Funding LLC,
5.05%, 2023 (z) | | | 178,332 | | | 174,947 |
Structured Asset Securities Corp., FRN, 4.67%, 2035 | | | 189,364 | | | 189,091 |
Wachovia Bank Commercial Mortgage Trust, FRN, 4.847%, 2041 | | | 50,000 | | | 48,202 |
Wachovia Bank Commercial Mortgage Trust, FRN, 5.083%, 2042 | | | 185,000 | | | 180,741 |
Wachovia Bank Commercial Mortgage Trust, FRN, 5.118%, 2042 | | | 200,000 | | | 196,552 |
Wachovia Bank Commercial Mortgage Trust, FRN, 5.513%, 2043 | | | 55,500 | | | 48,466 |
Wachovia Bank Commercial Mortgage Trust, FRN, 5.466%, 2045 | | | 189,000 | | | 186,756 |
Wachovia Bank Commercial Mortgage Trust, FRN, 5.961%, 2045 | | | 140,000 | | | 143,404 |
Wachovia Bank Commercial Mortgage Trust, FRN, 5.795%, 2045 | | | 150,000 | | | 150,599 |
Wachovia Bank Commercial Mortgage Trust, FRN, 5.776%, 2047 | | | 99,000 | | | 81,990 |
| | | | | | |
| | | | | $ | 4,502,147 |
| | | | | | |
Automotive - 0.1% | | | | | | |
Johnson Controls, Inc., 5.5%, 2016 | | $ | 136,000 | | $ | 134,006 |
| | | | | | |
Broadcasting - 0.2% | | | | | | |
CBS Corp., 6.625%, 2011 | | $ | 137,000 | | $ | 142,100 |
News America Holdings, 8.5%, 2025 | | | 99,000 | | | 117,977 |
News America, Inc., 6.2%, 2034 | | | 42,000 | | | 41,403 |
| | | | | | |
| | | | | $ | 301,480 |
| | | | | | |
Brokerage & Asset Managers - 0.6% |
Goldman Sachs Group, Inc.,
5.625%, 2017 | | $ | 176,000 | | $ | 171,877 |
Lehman Brothers Holdings, Inc.,
6.5%, 2017 | | | 170,000 | | | 172,016 |
Merrill Lynch & Co., Inc., 6.05%, 2016 | | | 200,000 | | | 196,514 |
Merrill Lynch & Co., Inc., 6.11%, 2037 | | | 130,000 | | | 114,815 |
Morgan Stanley, 5.75%, 2016 | | | 100,000 | | | 98,677 |
Morgan Stanley Group, Inc.,
6.75%, 2011 | | | 156,000 | | | 163,510 |
| | | | | | |
| | | | | $ | 917,409 |
| | | | | | |
25-TRVA
Portfolio of Investments — continued
| | | | | | |
| Issuer | | Shares/Par | | Value ($) |
| | | | | | |
BONDS - continued | | | | | | |
Building - 0.1% | | | | | | |
CRH America, Inc., 6.95%, 2012 | | $ | 208,000 | | $ | 219,942 |
| | | | | | |
Business Services - 0.1% | | | | | | |
Xerox Corp., 5.5%, 2012 | | $ | 80,000 | | $ | 81,329 |
Xerox Corp., 6.4%, 2016 | | | 40,000 | | | 40,931 |
| | | | | | |
| | | | | $ | 122,260 |
| | | | | | |
Cable TV - 0.2% | | | | | | |
Cox Communications, Inc.,
4.625%, 2013 | | $ | 159,000 | | $ | 152,117 |
Time Warner Entertainment Co. LP, 8.375%, 2033 | | | 110,000 | | | 132,507 |
| | | | | | |
| | | | | $ | 284,624 |
| | | | | | |
Conglomerates - 0.2% | | | | | | |
General Electric Co., 5.25%, 2017 | | $ | 80,000 | | $ | 79,829 |
Kennametal, Inc., 7.2%, 2012 | | | 211,000 | | | 229,298 |
| | | | | | |
| | | | | $ | 309,127 |
| | | | | | |
Consumer Goods & Services - 0.2% |
Fortune Brands, Inc., 5.125%, 2011 | | $ | 158,000 | | $ | 157,679 |
Western Union Co., 5.4%, 2011 | | | 210,000 | | | 211,607 |
| | | | | | |
| | | | | $ | 369,286 |
| | | | | | |
Defense Electronics - 0.1% | | | | | | |
BAE Systems Holdings, Inc.,
5.2%, 2015 (n) | | $ | 103,000 | | $ | 100,016 |
| | | | | | |
Electronics - 0.1% | | | | | | |
Tyco Electronics Ltd., 6.55%, 2017 (n) | | $ | 128,000 | | $ | 131,657 |
| | | | | | |
Emerging Market Sovereign - 0.1% |
State of Israel, 4.625%, 2013 | | $ | 112,000 | | $ | 110,361 |
| | | | | | |
Energy - Independent - 0.3% | | | | | | |
Nexen, Inc., 5.875%, 2035 | | $ | 100,000 | | $ | 94,221 |
Ocean Energy, Inc., 7.25%, 2011 | | | 165,000 | | | 179,323 |
XTO Energy, Inc., 5.65%, 2016 | | | 190,000 | | | 191,350 |
| | | | | | |
| | | | | $ | 464,894 |
| | | | | | |
Financial Institutions - 0.6% | | | | | | |
American Express Co., 5.5%, 2016 | | $ | 200,000 | | $ | 198,824 |
Capital One Financial Co., 6.15%, 2016 | | | 130,000 | | | 115,355 |
Capmark Financial Group, Inc.,
5.875%, 2012 (n) | | | 170,000 | | | 134,566 |
CIT Group, Inc., 6.1% to 2017,
FRN to 2067 | | | 10,000 | | | 7,261 |
Countrywide Financial Corp.,
6.25%, 2016 | | | 171,000 | | | 98,422 |
General Electric Capital Corp.,
5.375%, 2016 | | | 60,000 | | | 60,766 |
HSBC Finance Corp., 5.25%, 2011 | | | 145,000 | | | 144,951 |
ORIX Corp., 5.48%, 2011 | | | 210,000 | | | 209,993 |
| | | | | | |
| | | | | $ | 970,138 |
| | | | | | |
Food & Beverages - 0.4% | | | | | | |
Coca Cola Co., 5.35%, 2017 | | $ | 150,000 | | $ | 153,681 |
Diageo Finance B.V., 5.5%, 2013 | | | 230,000 | | | 233,346 |
Miller Brewing Co., 5.5%, 2013 (n) | | | 276,000 | | | 279,670 |
| | | | | | |
| | | | | $ | 666,697 |
| | | | | | |
Food & Drug Stores - 0.1% | | | | | | |
CVS Caremark Corp., 6.125%, 2016 | | $ | 110,000 | | $ | 112,913 |
CVS Caremark Corp., 5.75%, 2017 | | | 70,000 | | | 70,451 |
| | | | | | |
| | | | | $ | 183,364 |
| | | | | | |
Forest & Paper Products - 0.0% | | | | | | |
MeadWestvaco Corp., 6.8%, 2032 | | $ | 69,000 | | $ | 64,985 |
| | | | | | |
Gaming & Lodging - 0.2% | | | | | | |
Marriott International, Inc.,
6.375%, 2017 | | $ | 160,000 | | $ | 164,156 |
Wyndham Worldwide Corp., 6%, 2016 | | | 100,000 | | | 94,840 |
| | | | | | |
| | | | | $ | 258,996 |
| | | | | | |
| | | | | | |
| Issuer | | Shares/Par | | Value ($) |
| | | | | | |
BONDS - continued | | | | | | |
Insurance - 0.3% | | | | | | |
American International Group, Inc.,
6.25%, 2037 | | $ | 100,000 | | $ | 89,442 |
ING Groep N.V., 5.775% to 2015,
FRN to 2049 | | | 223,000 | | | 206,163 |
MetLife, Inc., 6.5%, 2032 | | | 48,000 | | | 48,301 |
MetLife, Inc., 6.4%, 2036 | | | 120,000 | | | 109,979 |
| | | | | | |
| | | | | $ | 453,885 |
| | | | | | |
Insurance - Property & Casualty - 0.3% |
Allstate Corp., 6.125%, 2032 | | $ | 185,000 | | $ | 179,608 |
Chubb Corp., 6.375% to 2017,
FRN to 2037 | | | 200,000 | | | 195,082 |
Fund American Cos., Inc.,
5.875%, 2013 | | | 117,000 | | | 117,252 |
| | | | | | |
| | | | | $ | 491,942 |
| | | | | | |
International Market Quasi-Sovereign - 0.3% |
Hydro-Quebec, 6.3%, 2011 | | $ | 262,000 | | $ | 280,555 |
Province of Ontario, 5%, 2011 | | | 200,000 | | | 206,678 |
| | | | | | |
| | | | | $ | 487,233 |
| | | | | | |
Machinery & Tools - 0.1% | | | | | | |
Atlas Copco AB, 5.6%, 2017 (n) | | $ | 160,000 | | $ | 160,058 |
| | | | | | |
Major Banks - 1.0% | | | | | | |
Bank of America Corp., 5.3%, 2017 | | $ | 250,000 | | $ | 243,094 |
BNP Paribas, 7.195% to 2037,
FRN to 2049(n) | | | 100,000 | | | 98,591 |
DBS Capital Funding Corp.,
7.657% to 2011, FRN to 2049(n) | | | 170,000 | | | 181,654 |
MUFG Capital Finance 1 Ltd.,
6.346% to 2016, FRN to 2049 | | | 200,000 | | | 189,427 |
PNC Funding Corp., 5.625%, 2017 | | | 90,000 | | | 87,593 |
Royal Bank of Scotland Group PLC,
6.99% to 2017, FRN to 2049(n) | | | 100,000 | | | 99,699 |
UniCredito Italiano Capital Trust II,
9.2% to 2010, FRN to 2049(n) | | | 208,000 | | | 226,672 |
Unicredito Luxembourg Finance S.A.,
6%, 2017 (n) | | | 100,000 | | | 99,012 |
Wachovia Corp., 5.25%, 2014 | | | 81,000 | | | 79,197 |
Wells Fargo National Bank, 4.75%, 2015 | | | 315,000 | | | 300,862 |
| | | | | | |
| | | | | $ | 1,605,801 |
| | | | | | |
Medical & Health Technology & Services - 0.3% |
Baxter International, Inc., 5.9%, 2016 | | $ | 136,000 | | $ | 141,309 |
Cardinal Health, Inc., 6.3%, 2016 (n) | | | 75,000 | | | 76,870 |
Covidien Ltd., 6%, 2017 (n) | | | 40,000 | | | 41,389 |
Covidien Ltd., 6.55%, 2037 (n) | | | 30,000 | | | 31,156 |
HCA, Inc., 8.75%, 2010 | | | 40,000 | | | 40,350 |
Hospira, Inc., 5.55%, 2012 | | | 50,000 | | | 50,844 |
Hospira, Inc., 6.05%, 2017 | | | 174,000 | | | 174,836 |
| | | | | | |
| | | | | $ | 556,754 |
| | | | | | |
Metals & Mining - 0.1% | | | | | | |
Vale Overseas Ltd., 6.25%, 2017 | | $ | 150,000 | | $ | 150,466 |
| | | | | | |
Mortgage Backed - 16.1% | | | | | | |
Fannie Mae, 4.01%, 2013 | | $ | 18,683 | | $ | 18,143 |
Fannie Mae, 4.547%, 2014 | | | 128,201 | | | 127,309 |
Fannie Mae, 4.63%, 2014 | | | 46,279 | | | 46,092 |
Fannie Mae, 4.839%, 2014 | | | 65,871 | | | 66,308 |
Fannie Mae, 4.56%, 2015 | | | 38,465 | | | 37,946 |
Fannie Mae, 4.78%, 2015 | | | 38,658 | | | 38,524 |
Fannie Mae, 4.925%, 2015 | | | 260,944 | | | 262,930 |
Fannie Mae, 5.09%, 2016 | | | 40,000 | | | 40,389 |
Fannie Mae, 5.5%, 2016-2036 | | | 7,879,553 | | | 7,894,873 |
Fannie Mae, 4.994%, 2017 | | | 87,943 | | | 88,889 |
Fannie Mae, 5.05%, 2017 | | | 39,000 | | | 39,271 |
26-TRVA
Portfolio of Investments — continued
| | | | | | |
| Issuer | | Shares/Par | | Value ($) |
| | | | | | |
BONDS - continued | | | | | | |
Mortgage Backed - continued | | | | | | |
Fannie Mae, 6%, 2017-2037 | | $ | 3,996,584 | | $ | 4,067,929 |
Fannie Mae, 4.5%, 2018-2035 | | | 868,822 | | | 844,717 |
Fannie Mae, 5%, 2018-2036 | | | 2,775,276 | | | 2,739,450 |
Fannie Mae, 6.5%, 2031-2037 | | | 1,210,802 | | | 1,251,456 |
Fannie Mae, 7.5%, 2031 | | | 21,313 | | | 22,729 |
Freddie Mac, 6%, 2016-2037 | | | 2,036,982 | | | 2,072,354 |
Freddie Mac, 5%, 2017-2035 | | | 2,044,253 | | | 2,005,591 |
Freddie Mac, 4.5%, 2018-2035 | | | 707,749 | | | 690,495 |
Freddie Mac, 5.5%, 2020-2035 | | | 1,510,738 | | | 1,513,492 |
Freddie Mac, 6.5%, 2034-2037 | | | 404,725 | | | 416,559 |
Ginnie Mae, 4.5%, 2033-2034 | | | 141,692 | | | 135,012 |
Ginnie Mae, 5%, 2033-2034 | | | 148,687 | | | 146,241 |
Ginnie Mae, 5.5%, 2033-2035 | | | 613,694 | | | 618,470 |
Ginnie Mae, 6%, 2033-2035 | | | 412,073 | | | 422,044 |
Ginnie Mae, 6.5%, 2035-2036 | | | 71,000 | | | 73,381 |
| | | | | | |
| | | | | $ | 25,680,594 |
| | | | | | |
Municipals - 0.1% | | | |
Massachusetts Bay Transportation Authority, 5.25%, 2017 | | $ | 130,000 | | $ | 145,452 |
| | | | | | |
Natural Gas - Pipeline - 0.3% | | | | | | |
CenterPoint Energy Resources Corp., 7.875%, 2013 | | $ | 112,000 | | $ | 122,974 |
Kinder Morgan Energy Partners LP,
6.75%, 2011 | | | 165,000 | | | 173,094 |
Kinder Morgan Energy Partners LP, 5.125%, 2014 | | | 46,000 | | | 44,820 |
Kinder Morgan Energy Partners LP,
7.75%, 2032 | | | 71,000 | | | 79,306 |
Spectra Energy Capital LLC, 8%, 2019 | | | 53,000 | | | 61,058 |
| | | | | | |
| | | | | $ | 481,252 |
| | | | | | |
Network & Telecom - 0.8% | | | | | | |
AT&T, Inc., 6.5%, 2037 | | $ | 139,000 | | $ | 145,349 |
BellSouth Corp., 6.55%, 2034 | | | 146,000 | | | 151,008 |
Deutsche Telekom International Finance B.V., 5.75%, 2016 | | | 176,000 | | | 176,165 |
Telecom Italia Capital, 5.25%, 2013 | | | 60,000 | | | 59,300 |
Telefonica Emisiones S.A.U.,
7.045%, 2036 | | | 110,000 | | | 122,956 |
Telefonica Europe B.V., 7.75%, 2010 | | | 50,000 | | | 53,518 |
TELUS Corp., 8%, 2011 | | | 180,000 | | | 195,024 |
Verizon New York, Inc., 6.875%, 2012 | | | 286,000 | | | 303,448 |
| | | | | | |
| | | | | $ | 1,206,768 |
| | | | | | |
Oil Services - 0.0% | | | | | | |
Weatherford International, Inc.,
6.35%, 2017 (n) | | $ | 40,000 | | $ | 41,346 |
| | | | | | |
Oils - 0.1% | | | | | | |
Valero Energy Corp., 6.875%, 2012 | | $ | 111,000 | | $ | 118,443 |
| | | | | | |
Other Banks & Diversified Financials - 0.7% |
Commonwealth Bank, 5%, 2012 (n) | | $ | 230,000 | | $ | 234,726 |
Mizuho Capital Investment 1 Ltd.,
6.686% to 2016, FRN to 2049 (n) | | | 190,000 | | | 177,770 |
Nordea Bank AB, 5.424% to 2015,
FRN to 2049 (n) | | | 100,000 | | | 90,411 |
UBS Preferred Funding Trust V,
6.243% to 2016, FRN to 2049 | | | 190,000 | | | 182,943 |
UFJ Finance Aruba AEC, 6.75%, 2013 | | | 145,000 | | | 157,524 |
Woori Bank, 6.125% to 2011,
FRN to 2016 (n) | | | 220,000 | | | 221,132 |
| | | | | | |
| | | | | $ | 1,064,506 |
| | | | | | |
Pharmaceuticals - 0.1% | | | | | | |
Allergan, Inc., 5.75%, 2016 | | $ | 160,000 | | $ | 163,884 |
| | | | | | |
| | | | | | |
| Issuer | | Shares/Par | | Value ($) |
| | | | | | |
BONDS - continued | | | | | | |
Pollution Control - 0.1% | | | | | | |
Waste Management, Inc.,
7.375%, 2010 | | $ | 134,000 | | $ | 141,544 |
| | | | | | |
Railroad & Shipping - 0.1% | | | | | | |
CSX Corp., 6.75%, 2011 | | $ | 35,000 | | $ | 36,727 |
CSX Corp., 7.9%, 2017 | | | 120,000 | | | 134,448 |
| | | | | | |
| | | | | $ | 171,175 |
| | | | | | |
Real Estate - 0.5% | | | | | | |
Boston Properties, Inc., REIT, 5%, 2015 | | $ | 42,000 | | $ | 38,908 |
ERP Operating LP, REIT, 5.75%, 2017 | | | 180,000 | | | 171,406 |
HRPT Properties Trust, REIT,
6.25%, 2016 | | | 180,000 | | | 171,109 |
Kimco Realty Corp., REIT,
5.783%, 2016 | | | 100,000 | | | 96,545 |
ProLogis, REIT, 5.75%, 2016 | | | 179,000 | | | 168,017 |
Simon Property Group LP, REIT,
5.1%, 2015 | | | 193,000 | | | 181,456 |
| | | | | | |
| | | | | $ | 827,441 |
| | | | | | |
Retailers - 0.3% | | | | | | |
Federated Retail Holdings, Inc.,
5.35%, 2012 | | $ | 40,000 | | $ | 38,972 |
Home Depot, Inc., 5.875%, 2036 | | | 110,000 | | | 92,829 |
Limited Brands, Inc., 5.25%, 2014 | | | 132,000 | | | 118,480 |
Wal-Mart Stores, Inc., 5.25%, 2035 | | | 194,000 | | | 172,081 |
| | | | | | |
| | | | | $ | 422,362 |
| | | | | | |
Supermarkets - 0.0% | | | | | | |
Kroger Co., 6.4%, 2017 | | $ | 30,000 | | $ | 31,377 |
Supranational - 0.6% | | | | | | |
European Investment Bank,
5.125%, 2017 | | $ | 876,000 | | $ | 913,884 |
Telecommunications - Wireless - 0.2% |
Cingular Wireless LLC, 6.5%, 2011 | | $ | 35,000 | | $ | 36,847 |
Nextel Communications, Inc.,
5.95%, 2014 | | | 180,000 | | | 169,194 |
Vodafone Group PLC, 5.625%, 2017 | | | 182,000 | | | 181,227 |
| | | | | | |
| | | | | $ | 387,268 |
| | | | | | |
U.S. Government Agencies - 2.1% |
Aid-Egypt, 4.45%, 2015 | | $ | 152,000 | | $ | 151,208 |
Fannie Mae, 6.625%, 2009-2010 | | | 1,188,000 | | | 1,275,619 |
Fannie Mae, 6%, 2011 | | | 165,000 | | | 177,062 |
Federal Home Loan Bank, 3.9%, 2008 | | | 40,000 | | | 39,957 |
Freddie Mac, 5.5%, 2017 | | | 700,000 | | | 751,081 |
Small Business Administration,
4.35%, 2023 | | | 35,986 | | | 35,136 |
Small Business Administration,
4.77%, 2024 | | | 88,360 | | | 87,928 |
Small Business Administration,
4.99%, 2024 | | | 125,837 | | | 126,508 |
Small Business Administration,
5.18%, 2024 | | | 143,896 | | | 145,861 |
Small Business Administration,
5.52%, 2024 | | | 213,341 | | | 219,249 |
Small Business Administration,
4.95%, 2025 | | | 96,213 | | | 94,661 |
Small Business Administration,
5.09%, 2025 | | | 121,212 | | | 122,124 |
Small Business Administration,
5.39%, 2025 | | | 91,436 | | | 93,305 |
| | | | | | |
| | | | | $ | 3,319,699 |
| | | | | | |
U.S. Treasury Obligations - 9.2% | | | | | | |
U.S. Treasury Bonds, 8%, 2021 | | $ | 37,000 | | $ | 50,638 |
U.S. Treasury Bonds, 6.25%, 2023 | | | 211,000 | | | 252,623 |
U.S. Treasury Bonds, 6%, 2026 | | | 15,000 | | | 17,752 |
27-TRVA
Portfolio of Investments — continued
| | | | | | |
| Issuer | | Shares/Par | | Value($) |
| | | | | | |
BONDS - continued | | | | | | |
U.S. Treasury Obligations - continued | | | |
U.S. Treasury Bonds, 6.75%, 2026 | | $ | 341,000 | | $ | 436,480 |
U.S. Treasury Bonds, 5.375%, 2031 | | | 1,707,000 | | | 1,923,176 |
U.S. Treasury Bonds, 4.5%, 2036 | | | 778,000 | | | 781,951 |
U.S. Treasury Notes, 5.625%, 2008 | | | 1,010,000 | | | 1,018,127 |
U.S. Treasury Notes, 3.125%, 2008 | | | 2,315,000 | | | 2,311,021 |
U.S. Treasury Notes, 4.75%, 2008 | | | 46,000 | | | 46,518 |
U.S. Treasury Notes, 4.5%, 2009 | | | 2,916,000 | | | 2,964,753 |
U.S. Treasury Notes, 4%, 2009 | | | 23,000 | | | 23,300 |
U.S. Treasury Notes, 4.875%, 2009 | | | 2,415,000 | | | 2,481,789 |
U.S. Treasury Notes, 6.5%, 2010 | | | 128,000 | | | 136,870 |
U.S. Treasury Notes, 5.125%, 2011 | | | 180,000 | | | 191,236 |
U.S. Treasury Notes, 3.875%, 2013 | | | 940,000 | | | 958,800 |
U.S. Treasury Notes, 4.25%, 2013 | | | 250,000 | | | 259,199 |
U.S. Treasury Notes, 4.75%, 2014 | | | 150,000 | | | 159,504 |
U.S. Treasury Notes, 4.875%, 2016 | | | 600,000 | | | 638,906 |
| | | | | | |
| | | | | $ | 14,652,643 |
| | | | | | |
Utilities - Electric Power - 1.4% | | | | | | |
Bruce Mansfield Unit, 6.85%, 2034 | | $ | 210,000 | | $ | 211,153 |
Dominion Resources, Inc., 5.15%, 2015 | | | 141,000 | | | 136,436 |
EDP Finance B.V., 6%, 2018 (n) | | | 110,000 | | | 107,287 |
Enel Finance International,
6.25%, 2017 (n) | | | 170,000 | | | 172,025 |
Exelon Generation Co. LLC,
6.95%, 2011 | | | 232,000 | | | 242,062 |
Exelon Generation Co. LLC, 6.2%, 2017 | | | 80,000 | | | 79,506 |
FirstEnergy Corp., 6.45%, 2011 | | | 209,000 | | | 215,817 |
MidAmerican Energy Holdings Co.,
3.5%, 2008 | | | 118,000 | | | 117,225 |
MidAmerican Energy Holdings Co., 5.875%, 2012 | | | 61,000 | | | 63,226 |
MidAmerican Funding LLC,
6.927%, 2029 | | | 154,000 | | | 169,785 |
Oncor Electric Delivery Co., 7%, 2022 | | | 152,000 | | | 157,463 |
Pacific Gas & Electric Co., 4.8%, 2014 | | | 45,000 | | | 43,750 |
PSEG Power LLC, 6.95%, 2012 | | | 71,000 | | | 75,694 |
PSEG Power LLC, 5.5%, 2015 | | | 90,000 | | | 88,112 |
System Energy Resources, Inc.,
5.129%, 2014 (n) | | | 85,401 | | | 87,465 |
Waterford 3 Funding Corp.,
8.09%, 2017 | | | 326,415 | | | 326,542 |
| | | | | | |
| | | | | $ | 2,293,548 |
| | | | | | |
Total Bonds
(Identified Cost, $66,003,762) | | $ | 66,144,813 |
| | | | | | |
SHORT-TERM OBLIGATIONS - 0.6% | | | |
American Express Credit Corp.,
4.12%, due 1/02/08, at
Amortized Cost and Value (y) | | $ | 1,057,000 | | $ | 1,056,879 |
| | | | | | |
Total Investments
(Identified Cost, $151,053,414) (k) | | $ | 158,857,180 |
| | | | | | |
| | |
OTHER ASSETS,
LESS LIABILITIES - 0.4% | | | | | | 631,644 |
| | | | | | |
NET ASSETS - 100.0% | | $ | 159,488,824 |
| | | | | | |
See portfolio footnotes and notes to financial statements.
28-TRVA
Portfolio of Investments — continued
Portfolio Footnotes:
| (a) | Non-income producing security. |
| (f) | All or a portion of the security has been segregated as collateral for an open futures contract. |
| (g) | The rate shown represents a weighted average coupon rate on settled positions at period end. |
| (i) | 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. |
| (k) | As of December 31, 2007, the following variable accounts held securities fair valued in accordance with the policies adopted by the Board of Managers. An independent pricing service provided an evaluated bid for a percent of the market value. |
| | | | | | | | | |
| Variable Account | | Market Value | | % of
Market Value | | | Evaluated
Bid % | |
| Global Governments Variable Account | | $ | 7,359,871 | | 91.59 | % | | 90.03 | % |
| Government Securities Variable Account | | | 67,238,613 | | 98.32 | | | 98.32 | |
| High Yield Variable Account | | | 41,037,402 | | 84.73 | | | 84.73 | (1) |
| Total Return Variable Account | | | 66,144,813 | | 41.64 | | | 41.64 | |
| | (1) | Non-evaluated bid percentage less than 0.01% |
| (n) | Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be sold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. At period end, the aggregate value of these securities was: |
| | | | | | |
| Variable Account | | Market Value | | % of Net Assets | |
| Global Governments Variable Account | | $ | 280,379 | | 3.5 | % |
| Government Securities Variable Account | | | 730,758 | | 1.1 | |
| High Yield Variable Account | | | 6,699,169 | | 13.6 | |
| Total Return Variable Account | | | 2,903,150 | | 1.8 | |
| (o) | All or a portion of this position has not settled. Upon settlement date, interest rates will be determined. |
| (p) | Payment-in-kind security. |
| (r) | Remaining maturities of floating rate loans may be less than stated maturities shown as a result of contractual or optional prepayments by the borrower. Such prepayments cannot be predicted with certainty. These loans may be subject to restrictions on resale. Floating rate loans generally have rates of interest which are determined periodically by reference to a base lending rate plus a premium. |
| (t) | Security exempt from registration with the U.S. Securities and Exchange Commission under Section 4(2) of the Securities Act of 1933. |
| (y) | The rate shown represents an annualized yield at time of purchase. |
| (z) | Restricted securities are not registered under the Securities Act of 1933 and are subject to legal restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are subsequently registered. Disposal of these securities may involve time-consuming negotiations and prompt sale at an acceptable price may be difficult. The variable accounts holds the following restricted securities: |
| | | | | | | | | | | | |
| Variable Account | | Restricted Securities | | Acquisition Date | | Acquisition
Cost | | Current
Market Value | | Total % of
Net Assets |
| High Yield Variable Account | | Asset Securitization Corp., FRN, 8.825%, 2029 | | 1/25/05 | | $ | 172,565 | | $ | 207,500 | | |
| | NewPage Holdings Corp., 10%, 2012 | | 12/07/07 - 12/11/07 | | | 151,450 | | | 150,750 | | |
| | Nuveen Investments, Inc., 10.5%, 2015 | | 10/31/07 | | | 145,000 | | | 144,456 | | |
| | | Wachovia Credit, CDO, FRN, 6.233%, 2026 | | 6/08/06 | | | 250,000 | | | 201,718 | | |
| | Total Restricted Securities | | | | | | | $ | 704,424 | | 1.4% |
| | | | | | | | | | | | |
| | | | | |
| Total Return Variable Account | | Bayview Financial Revolving Mortgage Loan Trust, FRN,
5.6%, 2040 | | 3/01/06 | | $ | 250,000 | | $ | 200,000 | | |
| | KKR Private Equity Investments LP, IEU | | 5/03/06 | | | 165,000 | | | 119,856 | | |
| | Nomura Asset Securities Corp., FRN, 9.779%, 2027 | | 7/16/07 | | | 231,896 | | | 234,800 | | |
| | | Spirit Master Funding LLC, 5.05%, 2023 | | 10/04/05 | | | 176,033 | | | 174,947 | | |
| | Total Restricted Securities | | | | | | | $ | 729,603 | | 0.5% |
| | | | | | | | | | | | |
The following abbreviations are used in this report and are defined:
| ADR | American Depository Receipt |
| CDO | Collateralized Debt Obligation |
| FRN | Floating Rate Note. Interest rate resets periodically and may not be the rate reported at period end. |
| GDR | Global Depository Receipt |
| IEU | International Equity Unit |
| REIT | Real Estate Investment Trust |
| STRIPS | Separate Trading of Registered Interest and Principal of Securities |
| TIPS | Treasury Inflation Protected Security |
29-TRVA
Portfolio of Investments — continued
Abbreviations 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 | | IDR | | Indonesian Rupiah |
CAD | | Canadian Dollar | | JPY | | Japanese Yen |
CHF | | Swiss Franc | | MYR | | Malaysian Ringgit |
DKK | | Danish Krone | | NOK | | Norwegian Krone |
EUR | | Euro | | SEK | | Swedish Krona |
GBP | | British Pound | | | | |
See portfolio footnotes and notes to financial statements.
30-TRVA
Statements of Assets and Liabilities — December 31, 2007
(000 Omitted)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Capital
Appreciation
Variable
Account | | | Global
Governments
Variable
Account | | | Government
Securities
Variable
Account | | | High
Yield
Variable
Account | | | Money
Market
Variable
Account | | | Total
Return
Variable
Account | |
Assets: | | | | | | | | | | | | | | | | | | | | | | | | |
Investments — | | | | | | | | | | | | | | | | | | | | | | | | |
Investments, cost | | $ | 179,289 | | | $ | 7,918 | | | $ | 67,615 | | | $ | 50,167 | | | $ | 45,836 | | | $ | 151,053 | |
Unrealized appreciation (depreciation) | | | 18,618 | | | | 118 | | | | 770 | | | | (1,732 | ) | | | — | | | | 7,804 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total investments, at value | | $ | 197,907 | | | $ | 8,036 | | | $ | 68,385 | | | $ | 48,435 | | | $ | 45,836 | | | $ | 158,857 | |
Cash | | | 1 | | | | 1 | | | | 0 | * | | | 138 | | | | 0 | * | | | 7 | |
Foreign currency, at value (identified cost, $0*) | | | — | | | | 0 | * | | | — | | | | — | | | | — | | | | — | |
Receivable for forward foreign currency exchange contracts | | | — | | | | 52 | | | | — | | | | — | | | | — | | | | — | |
Receivable for daily variation on open futures contracts | | | — | | | | — | | | | 7 | | | | — | | | | — | | | | — | |
Receivable for investments sold | | | — | | | | 27 | | | | — | | | | 399 | | | | — | | | | 107 | |
Receivable for units sold | | | 23 | | | | 0 | * | | | 1 | | | | 4 | | | | 1 | | | | 14 | |
Interest and dividends receivable | | | 155 | | | | 96 | | | | 665 | | | | 926 | | | | 57 | | | | 791 | |
Receivable from Investment Adviser | | | 10 | | | | 15 | | | | — | | | | — | | | | — | | | | 9 | |
Receivable from Sponsor | | | 8 | | | | — | | | | 9 | | | | — | | | | 1 | | | | 7 | |
Swaps, at value (premiums paid, $25) | | | — | | | | — | | | | — | | | | 25 | | | | — | | | | — | |
Other assets | | | 26 | | | | 1 | | | | 3 | | | | 2 | | | | 2 | | | | 68 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total assets | | $ | 198,130 | | | $ | 8,228 | | | $ | 69,070 | | | $ | 49,929 | | | $ | 45,897 | | | $ | 159,860 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | |
Payable for forward foreign currency exchange contracts | | $ | — | | | $ | 50 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Payable for investments purchased | | | 1,528 | | | | 9 | | | | — | | | | 332 | | | | — | | | | 127 | |
Payable for units surrendered | | | 196 | | | | 28 | | | | 18 | | | | 39 | | | | 174 | | | | 154 | |
Unrealized depreciation on unfunded loan commitments | | | — | | | | — | | | | — | | | | 0 | * | | | — | | | | — | |
Swaps, at value | | | — | | | | — | | | | — | | | | 76 | | | | — | | | | — | |
Payable to affiliates — | | | | | | | | | | | | | | | | | | | | | | | | |
Investment Adviser | | | 16 | | | | 1 | | | | 4 | | | | 4 | | | | 2 | | | | 13 | |
Administrative services fee | | | 0 | * | | | 0 | * | | | 0 | * | | | 0 | * | | | 0 | * | | | 0 | * |
Sponsor | | | — | | | | 0 | * | | | — | | | | 8 | | | | — | | | | — | |
Accrued expenses and other liabilities | | | 61 | | | | 58 | | | | 53 | | | | 56 | | | | 32 | | | | 77 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total liabilities | | $ | 1,801 | | | $ | 146 | | | $ | 75 | | | $ | 515 | | | $ | 208 | | | $ | 371 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net assets | | $ | 196,329 | | | $ | 8,082 | | | $ | 68,995 | | | $ | 49,414 | | | $ | 45,689 | | | $ | 159,489 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| * | Amount was less than $500. |
See notes to financial statements.
31
Statements of Assets and Liabilities — December 31, 2007 — continued
(000 Omitted except for unit values)
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Units | | Unit
Value | | Capital
Appreciation
Variable
Account | | Global
Governments
Variable
Account | | Government
Securities
Variable
Account | | High
Yield
Variable
Account | | Money
Market
Variable
Account | | Total
Return
Variable
Account |
Net assets applicable to contract owners: | | | | | | | | | | | | | | | | | | | | | | | |
Capital Appreciation Variable Account — | | | | | | | | | | | | | | | | | | | | | | | |
Compass 2 | | 1,980 | | $ | 63.669 | | $ | 126,051 | | | | | | | | | | | | | | | |
Compass 3 | | 73 | | | 41.858 | | | 3,077 | | | | | | | | | | | | | | | |
Compass 3 – Level 2 | | 3,671 | | | 17.501 | | | 64,240 | | | | | | | | | | | | | | | |
Global Governments Variable Account — | | | | | | | | | | | | | | | | | | | | | | | |
Compass 2 | | 85 | | $ | 27.622 | | | | | $ | 2,350 | | | | | | | | | | | | |
Compass 3 | | 15 | | | 26.814 | | | | | | 416 | | | | | | | | | | | | |
Compass 3 – Level 2 | | 332 | | | 15.798 | | | | | | 5,243 | | | | | | | | | | | | |
Government Securities Variable Account — | | | | | | | | | | | | | | | | | | | | | | | |
Compass 2 | | 1,269 | | $ | 40.804 | | | | | | | | $ | 51,759 | | | | | | | | | |
Compass 3 | | 28 | | | 28.419 | | | | | | | | | 797 | | | | | | | | | |
Compass 3 – Level 2 | | 889 | | | 16.717 | | | | | | | | | 14,865 | | | | | | | | | |
High Yield Variable Account — | | | | | | | | | | | | | | | | | | | | | | | |
Compass 2 | | 958 | | $ | 40.344 | | | | | | | | | | | $ | 38,656 | | | | | | |
Compass 3 | | 21 | | | 29.556 | | | | | | | | | | | | 607 | | | | | | |
Compass 3 – Level 2 | | 579 | | | 15.890 | | | | | | | | | | | | 9,196 | | | | | | |
Money Market Variable Account — | | | | | | | | | | | | | | | | | | | | | | | |
Compass 2 | | 887 | | $ | 21.676 | | | | | | | | | | | | | | $ | 19,231 | | | |
Compass 3 | | 64 | | | 17.704 | | | | | | | | | | | | | | | 1,131 | | | |
Compass 3 – Level 2 | | 1,871 | | | 13.330 | | | | | | | | | | | | | | | 24,946 | | | |
Total Return Variable Account — | | | | | | | | | | | | | | | | | | | | | | | |
Compass 2 | | 948 | | $ | 52.709 | | | | | | | | | | | | | | | | | | $49,944 |
Compass 3 | | 107 | | | 51.169 | | | | | | | | | | | | | | | | | | 5,495 |
Compass 3 – Level 2 | | 4,116 | | | 24.850 | | | | | | | | | | | | | | | | | | 102,279 |
| | | | | | | | | | | | | | | | | | |
Net assets applicable to owners of deferred contracts | | | 193,368 | | | 8,009 | | | 67,421 | | | 48,459 | | | 45,308 | | | 157,718 |
Reserve for variable annuities — | | | | | | | | | | | | | | | | | | |
Compass 2 Contracts | | | 2,672 | | | 18 | | | 1,530 | | | 911 | | | 299 | | | 1,278 |
Compass 3 Contracts | | | 1 | | | 1 | | | — | | | 1 | | | 1 | | | 2 |
Compass 3 – Level 2 Contracts | | | 288 | | | 54 | | | 44 | | | 43 | | | 81 | | | 491 |
| | | | | | | | | | | | | | | | | | |
Net assets | | $ | 196,329 | | $ | 8,082 | | $ | 68,995 | | $ | 49,414 | | $ | 45,689 | | $ | 159,489 |
| | | | | | | | | | | | | | | | | | |
See notes to financial statements.
32
Statements of Operations — Year Ended December 31, 2007
(000 Omitted)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Capital
Appreciation
Variable
Account | | | Global
Governments
Variable
Account | | | Government
Securities
Variable
Account | | | High
Yield
Variable
Account | | | Money
Market
Variable
Account | | | Total
Return
Variable
Account | |
Net Investment income (loss): | | | | | | | | | | | | | | | | | | | | | | | | |
Income — | | | | | | | | | | | | | | | | | | | | | | | | |
Interest | | $ | 193 | | | $ | 350 | | | $ | 3,835 | | | $ | 4,454 | | | $ | 2,469 | | | $ | 3,845 | |
Dividends | | | 2,338 | | | | — | | | | — | | | | 25 | | | | — | | | | 2,068 | |
Foreign taxes withheld | | | (41 | ) | | | — | | | | — | | | | — | | | | — | | | | (18 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total investment income | | $ | 2,490 | | | $ | 350 | | | $ | 3,835 | | | $ | 4,479 | | | $ | 2,469 | | | $ | 5,895 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Expenses — | | | | | | | | | | | | | | | | | | | | | | | | |
Mortality and expense risk charges | | $ | 2,617 | | | $ | 108 | | | $ | 921 | | | $ | 697 | | | $ | 591 | | | $ | 2,156 | |
Management fee | | | 1,553 | | | | 65 | | | | 402 | | | | 414 | | | | 234 | | | | 1,308 | |
Boards of Managers fees | | | 20 | | | | 1 | | | | 7 | | | | 5 | | | | 4 | | | | 17 | |
Distribution fee | | | 6 | | | | 1 | | | | 1 | | | | 1 | | | | 2 | | | | 10 | |
Administrative fee | | | 54 | | | | 10 | | | | 19 | | | | 14 | | | | 12 | | | | 46 | |
Custodian fee | | | 48 | | | | 39 | | | | 28 | | | | 12 | | | | 13 | | | | 53 | |
Printing | | | 29 | | | | 11 | | | | 17 | | | | 16 | | | | 28 | | | | 21 | |
Auditing fees | | | 35 | | | | 45 | | | | 41 | | | | 46 | | | | 22 | | | | 48 | |
Legal fees | | | 6 | | | | 6 | | | | 6 | | | | 6 | | | | 6 | | | | 6 | |
Miscellaneous | | | 19 | | | | 6 | | | | 9 | | | | 10 | | | | 9 | | | | 22 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | $ | 4,387 | | | $ | 292 | | | $ | 1,451 | | | $ | 1,221 | | | $ | 921 | | | $ | 3,687 | |
Fees paid indirectly | | | (1 | ) | | | 0 | * | | | (1 | ) | | | (4 | ) | | | 0 | * | | | (2 | ) |
Reduction of expenses by investment adviser | | | (28 | ) | | | (74 | ) | | | — | | | | (28 | ) | | | — | | | | (28 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net expenses | | $ | 4,358 | | | $ | 218 | | | $ | 1,450 | | | $ | 1,189 | | | $ | 921 | | | $ | 3,657 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) | | $ | (1,868 | ) | | $ | 132 | | | $ | 2,385 | | | $ | 3,290 | | | $ | 1,548 | | | $ | 2,238 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Realized and unrealized gain (loss) on investments: | | | | | | | | | | | | | | | | | | | | | | | | |
Realized gain (loss) (identified cost basis) — | | | | | | | | | | | | | | | | | | | | | | | | |
Investment transactions | | $ | 19,822 | | | $ | 450 | | | $ | 578 | | | $ | 253 | | | $ | (5 | ) | | $ | 11,872 | |
Futures contracts | | | — | | | | (7 | ) | | | 124 | | | | — | | | | — | | | | — | |
Swap transactions | | | — | | | | — | | | | — | | | | 32 | | | | — | | | | — | |
Foreign currency transactions | | | 0 | * | | | 2 | | | | — | | | | — | | | | — | | | | (3 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net realized gain (loss) on investments and
foreign currency transactions | | $ | 19,822 | | | $ | 445 | | | $ | 702 | | | $ | 285 | | | $ | (5 | ) | | $ | 11,869 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Change in unrealized appreciation (depreciation) — | | | | | | | | | | | | | | | | | | | | | | | | |
Investments | | $ | 1,265 | | | $ | 19 | | | $ | 899 | | | $ | (3,098 | ) | | $ | — | | | $ | (9,247 | ) |
Futures contracts | | | — | | | | — | | | | (9 | ) | | | — | | | | — | | | | — | |
Swap transactions | | | — | | | | — | | | | — | | | | (76 | ) | | | — | | | | — | |
Translation of assets and liabilities in foreign currencies | | | 2 | | | | 10 | | | | — | | | | — | | | | — | | | | 1 | |
Unfunded loan commitments | | | — | | | | — | | | | — | | | | (0 | )* | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net unrealized gain (loss) on investments and
foreign currency translation | | $ | 1,267 | | | $ | 29 | | | $ | 890 | | | $ | (3,174 | ) | | $ | — | | | $ | (9,246 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net realized and unrealized gain (loss) on
investments and foreign currency | | $ | 21,089 | | | $ | 474 | | | $ | 1,592 | | | $ | (2,889 | ) | | $ | (5 | ) | | $ | 2,623 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Change in net assets from operations | | $ | 19,221 | | | $ | 606 | | | $ | 3,977 | | | $ | 401 | | | $ | 1,543 | | | $ | 4,861 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| * | Amount was less than $500. |
See notes to financial statements.
33
Statements of Changes in Net Assets
(000 Omitted)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Capital Appreciation
Variable Account | | | Global Governments
Variable Account | | | Government Securities
Variable Account | |
| | | Year Ended 12/31 | | | Year Ended 12/31 | | | Year Ended 12/31 | |
| | | 2007 | | | 2006 | | | 2007 | | | 2006 | | | 2007 | | | 2006 | |
Change in net assets: | | | | | | | | | | | | | | | | | | | | | | | | |
From operations: | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) | | $ | (1,868 | ) | | $ | (2,616 | ) | | $ | 132 | | | $ | 140 | | | $ | 2,385 | | | $ | 2,792 | |
Net realized gain (loss) on investments and
foreign currency transactions | | | 19,822 | | | | 3,539 | | | | 445 | | | | (100 | ) | | | 702 | | | | (433 | ) |
Net unrealized gain (loss) on investments and
foreign currency translation | | | 1,267 | | | | 9,410 | | | | 29 | | | | 282 | | | | 890 | | | | (392 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Change in net assets from operations | | $ | 19,221 | | | $ | 10,333 | | | $ | 606 | | | $ | 322 | | | $ | 3,977 | | | $ | 1,967 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Participant transactions: | | | | | | | | | | | | | | | | | | | | | | | | |
Accumulation activity: | | | | | | | | | | | | | | | | | | | | | | | | |
Purchase payments received | | $ | 3,083 | | | $ | 4,393 | | | $ | 182 | | | $ | 279 | | | $ | 888 | | | $ | 1,459 | |
Net transfers between variable and fixed
accumulation accounts | | | (6,076 | ) | | | (6,547 | ) | | | (63 | ) | | | (22 | ) | | | (2,041 | ) | | | (1,158 | ) |
Withdrawals, surrenders, annuitizations,
and contract charges | | | (37,910 | ) | | | (48,533 | ) | | | (1,776 | ) | | | (1,676 | ) | | | (12,438 | ) | | | (16,396 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net accumulation activity | | $ | (40,903 | ) | | $ | (50,687 | ) | | $ | (1,657 | ) | | $ | (1,419 | ) | | $ | (13,591 | ) | | $ | (16,095 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Annuitization activity: | | | | | | | | | | | | | | | | | | | | | | | | |
Annuitizations | | $ | 139 | | | $ | 293 | | | $ | 17 | | | $ | — | | | $ | 240 | | | $ | 309 | |
Annuity payments and contract charges | | | (409 | ) | | | (449 | ) | | | (6 | ) | | | (7 | ) | | | (252 | ) | | | (234 | ) |
Net transfers among accounts for annuity reserves | | | (168 | ) | | | — | | | | — | | | | — | | | | — | | | | — | |
Adjustments to annuity reserves | | | 41 | | | | (39 | ) | | | (5 | ) | | | 5 | | | | 26 | | | | (24 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net annuitization activity | | $ | (397 | ) | | $ | (195 | ) | | $ | 6 | | | $ | (2 | ) | | $ | 14 | | | $ | 51 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Change in net assets from participations transactions | | $ | (41,300 | ) | | $ | (50,882 | ) | | $ | (1,651 | ) | | $ | (1,421 | ) | | $ | (13,577 | ) | | $ | (16,044 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total change in net assets | | $ | (22,079 | ) | | $ | (40,549 | ) | | $ | (1,045 | ) | | $ | (1,099 | ) | | $ | (9,600 | ) | | $ | (14,077 | ) |
Net assets: | | | | | | | | | | | | | | | | | | | | | | | | |
At beginning of period | | | 218,408 | | | | 258,957 | | | | 9,127 | | | | 10,226 | | | | 78,595 | | | | 92,672 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
At end of period | | $ | 196,329 | | | $ | 218,408 | | | $ | 8,082 | | | $ | 9,127 | | | $ | 68,995 | | | $ | 78,595 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
See notes to financial statements.
34
Statements of Changes in Net Assets — continued
(000 Omitted)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | High Yield
Variable Account | | | Money Market
Variable Account | | | Total Return
Variable Account | |
| | | Year Ended 12/31 | | | Year Ended 12/31 | | | Year Ended 12/31 | |
| | | 2007 | | | 2006 | | | 2007 | | | 2006 | | | 2007 | | | 2006 | |
Change in net assets: | | | | | | | | | | | | | | | | | | | | | | | | |
From operations: | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | $ | 3,290 | | | $ | 3,577 | | | $ | 1,548 | | | $ | 1,655 | | | $ | 2,238 | | | $ | 2,660 | |
Net realized gain (loss) on investments and
foreign currency transactions | | | 285 | | | | (1,046 | ) | | | (5 | ) | | | — | | | | 11,869 | | | | 10,962 | |
Net unrealized gain (loss) on investments and
foreign currency translation | | | (3,174 | ) | | | 2,730 | | | | — | | | | — | | | | (9,246 | ) | | | 4,841 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Change in net assets from operations | | $ | 401 | | | $ | 5,261 | | | $ | 1,543 | | | $ | 1,655 | | | $ | 4,861 | | | $ | 18,463 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Participant transactions: | | | | | | | | | | | | | | | | | | | | | | | | |
Accumulation activity: | | | | | | | | | | | | | | | | | | | | | | | | |
Purchase payments received | | $ | 702 | | | $ | 761 | | | $ | 1,063 | | | $ | 1,321 | | | $ | 3,595 | | | $ | 4,300 | |
Net transfers between variable and fixed
accumulation accounts | | | (2,554 | ) | | | (749 | ) | | | 6,899 | | | | (342 | ) | | | 1,562 | | | | 2,227 | |
Withdrawals, surrenders, annuitizations,
and contract charges | | | (8,241 | ) | | | (10,582 | ) | | | (11,300 | ) | | | (11,845 | ) | | | (32,427 | ) | | | (36,753 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net accumulation activity | | $ | (10,093 | ) | | $ | (10,570 | ) | | $ | (3,338 | ) | | $ | (10,866 | ) | | $ | (27,270 | ) | | $ | (30,226 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Annuitization activity: | | | | | | | | | | | | | | | | | | | | | | | | |
Annuitizations | | $ | 30 | | | $ | 69 | | | $ | (68 | ) | | $ | 15 | | | $ | 18 | | | $ | 35 | |
Annuity payments and contract charges | | | (156 | ) | | | (172 | ) | | | (118 | ) | | | (161 | ) | | | (315 | ) | | | (341 | ) |
Net transfers among accounts for annuity reserves | | | — | | | | — | | | | 0 | * | | | — | | | | 168 | | | | — | |
Adjustments to annuity reserves | | | (42 | ) | | | 30 | | | | 79 | | | | (75 | ) | | | (6 | ) | | | 6 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net annuitization activity | | $ | (168 | ) | | $ | (73 | ) | | $ | (107 | ) | | $ | (221 | ) | | $ | (135 | ) | | $ | (300 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Change in net assets from participations transactions | | $ | (10,261 | ) | | $ | (10,643 | ) | | $ | (3,445 | ) | | $ | (11,087 | ) | | $ | (27,405 | ) | | $ | (30,526 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total change in net assets | | $ | (9,860 | ) | | $ | (5,382 | ) | | $ | (1,902 | ) | | $ | (9,432 | ) | | $ | (22,544 | ) | | $ | (12,063 | ) |
Net assets: | | | | | | | | | | | | | | | | | | | | | | | | |
At beginning of period | | | 59,274 | | | | 64,656 | | | | 47,591 | | | | 57,023 | | | | 182,033 | | | | 194,096 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
At end of period | | $ | 49,414 | | | $ | 59,274 | | | $ | 45,689 | | | $ | 47,591 | | | $ | 159,489 | | | $ | 182,033 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| * | Amount was less than $500. |
See notes to financial statements.
35
Financial Highlights
The financial highlights table is intended to help you understand the variable account’s financial performance for 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 | |
| | | Years Ended 12/31 | |
| | | 2007 | | | 2006 | | | 2005 | | | 2004 | | | 2003 | |
Per unit data: (d) | | | | | | | | | | | | | | | | | | | | |
Net asset value — beginning of period | | $ | 58.101 | | | $ | 55.446 | | | $ | 55.625 | | | $ | 50.814 | | | $ | 39.859 | |
| | | | | | | | | | | | | | | | | | | | |
Investment income | | $ | 0.751 | | | $ | 0.560 | | | $ | 0.580 | | | $ | 0.744 | | | $ | 0.402 | |
Expenses | | | (1.319 | ) | | | (1.198 | ) | | | (1.179 | ) | | | (1.109 | ) | | | (0.951 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net investment loss | | $ | (0.568 | ) | | $ | (0.638 | ) | | $ | (0.599 | ) | | $ | (0.365 | ) | | $ | (0.549 | ) |
Net realized and unrealized gain (loss) on investments and foreign currency transactions | | | 6.136 | | | | 3.293 | | | | 0.420 | | | | 5.176 | | | | 11.504 | |
| | | | | | | | | | | | | | | | | | | | |
Change in unit value | | $ | 5.568 | | | $ | 2.655 | | | $ | (0.179 | ) | | $ | 4.811 | | | $ | 10.955 | |
| | | | | | | | | | | | | | | | | | | | |
Unit value: | | | | | | | | | | | | | | | | | | | | |
Net asset value — end of period | | $ | 63.669 | | | $ | 58.101 | | | $ | 55.446 | | | $ | 55.625 | | | $ | 50.814 | |
| | | | | | | | | | | | | | | | | | | | |
Total Return (%) (k)(s) | | | 9.58 | | | | 4.79 | | | | (0.32 | ) | | | 9.47 | (b) | | | 27.48 | (j) |
Ratios (%) (to average net assets): | | | | | | | | | | | | | | | | | | | | |
Expenses before expense reductions (f) | | | 2.15 | | | | 2.15 | | | | 2.16 | | | | 2.14 | | | | 2.12 | |
Expenses after expense reductions (f) | | | 2.14 | | | | N/A | | | | N/A | | | | N/A | | | | N/A | |
Net investment loss | | | (0.91 | ) | | | (1.11 | ) | | | (1.08 | ) | | | (0.70 | ) | | | (1.20 | ) |
Portfolio turnover (%) | | | 63 | | | | 61 | | | | 130 | | | | 65 | | | | 104 | |
Number of units outstanding at end of period (000 Omitted) | | | 1,980 | | | | 2,419 | | | | 3,018 | | | | 3,544 | | | | 4,040 | |
| |
| | | Capital Appreciation Variable Account | |
| | | Compass 3 | |
| | | Years Ended 12/31 | |
| | | 2007 | | | 2006 | | | 2005 | | | 2004 | | | 2003 | |
Per unit data: (d) | | | | | | | | | | | | | | | | | | | | |
Net asset value — beginning of period | | $ | 38.235 | | | $ | 36.524 | | | $ | 36.678 | | | $ | 33.539 | | | $ | 26.334 | |
| | | | | | | | | | | | | | | | | | | | |
Investment income | | $ | 0.490 | | | $ | 0.355 | | | $ | 0.370 | | | $ | 0.458 | | | $ | 0.260 | |
Expenses | | | (0.903 | ) | | | (0.807 | ) | | | (0.795 | ) | | | (0.753 | ) | | | (0.648 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net investment loss | | $ | (0.413 | ) | | $ | (0.452 | ) | | $ | (0.425 | ) | | $ | (0.295 | ) | | $ | (0.388 | ) |
Net realized and unrealized gain (loss) on investments and foreign currency transactions | | | 4.036 | | | | 2.163 | | | | 0.271 | | | | 3.434 | | | | 7.593 | |
| | | | | | | | | | | | | | | | | | | | |
Change in unit value | | $ | 3.623 | | | $ | 1.711 | | | $ | (0.154 | ) | | $ | 3.139 | | | $ | 7.205 | |
| | | | | | | | | | | | | | | | | | | | |
Unit value: | | | | | | | | | | | | | | | | | | | | |
Net asset value — end of period | | $ | 41.858 | | | $ | 38.235 | | | $ | 36.524 | | | $ | 36.678 | | | $ | 33.539 | |
| | | | | | | | | | | | | | | | | | | | |
Total Return (%) (k)(s) | | | 9.48 | | | | 4.69 | | | | (0.42 | ) | | | 9.36 | (b) | | | 27.36 | (j) |
Ratios (%) (to average net assets): | | | | | | | | | | | | | | | | | | | | |
Expenses before expense reductions (f) | | | 2.25 | | | | 2.25 | | | | 2.26 | | | | 2.24 | | | | 2.22 | |
Expenses after expense reductions (f) | | | 2.24 | | | | N/A | | | | N/A | | | | N/A | | | | N/A | |
Net investment loss | | | (1.04 | ) | | | (1.30 | ) | | | (1.20 | ) | | | (0.87 | ) | | | (1.31 | ) |
Portfolio turnover (%) | | | 63 | | | | 61 | | | | 130 | | | | 65 | | | | 104 | |
Number of units outstanding at end of period (000 Omitted) | | | 73 | | | | 128 | | | | 237 | | | | 413 | | | | 621 | |
36
Financial Highlights — continued
| | | | | | | | | | | | | | | | | | | | |
| | | Capital Appreciation Variable Account | |
| | | Compass 3 – Level 2 | |
| | | Years Ended 12/31 | |
| | | 2007 | | | 2006 | | | 2005 | | | 2004 | | | 2003 | |
Per unit data: (d) | | | | | | | | | | | | | | | | | | | | |
Net asset value — beginning of period | | $ | 15.963 | | | $ | 15.226 | | | $ | 15.267 | | | $ | 13.940 | | | $ | 10.929 | |
| | | | | | | | | | | | | | | | | | | | |
Investment income | | $ | 0.203 | | | $ | 0.152 | | | $ | 0.158 | | | $ | 0.205 | | | $ | 0.109 | |
Expenses | | | (0.352 | ) | | | (0.320 | ) | | | (0.316 | ) | | | (0.297 | ) | | | (0.254 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net investment loss | | $ | (0.149 | ) | | $ | (0.168 | ) | | $ | (0.158 | ) | | $ | (0.092 | ) | | $ | (0.145 | ) |
Net realized and unrealized gain (loss) on investments and foreign currency transactions | | | 1.687 | | | | 0.905 | | | | 0.117 | | | | 1.419 | | | | 3.156 | |
| | | | | | | | | | | | | | | | | | | | |
Change in unit value | | $ | 1.538 | | | $ | 0.737 | | | $ | (0.041 | ) | | $ | 1.327 | | | $ | 3.011 | |
| | | | | | | | | | | | | | | | | | | | |
Unit value: | | | | | | | | | | | | | | | | | | | | |
Net asset value — end of period | | $ | 17.501 | | | $ | 15.963 | | | $ | 15.226 | | | $ | 15.267 | | | $ | 13.940 | |
| | | | | | | | | | | | | | | | | | | | |
Total Return (%) (k)(s) | | | 9.64 | | | | 4.84 | | | | (0.27 | ) | | | 9.52 | (b) | | | 27.55 | (j) |
Ratios (%) (to average net assets): | | | | | | | | | | | | | | | | | | | | |
Expenses before expense reductions (f) | | | 2.10 | | | | 2.10 | | | | 2.11 | | | | 2.09 | | | | 2.07 | |
Expenses after expense reductions (f) | | | 2.09 | | | | N/A | | | | N/A | | | | N/A | | | | N/A | |
Net investment loss | | | (0.88 | ) | | | (1.13 | ) | | | (1.05 | ) | | | (0.65 | ) | | | (1.17 | ) |
Portfolio turnover (%) | | | 63 | | | | 61 | | | | 130 | | | | 65 | | | | 104 | |
Number of units outstanding at end of period (000 Omitted) | | | 3,671 | | | | 4,378 | | | | 5,248 | | | | 5,798 | | | | 6,086 | |
| (b) | The variable 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 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. |
| (d) | Per unit data are based on the average number of units outstanding during each year. |
| (f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
| (j) | The variable account’s 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. |
| (k) | 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. |
| (s) | From time to time the variable account may receive proceeds from litigation settlements, without which performance would be lower. |
See notes to financial statements.
37
Financial Highlights — continued
The financial highlights table is intended to help you understand the variable account’s financial performance for 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 | |
| | | Years Ended 12/31 | |
| | | 2007 | | | 2006 | | | 2005 | | | 2004 | | | 2003 | |
Per unit data: (d) | | | | | | | | | | | | | | | | | | | | |
Net asset value — beginning of period | | $ | 25.732 | | | $ | 24.865 | | | $ | 27.240 | | | $ | 25.169 | | | $ | 22.125 | |
| | | | | | | | | | | | | | | | | | | | |
Investment income | | $ | 1.052 | | | $ | 1.003 | | | $ | 0.925 | | | $ | 0.872 | | | $ | 0.877 | |
Expenses | | | (0.653 | ) | | | (0.629 | ) | | | (0.651 | ) | | | (0.633 | ) | | | (0.584 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net investment income | | $ | 0.399 | | | $ | 0.374 | | | $ | 0.274 | | | $ | 0.239 | | | $ | 0.293 | |
Net realized and unrealized gain (loss) on investments and foreign currency transactions | | | 1.491 | | | | 0.493 | | | | (2.649 | ) | | | 1.832 | | | | 2.751 | |
| | | | | | | | | | | | | | | | | | | | |
Change in unit value | | $ | 1.890 | | | $ | 0.867 | | | $ | (2.375 | ) | | $ | 2.071 | | | $ | 3.044 | |
| | | | | | | | | | | | | | | | | | | | |
Unit value: | | | | | | | | | | | | | | | | | | | | |
Net asset value — end of period | | $ | 27.622 | | | $ | 25.732 | | | $ | 24.865 | | | $ | 27.240 | | | $ | 25.169 | |
| | | | | | | | | | | | | | | | | | | | |
Total Return (%) (k)(r) | | | 7.34 | | | | 3.49 | | | | (8.72 | ) | | | 8.23 | | | | 13.76 | |
Ratios (%) (to average net assets): | | | | | | | | | | | | | | | | | | | | |
Expenses before expense reductions (f) | | | 3.35 | | | | 3.39 | | | | 2.95 | | | | 2.67 | | | | 2.47 | |
Expenses after expense reductions (f) | | | 2.50 | | | | 2.50 | | | | 2.50 | | | | 2.50 | | | | N/A | |
Net investment income | | | 1.52 | | | | 1.48 | | | | 1.04 | | | | 0.94 | | | | 1.23 | |
Portfolio turnover (%) | | | 141 | | | | 118 | | | | 144 | | | | 128 | | | | 130 | |
Number of units outstanding at end of period (000 Omitted) | | | 85 | | | | 104 | | | | 116 | | | | 128 | | | | 161 | |
| |
| | | Global Governments Variable Account | |
| | | Compass 3 | |
| | | Years Ended 12/31 | |
| | | 2007 | | | 2006 | | | 2005 | | | 2004 | | | 2003 | |
Per unit data: (d) | | | | | | | | | | | | | | | | | | | | |
Net asset value — beginning of period | | $ | 25.017 | | | $ | 24.209 | | | $ | 26.561 | | | $ | 24.578 | | | $ | 21.638 | |
| | | | | | | | | | | | | | | | | | | | |
Investment income | | $ | 1.044 | | | $ | 1.025 | | | $ | 0.949 | | | $ | 0.883 | | | $ | 0.869 | |
Expenses | | | (0.678 | ) | | | (0.659 | ) | | | (0.688 | ) | | | (0.662 | ) | | | (0.600 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net investment income | | $ | 0.366 | | | $ | 0.366 | | | $ | 0.261 | | | $ | 0.221 | | | $ | 0.269 | |
Net realized and unrealized gain (loss) on investments and foreign currency transactions | | | 1.431 | | | | 0.442 | | | | (2.613 | ) | | | 1.762 | | | | 2.671 | |
| | | | | | | | | | | | | | | | | | | | |
Change in unit value | | $ | 1.797 | | | $ | 0.808 | | | $ | (2.352 | ) | | $ | 1.983 | | | $ | 2.940 | |
| | | | | | | | | | | | | | | | | | | | |
Unit value: | | | | | | | | | | | | | | | | | | | | |
Net asset value — end of period | | $ | 26.814 | | | $ | 25.017 | | | $ | 24.209 | | | $ | 26.561 | | | $ | 24.578 | |
| | | | | | | | | | | | | | | | | | | | |
Total Return (%) (k)(r) | | | 7.18 | | | | 3.34 | | | | (8.85 | ) | | | 8.07 | | | | 13.59 | |
Ratios (%) (to average net assets): | | | | | | | | | | | | | | | | | | | | |
Expenses before expense reductions (f) | | | 3.50 | | | | 3.54 | | | | 3.10 | | | | 2.82 | | | | 2.62 | |
Expenses after expense reductions (f) | | | 2.65 | | | | 2.65 | | | | 2.65 | | | | 2.65 | | | | N/A | |
Net investment income | | | 1.44 | | | | 1.41 | | | | 0.97 | | | | 0.85 | | | | 1.15 | |
Portfolio turnover (%) | | | 141 | | | | 118 | | | | 144 | | | | 128 | | | | 130 | |
Number of units outstanding at end of period (000 Omitted) | | | 15 | | | | 18 | | | | 26 | | | | 28 | | | | 41 | |
38
Financial Highlights — continued
| | | | | | | | | | | | | | | | | | | | |
| | | Global Governments Variable Account | |
| | | Compass 3 — Level 2 | |
| | | Years Ended 12/31 | |
| | | 2007 | | | 2006 | | | 2005 | | | 2004 | | | 2003 | |
Per unit data: (d) | | | | | | | | | | | | | | | | | | | | |
Net asset value — beginning of period | | $ | 14.718 | | | $ | 14.221 | | | $ | 15.580 | | | $ | 14.396 | | | $ | 12.655 | |
| | | | | | | | | | | | | | | | | | | | |
Investment income | | $ | 0.608 | | | $ | 0.574 | | | $ | 0.526 | | | $ | 0.497 | | | $ | 0.494 | |
Expenses | | | (0.377 | ) | | | (0.361 | ) | | | (0.371 | ) | | | (0.361 | ) | | | (0.331 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net investment income | | $ | 0.231 | | | $ | 0.213 | | | $ | 0.155 | | | $ | 0.136 | | | $ | 0.163 | |
Net realized and unrealized gain (loss) on investments and foreign currency transactions | | | 0.849 | | | | 0.284 | | | | (1.514 | ) | | | 1.048 | | | | 1.578 | |
| | | | | | | | | | | | | | | | | | | | |
Change in unit value | | $ | 1.080 | | | $ | 0.497 | | | $ | (1.359 | ) | | $ | 1.184 | | | $ | 1.741 | |
| | | | | | | | | | | | | | | | | | | | |
Unit value: | | | | | | | | | | | | | | | | | | | | |
Net asset value — end of period | | $ | 15.798 | | | $ | 14.718 | | | $ | 14.221 | | | $ | 15.580 | | | $ | 14.396 | |
| | | | | | | | | | | | | | | | | | | | |
Total Return (%) (k)(r) | | | 7.34 | | | | 3.49 | | | | (8.72 | ) | | | 8.23 | | | | 13.76 | |
Ratios (%) (to average net assets): | | | | | | | | | | | | | | | | | | | | |
Expenses before expense reductions (f) | | | 3.35 | | | | 3.39 | | | | 2.95 | | | | 2.67 | | | | 2.47 | |
Expenses after expense reductions (f) | | | 2.50 | | | | 2.50 | | | | 2.50 | | | | 2.50 | | | | N/A | |
Net investment income | | | 1.53 | | | | 1.47 | | | | 1.04 | | | | 0.94 | | | | 1.21 | |
Portfolio turnover (%) | | | 141 | | | | 118 | | | | 144 | | | | 128 | | | | 130 | |
Number of units outstanding at end of period (000 Omitted) | | | 332 | | | | 403 | | | | 468 | | | | 500 | | | | 559 | |
| (d) | Per unit data are based on the average number of units outstanding during each year. |
| (f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
| (k) | 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. |
| (r) | Certain expenses have been reduced without which performance would have been lower. |
See notes to financial statements.
39
Financial Highlights — continued
The financial highlights table is intended to help you understand the variable account’s financial performance for 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 | |
| | | Years Ended 12/31 | |
| | | 2007 | | | 2006 | | | 2005 | | | 2004 | | | 2003 | |
Per unit data: (d) | | | | | | | | | | | | | | | | | | | | |
Net asset value — beginning of period | | $ | 38.619 | | | $ | 37.679 | | | $ | 37.338 | | | $ | 36.470 | | | $ | 36.124 | |
| | | | | | | | | | | | | | | | | | | | |
Investment income | | $ | 2.117 | | | $ | 2.024 | | | $ | 1.936 | | | $ | 1.834 | | | $ | 1.482 | |
Expenses | | | (0.802 | ) | | | (0.757 | ) | | | (0.752 | ) | | | (0.726 | ) | | | (0.711 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net investment income | | $ | 1.315 | | | $ | 1.267 | | | $ | 1.184 | | | $ | 1.108 | | | $ | 0.771 | |
Net realized and unrealized gain (loss) on investments | | | 0.870 | | | | (0.327 | ) | | | (0.843 | ) | | | (0.240 | ) | | | (0.425 | ) |
| | | | | | | | | | | | | | | | | | | | |
Change in unit value | | $ | 2.185 | | | $ | 0.940 | | | $ | 0.341 | | | $ | 0.868 | | | $ | 0.346 | |
| | | | | | | | | | | �� | | | | | | | | | |
Unit value: | | | | | | | | | | | | | | | | | | | | |
Net asset value — end of period | | $ | 40.804 | | | $ | 38.619 | | | $ | 37.679 | | | $ | 37.338 | | | $ | 36.470 | |
| | | | | | | | | | | | | | | | | | | | |
Total Return (%) (k) | | | 5.66 | | | | 2.50 | | | | 0.91 | | | | 2.38 | | | | 0.96 | |
Ratios (%) (to average net assets): | | | | | | | | | | | | | | | | | | | | |
Expenses (f) | | | 2.02 | | | | 2.01 | | | | 2.01 | | | | 1.97 | | | | 1.95 | |
Net investment income | | | 3.26 | | | | 3.28 | | | | 3.09 | | | | 2.96 | | | | 2.08 | |
Portfolio turnover (%) | | | 35 | | | | 17 | | | | 69 | | | | 89 | | | | 138 | |
Number of units outstanding at end of period (000 Omitted) | | | 1,269 | | | | 1,538 | | | | 1,852 | | | | 2,125 | | | | 2,447 | |
| |
| | | Government Securities Variable Account | |
| | | Compass 3 | |
| | | Years Ended 12/31 | |
| | | 2007 | | | 2006 | | | 2005 | | | 2004 | | | 2003 | |
Per unit data: (d) | | | | | | | | | | | | | | | | | | | | |
Net asset value — beginning of period | | $ | 26.924 | | | $ | 26.295 | | | $ | 26.082 | | | $ | 25.501 | | | $ | 25.284 | |
| | | | | | | | | | | | | | | | | | | | |
Investment income | | $ | 1.470 | | | $ | 1.352 | | | $ | 1.316 | | | $ | 1.244 | | | $ | 1.045 | |
Expenses | | | (0.583 | ) | | | (0.538 | ) | | | (0.543 | ) | | | (0.525 | ) | | | (0.514 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net investment income | | $ | 0.887 | | | $ | 0.814 | | | $ | 0.773 | | | $ | 0.719 | | | $ | 0.531 | |
Net realized and unrealized gain (loss) on investments | | | 0.608 | | | | (0.185 | ) | | | (0.560 | ) | | | (0.138 | ) | | | (0.314 | ) |
| | | | | | | | | | | | | | | | | | | | |
Change in unit value | | $ | 1.495 | | | $ | 0.629 | | | $ | 0.213 | | | $ | 0.581 | | | $ | 0.217 | |
| | | | | | | | | | | | | | | | | | | | |
Unit value: | | | | | | | | | | | | | | | | | | | | |
Net asset value — end of period | | $ | 28.419 | | | $ | 26.924 | | | $ | 26.295 | | | $ | 26.082 | | | $ | 25.501 | |
| | | | | | | | | | | | | | | | | | | | |
Total Return (%) (k) | | | 5.55 | | | | 2.40 | | | | 0.82 | | | | 2.28 | | | | 0.86 | |
Ratios (%) (to average net assets): | | | | | | | | | | | | | | | | | | | | |
Expenses (f) | | | 2.12 | | | | 2.11 | | | | 2.11 | | | | 2.07 | | | | 2.05 | |
Net investment income | | | 3.25 | | | | 3.15 | | | | 2.96 | | | | 2.82 | | | | 2.08 | |
Portfolio turnover (%) | | | 35 | | | | 17 | | | | 69 | | | | 89 | | | | 138 | |
Number of units outstanding at end of period (000 Omitted) | | | 28 | | | | 40 | | | | 69 | | | | 100 | | | | 147 | |
40
Financial Highlights — continued
| | | | | | | | | | | | | | | | | | | | |
| | | Government Securities Variable Account | |
| | | Compass 3 — Level 2 | |
| | | Years Ended 12/31 | |
| | | 2007 | | | 2006 | | | 2005 | | | 2004 | | | 2003 | |
Per unit data: (d) | | | | | | | | | | | | | | | | | | | | |
Net asset value — beginning of period | | $ | 15.814 | | | $ | 15.421 | | | $ | 15.274 | | | $ | 14.912 | | | $ | 14.763 | |
| | | | | | | | | | | | | | | | | | | | |
Investment income | | $ | 0.848 | | | $ | 0.813 | | | $ | 0.781 | | | $ | 0.742 | | | $ | 0.597 | |
Expenses | | | (0.318 | ) | | | (0.300 | ) | | | (0.299 | ) | | | (0.289 | ) | | | (0.282 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net investment income | | $ | 0.530 | | | $ | 0.513 | | | $ | 0.482 | | | $ | 0.453 | | | $ | 0.315 | |
Net realized and unrealized gain (loss) on investments | | | 0.373 | | | | (0.120 | ) | | | (0.335 | ) | | | (0.091 | ) | | | (0.166 | ) |
| | | | | | | | | | | | | | | | | | | | |
Change in unit value | | $ | 0.903 | | | $ | 0.393 | | | $ | 0.147 | | | $ | 0.362 | | | $ | 0.149 | |
| | | | | | | | | | | | | | | | | | | | |
Unit value: | | | | | | | | | | | | | | | | | | | | |
Net asset value — end of period | | $ | 16.717 | | | $ | 15.814 | | | $ | 15.421 | | | $ | 15.274 | | | $ | 14.912 | |
| | | | | | | | | | | | | | | | | | | | |
Total Return (%) (k) | | | 5.71 | | | | 2.55 | | | | 0.96 | | | | 2.43 | | | | 1.01 | |
Ratios (%) (to average net assets): | | | | | | | | | | | | | | | | | | | | |
Expenses (f) | | | 1.97 | | | | 1.96 | | | | 1.96 | | | | 1.92 | | | | 1.90 | |
Net investment income | | | 3.29 | | | | 3.30 | | | | 3.12 | | | | 2.99 | | | | 2.10 | |
Portfolio turnover (%) | | | 35 | | | | 17 | | | | 69 | | | | 89 | | | | 138 | |
Number of units outstanding at end of period (000 Omitted) | | | 889 | | | | 1,054 | | | | 1,280 | | | | 1,377 | | | | 1,562 | |
| (d) | Per unit data are based on the average number of units outstanding during each year. |
| (f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
| (k) | 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.
41
Financial Highlights — continued
The financial highlights table is intended to help you understand the variable account’s financial performance for 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 | |
| | | Years Ended 12/31 | |
| | | 2007 | | | 2006 | | | 2005 | | | 2004 | | | 2003 | |
Per unit data: (d) | | | | | | | | | | | | | | | | | | | | |
Net asset value — beginning of period | | $ | 40.172 | | | $ | 36.840 | | | $ | 36.669 | | | $ | 34.056 | | | $ | 28.505 | |
| | | | | | | | | | | | | | | | | | | | |
Investment income | | $ | 3.391 | | | $ | 3.121 | | | $ | 2.959 | | | $ | 2.857 | | | $ | 2.769 | |
Expenses | | | (0.901 | ) | | | (0.847 | ) | | | (0.820 | ) | | | (0.770 | ) | | | (0.689 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net investment income | | $ | 2.490 | | | $ | 2.274 | | | $ | 2.139 | | | $ | 2.087 | | | $ | 2.080 | |
Net realized and unrealized gain (loss) on investments and foreign currency transactions | | | (2.318 | ) | | | 1.058 | | | | (1.968 | ) | | | 0.526 | | | | 3.471 | |
| | | | | | | | | | | | | | | | | | | | |
Change in unit value | | $ | 0.172 | | | $ | 3.332 | | | $ | 0.171 | | | $ | 2.613 | | | $ | 5.551 | |
| | | | | | | | | | | | | | | | | | | | |
Unit value: | | | | | | | | | | | | | | | | | | | | |
Net asset value — end of period | | $ | 40.344 | | | $ | 40.172 | | | $ | 36.840 | | | $ | 36.669 | | | $ | 34.056 | |
| | | | | | | | | | | | | | | | | | | | |
Total Return (%) (k)(r)(s) | | | 0.43 | | | | 9.04 | | | | 0.47 | | | | 7.67 | | | | 19.47 | |
Ratios (%) (to average net assets): | | | | | | | | | | | | | | | | | | | | |
Expenses before expense reductions (f) | | | 2.25 | | | | 2.32 | | | | 2.28 | (o) | | | 2.21 | | | | 2.20 | |
Expenses after expense reductions (f) | | | 2.20 | | | | 2.22 | | | | 2.25 | | | | N/A | | | | N/A | |
Net investment income | | | 5.96 | | | | 5.84 | | | | 5.76 | | | | 5.91 | | | | 6.53 | |
Portfolio turnover (%) | | | 66 | | | | 88 | | | | 53 | | | | 81 | | | | 164 | |
Number of units outstanding at end of period (000 Omitted) | | | 958 | | | | 1,119 | | | | 1,323 | | | | 1,601 | | | | 1,827 | |
| |
| | | High Yield Variable Account | |
| | | Compass 3 | |
| | | Years Ended 12/31 | |
| | | 2007 | | | 2006 | | | 2005 | | | 2004 | | | 2003 | |
Per unit data: (d) | | | | | | | | | | | | | | | | | | | | |
Net asset value — beginning of period | | $ | 29.459 | | | $ | 27.043 | | | $ | 26.943 | | | $ | 25.048 | | | $ | 20.986 | |
| | | | | | | | | | | | | | | | | | | | |
Investment income | | $ | 2.445 | | | $ | 2.212 | | | $ | 2.118 | | | $ | 2.021 | | | $ | 1.964 | |
Expenses | | | (0.681 | ) | | | (0.635 | ) | | | (0.620 | ) | | | (0.576 | ) | | | (0.514 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net investment income | | $ | 1.764 | | | $ | 1.577 | | | $ | 1.498 | | | $ | 1.445 | | | $ | 1.450 | |
Net realized and unrealized gain (loss) on investments and foreign currency transactions | | | (1.667 | ) | | | 0.839 | | | | (1.398 | ) | | | 0.450 | | | | 2.612 | |
| | | | | | | | | | | | | | | | | | | | |
Change in unit value | | $ | 0.097 | | | $ | 2.416 | | | $ | 0.100 | | | $ | 1.895 | | | $ | 4.062 | |
| | | | | | | | | | | | | | | | | | | | |
Unit value: | | | | | | | | | | | | | | | | | | | | |
Net asset value — end of period | | $ | 29.556 | | | $ | 29.459 | | | $ | 27.043 | | | $ | 26.943 | | | $ | 25.048 | |
| | | | | | | | | | | | | | | | | | | | |
Total Return (%) (k)(r)(s) | | | 0.33 | | | | 8.94 | | | | 0.37 | | | | 7.57 | | | | 19.35 | |
Ratios (%) (to average net assets): | | | | | | | | | | | | | | | | | | | | |
Expenses before expense reductions (f) | | | 2.35 | | | | 2.42 | | | | 2.38 | (o) | | | 2.31 | | | | 2.30 | |
Expenses after expense reductions (f) | | | 2.30 | | | | 2.32 | | | | 2.35 | | | | N/A | | | | N/A | |
Net investment income | | | 5.93 | | | | 5.71 | | | | 5.64 | | | | 5.75 | | | | 6.41 | |
Portfolio turnover (%) | | | 66 | | | | 88 | | | | 53 | | | | 81 | | | | 164 | |
Number of units outstanding at end of period (000 Omitted) | | | 21 | | | | 34 | | | | 47 | | | | 67 | | | | 115 | |
42
Financial Highlights — continued
| | | | | | | | | | | | | | | | | | | | |
| | | High Yield Variable Account | |
| | | Compass 3 – Level 2 | |
| | | Years Ended 12/31 | |
| | | 2007 | | | 2006 | | | 2005 | | | 2004 | | | 2003 | |
Per unit data: (d) | | | | | | | | | | | | | | | | | | | | |
Net asset value — beginning of period | | $ | 15.814 | | | $ | 14.495 | | | $ | 14.421 | | | $ | 13.386 | | | $ | 11.199 | |
| | | | | | | | | | | | | | | | | | | | |
Investment income | | $ | 1.310 | | | $ | 1.202 | | | $ | 1.142 | | | $ | 1.019 | | | $ | 1.161 | |
Expenses | | | (0.344 | ) | | | (0.323 | ) | | | (0.312 | ) | | | (0.275 | ) | | | (0.286 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net investment income | | $ | 0.966 | | | $ | 0.879 | | | $ | 0.830 | | | $ | 0.744 | | | $ | 0.875 | |
Net realized and unrealized gain (loss) on investments and foreign currency | | | (0.890 | ) | | | 0.440 | | | | (0.756 | ) | | | 0.291 | | | | 1.312 | |
| | | | | | | | | | | | | | | | | | | | |
Change in unit value | | $ | 0.076 | | | $ | 1.319 | | | $ | 0.074 | | | $ | 1.035 | | | $ | 2.187 | |
| | | | | | | | | | | | | | | | | | | | |
Unit value: | | | | | | | | | | | | | | | | | | | | |
Net asset value — end of period | | $ | 15.890 | | | $ | 15.814 | | | $ | 14.495 | | | $ | 14.421 | | | $ | 13.386 | |
| | | | | | | | | | | | | | | | | | | | |
Total Return (%) (k)(r)(s) | | | 0.48 | | | | 9.10 | | | | 0.52 | | | | 7.73 | | | | 19.53 | |
Ratios (%) (to average net assets): | | | | | | | | | | | | | | | | | | | | |
Expenses before expense reductions (f) | | | 2.20 | | | | 2.27 | | | | 2.23 | (o) | | | 2.16 | | | | 2.15 | |
Expenses after expense reductions (f) | | | 2.15 | | | | 2.17 | | | | 2.20 | | | | N/A | | | | N/A | |
Net investment income | | | 5.98 | | | | 5.86 | | | | 5.81 | | | | 5.77 | | | | 6.57 | |
Portfolio turnover (%) | | | 66 | | | | 88 | | | | 53 | | | | 81 | | | | 164 | |
Number of units outstanding at end of period (000 Omitted) | | | 579 | | | | 774 | | | | 937 | | | | 971 | | | | 2,631 | |
| (d) | Per unit data are based on the average number of units outstanding during each year. |
| (f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
| (k) | 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. |
| (o) | Due to a revision, the ratios of expenses before expense reductions for the year ended December 31, 2005 not previously reported, were 2.28%, 2.38% and 2.23% for Compass 2, Compass 3, and Compass 3 – Level 2, respectively. There was no impact to net assets or the expenses charged to the shareholder. |
| (r) | Certain expenses have been reduced without which performance would have been lower. |
| (s) | From time to time the variable account may receive proceeds from litigation settlements, without which performance would be lower. |
See notes to financial statements.
43
Financial Highlights — continued
The financial highlights table is intended to help you understand the variable account’s financial performance for 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 | |
| | | Years Ended 12/31 | |
| | | 2007 | | | 2006 | | | 2005 | | | 2004 | | | 2003 | |
Per unit data: (d) | | | | | | | | | | | | | | | | | | | | |
Net asset value — beginning of period | | $ | 20.979 | | | $ | 20.331 | | | $ | 20.073 | | | $ | 20.188 | | | $ | 20.322 | |
| | | | | | | | | | | | | | | | | | | | |
Investment income | | $ | 1.145 | | | $ | 1.051 | | | $ | 0.661 | | | $ | 0.281 | | | $ | 0.247 | |
Expenses | | | (0.431 | ) | | | (0.403 | ) | | | (0.403 | ) | | | (0.396 | ) | | | (0.381 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) | | $ | 0.714 | | | $ | 0.648 | | | $ | 0.258 | | | $ | (0.115 | ) | | $ | (0.134 | ) |
Net realized and unrealized gain (loss) on investments | | | (0.017 | )(g) | | | — | | | | (0.000 | )(w) | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Change in unit value | | $ | 0.697 | | | $ | 0.648 | | | $ | 0.258 | | | $ | (0.115 | ) | | $ | (0.134 | ) |
| | | | | | | | | | | | | | | | | | | | |
Unit value: | | | | | | | | | | | | | | | | | | | | |
Net asset value — end of period | | $ | 21.676 | | | $ | 20.979 | | | $ | 20.331 | | | $ | 20.073 | | | $ | 20.188 | |
| | | | | | | | | | | | | | | | | | | | |
Total Return (%) (k) | | | 3.32 | | | | 3.19 | | | | 1.29 | | | | (0.57 | ) | | | (0.66 | ) |
Ratios (%) (to average net assets): | | | | | | | | | | | | | | | | | | | | |
Expenses (f) | | | 2.00 | | | | 1.95 | | | | 1.99 | | | | 1.96 | | | | 1.87 | |
Net investment income (loss) | | | 3.29 | | | | 3.15 | | | | 1.38 | | | | (0.56 | ) | | | (0.63 | ) |
Number of units outstanding at end of period (000 Omitted) | | | 887 | | | | 928 | | | | 1,128 | | | | 1,009 | | | | 1,172 | |
| |
| | | Money Market Variable Account | |
| | | Compass 3 | |
| | | Years Ended 12/31 | |
| | | 2007 | | | 2006 | | | 2005 | | | 2004 | | | 2003 | |
Per unit data: (d) | | | | | | | | | | | | | | | | | | | | |
Net asset value — beginning of period | | $ | 17.152 | | | $ | 16.638 | | | $ | 16.443 | | | $ | 16.553 | | | $ | 16.680 | |
| | | | | | | | | | | | | | | | | | | | |
Investment income | | $ | 0.902 | | | $ | 0.852 | | | $ | 0.539 | | | $ | 0.229 | | | $ | 0.198 | |
Expenses | | | (0.356 | ) | | | (0.338 | ) | | | (0.344 | ) | | | (0.339 | ) | | | (0.325 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) | | $ | 0.546 | | | $ | 0.514 | | | $ | 0.195 | | | $ | (0.110 | ) | | $ | (0.127 | ) |
Net realized and unrealized gain (loss) on investments | | | 0.006 | (g) | | | — | | | | (0.000 | )(w) | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Change in unit value | | $ | 0.552 | | | $ | 0.514 | | | $ | 0.195 | | | $ | (0.110 | ) | | $ | (0.127 | ) |
| | | | | | | | | | | | | | | | | | | | |
Unit value: | | | | | | | | | | | | | | | | | | | | |
Net asset value — end of period | | $ | 17.704 | | | $ | 17.152 | | | $ | 16.638 | | | $ | 16.443 | | | $ | 16.553 | |
| | | | | | | | | | | | | | | | | | | | |
Total Return (%) (k) | | | 3.22 | | | | 3.09 | | | | 1.19 | | | | (0.67 | ) | | | (0.76 | ) |
Ratios (%) (to average net assets): | | | | | | | | | | | | | | | | | | | | |
Expenses (f) | | | 2.10 | | | | 2.05 | | | | 2.09 | | | | 2.06 | | | | 1.97 | |
Net investment income (loss) | | | 3.20 | | | | 3.00 | | | | 1.42 | | | | (0.71 | ) | | | (0.74 | ) |
Number of units outstanding at end of period (000 Omitted) | | | 64 | | | | 131 | | | | 218 | | | | 97 | | | | 155 | |
44
Financial Highlights — continued
| | | | | | | | | | | | | | | | | | | | |
| | | Money Market Variable Account | |
| | | Compass 3 — Level 2 | |
| | | Years Ended 12/31 | |
| | | 2007 | | | 2006 | | | 2005 | | | 2004 | | | 2003 | |
Per unit data: (d) | | | | | | | | | | | | | | | | | | | | |
Net asset value — beginning of period | | $ | 12.895 | | | $ | 12.491 | | | $ | 12.326 | | | $ | 12.390 | | | $ | 12.466 | |
| | | | | | | | | | | | | | | | | | | | |
Investment income | | $ | 0.695 | | | $ | 0.644 | | | $ | 0.405 | | | $ | 0.181 | | | $ | 0.131 | |
Expenses | | | (0.257 | ) | | | (0.240 | ) | | | (0.240 | ) | | | (0.245 | ) | | | (0.207 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) | | $ | 0.438 | | | $ | 0.404 | | | $ | 0.165 | | | $ | (0.064 | ) | | $ | (0.076 | ) |
Net realized and unrealized gain (loss) on investments | | | (0.003 | )(g) | | | — | | | | (0.000 | )(w) | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Change in unit value | | $ | 0.435 | | | $ | 0.404 | | | $ | 0.165 | | | $ | (0.064 | ) | | $ | (0.076 | ) |
| | | | | | | | | | | | | | | | | | | | |
Unit value: | | | | | | | | | | | | | | | | | | | | |
Net asset value — end of period | | $ | 13.330 | | | $ | 12.895 | | | $ | 12.491 | | | $ | 12.326 | | | $ | 12.390 | |
| | | | | | | | | | | | | | | | | | | | |
Total Return (%) (k) | | | 3.38 | | | | 3.24 | | | | 1.34 | | | | (0.52 | ) | | | (0.61 | ) |
Ratios (%) (to average net assets): | | | | | | | | | | | | | | | | | | | | |
Expenses (f) | | | 1.95 | | | | 1.90 | | | | 1.94 | | | | 1.91 | | | | 1.82 | |
Net investment income (loss) | | | 3.32 | | | | 3.18 | | | | 1.39 | | | | (0.48 | ) | | | (0.61 | ) |
Number of units outstanding at end of period (000 Omitted) | | | 1,871 | | | | 1,969 | | | | 2,384 | | | | 2,259 | | | | 896 | |
| (d) | Per unit data are based on the average number of units outstanding during each year. |
| (f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
| (g) | The per share amount is not in accordance with the net realized and unrealized gain/loss for the period because of the timing of sales of variable account units and the per unit amount of realized and unrealized gains and losses at such time. |
| (k) | 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. |
| (w) | Per unit amount was less than $0.01. |
See notes to financial statements.
45
Financial Highlights — continued
The financial highlights table is intended to help you understand the variable account’s financial performance for 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 | |
| | | Years Ended 12/31 | |
| | | 2007 | | | 2006 | | | 2005 | | | 2004 | | | 2003 | |
Per unit data: (d) | | | | | | | | | | | | | | | | | | | | |
Net asset value — beginning of period | | $ | 51.373 | | | $ | 46.459 | | | $ | 45.729 | | | $ | 41.571 | | | $ | 35.950 | |
| | | | | | | | | | | | | | | | | | | | |
Investment income | | $ | 1.832 | | | $ | 1.749 | | | $ | 1.521 | | | $ | 1.450 | | | $ | 1.237 | |
Expenses | | | (1.126 | ) | | | (1.033 | ) | | | (0.970 | ) | | | (0.905 | ) | | | (0.800 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net investment income | | $ | 0.706 | | | $ | 0.716 | | | $ | 0.551 | | | $ | 0.545 | | | $ | 0.437 | |
Net realized and unrealized gain (loss) on investments and foreign currency transactions | | | 0.630 | | | | 4.198 | | | | 0.179 | | | | 3.613 | | | | 5.184 | |
| | | | | | | | | | | | | | | | | | | | |
Change in unit value | | $ | 1.336 | | | $ | 4.914 | | | $ | 0.730 | | | $ | 4.158 | | | $ | 5.621 | |
| | | | | | | | | | | | | | | | | | | | |
Unit value: | | | | | | | | | | | | | | | | | | | | |
Net asset value — end of period | | $ | 52.709 | | | $ | 51.373 | | | $ | 46.459 | | | $ | 45.729 | | | $ | 41.571 | |
| | | | | | | | | | | | | | | | | | | | |
Total Return (%) (k)(r)(s) | | | 2.60 | | | | 10.58 | | | | 1.60 | | | | 10.00 | (b) | | | 15.64 | |
Ratios (%) (to average net assets): | | | | | | | | | | | | | | | | | | | | |
Expenses before expense reductions (f) | | | 2.12 | | | | 2.14 | | | | 2.12 | | | | 2.11 | | | | 2.10 | |
Expenses after expense reductions (f) | | | 2.11 | | | | N/A | | | | N/A | | | | N/A | | | | N/A | |
Net investment income | | | 1.30 | | | | 1.46 | | | | 1.18 | | | | 1.25 | | | | 1.13 | |
Portfolio turnover (%) | | | 54 | | | | 45 | | | | 49 | | | | 64 | | | | 62 | |
Number of units outstanding at end of period (000 Omitted) | | | 948 | | | | 1,156 | | | | 1,349 | | | | 1,511 | | | | 1,688 | |
| |
| | | Total Return Variable Account | |
| | | Compass 3 | |
| | | Years Ended 12/31 | |
| | | 2007 | | | 2006 | | | 2005 | | | 2004 | | | 2003 | |
Per unit data: (d) | | | | | | | | | | | | | | | | | | | | |
Net asset value — beginning of period | | $ | 49.947 | | | $ | 45.236 | | | $ | 44.592 | | | $ | 40.597 | | | $ | 35.160 | |
| | | | | | | | | | | | | | | | | | | | |
Investment income | | $ | 1.770 | | | $ | 1.645 | | | $ | 1.450 | | | $ | 1.375 | | | $ | 1.200 | |
Expenses | | | (1.165 | ) | | | (1.051 | ) | | | (1.019 | ) | | | (0.929 | ) | | | (0.823 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net investment income | | $ | 0.605 | | | $ | 0.594 | | | $ | 0.431 | | | $ | 0.446 | | | $ | 0.377 | |
Net realized and unrealized gain (loss) on investments and foreign currency transactions | | | 0.617 | | | | 4.117 | | | | 0.213 | | | | 3.549 | | | | 5.060 | |
| | | | | | | | | | | | | | | | | | | | |
Change in unit value | | $ | 1.222 | | | $ | 4.711 | | | $ | 0.644 | | | $ | 3.995 | | | $ | 5.437 | |
| | | | | | | | | | | | | | | | | | | | |
Unit value: | | | | | | | | | | | | | | | | | | | | |
Net asset value — end of period | | $ | 51.169 | | | $ | 49.947 | | | $ | 45.236 | | | $ | 44.592 | | | $ | 40.597 | |
| | | | | | | | | | | | | | | | | | | | |
Total Return (%) (k)(r)(s) | | | 2.45 | | | | 10.42 | | | | 1.45 | | | | 9.84 | (b) | | | 15.46 | |
Ratios (%) (to average net assets): | | | | | | | | | | | | | | | | | | | | |
Expenses before expense reductions (f) | | | 2.27 | | | | 2.29 | | | | 2.27 | | | | 2.26 | | | | 2.25 | |
Expenses after expense reductions (f) | | | 2.26 | | | | N/A | | | | N/A | | | | N/A | | | | N/A | |
Net investment income | | | 1.18 | | | | 1.28 | | | | 0.97 | | | | 1.07 | | | | 1.01 | |
Portfolio turnover (%) | | | 54 | | | | 45 | | | | 49 | | | | 64 | | | | 62 | |
Number of units outstanding at end of period (000 Omitted) | | | 107 | | | | 142 | | | | 217 | | | | 315 | | | | 453 | |
46
Financial Highlights — continued
| | | | | | | | | | | | | | | | | | | | |
| | | Total Return Variable Account | |
| | | Compass 3 – Level 2 | |
| | | Years Ended 12/31 | |
| | | 2007 | | | 2006 | | | 2005 | | | 2004 | | | 2003 | |
Per unit data: (d) | | | | | | | | | | | | | | | | | | | | |
Net asset value — beginning of period | | $ | 24.220 | | | $ | 21.903 | | | $ | 21.559 | | | $ | 19.599 | | | $ | 16.949 | |
| | | | | | | | | | | | | | | | | | | | |
Investment income | | $ | 0.849 | | | $ | 0.812 | | | $ | 0.710 | | | $ | 0.676 | | | $ | 0.575 | |
Expenses | | | (0.527 | ) | | | (0.484 | ) | | | (0.457 | ) | | | (0.425 | ) | | | (0.376 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net investment income | | $ | 0.322 | | | $ | 0.328 | | | $ | 0.253 | | | $ | 0.251 | | | $ | 0.199 | |
Net realized and unrealized gain (loss) on investments and foreign currency transactions | | | 0.308 | | | | 1.989 | | | | 0.091 | | | | 1.709 | | | | 2.451 | |
| | | | | | | | | | | | | | | | | | | | |
Change in unit value | | $ | 0.630 | | | $ | 2.317 | | | $ | 0.344 | | | $ | 1.960 | | | $ | 2.650 | |
| | | | | | | | | | | | | | | | | | | | |
Unit value: | | | | | | | | | | | | | | | | | | | | |
Net asset value — end of period | | $ | 24.850 | | | $ | 24.220 | | | $ | 21.903 | | | $ | 21.559 | | | $ | 19.599 | |
| | | | | | | | | | | | | | | | | | | | |
Total Return (%) (k)(r)(s) | | | 2.60 | | | | 10.58 | | | | 1.60 | | | | 10.00 | (b) | | | 15.64 | |
Ratios (%) (to average net assets): | | | | | | | | | | | | | | | | | | | | |
Expenses before expense reductions (f) | | | 2.12 | | | | 2.14 | | | | 2.12 | | | | 2.11 | | | | 2.10 | |
Expenses after expense reductions (f) | | | 2.11 | | | | N/A | | | | N/A | | | | N/A | | | | N/A | |
Net investment income | | | 1.28 | | | | 1.44 | | | | 1.17 | | | | 1.24 | | | | 1.11 | |
Portfolio turnover (%) | | | 54 | | | | 45 | | | | 49 | | | | 64 | | | | 62 | |
Number of units outstanding at end of period (000 Omitted) | | | 4,116 | | | | 4,695 | | | | 5,462 | | | | 5,646 | | | | 5,946 | |
| (b) | The variable 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 share based on the shares outstanding on the day the proceeds were recorded. |
| (d) | Per unit data are based on the average number of units outstanding during each year. |
| (f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. |
| (k) | 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. |
| (r) | Certain expenses have been reduced without which performance would have been lower. |
| (s) | From time to time the variable account may receive proceeds from litigation settlements, without which performance would be lower. |
See notes to financial statements.
47
Notes to Financial Statements
| (1) | Business and Organization |
Capital Appreciation Variable Account, Global Governments Variable Account, Government Securities Variable Account, High Yield 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. The variable accounts operate as open-end management investment companies as those terms are defined in the Investment Company Act of 1940, as amended.
| (2) | Significant Accounting Policies |
General – The preparation of financial statements in conformity with 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 and Total Return Variable Account can invest in foreign securities, including securities of emerging market issuers. 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. The markets of emerging markets countries are generally more volatile than the markets of developed countries with more mature economies. All of the risks of investing in foreign securities previously described are heightened when investing in emerging markets countries.
Investment Valuations – Money market instruments are valued at amortized cost, which approximates market value. Amortized cost involves valuing an instrument at its cost as adjusted for amortization of premium or accretion of discount rather than its current market value. Each money market fund’s use of amortized cost is subject to the fund’s compliance with Rule 2a-7 under the Investment Company Act of 1940. The amortized cost value of an instrument can be different from the market value of an instrument. Equity securities, including restricted equity securities, are generally valued at the last sale or official closing price as reported by an independent pricing service on the market or exchange on which they are primarily traded. For securities for which there were no sales reported that day, equity securities are generally valued at the last quoted daily bid quotation as reported by an independent pricing service on the market or exchange on which they are primarily traded. For securities held short for which there were no sales reported for the day, the position is generally valued at the last quoted daily ask quotation as reported by an independent pricing service on the market or exchange on which such securities are primarily traded. Debt instruments (other than short-term instruments), including restricted debt instruments, are generally valued at an evaluated or composite bid as reported by an independent pricing service. Short-term instruments with a maturity at issuance of 60 days or less may be valued at amortized cost, which approximates market value. Exchange-traded options are generally valued at the last sale or official closing price as reported by an independent pricing service on the exchange on which such options are primarily traded. Exchange-traded options for which there were no sales reported that day are generally valued at the last daily bid quotation as reported by an independent pricing service on the exchange on which such options are primarily traded. Options not traded on an exchange are generally valued at a broker-dealer bid quotation. Foreign currency options are generally valued using an external pricing model that uses market data from an independent source. Futures contracts are generally valued at last posted settlement price as reported by an independent pricing service on the market on which they are primarily traded. Futures contracts for which there were no trades that day for a particular position are generally valued at the closing bid quotation as reported by an independent pricing service on the market on which such futures contracts are primarily traded. Forward foreign currency contracts are generally valued at the mean of bid and asked prices for the time period interpolated from rates reported by an independent pricing service for proximate time periods. Swaps are generally valued at an evaluated bid as reported by an independent pricing service. Securities and other assets generally valued on the basis of information from an independent pricing service may also be valued at a broker-dealer bid quotation. Values obtained from pricing services can utilize both dealer-supplied valuations and electronic data processing techniques, which take into account 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. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates reported by an independent pricing service.
The Board of Managers has delegated primary responsibility for determining or causing to be determined the value of the variable accounts’ investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Managers. Under the variable accounts’ valuation policies and procedures, market quotations are not considered to be readily available for many types of debt instruments and certain types of derivatives. These investments are generally valued at fair value based on information from independent pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the variable accounts’ net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the variable accounts’ net asset value may be deemed to have a material affect on the value of securities traded in foreign markets. Accordingly, the variable accounts’ foreign equity securities may often be valued at fair value. The adviser may rely on independent pricing services or other information (such as the correlation with price movements of similar securities in the same
48
Notes to Financial Statements — continued
or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the variable accounts’ net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of investments used to determine the variable accounts’ net asset value may differ from quoted or published prices for the same investments.
In September 2006, FASB Statement No. 157, Fair Value Measurements (the “Statement”) was issued, and is effective for fiscal years beginning after November 15, 2007 and for all interim periods within those fiscal years. This Statement provides a single definition of fair value, a hierarchy for measuring fair value and expanded disclosures about fair value measurements. Management is evaluating the application of the Statement to the variable accounts, and believes the impact will be limited to expanded disclosures resulting from the adoption of this Statement in the variable accounts’ financial statements.
Repurchase Agreements – Each variable account 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 account 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 and other funds managed by Massachusetts Financial Services Company (MFS), may utilize a joint trading account for the purpose of entering into one or more repurchase agreements.
Inflation-Adjusted Debt Securities – Certain variable accounts invest in inflation-adjusted debt securities issued by the U.S. Treasury. The variable accounts may also invest in inflation-adjusted debt securities issued by U.S. Government agencies and instrumentalities other than the U.S. Treasury and by other entities such as U.S. and foreign corporations and foreign governments. The principal value of these debt securities is adjusted through income according to changes in the Consumer Price Index or another general price or wage index. These debt securities typically pay a fixed rate of interest, but this fixed rate is applied to the inflation-adjusted principal amount. The principal paid at maturity of the debt security is typically equal to the inflation-adjusted principal amount, or the security’s original par value, whichever is greater. Other types of inflation-adjusted securities may use other methods to adjust for other measures of inflation.
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.
Derivative Risk – Certain variable accounts may invest in derivatives for hedging or non-hedging purposes. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. When the variable accounts use derivatives as an investment to gain market exposure, or for hedging purposes, gains and losses from derivative instruments may be substantially greater than the derivative’s original cost. Derivative instruments include purchased options, futures contracts, and forward foreign currency exchange contracts for the Global Governments Variable Account, futures contracts for the Government Securities Variable Account and swap agreements for the High Yield Variable Account.
Purchased Options – Certain variable accounts may purchase call or put options for a premium. Purchasing call options may be a hedge against an anticipated increase in the dollar cost of securities to be acquired or to increase the variable account’s exposure to the underlying instrument. Purchasing put options may hedge against a decline in the value of portfolio securities. The premium paid is included as an investment in the Statement of Assets and Liabilities and is subsequently adjusted to the current value of the option. Premiums paid for purchased options which have expired are treated as realized losses on investments in the Statement of Operations. Premiums paid for purchased options which are exercised or closed are added to the amount paid or offset against the proceeds on the underlying security or financial instrument to determine the realized gain or loss. The risk of loss associated with purchased options is limited to the premium paid.
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 account 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. Upon entering into such contracts, the variable accounts bear the risk of interest or exchange rates or securities prices moving unexpectedly, in which case, 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 the contract. 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
49
Notes to Financial Statements — continued
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.
Swap Agreements – Certain variable accounts may enter into swap agreements. A swap is an exchange of cash payments between the variable accounts and another party. Net cash payments are exchanged at specified intervals and are recorded as a realized gain or loss in the Statement of Operations. The value of the swap is adjusted daily and the change in value, including accruals of periodic amounts of interest to be paid or received, is recorded as unrealized appreciation or depreciation in the Statement of Operations. Amounts paid or received at the inception of the swap are reflected as premiums paid or received on the Statement of Assets and Liabilities and are amortized using the effective interest method over the term of the agreement. A liquidation payment received or made upon early termination is recorded as a realized gain or loss in the Statement of Operations. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with the variable accounts custodian in connection with these agreements. Risk of loss may exceed amounts recognized on the Statement of Assets and Liabilities. These risks include the possible lack of a liquid market, failure of the counterparty to perform under the terms of the agreements, and unfavorable market movement of the underlying instrument. All swap agreements entered into by the variable accounts with the same counterparty are generally governed by a single master agreement, which provides for the netting of all amounts owed by the parties under the agreement upon the occurrence of an event of default, thereby reducing the credit risk to which such party is exposed.
The High Yield Variable Account holds a credit default swap in which one party makes a stream of payments based on a fixed percentage applied to the notional amount to another party in exchange for the right to receive a specified return in the event of a default by a third party, such as a corporate issuer or foreign issuer, on its obligation. The variable accounts may enter into credit default swaps to limit or to reduce its risk exposure to defaults of corporate and sovereign issuers or to create direct or synthetic short or long exposure to corporate debt securities or certain sovereign debt securities to which it is not otherwise exposed.
Loans and Other Direct Debt Instruments – Certain variable accounts may invest in loans and loan participations or other receivables. These investments may include standby financing commitments, including revolving credit facilities, which obligate the variable account to supply additional cash to the borrower on demand. At December 31, 2007, the High Yield Variable Account had unfunded loan commitments of $18,188, which could be extended at the option of the borrower and which are covered by sufficient cash and/or liquid securities held by the variable account. Loan participations involve a risk of insolvency of the lending bank or other financial intermediary.
Indemnifications – Under each variable account’s organizational documents, its officers and trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the variable account. Additionally, in the normal course of business, each variable account enters into agreements with service providers that may contain indemnification clauses. Each variable account’s maximum exposure under these agreements is unknown as this would involve future claims that may be made against the variable account that have not yet occurred.
Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. 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. For all other variable accounts, all premium and discount is amortized or accreted for financial statement purposes in accordance with U.S. generally accepted accounting principles. All discount is accreted for tax reporting purposes as required by federal income tax regulations. Certain variable accounts earn certain fees in connection with their floating rate loan purchasing activities. These fees are in addition to interest payments earned and may include amendment fees, commitment fees, facility fees, consent fees, and prepayment fees. Commitment fees are recorded on an accrual basis as income in the accompanying financial statements. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the variable account is informed of the dividend if such information is obtained subsequent to 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. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the variable accounts or in unrealized gain/loss if the security is still held by the variable accounts. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
Fees Paid Indirectly – The variable accounts custody fees may be reduced according to an arrangement that measures the value of cash deposited with the custodian by the variable accounts. This amount, for the year ended December 31, 2007, is shown as a reduction of total expenses on the Statement of Operations.
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.
50
Notes to Financial Statements — continued
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, 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 to 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.
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 |
Each variable account has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the variable accounts. The management fee is computed daily and paid monthly at the following annual rates based on a percentage of each variable account’s average daily net assets:
| | | | | | | | | |
| | | Annual Rate of Management Fee
Based on Average
Daily Net Assets
Not Exceeding $300 Million | | | Annual Rate of Management Fee
Based on Average
Daily Net Assets
In Excess of $300 Million | | | Effective
Management
Fees | |
Capital Appreciation Variable Account | | 0.75 | % | | 0.675 | % | | 0.75 | % |
Global Governments Variable Account | | 0.75 | % | | 0.675 | % | | 0.75 | % |
Government Securities Variable Account | | 0.55 | % | | 0.495 | % | | 0.55 | % |
High Yield Variable Account | | 0.75 | %(a) | | 0.675 | % | | 0.70 | % |
Money Market Variable Account | | 0.50 | %(b) | | 0.50 | %(b) | | 0.50 | % |
Total Return Variable Account | | 0.75 | % | | 0.675 | % | | 0.75 | % |
| (a) | The investment adviser had agreed to reduce its management fee to 0.70% for the first $300 million of average daily net assets. This written agreement will continue through August 31, 2008, unless changed or rescinded by the variable account’s Board of Managers. This management fee reduction amounted to $27,575, which is shown as a reduction of total expenses in the Statement of Operations. |
| (b) | The investment adviser has agreed in writing to reduce its management fee to 0.45% of average daily net assets in excess of $500 million. This written agreement may be rescinded only upon consent of the variable account’s Board of Managers. For the year ended December 31, 2007, the Money Market Variable Account’s average daily net assets did not exceed $500 million, and therefore, the management fee was not reduced. |
The investment adviser has agreed in writing to pay each variable account’s operating expenses, exclusive of certain expenses and charges, such that total annual operating expenses do not exceed 1.25% annually of each variable account’s average daily net assets. These agreements are contained in the investment advisory agreement between MFS and the variable accounts and may not be rescinded without shareholder approval. For the year ended December 31, 2007, this reduction amounted to $73,812 for the Global Governments Variable Account and is reflected as a reduction of total expenses in the Statement of Operations. Each of the other variable accounts did not exceed the limit and therefore, the investment adviser did not pay any portion of the variable accounts’ expenses. In addition, the investment adviser has agreed in writing to pay the High Yield Variable Account’s total annual operating expenses, exclusive of certain expenses and charges, such that total annual operating expenses do not exceed 0.90% annually of the High Yield Variable Account’s average daily net assets. This written agreement will continue through August 31, 2008 unless changed or rescinded by the variable account’s Board of Managers. The High Yield Variable Account did not exceed the limit and therefore, the investment adviser did not pay any portion of the variable account’s expenses.
51
Notes to Financial Statements — continued
Effective September 1, 2007, the investment adviser has agreed in writing to pay the Capital Appreciation Variable Account’s and Total Return Variable Account’s total annual operating expenses, exclusive of certain expenses and charges, such that total annual operating expenses do not exceed 0.82% and 0.85%, respectively, annually of the variable account’s average daily net assets. These written agreements will continue through August 31, 2008 unless changed or rescinded by the variable accounts’ Board of Managers. For the year ended December 31, 2007, this reduction amounted to $28,483 and $28,332, for the Capital Appreciation Variable Account and Total Return Variable Account, respectively.
Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to each variable account. Under an administrative services agreement, each variable account partially reimburses MFS the costs incurred to provide these services. Each variable account is charged an annual fixed amount of $10,000 plus a fee based on average daily net assets. The administrative services fee incurred for the year ended December 31, 2007, was equivalent to the following annual effective rate of the variable accounts’ average daily net assets:
| | | | | | | | | | | | | | | | | | |
| | | Capital
Appreciation
Variable
Account | | | Global
Governments
Variable
Account | | | Government
Securities
Variable
Account | | | High
Yield
Variable
Account | | | Money
Market
Variable
Account | | | Total
Return
Variable
Account | |
Percent of average daily net assets | | 0.0263 | % | | 0.1150 | % | | 0.0255 | % | | 0.0253 | % | | 0.0258 | % | | 0.0262 | % |
| | | | | | | | | | | | | | | | | | |
Managers’ and Officers’ Compensation – Each variable account pays compensation to 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 who are affiliated with the Investment Adviser or the Sponsor. Certain officers of the variable accounts are officers or directors of MFS, MFD, (MFS Fund Distributors, Inc.), and MFSC ( MFS Service Center, Inc.).
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. The funds can terminate the Agreement with Tarantino LLC at any time under the terms of the Agreement. MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ICCO. For the year ended December 31, 2007, the fees paid to Tarantino LLC were as follows:
| | | |
Capital Appreciation Variable Account | | $ | 1,002 |
Global Governments Variable Account | | | 42 |
Government Securities Variable Account | | | 348 |
High Yield Variable Account | | | 267 |
Money Market Variable Account | | | 223 |
Total Return Variable Account | | | 846 |
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 | | $ | 127,156,238 | | $ | 170,234,197 |
Global Governments Variable Account | | | 8,578,078 | | | 9,862,812 |
Government Securities Variable | | | 1,320,720 | | | 4,032,461 |
High Yield Variable Account | | | 35,267,304 | | | 42,696,618 |
Total Return Variable Account | | | 77,332,576 | | | 101,671,253 |
Purchases and sales of investments for the Money Market Variable Account, exclusive of securities subject to repurchase agreements, aggregated $733,719,714 and $742,283,689 respectively.
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 | | $ | 2,427,131 | | $ | 2,668,126 |
Government Securities Variable Account | | | 23,326,940 | | | 31,779,966 |
Total Return Variable Account | | | 15,532,051 | | | 16,255,615 |
52
Notes to Financial Statements — continued
| (7) | Participant Transactions |
The changes in net assets from changes in numbers of outstanding units were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, 2007 (000 Omitted) | |
| | | Purchase
Payments
Received | | Transfers Between Variable Accounts and Fixed
Accumulation
Account | | | Withdrawals, Surrenders,
Annuitizations, and Contract Charges | | | Net Accumulation Activity | | | Net
Annuitization
Activity | | | Net Increases
(Decrease) | |
| | | Units | | Dollars | | Units | | | Dollars | | | Units | | | Dollars | | | Units | | | Dollars | | | Dollars | | | Dollars | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Capital Appreciation Variable Account | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compass 2 Contracts | | 14 | | $ | 843 | | (65 | ) | | $ | (3,891 | ) | | (388 | ) | | $ | (23,761 | ) | | (439 | ) | | $ | (26,809 | ) | | $ | (361 | ) | | $ | (27,170 | ) |
Compass 3 Contracts | | 12 | | | 478 | | (50 | ) | | | (1,999 | ) | | (17 | ) | | | (695 | ) | | (55 | ) | | $ | (2,216 | ) | | | 0 | * | | | (2,216 | ) |
Compass 3 – Level 2 Contracts | | 105 | | | 1,762 | | (14 | ) | | | (186 | ) | | (798 | ) | | | (13,454 | ) | | (707 | ) | | | (11,878 | ) | | | (36 | ) | | | (11,914 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | $ | 3,083 | | | | | $ | (6,076 | ) | | | | | $ | (37,910 | ) | | | | | $ | (40,903 | ) | | $ | (397 | ) | | $ | (41,300 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Global Governments Variable Account | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compass 2 Contracts | | 1 | | $ | 34 | | (7 | ) | | $ | (170 | ) | | (13 | ) | | $ | (339 | ) | | (19 | ) | | $ | (475 | ) | | $ | (3 | ) | | $ | (478 | ) |
Compass 3 Contracts | | 2 | | | 62 | | (3 | ) | | | (68 | ) | | (2 | ) | | | (65 | ) | | (3 | ) | | | (71 | ) | | | 0 | * | | | (71 | ) |
Compass 3 – Level 2 Contracts | | 6 | | | 86 | | 12 | | | | 175 | | | (89 | ) | | | (1,372 | ) | | (71 | ) | | | (1,111 | ) | | | 9 | | | | (1,102 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | $ | 182 | | | | | $ | (63 | ) | | | | | $ | (1,776 | ) | | | | | $ | (1,657 | ) | | $ | 6 | | | $ | (1,651 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Government Securities Variable Account | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compass 2 Contracts | | 10 | | $ | 383 | | (36 | ) | | $ | (1,401 | ) | | (243 | ) | | $ | (9,579 | ) | | (269 | ) | | $ | (10,597 | ) | | $ | 18 | | | $ | (10,579 | ) |
Compass 3 Contracts | | 5 | | | 141 | | (8 | ) | | | (234 | ) | | (9 | ) | | | (244 | ) | | (12 | ) | | | (337 | ) | | | — | | | | (337 | ) |
Compass 3 – Level 2 Contracts | | 23 | | | 364 | | (25 | ) | | | (406 | ) | | (163 | ) | | | (2,615 | ) | | (165 | ) | | | (2,657 | ) | | | (4 | ) | | | (2,661 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | $ | 888 | | | | | $ | (2,041 | ) | | | | | $ | (12,438 | ) | | | | | $ | (13,591 | ) | | $ | 14 | | | $ | (13,577 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| High Yield Variable Account | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compass 2 Contracts | | 7 | | $ | 304 | | (21 | ) | | $ | (860 | ) | | (147 | ) | | $ | (5,999 | ) | | (161 | ) | | $ | (6,555 | ) | | $ | (162 | ) | | $ | (6,717 | ) |
Compass 3 Contracts | | 4 | | | 115 | | (10 | ) | | | (311 | ) | | (7 | ) | | | (192 | ) | | (13 | ) | | | (388 | ) | | | 0 | * | | | (388 | ) |
Compass 3 – Level 2 Contracts | | 18 | | | 283 | | (85 | ) | | | (1,383 | ) | | (128 | ) | | | (2,050 | ) | | (195 | ) | | | (3,150 | ) | | | (6 | ) | | | (3,156 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | $ | 702 | | | | | $ | (2,554 | ) | | | | | $ | (8,241 | ) | | | | | $ | (10,093 | ) | | $ | (168 | ) | | $ | (10,261 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Money Market Variable Account | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compass 2 Contracts | | 8 | | $ | 165 | | 184 | | | $ | 3,917 | | | (233 | ) | | $ | (4,971 | ) | | (41 | ) | | $ | (889 | ) | | $ | (66 | ) | | | (955 | ) |
Compass 3 Contracts | | 11 | | | 190 | | (59 | ) | | | (1,035 | ) | | (19 | ) | | | (326 | ) | | (67 | ) | | | (1,171 | ) | | | (7 | ) | | | (1,178 | ) |
Compass 3 – Level 2 Contracts | | 54 | | | 708 | | 306 | | | | 4,017 | | | (458 | ) | | | (6,003 | ) | | (98 | ) | | | (1,278 | ) | | | (34 | ) | | | (1,312 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | $ | 1,063 | | | | | $ | 6,899 | | | | | | $ | (11,300 | ) | | | | | $ | (3,338 | ) | | $ | (107 | ) | | $ | (3,445 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return Variable Account | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compass 2 Contracts | | 10 | | $ | 543 | | 18 | | | $ | 932 | | | (236 | ) | | $ | (12,501 | ) | | (208 | ) | | $ | (11,026 | ) | | $ | (2 | ) | | $ | (11,028 | ) |
Compass 3 Contracts | | 14 | | | 733 | | (28 | ) | | | (1,444 | ) | | (21 | ) | | | (1,098 | ) | | (35 | ) | | | (1,809 | ) | | | 0 | * | | | (1,809 | ) |
Compass 3 – Level 2 Contracts | | 93 | | | 2,319 | | 82 | | | | 2,074 | | | (754 | ) | | | (18,828 | ) | | (579 | ) | | | (14,435 | ) | | | (133 | ) | | | (14,568 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | $ | 3,595 | | | | | $ | 1,562 | | | | | | $ | (32,427 | ) | | | | | $ | (27,270 | ) | | $ | (135 | ) | | $ | (27,405 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
* Amount less than $500
53
Notes to Financial Statements — continued
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, 2006 (000 Omitted) | |
| | | Purchase
Payments
Received | | Transfers Between
Variable Accounts
and Fixed
Accumulation
Account | | | Withdrawals,
Surrenders,
Annuitizations,
and Contract Charges | | | Net
Accumulation
Activity | | | Net
Annuitization
Activity | | | Net
Increases
(Decrease) | |
| | | Units | | Dollars | | Units | | | Dollars | | | Units | | | Dollars | | | Units | | | Dollars | | | Dollars | | | Dollars | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Capital Appreciation Variable Account | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compass 2 Contracts | | 28 | | $ | 1,602 | | (78 | ) | | $ | (4,354 | ) | | (549 | ) | | $ | (30,610 | ) | | (599 | ) | | $ | (33,362 | ) | | $ | (159 | ) | | $ | (33,521 | ) |
Compass 3 Contracts | | 20 | | | 756 | | (99 | ) | | | (3,657 | ) | | (30 | ) | | | (1,105 | ) | | (109 | ) | | | (4,006 | ) | | | 0 | * | | | (4,006 | ) |
Compass 3 – Level 2 Contracts | | 133 | | | 2,035 | | 93 | | | | 1,464 | | | (1,096 | ) | | | (16,818 | ) | | (870 | ) | | | (13,319 | ) | | | (36 | ) | | | (13,355 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | $ | 4,393 | | | | | $ | (6,547 | ) | | | | | $ | (48,533 | ) | | | | | $ | (50,687 | ) | | $ | (195 | ) | | $ | (50,882 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Global Governments Variable Account | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compass 2 Contracts | | 2 | | $ | 41 | | 9 | | | $ | 229 | | | (23 | ) | | $ | (568 | ) | | (12 | ) | | $ | (298 | ) | | $ | 1 | | | $ | (297 | ) |
Compass 3 Contracts | | 4 | | | 109 | | (7 | ) | | | (177 | ) | | (5 | ) | | | (127 | ) | | (8 | ) | | | (195 | ) | | | (38 | ) | | | (233 | ) |
Compass 3 – Level 2 Contracts | | 8 | | | 129 | | (5 | ) | | | (74 | ) | | (68 | ) | | | (981 | ) | | (65 | ) | | | (926 | ) | | | 35 | | | | (891 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | $ | 279 | | | | | $ | (22 | ) | | | | | $ | (1,676 | ) | | | | | $ | (1,419 | ) | | $ | (2 | ) | | $ | (1,421 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Government Securities Variable Account | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compass 2 Contracts | | 22 | | $ | 834 | | (21 | ) | | $ | (771 | ) | | (315 | ) | | $ | (11,902 | ) | | (314 | ) | | $ | (11,839 | ) | | $ | 51 | | | $ | (11,788 | ) |
Compass 3 Contracts | | 8 | | | 204 | | (29 | ) | | | (763 | ) | | (8 | ) | | | (205 | ) | | (29 | ) | | | (764 | ) | | | — | | | | (764 | ) |
Compass 3 – Level 2 Contracts | | 27 | | | 421 | | 25 | | | | 376 | | | (278 | ) | | | (4,289 | ) | | (226 | ) | | | (3,492 | ) | | | 0 | * | | | (3,492 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | $ | 1,459 | | | | | $ | (1,158 | ) | | | | | $ | (16,396 | ) | | | | | $ | (16,095 | ) | | $ | 51 | | | $ | (16,044 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| High Yield Variable Account | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compass 2 Contracts | | 9 | | $ | 332 | | (13 | ) | | $ | (465 | ) | | (200 | ) | | $ | (7,644 | ) | | (204 | ) | | $ | (7,777 | ) | | $ | (72 | ) | | $ | (7,849 | ) |
Compass 3 Contracts | | 6 | | | 163 | | (13 | ) | | | (374 | ) | | (6 | ) | | | (158 | ) | | (13 | ) | | | (369 | ) | | | 0 | * | | | (369 | ) |
Compass 3 – Level 2 Contracts | | 18 | | | 266 | | 3 | | | | 90 | | | (184 | ) | | | (2,780 | ) | | (163 | ) | | | (2,424 | ) | | | (1 | ) | | | (2,425 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | $ | 761 | | | | | $ | (749 | ) | | | | | $ | (10,582 | ) | | | | | $ | (10,570 | ) | | $ | (73 | ) | | $ | (10,643 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Money Market Variable Account | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compass 2 Contracts | | 9 | | $ | 188 | | 2 | | | $ | 41 | | | (211 | ) | | $ | (4,359 | ) | | (200 | ) | | $ | (4,130 | ) | | $ | (178 | ) | | $ | (4,308 | ) |
Compass 3 Contracts | | 21 | | | 356 | | (80 | ) | | | (1,346 | ) | | (28 | ) | | | (473 | ) | | (87 | ) | | | (1,463 | ) | | | (9 | ) | | | (1,472 | ) |
Compass 3 – Level 2 Contracts | | 62 | | | 777 | | 77 | | | | 963 | | | (554 | ) | | | (7,013 | ) | | (415 | ) | | | (5,273 | ) | | | (34 | ) | | | (5,307 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | $ | 1,321 | | | | | $ | (342 | ) | | | | | $ | (11,845 | ) | | | | | $ | (10,866 | ) | | $ | (221 | ) | | $ | (11,087 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return Variable Account | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compass 2 Contracts | | 11 | | $ | 492 | | 27 | | | $ | 1,266 | | | (231 | ) | | $ | (11,129 | ) | | (193 | ) | | $ | (9,371 | ) | | $ | (174 | ) | | $ | (9,545 | ) |
Compass 3 Contracts | | 24 | | | 1,119 | | (74 | ) | | | (3,480 | ) | | (25 | ) | | | (1,142 | ) | | (75 | ) | | | (3,503 | ) | | | (48 | ) | | | (3,551 | ) |
Compass 3 – Level 2 Contracts | | 119 | | | 2,689 | | 193 | | | | 4,441 | | | (1,079 | ) | | | (24,482 | ) | | (767 | ) | | | (17,352 | ) | | | (78 | ) | | | (17,430 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | $ | 4,300 | | | | | $ | 2,227 | | | | | | $ | (36,753 | ) | | | | | $ | (30,226 | ) | | $ | (300 | ) | | $ | (30,526 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
54
Notes to Financial Statements — continued
The variable accounts and other funds managed by MFS participate in a $1 billion unsecured committed line of credit provided by a syndication of banks under a credit agreement. In addition, the variable accounts and other funds managed by MFS have established uncommitted borrowing arrangements with certain banks. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the Federal Reserve funds rate plus 0.30%. In addition, a commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. For the year ended December 31, 2007 the variable accounts’ commitment fee and interest expense are included in miscellaneous expense on the Statement of Operations and were as follows:
| | | | | | |
| | | Commitment fee | | Interest Expense |
Capital Appreciation Variable Account | | $ | 913 | | $ | — |
Global Governments Variable Account | | | 39 | | | — |
Government Securities Variable Account | | | 319 | | | — |
High Yield Variable Account | | | 265 | | | 84 |
Money Market Variable Account | | | 248 | | | — |
Total Return Variable Account | | | 805 | | | — |
55
Report of Independent Registered Public Accounting Firm
To the Participants in and the Board of Managers of Capital Appreciation Variable Account, Global Governments Variable Account, Government Securities Variable Account, High Yield Variable Account, Money Market Variable Account and Total Return Variable Account and the Board of Directors of Sun Life Insurance Company of Canada:
We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of Capital Appreciation Variable Account, Global Governments Variable Account, Government Securities Variable Account, High Yield Variable Account, Money Market Variable Account and Total Return Variable Account (the “Variable Accounts”) as of December 31, 2007, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Variable Accounts’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Variable Accounts are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Variable Accounts’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2007, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of Capital Appreciation Variable Account, Global Governments Variable Account, Government Securities Variable Account, High Yield Variable Account, Money Market Variable Account and Total Return Variable Account as of December 31, 2007, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 19, 2008
56
Compass Variable Accounts
Members of Boards of Managers and Officers — Identification and Background
The members of the Boards of Managers (“Managers”) and the officers of each Account, as of February 1, 2008, are listed below, together with their principal occupations during the past five years. (Their titles may have varied during that period.) The address of each Manager and officer is 500 Boylston Street, Boston, Massachusetts 02116.
| | | | | | |
| | | | |
| Name, Date of Birth | | Position(s) Held
with Fund | | Manager/Officer
Since(1) | | Principal Occupations During the Past
Five Years and Other Directorships(2) |
| INTERESTED MANAGER | | | | | | |
David D. Horn(3) (born 06/07/41) | | Manager | | April 1986 | | Private investor; Retired; Sun Life Assurance Company of Canada, Former Senior Vice President and General Manager for the United States (until 1997); Retired: Sun Life Assurance Company of Canada, Director (until March 2004) |
| | | | | | | |
| INDEPENDENT MANAGERS | | | | | | |
J. Kermit Birchfield (born 01/08/40) | | Chairman | | May 1997 | | Consultant; Century Partners, Inc. (investments), Director (1988 to present); Displaytech, Inc. (technology), Director (1995 to present); Dessin Fournir LLC (furniture manufacturer), Director (2005 to present); Intermountain Gas Company, Inc. & Intermountain Industries, Inc. (oil & gas exploration and production) (1988 to present); Site Watch LLC (software to monitor oil tanks) Managing Director (2006 to present); Juridica Investments (fund investing in judicial matters) Director (2007 to present); Dairy Mart Convenience Stores, Inc. (convenience stores), Chairman (1977 to 2003) |
| | | | | | | |
Robert C. Bishop (born 01/13/43) | | Manager | | May 2001 | | AutoImmune, Inc. (pharmaceutical product licensing), Chairman, President and Chief Executive Officer (1992 to present); Caliper Life Sciences Corp. (laboratory analytical instruments), Director (2002 to present); Millipore Corporation (biopharmaceutical/research laboratory products), Director (1997 to present); Optobionics Corporation (ophthalmic devices), Director (2002 to 2007) Quintiles Transnational Corp. (contract research services) Director (until 2003) |
| | | | | | | |
Frederick H. Dulles (born 03/12/42) | | Manager | | May 2001 | | Ten State International Law PLLC (law firm), Of Counsel (since 2006); Prudential Carolina Real Estate, (real estate), Broker (since 2006); Free Enterprise Foundation, Inc. (research institute), Director & Secretary (until 2008); Disher, Hamrick & Myers Residential, Inc. (real estate) Broker (until 2006); Frederick H. Dulles law practice (until 2006); Ten State Street LLP (law firm), Member (until 2005); McFadden, Pilkington & Ward LLP (solicitors and registered foreign lawyers), Member & Of Counsel (until 2003) |
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Members of Boards of Managers and Officers — Identification and Background — continued
| | | | | | |
| | | | |
| Name, Date of Birth | | Position(s) Held
with Fund | | Manager/Officer
Since(1) | | Principal Occupations During the Past
Five Years and Other Directorships(2) |
| | | | | | | |
Marcia A. Kean (born 06/30/48) | | Manager | | April 2005 | | Feinstein Kean Healthcare (consulting), Chief Executive Officer (since December 2002), Managing Director (prior to May 2001); Ardais Corporation (biotech products), Senior Vice President – Commercialization (February 2002 until November 2002) |
| | | | | | | |
Ronald G. Steinhart (born 06/15/40) | | Manager | | May 2001 | | Private investor; Penske Automotive Group (automotive retailer), Director (2001 to present); Penson Worldwide, Inc. (securities clearance), Director (2006 to present); Animal Health International, Inc. (animal health products), Director (2007 to present); Texas Industries (concrete/aggregates/cement), Director (2007 to present); Carreker Corporation (technology consulting) Director (until 2005); Prentiss Properties Trust (real estate investment trust), Director (until 2006) |
| | | | | | | |
Haviland Wright (born 07/21/48) | | Manager | | May 2001 | | Elixir Technologies Corporation (software) Director (2005 to present); Nano Loa Inc. (liquid crystal displays), Director (2003 to present); Silk Displays, Inc. (smart polymers) Director (2007 to present); Displaytech, Inc. (technology) Chairman and CEO (1995 - 2002) |
| | | | | | | |
| MANAGER EMERITUS | | | | | | |
Samuel Adams (born 10/19/25) | | Manager Emeritus | | | | Retired; Kirkpatrick & Lockhart Preston Gates Ellis LLP (law firm), Of Counsel |
| | | | | | | |
| OFFICERS | | | | | | |
Maria F. Dwyer(4) (born 12/01/58) | | President | | November 2005 | | Massachusetts Financial Services Company, Executive Vice President and Chief Regulatory Officer (since March 2004); Fidelity Management & Research Company, Vice President (prior to March 2004); Fidelity Group of Funds, President and Treasurer (prior to March 2004) |
| | | | | | | |
Tracy Atkinson(4) (born 12/30/64) | | Treasurer | | September 2005 | | Massachusetts Financial Services Company, Senior Vice President (since September 2004); PricewaterhouseCoopers LLP, Partner (prior to September 2004) |
| | | | | | | |
Christopher R. Bohane(4) (born 01/18/74) | | Assistant Secretary
and Assistant Clerk | | July 2005 | | Massachusetts Financial Services Company, Vice President and Senior Counsel (since April 2003); Kirkpatrick & Lockhart LLP (law firm), Associate (prior to April 2003) |
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Members of Boards of Managers and Officers — Identification and Background — continued
| | | | | | |
| | | | |
| Name, Date of Birth | | Position(s) Held
with Fund | | Manager/Officer
Since(1) | | Principal Occupations During the Past
Five Years and Other Directorships(2) |
| | | | | | | |
Ethan D. Corey(4) (born 11/21/63) | | Assistant Secretary
and Assistant Clerk | | July 2005 | | Massachusetts Financial Services Company, Senior Vice President and Associate General Counsel (since April 2006); Special Counsel (prior to April 2006); Dechert LLP (law firm), Counsel (prior to December 2004) |
| | | | | | | |
David L. DiLorenzo(4) (born 08/10/68) | | Assistant Treasurer | | July 2005 | | Massachusetts Financial Services Company, Vice President (since June 2005); JP Morgan Investor Services, Vice President (January 2001 to June 2005) |
| | | | | | | |
Timothy M. Fagan(4) (born 07/10/68) | | Assistant Secretary
and Assistant Clerk | | September 2005 | | Massachusetts Financial Services Company, Vice President and Senior Counsel (since September 2005); John Hancock Advisers, LLC, Vice President and Chief Compliance Officer (September 2004 to August 2005) Senior Attorney (prior to September 2004); John Hancock Group of Funds, Vice President and Chief Compliance Officer (September 2004 to December 2004) |
| | | | | | | |
Mark D. Fischer(4) (born 10/27/70) | | Assistant Treasurer | | July 2005 | | Massachusetts Financial Services Company, Vice President (since May 2005); JP Morgan Investment Management Company, Vice President (prior to May 2005) |
| | | | | | | |
Brian E. Langenfeld(4) (born 03/07/73) | | Assistant Secretary
and Assistant Clerk | | May 2006 | | Massachusetts Financial Services Company, Assistant Vice President and Counsel (since May 2006); John Hancock Advisers, LLC, Assistant Vice President and Counsel (May 2005 to April 2006); John Hancock Advisers, LLC, Attorney and Assistant Secretary (prior to May 2005) |
| | | | | | | |
Ellen Moynihan(4) (born 11/13/57) | | Assistant Treasurer | | May 1997 | | Massachusetts Financial Services Company, Senior Vice President |
| | | | | | | |
Susan S. Newton(4) (born 03/07/50) | | Assistant Secretary
and Assistant Clerk | | May 2005 | | Massachusetts Financial Services Company, Senior Vice President and Assistant General Counsel (since April 2005); John Hancock Advisers, LLC, Senior Vice President, Secretary and Chief Legal Officer (prior to April 2005); John Hancock Group of Funds, Senior Vice President, Secretary and Chief Legal Officer (prior to April 2005) |
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Members of Boards of Managers and Officers — Identification and Background — continued
| | | | | | |
| | | | |
| Name, Date of Birth | | Position(s) Held
with Fund | | Manager/Officer
Since(1) | | Principal Occupations During the Past
Five Years and Other Directorships(2) |
| | | | | | | |
Susan A. Pereira(4) (born 11/05/70) | | Assistant Secretary
and Assistant Clerk | | July 2005 | | Massachusetts Financial Services Company, Vice President and Senior Counsel (since June 2004); Bingham McCutchen LLP (law firm), Associate (January 2001 to June 2004) |
| | | | | | | |
Mark N. Polebaum(4) (born 05/01/52) | | Secretary and Assistant Clerk | | February 2006 | | Massachusetts Financial Services Company, Executive Vice President, General Counsel and Secretary (since January 2006); Wilmer Cutler Pickering Hale and Dorr LLP (law firm), Partner (prior to January 2006) |
| | | | | | | |
Frank L. Tarantino (born 03/07/44) | | Independent Chief Compliance Officer | | September 2004 | | Tarantino LLC (provider of compliance services), Principal (since June 2004); CRA Business Strategies Group (consulting services), Executive Vice President (April 2003 to June 2004); David L. Babson & Co. (investment adviser), Managing Director, Chief Administrative Officer and Director (February 1997 to March 2003) |
| | | | | | | |
Richard S. Weitzel(4) (born 7/16/70) | | Assistant Secretary
and Assistant Clerk | | October 2007 | | Massachusetts Financial Services Company, Vice President and Assistant General Counsel (since 2007); Vice President and Senior Counsel (since May 2004); Massachusetts Department of Business and Technology, General Counsel (February 2003 to April 2004); Massachusetts Office of the Attorney General, Assistant Attorney General (April 2001 to February 2003); Ropes and Gray, Associate (prior to April 2001) |
| | | | | | | |
James O. Yost(4) (born 06/12/60) | | Assistant Treasurer | | April 1992 | | Massachusetts Financial Services Company, Senior Vice President |
(1) | Date first appointed to serve as Manager/Trustee/Officer of an MFS fund or a Compass variable account. Each Manager has served continuously since appointment. |
(2) | Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., “public companies”). |
(3) | “Interested person” of the Sun Life of Canada (U.S.), within the meaning of the Investment Company Act of 1940 (referred to as the 1940 Act), which is the principal federal law governing investment companies like the Series. The address of Sun Life of Canada (U.S.) is One Sun Life Executive Park, Wellesley Hills, Massachusetts 02481. |
(4) | “Interested person” of MFS within the meaning of the 1940 Act. The address of MFS is 500 Boylston Street, Boston, Massachusetts 02116. |
The Accounts do not hold annual meetings for the purpose of electing Managers, and Managers are not elected for fixed terms. Each Manager and officer holds office until his or her successor is chosen and qualified, or until his or her earlier death, resignation, retirement or removal.
All Managers currently serve as Managers of each Account and have served in that capacity since originally elected or appointed. All of the Managers are also Trustees of the MFS Variable Insurance Trust II. The executive officers of the Compass Variable Accounts hold similar offices for the MFS Variable Insurance Trust II and other funds in the MFS fund complex. As of January 1, 2008, each Manager serves as a Trustee or Manager of 35 Accounts/Funds.
The Statement of Additional Information contains further information about the Managers and is available without charge upon request by calling 1-800-752-7215.
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Board Review of Investment Advisory Agreements
The Investment Company Act of 1940 requires that both the full Board of Managers and a majority of the non-interested (“independent”) Managers, voting separately, annually approve the continuation of each Variable Account’s investment advisory agreement with Massachusetts Financial Services Company (MFS) on behalf of the Variable Accounts. The Managers consider matters bearing on the Variable Accounts and their advisory arrangements at their meetings throughout the year, including a review of performance data at each regular meeting. In addition, the independent Managers met several times over the course of three months beginning in May and ending in July 2007 (“contract review meetings”) for the specific purpose of considering whether to approve the continuation of the investment advisory agreements for the Variable Accounts. The independent Managers were assisted in their evaluation of the investment advisory agreements by independent legal counsel, from whom they received separate legal advice and with whom they met separately from MFS management during various contract review meetings. The independent Managers were also assisted in this process by the Variable Accounts’ Independent Chief Compliance Officer, a full-time senior officer appointed by and reporting to the independent Managers.
In connection with their deliberations, the Managers, including the independent Managers, considered such information and factors as they believed, in light of the legal advice furnished to them and their own business judgment, to be relevant. Each investment advisory agreement was considered separately for each Variable Account, although the Managers also took into account the common interests of all Variable Accounts in their review. As described below, the Managers considered the nature, quality, and extent of the various investment advisory, administrative, and shareholder services performed by MFS under the existing investment advisory agreements and other arrangements with the Variable Accounts.
In connection with their contract review meetings, the Managers received and relied upon materials which included, among other items: (i) information provided by Lipper Inc. on the investment performance of each Variable Account for various time periods ended December 31, 2006, compared to the investment performance of a group of funds with substantially similar investment classifications/objectives (the “Lipper performance universe”), as well as the investment performance of a group of funds identified by objective criteria suggested by MFS (“peer funds”), (ii) information provided by Lipper Inc. on each Variable Account’s advisory fees and other expenses compared to the advisory fees and other expenses of comparable funds identified by Lipper (the “Lipper expense group”), as well as the advisory fees and other expenses of peer funds identified by objective criteria suggested by MFS, (iii) information provided by MFS on the advisory fees of comparable portfolios of its other clients, including institutional separate account and other clients, (iv) information as to whether, and to what extent applicable, expense waivers, reimbursements or fee “breakpoints” are observed for a Variable Account, (v) information regarding MFS’ financial results and financial condition, including MFS’ and certain of its affiliates’ estimated profitability from services performed for the Variable Accounts, (vi) MFS’ views regarding the outlook for the mutual fund industry and its strategic business plans, (vii) descriptions of various functions performed by MFS for the Variable Accounts, such as compliance monitoring and portfolio trading practices, and (viii) information regarding the overall organization of MFS, including information about MFS’ senior management and other personnel providing investment advisory, administrative and other services to the Variable Accounts. The comparative performance, fee and expense information prepared and provided by Lipper Inc. was not independently verified, and the independent Managers did not independently verify any information provided to them by MFS.
The Managers’ conclusions as to the continuation of the investment advisory agreements were based on comprehensive consideration of all information provided to the Managers and not the result of any single factor. Some of the factors that figured particularly in the Managers’ deliberations are described below for each Variable Account, while individual Managers may have given different weight to various factors and evaluated the information presented as a whole differently than another Manager. The Managers recognized that the fee arrangements for the Variable Accounts reflect years of review and discussion between the independent Managers and MFS, that certain aspects of such arrangements may receive greater scrutiny in some years than others, and that the Managers’ conclusions may be based, in part, on their consideration of these same arrangements during the course of the year and in prior years.
Based on information provided by Lipper Inc. and MFS, the Managers compared each Variable Account’s total return investment performance to the performance of peer groups of funds and its Lipper performance universe over the one-, three- and five-year periods. The Managers did not rely on performance results for more recent periods, including those shown elsewhere in this report.
In the course of their deliberations, the Managers took into account information provided by MFS during contract review meetings, as well as during investment review meetings conducted with portfolio management personnel during the course of the year. For Variable Accounts whose performance lagged their peer groups, they discussed the factors that contributed thereto and MFS’ efforts to improve such Variable Account’s performance. After reviewing this information, the Managers concluded, within the context of their overall conclusions regarding the investment advisory agreements, that they were satisfied with MFS’ responses and efforts relating to investment performance.
In assessing the reasonableness of each Variable Account’s advisory fee, the Managers considered, among other information, each Variable Account’s advisory fee and the total expense ratio as a percentage of average daily net assets, compared to the advisory fees and total expense ratios of peer groups of funds based on information provided by Lipper Inc. and MFS. The Managers also considered the advisory fees charged by MFS to institutional accounts. In comparing these fees, the Managers considered the generally broader scope of services provided by MFS to the Variable Accounts than those provided to institutional accounts. The Managers also considered the higher demands placed on MFS’ investment personnel and trading infrastructure as a result of the daily cash in-flows and out-flows of the Variable Accounts, and the impact on MFS and related expenses due to the more extensive regulatory regime to which the Variable Accounts are subject, compared to institutional accounts.
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The Managers also considered whether a Variable Account is likely to benefit from any economies of scale due to future asset growth. In this regard, the Managers reviewed the adequacy of breakpoints and discussed with MFS any adjustments necessary for the shareholders’ benefit.
The Managers also considered information prepared by MFS relating to its costs and profits with respect to each Variable Account and other investment companies and accounts advised by MFS, as well as MFS’ methodologies used to determine and allocate its costs to the Variable Accounts and other accounts and products for purposes of estimating profitability.
After reviewing these and other factors described below, the Managers concluded that the advisory fees charged to the Variable Accounts represent reasonable compensation in light of the nature and quality of the services being provided by MFS.
In addition, the Managers considered MFS’ resources and related efforts to continue to retain, attract and motivate capable personnel to serve the Variable Accounts. The Managers also considered the financial resources of MFS and its parent, Sun Life Financial Inc. The Managers further considered any advantages and possible disadvantages of having an adviser which also serves other investment companies as well as institutional accounts.
The Managers also considered the nature, quality, cost, and extent of administrative, transfer agency, and distribution services provided to the Variable Accounts by MFS and its affiliates under agreements and plans other than the investment advisory agreements. The Managers also considered the nature, extent and quality of certain other services MFS performs or arranges on the Variable Accounts’ behalf, which may include securities lending programs, directed expense payment programs, class action recovery programs, and MFS’ interaction with third-party service providers, principally custodians and sub-custodians. The Managers concluded that the various non-advisory services provided by MFS and its affiliates on behalf of the Variable Accounts were satisfactory. The Managers also considered the benefits to MFS from the use of the Variable Accounts’ portfolio brokerage commissions to pay for research and other similar services (including MFS’ current policy not to use “soft dollars” generated by Variable Account portfolio transactions to pay for third-party research), and various other factors. Additionally, the Managers considered so-called “fall-out benefits” to MFS such as reputational value derived from serving as investment manager to the Variable Accounts, and determined that any such benefits derived by MFS were reasonable and fair.
Based on their evaluation of factors that they deemed to be material, including those factors described above, the Board of Managers, including a majority of the independent Managers, concluded that the investment advisory agreements should be continued for an additional one-year period, commencing September 1, 2007.
Capital Appreciation Variable Account
The Managers noted the Variable Account’s performance was in the 3rd quintile relative to the other funds in the universe for the one-year period (the 1st quintile being the best performers and the 5th quintile being the worst performers). The total return performance of the Variable Account was in the 4th quintile for the three-year period and the 5th quintile for the five-year period ended December 31, 2006, relative to the Lipper performance universe. Based on the nature and quality of services provided by MFS and MFS’ explanation of steps taken to improve performance, the Board of Managers concluded that the Variable Account’s performance was adequate.
In considering the fees, the Managers noted from the Lipper data that the Variable Account’s effective advisory fee was approximately at the median and total expense ratio was above the median of such fees and expenses of funds in the Lipper expense group. In addition, the Managers accepted MFS’ offer to continue its expense limitation for the Variable Account, and noted the expense limitation was reduced for the next year. The Managers further concluded that the existing breakpoints were sufficient to allow the Variable Account to benefit from economies of scale as its assets grow. The Managers concluded that the fees were reasonable in light of the nature and quality of services provided.
Global Governments Variable Account
The Managers noted the Variable Account’s performance was in the 3rd quintile relative to the other funds in the universe for the one-year period (the 1st quintile being the best performers and the 5th quintile being the worst performers). The total return performance of the Variable Account was in the 5th quintile for the three-year period and the 3rd quintile for the five-year period ended December 31, 2006, relative to the Lipper performance universe. Based on the nature and quality of services provided by MFS and MFS’ explanation of steps taken to improve performance, the Board of Managers concluded that the Variable Account’s performance was adequate.
In considering the fees, the Managers noted from the Lipper data that the Variable Account’s effective advisory fee rate was below the median and total expense ratio was above the median of such fees and expenses of funds in the Lipper expense group. In addition, the Managers accepted MFS’ offer to continue its expense limitation for the Variable Account. The Managers further concluded that the existing breakpoints were sufficient to allow the Variable Account to benefit from economies of scale as its assets grow. The Managers concluded that the fees were reasonable in light of the nature and quality of services provided.
Government Securities Variable Account
The Managers noted the Variable Account’s performance was in the 2nd quintile relative to the other funds in the universe for the one-year period (the 1st quintile being the best performers and the 5th quintile being the worst performers). The total return performance of the Variable Account was in the 3rd quintile for the three-year period and the five-year period ended December 31, 2006, relative to the Lipper performance universe. Based on the nature and quality of services provided by MFS, the Board of Managers concluded that the Variable Account’s performance was satisfactory.
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In considering the fees, the Managers noted from the Lipper data that the Variable Account’s effective advisory fee rate and total expense ratio were each approximately at the median of such fees and expenses of funds in the Lipper expense group. In addition, the Managers accepted MFS’ offer to continue its expense limitation for the Variable Account. The Managers further concluded that the existing breakpoints were sufficient to allow the Variable Account to benefit from economies of scale as its assets grow. The Managers concluded that the fees were reasonable in light of the nature and quality of services provided.
High Yield Variable Account
The Managers noted the Variable Account’s performance was in the 2nd quintile relative to the other funds in the universe for the one-year period (the 1st quintile being the best performers and the 5th quintile being the worst performers). The total return performance of the Variable Account was in the 4th quintile for the three-year period and the five-year period ended December 31, 2006, relative to the Lipper performance universe. Based on the nature and quality of services provided by MFS and MFS’ explanation of steps taken to improve performance, the Board of Managers concluded that the Variable Account’s performance was satisfactory.
In considering the fees, the Managers noted from the Lipper data that the Variable Account’s effective advisory fee rate and total expense ratio were each above the median of such fees and expenses of funds in the Lipper expense group. In addition, the Managers accepted MFS’ offer to continue its management fee waiver and expense limitation for the Variable Account. The Managers further concluded that the existing breakpoints were sufficient to allow the Variable Account to benefit from economies of scale as its assets grow. The Managers concluded that the fees were reasonable in light of the nature and quality of services provided.
Money Market Variable Account
The Managers noted the Variable Account’s performance was in the 3rd quintile relative to the other funds in the universe for the one-year period (the 1st quintile being the best performers and the 5th quintile being the worst performers). The total return performance of the Variable Account was in the 4th quintile for the three-year period and the five-year period ended December 31, 2006, relative to the Lipper performance universe. Based on the nature and quality of services provided by MFS, the Board of Managers concluded that the Variable Account’s performance was adequate.
In considering the fees, the Managers noted from the Lipper data that the Variable Account’s effective advisory fee rate and total expense ratio were each above the median of such fees and expenses of funds in the Lipper expense group. In addition, the Managers accepted MFS’ offer to continue its expense limitation for the Variable Account, and determined that the waiver was sufficient to allow the Variable Account to benefit from economies of scale as its assets grow. The Managers concluded that the fees were reasonable in light of the nature and quality of services provided.
Total Return Variable Account
The Managers noted the Variable Account’s performance was in the 1st quintile relative to the other funds in the universe for the one-year period (the 1st quintile being the best performers and the 5th quintile being the worst performers). The total return performance of the Variable Account was in the 2nd quintile for the three-year period and the 1st quintile for the five-year period ended December 31, 2006, relative to the Lipper performance universe. Based on the nature and quality of services provided by MFS, the Board of Managers concluded that the Variable Account’s performance was satisfactory.
In considering the fees, the Managers noted from the Lipper data that the Variable Account’s effective advisory fee rate and total expense ratio were each above the median of such fees and expenses of funds in the Lipper expense group. In addition, the Managers accepted MFS’ offer to continue its expense limitation for the Variable Account. The Managers further concluded that the existing breakpoints were sufficient to allow the Variable Account to benefit from economies of scale as its assets grow. The Managers concluded that the fees were reasonable in light of the nature and quality of services provided.
A discussion regarding the Board’s most recent review and renewal of the accounts’ Investment Advisory Agreement with MFS is available by clicking on “Compass” in the “Products and Performance” section of the MFS Web site (mfs.com).
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MFS® Privacy Notice
Privacy is a concern for every investor today. At MFS Investment Management® and the MFS funds, we take this concern very seriously. We want you to understand our policies about the investment products and services that we offer, and how we protect the nonpublic personal information of investors who have a direct relationship with us and our wholly owned subsidiaries.
Throughout our business relationship, you provide us with personal information. We maintain information and records about you, your investments, and the services you use. Examples of the nonpublic personal information we maintain include
| | • | | data from investment applications and other forms |
| | • | | share balances and transactional history with us, our affiliates, or others |
| | • | | facts from a consumer reporting agency |
We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. We may share nonpublic personal information with third parties or certain of our affiliates in connection with servicing your account or processing your transactions. We may share information with companies or financial institutions that perform marketing services on our behalf or with other financial institutions with which we have joint marketing arrangements, subject to any legal requirements.
Authorization to access your nonpublic personal information is limited to appropriate personnel who provide products, services, or information to you. We maintain physical, electronic, and procedural safeguards to help protect the personal information we collect about you.
If you have any questions about the MFS privacy policy, please call 1-800-225-2606 any business day between 8 a.m. and 8 p.m. Eastern time.
Note: If you own MFS products or receive MFS services in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours.
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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
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.
cous-ann-2/08
Sun Life Financial Distributors Inc.
The Registrant has adopted a Code of Ethics pursuant to Section 406 of the Sarbanes-Oxley Act and as defined in Form N-CSR that applies to the Registrant’s principal executive officer and principal financial and accounting officer. The Registrant has not amended any provision in its Code of Ethics (the “Code”) that relates to an element of the Code’s definitions enumerated in paragraph (b) of Item 2 of this Form N-CSR.
A copy of the Code of Ethics is filed as an exhibit to this Form N-CSR.
| ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. |
Messrs. J. Kermit Birchfield, Robert C. Bishop, Ronald G. Steinhart and Haviland Wright, members of the Audit Committee, have been determined by the Board of Managers in their reasonable business judgment to meet the definition of “audit committee financial expert” as such term is defined in Form N-CSR. In addition, Messrs. J. Kermit Birchfield, Robert C. Bishop, Ronald G. Steinhart and Haviland Wright are “independent” members of the Audit Committee as defined in Form N-CSR.
| ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
| Items 4(a) | through 4(d) and 4(g): |
The Board of Managers has appointed Deloitte & Touche LLP (“Deloitte”) to serve as independent accountants to the Registrant (the “Account”). The tables below set forth the audit fees billed to the Account as well as fees for non-audit services provided to the Account and/or to the Account’s investment adviser, Massachusetts Financial Services Company (“MFS”), and to various entities either controlling, controlled by, or under common control with MFS that provide ongoing services to the Account (“MFS Related Entities”).
For the fiscal years ended December 31, 2007 and 2006, audit fees billed to the Account by Deloitte were as follows:
| | | | |
| | | Audit Fees |
| | | 2007 | | 2006 |
Fees billed by Deloitte: | | | | |
Total Return Variable Account | | 47,343 | | 45,458 |
For the fiscal years ended December 31, 2007 and 2006, fees billed by Deloitte for audit-related, tax and other services provided to the Account and for audit-related, tax and other services provided to MFS and MFS Related Entities were as follows:
| | | | | | | | | | | | |
| | | Audit-Related Fees1 | | Tax Fees2 | | All Other Fees4 |
| | | 2007 | | 2006 | | 2007 | | 2006 | | 2007 | | 2006 |
Fees billed by Deloitte: | | | | | | | | | | | | |
To Total Return Variable Account | | 0 | | 0 | | 0 | | 0 | | 1,205 | | 379 |
To MFS and MFS Related Entities of Total Return Variable Account* | | 1,189,135 | | 981,825 | | 0 | | 0 | | 366,217 | | 418,092 |
| | | | |
| Aggregate fees for non-audit services: | | | | |
| | | 2007 | | 2006 |
To Total Return Variable Account, MFS and MFS Related Entities# | | 2,057,875 | | 1,903,431 |
* | This amount reflects the fees billed to MFS and MFS Related Entities for non-audit services relating directly to the operations and financial reporting of the Account (portions of which services also related to the operations and financial reporting of other variable accounts and funds within the MFS Funds complex). |
# | This amount reflects the aggregate fees billed by Deloitte for non-audit services rendered to the Account and for non-audit services rendered to MFS and the MFS Related Entities. |
1 | The fees included under “Audit-Related Fees” are fees related to assurance and related services that are reasonably related to the performance of the audit or review of financial statements, but not reported under “Audit Fees,” including accounting consultations, agreed-upon procedure reports, attestation reports, comfort letters and internal control reviews. |
2 | The fees included under “Tax Fees” are fees associated with tax compliance, tax advice and tax planning, including services relating to the filing or amendment of federal, state or local income tax returns, regulated investment company qualification reviews and tax distribution and analysis. |
3 | The fees included under “All Other Fees” are fees for products and services provided by Deloitte other than those reported under “Audit Fees,” “Audit-Related Fees” and “Tax Fees”, including fees for services related to sales tax refunds, consultation on internal cost allocations, consultation on allocation of monies pursuant to an administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund sales, and analysis of certain portfolio holdings verses investment styles. |
Item 4(e)(1):
Set forth below are the policies and procedures established by the Audit Committee of the Board of Managers relating to the pre-approval of audit and non-audit related services:
To the extent required by applicable law, pre-approval by the Audit Committee of the Board is needed for all audit and permissible non-audit services rendered to the Registrant
and all permissible non-audit services rendered to MFS or MFS Related Entities if the services relate directly to the operations and financial reporting of the Registrant. Pre-approval is currently on an engagement-by-engagement basis. In the event pre-approval of such services is necessary between regular meetings of the Audit Committee and it is not practical to wait to seek pre-approval at the next regular meeting of the Audit Committee, pre-approval of such services may be referred to the Chair of the Audit Committee for approval; provided that the Chair may not pre-approve any individual engagement for such services exceeding $50,000 or multiple engagements for such services in the aggregate exceeding $100,000 in each period between regular meetings of the Audit Committee. Any engagement pre-approved by the Chair between regular meetings of the Audit Committee shall be presented for ratification by the entire Audit Committee at its next regularly scheduled meeting.
None, or 0%, of the services relating to the Audit-Related Fees, Tax Fees and All Other Fees paid by the Account and MFS and MFS Related Entities relating directly to the operations and financial reporting of the Registrant disclosed above were approved by the audit committee pursuant to paragraphs (c)(7)(i)(C) of Rule 2-01 of Regulation S-X (which permits audit committee approval after the start of the engagement with respect to services other than audit, review or attest services, if certain conditions are satisfied).
| Item 4(f): | Not applicable. |
Item 4(h): The Registrant’s Audit Committee has considered whether the provision by a Registrant’s independent registered public accounting firm of non-audit services to MFS and MFS Related Entities that were not pre-approved by the Committee (because such services did not relate directly to the operations and financial reporting of the Registrant) was compatible with maintaining the independence of the independent registered public accounting firm as the Registrant’s principal auditors.
| ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. |
Not applicable to the Registrant.
| ITEM 6. | SCHEDULE OF INVESTMENTS |
A schedule of investments 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 407(c)(2)(iv) of Regulation S-K (as required by Item 22(b)(15) of Schedule 14A), or this Item.
| ITEM 11. | CONTROLS AND PROCEDURES. |
| (a) | Based upon their evaluation of the effectiveness of the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as conducted within 90 days of the filing date of this report on 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 of the period covered by the report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
| (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) TOTAL RETURN VARIABLE ACCOUNT
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| By (Signature and Title)* | | MARIA F. DWYER |
| | Maria F. Dwyer, President |
Date: February 19, 2008
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.
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| By (Signature and Title)* | | MARIA F. DWYER |
| | Maria F. Dwyer, President (Principal Executive Officer) |
Date: February 19, 2008
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| By (Signature and Title)* | | TRACY ATKINSON |
| | Tracy Atkinson, Treasurer (Principal Financial Officer and Accounting Officer) |
Date: February 19, 2008
| * | Print name and title of each signing officer under his or her signature. |
