<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 Contracts December 31, 1997 December 31, 1998 in Unit Value
----------------- ----------------- -------------
<S> <C> <C> <C>
Massachusetts Investors Trust........................ $85.1160 $103.3129 21.38%
Massachusetts Investors Growth Stock Fund............ 71.6206 98.9683 38.18
MFS Total Return Fund................................ 62.6622 69.2493 10.51
MFS Growth Opportunities Fund........................ 50.5718 64.4932 27.53
MFS Reseach Fund..................................... 70.5612 85.6092 21.33
MFS Bond Fund........................................ 37.4559 38.6443 3.17
MFS Money Market Fund................................ 20.2949 21.0291 3.62
MFS Government Money Market Fund..................... 19.4875 20.1619 3.46
MFS High Income Fund................................. 42.8235 42.6829 (0.33)
MFS World Governments Fund........................... 37.9444 38.9935 2.76
MFS Emerging Growth Fund............................. 60.5646 74.4225 22.88
</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-- December 31, 1998
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C> <C>
Investments in mutual funds: Shares Cost Value
--------- ------------ ------------
Massachusetts Investors Trust
("MIT")*............................ 807,736 $ 11,113,878 $ 16,355,408
Massachusetts Investors Growth Stock
Fund ("MIG")*....................... 691,857 8,020,219 11,007,164
MFS Total Return Fund ("MTR")*........ 1,435,169 20,416,046 21,475,555
MFS Growth Opportunities Fund
("MGO")*............................ 2,525,400 30,904,315 40,286,399
MFS Reseach Fund ("MFR")*............. 414,608 6,483,244 10,426,759
MFS Bond Fund ("MFB")*................ 420,440 5,496,552 5,588,040
MFS Money Market Fund ("MCM")......... 5,268,810 5,268,810 5,268,810
MFS Government Money Market Fund
("MCG")............................. 1,370,147 1,370,147 1,370,147
MFS High Income Fund ("MFH")*......... 1,405,043 7,262,724 7,189,492
MFS World Governments Fund ("MWG")*... 191,273 2,205,725 2,019,644
MFS Emerging Growth Fund ("MEG")*..... 418,563 9,294,412 18,667,509
------------ ------------
$107,836,072 $139,654,927
------------
------------
<CAPTION>
LIABILITY:
<S> <C> <C> <C>
Payable to sponsor............................................... (134,935)
------------
Net assets................................................. $139,519,992
------------
------------
</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......................... 156,406 $ 103.312858 $ 16,155,645 $ 225,310 $ 16,380,955
MIG......................... 110,261 98.968251 10,906,738 114,384 11,021,122
MTR......................... 304,876 69.249292 21,081,700 114,427 21,196,127
MGO......................... 617,973 64.493151 40,084,465 241,640 40,326,105
MFR......................... 121,411 85.609177 10,396,344 43,987 10,440,331
MFB......................... 139,906 38.644340 5,497,200 109,729 5,606,929
MCM......................... 247,311 21.029066 5,197,045 80,381 5,277,426
MCG......................... 67,794 20.161924 1,366,562 3,861 1,370,423
MFH......................... 168,359 42.682892 7,109,897 120,420 7,230,317
MWG......................... 49,718 38.993543 1,938,539 38,894 1,977,433
MEG......................... 249,765 74.422527 18,587,882 104,942 18,692,824
------------ ------------- ------------
Net assets....................................... $138,322,017 $ 1,197,975 $139,519,992
------------ ------------- ------------
------------ ------------- ------------
</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, 1998
<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............... $1,040,778 $ 888,114 $ 3,432,291 $4,344,859 $ 380,158 $ 404,022
Mortality and expense risk charges.... (219,444 ) (123,343 ) (289,448) (475,498 ) (125,144 ) (73,722)
---------- ---------- ------------ ---------- ---------- -----------
Net investment income............. $ 821,334 $ 764,771 $ 3,142,843 $3,869,361 $ 255,014 $ 330,300
---------- ---------- ------------ ---------- ---------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment
transactions:
Proceeds from sales................. $4,384,806 $1,715,133 $ 5,702,621 $5,412,285 $1,176,296 $ 1,530,276
Cost of investments sold............ (2,879,524) (1,355,069) (4,172,148) (3,821,380) (592,744 ) (1,591,682)
---------- ---------- ------------ ---------- ---------- -----------
Net realized gains (losses)....... $1,505,282 $ 360,064 $ 1,530,473 $1,590,905 $ 583,552 $ (61,406)
---------- ---------- ------------ ---------- ---------- -----------
Net unrealized appreciation on
investments:
End of year......................... $5,241,530 $2,986,945 $ 1,059,509 $9,382,084 $3,943,515 $ 91,488
Beginning of year................... 4,329,519 1,007,405 3,446,969 5,707,322 2,911,315 172,676
---------- ---------- ------------ ---------- ---------- -----------
Change in unrealized
appreciation.................... $ 912,011 $1,979,540 $(2,387,460) $3,674,762 $1,032,200 $ (81,188)
---------- ---------- ------------ ---------- ---------- -----------
Realized and unrealized gains
(losses).......................... $2,417,293 $2,339,604 $ (856,987) $5,265,667 $1,615,752 $ (142,594)
---------- ---------- ------------ ---------- ---------- -----------
INCREASE IN NET ASSETS FROM
OPERATIONS............................. $3,238,627 $3,104,375 $ 2,285,856 $9,135,028 $1,870,766 $ 187,706
---------- ---------- ------------ ---------- ---------- -----------
---------- ---------- ------------ ---------- ---------- -----------
<CAPTION>
MCM MCG MFH MWG MEG
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Total
---------- ---------- ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Dividend income and capital gain
distributions received............... $ 268,930 $ 58,364 $ 693,908 $ 132,870 $ 170,889 $11,815,183
Mortality and expense risk charges.... (70,630 ) (15,974 ) (103,145) (26,129 ) (224,649 ) (1,747,126)
---------- ---------- ------------ ---------- ---------- -----------
Net investment income (loss)...... $ 198,300 $ 42,390 $ 590,763 $ 106,741 $ (53,760 ) $10,068,057
---------- ---------- ------------ ---------- ---------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment
transactions:
Proceeds from sales................. $4,851,493 $ 629,960 $ 1,859,134 $ 288,916 $3,528,393 $31,079,313
Cost of investments sold............ (4,851,493) (629,960 ) (1,710,227) (303,761 ) (1,335,644) (23,243,632)
---------- ---------- ------------ ---------- ---------- -----------
Net realized gains (losses)....... $ -- $ -- $ 148,907 $ (14,845 ) $2,192,749 $ 7,835,681
---------- ---------- ------------ ---------- ---------- -----------
Net unrealized appreciation
(depreciation) on investments:
End of year......................... $ -- $ -- $ (73,232) $(186,081 ) $9,373,097 $31,818,855
Beginning of year................... -- -- 655,044 (153,917 ) 7,828,944 25,905,277
---------- ---------- ------------ ---------- ---------- -----------
Change in unrealized appreciation
(depreciation).................. $ -- $ -- $ (728,276) $ (32,164 ) $1,544,153 $ 5,913,578
---------- ---------- ------------ ---------- ---------- -----------
Realized and unrealized gains
(losses).......................... $ -- $ -- $ (579,369) $ (47,009 ) $3,736,902 $13,749,259
---------- ---------- ------------ ---------- ---------- -----------
INCREASE IN NET ASSETS FROM
OPERATIONS............................. $ 198,300 $ 42,390 $ 11,394 $ 59,732 $3,683,142 $23,817,316
---------- ---------- ------------ ---------- ---------- -----------
---------- ---------- ------------ ---------- ---------- -----------
</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
------------------------ ------------------------ ------------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
------------------------ ------------------------ ------------------------
1998 1997 1998 1997 1998 1997
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income................. $ 821,334 $ 1,084,136 $ 764,771 $ 1,201,248 $ 3,142,843 $ 2,494,923
Net realized gains.................... 1,505,282 391,861 360,064 20,166 1,530,473 1,165,431
Net unrealized gains (losses)......... 912,011 2,436,981 1,979,540 1,533,779 (2,387,460) 440,641
----------- ----------- ----------- ----------- ----------- -----------
Increase in net assets from
operations...................... $ 3,238,627 $ 3,912,978 $ 3,104,375 $ 2,755,193 $ 2,285,856 $ 4,100,995
----------- ----------- ----------- ----------- ----------- -----------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received.......... $ 250,927 $ 295,282 $ 182,818 $ 161,450 $ 289,514 $ 375,661
Net transfers between Sub-Accounts
and Fixed Account.................. 175,482 443,283 520,045 190,511 (1,127,992) (117,230)
Withdrawals, surrenders,
annuitizations and contract
charges............................ (3,770,189) (2,182,271) (1,231,561) (1,420,037) (3,913,196) (4,140,788)
----------- ----------- ----------- ----------- ----------- -----------
Net accumulation activity......... $(3,343,780) $(1,443,706) $ (528,698) $(1,068,076) $(4,751,674) $(3,882,357)
----------- ----------- ----------- ----------- ----------- -----------
Annuitization activity:
Annuitizations...................... $ -- $ 73,820 $ -- $ -- $ 50,954 $ --
Annuity payments.................... (33,722) (26,781) (28,970) (24,415) (9,910) (132,212)
Adjustments to annuity reserve...... 3,919 12,259 3,506 4,039 (30,175) (139,226)
----------- ----------- ----------- ----------- ----------- -----------
Net annuitization activity........ $ (29,803) $ 59,298 $ (25,464) $ (20,376) $ 10,869 $ (271,438)
----------- ----------- ----------- ----------- ----------- -----------
Decrease in net assets from
participant transactions............. $(3,373,583) $(1,384,408) $ (554,162) $(1,088,452) $(4,740,805) $(4,153,795)
----------- ----------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets... $ (134,956) $ 2,528,570 $ 2,550,213 $ 1,666,741 $(2,454,949) $ (52,800)
NET ASSETS:
Beginning of year..................... 16,515,911 13,987,341 8,470,909 6,804,168 23,651,076 23,703,876
----------- ----------- ----------- ----------- ----------- -----------
End of year........................... $16,380,955 $16,515,911 $11,021,122 $ 8,470,909 $21,196,127 $23,651,076
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</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
------------------------ ------------------------ ------------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
------------------------ ------------------------ ------------------------
1998 1997 1998 1997 1998 1997
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income................. $ 3,869,361 $ 3,877,405 $ 255,014 $ 292,042 $ 330,300 $ 343,280
Net realized gains (losses)........... 1,590,905 1,192,014 583,552 645,408 (61,406) (100,223)
Net unrealized gains (losses)......... 3,674,762 1,531,238 1,032,200 586,469 (81,188) 270,646
----------- ----------- ----------- ----------- ----------- -----------
Increase in net assets from
operations...................... $ 9,135,028 $ 6,600,657 $ 1,870,766 $ 1,523,919 $ 187,706 $ 513,703
----------- ----------- ----------- ----------- ----------- -----------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received.......... $ 511,586 $ 396,402 $ 92,604 $ 115,867 $ 229,930 $ 97,957
Net transfers between Sub-Accounts
and Fixed Account.................. (246,517) (331,038) 251,933 112,699 (137,088) 137,968
Withdrawals, surrenders,
annuitizations and contract
charges............................ (3,973,370) (3,356,390) (930,243) (1,160,821) (795,428) (1,220,161)
----------- ----------- ----------- ----------- ----------- -----------
Net accumulation activity......... $(3,708,301) $(3,291,026) $ (585,706) $ (932,255) $ (702,586) $ (984,236)
----------- ----------- ----------- ----------- ----------- -----------
Annuitization activity:
Annuitizations...................... $ 57,163 $ 40,042 $ -- $ -- $ -- $ 52,142
Annuity payments.................... (31,779) (22,778) (9,455) (9,402) (11,729) (12,112)
Adjustments to annuity reserve...... (29,875) 12,645 1,832 1,887 1,001 11,228
----------- ----------- ----------- ----------- ----------- -----------
Net annuitization activity........ $ (4,491) $ 29,909 $ (7,623) $ (7,515) $ (10,728) $ 51,258
----------- ----------- ----------- ----------- ----------- -----------
Decrease in net assets from
participant transactions............. $(3,712,792) $(3,261,117) $ (593,329) $ (939,770) $ (713,314) $ (932,978)
----------- ----------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets... $ 5,422,236 $ 3,339,540 $ 1,277,437 $ 584,149 $ (525,608) $ (419,275)
NET ASSETS:
Beginning of year..................... 34,903,869 31,564,329 9,162,894 8,578,745 6,132,537 6,551,812
----------- ----------- ----------- ----------- ----------- -----------
End of year........................... $40,326,105 $34,903,869 $10,440,331 $ 9,162,894 $ 5,606,929 $ 6,132,537
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</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,
------------------------ ------------------------ --------------------------
1998 1997 1998 1997 1998 1997
----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income................. $ 198,300 $ 243,804 $ 42,390 $ 41,525 $ 590,763 $ 620,612
Net realized gains.................... -- -- -- -- 148,907 19,181
Net unrealized gains (losses)......... -- -- -- -- (728,276) 271,258
----------- ----------- ----------- ----------- ------------ ------------
Increase in net assets from
operations...................... $ 198,300 $ 243,804 $ 42,390 $ 41,525 $ 11,394 $ 911,051
----------- ----------- ----------- ----------- ------------ ------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received.......... $ 95,793 $ 107,567 $ 172,988 $ 29,140 $ 47,917 $ 66,166
Net transfers between Sub-Accounts
and Fixed Account.................. 1,099,327 (678,009) 92,742 55,363 (234,750) (76,758)
Withdrawals, surrenders,
annuitizations and contract
charges............................ (2,304,486) (1,416,396) (279,549) (171,168) (1,213,505) (1,125,638)
----------- ----------- ----------- ----------- ------------ ------------
Net accumulation activity......... $(1,109,366) $(1,986,838) $ (13,819) $ (86,665) $ (1,400,338) $ (1,136,230)
----------- ----------- ----------- ----------- ------------ ------------
Annuitization activity:
Annuitizations...................... $ -- $ 49,826 $ 3,544 $ -- $ -- $ --
Annuity payments.................... (8,378) (7,711) (990) (194) (18,033) (19,721)
Annuity transfers................... -- -- -- -- -- (3,495)
Adjustments to annuity reserve...... 102 9,057 78 76 2,893 9,135
----------- ----------- ----------- ----------- ------------ ------------
Net annuitization activity........ $ (8,276) $ 51,172 $ 2,632 $ (118) $ (15,140) $ (14,081)
----------- ----------- ----------- ----------- ------------ ------------
Decrease in net assets from
participant transactions............ $(1,117,642) $(1,935,666) $ (11,187) $ (86,783) $ (1,415,478) $ (1,150,311)
----------- ----------- ----------- ----------- ------------ ------------
Increase (decrease) in net assets... $ (919,342) $(1,691,862) $ 31,203 $ (45,258) $ (1,404,084) $ (239,260)
NET ASSETS:
Beginning of year..................... 6,196,768 7,888,630 1,339,220 1,384,478 8,634,401 8,873,661
----------- ----------- ----------- ----------- ------------ ------------
End of year........................... $ 5,277,426 $ 6,196,768 $ 1,370,423 $ 1,339,220 $ 7,230,317 $ 8,634,401
----------- ----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ----------- ------------ ------------
</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,
------------------------ ------------------------ --------------------------
1998 1997 1998 1997 1998 1997
----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 106,741 $ 67,492 $ (53,760) $ (60,819) $ 10,068,057 $ 10,205,648
Net realized gains (losses)........... (14,845) (50,885) 2,192,749 1,959,202 7,835,681 5,242,155
Net unrealized gains (losses)......... (32,164) (48,770) 1,544,153 1,077,568 5,913,578 8,099,810
----------- ----------- ----------- ----------- ------------ ------------
Increase (decrease) in net assets
from operations................. $ 59,732 $ (32,163) $ 3,683,142 $ 2,975,951 $ 23,817,316 $ 23,547,613
----------- ----------- ----------- ----------- ------------ ------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received.......... $ 10,731 $ 20,613 $ 297,252 $ 273,824 $ 2,182,060 $ 1,939,929
Net transfers between Sub-Accounts
and Fixed Account.................. (79,290) (57,194) 87,481 180,160 401,373 (140,245)
Withdrawals, surrenders,
annuitizations and contract
charges............................ (167,294) (504,226) (2,456,028) (2,750,634) (21,034,849) (19,448,530)
----------- ----------- ----------- ----------- ------------ ------------
Net accumulation activity......... $ (235,853) $ (540,807) $(2,071,295) $(2,296,650) $(18,451,416) $(17,648,846)
----------- ----------- ----------- ----------- ------------ ------------
Annuitization activity:
Annuitizations...................... $ -- $ 12,236 $ -- $ 4,465 $ 111,661 $ 232,531
Annuity payments.................... (5,614) (5,464) (17,582) (22,268) (176,162) (283,058)
Annuity transfers................... -- -- -- 3,495 -- --
Adjustments to annuity reserve...... (1,687) 2,064 6,854 2,764 (41,552) (74,072)
----------- ----------- ----------- ----------- ------------ ------------
Net annuitization activity........ $ (7,301) $ 8,836 $ (10,728) $ (11,544) $ (106,053) $ (124,599)
----------- ----------- ----------- ----------- ------------ ------------
Decrease in net assets from
participant transactions............ $ (243,154) $ (531,971) $(2,082,023) $(2,308,194) $(18,557,469) $(17,773,445)
----------- ----------- ----------- ----------- ------------ ------------
Increase (decrease) in net assets... $ (183,422) $ (564,134) $ 1,601,119 $ 667,757 $ 5,259,847 $ 5,774,168
NET ASSETS:
Beginning of year..................... 2,160,855 2,724,989 17,091,705 16,423,948 134,260,145 128,485,977
----------- ----------- ----------- ----------- ------------ ------------
End of year........................... $ 1,977,433 $ 2,160,855 $18,692,824 $17,091,705 $139,519,992 $134,260,145
----------- ----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ----------- ------------ ------------
</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
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) UNIT ACTIVITY FROM PARTICIPANT TRANSACTIONS
<TABLE>
<CAPTION>
MIT MIG MTR
Sub Account Sub Account Sub Account
--------------- ---------------- ---------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
--------------- ---------------- ---------------
1998 1997 1998 1997 1998 1997
------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding, beginning of
year............................ 191,532 211,924 116,839 137,226 376,845 445,574
Units purchased................ 2,680 3,952 2,161 2,689 4,393 6,597
Units transferred between
Sub-Accounts and Fixed
Account...................... 1,444 5,860 5,819 2,571 (16,851) (1,968)
Units withdrawn, surrendered
and annuitized............... (39,250) (30,204) (14,558) (25,647) (59,511) (73,358)
------- ------- -------- ------- ------- -------
Units outstanding, end of
year......................... 156,406 191,532 110,261 116,839 304,876 376,845
------- ------- -------- ------- ------- -------
------- ------- -------- ------- ------- -------
<CAPTION>
MCM MCG MFH
Sub Account Sub Account Sub Account
--------------- ---------------- ---------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
--------------- ---------------- ---------------
1998 1997 1998 1997 1998 1997
------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding, beginning of
year............................ 301,313 401,141 68,686 73,345 200,252 229,079
Units purchased................ 4,643 5,399 8,633 1,523 1,084 1,652
Units transferred between
Sub-Accounts and Fixed
Account...................... 53,161 (33,845) 4,580 2,802 (5,278) (2,180)
Units withdrawn, surrendered
and annuitized............... (111,806) (71,382) (14,105) (8,984) (27,699) (28,299)
------- ------- -------- ------- ------- -------
Units outstanding, end of
year......................... 247,311 301,313 67,794 68,686 168,359 200,252
------- ------- -------- ------- ------- -------
------- ------- -------- ------- ------- -------
<CAPTION>
MGO MFR MFB
Sub Account Sub Account Sub Account
--------------- --------------- ---------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
--------------- --------------- ---------------
1998 1997 1998 1997 1998 1997
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding, beginning of
year............................ 682,668 752,698 129,195 143,843 158,314 186,637
Units purchased................ 9,055 8,648 1,193 1,771 6,031 2,751
Units transferred between
Sub-Accounts and Fixed
Account...................... (4,580) (6,742) 3,013 2,007 (3,600) 3,481
Units withdrawn, surrendered
and annuitized............... (69,170) (71,936) (11,990) (18,426) (20,839) (34,555)
------- ------- ------- ------- ------- -------
Units outstanding, end of
year......................... 617,973 682,668 121,411 129,195 139,906 158,314
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
MWG MEG
Sub Account Sub Account
--------------- ---------------
Year Ended Year Ended
December 31, December 31,
--------------- ---------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding, beginning of
year............................ 55,822 70,278 280,589 321,077
Units purchased................ 277 554 4,313 4,900
Units transferred between
Sub-Accounts and Fixed
Account...................... (2,074) (1,541) 1,703 4,053
Units withdrawn, surrendered
and annuitized............... (4,307) (13,469) (36,840) (49,441)
------- ------- ------- -------
Units outstanding, end of
year......................... 49,718 55,822 249,765 280,589
------- ------- ------- -------
------- ------- ------- -------
</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 World Governments
Sub-Account, and MFS Emerging Growth Sub-Account of Sun Life of Canada (U.S.)
Variable Account C (the "Sub-Accounts") as of December 31, 1998, the related
statement of operations for the year then ended and the statements of changes in
net assets for the years ended December 31, 1998 and 1997. 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, 1998 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 December 31, 1998,
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
February 4, 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, Senior Vice President and
Deputy General Manager and 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 M. A. ANDERSON, Vice President, Investments
ROBERT P. VROLYK, Vice President and Actuary
L. BROCK THOMSON, Vice President and
Treasurer
ELLEN B. KING, 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
125 Summer Street, Boston, Massachusetts 02110-1616
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.
CO2-2/99 6M
UV
PROFESSIONALLY MANAGED COMBINATION
FIXED/VARIABLE ANNUITY
FOR QUALIFIED RETIREMENT PLANS
ANNUAL REPORT - DECEMBER 31, 1998
ISSUED BY
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
A WHOLLY-OWNED SUBSIDIARY OF
SUN LIFE OF CANADA (U.S.) HOLDINGS, INC.
