<PAGE>
DEAR CONTRACT OWNERS:
This past year has been a difficult one for investors in both fixed-income
securities and equities. In February, the Federal Reserve Board initiated a
series of increases in short-term interest rates in an effort to restrain
anticipated inflationary pressures. This caused a major sell-off in fixed-income
markets around the world. As a result, with the exception of the Money Market
Fund, which seeks to maintain a constant net asset value per share, all of the
fixed-income funds available under your contract experienced negative total
returns during the fiscal year ended December 31, 1994.
The past year was also difficult for the stock market, with many stocks
performing significantly worse than the market averages. For the 12 months ended
December 31, 1994, the market as measured by Standard & Poor's 500 Composite
Index (S&P 500), a popular, unmanaged index of common stock performance, had a
return of +1.31%. As a result, during that same period, most of the equity funds
available under your contract also experienced disappointing total returns.
ECONOMIC ENVIRONMENT
The economic expansion, which is about to enter its fifth year, has gained
firmer underpinnings as employers have been stepping up hiring levels. Increased
employment, stronger capital spending by businesses, and strengthening overseas
economies resulted in 4% real (adjusted for inflation) gross domestic product
growth in 1994. Interest rates rose significantly in 1994, which should help
restrain, but not curtail, the economic expansion. Based on improving economic
fundamentals both here and abroad, we expect the business expansion to continue
well into 1995.
Despite a stronger economy, inflation at the consumer level has remained
relatively benign at 2.7% in 1994, the fourth straight year of 3.0% or less. Due
to a prolonged period of below-trend-line growth and continued pressure on
corporations to emphasize effective cost controls, wage growth and unit labor
costs have remained subdued. However, as the economy has exhibited continuing
strength, various industrial commodity prices have been rising substantially
faster than consumer prices. Nevertheless, businesses have had difficulty
passing these price increases on to the consumer. With the economy continuing to
expand, we expect to see some upward movement in inflation from below 3% to the
3 1/2% range.
BOND MARKETS
The Federal Reserve has shown a willingness to raise short-term rates to slow
the economy in an effort to dampen inflationary pressures. The Federal Reserve
most recently raised the federal funds rate 75 basis points (0.75%) on November
15, and we expect the Federal Reserve to raise short-term rates again in the
coming months if it believes that current efforts have not been sufficient to
dampen inflationary expectations. Although we believe fundamentals are favorable
for lower long-term rates sometime in 1995, this will not likely occur until the
Federal Reserve is comfortable that its policy toward slowing the economic
expansion has been successful. Thus, we believe that yields on long-term
securities will move moderately higher in the near term.
During 1994, the high-yield bond market posted a negative total return due
primarily to the rise in U.S. Treasury bond yields. Principal value and interest
on Treasury securities are guaranteed by the U.S. government if held to
maturity. Throughout the year, the spread between yields on high-yield bonds and
Treasury securities remained relatively stable at about 360 basis points (3.6%).
Against a backdrop of rising interest rates and
1
<PAGE>
level credit spreads, high-yield bonds generally outperformed other fixed-income
securities which had longer durations. The credit quality of the typical
high-yield company improved as the economy strengthened, and as a result, the
annualized default rate was at its lowest level in 10 years. However, the
default rate may increase in the coming year if higher short-term interest rates
cause the domestic expansion to slow in late 1995. The average credit quality of
first-time high-yield issuers was lower than in recent years, and these riskier
companies will find it more difficult to meet their debt obligations as the
economy slows. In addition, credit spreads have historically widened prior to
the peak in an economic cycle.
International bond markets continue to grapple with the prospect of global
economic recovery. Anticipation of interest rate cuts has been replaced by
concern over eventual central bank rate hikes. This has led to higher interest
rates and a weaker dollar. Countries with high deficits and/or debt burden, such
as Italy and Sweden, have been hit especially hard. Long-term interest rates
rose between 200 and 400 basis points (2% to 4%), with the smaller countries
such as Australia, Spain and Italy suffering the worst declines in bond prices.
We believe the bond markets have overreacted, however, and in due course will
have a firmer tone.
STOCK MARKET
The stock market proved volatile in 1994, influenced by both a strengthening
economy and uncertainty over interest rates. Although the stronger economy has
been beneficial to corporate earnings, higher interest rates have negatively
impacted price-to-earnings multiples (or stock valuations). Given our
expectation of further upward pressure on short-term interest rates as the
Federal Reserve continues to lean against the current economic expansion, we
believe the stock market will have difficulty sustaining any significant
improvement. When interest rates finally stabilize, however, we expect the stock
market to benefit given our continuing outlook for improved corporate earnings.
On behalf of the
Board of Directors,
John D. McNeil
Chairman
January 20, 1995
2
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT C
STATEMENT OF CONDITION -- December 31, 1994
<TABLE>
<CAPTION>
ASSETS:
Investments in mutual funds: Shares Cost Value
--------- --------- ---------
<S> <C> <C> <C>
Massachusetts Investors Trust ("MIT")*................... 892,957 $11,121,196 $8,993,440
Massachusetts Investors Growth Stock Fund ("MIG")*....... 644,998 6,763,590 6,157,358
MFS Total Return Fund ("MTR")*........................... 1,754,795 21,019,704 21,825,712
MFS Growth Opportunities Fund ("MGO")*................... 2,452,245 26,602,498 24,941,590
MFS Research Fund ("MFR")*............................... 558,268 6,608,950 6,717,091
MFS Bond Fund ("MFB")*................................... 547,449 7,566,019 6,642,009
MFS Money Market Fund ("MCM")............................ 8,803,815 8,803,815 8,803,815
MFS Government Money Market Fund ("MCG")................. 2,450,539 2,450,539 2,450,539
MFS High Income Fund ("MFH")*............................ 2,115,962 10,612,834 10,193,462
MFS World Governments Fund ("MWG")*...................... 306,228 3,753,601 3,341,217
MFS Emerging Growth Fund ("MEG")*........................ 668,790 10,669,877 12,655,748
--------- ---------
$115,972,623 $112,721,981
---------
---------
LIABILITY:
Payable to sponsor............................................................... 7,316
---------
Net assets................................................................. $112,714,665
---------
---------
</TABLE>
<TABLE>
<CAPTION>
Applicable to Owners of
Deferred Variable Annuity Contracts Reserve for
----------------------------------- Variable
NET ASSETS OF CONTRACT OWNERS: Unit Value Value Annuities Total
----------- ----------- ----------- -----------
Units
---------
<S> <C> <C> <C> <C> <C>
MIT.................................................. 233,419 $ 38.3097 $ 8,940,411 $ 51,393 $ 8,991,804
MIG.................................................. 191,666 31.8549 6,104,902 57,332 6,162,234
MTR.................................................. 580,826 37.0619 21,536,951 236,754 21,773,705
MGO.................................................. 952,138 26.0211 24,862,356 109,952 24,972,308
MFR.................................................. 189,988 35.2820 6,704,420 12,874 6,717,294
MFB.................................................. 233,449 27.9595 6,589,805 55,874 6,645,679
MCM.................................................. 480,850 18.2359 8,767,775 34,489 8,802,264
MCG.................................................. 139,248 17.5882 2,449,150 1,381 2,450,531
MFH.................................................. 339,549 29.6848 10,075,876 152,904 10,228,780
MWG.................................................. 101,661 32.3034 3,283,896 22,419 3,306,315
MEG.................................................. 390,605 32.2107 12,581,318 82,433 12,663,751
----------- ----------- -----------
Net assets............................................................... $111,896,860 $ 817,805 $112,714,665
----------- ----------- -----------
----------- ----------- -----------
</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 -- Year Ended December 31, 1994
<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..................................... $1,068,199 $ 628,069 $1,010,312 $2,045,951 $ 664,599 $ 622,870
Mortality and expense risk charges............ 127,063 83,173 302,269 348,305 91,913 112,155
---------- ---------- ---------- ---------- ---------- ----------
Net investment income..................... $ 941,136 $ 544,896 $ 708,043 $1,697,646 $ 572,686 $ 510,715
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Realized and unrealized gains (losses):
Realized gains (losses) on investment
transactions:
Proceeds from sales......................... $1,728,009 $1,094,775 $3,697,588 $5,288,494 $2,019,520 $4,271,612
Cost of investments sold.................... 2,053,473 937,992 3,231,271 5,429,529 1,659,574 4,490,143
---------- ---------- ---------- ---------- ---------- ----------
Net realized gains (losses)............... $ (325,464) $ 156,783 $ 466,317 $ (141,035) $ 359,946 $ (218,531)
---------- ---------- ---------- ---------- ---------- ----------
Net unrealized appreciation (depreciation) on
investments:
End of year................................. $(2,127,756) $ (606,232) $ 806,008 $(1,660,908) $ 108,141 $ (924,010)
Beginning of year........................... (1,284,685) 666,985 2,908,332 1,406,862 1,108,847 (12,884)
---------- ---------- ---------- ---------- ---------- ----------
Change in unrealized appreciation
(depreciation)........................... $ (843,071) $(1,273,217) $(2,102,324) $(3,067,770) $(1,000,706) $ (911,126)
---------- ---------- ---------- ---------- ---------- ----------
Realized and unrealized gains (losses)........ $(1,168,535) $(1,116,434) $(1,636,007) $(3,208,805) $ (640,760) $(1,129,657)
---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets from
operations................................... $ (227,399) $ (571,538) $ (927,964) $(1,511,159) $ (68,074) $ (618,942)
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
</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...................... $ 340,264 $ 89,299 $ 880,109 $ 182,116 $ 254,436 $ 7,786,224
Mortality and expense risk charges........... 125,645 36,119 129,626 47,441 157,340 1,561,049
---------- ---------- ---------- ---------- ---------- -----------
Net investment income.................... $ 214,619 $ 53,180 $ 750,483 $ 134,675 $ 97,096 $ 6,225,175
---------- ---------- ---------- ---------- ---------- -----------
---------- ---------- ---------- ---------- ---------- -----------
Realized and unrealized gains (losses):
Realized gains (losses) on investment
transactions:
Proceeds from sales........................ $7,488,918 $1,375,916 $5,281,276 $ 976,299 $2,505,003 $35,727,410
Cost of investments sold................... 7,488,918 1,375,916 4,129,185 1,033,168 2,035,973 33,865,142
---------- ---------- ---------- ---------- ---------- -----------
Net realized gains (losses).............. $ -- $ -- $1,152,091 $ (56,869) $ 469,030 $ 1,862,268
---------- ---------- ---------- ---------- ---------- -----------
Net unrealized appreciation (depreciation) on
investments:
End of year................................ $ -- $ -- $ (419,372) $ (412,384) $1,985,871 $(3,250,642)
Beginning of year.......................... -- -- 1,847,638 9,472 2,103,053 8,753,620
---------- ---------- ---------- ---------- ---------- -----------
Change in unrealized appreciation
(depreciation).......................... $ -- $ -- $(2,267,010) $ (421,856) $ (117,182) $(12,004,262)
---------- ---------- ---------- ---------- ---------- -----------
Realized and unrealized gains (losses)....... $ -- $ -- $(1,114,919) $ (478,725) $ 351,848 $(10,141,994)
---------- ---------- ---------- ---------- ---------- -----------
Increase (decrease) in net assets from
operations.................................. $ 214,619 $ 53,180 $ (364,436) $ (344,050) $ 448,944 $(3,916,819)
---------- ---------- ---------- ---------- ---------- -----------
---------- ---------- ---------- ---------- ---------- -----------
</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
---------------------- --------------------- ----------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
---------------------- --------------------- ----------------------
1994 1993 1994 1993 1994 1993
---------- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income.................. $ 941,136 $1,485,146 $ 544,896 $1,001,799 $ 708,043 $1,156,242
Net realized gains (losses)............ (325,464) (220,048) 156,783 172,492 466,317 506,225
Net unrealized gains (losses).......... (843,071) (393,871) (1,273,217) (313,432) (2,102,324) 1,550,634
---------- ---------- ---------- --------- ---------- ----------
Increase (decrease) in net assets
from operations................... $ (227,399) $ 871,227 $ (571,538) $ 860,859 $ (927,964) $3,213,101
---------- ---------- ---------- --------- ---------- ----------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received........... $ 376,453 $ 363,175 $ 183,072 $ 164,533 $ 776,476 $ 678,863
Net transfers between Sub-Acccounts
and Fixed Account................... (161,720) 48,623 (151,270) (105,578) 298,368 341,168
Withdrawals, surrenders,
annuitizations, and contract
charges............................... (1,382,160) (1,746,927) (633,457) (904,778) (3,550,874) (3,005,323)
---------- ---------- ---------- --------- ---------- ----------
Net accumulation activity.......... $(1,167,427) $(1,335,129) $ (601,655) $(845,823) $(2,476,030) $(1,985,292)
---------- ---------- ---------- --------- ---------- ----------
Annuitization activity:
Annuitizations....................... $ 23,903 $ -- $ -- $ -- $ -- $ --
Annuity payments..................... (7,374) (7,157) (10,179) (10,467) (35,096) (38,712)
Annuity transfers.................... -- -- -- -- -- --
Adjustments to annuity reserve....... 38 (211) (1,123) 30 (1,676) (9,594)
---------- ---------- ---------- --------- ---------- ----------
Net annuitization activity......... $ 16,567 $ (7,368) $ (11,302) $ (10,437) $ (36,772) $ (48,306)
---------- ---------- ---------- --------- ---------- ----------
Decrease in net assets from participant
transactions.......................... $(1,150,860) $(1,342,497) $ (612,957) $(856,260) $(2,512,802) $(2,033,598)
---------- ---------- ---------- --------- ---------- ----------
Increase (decrease) in net assets.... $(1,378,259) $ (471,270) $(1,184,495) $ 4,599 $(3,440,766) $1,179,503
NET ASSETS:
Beginning of year...................... 10,370,063 10,841,333 7,346,729 7,342,130 25,214,471 24,034,968
---------- ---------- ---------- --------- ---------- ----------
End of year............................ $8,991,804 $10,370,063 $6,162,234 $7,346,729 $21,773,705 $25,214,471
---------- ---------- ---------- --------- ---------- ----------
---------- ---------- ---------- --------- ---------- ----------
</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
---------------------- ---------------------- ----------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
---------------------- ---------------------- ----------------------
1994 1993 1994 1993 1994 1993
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income................. $1,697,646 $3,012,140 $ 572,686 $ 821,061 $ 510,715 $1,430,016
Net realized gains (losses)........... (141,035) 401,427 359,946 268,889 (218,531) 239,678
Net unrealized gains (losses)......... (3,067,770) 896,440 (1,000,706) 376,647 (911,126) (346,895)
---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets
from operations.................. $(1,511,159) $4,310,007 $ (68,074) $1,466,597 $ (618,942) $1,322,799
---------- ---------- ---------- ---------- ---------- ----------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received.......... $ 478,427 $ 608,491 $ 121,114 $ 141,348 $ 200,554 $ 185,093
Net transfers between Sub-Acccounts
and Fixed Account.................. (774,231) (909,776) 264,916 140,223 (2,342,807) (306,172)
Withdrawals, surrenders,
annuitizations, and contract
charges.............................. (4,408,644) (4,248,527) (1,924,638) (962,412) (1,643,081) (1,387,912)
---------- ---------- ---------- ---------- ---------- ----------
Net accumulation activity......... $(4,704,448) $(4,549,812) $(1,538,608) $ (680,841) $(3,785,334) $(1,508,991)
---------- ---------- ---------- ---------- ---------- ----------
Annuitization activity:
Annuitizations...................... $ 2,024 $ -- $ 2,706 $ -- $ 20,883 $ --
Annuity payments.................... (17,432) (37,077) (2,839) (2,034) (7,361) (6,132)
Annuity transfers................... -- -- -- -- -- --
Adjustments to annuity reserve...... (259) 3,222 367 (138) (211) 804
---------- ---------- ---------- ---------- ---------- ----------
Net annuitization activity........ $ (15,667) $ (33,855) $ 234 $ (2,172) $ 13,311 $ (5,328)
---------- ---------- ---------- ---------- ---------- ----------
Decrease in net assets from
participant transactions............. $(4,720,115) $(4,583,667) $(1,538,374) $ (683,013) $(3,772,023) $(1,514,319)
---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets... $(6,231,274) $ (273,660) $(1,606,448) $ 783,584 $(4,390,965) $ (191,520)
NET ASSETS:
Beginning of year..................... 31,203,582 31,477,242 8,323,742 7,540,158 11,036,644 11,228,164
---------- ---------- ---------- ---------- ---------- ----------
End of year........................... $24,972,308 $31,203,582 $6,717,294 $8,323,742 $6,645,679 $11,036,644
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
</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
---------------------- -------------------- ----------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
---------------------- -------------------- ----------------------
1994 1993 1994 1993 1994 1993
---------- ---------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income......................... $ 214,619 $ 103,670 $ 53,180 $ 27,356 $ 750,483 $ 915,254
Net realized gains (losses)................... -- -- -- -- 1,152,091 183,502
Net unrealized gains (losses)................. -- -- -- -- (2,267,010) 926,480
---------- ---------- --------- --------- ---------- ----------
Increase (decrease) in net assets from
operations................................. $ 214,619 $ 103,670 $ 53,180 $ 27,356 $ (364,436) $2,025,236
---------- ---------- --------- --------- ---------- ----------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received.................. $ 390,625 $ 342,742 $ 75,647 $ 56,754 $ 202,770 $ 295,740
Net transfers between Sub-Acccounts and
Fixed Account.............................. 1,918,944 277,556 485,402 (205,277) (20,819) 269,416
Withdrawals, surrenders, annuitizations, and
contract charges........................... (2,896,413) (2,988,197) (960,223) (813,845) (2,371,864) (1,754,580)
---------- ---------- --------- --------- ---------- ----------
Net accumulation activity................. $ (586,844) $(2,367,899) $(399,174) $(962,368) $(2,189,913) $(1,189,424)
---------- ---------- --------- --------- ---------- ----------
Annuitization activity:
Annuitizations.............................. $ -- $ -- $ -- $ -- $ 2,426 $ --
Annuity payments............................ (3,642) (17,244) (199) (204) (24,131) (23,397)
Annuity transfers........................... 20,529 4,654 -- -- -- --
Adjustments to annuity reserve.............. (19,466) 17,250 55 52 2,745 4,907
---------- ---------- --------- --------- ---------- ----------
Net annuitization activity................ $ (2,579) $ 4,660 $ (144) $ (152) $ (18,960) $ (18,490)
---------- ---------- --------- --------- ---------- ----------
Decrease in net assets from participant
transactions................................. $ (589,423) $(2,363,239) $(399,318) $(962,520) $(2,208,873) $(1,207,914)
---------- ---------- --------- --------- ---------- ----------
Increase (decrease) in net assets........... $ (374,804) $(2,259,569) $(346,138) $(935,164) $(2,573,309) $ 817,322
NET ASSETS:
Beginning of year............................. 9,177,068 11,436,637 2,796,669 3,731,833 12,802,089 11,984,767
---------- ---------- --------- --------- ---------- ----------
End of year................................... $8,802,264 $9,177,068 $2,450,531 $2,796,669 $10,228,780 $12,802,089
---------- ---------- --------- --------- ---------- ----------
---------- ---------- --------- --------- ---------- ----------
</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
---------------------- ---------------------- ------------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
---------------------- ---------------------- ------------------------
1994 1993 1994 1993 1994 1993
---------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income..................... $ 134,675 $ 367,495 $ 97,096 $1,083,614 $ 6,225,175 $11,403,793
Net realized gains (losses)............... (56,869) (28,001) 469,030 511,749 1,862,268 2,035,913
Net unrealized gains (losses)............. (421,856) 365,467 (117,182) 1,042,313 (12,004,262) 4,103,783
---------- ---------- ---------- ---------- ----------- -----------
Increase (decrease) in net assets from
operations............................. $ (344,050) $ 704,961 $ 448,944 $2,637,676 $(3,916,819) $17,543,489
---------- ---------- ---------- ---------- ----------- -----------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received.............. $ 60,004 $ 99,690 $ 267,434 $ 281,697 $ 3,132,576 $ 3,218,126
Net transfers between Sub-Acccounts and
Fixed Account.......................... (136,100) (103,742) 322,219 597,202 (297,098) 43,643
Withdrawals, surrenders, annuitizations,
and contract charges................... (700,903) (1,019,759) (1,071,937) (1,798,243) (21,544,194) (20,630,503)
---------- ---------- ---------- ---------- ----------- -----------
Net accumulation activity............. $ (776,999) $(1,023,811) $ (482,284) $ (919,344) $(18,708,716) $(17,368,734)
---------- ---------- ---------- ---------- ----------- -----------
Annuitization activity:
Annuitizations.......................... $ -- $ -- $ -- $ 91,544 $ 51,942 $ 91,544
Annuity payments........................ (5,454) (5,176) (13,626) (11,576) (127,333) (159,176)
Annuity transfers....................... -- -- (20,529) (4,654) -- --
Adjustments to annuity reserve.......... 2,332 (5,944) 21,345 (16,812) 4,147 (6,434)
---------- ---------- ---------- ---------- ----------- -----------
Net annuitization activity............ $ (3,122) $ (11,120) $ (12,810) $ 58,502 $ (71,244) $ (74,066)
---------- ---------- ---------- ---------- ----------- -----------
Decrease in net assets from participant
transactions............................. $ (780,121) $(1,034,931) $ (495,094) $ (860,842) $(18,779,960) $(17,442,800)
---------- ---------- ---------- ---------- ----------- -----------
Increase (decrease) in net assets....... $(1,124,171) $ (329,970) $ (46,150) $1,776,834 $(22,696,779) $ 100,689
NET ASSETS:
Beginning of year......................... 4,430,486 4,760,456 12,709,901 10,933,067 135,411,444 135,310,755
---------- ---------- ---------- ---------- ----------- -----------
End of year............................... $3,306,315 $4,430,486 $12,663,751 $12,709,901 $112,714,665 $135,411,444
---------- ---------- ---------- ---------- ----------- -----------
---------- ---------- ---------- ---------- ----------- -----------
</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 MFR
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
-------------------- -------------------- -------------------- -------------------- --------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
-------------------- -------------------- -------------------- -------------------- --------------------
1994 1993 1994 1993 1994 1993 1994 1993 1994 1993
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Units outstanding
beginning of
year.............. 263,601 299,263 210,268 237,389 646,262 699,832 1,126,904 1,303,035 232,537 253,146
Units
purchased....... 9,625 9,659 5,720 5,393 20,357 18,519 17,873 23,854 3,339 4,484
Units transferred
between
Sub-Accounts and
Fixed Account... (4,059) 1,197 (4,872) (3,487) 7,502 9,541 (29,218) (34,976) 7,358 4,537
Units withdrawn,
surrendered and
annuitized...... (35,748) (46,518) (19,450) (29,027) (93,295) (81,630) (163,421) (165,009) (53,246) (29,630)
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Units outstanding
end of year....... 233,419 263,601 191,666 210,268 580,826 646,262 952,138 1,126,904 189,988 232,537
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
MFB
Sub-Account
--------------------
Year Ended
December 31,
--------------------
1994 1993
--------- ---------
<S> <C> <C>
Units outstanding
beginning of
year.............. 368,774 421,711
Units
purchased....... 7,025 6,460
Units transferred
between
Sub-Accounts and
Fixed Account... (84,505) (10,744)
Units withdrawn,
surrendered and
annuitized...... (57,845) (48,653)
--------- ---------
Units outstanding
end of year....... 233,449 368,774
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
MCM MCG MFH MWG
Sub-Account Sub-Account Sub-Account Sub-Account
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
-------------------- -------------------- -------------------- --------------------
<CAPTION>
1994 1993 1994 1993 1994 1993 1994 1993
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Units outstanding beginning of year...... 512,329 646,162 162,009 218,074 408,637 450,376 125,704 157,841
Units purchased........................ 21,724 19,323 4,349 3,305 6,736 10,271 1,846 3,039
Units transferred between Sub-Accounts
and Fixed Account..................... 107,801 15,391 28,123 (11,964) 1,513 9,246 (4,391) (3,142)
Units withdrawn, surrendered and
annuitized............................ (161,004) (168,547) (55,233) (47,406) (77,337) (61,256) (21,498) (32,034)
--------- --------- --------- --------- --------- --------- --------- ---------
Units outstanding end of year............ 480,850 512,329 139,248 162,009 339,549 408,637 101,661 125,704
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
MEG
Sub-Account
--------------------
<S> <C> <C>
Year Ended
December 31,
--------------------
1994 1993
--------- ---------
<S> <C> <C>
Units outstanding beginning of year...... 405,542 439,127
Units purchased........................ 8,553 10,973
Units transferred between Sub-Accounts
and Fixed Account..................... 11,117 23,612
Units withdrawn, surrendered and
annuitized............................ (34,607) (68,170)
--------- ---------
Units outstanding end of year............ 390,605 405,542
--------- ---------
--------- ---------
</TABLE>
10
<PAGE>
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 December 31, 1994, the
related statement of operations for the year then ended and the statements of
changes in net assets for the years ended December 31, 1994 and 1993. 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 December 31, 1994. 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 December 31,
1994, 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
February 3, 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-2 2/95 10M
[LOGO]
PROFESSIONALLY MANAGED COMBINATION
FIXED/VARIABLE ANNUITY
FOR QUALIFIED RETIREMENT PLANS
ANNUAL REPORT - DECEMBER 31, 1994
ISSUED BY
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.),
A WHOLLY-OWNED SUBSIDIARY OF
SUN LIFE ASSURANCE COMPANY OF CANADA
