<PAGE>
DEAR CONTRACT OWNERS:
A general slowdown in most major economies has resulted in favorable performance
for both stock and bond markets around the world during the past six months.
Yields on many fixed-income securities declined over the period, and as bond
prices rose in response to these declines, all of the fixed-income funds
available under your annuity contract experienced positive total returns. At the
same time, the decline in interest rates and strong corporate earnings reports
caused many stock prices to rise over the period, producing strong returns. For
the six months ended June 30, 1995, the market, as measured by the Standard &
Poor's 500 Composite Index (the S&P 500), a popular, unmanaged index of common
stock performance, returned +20.19%. All of the equity funds available under
your contract achieved positive results.
U.S. OUTLOOK
In response to increasing evidence of economic weakness during the second
quarter, the Federal Reserve Board has reversed policy by lowering the federal
funds rate 0.25%. This marks the first time in three years that this rate has
been lowered, and brings the Federal Reserve's 18-month monetary-tightening
initiative to at least a temporary conclusion. Although inflation at the
consumer level has been trending higher this year at a 3 1/2% annualized rate,
recent evidence suggests that these pressures are beginning to moderate,
allowing the Federal Reserve to shift its policy focus toward sustaining
economic growth. Despite the economy's apparent lackluster performance in the
second quarter, we do not anticipate that the economy will lapse into recession.
Rather, we believe it will continue to expand at a more moderate, sustainable
pace, supported by lower prevailing interest rates and a healthy export sector.
GLOBAL OUTLOOK
Economic recoveries in both Europe and Japan have been inhibited by the strength
of the yen and deutsche mark against the U.S. dollar. These export-led
expansions are struggling to compete in a global marketplace in which their
products are less competitively priced. Consumer sectors in these economies have
been impaired by relatively high unemployment rates and continued low growth in
domestic money supplies. Recently, the Bank of Japan lowered interest rates in
an effort to stimulate domestic demand as well as to arrest the strength of the
yen against the dollar. Germany's Bundesbank lowered rates in March, yet it
appears that controlled inflation and sluggish domestic demand should leave it
with further room to ease. Our view is that the global expansion remains intact,
yet at a sluggish pace, particularly in Japan. Inflation in overseas economies
remains in a downward trend, providing fixed-income investors with opportunities
for relatively attractive real (adjusted for inflation) rates of interest,
possibly accompanied by moderate price appreciation. While we view emerging
markets with caution, selected opportunities exist in both fixed-income and
equity markets, particularly at the more attractive levels resulting from
selloffs in many of those markets last year. Recently, the U.S. dollar has
stabilized in world currency markets. Although we believe that the dollar
continues to represent a sound store of value over the long term, in the near
term its relative strength will be restrained by the persistently large U.S.
current-account deficit.
BOND MARKETS
As the economy's ability to create jobs has diminished along with its use of
available productive capacity, fixed-income markets have become increasingly
convinced that inflationary pressures will remain subdued. As a result,
long-term
1
<PAGE>
U.S. Treasury bond yields have declined to 6.50% from their 7.85% level at the
beginning of the year. As bond yields continued to decline, it became apparent
that the markets had been anticipating an easing of the Federal Reserve's
policy. Now that the easing has begun, we believe that prevailing rates may
consolidate near present levels in the near term. Longer term, we feel that
continuing moderate growth should result in interest rates maintaining their
present levels or perhaps declining moderately over the balance of this year.
The general slowdown of world economies has resulted in solid performance in
world bond markets during the past six months. European markets continue to be
buoyed by slow growth, low and controlled inflation, and recent interest rate
cuts from key central banks. The Japanese market also has been strong as anemic
economic growth and consumer price deflation have helped interest rates stage a
major decline. We remain positive on overseas markets because we anticipate
continued slow growth and minimal inflationary pressures.
STOCK MARKET
The U.S. stock market has maintained its upward momentum as stock prices have
responded to the cessation of the Federal Reserve's monetary-tightening
initiative and to the belief that gains in corporate earnings may remain
substantial. Although we expect growth to remain moderate, our outlook for
corporate earnings growth remains favorable. We have been de-emphasizing many
cyclical areas such as autos and basic materials because of their less
attractive earnings outlook and have been emphasizing growth areas such as
technology, health care, consumer and household products, and financial
services.
A table reflecting the change in unit values during the past six months for the
Funds available under your annuity contract follows. We appreciate your support
and welcome any questions or comments you may have.
On behalf of the Board of Directors,
John D. McNeil
Chairman
July 18, 1995
PERFORMANCE SUMMARY
These performance results do not reflect any applicable surrender charges or
contract charges. Past performance is no guarantee of future results.
<TABLE>
<S> <C> <C> <C>
Unit Value
------------------------------
December 31,
1994
---------------- June 30, Percent Change
COMPASS 1 (U.S.) CONTRACTS 1995 in Unit Value
------------ ---------------
Massachusetts Investors Growth Stock Fund.......................... $ 31.8549 $ 36.9989 16.15%
Massachusetts Investors Trust...................................... 38.3097 45.2158 18.03%
MFS-Registered Trademark- Bond Fund................................ 27.9595 31.5449 12.82%
MFS-Registered Trademark- Emerging Growth Fund..................... 32.2107 37.4058 16.13%
MFS-Registered Trademark- Government Money Market Fund............. 17.5882 17.9303 1.94%
MFS-Registered Trademark- Growth Opportunities Fund................ 26.0211 31.0032 19.15%
MFS-Registered Trademark- High Income Fund......................... 29.6848 32.5015 9.49%
MFS-Registered Trademark- Money Market Fund........................ 18.2359 18.5987 1.99%
MFS-Registered Trademark- Research Fund............................ 35.2820 41.1391 16.60%
MFS-Registered Trademark- Total Return Fund........................ 37.0619 41.9757 13.26%
MFS-Registered Trademark- World Governments Fund................... 32.3034 35.9709 11.35%
</TABLE>
Investment return and principal value will fluctuate, and units, when
surrendered, may be worth more or less than their original cost.
2
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT C
STATEMENT OF CONDITION -- JUNE 30, 1995
<TABLE>
<CAPTION>
ASSETS:
Investments in mutual funds: Shares Cost Value
---------- ----------- -----------
Massachusetts Investors Trust ("MIT")*................................... 911,561 $11,266,365 $10,789,004
<S> <C> <C> <C>
Massachusetts Investors Growth Stock Fund ("MIG")*....................... 619,748 6,514,304 6,916,072
MFS Total Return Fund ("MTR")*........................................... 1,629,604 19,813,567 22,564,119
MFS Growth Opportunities Fund ("MGO")*................................... 2,311,658 25,071,317 28,194,157
MFS Research Fund ("MFR")*............................................... 513,755 6,105,498 7,254,229
MFS Bond Fund ("MFB")*................................................... 591,292 8,092,173 7,839,983
MFS Money Market Fund ("MCM")............................................ 7,264,809 7,264,809 7,264,809
MFS Government Money Market Fund ("MMG")................................. 2,281,692 2,281,692 2,281,692
MFS High Income Fund ("MFH")*............................................ 1,845,969 9,358,496 9,379,170
MFS World Governments Fund ("MWG")*...................................... 275,235 3,355,099 3,365,583
MFS Emerging Growth Fund ("MEG")*........................................ 626,196 10,137,762 13,849,749
----------- -----------
$109,261,082 $119,698,567
-----------
-----------
LIABILITY:
Payable to sponsor.................................................................................. 10,133
-----------
Net assets.................................................................................... $119,688,434
-----------
-----------
</TABLE>
<TABLE>
<CAPTION>
Applicable to Owners of
Deferred Variable Annuity Contracts Reserve for
----------------------------------- Variable
NET ASSETS OF CONTRACT OWNERS: Units Unit Value Value Annuities Total
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
MIT.................................................. 237,433 $ 45.2158 $10,734,295 $ 52,675 $10,786,970
MIG.................................................. 185,439 36.9989 6,860,317 61,003 6,921,320
MTR.................................................. 530,020 41.9757 22,253,619 250,000 22,503,619
MGO.................................................. 903,320 31.0032 28,109,594 118,826 28,228,420
MFR.................................................. 175,625 41.1391 7,226,418 27,052 7,253,470
MFB.................................................. 244,523 31.5449 7,784,457 61,857 7,846,314
MCM.................................................. 388,807 18.5987 7,229,861 33,628 7,263,489
MCG.................................................. 127,184 17.9303 2,280,366 1,347 2,281,713
MFH.................................................. 285,258 32.5015 9,262,918 154,724 9,417,642
MWG.................................................. 91,903 35.9709 3,305,703 20,765 3,326,468
MEG.................................................. 368,120 37.4058 13,769,275 89,734 13,859,009
----------- ----------- -----------
Net assets............................................................... $118,816,823 $ 871,611 $119,688,434
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
*Investments are made in Class A shares of the Fund.
See notes to financial statements
3
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT C
STATEMENT OF OPERATIONS -- SIX MONTHS ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
MIT MIG MTR MGO MFR MFB
Sub- Sub- Sub- Sub- Sub- Sub-
Account Account Account Account Account Account
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Income and expenses:
Dividend income and capital gain distributions
received..................................... $ 109,842 $ -- $ 527,387 $ -- $ -- $ 263,111
Mortality and expense risk charges............ 62,557 40,740 142,087 168,149 44,640 44,104
---------- ---------- ---------- ---------- ---------- ----------
Net investment income (expense)........... $ 47,285 $ (40,740) $ 385,300 $ (168,149) $ (44,640) $ 219,007
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Realized and unrealized gains (losses):
Realized gains (losses) on investment
transactions:
Proceeds from sales......................... $ 684,297 $ 481,400 $2,538,765 $1,752,184 $ 665,995 $ 756,521
Cost of investments sold.................... 773,015 475,936 2,088,954 1,730,231 592,455 814,267
---------- ---------- ---------- ---------- ---------- ----------
Net realized gains (losses)............... $ (88,718) $ 5,464 $ 449,811 $ 21,953 $ 73,540 $ (57,746)
---------- ---------- ---------- ---------- ---------- ----------
Net unrealized appreciation (depreciation) on
investments:
End of period............................... $ (477,361) $ 401,768 $2,750,552 $3,122,840 $1,148,731 $ (252,190)
Beginning of period......................... (2,127,756) (606,232) 806,008 (1,660,908) 108,141 (924,010)
---------- ---------- ---------- ---------- ---------- ----------
Change in unrealized appreciation
(depreciation)........................... $1,650,395 $1,008,000 $1,944,544 $4,783,748 $1,040,590 $ 671,820
---------- ---------- ---------- ---------- ---------- ----------
Realized and unrealized gains................. $1,561,677 $1,013,464 $2,394,355 $4,805,701 $1,114,130 $ 614,074
---------- ---------- ---------- ---------- ---------- ----------
Increase in net assets from operations........ $1,608,962 $ 972,724 $2,779,655 $4,637,552 $1,069,490 $ 833,081
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
MCM MCG MFH MWG MEG
Sub- Sub- Sub- Sub- Sub-
Account Account Account Account Account Total
---------- ---------- ---------- ---------- ---------- -----------
---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Income and expenses:
Dividend income and capital gain
distributions received...................... $ 214,244 $ 61,456 $ 448,620 $ -- $ -- $ 1,624,660
Mortality and expense risk charges........... 52,682 15,431 65,520 21,253 84,102 741,265
---------- ---------- ---------- ---------- ---------- -----------
Net investment income (expense).......... $ 161,562 $ 46,025 $ 383,100 $ (21,253) $ (84,102) $ 883,395
---------- ---------- ---------- ---------- ---------- -----------
---------- ---------- ---------- ---------- ---------- -----------
Realized and unrealized gains (losses):
Realized gains (losses) on investment
transactions:
Proceeds from sales........................ $2,903,360 $ 466,453 $2,235,322 $ 412,536 $1,296,639 $14,193,472
Cost of investments sold................... 2,903,360 466,453 2,121,288 453,546 960,887 13,380,392
---------- ---------- ---------- ---------- ---------- -----------
Net realized gains (losses).............. $ -- $ -- $ 114,034 $ (41,010) $ 335,752 $ 813,080
---------- ---------- ---------- ---------- ---------- -----------
Net unrealized appreciation (depreciation) on
investments:
End of period.............................. $ -- $ -- $ 20,674 $ 10,484 $3,711,987 $10,437,485
Beginning of period........................ -- -- (419,372) (412,384) 1,985,871 (3,250,642)
---------- ---------- ---------- ---------- ---------- -----------
Change in unrealized appreciation
(depreciation).......................... $ -- $ -- $ 440,046 $ 422,868 $1,726,116 $13,688,127
---------- ---------- ---------- ---------- ---------- -----------
Realized and unrealized gains................ $ -- $ -- $ 554,080 $ 381,858 $2,061,868 $14,501,207
---------- ---------- ---------- ---------- ---------- -----------
Increase in net assets from operations....... $ 161,562 $ 46,025 $ 937,180 $ 360,605 $1,977,766 $15,384,602
---------- ---------- ---------- ---------- ---------- -----------
---------- ---------- ---------- ---------- ---------- -----------
</TABLE>
See notes to financial statements
4
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT C
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MIT MIG MTR
Sub-Account Sub-Account Sub-Account
----------------------------- ------------------------------ -------------
Six Months Six Months Six Months
Ended June Year Ended Ended June Year Ended Ended June
30, 1995 Dec. 31, 1994 30, 1995 Dec. 31, 1994 30, 1995
------------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (expense)... $ 47,285 $ 941,136 $ (40,740) $ 544,896 $ 385,300
Net realized gains (losses)....... (88,718) (325,464) 5,464 156,783 449,811
Net unrealized gains (losses)..... 1,650,395 (843,071) 1,008,000 (1,273,217) 1,944,544
------------- ------------- ------------- -------------- -------------
Increase (decrease) in net
assets from operations....... $ 1,608,962 $ (227,399) $ 972,724 $ (571,538) $ 2,779,655
------------- ------------- ------------- -------------- -------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received...... $ 208,371 $ 376,453 $ 105,127 $ 183,072 $ 351,839
Net transfers between
Sub-Accounts and Fixed
Account........................ 583,853 (161,720) 44,145 (151,270) (215,576)
Withdrawals, surrenders,
annuitizations and contract
charges........................ (598,504) (1,382,160) (358,359) (633,457) (2,160,433)
------------- ------------- ------------- -------------- -------------
Net accumulation activity..... $ 193,720 $(1,167,427) $ (209,087) $ (601,655) $(2,024,170)
------------- ------------- ------------- -------------- -------------
Annuitization activity:
Annuitizations.................. $ -- $ 23,903 $ -- $ -- $ --
Annuity payments and contract
charges........................ (7,116) (7,374) (4,924) (10,179) (17,080)
Annuity transfers............... -- -- -- -- --
Adjustments to annuity
reserve........................ (400) 38 373 (1,123) (8,491)
------------- ------------- ------------- -------------- -------------
Net annuitization activity.... $ (7,516) $ 16,567 $ (4,551) $ (11,302) $ (25,571)
------------- ------------- ------------- -------------- -------------
Increase (decrease) in net assets
from participant transactions.... $ 186,204 $(1,150,860) $ (213,638) $ (612,957) $(2,049,741)
------------- ------------- ------------- -------------- -------------
Increase (decrease) in net
assets......................... $ 1,795,166 $(1,378,259) $ 759,086 $(1,184,495) $ 729,914
NET ASSETS:
Beginning of period............... 8,991,804 10,370,063 6,162,234 7,346,729 21,773,705
------------- ------------- ------------- -------------- -------------
End of period..................... $10,786,970 $ 8,991,804 $6,921,320 $ 6,162,234 $22,503,619
------------- ------------- ------------- -------------- -------------
------------- ------------- ------------- -------------- -------------
<CAPTION>
Year Ended
Dec. 31, 1994
-------------
<S> <C>
OPERATIONS:
Net investment income (expense)... $ 708,043
Net realized gains (losses)....... 466,317
Net unrealized gains (losses)..... (2,102,324)
-------------
Increase (decrease) in net
assets from operations....... $ (927,964)
-------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received...... $ 776,476
Net transfers between
Sub-Accounts and Fixed
Account........................ 298,368
Withdrawals, surrenders,
annuitizations and contract
charges........................ (3,550,874)
-------------
Net accumulation activity..... $(2,476,030)
-------------
Annuitization activity:
Annuitizations.................. $ --
Annuity payments and contract
charges........................ (35,096)
Annuity transfers............... --
Adjustments to annuity
reserve........................ (1,676)
-------------
Net annuitization activity.... $ (36,772)
-------------
Increase (decrease) in net assets
from participant transactions.... $(2,512,802)
-------------
Increase (decrease) in net
assets......................... $(3,440,766)
NET ASSETS:
Beginning of period............... 25,214,471
-------------
End of period..................... $21,773,705
-------------
-------------
</TABLE>
See notes to financial statements
5
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT C
STATEMENTS OF CHANGES IN NET ASSETS -- continued
<TABLE>
<CAPTION>
MGO MFR MFB
Sub-Account Sub-Account Sub-Account
----------------------------- ----------------------------- -----------------------------
Six Months Six Months Six Months
Ended June Year Ended Ended June Year Ended Ended June Year Ended
30, 1995 Dec. 31, 1994 30, 1995 Dec. 31, 1994 30, 1995 Dec. 31, 1994
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (expense)... $ (168,149) $ 1,697,646 $ (44,640) $ 572,686 $ 219,007 $ 510,715
Net realized gains (losses)....... 21,953 (141,035) 73,540 359,946 (57,746) (218,531)
Net unrealized gains (losses)..... 4,783,748 (3,067,770) 1,040,590 (1,000,706) 671,820 (911,126)
------------- ------------- ------------- ------------- ------------- -------------
Increase (decrease) in net
assets from operations....... $ 4,637,552 $(1,511,159) $1,069,490 $ (68,074) $ 833,081 $ (618,942)
------------- ------------- ------------- ------------- ------------- -------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received...... $ 258,491 $ 478,427 $ 81,600 $ 121,114 $ 88,477 $ 200,554
Net transfers between
Sub-Accounts
and Fixed Account.............. (86,147) (774,231) (162,835) 264,916 737,072 (2,342,807)
Withdrawals, surrenders,
annuitizations and contract
charges........................ (1,548,102) (4,408,644) (462,626) (1,924,638) (457,247) (1,643,081)
------------- ------------- ------------- ------------- ------------- -------------
Net accumulation activity..... $(1,375,758) $(4,704,448) $ (543,861) $(1,538,608) $ 368,302 $(3,785,334)
------------- ------------- ------------- ------------- ------------- -------------
Annuitization activity:
Annuitizations.................. $ -- $ 2,024 $ 13,048 $ 2,706 $ -- $ 20,883
Annuity payments and contract
charges........................ (9,226) (17,432) (1,539) (2,839) (3,409) (7,361)
Annuity transfers............... -- -- -- -- -- --
Adjustments to annuity
reserve........................ 3,544 (259) (962) 367 2,661 (211)
------------- ------------- ------------- ------------- ------------- -------------
Net annuitization activity.... $ (5,682) $ (15,667) $ 10,547 $ 234 $ (748) $ 13,311
------------- ------------- ------------- ------------- ------------- -------------
Increase (decrease) in net assets
from participant transactions.... $(1,381,440) $(4,720,115) $ (533,314) $(1,538,374) $ 367,554 $(3,772,023)
------------- ------------- ------------- ------------- ------------- -------------
Increase (decrease) in net
assets......................... $ 3,256,112 $(6,231,274) $ 536,176 $(1,606,448) $ 1,200,635 $(4,390,965)
NET ASSETS:
Beginning of period............... 24,972,308 31,203,582 6,717,294 8,323,742 6,645,679 11,036,644
------------- ------------- ------------- ------------- ------------- -------------
End of period..................... $28,228,420 $24,972,308 $7,253,470 $6,717,294 $ 7,846,314 $ 6,645,679
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
</TABLE>
See notes to financial statements
6
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT C
STATEMENTS OF CHANGES IN NET ASSETS -- continued
<TABLE>
<CAPTION>
MCM MCG MFH
Sub-Account Sub-Account Sub-Account
----------------------------- ----------------------------- -----------------------------
Six Months Six Months Six Months
Ended June Year Ended Ended June Year Ended Ended June Year Ended
30, 1995 Dec. 31, 1994 30, 1995 Dec. 31, 1994 30, 1995 Dec. 31, 1994
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (expense)... $ 161,562 $ 214,619 $ 46,025 $ 53,180 $ 383,100 $ 750,483
Net realized gains (losses)....... -- -- -- -- 114,034 1,152,091
Net unrealized gains (losses)..... -- -- -- -- 440,046 (2,267,010)
------------- ------------- ------------- ------------- ------------- -------------
Increase (decrease) in net
assets from operations......... $ 161,562 $ 214,619 $ 46,025 $ 53,180 $ 937,180 $ (364,436)
------------- ------------- ------------- ------------- ------------- -------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received...... $ 144,975 $ 390,625 $ 29,665 $ 75,647 $ 190,990 $ 202,770
Net transfers between
Sub-Accounts and Fixed
Account........................ (713,459) 1,918,944 (26,494) 485,402 (88,770) (20,819)
Withdrawals, surrenders,
annuitizations and contract
charges........................ (1,130,071) (2,896,413) (217,946) (960,223) (1,841,093) (2,371,864)
------------- ------------- ------------- ------------- ------------- -------------
Net accumulation activity..... $(1,698,555) $ (586,844) $ (214,775) $ (399,174) $(1,738,873) $(2,189,913)
------------- ------------- ------------- ------------- ------------- -------------
Annuitization activity:
Annuitizations.................. $ -- $ -- $ -- $ -- $ -- $ 2,426
Annuity payments and contract
charges........................ (2,014) (3,642) (98) (199) (12,600) (24,131)
Annuity transfers............... -- 20,529 -- -- -- --
Adjustments to annuity
reserve........................ 232 (19,466) 30 55 3,155 2,745
------------- ------------- ------------- ------------- ------------- -------------
Net annuitization activity.... $ (1,782) $ (2,579) $ (68) $ (144) $ (9,445) $ (18,960)
------------- ------------- ------------- ------------- ------------- -------------
Decrease in net assets from
participant transactions......... $(1,700,337) $ (589,423) $ (214,843) $ (399,318) $(1,748,318) $(2,208,873)
------------- ------------- ------------- ------------- ------------- -------------
Decrease in net assets.......... $(1,538,775) $ (374,804) $ (168,818) $ (346,138) $ (811,138) $(2,573,309)
NET ASSETS:
Beginning of period............... 8,802,264 9,177,068 2,450,531 2,796,669 10,228,780 12,802,089
------------- ------------- ------------- ------------- ------------- -------------
End of period..................... $ 7,263,489 $8,802,264 $2,281,713 $2,450,531 $ 9,417,642 $10,228,780
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
</TABLE>
See notes to financial statements
7
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT C
STATEMENTS OF CHANGES IN NET ASSETS -- continued
<TABLE>
<CAPTION>
MWG MEG
Sub-Account Sub-Account Total
----------------------------- ----------------------------- --------------
Six Months Six Months Six Months
Ended June Year Ended Ended June Year Ended Ended June 30,
30, 1995 Dec. 31, 1994 30, 1995 Dec. 31, 1994 1995
------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (expense)... $ (21,253) $ 134,675 $ (84,102) $ 97,096 $ 883,395
Net realized gains (losses)....... (41,010) (56,869) 335,752 469,030 813,080
Net unrealized gains (losses)..... 422,868 (421,856) 1,726,116 (117,182) 13,688,127
------------- ------------- ------------- ------------- --------------
Increase (decrease) in net
assets from operations......... $ 360,605 $ (344,050) $ 1,977,766 $ 448,944 $ 15,384,602
------------- ------------- ------------- ------------- --------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received...... $ 36,928 $ 60,004 $ 183,886 $ 267,434 $ 1,680,349
Net transfers between
Sub-Accounts and Fixed
Account........................ 30,886 (136,100) (158,096) 322,219 (55,421)
Withdrawals, surrenders,
annuitizations and contract
charges........................ (400,102) (700,903) (803,731) (1,071,937) (9,978,214)
------------- ------------- ------------- ------------- --------------
Net accumulation activity..... $ (332,288) $ (776,999) $ (777,941) $ (482,284) $ (8,353,286)
------------- ------------- ------------- ------------- --------------
Annuitization activity:
Annuitizations.................. $ -- $ -- $ -- $ -- $ 13,048
Annuity payments and contract
charges........................ (3,950) (5,454) (5,823) (13,626) (67,779)
Annuity transfers............... -- -- -- (20,529) --
Adjustments to annuity
reserve........................ (4,214) 2,332 1,256 21,345 (2,816)
------------- ------------- ------------- ------------- --------------
Net annuitization activity.... $ (8,164) $ (3,122) $ (4,567) $ (12,810) $ (57,547)
------------- ------------- ------------- ------------- --------------
Decrease in net assets from
participant transactions......... $ (340,452) $ (780,121) $ (782,508) $ (495,094) $ (8,410,833)
------------- ------------- ------------- ------------- --------------
Increase (decrease) in net
assets......................... $ 20,153 $(1,124,171) $ 1,195,258 $ (46,150) $ 6,973,769
NET ASSETS:
Beginning of period............... 3,306,315 4,430,486 12,663,751 12,709,901 112,714,665
------------- ------------- ------------- ------------- --------------
End of period..................... $3,326,468 $ 3,306,315 $13,859,009 $12,663,751 $119,688,434
------------- ------------- ------------- ------------- --------------
------------- ------------- ------------- ------------- --------------
<CAPTION>
Year Ended
Dec. 31, 1994
--------------
<S> <C>
OPERATIONS:
Net investment income (expense)... $ 6,225,175
Net realized gains (losses)....... 1,862,268
Net unrealized gains (losses)..... (12,004,262)
--------------
Increase (decrease) in net
assets from operations......... $ (3,916,819)
--------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received...... $ 3,132,576
Net transfers between
Sub-Accounts and Fixed
Account........................ (297,098)
Withdrawals, surrenders,
annuitizations and contract
charges........................ (21,544,194)
--------------
Net accumulation activity..... $(18,708,716)
--------------
Annuitization activity:
Annuitizations.................. $ 51,942
Annuity payments and contract
charges........................ (127,333)
Annuity transfers............... --
Adjustments to annuity
reserve........................ 4,147
--------------
Net annuitization activity.... $ (71,244)
--------------
Decrease in net assets from
participant transactions......... $(18,779,960)
--------------
Increase (decrease) in net
assets......................... $(22,696,779)
NET ASSETS:
Beginning of period............... 135,411,444
--------------
End of period..................... $112,714,665
--------------
--------------
</TABLE>
See notes to financial statements
8
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT C
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION
Sun Life of Canada (U.S.) Variable Account C (the Variable Account), a separate
account of Sun Life Assurance Company of Canada (U.S.), the Sponsor, was
established on March 31, 1982 as a funding vehicle for individual variable
annuities issued in connection with qualified retirement plans. The Variable
Account is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940 as a unit investment trust.
The assets of the Variable Account are divided into Sub-Accounts. Each
Sub-Account is invested in shares of a specific mutual fund or series thereof
selected by contract owners from among available mutual funds (the Funds)
advised by Massachusetts Financial Services Company (MFS), a wholly-owned
subsidiary of the Sponsor.
(2) SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATIONS
Investments in the Funds are recorded at their net asset value. Realized gains
and losses on sales of shares of the Funds are determined on the identified cost
basis. Dividend income and capital gain distributions received by the
Sub-Accounts are reinvested in additional Fund shares and are recognized on the
ex-dividend date.
Exchanges between Sub-Accounts requested by contract owners are recorded in the
new Sub-Account upon receipt of the redemption proceeds.
FEDERAL INCOME TAX STATUS
The operations of the Variable Account are part of the operations of the Sponsor
and are not taxed separately; the Variable Account is not taxed as a regulated
investment company. The Sponsor qualifies for the federal income tax treatment
granted to life insurance companies under Subchapter L of the Internal Revenue
Code. Under existing federal income tax law, investment income and capital gains
earned by the Variable Account on contract owner reserves are not subject to
tax.
(3) CONTRACT CHARGES
A mortality and expense risk charge based on the value of the Variable Account
is deducted from the Variable Account at the end of each valuation period for
the mortality and expense risks assumed by the Sponsor. The deduction is at an
effective annual rate of 1.3%.
Each year on the contract anniversary, a contract maintenance charge of $25 is
deducted from each contract's accumulation account to cover administrative
expenses relating to the contract. After the annuity commencement date the
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 exceed 5% of the purchase payments made under the
contract.
9
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT C
NOTES TO FINANCIAL STATEMENTS -- continued
A deduction, when applicable, is made for premium or similar state or local
taxes. It is currently the policy of the Sponsor to deduct the taxes from the
amount applied to provide an annuity at the time annuity payments commence;
however, the Sponsor reserves the right to deduct such taxes when incurred.
(4) ANNUITY RESERVES
Annuity reserves for contracts with annuity commencement dates prior to February
1, 1987 are calculated using the 1971 Individual Annuitant Mortality Table.
Annuity reserves for contracts with annuity commencement dates on or after
February 1, 1987 are calculated using the 1983 Individual Annuitant Mortality
Table. All annuity reserves are calculated using an assumed interest rate of 4%.
Required adjustments to the reserve are accomplished by transfers to or from the
Sponsor.
(5) TRANSACTIONS IN UNITS OUTSTANDING
<TABLE>
<CAPTION>
MIT MIG MTR MGO
Sub-Account Sub-Account Sub-Account Sub-Account
------------------------ ------------------------ ------------------------ ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Six Months Six Months Six Months Six Months Year
Ended Year Ended Ended Year Ended Ended Year Ended Ended Ended
June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31,
1995 1994 1995 1994 1995 1994 1995 1994
----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------
Units outstanding,
beginning of period... 233,419 263,601 191,666 210,268 580,826 646,262 952,138 1,126,904
Units purchased...... 4,963 9,625 3,150 5,720 9,027 20,357 9,224 17,873
Units transferred
between Sub-Accounts
and Fixed Account... 13,216 (4,059) 1,301 (4,872) (5,219) 7,502 (3,089) (29,218)
Units withdrawn,
surrendered and
annuitized.......... (14,165) (35,748) (10,678) (19,450) (54,614) (93,295) (54,953) (163,421)
----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------
Units outstanding, end
of period............. 237,433 233,419 185,439 191,666 530,020 580,826 903,320 952,138
----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------
----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------
<CAPTION>
MFR MFB
Sub-Account Sub-Account
------------------------ ----------------------
<S> <C> <C> <C> <C>
Six Months Six Months Year
Ended Year Ended Ended Ended
June 30, Dec. 31, June 30, Dec. 31,
1995 1994 1995 1994
----------- ----------- ----------- ---------
Units outstanding,
beginning of period... 189,988 232,537 233,449 368,774
Units purchased...... 2,178 3,339 3,015 7,025
Units transferred
between Sub-Accounts
and Fixed Account... (4,417) 7,358 23,219 (84,505)
Units withdrawn,
surrendered and
annuitized.......... (12,124) (53,246) (15,160) (57,845)
----------- ----------- ----------- ---------
Units outstanding, end
of period............. 175,625 189,988 244,523 233,449
----------- ----------- ----------- ---------
----------- ----------- ----------- ---------
</TABLE>
<TABLE>
<CAPTION>
MCM MCG MFH MWG
Sub-Account Sub-Account Sub-Account Sub-Account
---------------------- ------------------------ ------------------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Six Months Year Six Months Six Months Six Months
Ended Ended Ended Year Ended Ended Year Ended Ended
June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31, June 30,
1995 1994 1995 1994 1995 1994 1995
----------- --------- ----------- ----------- ----------- ----------- -----------
Units outstanding, beginning of
period................................. 480,850 512,329 139,248 162,009 339,549 408,637 101,661
Units purchased....................... 7,884 21,724 1,673 4,349 6,099 6,736 1,068
Units transferred between Sub-Accounts
and Fixed Account.................... (38,436) 107,801 (1,472) 28,123 (2,573) 1,513 888
Units withdrawn, surrendered and
annuitized........................... (61,491) (161,004) (12,265) (55,233) (57,817) (77,337) (11,714)
----------- --------- ----------- ----------- ----------- ----------- -----------
Units outstanding, end of period........ 388,807 480,850 127,184 139,248 285,258 339,549 91,903
----------- --------- ----------- ----------- ----------- ----------- -----------
----------- --------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
MEG
Sub-Account
------------------------
<S> <C> <C> <C>
Six Months
Year Ended Ended Year Ended
Dec. 31, June 30, Dec. 31,
1994 1995 1994
----------- ----------- -----------
Units outstanding, beginning of
period................................. 125,704 390,605 405,542
Units purchased....................... 1,846 5,314 8,553
Units transferred between Sub-Accounts
and Fixed Account.................... (4,391) (4,615) 11,117
Units withdrawn, surrendered and
annuitized........................... (21,498) (23,184) (34,607)
----------- ----------- -----------
Units outstanding, end of period........ 101,661 368,120 390,605
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
10
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT C
NOTES TO FINANCIAL STATEMENTS -- continued
INDEPENDENT AUDITORS' REPORT
To the Participants in Sun Life of Canada (U.S.) Variable Account C
and the Board of Directors of Sun Life Assurance Company of Canada (U.S.):
We have audited the accompanying statement of condition of Sun Life of Canada
(U.S.) Variable Account C (the Variable Account) as of June 30, 1995, the
related statement of operations for the six months then ended and the statements
of changes in net assets for the six months ended June 30, 1995 and the year
ended December 31, 1994. These financial statements are the responsibility of
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation with the custodian of securities held for the Variable Account as
of June 30, 1995. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Variable Account as of June 30, 1995,
the results of its operations and the changes in its net assets for the
respective stated periods in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
August 4, 1995
----------------------------------------
This report is prepared for the general information of contract owners. It is
authorized for distribution to prospective purchasers only when preceded or
accompanied by an effective prospectus.
11
<PAGE>
COMPASS-I
DIRECTORS AND OFFICERS OF
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
JOHN D. McNEIL, Chairman and Director
JOHN R. GARDNER, President and Director
DAVID D. HORN, Senior Vice President and
General Manager and Director
RICHARD B. BAILEY, Director
A. KEITH BRODKIN, Director
M. COLYER CRUM, Director
JOHN S. LANE, Director
ANGUS A. MacNAUGHTON, Director
BONNIE S. ANGUS, Secretary
L. BROCK THOMSON, Treasurer
SUN LIFE ASSURANCE COMPANY
OF CANADA (U.S.)
ANNUITY SERVICE MAILING ADDRESS
Sun Life Annuity Service Center
P.O. Box 1024, Boston, Massachusetts 02103-9986
GENERAL DISTRIBUTOR
Clarendon Insurance Agency, Inc.
500 Boylston Street, Boston, Massachusetts 02116-3741
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, Massachusetts 02110-2875
LEGAL COUNSEL
Covington & Burling
1201 Pennsylvania Avenue, N.W.
P.O. Box 7566, Washington, D.C. 20044-7566
AUDITORS
Deloitte & Touche LLP
125 Summer Street, Boston, Massachusetts 02110-1616
ACCOUNT INFORMATION
For account information, please call toll free:
1-800-752-7218 anytime from a touch-tone telephone.
To speak with a customer service representative, please call toll
free: 1-800-752-7215 from 8 a.m. to 6 p.m.
Eastern time any business day.
CO1US-3 8/95 8.6M
[LOGO]
PROFESSIONALLY MANAGED COMBINATION
FIXED/VARIABLE ANNUITY
FOR QUALIFIED RETIREMENT PLANS
SEMIANNUAL REPORT - JUNE 30, 1995
ISSUED BY
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.),
A WHOLLY-OWNED SUBSIDIARY OF
SUN LIFE ASSURANCE COMPANY OF CANADA
