<PAGE>
COMPASS-G
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT D
DIRECTORS AND OFFICERS OF
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
JOHN D. McNEIL, Chairman and Director
JOHN R. GARDNER, President and Director
DAVID D. HORN, Senior Vice President and
General Manager and Director
RICHARD B. BAILEY, Director
A. KEITH BRODKIN, Director
M. COLYER CRUM, Director
JOHN S. LANE, Director
ANGUS A. MacNAUGHTON, Director
BONNIE S. ANGUS, Secretary
L. BROCK THOMSON, Vice President and
Treasurer
SUN LIFE ASSURANCE COMPANY
OF CANADA (U.S.)
ANNUITY SERVICE MAILING ADDRESS:
Sun Life Annuity Service Center
P.O. Box 1024, Boston, Massachusetts 02103
GENERAL DISTRIBUTOR
Clarendon Insurance Agency, Inc.
500 Boylston Street, Boston, Massachusetts 02116
LEGAL COUNSEL
Covington & Burling
1201 Pennsylvania Avenue, N.W.
P.O. Box 7566, Washington, D.C. 20044
AUDITORS
Deloitte & Touche LLP
125 Summer Street, Boston, Massachusetts 02110
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.
This report is prepared for the general information of
contract owners and participants. It is authorized for
distribution to prospective purchasers only if preceded
or accompanied by an effective prospectus.
COG-3-9/96 35M
COMPASS G
PROFESSIONALLY MANAGED COMBINATION
FIXED/VARIABLE GROUP ANNUITY
FOR QUALIFIED AND NON-QUALIFIED
RETIREMENT PLANS
--------------------------------------------
SEMI-ANNUAL REPORT, JUNE 30, 1996
[LOGO]
ISSUED BY
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
A WHOLLY OWNED SUBSIDIARY OF
SUN LIFE ASSURANCE COMPANY OF CANADA
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT D
STATEMENT OF CONDITION-- June 30, 1996
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C> <C>
Investments in mutual funds: Shares Cost Value
---------- ------------ ------------
Massachusetts Investors Trust
("MIT")*............................. 3,301,067 $ 39,385,829 $ 46,036,857
Massachusetts Investors Growth Stock
Fund ("MIG")*........................ 1,074,188 11,370,382 12,965,904
MFS Total Return Fund ("MTR")*........ 3,433,685 45,824,108 50,771,047
MFS Growth Opportunities Fund
("MGO")*............................. 341,030 3,992,928 4,591,533
MFS Bond Fund ("MFB")*................ 416,677 5,412,785 5,343,269
MFS World Governments Fund ("MWG")*... 307,114 3,529,399 3,353,591
MFS/Sun Life Series Trust:
Capital Appreciation Series
("CAS")............................ 1,443,390 39,759,084 47,895,912
Government Securities Series
("GSS")............................ 1,941,571 24,547,695 23,982,135
High Yield Series ("HYS")........... 1,020,389 8,688,292 8,632,701
Money Market Series ("MMS")......... 14,454,678 14,454,678 14,454,678
------------ ------------
$196,965,180 $218,027,627
------------
------------
Receivable from sponsor........................................... 6,661
------------
Net Assets.................................................. $218,034,288
------------
------------
</TABLE>
NET ASSETS:
<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> <C>
MIT-Level 2................... 1,071,118 $ 30.0257 $ 32,156,235 $ -- $ 32,156,235
MIT-Level 3................... 393,723 30.1886 11,887,888 -- 11,887,888
MIT-Level 4................... 89,410 22.2771 1,992,734 -- 1,992,734
MIG-Level 2................... 300,584 27.9117 8,391,195 -- 8,391,195
MIG-Level 3................... 145,897 30.7884 4,491,801 -- 4,491,801
MIG-Level 4................... 5,261 15.8417 82,908 -- 82,908
MTR-Level 2................... 1,405,550 25.6863 36,070,550 -- 36,070,550
MTR-Level 3................... 488,396 23.3757 11,409,162 -- 11,409,162
MTR-Level 4................... 184,892 17.8109 3,291,335 -- 3,291,335
MGO-Level 2................... 153,787 24.7758 3,823,581 -- 3,823,581
MGO-Level 3................... 26,456 26.5519 704,399 -- 704,399
MGO-Level 4................... 3,523 17.6713 63,552 -- 63,552
MFB-Level 2................... 134,076 18.2405 2,471,997 -- 2,471,997
MFB-Level 3................... 77,956 18.4244 1,448,782 -- 1,448,782
MFB-Level 4................... 92,877 15.2046 1,422,490 -- 1,422,490
MWG-Level 2................... 98,483 20.6244 2,031,010 -- 2,031,010
MWG-Level 3................... 72,558 18.2263 1,322,581 -- 1,322,581
CAS-Level 2................... 815,147 33.1986 27,057,112 111,015 27,168,127
CAS-Level 3................... 421,874 35.2501 14,869,256 8,944 14,878,200
CAS-Level 4................... 170,874 34.3080 5,857,635 -- 5,857,635
GSS-Level 2................... 548,703 18.0805 9,918,631 3,303 9,921,934
GSS-Level 3................... 354,809 17.5624 6,231,993 6,767 6,238,760
GSS-Level 4................... 452,118 17.2906 7,819,889 -- 7,819,889
HYS-Level 2................... 187,041 20.3773 3,811,535 2,728 3,814,263
HYS-Level 3................... 100,922 18.9445 1,911,709 5,737 1,917,446
HYS-Level 4................... 156,723 18.4946 2,901,050 -- 2,901,050
MMS-Level 2................... 430,053 14.9845 6,440,654 2,865 6,443,519
MMS-Level 3................... 310,031 13.9240 4,315,959 -- 4,315,959
MMS-Level 4................... 271,118 13.6340 3,695,306 -- 3,695,306
------------ ----------- ------------
Net Assets....................................... $217,892,929 $141,359 $218,034,288
------------ ----------- ------------
------------ ----------- ------------
</TABLE>
*Investments are made in Class A shares of the Fund.
See notes to financial statements
1
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT D
STATEMENTS OF OPERATIONS-- Six Months Ended June 30, 1996
<TABLE>
<CAPTION>
MIT MIG MTR MGO MFB MWG
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......................................... $ 339,027 $ -- $ 1,095,988 $ -- $ 203,049 $ --
Mortality and expense risk charges................ 278,073 76,147 311,752 27,878 30,915 21,307
----------- ----------- ----------- ----------- ----------- -----------
Net investment income (expense)............... $ 60,954 $ (76,147) $ 784,236 $ (27,878) $ 172,134 $ (21,307)
----------- ----------- ----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment
transactions:
Proceeds from sales............................. $11,848,315 $3,215,619 $10,460,180 $1,008,616 $ 1,143,958 $ 954,544
Cost of investments sold........................ 11,488,337 3,538,013 9,032,859 901,198 1,194,405 1,128,095
----------- ----------- ----------- ----------- ----------- -----------
Net realized gains (losses)................... $ 359,978 $(322,394) $ 1,427,321 $ 107,418 $ (50,447) $(173,551)
----------- ----------- ----------- ----------- ----------- -----------
Net unrealized appreciation (depreciation) on
investments:
End of period................................... $ 6,651,028 $1,595,522 $ 4,946,939 $ 598,605 $ (69,516) $(175,808)
Beginning of period............................. $ 2,634,262 $(344,804) $ 5,009,848 $ 154,918 $ 240,501 $(312,048)
----------- ----------- ----------- ----------- ----------- -----------
Change in unrealized appreciation
(depreciation)............................... $ 4,016,766 $1,940,326 $ (62,909) $ 443,687 $ (310,017) $ 136,240
----------- ----------- ----------- ----------- ----------- -----------
Realized and unrealized gains (losses).......... $ 4,376,744 $1,617,932 $ 1,364,412 $ 551,105 $ (360,464) $ (37,311)
----------- ----------- ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS... $ 4,437,698 $1,541,785 $ 2,148,648 $ 523,227 $ (188,330) $ (58,618)
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
CAS GSS HYS MMS
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......................................... $ 3,774,764 $1,322,439 $ 696,456 $ 347,723 $ 7,779,446
Mortality and expense risk charges................ 260,308 142,492 49,326 82,271 1,280,469
----------- ----------- ----------- ----------- -----------
Net investment income (expense)............... $ 3,514,456 $1,179,947 $ 647,130 $ 265,452 $ 6,498,977
----------- ----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains on investment transactions:
Proceeds from sales............................. $ 3,950,264 $6,803,150 $ 1,541,332 $6,027,356 $46,953,334
Cost of investments sold........................ 2,592,399 6,440,207 1,433,968 6,027,356 43,776,837
----------- ----------- ----------- ----------- -----------
Net realized gains (losses)................... $ 1,357,865 $ 362,943 $ 107,364 $ -- $ 3,176,497
----------- ----------- ----------- ----------- -----------
Net unrealized appreciation (depreciation) on
investments:
End of period................................... $ 8,136,828 $ (565,560 ) $ (55,591) $ -- $21,062,447
Beginning of period............................. $ 8,077,466 $1,807,209 $ 487,047 $ -- $17,754,399
----------- ----------- ----------- ----------- -----------
Change in unrealized appreciation
(depreciation)............................... $ 59,362 $(2,372,769) $ (542,638) $ -- $ 3,308,048
----------- ----------- ----------- ----------- -----------
Realized and unrealized gains (losses).......... $ 1,417,227 $(2,009,826) $ (435,274) $ -- $ 6,484,545
----------- ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS... $ 4,931,683 $ (829,879 ) $ 211,856 $ 265,452 $12,983,522
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
See notes to financial statements
2
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MIT MIG MTR
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 31, June 30, December 31,
1996 1995 1996 1995 1996 1995
----------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (expense)............... $ 60,954 $3,863,861 $ (76,147) $1,535,686 $ 784,236 $4,260,996
Net realized gains (losses)................... 359,978 (1,475,951) (322,394) (625,546) 1,427,321 1,319,082
Net unrealized gains (losses)................. 4,016,766 11,112,577 1,940,326 2,117,924 (62,909) 6,436,442
----------- ------------ ----------- ------------ ----------- ------------
Increase in net assets from operations.... $ 4,437,698 $13,500,487 $ 1,541,785 $3,028,064 $ 2,148,648 $12,016,520
----------- ------------ ----------- ------------ ----------- ------------
PARTICIPANT TRANSACTIONS:
Accumulation Activity:
Purchase payments received.................. $ 4,076,418 $8,532,635 $ 1,004,135 $2,266,231 $ 4,412,466 $10,735,986
Net transfers between Sub-Accounts and Fixed
Account.................................... 302,306 361,226 31,991 (105,149) (167,639) (1,537,141)
Withdrawals, surrenders, annuitizations and
contract charges........................... (8,900,018) (15,381,023) (2,087,233) (7,865,153) (8,625,327) (20,142,315)
----------- ------------ ----------- ------------ ----------- ------------
Net accumulation activity................. $(4,521,294) $(6,487,162) $(1,051,107) $(5,704,071) $(4,380,500) ($10,943,470)
----------- ------------ ----------- ------------ ----------- ------------
Annuitization Activity:
Adjustments to annuity reserve.............. $ 214 $ (61) $ -- $ -- $ 217 $ (46 )
----------- ------------ ----------- ------------ ----------- ------------
Net annuitization activity................ $ 214 $ (61 ) $ -- $ -- $ 217 $ (46 )
----------- ------------ ----------- ------------ ----------- ------------
Decrease in net assets from participant
transactions................................. $(4,521,080) $(6,487,223 ) $(1,051,107) $(5,704,071 ) $(4,380,283) $(10,943,516)
----------- ------------ ----------- ------------ ----------- ------------
Increase (decrease) in net assets........... $ (83,382) $ 7,013,264 $ 490,678 $(2,676,007 ) $(2,231,635) $ 1,073,004
NET ASSETS:
Beginning of period........................... 46,120,239 39,106,975 12,475,226 15,151,233 53,002,682 51,929,678
----------- ------------ ----------- ------------ ----------- ------------
End of period................................. $46,036,857 $46,120,239 $12,965,904 $12,475,226 $50,771,047 $53,002,682
----------- ------------ ----------- ------------ ----------- ------------
----------- ------------ ----------- ------------ ----------- ------------
<CAPTION>
MGO MFB MWG
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 31, June 30, December 31,
1996 1995 1996 1995 1996 1995
----------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (expense)............... $ (27,878) $ 488,680 $ 172,134 $ 405,249 $ (21,307) $ 436,307
Net realized gains (losses)................... 107,418 212,238 (50,447) (205,761) (173,551) (106,935)
Net unrealized gains (losses)................. 443,687 618,444 (310,017) 974,227 136,240 374,972
----------- ------------ ----------- ------------ ----------- ------------
Increase (decrease) in net assets from
operations............................... $ 523,227 $1,319,362 $ (188,330) $1,173,715 $ (58,618) $ 704,344
----------- ------------ ----------- ------------ ----------- ------------
PARTICIPANT TRANSACTIONS:
Accumulation Activity:
Purchase payments received.................. $ 404,155 $ 738,132 $ 422,913 $1,080,197 $ 264,136 $ 734,888
Net transfers between Sub-Accounts and Fixed
Account.................................... 237,185 65,501 (93,513) (246,836) (95,345) (164,387)
Withdrawals, surrenders, annuitizations and
contract charges........................... (960,460) (2,349,180) (742,097) (2,353,371) (704,583) (3,698,312)
----------- ------------ ----------- ------------ ----------- ------------
Net accumulation activity................. $ (319,120) $(1,545,547) $ (412,697) $(1,520,010) $ (535,792) $(3,127,811)
----------- ------------ ----------- ------------ ----------- ------------
Decrease in net assets from participant
transactions................................. $ (319,120) $(1,545,547) $ (412,697) $(1,520,010) $ (535,792) $(3,127,811)
----------- ------------ ----------- ------------ ----------- ------------
Increase (decrease) in net assets........... $ 204,107 $ (226,185) $ (601,027) $ (346,295) $ (594,410) $(2,423,467)
NET ASSETS:
Beginning of period........................... 4,387,425 4,613,610 5,944,296 6,290,591 3,948,001 6,371,468
----------- ------------ ----------- ------------ ----------- ------------
End of period................................. $ 4,591,532 $4,387,425 $ 5,343,269 $5,944,296 $ 3,353,591 $3,948,001
----------- ------------ ----------- ------------ ----------- ------------
----------- ------------ ----------- ------------ ----------- ------------
</TABLE>
See notes to financial statements
3
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT D
STATEMENTS OF CHANGES IN NET ASSETS-- continued
<TABLE>
<CAPTION>
CAS GSS HYS MMS
Sub-Account Sub-Account Sub-Account Sub-Account
---------------------------- ---------------------------- ---------------------------- -------------
Six Months Year Ended Six Months Year Ended Six Months Year Ended Six Months
Ended December 31, Ended December 31, Ended December 31, Ended
June 30, 1996 1995 June 30, 1996 1995 June 30, 1996 1995 June 30, 1996
------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income........... $ 3,514,456 $ 407,201 $ 1,179,947 $ 1,300,824 $ 647,130 $ 468,761 $ 265,452
Net realized
gains............ 1,357,865 1,675,496 362,943 227,500 107,364 135,977 --
Net unrealized
gains (losses)... 59,362 7,854,551 (2,372,769 ) 2,540,568 (542,638 ) 598,575 --
------------- ------------- ------------- ------------- ------------- ------------- -------------
Increase
(decrease) in
net assets
from
operations... $ 4,931,683 $ 9,937,248 $ (829,879 ) $ 4,068,892 $ 211,856 $ 1,203,313 $ 265,452
------------- ------------- ------------- ------------- ------------- ------------- -------------
PARTICIPANT
TRANSACTIONS:
Accumulation
Activity:
Purchase
payments
received....... $ 3,515,530 $ 6,689,889 $ 1,960,847 $ 4,655,684 $ 694,449 $ 1,495,744 $ 1,184,627
Net transfers
between
Sub-Accounts
and Fixed
Account........ 1,534,105 (596,568 ) (1,579,285 ) (1,355,901 ) (504,459 ) 826,665 1,877,518
Withdrawals,
surrenders,
annuitizations
and contract
charges........ (2,792,532 ) (6,314,794 ) (3,539,161 ) (4,593,776 ) (752,444 ) (1,672,150 ) (4,278,430)
------------- ------------- ------------- ------------- ------------- ------------- -------------
Net
accumulation
activity..... $ 2,257,103 $ (221,473 ) $(3,157,599 ) $(1,293,993 ) $ (562,454 ) $ 650,259 $(1,216,285)
------------- ------------- ------------- ------------- ------------- ------------- -------------
Annuitization
Activity:
Annuitizations... $ 102,338 $ -- $ -- $ -- $ -- $ -- $ --
Annuity payments
and contract
charges........ (3,202 ) (7,119 ) (1,024 ) (4,220 ) (849 ) (2,442 ) (111)
Adjustments to
annuity
reserve........ 521 1,782 9 (152 ) (22 ) (49 ) (7)
------------- ------------- ------------- ------------- ------------- ------------- -------------
Net
annuitization
activity..... $ 99,657 $ (5,337 ) $ (1,015 ) $ (4,372 ) $ (871 ) $ (2,491 ) $ (118)
------------- ------------- ------------- ------------- ------------- ------------- -------------
Increase
(decrease) in net
assets from
participant
transactions..... $ 2,356,760 $ (226,810 ) $(3,158,614 ) $(1,298,365 ) $ (563,325 ) $ 647,768 $(1,216,403)
------------- ------------- ------------- ------------- ------------- ------------- -------------
Increase
(decrease) in
net assets..... $ 7,288,443 $ 9,710,438 $(3,988,493 ) $ 2,770,527 $ (351,469 ) $ 1,851,081 $ (950,951)
NET ASSETS:
Beginning of
period........... 40,615,519 30,905,081 27,969,076 25,198,549 8,984,228 7,133,147 15,405,735
------------- ------------- ------------- ------------- ------------- ------------- -------------
End of period..... $47,903,962 $40,615,519 $23,980,583 $27,969,076 $8,632,759 $ 8,984,228 $14,454,784
------------- ------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- ------------- -------------
<CAPTION>
Total
----------------------------
Year Ended Six Months Year Ended
December 31, Ended December 31,
1995 June 30, 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment
income........... $ 730,611 $ 6,498,977 $ 13,898,176
Net realized
gains............ -- 3,176,497 1,156,100
Net unrealized
gains (losses)... -- 3,308,048 32,628,280
------------- ------------- -------------
Increase
(decrease) in
net assets
from
operations... $ 730,611 $12,983,522 $ 47,682,556
------------- ------------- -------------
PARTICIPANT
TRANSACTIONS:
Accumulation
Activity:
Purchase
payments
received....... $ 2,671,551 $17,939,676 $ 39,600,937
Net transfers
between
Sub-Accounts
and Fixed
Account........ (436,424 ) 1,542,864 (3,189,014)
Withdrawals,
surrenders,
annuitizations
and contract
charges........ (7,181,160 ) (33,382,285 ) (71,551,234)
------------- ------------- -------------
Net
accumulation
activity..... $(4,946,033 ) $(13,899,745) $ (35,139,311)
------------- ------------- -------------
Annuitization
Activity:
Annuitizations... $ -- $ 102,338 $ --
Annuity payments
and contract
charges........ (222 ) (5,186 ) (14,003)
Adjustments to
annuity
reserve........ (15 ) 932 1,459
------------- ------------- -------------
Net
annuitization
activity..... $ (237 ) $ 98,084 $ (12,544)
------------- ------------- -------------
Increase
(decrease) in net
assets from
participant
transactions..... $(4,946,270 ) $(13,801,661) $ (35,151,855)
------------- ------------- -------------
Increase
(decrease) in
net assets..... $(4,215,659 ) $ (818,139 ) $ 12,530,701
NET ASSETS:
Beginning of
period........... 19,621,394 218,852,427 206,321,726
------------- ------------- -------------
End of period..... $15,405,735 $218,034,288 $ 218,852,427
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See notes to financial statements
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION
Sun Life of Canada (U.S.) Variable Account D (the "Variable Account"), a
separate account of Sun Life Assurance Company of Canada (U.S.), the Sponsor,
was established on August 20, 1985 as a funding vehicle for the variable portion
of group combination fixed/variable annuities. The Variable Account is
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940 as a unit investment trust.
The assets of the Variable Account are divided into Sub-Accounts. Each
Sub-Account is invested in shares of a specific mutual fund or series thereof
selected by contract owners from among available mutual funds (the "Funds")
advised by Massachusetts Financial Services Company (MFS), a wholly-owned
subsidiary of the Sponsor.
4
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT D
NOTES TO FINANCIAL STATEMENTS -- continued
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
INVESTMENT VALUATIONS
Investments in the Funds are recorded at their net asset value. Realized gains
and losses on sales of shares of the Funds are determined on the identified cost
basis. Dividend income and capital gain distributions received by the
Sub-Accounts are reinvested in additional Fund shares and are recognized on the
ex-dividend date.
Exchanges between Sub-Accounts requested by contract owners are recorded in the
new Sub-Account upon receipt of the redemption proceeds.
FEDERAL INCOME TAX STATUS
The operations of the Variable Account are part of the operations of the Sponsor
and are not taxed separately; the Variable Account is not taxed as a regulated
investment company. The Sponsor qualifies for the federal income tax treatment
granted to life insurance companies under Subchapter L of the Internal Revenue
Code. Under existing federal income tax law, investment income and capital gains
earned by the Variable Account on contract owner reserves are not subject to
tax.
(3) CONTRACT CHARGES
A mortality and expense risk charge is deducted from the Variable Account at the
end of each valuation period for the mortality and expense risks assumed by the
Sponsor. These deductions are transferred periodically to the Sponsor. The rate
of this deduction varies based on total purchase payments credited to all
participants' accounts under a contract as follows:
<TABLE>
<CAPTION>
Mortality
and Expense
Level Purchase Payments Risk Charge
- ---------- ------------------------- ------------
<C> <S> <C>
1 $ up to $250,000 1.30%
2 250,000 to 1,499,999 1.25%
3 1,500,000 to 4,999,999 1.10%
4 5,000,000 and over 0.95%
</TABLE>
Since 1987 the Sponsor has reduced the Level 1 mortality and expense risk charge
to 1.25% and, therefore, has been accounting for all Level 1 units as Level 2
units.
5
<PAGE>
Each year on the account anniversary, an account administration fee is deducted
from the participant's account to cover administrative expenses relating to the
contract and the participant's account. The amount of the fee varies from $12 to
$25 and is based on total purchase payments credited to all participants'
accounts under a contract. After the annuity commencement date the account fee
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 6% of the purchase payments made under the
contract.
(4) ANNUITY RESERVES
Annuity reserves are calculated using the 1983 Individual Annuitant Mortality
Table and an assumed interest rate of 4%. Required adjustments to the reserve
are accomplished by transfers to or from the Sponsor.
6
<PAGE>
(5) UNIT ACTIVITY FROM PARTICIPANT TRANSACTIONS
<TABLE>
<CAPTION>
Units
Units Transferred Units Withdrawn, Outstanding
Units Outstanding Between Sub-Accounts Surrendered and End of
Beginning of Period Units Purchased and Fixed Account Annuitized Period
---------------------- ---------------------- ---------------------- ---------------------- ----------
Six Months Six Months Six Months Six Months Six Months
Ended Year Ended Ended Year Ended Ended Year Ended Ended Year Ended Ended
June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31, June 30,
Sub-Accounts 1996 1995 1996 1995 1996 1995 1996 1995 1996
--------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MIT-Level 2 1,325,017 1,302,429 107,203 304,799 (153,188) 2,239 (207,914) (284,450) 1,071,118
MIT-Level 3 317,412 354,395 27,415 45,258 146,423 8,829 (97,527) (91,070) 393,723
MIT-Level 4 59,347 421,137 8,863 24,234 22,068 4,424 (868) (390,448) 89,410
MIG-Level 2 382,429 393,686 24,792 77,506 (38,907) (8,205) (67,730) (80,558) 300,584
MIG-Level 3 108,010 127,769 11,879 20,579 36,149 8,202 (10,141) (48,540) 145,897
MIG-Level 4 4,837 429,508 194 4,995 239 (9,612) (9) (420,054) 5,261
MTR-Level 2 1,642,626 1,726,666 124,169 355,684 (111,115) (38,296) (250,130) (401,428) 1,405,550
MTR-Level 3 423,134 756,604 35,374 91,823 126,915 (22,980) (97,027) (402,313) 488,396
MTR-Level 4 177,310 329,757 26,780 76,222 (15,690) (16,128) (3,508) (212,541) 184,892
MGO-Level 2 172,600 201,423 14,678 31,135 2,436 1,108 (35,927) (61,066) 153,787
MGO-Level 3 21,847 59,105 2,052 6,878 5,134 2,216 (2,577) (46,352) 26,456
MGO-Level 4 2,467 16,384 248 268 821 (419) (13) (13,766) 3,523
MFB-Level 2 157,192 173,242 10,474 28,890 (12,354) (9,159) (21,236) (35,781) 134,076
MFB-Level 3 78,816 130,119 5,170 16,967 11,791 (7,548) (17,821) (60,722) 77,956
MFB-Level 4 90,684 111,663 8,736 19,759 (5,683) 3,221 (860) (43,959) 92,877
MWG-Level 2 128,962 158,464 6,577 23,878 (6,292) (7,073) (30,764) (46,307) 98,483
MWG-Level 3 67,461 101,949 7,060 13,728 1,903 1,694 (3,866) (49,910) 72,558
MWG-Level 4 -- 160,179 -- 1,660 -- (4,646) -- (157,193) --
CAS-Level 2 834,945 829,460 62,643 155,497 (21,406) (16,888) (61,035) (133,124) 815,147
CAS-Level 3 362,964 365,537 32,744 70,611 47,459 (3,819) (21,293) (69,365) 421,874
CAS-Level 4 143,089 160,474 12,618 24,304 19,078 (5,237) (3,911) (36,452) 170,874
GSS-Level 2 726,698 746,715 46,904 158,219 (128,430) (26,368) (96,469) (151,868) 548,703
GSS-Level 3 309,543 338,634 29,217 37,182 104,211 (6,591) (88,162) (59,682) 354,809
GSS-Level 4 494,152 519,083 33,949 77,682 (62,616) (47,652) (13,367) (54,961) 452,118
HYS-Level 2 213,240 206,627 15,552 36,334 (18,797) 12,587 (22,954) (42,308) 187,041
HYS-Level 3 99,034 80,917 4,545 11,281 6,780 45,065 (9,437) (38,229) 100,922
HYS-Level 4 160,381 145,707 15,899 36,474 (13,644) (9,026) (5,913) (12,774) 156,723
MMS-Level 2 530,592 634,761 52,873 132,695 94,283 (21,847) (247,695) (215,017) 430,053
MMS-Level 3 265,443 417,392 17,626 31,937 63,589 (25,114) (36,627) (158,772) 310,031
MMS-Level 4 296,406 404,055 11,594 25,520 (30,182) 16,480 (6,700) (149,649) 271,118
<CAPTION>
Year Ended
Dec. 31,
Sub-Accounts 1995
--------------- ----------
<S> <C>
MIT-Level 2 1,325,017
MIT-Level 3 317,412
MIT-Level 4 59,347
MIG-Level 2 382,429
MIG-Level 3 108,010
MIG-Level 4 4,837
MTR-Level 2 1,642,626
MTR-Level 3 423,134
MTR-Level 4 177,310
MGO-Level 2 172,600
MGO-Level 3 21,847
MGO-Level 4 2,467
MFB-Level 2 157,192
MFB-Level 3 78,816
MFB-Level 4 90,684
MWG-Level 2 128,962
MWG-Level 3 67,461
MWG-Level 4 --
CAS-Level 2 834,945
CAS-Level 3 362,964
CAS-Level 4 143,089
GSS-Level 2 726,698
GSS-Level 3 309,543
GSS-Level 4 494,152
HYS-Level 2 213,240
HYS-Level 3 99,034
HYS-Level 4 160,381
MMS-Level 2 530,592
MMS-Level 3 265,443
MMS-Level 4 296,406
</TABLE>
7
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Participants in Sun Life of Canada (U.S.) Variable Account D
and the Board of Directors of Sun Life Assurance Company of Canada (U.S.):
We have audited the accompanying statement of condition of Sun Life of Canada
(U.S.) Variable Account D (the "Variable Account") as of June 30, 1996, the
related statements of operations for the six months then ended and the
statements of changes in net assets for the six months then ended and the year
ended December 31, 1995. These financial statements are the responsibility of
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Variable Account as of June 30, 1996,
the results of its operations and the changes in its net assets for the
respective stated periods in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
August 2, 1996
8
