<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT C
STATEMENT OF CONDITION -- December 31, 1996
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C> <C>
Investments in mutual funds: Shares Cost Value
------------ ------------ ------------
Massachusetts Investors Trust ("MIT")*........ 966,416 $ 12,085,434 $ 13,977,972
Massachusetts Investors Growth Stock Fund
("MIG")*..................................... 681,422 7,324,130 6,797,756
MFS Total Return Fund ("MTR")*................ 1,609,824 20,807,575 23,813,903
MFS Growth Opportunities Fund ("MGO")*........ 2,429,946 27,331,309 31,507,393
MFS Research Fund ("MFR")*.................... 462,597 6,244,045 8,568,891
MFS Bond Fund ("MFB")*........................ 494,800 6,643,122 6,545,152
MFS Money Market Fund ("MCM")................. 7,889,174 7,889,174 7,889,174
MFS Government Money Market Fund ("MCG")...... 1,384,357 1,384,357 1,384,357
MFS High Income Fund ("MFH")*................. 1,655,686 8,461,078 8,844,864
MFS World Governments Fund ("MWG")*........... 244,980 2,872,725 2,767,578
MFS Emerging Growth Fund ("MEG")*............. 541,628 9,656,872 16,408,248
------------ ------------
$110,699,821 $128,505,288
------------
------------
<CAPTION>
LIABILITIES:
<S> <C> <C> <C>
Payable to sponsor.......................................................... 19,311
------------
Net assets............................................................ $128,485,977
------------
------------
</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...................................... 211,924 $65.4965 $ 13,878,043 $ 109,298 $ 13,987,341
MIG...................................... 137,226 48.9432 6,713,830 90,338 6,804,168
MTR...................................... 445,574 52.6180 23,422,668 281,208 23,703,876
MGO...................................... 752,698 41.5395 31,409,730 154,599 31,564,329
MFR...................................... 143,843 59.3112 8,533,053 45,692 8,578,745
MFB...................................... 186,637 34.3871 6,496,679 55,133 6,551,812
MCM...................................... 401,141 19.5956 7,857,887 30,743 7,888,630
MCG...................................... 73,345 18.8643 1,383,240 1,238 1,384,478
MFH...................................... 229,079 38.2245 8,737,289 136,372 8,873,661
MWG...................................... 70,278 38.3007 2,691,523 33,466 2,724,989
MEG...................................... 321,077 50.8597 16,329,244 94,704 16,423,948
------------ ------------- ------------
Net assets................................................ $127,453,186 $ 1,032,791 $128,485,977
------------ ------------- ------------
------------ ------------- ------------
</TABLE>
*Investments are made in Class A shares of the Fund.
See notes to financial statements
1
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT C
STATEMENTS OF OPERATIONS -- Year Ended December 31, 1996
<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........................................ $ 1,360,768 $1,613,641 $2,584,561 $ 3,410,898 $ 421,247 $ 503,122
Mortality and expense risk charges............... 167,768 91,871 300,949 393,921 107,599 89,184
----------- ---------- ---------- ----------- ---------- ----------
Net investment income........................ $ 1,193,000 $1,521,770 $2,283,612 $ 3,016,977 $ 313,648 $ 413,938
----------- ---------- ---------- ----------- ---------- ----------
Realized and unrealized gains (losses):
Realized gains (losses) on investment
transactions:
Proceeds from sales............................ $ 1,776,789 $2,466,325 $3,990,956 $ 4,161,499 $1,752,819 $1,873,338
Cost of investments sold....................... 1,726,389 2,073,433 3,121,561 3,474,538 1,041,985 2,032,173
----------- ---------- ---------- ----------- ---------- ----------
Net realized gains (losses).................. $ 50,400 $ 392,892 $ 869,395 $ 686,961 $ 710,834 $ (158,835)
----------- ---------- ---------- ----------- ---------- ----------
Net unrealized appreciation (depreciation) on
investments:
End of year.................................... $ 1,892,538 $ (526,374) $3,006,328 $ 4,176,084 $2,324,846 $ (97,970)
Beginning of year.............................. 296,421 9,941 3,270,426 2,314,275 1,679,172 15,221
----------- ---------- ---------- ----------- ---------- ----------
Change in unrealized appreciation
(depreciation).............................. $ 1,596,117 $ (536,315) $ (264,098) $ 1,861,809 $ 645,674 $ (113,191)
----------- ---------- ---------- ----------- ---------- ----------
Realized and unrealized gains (losses)........... $ 1,646,517 $ (143,423) $ 605,297 $ 2,548,770 $1,356,508 $ (272,026)
----------- ---------- ---------- ----------- ---------- ----------
Increase in net assets from operations........... $ 2,839,517 $1,378,347 $2,888,909 $ 5,565,747 $1,670,156 $ 141,912
----------- ---------- ---------- ----------- ---------- ----------
----------- ---------- ---------- ----------- ---------- ----------
</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.......................................... $ 333,700 $ 75,667 $ 776,979 $ 75,412 $ 200,183 $11,356,178
Mortality and expense risk charges................. $ 93,240 $ 21,782 $ 113,895 $ 36,819 $ 227,265 $ 1,644,293
---------- -------- ---------- --------- ---------- -----------
Net investment income (expense)................ $ 240,460 $ 53,885 $ 663,084 $ 38,593 $ (27,082) $ 9,711,885
---------- -------- ---------- --------- ---------- -----------
Realized and unrealized gains (losses):
Realized gains (losses) on investment transactions:
Proceeds from sales.............................. $3,838,287 $836,694 $2,506,867 $ 795,055 $3,756,989 $27,755,618
Cost of investments sold......................... 3,838,287 836,694 2,454,610 903,141 1,964,209 23,467,020
---------- -------- ---------- --------- ---------- -----------
Net realized gains (losses).................... $ -- $ -- $ 52,257 $(108,086) $1,792,780 $ 4,288,598
---------- -------- ---------- --------- ---------- -----------
Net unrealized appreciation (depreciation) on
investments:
End of year...................................... $ -- $ -- $ 383,786 $(105,147) $6,751,376 $17,805,467
Beginning of year................................ -- -- 161,693 (280,006) 6,409,399 13,876,542
---------- -------- ---------- --------- ---------- -----------
Change in unrealized appreciation
(depreciation)................................ $ -- $ -- $ 222,093 $ 174,859 $ 341,977 $ 3,928,925
---------- -------- ---------- --------- ---------- -----------
Realized and unrealized gains...................... $ -- $ -- $ 274,350 $ 66,773 $2,134,757 $ 8,217,523
---------- -------- ---------- --------- ---------- -----------
Increase in net assets from operations............. $ 240,460 $ 53,885 $ 937,434 $ 105,366 $2,107,675 $17,929,408
---------- -------- ---------- --------- ---------- -----------
---------- -------- ---------- --------- ---------- -----------
</TABLE>
See notes to financial statements
2
<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,
------------------------------- ------------------------------ --------------
1996 1995 1996 1995 1996
-------------- -------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income.................. $ 1,193,000 $ 992,999 $ 1,521,770 $ 897,494 $ 2,283,612
Net realized gains (losses)............ 50,400 (65,122) 392,892 94,187 869,395
Net unrealized gains (losses).......... 1,596,117 2,424,177 (536,315) 616,173 (264,098)
-------------- -------------- -------------- ------------- --------------
Increase in net assets from
operations........................ $ 2,839,517 $ 3,352,054 $ 1,378,347 $ 1,607,854 $ 2,888,909
-------------- -------------- -------------- ------------- --------------
CONTRACT OWNER TRANSACTIONS:
Accumulation activity:
Purchase payments received........... $ 336,122 $ 369,642 $ 205,998 $ 179,962 $ 528,206
Net transfers between Sub-Accounts
and
Fixed Account....................... 88,376 632,110 (203,622) 129,225 (145,482)
Withdrawals, surrenders,
annuitizations, and contract
charges............................. (1,397,434) (1,247,573) (2,057,962) (602,589) (3,143,002)
-------------- -------------- -------------- ------------- --------------
Net accumulation activity.......... $ (972,936) $ (245,821) $ (2,055,586) $ (293,402) $ (2,760,278)
-------------- -------------- -------------- ------------- --------------
Annuitization activity:
Annuitizations....................... $ 33,004 $ 6,637 $ -- $ 16,780 $ 8,227
Annuity payments and contract
charges............................. (17,495) (10,426) (3,060) (10,536) (8,688)
Adjustments to annuity reserve....... 11,899 (896) 1,203 334 (41,600)
-------------- -------------- -------------- ------------- --------------
Net annuitization activity......... $ 27,408 $ (4,685) $ (1,857) $ 6,578 $ (42,061)
-------------- -------------- -------------- ------------- --------------
Decrease in net assets from contract
owner transactions.................... $ (945,528) $ (250,506) $ (2,057,443) $ (286,824) $ (2,802,339)
-------------- -------------- -------------- ------------- --------------
Increase (decrease) in net assets.... $ 1,893,989 $ 3,101,548 $ (679,096) $ 1,321,030) $ 86,570
NET ASSETS:
Beginning of year...................... 12,093,352 8,991,804 7,483,264 6,162,234 23,617,306
-------------- -------------- -------------- ------------- --------------
End of year............................ $ 13,987,341 $ 12,093,352 $ 6,804,168 $ 7,483,264 $ 23,703,876
-------------- -------------- -------------- ------------- --------------
-------------- -------------- -------------- ------------- --------------
<CAPTION>
1995
--------------
<S> <C>
OPERATIONS:
Net investment income.................. $ 1,805,498
Net realized gains (losses)............ 847,811
Net unrealized gains (losses).......... 2,464,418
--------------
Increase in net assets from
operations........................ $ 5,117,727
--------------
CONTRACT OWNER TRANSACTIONS:
Accumulation activity:
Purchase payments received........... $ 632,542
Net transfers between Sub-Accounts
and
Fixed Account....................... (573,277)
Withdrawals, surrenders,
annuitizations, and contract
charges............................. (3,299,740)
--------------
Net accumulation activity.......... $ (3,240,475)
--------------
Annuitization activity:
Annuitizations....................... $ 16,421
Annuity payments and contract
charges............................. (33,654)
Adjustments to annuity reserve....... (16,418)
--------------
Net annuitization activity......... $ (33,651)
--------------
Decrease in net assets from contract
owner transactions.................... $ (3,274,126)
--------------
Increase (decrease) in net assets.... $ 1,843,601
NET ASSETS:
Beginning of year...................... 21,773,705
--------------
End of year............................ $ 23,617,306
--------------
--------------
</TABLE>
See notes to financial statements
3
<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,
------------------------------- ------------------------------ -------------
1996 1995 1996 1995 1996
-------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income................... $ 3,016,977 $ 3,299,790 $ 313,648 $ 379,798 $ 413,938
Net realized gains (losses)............. 686,961 510,987 710,834 329,788 (158,835)
Net unrealized gains (losses)........... 1,861,809 3,975,183 645,674 1,571,031 (113,191)
-------------- -------------- ------------- -------------- -------------
Increase in net assets from
operations......................... $ 5,565,747 $ 7,785,960 $ 1,670,156 $ 2,280,617 $ 141,912
-------------- -------------- ------------- -------------- -------------
CONTRACT OWNER TRANSACTIONS:
Accumulation activity:
Purchase payments received............ $ 446,789 $ 453,315 $ 143,449 $ 135,168 $ 155,303
Net transfers between Sub-Accounts and
Fixed Account........................ (284,146) (83,265) 382,929 (299,560) 32,233
Withdrawals, surrenders,
annuitizations, and contract
charges.............................. (3,282,766) (4,010,089) (1,327,739) (1,142,203) (1,500,550)
-------------- -------------- ------------- -------------- -------------
Net accumulation activity........... $ (3,120,123) $ (3,640,039) $ (801,361) $ (1,306,595) $ (1,313,014)
-------------- -------------- ------------- -------------- -------------
Annuitization activity:
Annuitizations........................ $ 4,584 $ 17,843 $ -- $ 13,047 $ --
Annuity payments and contract
charges.............................. (30,270) (17,899) (662) (3,401) (8,224)
Adjustments to annuity reserve........ 17,719 8,499 10,666 (1,016) 1,076
-------------- -------------- ------------- -------------- -------------
Net annuitization activity.......... $ (7,967) $ 8,443 $ 10,004 $ 8,630 $ (7,148)
-------------- -------------- ------------- -------------- -------------
Decrease in net assets from contract
owner transactions..................... $ (3,128,090) $ (3,631,596) $ (791,357) $ (1,297,965) $ (1,320,162)
-------------- -------------- ------------- -------------- -------------
Increase (decrease) in net assets..... $ 2,437,657 $ 4,154,364 $ 878,799 $ 982,652 $ (1,178,250)
NET ASSETS:
Beginning of year....................... 29,126,672 24,972,308 7,699,946 6,717,294 7,730,062
-------------- -------------- ------------- -------------- -------------
End of year............................. $ 31,564,329 $ 29,126,672 $ 8,578,745 $ 7,699,946 $ 6,551,812
-------------- -------------- ------------- -------------- -------------
-------------- -------------- ------------- -------------- -------------
<CAPTION>
1995
-------------
<S> <C>
OPERATIONS:
Net investment income................... $ 446,610
Net realized gains (losses)............. (88,404)
Net unrealized gains (losses)........... 939,231
-------------
Increase in net assets from
operations......................... $ 1,297,437
-------------
CONTRACT OWNER TRANSACTIONS:
Accumulation activity:
Purchase payments received............ $ 149,502
Net transfers between Sub-Accounts and
Fixed Account........................ 633,442
Withdrawals, surrenders,
annuitizations, and contract
charges.............................. (990,064)
-------------
Net accumulation activity........... $ (207,120)
-------------
Annuitization activity:
Annuitizations........................ $ --
Annuity payments and contract
charges.............................. (7,848)
Adjustments to annuity reserve........ 1,914
-------------
Net annuitization activity.......... $ (5,934)
-------------
Decrease in net assets from contract
owner transactions..................... $ (213,054)
-------------
Increase (decrease) in net assets..... $ 1,084,383
NET ASSETS:
Beginning of year....................... 6,645,679
-------------
End of year............................. $ 7,730,062
-------------
-------------
</TABLE>
See notes to financial statements
4
<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,
------------------------------ ----------------------------- ------------------------------
1996 1995 1996 1995 1996 1995
------------- -------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income........ $ 240,460 $ 293,849 $ 53,885 $ 84,729 $ 663,084 $ 724,913
Net realized gains........... -- -- -- -- 52,257 150,663
Net unrealized gains......... -- -- -- -- 222,093 581,065
------------- -------------- ------------- ------------- ------------- --------------
Increase in net assets
from operations......... $ 240,460 $ 293,849 $ 53,885 $ 84,729 $ 937,434 $ 1,456,641
------------- -------------- ------------- ------------- ------------- --------------
CONTRACT OWNER TRANSACTIONS:
Accumulation activity:
Purchase payments
received.................. $ 136,550 $ 238,984 $ 80,866 $ 66,406 $ 121,432 $ 221,528
Net transfers between Sub-
Accounts and Fixed
Account................... 1,635,082 (301,095) (278,103) (259,690) (411,820) (211,934)
Withdrawals, surrenders,
annuitizations, and
contract charges.......... (1,188,558) (1,961,874) (449,456) (364,427) (968,697) (2,451,712)
------------- -------------- ------------- ------------- ------------- --------------
Net accumulation
activity................ $ 583,074 $(2,023,985) $ (646,693) $ (557,711) $(1,259,085) $(2,442,118)
------------- -------------- ------------- ------------- ------------- --------------
Annuitization activity:
Annuitizations............. $ -- $ -- $ -- $ -- $ -- $ --
Annuity payments and
contract charges.......... (4,013) (4,026) (196) (196) (21,880) (19,590)
Adjustments to annuity
reserve................... 543 464 67 62 (927) (5,594)
------------- -------------- ------------- ------------- ------------- --------------
Net annuitization
activity................ $ (3,470) $ (3,562) $ (129) $ (134) $ (22,807) $ (25,184)
------------- -------------- ------------- ------------- ------------- --------------
Increase (decrease) in net
assets from contract owner
transactions................ $ 579,604 $(2,027,547) $ (646,822) $ (557,845) $(1,281,892) $(2,467,302)
------------- -------------- ------------- ------------- ------------- --------------
Increase (decrease) in net
assets.................... $ 820,064 $(1,733,698) $ (592,937) $ (473,116) $ (344,458) $(1,010,661)
NET ASSETS:
Beginning of year............ 7,068,566 8,802,264 1,977,415 2,450,531 9,218,119 10,228,780
------------- -------------- ------------- ------------- ------------- --------------
End of year.................. $7,888,630 $ 7,068,566 $1,384,478 $1,977,415 $8,873,661 $ 9,218,119
------------- -------------- ------------- ------------- ------------- --------------
------------- -------------- ------------- ------------- ------------- --------------
</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>
MWG MEG
Sub-Account Sub-Account Total
----------------------------- ------------------------------- -------------------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
----------------------------- ------------------------------- -------------------------------
1996 1995 1996 1995 1996 1995
------------- ------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(expense)................... $ 38,593 $ 351,401 $ (27,082) $ (185,410) $ 9,711,885 $ 9,091,671
Net realized gains
(losses).................... (108,086) (49,998) 1,792,780 529,814 4,288,598 2,259,726
Net unrealized gains......... 174,859 132,378 341,977 4,423,528 3,928,925 17,127,184
------------- ------------- -------------- -------------- -------------- --------------
Increase in net assets
from operations......... $ 105,366 $ 433,781 $ 2,107,675 $ 4,767,932 $ 17,929,408 $ 28,478,581
------------- ------------- -------------- -------------- -------------- --------------
CONTRACT OWNER TRANSACTIONS:
Accumulation activity:
Purchase payments
received.................. $ 32,241 $ 56,089 $ 413,103 $ 313,173 $ 2,600,059 $ 2,816,311
Net transfers between Sub-
Accounts and Fixed
Account................... (103,978) (8,929) (785,333) 252,941 (73,864) (90,032)
Withdrawals, surrenders,
annuitizations, and
contract charges.......... (400,559) (694,187) (2,122,298) (1,159,186) (17,839,021) (17,923,644)
------------- ------------- -------------- -------------- -------------- --------------
Net accumulation
activity................ $ (472,296) $ (647,027) $(2,494,528) $ (593,072) $(15,312,826) $(15,197,365)
------------- ------------- -------------- -------------- -------------- --------------
Annuitization activity:
Annuitizations............. $ -- $ 19,499 $ -- $ -- $ 45,815 $ 90,227
Annuity payments and
contract charges.......... (7,791) (5,171) (19,817) (15,686) (122,096) (128,433)
Adjustments to annuity
reserve................... (2,303) (5,384) 1,874 5,819 217 (12,216)
------------- ------------- -------------- -------------- -------------- --------------
Net annuitization
activity................ $ (10,094) $ 8,944 $ (17,943) $ (9,867) $ (76,064) $ (50,422)
------------- ------------- -------------- -------------- -------------- --------------
Decrease in net assets from
contract owner
transactions................ $ (482,390) $ (638,083) $(2,512,471) $ (602,939) $(15,388,890) $(15,247,787)
------------- ------------- -------------- -------------- -------------- --------------
Increase (decrease) in net
assets.................... $ (377,024) $ (204,302) $ (404,796) $ 4,164,993 $ 2,540,518 $ 13,230,794
NET ASSETS:
Beginning of year............ 3,102,013 3,306,315 16,828,744 12,663,751 125,945,459 112,714,665
------------- ------------- -------------- -------------- -------------- --------------
End of year.................. $2,724,989 $3,102,013 $16,423,948 $16,828,744 $128,485,977 $125,945,459
------------- ------------- -------------- -------------- -------------- --------------
------------- ------------- -------------- -------------- -------------- --------------
</TABLE>
See notes to financial statements
6
<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 subsidiary of the
Sponsor.
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The preparation of financial statements in conformity with 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 revenue and expenses during the reporting period. Actual
results could differ from those estimates.
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%.
7
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT C
NOTES TO FINANCIAL STATEMENTS -- continued
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.
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.
8
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT C
NOTES TO FINANCIAL STATEMENTS -- continued
(5) TRANSACTIONS IN UNITS OUTSTANDING
<TABLE>
<CAPTION>
MIT MIG MTR MGO MFR
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
-------------------- -------------------- -------------------- -------------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year
Ended
Year Ended Year Ended Year Ended Year Ended December
December 31, December 31, December 31, December 31, 31,
-------------------- -------------------- -------------------- -------------------- ---------
<CAPTION>
1996 1995 1996 1995 1996 1995 1996 1995 1996
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Units outstanding,
beginning of year....... 228,398 233,419 183,386 191,666 502,308 580,826 835,555 952,138 158,916
Units purchased........ 5,745 8,255 4,638 5,027 10,862 15,382 11,777 15,050 2,691
Units transferred
between Sub-Accounts
and Fixed Account..... 1,726 14,317 (4,521) 3,509 (2,602) (13,411) (8,450) (3,016) 6,223
Units withdrawn,
surrendered and
annuitized............ (23,945) (27,593) (46,277) (16,816) (64,994) (80,489) (86,184) (128,617) (23,987)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Units outstanding, end of
year.................... 211,924 228,398 137,226 183,386 445,574 502,308 752,698 835,555 143,843
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
MFB
Sub-Account
--------------------
<S> <C> <C> <C>
Year Ended
December 31,
--------------------
1995 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Units outstanding,
beginning of year....... 189,988 226,571 233,449
Units purchased........ 3,374 4,694 4,911
Units transferred
between Sub-Accounts
and Fixed Account..... (7,419) 970 19,907
Units withdrawn,
surrendered and
annuitized............ (27,027) (45,598) (31,696)
--------- --------- ---------
Units outstanding, end of
year.................... 158,916 186,637 226,571
--------- --------- ---------
--------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
MCM MCG MFH MWG
Sub-Account Sub-Account Sub-Account Sub-Account
---------------------- ------------------------ ------------------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Year Ended
Year Ended Year Ended Year Ended December
December 31, December 31, December 31, 31,
---------------------- ------------------------ ------------------------ -----------
<CAPTION>
1996 1995 1996 1995 1996 1995 1996
----------- --------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Units outstanding, beginning of year.... 371,369 480,850 108,206 139,248 264,391 339,549 83,177
Units purchased....................... 7,091 12,892 4,338 3,707 3,422 7,012 882
Units transferred between Sub-Accounts
and Fixed Account.................... 84,305 (16,523) (14,954) (14,383) (11,805) (6,198) (2,797)
Units withdrawn, surrendered and
annuitized........................... (61,624) (105,850) (24,245) (20,366) (26,929) (75,972) (10,984)
----------- --------- ----------- ----------- ----------- ----------- -----------
Units outstanding, end of year.......... 401,141 371,369 73,345 108,206 229,079 264,391 70,278
----------- --------- ----------- ----------- ----------- ----------- -----------
----------- --------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
MEG
Sub-Account
------------------------
<S> <C> <C> <C>
Year Ended
December 31,
------------------------
1995 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Units outstanding, beginning of year.... 101,661 372,726 390,605
Units purchased....................... 1,602 8,398 8,332
Units transferred between Sub-Accounts
and Fixed Account.................... (229) (16,860) 5,480
Units withdrawn, surrendered and
annuitized........................... (19,857) (43,187) (31,691)
----------- ----------- -----------
Units outstanding, end of year.......... 83,177 321,077 372,726
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
9
<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, 1996, the
related statements of operations for the year then ended and the statements of
changes in net assets for the years ended December 31, 1996 and 1995. 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 of securities held at December 31, 1996 by correspondence with the
custodian. 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,
1996, 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 7, 1997
----------------------------------------
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.
10
<PAGE>
COMPASS-I
DIRECTORS AND OFFICERS OF
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
JOHN D. McNEIL, Chairman and Director
DONALD A. STEWART, 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
MARGARET SEARS MEAD, Assistant Vice President
and Secretary
L. BROCK THOMSON, Vice President and 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.
[LOGO]
PROFESSIONALLY MANAGED COMBINATION
FIXED/VARIABLE ANNUITY
FOR QUALIFIED RETIREMENT PLANS
ANNUAL REPORT - DECEMBER 31, 1996
ISSUED BY
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.),
A WHOLLY-OWNED SUBSIDIARY OF
SUN LIFE ASSURANCE COMPANY OF CANADA
