<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, 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.
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
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, 1997
ISSUED BY
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT C
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 Change
December 31, 1996 December 31, 1997 in Unit Value
----------------- ----------------- --------------
COMPASS CONTRACTS
<S> <C> <C> <C>
Massachusetts Investors Trust......... $65.4965 $85.1160 29.96%
Massachusetts Investors Growth Stock
Fund................................. 48.9432 71.6206 46.33%
MFS Total Return Fund................. 52.6180 62.6622 19.09%
MFS Growth Opportunities Fund......... 41.5395 50.5718 21.74%
MFS Reseach Fund...................... 59.3112 70.5612 18.97%
MFS Bond Fund......................... 34.3871 37.4559 8.92%
MFS Money Market Fund................. 19.5956 20.2949 3.57%
MFS Government Money Market Fund...... 18.8643 19.4875 3.30%
MFS High Income Fund.................. 38.2245 42.8235 12.03%
MFS World Governments Fund............ 38.3007 37.9444 -0.93%
MFS Emerging Growth Fund.............. 50.8597 60.5646 19.08%
</TABLE>
1
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT C
STATEMENT OF CONDITION-- December 31, 1997
<TABLE>
<CAPTION>
ASSETS:
Investments in mutual funds: Shares Cost Value
------------ ------------ ------------
<S> <C> <C> <C>
Massachusetts Investors Trust ("MIT")*........ 941,569 $ 12,164,764 $ 16,494,283
Massachusetts Investors Growth Stock Fund
("MIG")*..................................... 681,103 7,453,052 8,460,457
MFS Total Return Fund ("MTR")*................ 1,510,751 20,453,360 23,900,329
MFS Growth Opportunities Fund ("MGO")*........ 2,502,414 29,126,966 34,834,288
MFS Reseach Fund ("MFR")*..................... 429,789 6,239,839 9,151,154
MFS Bond Fund ("MFB")*........................ 449,090 5,941,973 6,114,649
MFS Money Market Fund ("MCM")................. 6,188,254 6,188,254 6,188,254
MFS Government Money Market Fund ("MCG")...... 1,339,023 1,339,023 1,339,023
MFS High Income Fund ("MFH")*................. 1,554,446 7,941,425 8,596,469
MFS World Governments Fund ("MWG")*........... 203,014 2,355,295 2,201,378
MFS Emerging Growth Fund ("MEG")*............. 471,855 9,244,300 17,073,244
------------ ------------
$108,448,251 $134,353,528
------------
------------
<CAPTION>
LIABILITY:
<S> <C> <C> <C>
Payable to sponsor.......................................................... 93,383
------------
Net assets............................................................ $134,260,145
------------
------------
</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...................................... 191,532 $85.1160 $ 16,299,924 $ 215,987 $ 16,515,911
MIG...................................... 116,839 71.6206 8,364,201 106,708 8,470,909
MTR...................................... 376,845 62.6622 23,587,818 63,258 23,651,076
MGO...................................... 682,668 50.5718 34,698,532 205,337 34,903,869
MFR...................................... 129,195 70.5612 9,117,939 44,955 9,162,894
MFB...................................... 158,314 37.4559 6,016,248 116,289 6,132,537
MCM...................................... 301,313 20.2949 6,111,687 85,081 6,196,768
MCG...................................... 68,686 19.4875 1,338,053 1,167 1,339,220
MFH...................................... 200,252 42.8235 8,500,168 134,233 8,634,401
MWG...................................... 55,822 37.9444 2,117,957 42,898 2,160,855
MEG...................................... 280,589 60.5646 16,992,975 98,730 17,091,705
------------ ------------- ------------
Net assets................................................ $133,145,502 $ 1,114,643 $134,260,145
------------ ------------- ------------
------------ ------------- ------------
</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
STATEMENT OF OPERATIONS-- Year Ended December 31, 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......................................... $ 1,277,616 $1,295,658 $2,795,205 $ 4,313,661 $ 407,032 $ 419,047
Mortality and expense risk charges................ 193,480 94,410 300,282 436,256 114,990 75,767
----------- ---------- ---------- ----------- ---------- ----------
Net investment income......................... $ 1,084,136 $1,201,248 $2,494,923 $ 3,877,405 $ 292,042 $ 343,280
----------- ---------- ---------- ----------- ---------- ----------
Realized and unrealized gains (losses):
Realized gains (losses) on investment
transactions:
Proceeds from sales............................. $ 2,532,047 $1,711,573 $4,718,889 $ 4,107,750 $1,502,503 $1,448,870
Cost of investments sold........................ 2,140,186 1,691,407 3,553,458 2,915,736 857,095 1,549,093
----------- ---------- ---------- ----------- ---------- ----------
Net realized gains (losses)................... $ 391,861 $ 20,166 $1,165,431 $ 1,192,014 $ 645,408 $ (100,223)
----------- ---------- ---------- ----------- ---------- ----------
Net unrealized appreciation (depreciation) on
investments:
End of year..................................... $ 4,329,519 $1,007,405 $3,446,969 $ 5,707,322 $2,911,315 $ 172,676
Beginning of year............................... 1,892,538 (526,374) 3,006,328 4,176,084 2,324,846 (97,970)
----------- ---------- ---------- ----------- ---------- ----------
Change in unrealized appreciation
(depreciation)............................... $ 2,436,981 $1,533,779 $ 440,641 $ 1,531,238 $ 586,469 $ 270,646
----------- ---------- ---------- ----------- ---------- ----------
Realized and unrealized gains..................... $ 2,828,842 $1,553,945 $1,606,072 $ 2,723,252 $1,231,877 $ 170,423
----------- ---------- ---------- ----------- ---------- ----------
Increase in net assets from operations............ $ 3,912,978 $2,755,193 $4,100,995 $ 6,600,657 $1,523,919 $ 513,703
----------- ---------- ---------- ----------- ---------- ----------
----------- ---------- ---------- ----------- ---------- ----------
</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.......................................... $ 332,894 $ 58,061 $ 729,766 $ 96,701 $ 160,958 $11,886,599
Mortality and expense risk charges................. 89,090 16,536 109,154 29,209 221,777 1,680,951
---------- -------- ---------- --------- ---------- -----------
Net investment income (expense)................ $ 243,804 $ 41,525 $ 620,612 $ 67,492 $ (60,819) $10,205,648
---------- -------- ---------- --------- ---------- -----------
Realized and unrealized gains (losses):
Realized gains (losses) on investment transactions:
Proceeds from sales.............................. $3,916,262 $327,538 $1,898,424 $ 649,769 $3,522,932 $26,336,557
Cost of investments sold......................... 3,916,262 327,538 1,879,243 700,654 1,563,730 21,094,402
---------- -------- ---------- --------- ---------- -----------
Net realized gains (losses).................... $ -- $ -- $ 19,181 $ (50,885) $1,959,202 $ 5,242,155
---------- -------- ---------- --------- ---------- -----------
Net unrealized appreciation (depreciation) on
investments:
End of year...................................... $ -- $ -- $ 655,044 $(153,917) $7,828,944 $25,905,277
Beginning of year................................ $ -- $ -- 383,786 (105,147) 6,751,376 17,805,467
---------- -------- ---------- --------- ---------- -----------
Change in unrealized appreciation
(depreciation)................................ $ -- $ -- $ 271,258 $ (48,770) $1,077,568 $ 8,099,810
---------- -------- ---------- --------- ---------- -----------
Realized and unrealized gains (losses)............. $ -- $ -- $ 290,439 $ (99,655) $3,036,770 $13,341,965
---------- -------- ---------- --------- ---------- -----------
Increase (decrease) in net assets from
operations........................................ $ 243,804 $ 41,525 $ 911,051 $ (32,163) $2,975,951 $23,547,613
---------- -------- ---------- --------- ---------- -----------
---------- -------- ---------- --------- ---------- -----------
</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
Sub-Account Sub-Account
------------------------------- ------------------------------
Year Ended Year Ended
December 31, December 31,
------------------------------- ------------------------------
1997 1996 1997 1996
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income................. $ 1,084,136 $ 1,193,000 $ 1,201,248 $ 1,521,770
Net realized gains.................... 391,861 50,400 20,166 392,892
Net unrealized gains (losses)......... 2,436,981 1,596,117 1,533,779 (536,315)
-------------- -------------- -------------- -------------
Increase in net assets from
operations....................... $ 3,912,978 $ 2,839,517 $ 2,755,193 $ 1,378,347
-------------- -------------- -------------- -------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received.......... $ 295,282 $ 336,122 $ 161,450 $ 205,998
Net transfers between Sub-Accounts
and
Fixed Account...................... 443,283 88,376 190,511 (203,622)
Withdrawals, surrenders,
annuitizations and contract
charges............................ (2,182,271) (1,397,434) (1,420,037) (2,057,962)
-------------- -------------- -------------- -------------
Net accumulation activity......... $ (1,443,706) $ (972,936) $ (1,068,076) $ (2,055,586)
-------------- -------------- -------------- -------------
Annuitization activity:
Annuitizations...................... $ 73,820 $ 33,004 $ -- $ --
Annuity payments.................... (26,781) (17,495) (24,415) (3,060)
Adjustments to annuity reserve...... 12,259 11,899 4,039 1,203
-------------- -------------- -------------- -------------
Net annuitization activity........ $ 59,298 $ 27,408 $ (20,376) $ (1,857)
-------------- -------------- -------------- -------------
Decrease in net assets from
participant transactions............. $ (1,384,408) $ (945,528) $ (1,088,452) $ (2,057,443)
-------------- -------------- -------------- -------------
Increase (decrease) in net assets... $ 2,528,570 $ 1,893,989 $ 1,666,741 $ (679,096)
NET ASSETS:
Beginning of year..................... 13,987,341 12,093,352 6,804,168 7,483,264
-------------- -------------- -------------- -------------
End of year........................... $ 16,515,911 $ 13,987,341 $ 8,470,909 $ 6,804,168
-------------- -------------- -------------- -------------
-------------- -------------- -------------- -------------
<CAPTION>
MTR
Sub-Account
-------------------------------
Year Ended
December 31,
-------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income................. $ 2,494,923 $ 2,283,612
Net realized gains.................... 1,165,431 869,395
Net unrealized gains (losses)......... 440,641 (264,098)
-------------- --------------
Increase in net assets from
operations....................... $ 4,100,995 $ 2,888,909
-------------- --------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received.......... $ 375,661 $ 528,206
Net transfers between Sub-Accounts
and
Fixed Account...................... (117,230) (145,482)
Withdrawals, surrenders,
annuitizations and contract
charges............................ (4,140,788) (3,143,002)
-------------- --------------
Net accumulation activity......... $ (3,882,357) $ (2,760,278)
-------------- --------------
Annuitization activity:
Annuitizations...................... $ -- $ 8,227
Annuity payments.................... (132,212) (8,688)
Adjustments to annuity reserve...... (139,226) (41,600)
-------------- --------------
Net annuitization activity........ $ (271,438) $ (42,061)
-------------- --------------
Decrease in net assets from
participant transactions............. $ (4,153,795) $ (2,802,339)
-------------- --------------
Increase (decrease) in net assets... $ (52,800) $ 86,570
NET ASSETS:
Beginning of year..................... 23,703,876 23,617,306
-------------- --------------
End of year........................... $ 23,651,076 $ 23,703,876
-------------- --------------
-------------- --------------
</TABLE>
4
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT C
STATEMENTS OF CHANGES IN NET ASSETS -- continued
<TABLE>
<CAPTION>
MGO MFR
Sub-Account Sub-Account
------------------------------- ------------------------------
Year Ended Year Ended
December 31, December 31,
------------------------------- ------------------------------
1997 1996 1997 1996
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income.................. $ 3,877,405 $ 3,016,977 $ 292,042 $ 313,648
Net realized gains (losses)............ 1,192,014 686,961 645,408 710,834
Net unrealized gains (losses).......... 1,531,238 1,861,809 586,469 645,674
-------------- -------------- -------------- -------------
Increase in net assets from
operations........................ $ 6,600,657 $ 5,565,747 $ 1,523,919 $ 1,670,156
-------------- -------------- -------------- -------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received........... $ 396,402 $ 446,789 $ 115,867 $ 143,449
Net transfers between Sub-Accounts
and Fixed Account................... (331,038) (284,146) 112,699 382,929
Withdrawals, surrenders,
annuitizations and contract
charges............................. (3,356,390) (3,282,766) (1,160,821) (1,327,739)
-------------- -------------- -------------- -------------
Net accumulation activity.......... $ (3,291,026) $ (3,120,123) $ (932,255) $ (801,361)
-------------- -------------- -------------- -------------
Annuitization activity:
Annuitizations....................... $ 40,042 $ 4,584 $ - $ -
Annuity payments..................... (22,778) (30,270) (9,402) (662)
Adjustments to annuity reserve....... 12,645 17,719 1,887 10,666
-------------- -------------- -------------- -------------
Net annuitization activity......... $ 29,909 $ (7,967) $ (7,515) $ 10,004
-------------- -------------- -------------- -------------
Decrease in net assets from participant
transactions.......................... $ (3,261,117) $ (3,128,090) $ (939,770) $ (791,357)
-------------- -------------- -------------- -------------
Increase (decrease) in net assets.... $ 3,339,540 $ 2,437,657 $ 584,149 $ 878,799
NET ASSETS:
Beginning of year...................... 31,564,329 29,126,672 8,578,745 7,699,946
-------------- -------------- -------------- -------------
End of year............................ $ 34,903,869 $ 31,564,329 $ 9,162,894 $ 8,578,745
-------------- -------------- -------------- -------------
-------------- -------------- -------------- -------------
<CAPTION>
MFB
Sub-Account
-------------------------------
Year Ended
December 31,
-------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income.................. $ 343,280 $ 413,938
Net realized gains (losses)............ (100,223) (158,835)
Net unrealized gains (losses).......... 270,646 (113,191)
-------------- --------------
Increase in net assets from
operations........................ $ 513,703 $ 141,912
-------------- --------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received........... $ 97,957 $ 155,303
Net transfers between Sub-Accounts
and Fixed Account................... 137,968 32,233
Withdrawals, surrenders,
annuitizations and contract
charges............................. (1,220,161) (1,500,550)
-------------- --------------
Net accumulation activity.......... $ (984,236) $ (1,313,014)
-------------- --------------
Annuitization activity:
Annuitizations....................... $ 52,142 $ -
Annuity payments..................... (12,112) (8,224)
Adjustments to annuity reserve....... 11,228 1,076
-------------- --------------
Net annuitization activity......... $ 51,258 $ (7,148)
-------------- --------------
Decrease in net assets from participant
transactions.......................... $ (932,978) $ (1,320,162)
-------------- --------------
Increase (decrease) in net assets.... $ (419,275) $ (1,178,250)
NET ASSETS:
Beginning of year...................... 6,551,812 7,730,062
-------------- --------------
End of year............................ $ 6,132,537 $ 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
------------------------------ ----------------------------- ------------------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
------------------------------ ----------------------------- ------------------------------
1997 1996 1997 1996 1997 1996
------------- -------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income........ $ 243,804 $ 240,460 $ 41,525 $ 53,885 $ 620,612 $ 663,084
Net realized gains........... -- -- -- -- 19,181 52,257
Net unrealized gains......... -- -- -- -- 271,258 222,093
------------- -------------- ------------- ------------- ------------- --------------
Increase in net assets
from operations......... $ 243,804 $ 240,460 $ 41,525 $ 53,885 $ 911,051 $ 937,434
------------- -------------- ------------- ------------- ------------- --------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments
received.................. $ 107,567 $ 136,550 $ 29,140 $ 80,866 $ 66,166 $ 121,432
Net transfers between Sub-
Accounts and Fixed
Account................... (678,009) 1,635,082 55,363 (278,103) (76,758) (411,820)
Withdrawals, surrenders,
annuitizations and
contract charges.......... (1,416,396) (1,188,558) (171,168) (449,456) (1,125,638) (968,697)
------------- -------------- ------------- ------------- ------------- --------------
Net accumulation
activity................ $(1,986,838) $ 583,074 $ (86,665) $ (646,693) $(1,136,230) $(1,259,085)
------------- -------------- ------------- ------------- ------------- --------------
Annuitization activity:
Annuitizations............. $ 49,826 -- -- -- -- --
Annuity payments........... (7,711) (4,013) (194) (196) (19,721) (21,880)
Annuity transfers.......... -- -- -- -- (3,495) --
Adjustments to annuity
reserve................... 9,057 543 76 67 9,135 (927)
------------- -------------- ------------- ------------- ------------- --------------
Net annuitization
activity................ $ 51,172 $ (3,470) $ (118) $ (129) $ (14,081) $ (22,807)
------------- -------------- ------------- ------------- ------------- --------------
Increase (decrease) in net
assets from participant
transactions................ $(1,935,666) $ 579,604 $ (86,783) $ (646,822) $(1,150,311) $(1,281,892)
------------- -------------- ------------- ------------- ------------- --------------
Increase (decrease) in net
assets.................... $(1,691,862) $ 820,064 $ (45,258) $ (592,937) $ (239,260) $ (344,458)
NET ASSETS:
Beginning of year............ 7,888,630 7,068,566 1,384,478 1,977,415 8,873,661 9,218,119
------------- -------------- ------------- ------------- ------------- --------------
End of year.................. $ 6,196,768 $ 7,888,630 $1,339,220 $1,384,478 $ 8,634,401 $ 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
----------------------------- ------------------------------- -------------------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
----------------------------- ------------------------------- -------------------------------
1997 1996 1997 1996 1997 1996
------------- ------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income........ $ 67,492 $ 38,593 $ (60,819) $ (27,082) $ 10,205,648 $ 9,711,885
Net realized gains
(losses).................... (50,885) (108,086) 1,959,202 1,792,780 5,242,155 4,288,598
Net unrealized gains
(losses).................... (48,770) 174,859 1,077,568 341,977 8,099,810 3,928,925
------------- ------------- -------------- -------------- -------------- --------------
Increase (decrease) in
net assets from
operations.............. $ (32,163) $ 105,366 $ 2,975,951 $ 2,107,675 $ 23,547,613 $ 17,929,408
------------- ------------- -------------- -------------- -------------- --------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments
received.................. $ 20,613 $ 32,241 $ 273,824 $ 413,103 $ 1,939,929 $ 2,600,059
Net transfers between Sub-
Accounts and Fixed
Account................... (57,194) (103,978) 180,160 (785,333) (140,245) (73,864)
Withdrawals, surrenders,
annuitizations and
contract charges.......... (504,226) (400,559) (2,750,634) (2,122,298) (19,448,530) (17,839,021)
------------- ------------- -------------- -------------- -------------- --------------
Net accumulation
activity................ $ (540,807) $ (472,296) $(2,296,650) $(2,494,528) $(17,648,846) $(15,312,826)
------------- ------------- -------------- -------------- -------------- --------------
Annuitization activity:
Annuitizations............. $ 12,236 $ -- $ 4,465 $ -- $ 232,531 $ 45,815
Annuity payments........... (5,464) (7,791) (22,268) (19,817) (283,058) (122,096)
Annuity transfers.......... -- -- 3,495 -- -- --
Adjustments to annuity
reserve................... 2,064 (2,303) 2,764 1,874 (74,072) 217
------------- ------------- -------------- -------------- -------------- --------------
Net annuitization
activity................ $ 8,836 $ (10,094) $ (11,544) $ (17,943) $ (124,599) $ (76,064)
------------- ------------- -------------- -------------- -------------- --------------
Decrease in net assets from
participant transactions.... $ (531,971) $ (482,390) $(2,308,194) $(2,512,471) $(17,773,445) $(15,388,890)
------------- ------------- -------------- -------------- -------------- --------------
Increase (decrease) in net
assets.................... $ (564,134) $ (377,024) $ 667,757 $ (404,796) $ 5,774,168 $ 2,540,518
NET ASSETS:
Beginning of year............ 2,724,989 3,102,013 16,423,948 16,828,744 128,485,977 125,945,459
------------- ------------- -------------- -------------- -------------- --------------
End of year.................. $2,160,855 $2,724,989 $17,091,705 $16,423,948 $134,260,145 $128,485,977
------------- ------------- -------------- -------------- -------------- --------------
------------- ------------- -------------- -------------- -------------- --------------
</TABLE>
See notes to financial statements
7
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT C
STATEMENTS OF CHANGES IN NET ASSETS
(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"), an affiliate 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%.
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.
8
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT C
STATEMENTS OF CHANGES IN NET ASSETS -- continued
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.
(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,
---------------- ---------------- ---------------- ------------------ ----------------
1997 1996 1997 1996 1997 1996 1997 1996 1997 1996
------- ------- ------- ------- ------- ------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Units outstanding,
beginning of year... 211,924 228,398 137,226 183,386 445,574 502,308 752,698 835,555 143,843 158,916
Units purchased.... 3,952 5,745 2,689 4,638 6,597 10,862 8,648 11,777 1,771 2,691
Units transferred
between
Sub-Accounts and
Fixed Account..... 5,860 1,726 2,571 (4,521) (1,968) (2,602) (6,742) (8,450) 2,007 6,223
Units withdrawn,
surrendered and
annuitized........ (30,204) (23,945) (25,647) (46,277) (73,358) (64,994) (71,936) (86,184) (18,426) (23,987)
------- ------- ------- ------- ------- ------- ------- --------- ------- -------
Units outstanding,
end of year......... 191,532 211,924 116,839 137,226 376,845 445,574 682,668 752,698 129,195 143,843
------- ------- ------- ------- ------- ------- ------- --------- ------- -------
------- ------- ------- ------- ------- ------- ------- --------- ------- -------
<CAPTION>
MFB
Sub-Account
----------------
Year Ended
December 31,
----------------
1997 1996
------- -------
<S> <C> <C>
Units outstanding,
beginning of year... 186,637 226,571
Units purchased.... 2,751 4,694
Units transferred
between
Sub-Accounts and
Fixed Account..... 3,481 970
Units withdrawn,
surrendered and
annuitized........ (34,555) (45,598)
------- -------
Units outstanding,
end of year......... 158,314 186,637
------- -------
------- -------
</TABLE>
<TABLE>
<CAPTION>
MCM MCG MFH MWG
Sub-Account Sub-Account Sub-Account Sub-Account
-------------------- -------------------- -------------------- --------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
-------------------- -------------------- -------------------- --------------------
1997 1996 1997 1996 1997 1996 1997 1996
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Units outstanding, beginning of
year............................. 401,141 371,369 73,345 108,206 229,079 264,391 70,278 83,177
Units purchased................. 5,399 7,091 1,523 4,338 1,652 3,422 554 882
Units transferred between
Sub-Accounts and Fixed
Account........................ (33,845) 84,305 2,802 (14,954) (2,180) (11,805) (1,541) (2,797)
Units withdrawn, surrendered and
annuitized..................... (71,382) (61,624) (8,984) (24,245) (28,299) (26,929) (13,469) (10,984)
--------- --------- --------- --------- --------- --------- --------- ---------
Units outstanding, end of year.... 301,313 401,141 68,686 73,345 200,252 229,079 55,822 70,278
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
MEG
Sub-Account
--------------------
Year Ended
December 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Units outstanding, beginning of
year............................. 321,077 372,726
Units purchased................. 4,900 8,398
Units transferred between
Sub-Accounts and Fixed
Account........................ 4,053 (16,860)
Units withdrawn, surrendered and
annuitized..................... (49,441) (43,187)
--------- ---------
Units outstanding, end of year.... 280,589 321,077
--------- ---------
--------- ---------
</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, 1997, the
related statements of operations for the year then ended and the statements of
changes in net assets for the years ended December 31, 1997 and 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. Our procedures included
confirmation of securities held at December 31, 1997 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,
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
February 6, 1998
----------------------------------------
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
