<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
------------------------------------- Change
Compass 1 US Contracts: December 31, 1998 June 30, 1999 in Unit Value
----------------- ----------------- -------------
<S> <C> <C> <C>
Massachusetts Investors Trust........................ $103.3129 $108.5240 5.04%
Massachusetts Investors Growth Stock Fund............ 98.9683 110.3012 11.45
MFS Total Return Fund................................ 69.2493 71.9687 3.93
MFS Growth Opportunities Fund........................ 64.4932 69.4478 7.68
MFS Reseach Fund..................................... 85.6092 92.7227 8.31
MFS Bond Fund........................................ 38.6443 37.7703 (2.26)
MFS Money Market Fund................................ 21.0291 21.3392 1.47
MFS Government Money Market Fund..................... 20.1619 20.4426 1.39
MFS High Income Fund................................. 42.6829 44.7039 4.73
MFS Global Governments Fund.......................... 38.9935 37.4776 (3.89)
MFS Emerging Growth Fund............................. 74.4225 83.2080 11.80
</TABLE>
Investment return and principal value will fluctuate, and units, when
surrendered, may be worth more or less than their original cost.
1
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT C
STATEMENT OF CONDITION-- June 30, 1999
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C> <C>
Investments in mutual funds: Shares Cost Value
--------- ------------ ------------
Massachusetts Investors Trust
("MIT")*............................ 803,712 $ 11,298,206 $ 17,079,682
Massachusetts Investors Growth Stock
Fund ("MIG")*....................... 696,425 8,337,806 12,427,831
MFS Total Return Fund ("MTR")*........ 1,335,922 19,284,871 20,552,613
MFS Growth Opportunities Fund
("MGO")*............................ 2,465,996 30,750,322 41,546,215
MFS Reseach Fund ("MFR")*............. 383,394 6,182,675 10,509,952
MFS Bond Fund ("MFB")*................ 398,562 5,236,694 5,042,618
MFS Money Market Fund ("MCM")......... 5,300,439 5,300,439 5,300,439
MFS Government Money Market Fund
("MCG")............................. 1,298,315 1,298,315 1,298,315
MFS High Income Fund ("MFH")*......... 1,349,101 7,039,783 6,949,895
MFS Global Governments Fund
("MGG")*............................ 180,672 2,074,128 1,845,336
MFS Emerging Growth Fund ("MEG")*..... 376,588 9,305,421 18,898,628
------------ ------------
$106,108,660 $141,451,524
------------
------------
<CAPTION>
LIABILITY:
<S> <C> <C> <C>
Payable to sponsor............................................... (129,781)
------------
Net assets................................................. $141,321,743
------------
------------
</TABLE>
NET ASSETS OF CONTRACT OWNERS:
<TABLE>
<CAPTION>
Applicable to Owners of
Deferred Variable Annuity Contracts Reserve for
------------------------------------- Variable
Units Unit Value Value Annuities Total
--------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
MIT......................... 155,740 $ 108.5240 $ 16,898,213 $ 207,774 $ 17,105,987
MIG......................... 111,844 110.3012 12,330,102 112,562 12,442,664
MTR......................... 280,469 71.9687 20,151,822 108,061 20,259,883
MGO......................... 591,751 69.4478 41,344,334 244,195 41,588,529
MFR......................... 113,003 92.7227 10,480,584 44,382 10,524,966
MFB......................... 128,962 37.7703 4,959,895 103,200 5,063,095
MCM......................... 245,339 21.3392 5,231,371 77,773 5,309,144
MCG......................... 63,353 20.4426 1,294,756 3,863 1,298,619
MFH......................... 155,639 44.7039 6,875,827 120,256 6,996,083
MGG......................... 47,222 37.4776 1,769,594 34,967 1,804,561
MEG......................... 226,172 83.2080 18,818,727 109,485 18,928,212
------------ ------------- ------------
Net assets $140,155,225 $ 1,166,518 $141,321,743
------------ ------------- ------------
------------ ------------- ------------
</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 -- Six Months Ended June 30, 1999
<TABLE>
<CAPTION>
MIT MIG MTR MGO MFR MFB
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
------------ ----------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Dividend income and capital gain
distributions received............... $ 120,151 $ -- $ 353,982 $ 1,003,354 $ -- $ 177,237
Mortality and expense risk charges.... (105,045) (73,809) (129,914) (253,502) (65,178) (33,443)
------------ ----------- ------------ ----------- ----------- ------------
Net investment income (loss)...... $ 15,106 $ (73,809) $ 224,068 $ 749,852 $ (65,178) $ 143,794
------------ ----------- ------------ ----------- ----------- ------------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment
transactions:
Proceeds from sales................. $ 630,105 $ 666,897 $ 1,988,034 $ 2,413,122 $ 949,247 $ 559,004
Cost of investments sold............ (357,601) (423,599) (1,646,748) (1,578,477) (453,967) (538,111)
------------ ----------- ------------ ----------- ----------- ------------
Net realized gains (losses)....... $ 272,504 $ 243,298 $ 341,286 $ 834,645 $ 495,280 $ 20,893
------------ ----------- ------------ ----------- ----------- ------------
Net unrealized appreciation
(depreciation) on investments:
End of period....................... $ 5,781,476 $4,090,025 $ 1,267,742 $10,795,893 $4,327,277 $ (194,076)
Beginning of period................. 5,241,530 2,986,945 1,059,509 9,382,084 3,943,515 91,488
------------ ----------- ------------ ----------- ----------- ------------
Change in unrealized appreciation
(depreciation).................. $ 539,946 $1,103,080 $ 208,233 $ 1,413,809 $ 383,762 $ (285,564)
------------ ----------- ------------ ----------- ----------- ------------
Realized and unrealized gains
(losses).......................... $ 812,450 $1,346,378 $ 549,519 $ 2,248,454 $ 879,042 $ (264,671)
------------ ----------- ------------ ----------- ----------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS............................. $ 827,556 $1,272,569 $ 773,587 $ 2,998,306 $ 813,864 $ (120,877)
------------ ----------- ------------ ----------- ----------- ------------
------------ ----------- ------------ ----------- ----------- ------------
<CAPTION>
MCM MCG MFH MGG MEG
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
------------ ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Dividend income and capital gain
distributions received............... $ 111,378 $ 26,421 $ 330,484 $ -- $ --
Mortality and expense risk charges.... (33,531) (8,350) (46,310) (11,821) (113,787)
------------ ----------- ------------ ----------- -----------
Net investment income (loss)...... $ 77,847 $ 18,071 $ 284,174 $ (11,821) $ (113,787)
------------ ----------- ------------ ----------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment
transactions:
Proceeds from sales................. $ 2,039,854 $ 243,314 $ 897,301 $ 112,145 $2,861,159
Cost of investments sold............ (2,039,854) (243,314) (826,292) (133,007) (967,588)
------------ ----------- ------------ ----------- -----------
Net realized gains (losses)....... $ -- $ -- $ 71,009 $ (20,862) $1,893,571
------------ ----------- ------------ ----------- -----------
Net unrealized appreciation
(depreciation) on investments:
End of period....................... $ -- $ -- $ (89,888) $ (228,792) $9,593,207
Beginning of period................. -- -- (73,232) (186,081) 9,373,097
------------ ----------- ------------ ----------- -----------
Change in unrealized appreciation
(depreciation).................. $ -- $ -- $ (16,656) $ (42,711) $ 220,110
------------ ----------- ------------ ----------- -----------
Realized and unrealized gains
(losses).......................... $ -- $ -- $ 54,353 $ (63,573) $2,113,681
------------ ----------- ------------ ----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS............................. $ 77,847 $ 18,071 $ 338,527 $ (75,394) $1,999,894
------------ ----------- ------------ ----------- -----------
------------ ----------- ------------ ----------- -----------
</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
----------------------------- -----------------------------
Six Months Year Ended Six Months Year Ended
Ended December 31, Ended December 31,
June 30, 1999 1998 June 30, 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 15,106 $ 821,334 $ (73,809) $ 764,771
Net realized gains (losses)........... 272,504 1,505,282 243,298 360,064
Net unrealized gains (losses)......... 539,946 912,011 1,103,080 1,979,540
------------- ------------- ------------- -------------
Increase (Decrease) in net assets
from operations................. $ 827,556 $ 3,238,627 $ 1,272,569 $ 3,104,375
------------- ------------- ------------- -------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received.......... $ 101,618 $ 250,927 $ 71,557 $ 182,818
Net transfers between Sub-Accounts
and Fixed Account.................. 243,538 175,482 513,923 520,045
Withdrawals, surrenders,
annuitizations and contract
charges............................ (420,346) (3,770,189) (423,566) (1,231,561)
------------- ------------- ------------- -------------
Net accumulation activity......... $ (75,190) $(3,343,780) $ 161,914 $ (528,698)
------------- ------------- ------------- -------------
Annuitization activity:
Annuitizations...................... $ -- $ -- $ -- $ --
Annuity payments.................... (28,092) (33,722) (13,816) (28,970)
Adjustments to annuity reserve...... 758 3,919 875 3,506
------------- ------------- ------------- -------------
Net annuitization activity........ $ (27,334) $ (29,803) $ (12,941) $ (25,464)
------------- ------------- ------------- -------------
Increase (Decrease) in net assets from
participant transactions............. $ (102,524) $(3,373,583) $ 148,973 $ (554,162)
------------- ------------- ------------- -------------
Increase (Decrease) in net assets... $ 725,032 $ (134,956) $ 1,421,542 $ 2,550,213
NET ASSETS:
Beginning of period................... 16,380,955 16,515,911 11,021,122 8,470,909
------------- ------------- ------------- -------------
End of period......................... $17,105,987 $16,380,955 $12,442,664 $11,021,122
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
<CAPTION>
MTR
Sub-Account
-----------------------------
Six Months Year Ended
Ended December 31,
June 30, 1999 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 224,068 $ 3,142,843
Net realized gains (losses)........... 341,286 1,530,473
Net unrealized gains (losses)......... 208,233 (2,387,460)
------------- -------------
Increase (Decrease) in net assets
from operations................. $ 773,587 $ 2,285,856
------------- -------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received.......... $ 143,714 $ 289,514
Net transfers between Sub-Accounts
and Fixed Account.................. (712,775) (1,127,992)
Withdrawals, surrenders,
annuitizations and contract
charges............................ (1,116,793) (3,913,196)
------------- -------------
Net accumulation activity......... $(1,685,854) $(4,751,674)
------------- -------------
Annuitization activity:
Annuitizations...................... $ -- $ 50,954
Annuity payments.................... (10,675) (9,910)
Adjustments to annuity reserve...... (13,302) (30,175)
------------- -------------
Net annuitization activity........ $ (23,977) $ 10,869
------------- -------------
Increase (Decrease) in net assets from
participant transactions............. $(1,709,831) $(4,740,805)
------------- -------------
Increase (Decrease) in net assets... $ (936,244) $(2,454,949)
NET ASSETS:
Beginning of period................... 21,196,127 23,651,076
------------- -------------
End of period......................... $20,259,883 $21,196,127
------------- -------------
------------- -------------
</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>
MFR MFB
MGO Sub-Account Sub-Account
Sub-Account ---------------------------- ---------------------------
----------------------------- Six Months Six Months
Six Months Year Ended Ended Year Ended Ended Year Ended
Ended December 31, June 30, December 31, June 30, December 31,
June 30, 1999 1998 1999 1998 1999 1998
------------- ------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 749,852 $ 3,869,361 $ (65,178) $ 255,014 $ 143,794 $ 330,300
Net realized gains (losses)........... 834,645 1,590,905 495,280 583,552 20,893 (61,406)
Net unrealized gains (losses)......... 1,413,809 3,674,762 383,762 1,032,200 (285,564) (81,188)
------------- ------------- ------------ ------------- ------------ ------------
Increase (Decrease) in net assets
from operations................. $ 2,998,306 $ 9,135,028 $ 813,864 $ 1,870,766 $ (120,877) $ 187,706
------------- ------------- ------------ ------------- ------------ ------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received.......... $ 219,683 $ 511,586 $ 36,730 $ 92,604 $ 27,038 $ 229,930
Net transfers between Sub-Accounts
and Fixed Account................. (129,407) (246,517) 20,334 251,933 (128,071) (137,088)
Withdrawals, surrenders,
annuitizations and contract
charges........................... (1,812,758) (3,973,370) (784,183) (930,243) (316,776) (795,428)
------------- ------------- ------------ ------------- ------------ ------------
Net accumulation activity......... $(1,722,482) $(3,708,301) $ (727,119) $ (585,706) $ (417,809) $ (702,586)
------------- ------------- ------------ ------------- ------------ ------------
Annuitization activity:
Annuitizations...................... $ -- $ 57,163 $ -- $ -- $ -- $ --
Annuity payments.................... (16,007) (31,779) (3,553) (9,455) (6,737) (11,729)
Adjustments to annuity reserve...... 2,607 (29,875) 1,443 1,832 1,589 1,001
------------- ------------- ------------ ------------- ------------ ------------
Net annuitization activity........ $ (13,400) $ (4,491) $ (2,110) $ (7,623) $ (5,148) $ (10,728)
------------- ------------- ------------ ------------- ------------ ------------
Increase (Decrease) in net assets from
participant transactions............... $(1,735,882) $(3,712,792) $ (729,229) $ (593,329) $ (422,957) $ (713,314)
------------- ------------- ------------ ------------- ------------ ------------
Increase (Decrease) in net assets... $ 1,262,424 $ 5,422,236 $ 84,635 $ 1,277,437 $ (543,834) $ (525,608)
NET ASSETS:
Beginning of period................... 40,326,105 34,903,869 10,440,331 9,162,894 5,606,929 6,132,537
------------- ------------- ------------ ------------- ------------ ------------
End of period......................... $41,588,529 $40,326,105 $10,524,966 $10,440,331 $5,063,095 $5,606,929
------------- ------------- ------------ ------------- ------------ ------------
------------- ------------- ------------ ------------- ------------ ------------
</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
-------------------------- ------------------------- --------------------------
Six Months Six Months Six Months
Ended Year Ended Ended Year Ended Ended Year Ended
June 30, December 31, June 30, December June 30, December 31,
1999 1998 1999 31, 1998 1999 1998
----------- ------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 77,847 $ 198,300 $ 18,071 $ 42,390 $ 284,174 $ 590,763
Net realized gains (losses)........... -- -- -- -- 71,009 148,907
Net unrealized gains (losses)......... -- -- -- -- (16,656) (728,276)
----------- ------------ ----------- ----------- ----------- ------------
Increase (Decrease) in net assets
from operations................. $ 77,847 $ 198,300 $ 18,071 $ 42,390 $ 338,527 $ 11,394
----------- ------------ ----------- ----------- ----------- ------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received.......... $ 45,587 $ 95,793 $ 16,230 $ 172,988 $ 25,514 $ 47,917
Net transfers between Sub-Accounts
and Fixed Account................. 653,294 1,099,327 32,163 92,742 (77,538) (234,750)
Withdrawals, surrenders,
annuitizations and contract
charges........................... (740,929) (2,304,486) (138,198) (279,549) (516,352) (1,213,505)
----------- ------------ ----------- ----------- ----------- ------------
Net accumulation activity......... $ (42,048) $(1,109,366) $ (89,805) $ (13,819) $ (568,376) $(1,400,338)
----------- ------------ ----------- ----------- ----------- ------------
Annuitization activity:
Annuitizations...................... $ -- $ -- $ -- $ 3,544 $ -- $ --
Annuity payments.................... (4,171) (8,378) (96) (990) (9,747) (18,033)
Adjustments to annuity reserve...... 90 102 26 78 5,362 2,893
----------- ------------ ----------- ----------- ----------- ------------
Net annuitization activity........ $ (4,081) $ (8,276) $ (70) $ 2,632 $ (4,385) $ (15,140)
----------- ------------ ----------- ----------- ----------- ------------
Increase (Decrease) in net assets from
participant transactions............... $ (46,129) $(1,117,642) $ (89,875) $ (11,187) $ (572,761) $(1,415,478)
----------- ------------ ----------- ----------- ----------- ------------
Increase (Decrease) in net assets... $ 31,718 $ (919,342) $ (71,804) $ 31,203 $ (234,234) $(1,404,084)
NET ASSETS:
Beginning of period................... 5,277,426 6,196,768 1,370,423 1,339,220 7,230,317 8,634,401
----------- ------------ ----------- ----------- ----------- ------------
End of period......................... $5,309,144 $ 5,277,426 $1,298,619 $1,370,423 $6,996,083 $ 7,230,317
----------- ------------ ----------- ----------- ----------- ------------
----------- ------------ ----------- ----------- ----------- ------------
</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>
MGG MEG
Sub-Account Sub-Account
------------------------- ---------------------------
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, December June 30, December 31,
1999 31, 1998 1999 1998
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ (11,821) $ 106,741 $ (113,787) $ (53,760)
Net realized gains (losses)........... (20,862) (14,845) 1,893,571 2,192,749
Net unrealized gains (losses)......... (42,711) (32,164) 220,110 1,544,153
----------- ----------- ------------ ------------
Increase (Decrease) in net assets
from operations................. $ (75,394) $ 59,732 $ 1,999,894 $ 3,683,142
----------- ----------- ------------ ------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received.......... $ 2,794 $ 10,731 $ 111,963 $ 297,252
Net transfers between Sub-Accounts
and Fixed Account.................. (37,660) (79,290) (437,647) 87,481
Withdrawals, surrenders,
annuitizations and contract
charges............................ (61,278) (167,294) (1,434,580) (2,456,028)
----------- ----------- ------------ ------------
Net accumulation activity......... $ (96,144) $ (235,853) $(1,760,264) $(2,071,295)
----------- ----------- ------------ ------------
Annuitization activity:
Annuitizations...................... $ -- $ -- $ -- $ --
Annuity payments.................... (2,770) (5,614) (8,512) (17,582)
Adjustments to annuity reserve...... 1,436 (1,687) 4,270 6,854
----------- ----------- ------------ ------------
Net annuitization activity........ $ (1,334) $ (7,301) $ (4,242) $ (10,728)
----------- ----------- ------------ ------------
Increase (Decrease) in net assets from
participant transactions............ $ (97,478) $ (243,154) $(1,764,506) $(2,082,023)
----------- ----------- ------------ ------------
Increase (Decrease) in net assets... $ (172,872) $ (183,422) $ 235,388 $ 1,601,119
NET ASSETS:
Beginning of period................... 1,977,433 2,160,855 18,692,824 17,091,705
----------- ----------- ------------ ------------
End of period......................... $1,804,561 $1,977,433 $18,928,212 $18,692,824
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
</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 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 the Sponsor's 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 taxable;
therefore, no provision has been made for federal income taxes.
(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
(3) CONTRACT CHARGES -- 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 taxes 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
Sub Account Sub Account Sub Account
--------------------- --------------------- ---------------------
Six Six Six
Months Year Months Year Months Year
Ended Ended Ended Ended Ended Ended
June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31,
1999 1998 1999 1998 1999 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding, beginning of
period................................. 156,406 191,532 110,261 116,839 304,876 376,845
Units purchased....................... 985 2,680 678 2,161 2,032 4,393
Units transferred between Sub-Accounts
and Fixed Account................... 2,347 1,444 5,030 5,819 (10,467) (16,851)
Units withdrawn, surrendered and
annuitized.......................... (3,998) (39,250) (4,125) (14,558) (15,972) (59,511)
--------- --------- --------- --------- --------- ---------
Units outstanding, end of period...... 155,740 156,406 111,844 110,261 280,469 304,876
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
<CAPTION>
MGO MFR MFB
Sub Account Sub Account Sub Account
--------------------- --------------------- ---------------------
Six Six Six
Months Year Months Year Months Year
Ended Ended Ended Ended Ended Ended
June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31,
1999 1998 1999 1998 1999 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding, beginning of
period................................. 617,973 682,668 121,411 129,195 139,906 158,314
Units purchased....................... 3,368 9,055 424 1,193 699 6,031
Units transferred between Sub-Accounts
and Fixed Account................... (1,916) (4,580) 279 3,013 (3,339) (3,600)
Units withdrawn, surrendered and
annuitized.......................... (27,674) (69,170) (9,111) (11,990) (8,304) (20,839)
--------- --------- --------- --------- --------- ---------
Units outstanding, end of period...... 591,751 617,973 113,003 121,411 128,962 139,906
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
MCM MCG MFH
Sub Account Sub Account Sub Account
--------------------- --------------------- ---------------------
Six Six Six
Months Year Months Year Months Year
Ended Ended Ended Ended Ended Ended
June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31,
1999 1998 1999 1998 1999 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding, beginning of
period................................. 247,311 301,313 67,794 68,686 168,359 200,252
Units purchased....................... 2,142 4,643 854 8,633 598 1,084
Units transferred between Sub-Accounts
and Fixed Account................... 30,852 53,161 1,523 4,580 (1,695) (5,278)
Units withdrawn, surrendered and
annuitized.......................... (34,966) (111,806) (6,818) (14,105) (11,623) (27,699)
--------- --------- --------- --------- --------- ---------
Units outstanding, end of period...... 245,339 247,311 63,353 67,794 155,639 168,359
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
<CAPTION>
MGG MEG
Sub Account Sub Account
--------------------- ---------------------
Six Six
Months Year Months Year
Ended Ended Ended Ended
June 30, Dec. 31, June 30, Dec. 31,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding, beginning of
period................................. 49,718 55,822 249,765 280,589
Units purchased....................... 80 277 1,491 4,313
Units transferred between Sub-Accounts
and Fixed Account................... (980) (2,074) (5,845) 1,703
Units withdrawn, surrendered and
annuitized.......................... (1,596) (4,307) (19,239) (36,840)
--------- --------- --------- ---------
Units outstanding, end of period...... 47,222 49,718 226,172 249,765
--------- --------- --------- ---------
--------- --------- --------- ---------
</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 Massachusetts
Investors Trust Sub-Account, Massachusetts Investors Growth Stock Sub-Account,
MFS Total Return Sub-Account, MFS Growth Opportunities Sub-Account, MFS Research
Sub-Account, MFS Bond Sub-Account, MFS Money Market Sub-Account, MFS Government
Money Market Sub-Account, MFS High Income Sub-Account, MFS Global Governments
Sub-Account, and MFS Emerging Growth Sub-Account of Sun Life of Canada (U.S.)
Variable Account C (the "Sub-Accounts") as of June 30, 1999, the related
statement of operations for the six month period then ended and the statements
of changes in net assets for the six month period ended June 30, 1999 and the
year ended December 31, 1998. 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 June 30, 1999 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 Sub-Accounts as of June 30, 1999, the
results of their operations and the changes in their net assets for the
respective stated periods in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
August 6, 1999
<PAGE>
COMPASS-I
DIRECTORS AND OFFICERS OF
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
DONALD A. STEWART, Chairman and Director
C. JAMES PRIEUR, President and Director
S. CAESAR RABOY, Director
RICHARD B. BAILEY, Director
M. COLYER CRUM, Director
DAVID D. HORN, Director
JOHN S. LANE, Director
ANGUS A. MacNAUGHTON, Director
JOHN D. McNEIL, Director
PETER F. DEMUTH, Vice President, Chief
Counsel and Assistant Secretary
JAMES A. McNULTY, III, Vice President
and Assistant General Manager
JAMES M. A. ANDERSON, Vice President, Investments
ROBERT P. VROLYK, Vice President, Finance and
Actuary
L. BROCK THOMSON, Vice President and
Treasurer
ELLEN B. KING, Assistant Counsel and Secretary
SUN LIFE ASSURANCE COMPANY
OF CANADA (U.S.)
ANNUITY SERVICE MAILING ADDRESS:
Sun Life Retirement Products and Services
P.O. Box 1024, Boston, Massachusetts 02103-9986
GENERAL DISTRIBUTOR
Clarendon Insurance Agency, Inc.
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02481
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
200 Berkeley Street, Boston, Massachusetts 02116
ACCOUNT INFORMATION
For account information, 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 on any business day.
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.
CO3-8/99 5M
[LOGO]
PROFESSIONALLY MANAGED COMBINATION
FIXED/VARIABLE ANNUITY
FOR QUALIFIED RETIREMENT PLANS
SEMI-ANNUAL REPORT - JUNE 30, 1999
ISSUED BY
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
A WHOLLY-OWNED SUBSIDIARY OF
SUN LIFE OF CANADA (U.S.) HOLDINGS, INC.
