<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
JAMES A. McNULTY, III, Senior Vice President,
General Manager and Director
S. CAESAR RABOY, Director
RICHARD B. BAILEY, Director
M. COLYER CRUM, Director
DAVID D. HORN, Director
ANGUS A. MacNAUGHTON, Director
GREGORY W. GEE, Director
PETER F. DEMUTH, Vice President, Chief
Counsel and Assistant Secretary
DAVEY S. SCOON, Vice President, Finance
and Treasurer
JAMES M. A. ANDERSON, Vice President, Investments
ROBERT P. VROLYK, Vice President and Actuary
ELLEN B. KING, 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
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.
CO2-2/00 5M
[LOGO]
PROFESSIONALLY MANAGED COMBINATION
FIXED/VARIABLE ANNUITY
FOR QUALIFIED RETIREMENT PLANS
ANNUAL REPORT - DECEMBER 31, 1999
ISSUED BY
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
A WHOLLY-OWNED SUBSIDIARY OF
SUN LIFE OF CANADA (U.S.) HOLDINGS, INC.
<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
December 31, 1998 December 31, 1999 in Unit Value
Compass 1 (U.S.) Contracts: ----------------- ----------------- ---------------
<S> <C> <C> <C>
Massachusetts Investors Trust........................ $103.3129 $109.0939 5.60%
Massachusetts Investors Growth Stock Fund............ 98.9683 135.5845 37.00
MFS Total Return Fund................................ 69.2493 69.9144 0.96
MFS Growth Opportunities Fund........................ 64.4932 84.5669 31.13
MFS Reseach Fund..................................... 85.6092 104.6442 22.23
MFS Bond Fund........................................ 38.6443 37.3948 (3.23)
MFS Money Market Fund................................ 21.0291 21.7309 3.34
MFS Government Money Market Fund..................... 20.1619 20.7776 3.05
MFS High Income Fund................................. 42.6829 45.0959 5.65
MFS Global Governments Fund.......................... 38.9935 37.1590 (4.70)
MFS Emerging Growth Fund............................. 74.4225 110.2608 48.16
</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, 1999
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C> <C>
Investments in mutual funds: Shares Cost Value
--------- ------------ ------------
Massachusetts Investors Trust ("MIT")*........ 776,325 $ 11,227,735 $ 16,264,647
Massachusetts Investors Growth Stock Fund
("MIG")*.................................... 734,451 9,602,557 14,933,573
MFS Total Return Fund ("MTR")*................ 1,299,434 18,909,464 18,034,943
MFS Growth Opportunities Fund ("MGO")*........ 2,476,355 32,299,542 47,233,168
MFS Reseach Fund ("MFR")*..................... 381,690 6,607,728 11,015,314
MFS Bond Fund ("MFB")*........................ 359,526 4,742,783 4,379,212
MFS Money Market Fund ("MCM")................. 4,976,511 4,976,511 4,976,511
MFS Government Money Market Fund ("MCG")...... 851,549 851,549 851,549
MFS High Income Fund ("MFH")*................. 1,230,464 6,481,135 6,136,419
MFS Global Governments Fund ("MGG")*.......... 175,044 1,956,793 1,647,647
MFS Emerging Growth Fund ("MEG")*............. 342,299 9,374,914 22,792,777
------------ ------------
$107,030,711 $148,265,760
============
LIABILITY:
Payable to sponsor....................................................... (94,655)
------------
Net assets......................................................... $148,171,105
============
</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......................... 147,525 $109.0939 $ 16,090,651 $ 199,882 $ 16,290,533
MIG......................... 109,497 135.5845 14,838,324 112,670 14,950,994
MTR......................... 252,908 69.9144 17,650,690 97,550 17,748,240
MGO......................... 552,305 84.5669 47,010,702 279,167 47,289,869
MFR......................... 104,992 104.6442 10,989,885 42,739 11,032,624
MFB......................... 112,651 37.3948 4,301,166 96,649 4,397,815
MCM......................... 226,156 21.7309 4,909,941 75,395 4,985,336
MCG......................... 40,868 20.7776 848,758 3,121 851,879
MFH......................... 136,385 45.0959 6,067,080 115,623 6,182,703
MGG......................... 42,379 37.1590 1,574,609 32,434 1,607,043
MEG......................... 205,870 110.2608 22,698,426 135,643 22,834,069
------------ ---------- ------------
Net assets...................................... $146,980,232 $1,190,873 $148,171,105
============ ========== ============
</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, 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............... $ 527,155 $1,101,617 $1,813,007 $ 4,353,777 $ 807,108 $ 338,530
Mortality and expense risk charges.... (207,718) (156,876) (252,661) (514,379) (132,294) (62,694)
----------- ---------- ----------- ----------- ----------- ------------
Net investment income (loss)...... $ 319,437 $ 944,741 $1,560,346 $ 3,839,398 $ 674,814 $ 275,836
----------- ---------- ----------- ----------- ----------- ------------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment
transactions:
Proceeds from sales................. $1,793,532 $1,848,097 $4,078,883 $ 5,733,796 $ 1,828,184 $ 1,331,422
Cost of investments sold............ (1,016,452) (1,027,874) (3,524,306) (3,661,393) (866,982) (1,319,311)
----------- ---------- ----------- ----------- ----------- ------------
Net realized gains (losses)....... $ 777,080 $ 820,223 $ 554,577 $ 2,072,403 $ 961,202 $ 12,111
----------- ---------- ----------- ----------- ----------- ------------
Net unrealized appreciation
(depreciation) on investments:
End of year......................... $5,036,912 $5,331,016 $ (874,521) $14,933,626 $ 4,407,586 $ (363,571)
Beginning of year................... 5,241,530 2,986,945 1,059,509 9,382,084 3,943,515 91,488
----------- ---------- ----------- ----------- ----------- ------------
Change in unrealized appreciation
(depreciation).................. $ (204,618) $2,344,071 $(1,934,030) $ 5,551,542 $ 464,071 $ (455,059)
----------- ---------- ----------- ----------- ----------- ------------
Realized and unrealized gains
(losses).......................... $ 572,462 $3,164,294 $(1,379,453) $ 7,623,945 $ 1,425,273 $ (442,948)
----------- ---------- ----------- ----------- ----------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS............................. $ 891,899 $4,109,035 $ 180,893 $11,463,343 $ 2,100,087 $ (167,112)
=========== ========== =========== =========== =========== ============
<CAPTION>
MCM MCG MFH MGG MEG
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
----------- ----------- ----------- ----------- -----------
INCOME AND EXPENSES:
<S> <C> <C> <C> <C> <C> <C>
Dividend income and capital gain
distributions received............... $ 237,964 $ 51,843 $ 634,514 $ 126,439 $ 108,037
Mortality and expense risk charges.... (66,645) (15,633) (88,130) (22,606) (235,099)
----------- ---------- ----------- ----------- -----------
Net investment income (loss)...... $ 171,319 $ 36,210 $ 546,384 $ 103,833 $ (127,062)
----------- ---------- ----------- ----------- -----------
Realized and unrealized gains
(losses):
Realized gains (losses) on investment
transactions:
Proceeds from sales................. $3,930,042 $ 779,756 $1,877,769 $ 307,305 $ 5,618,789
Cost of investments sold............ (3,930,042) (779,756) (1,759,865) (377,837) (1,789,411)
----------- ---------- ----------- ----------- -----------
Net realized gains (losses)....... $ -- $ -- $ 117,904 $ (70,532) $ 3,829,378
----------- ---------- ----------- ----------- -----------
Net unrealized appreciation
(depreciation) on investments:
End of year......................... $ -- $ -- $ (344,716) $ (309,146) $13,417,863
Beginning of year................... -- -- (73,232) (186,081) 9,373,097
----------- ---------- ----------- ----------- -----------
Change in unrealized appreciation
(depreciation).................. $ -- $ -- $ (271,484) $ (123,065) $ 4,044,766
----------- ---------- ----------- ----------- -----------
Realized and unrealized gains
(losses).......................... $ -- $ -- $ (153,580) $ (193,597) $ 7,874,144
----------- ---------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS............................. $ 171,319 $ 36,210 $ 392,804 $ (89,764) $ 7,747,082
=========== ========== =========== =========== ===========
</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,
-------------------------- --------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 319,437 $ 821,334 $ 944,741 $ 764,771
Net realized gains (losses)........... 777,080 1,505,282 820,223 360,064
Net unrealized gains (losses)......... (204,618) 912,011 2,344,071 1,979,540
----------- ----------- ----------- -----------
Increase (Decrease) in net assets
from operations................. $ 891,899 $ 3,238,627 $ 4,109,035 $ 3,104,375
----------- ----------- ----------- -----------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received.......... $ 167,331 $ 250,927 $ 122,298 $ 182,818
Net transfers between Sub-Accounts
and Fixed Account.................. 294,781 175,482 1,240,969 520,045
Withdrawals, surrenders,
annuitizations and contract
charges............................ (1,407,400) (3,770,189) (1,510,781) (1,231,561)
----------- ----------- ----------- -----------
Net accumulation activity......... $ (945,288) $(3,343,780) $ (147,514) $ (528,698)
----------- ----------- ----------- -----------
Annuitization activity:
Annuitizations...................... $ -- $ -- $ -- $ --
Annuity payments.................... (37,372) (33,722) (35,111) (28,970)
Adjustments to annuity reserve...... 339 3,919 3,462 3,506
----------- ----------- ----------- -----------
Net annuitization activity........ $ (37,033) $ (29,803) $ (31,649) $ (25,464)
----------- ----------- ----------- -----------
Increase (Decrease) in net assets from
participant transactions............. $ (982,321) $(3,373,583) $ (179,163) $ (554,162)
----------- ----------- ----------- -----------
Increase (Decrease) in net assets... $ (90,422) $ (134,956) $ 3,929,872 $ 2,550,213
NET ASSETS:
Beginning of year..................... 16,380,955 16,515,911 11,021,122 8,470,909
----------- ----------- ----------- -----------
End of year........................... $16,290,533 $16,380,955 $14,950,994 $11,021,122
=========== =========== =========== ===========
<CAPTION>
MTR
Sub-Account
--------------------------
Year Ended
December 31,
--------------------------
1999 1998
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 1,560,346 $ 3,142,843
Net realized gains (losses)........... 554,577 1,530,473
Net unrealized gains (losses)......... (1,934,030) (2,387,460)
----------- -----------
Increase (Decrease) in net assets
from operations................. $ 180,893 $ 2,285,856
----------- -----------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received.......... $ 195,625 $ 289,514
Net transfers between Sub-Accounts
and Fixed Account.................. (1,348,674) (1,127,992)
Withdrawals, surrenders,
annuitizations and contract
charges............................ (2,450,106) (3,913,196)
----------- -----------
Net accumulation activity......... $(3,603,155) $(4,751,674)
----------- -----------
Annuitization activity:
Annuitizations...................... $ -- $ 50,954
Annuity payments.................... (18,350) (9,910)
Adjustments to annuity reserve...... (7,275) (30,175)
----------- -----------
Net annuitization activity........ $ (25,625) $ 10,869
----------- -----------
Increase (Decrease) in net assets from
participant transactions............. $(3,628,780) $(4,740,805)
----------- -----------
Increase (Decrease) in net assets... $(3,447,887) $(2,454,949)
NET ASSETS:
Beginning of year..................... 21,196,127 23,651,076
----------- -----------
End of year........................... $17,748,240 $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>
MGO MFR MFB
Sub-Account Sub-Account Sub-Account
-------------------------- -------------------------- ------------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
-------------------------- -------------------------- ------------------------
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 3,839,398 $ 3,869,361 $ 674,814 $ 255,014 $ 275,836 $ 330,300
Net realized gains (losses)........... 2,072,403 1,590,905 961,202 583,552 12,111 (61,406)
Net unrealized gains (losses)......... 5,551,542 3,674,762 464,071 1,032,200 (455,059) (81,188)
----------- ----------- ----------- ----------- ----------- ----------
Increase (Decrease) in net assets
from operations................. $11,463,343 $ 9,135,028 $ 2,100,087 $ 1,870,766 $ (167,112) $ 187,706
----------- ----------- ----------- ----------- ----------- ----------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received.......... $ 319,690 $ 511,586 $ 56,994 $ 92,604 $ 36,226 $ 229,930
Net transfers between Sub-Accounts
and Fixed Account................. (56,754) (246,517) 39,394 251,933 (136,413) (137,088)
Withdrawals, surrenders,
annuitizations and contract
charges........................... (4,743,125) (3,973,370) (1,597,218) (930,243) (930,409) (795,428)
----------- ----------- ----------- ----------- ----------- ----------
Net accumulation activity......... $(4,480,189) $(3,708,301) $(1,500,830) $ (585,706) $(1,030,596) $ (702,586)
----------- ----------- ----------- ----------- ----------- ----------
Annuitization activity:
Annuitizations...................... $ -- $ 57,163 $ -- $ -- $ -- $ --
Annuity payments.................... (36,385) (31,779) (10,702) (9,455) (11,120) (11,729)
Adjustments to annuity reserve...... 16,995 (29,875) 3,738 1,832 (286) 1,001
----------- ----------- ----------- ----------- ----------- ----------
Net annuitization activity........ $ (19,390) $ (4,491) $ (6,964) $ (7,623) $ (11,406) $ (10,728)
----------- ----------- ----------- ----------- ----------- ----------
Increase (Decrease) in net assets from
participant transactions............... $(4,499,579) $(3,712,792) $(1,507,794) $ (593,329) $(1,042,002) $ (713,314)
----------- ----------- ----------- ----------- ----------- ----------
Increase (Decrease) in net assets... $ 6,963,764 $ 5,422,236 $ 592,293 $ 1,277,437 $(1,209,114) $ (525,608)
NET ASSETS:
Beginning of year..................... 40,326,105 34,903,869 10,440,331 9,162,894 5,606,929 6,132,537
----------- ----------- ----------- ----------- ----------- ----------
End of year........................... $47,289,869 $40,326,105 $11,032,624 $10,440,331 $ 4,397,815 $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
------------------------- ------------------------ ---------------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
------------------------- ------------------------ ---------------------------
1999 1998 1999 1998 1999 1998
----------- ------------ ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 171,319 $ 198,300 $ 36,210 $ 42,390 $ 546,384 $ 590,763
Net realized gains (losses)........... -- -- -- -- 117,904 148,907
Net unrealized gains (losses)......... -- -- -- -- (271,484) (728,276)
---------- ----------- ----------- ----------- ------------ -------------
Increase (Decrease) in net assets
from operations................. $ 171,319 $ 198,300 $ 36,210 $ 42,390 $ 392,804 $ 11,394
---------- ----------- ----------- ----------- ------------ -------------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received.......... $ 89,384 $ 95,793 $ 19,501 $ 172,988 $ 56,022 $ 47,917
Net transfers between Sub-Accounts
and Fixed Account................. 859,466 1,099,327 12,828 92,742 (227,923) (234,750)
Withdrawals, surrenders,
annuitizations and contract
charges........................... (1,404,142) (2,304,486) (586,196) (279,549) (1,258,452) (1,213,505)
---------- ----------- ----------- ----------- ------------ -------------
Net accumulation activity......... $ (455,292) $(1,109,366) $ (553,867) $ (13,819) $(1,430,353) $ (1,400,338)
---------- ----------- ----------- ----------- ------------ -------------
Annuitization activity:
Annuitizations...................... $ -- $ -- $ -- $ 3,544 $ -- $ --
Annuity payments.................... (8,327) (8,378) (941) (990) (15,524) (18,033)
Adjustments to annuity reserve...... 210 102 54 78 5,459 2,893
---------- ----------- ----------- ----------- ------------ -------------
Net annuitization activity........ $ (8,117) $ (8,276) $ (887) $ 2,632 $ (10,065) $ (15,140)
---------- ----------- ----------- ----------- ------------ -------------
Increase (Decrease) in net assets from
participant transactions............... $ (463,409) $(1,117,642) $ (554,754) $ (11,187) $(1,440,418) $ (1,415,478)
---------- ----------- ----------- ----------- ------------ -------------
Increase (Decrease) in net assets... $ (292,090) $ (919,342) $ (518,544) $ 31,203 $(1,047,614) $ (1,404,084)
NET ASSETS:
Beginning of year..................... 5,277,426 6,196,768 1,370,423 1,339,220 7,230,317 8,634,401
---------- ----------- ----------- ----------- ------------ -------------
End of year........................... $4,985,336 $ 5,277,426 $ 851,879 $1,370,423 $ 6,182,703 $ 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
------------------------ -------------------------
Year Ended Year Ended
December 31, December 31,
------------------------ -------------------------
1999 1998 1999 1998
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 103,833 $ 106,741 $ (127,062) $ (53,760)
Net realized gains (losses)........... (70,532) (14,845) 3,829,378 2,192,749
Net unrealized gains (losses)......... (123,065) (32,164) 4,044,766 1,544,153
---------- ---------- ----------- -----------
Increase (Decrease) in net assets
from operations................. $ (89,764) $ 59,732 $ 7,747,082 $ 3,683,142
---------- ---------- ----------- -----------
PARTICIPANT TRANSACTIONS:
Accumulation activity:
Purchase payments received.......... $ 5,219 $ 10,731 $ 155,477 $ 297,252
Net transfers between Sub-Accounts
and Fixed Account.................. (86,025) (79,290) (771,150) 87,481
Withdrawals, surrenders,
annuitizations and contract
charges............................ (196,101) (167,294) (2,988,579) (2,456,028)
---------- ---------- ----------- -----------
Net accumulation activity......... $ (276,907) $ (235,853) $(3,604,252) $(2,071,295)
---------- ---------- ----------- -----------
Annuitization activity:
Annuitizations...................... $ -- $ -- $ -- $ --
Annuity payments.................... (5,326) (5,614) (17,562) (17,582)
Adjustments to annuity reserve...... 1,607 (1,687) 15,977 6,854
---------- ---------- ----------- -----------
Net annuitization activity........ $ (3,719) $ (7,301) $ (1,585) $ (10,728)
---------- ---------- ----------- -----------
Increase (Decrease) in net assets from
participant transactions............ $ (280,626) $ (243,154) $(3,605,837) $(2,082,023)
---------- ---------- ----------- -----------
Increase (Decrease) in net assets... $ (370,390) $ (183,422) $ 4,141,245 $ 1,601,119
NET ASSETS:
Beginning of year..................... 1,977,433 2,160,855 18,692,824 17,091,705
---------- ---------- ----------- -----------
End of year........................... $1,607,043 $1,977,433 $22,834,069 $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) UNIT ACTIVITY FROM PARTICIPANT TRANSACTIONS
<TABLE>
<CAPTION>
MIT MIG MTR
Sub-Account Sub-Account Sub-Account
------------------ ------------------ ------------------
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1999 1998 1999 1998 1999 1998
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding, beginning of year.... 156,406 191,532 110,261 116,839 304,876 376,845
Units purchased....................... 1,635 2,680 1,135 2,161 2,773 4,393
Units transferred between Sub-
Accounts and Fixed Account.......... 2,877 1,444 11,474 5,819 (19,641) (16,851)
Units withdrawn, surrendered and
annuitized.......................... (13,393) (39,250) (13,373) (14,558) (35,100) (59,511)
-------- -------- -------- -------- -------- --------
Units outstanding, end of year........ 147,525 156,406 109,497 110,261 252,908 304,876
======== ======== ======== ======== ======== ========
<CAPTION>
MGO MFR MFB
Sub-Account Sub-Account Sub-Account
------------------ ------------------ ------------------
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1999 1998 1999 1998 1999 1998
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding, beginning of year.... 617,973 682,668 121,411 129,195 139,906 158,314
Units purchased....................... 4,824 9,055 647 1,193 941 6,031
Units transferred between Sub-
Accounts and Fixed Account.......... (1,021) (4,580) 497 3,013 (3,556) (3,600)
Units withdrawn, surrendered and
annuitized.......................... (69,471) (69,170) (17,563) (11,990) (24,640) (20,839)
-------- -------- -------- -------- -------- --------
Units outstanding, end of year........ 552,305 617,973 104,992 121,411 112,651 139,906
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
MCM MCG MFH
Sub-Account Sub-Account Sub-Account
------------------ ------------------ ------------------
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1999 1998 1999 1998 1999 1998
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding, beginning of year.... 247,311 301,313 67,794 68,686 168,359 200,252
Units purchased....................... 4,169 4,643 1,063 8,633 1,309 1,084
Units transferred between Sub-
Accounts and Fixed Account.......... 40,396 53,161 528 4,580 (5,090) (5,278)
Units withdrawn, surrendered and
annuitized.......................... (65,720) (111,806) (28,517) (14,105) (28,193) (27,699)
-------- -------- -------- -------- -------- --------
Units outstanding, end of year........ 226,156 247,311 40,868 67,794 136,385 168,359
======== ======== ======== ======== ======== ========
<CAPTION>
MGG MEG
Sub-Account Sub-Account
------------------ ------------------
Year Year Year Year
Ended Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding, beginning of year.... 49,718 55,822 249,765 280,589
Units purchased....................... 149 277 2,037 4,313
Units transferred between Sub-
Accounts and Fixed Account.......... (2,280) (2,074) (9,296) 1,703
Units withdrawn, surrendered and
annuitized.......................... (5,208) (4,307) (36,636) (36,840)
-------- -------- -------- --------
Units outstanding, end of year........ 42,379 49,718 205,870 249,765
======== ======== ======== ========
</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 December 31, 1999, the related
statement of operations for the year then ended and the statements of changes in
net assets for the years ended December 31, 1999 and 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 December 31, 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 December 31, 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
February 10, 2000
