<PAGE>
PERFORMANCE SUMMARY
These performance results do not reflect any applicable surrender charges or
contract charges. Past performance is no guarantee of future results.
<TABLE>
<CAPTION>
Unit Value
-------------------------------- Percent
June 30, Change
Compass 1 (U.S.) Contracts December 31, 1996 1997 in Unit Value
----------------- ------------ -------------
<S> <C> <C> <C>
Massachusetts Investors Trust........................ $65.4965 $77.3818 18.15%
Massachusetts Investors Growth Stock Fund............ 48.9432 61.4079 25.47%
MFS Total Return Fund................................ 52.6180 57.9137 10.06%
MFS Growth Opportunities Fund........................ 41.5395 47.6327 14.67%
MFS Reseach Fund..................................... 59.3112 66.6105 12.31%
MFS Bond Fund........................................ 34.3871 35.4335 3.04%
MFS Money Market Fund................................ 19.5956 19.3228 (1.39)%
MFS Government Money Market Fund..................... 18.8643 19.1668 1.60%
MFS High Income Fund................................. 38.2245 40.4401 5.80%
MFS World Governments Fund........................... 38.3007 37.1718 (2.95)%
MFS Emerging Growth Fund............................. 50.8597 57.0523 12.18%
</TABLE>
1
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT C
STATEMENT OF CONDITION -- June 30, 1997
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C> <C>
Investments in mutual funds: Shares Cost Value
------------ ------------ ------------
Massachusetts Investors Trust ("MIT")*........ 890,755 $ 11,133,691 $ 15,232,922
Massachusetts Investors Growth Stock Fund
("MIG")*.................................... 579,402 6,170,621 7,298,602
MFS Total Return Fund ("MTR")*................ 1,458,142 19,172,156 23,436,227
MFS Growth Opportunities Fund ("MGO")*........ 2,293,560 25,908,284 34,320,238
MFS Reseach Fund ("MFR")*..................... 427,638 5,956,925 8,953,314
MFS Bond Fund ("MFB")*........................ 448,770 5,977,050 5,945,171
MFS Money Market Fund ("MCM")................. 6,824,840 6,824,840 6,824,840
MFS Government Money Market Fund ("MCG")...... 1,269,378 1,269,378 1,269,378
MFS High Income Fund ("MFH")*................. 1,534,900 7,819,945 8,308,725
MFS World Governments Fund ("MWG")*........... 208,620 2,426,050 2,302,037
MFS Emerging Growth Fund ("MEG")*............. 504,715 9,305,673 17,261,871
------------ ------------
$101,964,613 $131,153,325
------------
------------
Receivable from sponsor..................................................... 145,816
------------
Net Assets............................................................ $131,299,141
------------
------------
</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...................................... 194,517 $77.3818 $ 15,050,037 $ 203,766 $ 15,253,803
MIG...................................... 117,350 61.4079 7,202,965 104,341 7,307,306
MTR...................................... 400,210 57.9137 23,144,945 287,903 23,432,848
MGO...................................... 714,912 47.6327 34,217,947 168,460 34,386,407
MFR...................................... 133,837 66.6105 8,916,738 48,724 8,965,462
MFB...................................... 162,680 35.4335 5,845,987 118,266 5,964,253
MCM...................................... 338,585 19.3228 6,745,686 87,507 6,833,193
MCG...................................... 66,195 19.1668 1,268,335 1,202 1,269,537
MFH...................................... 204,747 40.4401 8,210,648 133,444 8,344,092
MWG...................................... 59,676 37.1718 2,218,103 44,561 2,262,664
MEG...................................... 301,030 57.0523 17,173,774 105,802 17,279,576
------------ ----------- ------------
Net Assets................................................ $129,995,165 $1,303,976 $131,299,141
------------ ----------- ------------
------------ ----------- ------------
</TABLE>
*Investments are made in Class A shares of the Fund.
See notes to financial statements
2
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT C
STATEMENTS OF OPERATIONS -- Six Months Ended June 30, 1997
<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.......................................... $ 82,487 $ -- $ 442,407 $ -- $ -- $213,822
Mortality and expense risk charges................. 90,789 42,644 147,002 $ 204,745 54,492 38,108
---------- ---------- ---------- ---------- ---------- --------
Net investment income (expense)................ $ (8,302) $ (42,644) $ 295,405 $ (204,745) $ (54,492) $175,714
---------- ---------- ---------- ---------- ---------- --------
Realized and unrealized gains (losses):
Realized gains (losses) on investment transactions:
Proceeds from sales.............................. $1,753,640 $1,221,643 $2,859,975 $2,089,745 $ 945,882 $923,048
Cost of investments sold......................... 1,557,586 1,282,735 2,198,617 1,653,305 564,156 983,599
---------- ---------- ---------- ---------- ---------- --------
Net realized gains (losses).................... $ 196,054 $ (61,092) $ 661,358 $ 436,440 $ 381,726 $(60,551)
---------- ---------- ---------- ---------- ---------- --------
Net unrealized appreciation (depreciation) on
investments:
End of period.................................... $4,099,231 $1,127,981 $4,264,071 $8,411,954 $2,996,389 $(31,879)
Beginning of period.............................. 1,892,538 (526,374) 3,006,328 4,176,084 2,324,846 (97,970)
---------- ---------- ---------- ---------- ---------- --------
Change in unrealized appreciation.............. $2,206,693 $1,654,355 $1,257,743 $4,235,870 $ 671,543 $ 66,091
---------- ---------- ---------- ---------- ---------- --------
Realized and unrealized gains...................... $2,402,747 $1,593,263 $1,919,101 $4,672,310 $1,053,269 $ 5,540
---------- ---------- ---------- ---------- ---------- --------
Increase in net assets from operations............. $2,394,445 $1,550,619 $2,214,506 $4,467,565 $ 998,777 $181,254
---------- ---------- ---------- ---------- ---------- --------
---------- ---------- ---------- ---------- ---------- --------
</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.......................................... $ 171,259 $ 29,200 $ 368,712 $ -- $ -- $ 1,307,887
Mortality and expense risk charges................. 46,581 8,392 53,629 14,972 104,015 805,369
---------- -------- ---------- --------- ---------- -----------
Net investment income (expense)................ $ 124,678 $ 20,808 $ 315,083 $ (14,972) $ (104,015) $ 502,518
---------- -------- ---------- --------- ---------- -----------
Realized and unrealized gains (losses):
Realized gains (losses) on investment transactions:
Proceeds from sales.............................. $2,227,258 $163,789 $1,213,638 $ 422,511 $1,555,449 $15,376,578
Cost of investments sold......................... 2,227,258 163,789 1,211,381 467,492 757,006 13,066,924
---------- -------- ---------- --------- ---------- -----------
Net realized gains (losses).................... $ -- $ -- $ 2,257 $ (44,981) $ 798,443 $ 2,309,654
---------- -------- ---------- --------- ---------- -----------
Net unrealized appreciation (depreciation) on
investments:
End of period.................................... $ -- $ -- $ 488,780 $(124,013) $7,956,198 $29,188,712
Beginning of period.............................. -- -- 383,786 (105,147) 6,751,376 17,805,467
---------- -------- ---------- --------- ---------- -----------
Change in unrealized appreciation
(depreciation)............................... $ -- $ -- $ 104,994 $ (18,866) $1,204,822 $11,383,245
---------- -------- ---------- --------- ---------- -----------
Realized and unrealized gains (losses)............. $ -- $ -- $ 107,251 $ (63,847) $2,003,265 $13,692,899
---------- -------- ---------- --------- ---------- -----------
Increase (decrease) in net assets from
operations........................................ $ 124,678 $ 20,808 $ 422,334 $ (78,819) $1,899,250 $14,195,417
---------- -------- ---------- --------- ---------- -----------
---------- -------- ---------- --------- ---------- -----------
</TABLE>
See notes to financial statements
3
<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
------------------------------- ------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
Six Months Year Ended Six Months Year Ended Six Months Year Ended
Ended December 31, Ended December 31, Ended December 31,
June 30, 1997 1996 June 30, 1997 1996 June 30, 1997 1996
-------------- -------------- -------------- -------------- -------------- --------------
OPERATIONS:
Net investment income
(expense)................... $ (8,302) $ 1,193,000 $ (42,644) $ 1,521,770 $ 295,405 $ 2,283,612
Net realized gains
(losses).................... 196,054 50,400 (61,092) 392,892 661,358 869,395
Net unrealized gains
(losses).................... 2,206,693 1,596,117 1,654,355 (536,315) 1,257,743 (264,098)
-------------- -------------- -------------- -------------- -------------- --------------
Increase in net assets
from operations........ $ 2,394,445 $ 2,839,517 $ 1,550,619 $ 1,378,347 $ 2,214,506 $ 2,888,909
-------------- -------------- -------------- -------------- -------------- --------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments
received................. $ 155,896 $ 336,122 $ 98,468 $ 205,998 $ 216,131 $ 528,206
Net transfers between Sub-
Accounts and Fixed
Account.................. 259,071 88,376 (33,682) (203,622) (12,469) (145,482)
Withdrawals, surrenders,
annuitizations and
contract charges......... (1,609,117) (1,397,434) (1,105,602) (2,057,962) (2,668,253) (3,143,002)
-------------- -------------- -------------- -------------- -------------- --------------
Net accumulation
activity............... $(1,194,150) $ (972,936) $(1,040,816) $(2,055,586) $(2,464,591) $(2,760,278)
-------------- -------------- -------------- -------------- -------------- --------------
Annuitization activity:
Annuitizations............. $ 73,820 $ 33,004 $ -- $ -- $ -- $ 8,227
Annuity payments and
contract charges......... (19,165) (17,495) (8,956) (3,060) (127,591) (8,688)
Adjustments to annuity
reserve.................. 11,512 11,899 2,291 1,203 106,648 (41,600)
-------------- -------------- -------------- -------------- -------------- --------------
Net annuitization
activity............... $ 66,167 $ 27,408 $ (6,665) $ (1,857) $ (20,943) $ (42,061)
-------------- -------------- -------------- -------------- -------------- --------------
Decrease in net assets from
contract owner
transactions................ $(1,127,983) $ (945,528) $(1,047,481) $(2,057,443) $(2,485,534) $(2,802,339)
-------------- -------------- -------------- -------------- -------------- --------------
Increase (decrease) in net
assets................... $ 1,266,462 $ 1,893,989 $ 503,138 $ (679,096) $ (271,028) $ 86,570
NET ASSETS:
Beginning of period.......... 13,987,341 12,093,352 6,804,168 7,483,264 23,703,876 23,617,306
-------------- -------------- -------------- -------------- -------------- --------------
End of period................ $15,253,803 $13,987,341 $ 7,307,306 $ 6,804,168 $23,432,848 $23,703,876
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
</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>
MGO MFR MFB
Sub-Account Sub-Account Sub-Account
------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Six Months Year Ended Six Months Year Ended Six Months Year Ended
Ended December 31, Ended December 31, Ended December 31,
June 30, 1997 1996 June 30, 1997 1996 June 30, 1997 1996
------------- -------------- ------------- -------------- ------------- --------------
OPERATIONS:
Net investment income
(expense)................... $ (204,745) $ 3,016,977 $ (54,492) $ 313,648 $ 175,714 $ 413,938
Net realized gains
(losses).................... 436,440 686,961 381,726 710,834 (60,551) (158,835)
Net unrealized gains
(losses).................... 4,235,870 1,861,809 671,543 645,674 66,091 (113,191)
------------- -------------- ------------- -------------- ------------- --------------
Increase in net assets
from operations........ $ 4,467,565 $ 5,565,747 $ 998,777 $ 1,670,156 $ 181,254 $ 141,912
------------- -------------- ------------- -------------- ------------- --------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments
received................. $ 226,768 $ 446,789 $ 53,099 $ 143,449 $ 57,963 $ 155,303
Net transfers between Sub-
Accounts and Fixed
Account.................. (51,682) (284,146) 133,912 382,929 (113,070) 32,233
Withdrawals, surrenders,
annuitizations and
contract charges......... (1,820,625) (3,282,766) (797,787) (1,327,739) (773,117) (1,500,550)
------------- -------------- ------------- -------------- ------------- --------------
Net accumulation
activity............... $(1,645,539) $(3,120,123) $ (610,776) $ (801,361) $ (828,224) $(1,313,014)
------------- -------------- ------------- -------------- ------------- --------------
Annuitization activity:
Annuitizations............. $ 2,928 $ 4,584 $ -- $ -- $ 52,142 $ --
Annuity payments and
contract charges......... (12,110) (30,270) (3,579) (662) (5,153) (8,224)
Adjustments to annuity
reserve.................. 9,234 17,719 2,295 10,666 12,422 1,076
------------- -------------- ------------- -------------- ------------- --------------
Net annuitization
activity............... $ 52 $ (7,967) $ 1,284 $ 10,004 $ 59,411 $ (7,148)
------------- -------------- ------------- -------------- ------------- --------------
Decrease in net assets from
contract owner
transactions................ $(1,645,487) $(3,128,090) $ (612,060) $ (791,357) $ (768,813) $(1,320,162)
------------- -------------- ------------- -------------- ------------- --------------
Increase (decrease) in net
assets................... $ 2,822,078 $ 2,437,657 $ 386,717 $ 878,799 $ (587,559) $(1,178,250)
NET ASSETS:
Beginning of period.......... 31,564,329 29,126,672 8,578,745 7,699,946 6,551,812 7,730,062
------------- -------------- ------------- -------------- ------------- --------------
End of period................ $34,386,407 $31,564,329 $8,965,462 $ 8,578,745 $5,964,253 $ 6,551,812
------------- -------------- ------------- -------------- ------------- --------------
------------- -------------- ------------- -------------- ------------- --------------
</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>
MCM MCG MFH
Sub-Account Sub-Account Sub-Account
------------------------------- ----------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Six Months Year Ended Six Months Year Ended Six Months Year Ended
Ended December 31, Ended December 31, Ended December 31,
June 30, 1997 1996 June 30, 1997 1996 June 30, 1997 1996
-------------- -------------- ------------- ------------- ------------- --------------
OPERATIONS:
Net investment income........ $ 124,678 $ 240,460 $ 20,808 $ 53,885 $ 315,083 $ 663,084
Net realized gains........... -- -- -- -- 2,257 52,257
Net unrealized gains......... -- -- -- -- 104,994 222,093
-------------- -------------- ------------- ------------- ------------- --------------
Increase in net assets
from operations........ $ 124,678 $ 240,460 $ 20,808 $ 53,885 $ 422,334 $ 937,434
-------------- -------------- ------------- ------------- ------------- --------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments
received................. $ 59,113 $ 136,550 $ 14,616 $ 80,866 $ 38,820 $ 121,432
Net transfers between Sub-
Accounts and Fixed
Account.................. (286,040) 1,635,082 (26,667) (278,103) (234,126) (411,820)
Withdrawals, surrenders,
annuitizations and
contract charges......... (1,008,682) (1,188,558) (123,638) (449,456) (747,953) (968,697)
-------------- -------------- ------------- ------------- ------------- --------------
Net accumulation
activity............... $(1,235,609) $ 583,074 $ (135,689) $ (646,693) $ (943,259) $(1,259,085)
-------------- -------------- ------------- ------------- ------------- --------------
Annuitization activity:
Annuitizations............. $ 49,826 $ -- $ -- $ -- $ -- $ --
Annuity payments and
contract charges......... (3,228) (4,013) (97) (196) (11,718) (21,880)
Annuity transfers.......... -- -- -- -- (3,495) --
Adjustments to annuity
reserve.................. 8,896 543 37 67 6,569 (927)
-------------- -------------- ------------- ------------- ------------- --------------
Net annuitization
activity............... $ 55,494 $ (3,470) $ (60) $ (129) $ (8,644) $ (22,807)
-------------- -------------- ------------- ------------- ------------- --------------
Increase (decrease) in net
assets from contract owner
transactions................ $(1,180,115) $ 579,604 $ (135,749) $ (646,822) $ (951,903) $(1,281,892)
-------------- -------------- ------------- ------------- ------------- --------------
Increase (decrease) in net
assets................... $(1,055,437) $ 820,064 $ (114,941) $ (592,937) $ (529,569) $ (344,458)
NET ASSETS:
Beginning of period.......... 7,888,630 7,068,566 1,384,478 1,977,415 8,873,661 9,218,119
-------------- -------------- ------------- ------------- ------------- --------------
End of period................ $ 6,833,193 $ 7,888,630 $1,269,537 $1,384,478 $8,344,092 $ 8,873,661
-------------- -------------- ------------- ------------- ------------- --------------
-------------- -------------- ------------- ------------- ------------- --------------
</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>
MWG MEG
Sub-Account Sub-Account Total
----------------------------- ------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
Six Months Year Ended Six Months Year Ended Six Months Year Ended
Ended December 31, Ended December 31, Ended December 31,
June 30, 1997 1996 June 30, 1997 1996 June 30, 1997 1996
------------- ------------- -------------- -------------- -------------- --------------
OPERATIONS:
Net investment income
(expense)................... $ (14,972) $ 38,593 $ (104,015) $ (27,082) $ 502,518 $ 9,711,885
Net realized gains
(losses).................... (44,981) (108,086) 798,443 1,792,780 2,309,654 4,288,598
Net unrealized gains
(losses).................... (18,866) 174,859 1,204,822 341,977 11,383,245 3,928,925
------------- ------------- -------------- -------------- -------------- --------------
Increase (decrease) in
net assets from
operations............. $ (78,819) $ 105,366 $ 1,899,250 $ 2,107,675 $ 14,195,417 $ 17,929,408
------------- ------------- -------------- -------------- -------------- --------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments
received................. $ 11,844 $ 32,241 $ 149,423 $ 413,103 $ 1,082,141 $ 2,600,059
Net transfers between Sub-
Accounts and Fixed
Account.................. (61,228) (103,978) 390,829 (785,333) (35,152) (73,864)
Withdrawals, surrenders,
annuitizations and
contract charges......... (346,893) (400,559) (1,585,687) (2,122,298) (12,587,354) (17,839,021)
------------- ------------- -------------- -------------- -------------- --------------
Net accumulation
activity............... $ (396,277) $ (472,296) $(1,045,435) $(2,494,528) $(11,540,365) $(15,312,826)
------------- ------------- -------------- -------------- -------------- --------------
Annuitization activity:
Annuitizations............. $ 12,236 $ -- $ 4,465 $ -- $ 195,417 $ 45,815
Annuity payments and
contract charges......... (2,680) (7,791) (8,155) (19,817) (202,432) (122,096)
Annuity transfers.......... -- -- 3,495 -- -- --
Adjustments to annuity
reserve.................. 3,215 (2,303) 2,008 1,874 165,127 217
------------- ------------- -------------- -------------- -------------- --------------
Net annuitization
activity............... $ 12,771 $ (10,094) $ 1,813 $ (17,943) $ 158,112 $ (76,064)
------------- ------------- -------------- -------------- -------------- --------------
Decrease in net assets from
contract owner
transactions................ $ (383,506) $ (482,390) $(1,043,622) $(2,512,471) $(11,382,253) $(15,388,890)
------------- ------------- -------------- -------------- -------------- --------------
Increase (decrease) in net
assets................... $ (462,325) $ (377,024) $ 855,628 $ (404,796) $ 2,813,164 $ 2,540,518
NET ASSETS:
Beginning of period.......... 2,724,989 3,102,013 16,423,948 16,828,744 128,485,977 125,945,459
------------- ------------- -------------- -------------- -------------- --------------
End of period................ $2,262,664 $2,724,989 $17,279,576 $16,423,948 $131,299,141 $128,485,977
------------- ------------- -------------- -------------- -------------- --------------
------------- ------------- -------------- -------------- -------------- --------------
</TABLE>
See notes to financial statements
7
<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%.
8
<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.
9
<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
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
Ended Year Ended Ended Year Ended Ended Year Ended Ended Year Ended
June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31,
1997 1996 1997 1996 1997 1996 1997 1996
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Units outstanding
beginning of period..... 211,924 228,398 137,226 183,386 445,574 502,308 752,698 835,555
Units purchased........ 2,240 5,745 1,761 4,638 3,980 10,862 5,311 11,777
Units transferred
between Sub-Accounts
and Fixed Account.... 3,589 1,726 (743) (4,521) (216) (2,602) (1,257) (8,450)
Units withdrawn,
surrendered, and
annuitized........... (23,236) (23,945) (20,894) (46,277) (49,128) (64,994) (41,840) (86,184)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Units outstanding end of
period.................. 194,517 211,924 117,350 137,226 400,210 445,574 714,912 752,698
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
MFR MFB
Sub-Account Sub-Account
------------------------ ------------------------
<S> <C> <C> <C> <C>
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, Dec. 31, June 30, Dec. 31,
1997 1996 1997 1996
----------- ----------- ----------- -----------
Units outstanding
beginning of period..... 143,843 158,916 186,637 226,571
Units purchased........ 873 2,691 1,681 4,694
Units transferred
between Sub-Accounts
and Fixed Account.... 2,334 6,223 (3,272) 970
Units withdrawn,
surrendered, and
annuitized........... (13,213) (23,987) (22,366) (45,598)
----------- ----------- ----------- -----------
Units outstanding end of
period.................. 133,837 143,843 162,680 186,637
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</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 Six Months Six Months Six Months
Ended Year Ended Ended Year Ended Ended Year Ended Ended
June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31, June 30,
1997 1996 1997 1996 1997 1996 1997
----------- ----------- ----------- ----------- ----------- ----------- -----------
Units outstanding beginning of period... 401,141 371,369 73,345 108,206 229,079 264,391 70,278
Units purchased....................... 2,990 7,091 771 4,338 1,000 3,422 319
Units transferred between Sub-Accounts
and Fixed Account................... (14,445) 84,305 (1,401) (14,954) (5,992) (11,805) (1,630)
Units withdrawn, surrendered, and
annuitized.......................... (51,101) (61,624) (6,520) (24,245) (19,340) (26,929) (9,291)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Units outstanding end of period....... 338,585 401,141 66,195 73,345 204,747 229,079 59,676
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
MEG
Sub-Account
------------------------
<S> <C> <C> <C>
Six Months
Year Ended Ended Year Ended
Dec. 31, June 30, Dec. 31,
1996 1997 1996
----------- ----------- -----------
Units outstanding beginning of period... 83,177 321,077 372,726
Units purchased....................... 882 2,910 8,398
Units transferred between Sub-Accounts
and Fixed Account................... (2,797) 7,575 (16,860)
Units withdrawn, surrendered, and
annuitized.......................... (10,984) (30,532) (43,187)
----------- ----------- -----------
Units outstanding end of period....... 70,278 301,030 321,077
----------- ----------- -----------
----------- ----------- -----------
</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 June 30, 1997, the
related statements of operations for the six months then ended and the
statements of changes in net assets for the six months ended June 30, 1997 and
the year ended December 31, 1996. 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. 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, 1997,
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 8, 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.
9
<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
S. CAESAR RABOY, Senior Vice President and
Deputy 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.
CO1-3 8/97 9M
UV
PROFESSIONALLY MANAGED COMBINATION
FIXED/VARIABLE ANNUITY
FOR QUALIFIED RETIREMENT PLANS
SEMIANNUAL REPORT - JUNE 30, 1997
ISSUED BY
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.),
A WHOLLY-OWNED SUBSIDIARY OF
SUN LIFE ASSURANCE COMPANY OF CANADA
