<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
DONALD A. STEWART, 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
MARGARET SEARS MEAD, Assistant Vice President
and Secretary
L. BROCK THOMSON, Vice President and
Treasurer
SUN LIFE ASSURANCE COMPANY
OF CANADA (U.S.)
ANNUITY SERVICE MAILING ADDRESS:
Sun Life Annuity Service Center
P.O. Box 1024, Boston, Massachusetts 02103
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-3-2/97
COMPASS G
PROFESSIONALLY MANAGED COMBINATION
FIXED/VARIABLE GROUP ANNUITY
FOR QUALIFIED AND NON-QUALIFIED
RETIREMENT PLANS
--------------------------------------------
ANNUAL REPORT, DECEMBER 31, 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-- December 31, 1996
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C> <C>
Investments in mutual funds: Shares Cost Value
---------- ------------ ------------
Massachusetts Investors Trust
("MIT")*............................. 3,491,149 $ 43,107,876 $ 50,494,997
Massachusetts Investors Growth Stock
Fund ("MIG")*........................ 1,362,279 14,324,800 13,589,882
MFS Total Return Fund ("MTR")*........ 3,348,198 45,869,232 49,529,426
MFS Growth Opportunities Fund
("MGO")*............................. 331,242 3,955,050 4,294,981
MFS Bond Fund ("MFB")*................ 408,178 5,268,167 5,399,328
MFS World Governments Fund ("MWG")*... 276,251 3,126,585 3,120,853
MFS/Sun Life Series Trust:
Capital Appreciation Series
("CAS")............................ 1,393,663 39,404,372 49,937,527
Government Securities Series
("GSS")............................ 1,844,553 23,281,980 23,734,196
High Yield Series ("HYS")........... 997,166 8,520,374 9,186,648
Money Market Series ("MMS")......... 13,324,248 13,324,248 13,324,248
------------ ------------
$200,182,684 $222,612,086
------------
------------
Receivable from sponsor........................................... 6,387
------------
Net Assets.................................................. $222,618,473
------------
------------
</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................... 1,035,562 $ 33.9934 $ 35,196,814 $ -- $ 35,196,814
MIT-Level 3................... 374,426 34.2037 12,743,121 -- 12,743,121
MIT-Level 4................... 101,110 25.2599 2,555,062 -- 2,555,062
MIG-Level 2................... 286,667 29.9956 8,599,144 -- 8,599,144
MIG-Level 3................... 146,881 33.1121 4,862,891 -- 4,862,891
MIG-Level 4................... 7,528 17.0503 127,847 -- 127,847
MTR-Level 2................... 1,220,754 27.9279 34,051,663 -- 34,051,663
MTR-Level 3................... 447,244 25.4349 11,366,061 -- 11,366,061
MTR-Level 4................... 212,123 19.3946 4,111,702 -- 4,111,702
MGO-Level 2................... 128,456 26.5992 3,431,430 -- 3,431,430
MGO-Level 3................... 27,750 28.5276 793,746 -- 793,746
MGO-Level 4................... 3,600 19.0006 69,805 -- 69,805
MFB-Level 2................... 119,172 19.3773 2,337,394 -- 2,337,394
MFB-Level 3................... 74,041 19.5875 1,463,667 -- 1,463,667
MFB-Level 4................... 98,115 16.1767 1,598,267 -- 1,598,267
MWG-Level 2................... 80,812 21.7932 1,761,028 -- 1,761,028
MWG-Level 3................... 70,548 19.2739 1,359,825 -- 1,359,825
CAS-Level 2................... 779,653 35.6224 27,768,302 114,769 27,883,071
CAS-Level 3................... 408,889 37.8523 15,475,378 8,428 15,483,806
CAS-Level 4................... 178,569 36.8685 6,578,544 -- 6,578,544
GSS-Level 2................... 496,576 18.7159 9,291,655 3,280 9,294,935
GSS-Level 3................... 344,849 18.1933 6,274,691 6,152 6,280,843
GSS-Level 4................... 454,900 17.9254 8,156,775 -- 8,156,775
HYS-Level 2................... 177,021 22.0500 3,903,339 2,832 3,906,171
HYS-Level 3................... 97,150 20.5150 1,992,773 5,452 1,998,225
HYS-Level 4................... 163,622 20.0430 3,282,290 -- 3,282,290
MMS-Level 2................... 364,557 15.2586 5,558,058 2,812 5,560,870
MMS-Level 3................... 281,463 14.1894 3,992,442 -- 3,992,442
MMS-Level 4................... 271,308 13.9044 3,771,034 -- 3,771,034
------------ ----------- ------------
Net Assets....................................... $222,474,748 $143,725 $222,618,473
------------ ----------- ------------
------------ ----------- ------------
</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-- Year Ended December 31, 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......................................... $ 4,888,028 $3,231,716 $ 5,480,250 $ 463,437 $ 398,125 $ 84,117
Mortality and expense risk charges................ 567,424 155,284 613,487 55,172 61,780 40,508
----------- ----------- ----------- ----------- ----------- -----------
Net investment income......................... $ 4,320,604 $3,076,432 $ 4,866,763 $ 408,265 $ 336,345 $ 43,609
----------- ----------- ----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment
transactions:
Proceeds from sales............................. $17,971,404 $4,631,793 $18,993,309 $ 1,988,199 $ 2,245,557 $1,561,690
Cost of investments sold........................ 16,649,058 4,819,175 16,205,379 1,732,417 2,325,227 1,793,547
----------- ----------- ----------- ----------- ----------- -----------
Net realized gains (losses)................... $ 1,322,346 $(187,382) $ 2,787,930 $ 255,782 $ (79,670) $(231,857)
----------- ----------- ----------- ----------- ----------- -----------
Net unrealized appreciation (depreciation) on
investments:
End of year..................................... $ 7,387,121 $(734,918) $ 3,660,194 $ 339,931 $ 131,161 $ (5,732)
Beginning of year............................... $ 2,634,262 $(344,804) $ 5,009,848 $ 154,918 $ 240,501 $(312,048)
----------- ----------- ----------- ----------- ----------- -----------
Change in unrealized appreciation
(depreciation)............................... $ 4,752,859 $(390,114) $(1,349,654) $ 185,013 $ (109,340) $ 306,316
----------- ----------- ----------- ----------- ----------- -----------
Realized and unrealized gains (losses).......... $ 6,075,205 $(577,496) $ 1,438,276 $ 440,795 $ (189,010) $ 74,459
----------- ----------- ----------- ----------- ----------- -----------
INCREASE IN NET ASSETS FROM OPERATIONS.............. $10,395,809 $2,498,936 $ 6,305,039 $ 849,060 $ 147,335 $ 118,068
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
<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 $ 681,638 $21,020,970
Mortality and expense risk charges................ 541,204 275,808 99,651 160,089 2,570,407
----------- ----------- ----------- ----------- -----------
Net investment income......................... $ 3,233,560 $1,046,631 $ 596,805 $ 521,549 $18,450,563
----------- ----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains on investment transactions:
Proceeds from sales............................. $ 8,789,948 $9,523,645 $ 2,451,195 $12,526,203 $80,682,943
Cost of investments sold........................ 6,120,020 9,215,772 2,305,565 12,526,203 73,692,363
----------- ----------- ----------- ----------- -----------
Net realized gains............................ $ 2,669,928 $ 307,873 $ 145,630 $ -- $ 6,990,580
----------- ----------- ----------- ----------- -----------
Net unrealized appreciation (depreciation) on
investments:
End of year..................................... $10,533,155 $ 452,216 $ 666,274 $ -- $22,429,402
Beginning of year............................... $ 8,077,466 $1,807,209 $ 487,047 $ -- $17,754,399
----------- ----------- ----------- ----------- -----------
Change in unrealized appreciation
(depreciation)............................... $ 2,455,689 ($1,354,993) $ 179,227 $ -- $ 4,675,003
----------- ----------- ----------- ----------- -----------
Realized and unrealized gains (losses).......... $ 5,125,617 ($1,047,120) $ 324,857 $ -- $11,665,583
----------- ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS... $ 8,359,177 $ (489) $ 921,662 $ 521,549 $30,116,146
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</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
------------------------ ------------------------ ------------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
------------------------ ------------------------ ------------------------
1996 1995 1996 1995 1996 1995
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income........................... $ 4,320,604 $ 3,863,861 $ 3,076,432 $ 1,535,686 $ 4,866,763 $ 4,260,996
Net realized gains (losses)..................... 1,322,346 (1,475,951) (187,382) (625,546) 2,787,930 1,319,082
Net unrealized gains (losses)................... 4,752,859 11,112,577 (390,114) 2,117,924 (1,349,654) 6,436,442
----------- ----------- ----------- ----------- ----------- -----------
Increase in net assets from operations...... $10,395,809 $13,500,487 $ 2,498,936 $ 3,028,064 $ 6,305,039 $12,016,520
----------- ----------- ----------- ----------- ----------- -----------
PARTICIPANT TRANSACTIONS:
Accumulation Activity:
Purchase payments received.................... $ 8,484,377 $ 8,532,635 $ 2,166,246 $ 2,266,231 $ 9,144,366 $10,735,986
Net transfers between Sub-Accounts and Fixed
Account...................................... 818,874 361,226 44,987 (105,149) (1,402,954) (1,537,141)
Withdrawals, surrenders, annuitizations and
contract charges............................. (15,324,516) (15,381,023) (3,595,513) (7,865,153) (17,519,924) (20,142,315)
----------- ----------- ----------- ----------- ----------- -----------
Net accumulation activity................... $(6,021,265) $(6,487,162) $(1,384,280) $(5,704,071) $(9,778,512) $(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................................... $(6,021,051) $(6,487,223) $(1,384,280) $(5,704,071) $(9,778,295) $(10,943,516)
----------- ----------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets............. $ 4,374,758 $ 7,013,264 $ 1,114,656 $(2,676,007) $(3,473,256) $ 1,073,004
NET ASSETS:
Beginning of year............................... 46,120,239 39,106,975 12,475,226 15,151,233 53,002,682 51,929,678
----------- ----------- ----------- ----------- ----------- -----------
End of year..................................... $50,494,997 $46,120,239 $13,589,882 $12,475,226 $49,529,426 $53,002,682
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
MG0 MFB MWG
Sub-Account Sub-Account Sub-Account
------------------------ ------------------------ ------------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
------------------------ ------------------------ ------------------------
1996 1995 1996 1995 1996 1995
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income........................... $ 408,265 $ 488,680 $ 336,345 $ 405,249 $ 43,609 $ 436,307
Net realized gains (losses)..................... 255,782 212,238 (79,670) (205,761) (231,857) (106,935)
Net unrealized gains (losses)................... 185,013 618,444 (109,340) 974,227 306,316 374,972
----------- ----------- ----------- ----------- ----------- -----------
Increase in net assets from operations...... $ 849,060 $ 1,319,362 $ 147,335 $ 1,173,715 $ 118,068 $ 704,344
----------- ----------- ----------- ----------- ----------- -----------
PARTICIPANT TRANSACTIONS:
Accumulation Activity:
Purchase payments received.................... $ 757,184 $ 738,132 $ 822,947 $ 1,080,197 $ 490,349 $ 734,888
Net transfers between Sub-Accounts and Fixed
Account...................................... 361 65,501 (213,342) (246,836) (178,620) (164,387)
Withdrawals, surrenders, annuitizations and
contract charges............................. (1,699,049) (2,349,180) (1,301,908) (2,353,371) (1,256,945) (3,698,312)
----------- ----------- ----------- ----------- ----------- -----------
Net accumulation activity................... $ (941,504) $(1,545,547) $ (692,303) $(1,520,010) $ (945,216) $(3,127,811)
----------- ----------- ----------- ----------- ----------- -----------
Decrease in net assets from participant
transactions................................... $ (941,504) $(1,545,547) $ (692,303) $(1,520,010) $ (945,216) $(3,127,811)
----------- ----------- ----------- ----------- ----------- -----------
Decrease in net assets........................ $ (92,444) $ (226,185) $ (544,968) $ (346,295) $ (827,148) $(2,423,467)
NET ASSETS:
Beginning of year............................... 4,387,425 4,613,610 5,944,296 6,290,591 3,948,001 6,371,468
----------- ----------- ----------- ----------- ----------- -----------
End of year..................................... $ 4,294,981 $ 4,387,425 $ 5,399,328 $ 5,944,296 $ 3,120,853 $ 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
---------------------------- ---------------------------- ---------------------------- -------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
---------------------------- ---------------------------- ---------------------------- -------------
1996 1995 1996 1995 1996 1995 1996
------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income........... $ 3,233,560 $ 407,201 $ 1,046,631 $ 1,300,824 $ 596,805 $ 468,761 $ 521,549
Net realized
gains............ 2,669,928 1,675,496 307,873 227,500 145,630 135,977 --
Net unrealized
gains (losses)... 2,455,689 7,854,551 (1,354,993) 2,540,568 179,227 598,575 --
------------- ------------- ------------- ------------- ------------- ------------- -------------
Increase
(decrease) in
net assets
from
operations... $ 8,359,177 $ 9,937,248 $ (489) $ 4,068,892 $ 921,662 $ 1,203,313 $ 521,549
------------- ------------- ------------- ------------- ------------- ------------- -------------
PARTICIPANT
TRANSACTIONS:
Accumulation
Activity:
Purchase
payments
received....... $ 6,939,855 $ 6,689,889 $ 3,634,713 $ 4,655,684 $ 1,337,369 $ 1,495,744 $ 2,033,183
Net transfers
between
Sub-Accounts
and Fixed
Account........ 1,007,214 (596,568) (2,176,253) (1,355,901) (690,101) 826,665 2,860,850
Withdrawals,
surrenders,
annuitizations
and contract
charges........ (7,071,186) (6,314,794) (5,692,379) (4,593,776) (1,364,716) (1,672,150) (7,496,733)
------------- ------------- ------------- ------------- ------------- ------------- -------------
Net
accumulation
activity..... $ 875,883 $ (221,473) $ (4,233,919) $ (1,293,993) $ (717,448) $ 650,259 $ (2,602,700)
------------- ------------- ------------- ------------- ------------- ------------- -------------
Annuitization
Activity:
Annuitizations... $ 102,853 $ -- $ -- $ -- $ -- $ -- $ --
Annuity payments
and contract
charges........ (8,376) (7,119) (2,033) (4,220) (1,716) (2,442) (222)
Adjustments to
annuity
reserve........ 365 1,782 (82) (152) (40) (49) (16)
------------- ------------- ------------- ------------- ------------- ------------- -------------
Net
annuitization
activity..... $ 94,842 $ (5,337) $ (2,115) $ (4,372) $ (1,756) $ (2,491) $ (238)
------------- ------------- ------------- ------------- ------------- ------------- -------------
Increase
(decrease) in net
assets from
participant
transactions..... $ 970,725 $ (226,810) $ (4,236,034) $ (1,298,365) $ (719,204) $ 647,768 $ (2,602,938)
------------- ------------- ------------- ------------- ------------- ------------- -------------
Increase
(decrease) in
net assets..... $ 9,329,902 $ 9,710,438 $ (4,236,523) $ 2,770,527 $ 202,458 $ 1,851,081 $ (2,081,389)
NET ASSETS:
Beginning of
year............. 40,615,519 30,905,081 27,969,076 25,198,549 8,984,228 7,133,147 15,405,735
------------- ------------- ------------- ------------- ------------- ------------- -------------
End of year....... $ 49,945,421 $ 40,615,519 $ 23,732,553 $ 27,969,076 $ 9,186,686 $ 8,984,228 $ 13,324,346
------------- ------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- ------------- -------------
<CAPTION>
Total
----------------------------
Year Ended
December 31,
----------------------------
1995 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment
income........... $ 730,611 $ 18,450,563 $ 13,898,176
Net realized
gains............ -- 6,990,580 1,156,100
Net unrealized
gains (losses)... -- 4,675,003 32,628,280
------------- ------------- -------------
Increase
(decrease) in
net assets
from
operations... $ 730,611 $ 30,116,146 $ 47,682,556
------------- ------------- -------------
PARTICIPANT
TRANSACTIONS:
Accumulation
Activity:
Purchase
payments
received....... $ 2,671,551 $ 35,810,589 $ 39,600,937
Net transfers
between
Sub-Accounts
and Fixed
Account........ (436,424) 71,016 (3,189,014)
Withdrawals,
surrenders,
annuitizations
and contract
charges........ (7,181,160) (62,322,869) (71,551,234)
------------- ------------- -------------
Net
accumulation
activity..... $ (4,946,033) $(26,441,264) $ (35,139,311)
------------- ------------- -------------
Annuitization
Activity:
Annuitizations... $ -- $ 102,853 $ --
Annuity payments
and contract
charges........ (222) (12,347) (14,003)
Adjustments to
annuity
reserve........ (15) 658 1,459
------------- ------------- -------------
Net
annuitization
activity..... $ (237) $ 91,164 $ (12,544)
------------- ------------- -------------
Increase
(decrease) in net
assets from
participant
transactions..... $ (4,946,270) $(26,350,100) $ (35,151,855)
------------- ------------- -------------
Increase
(decrease) in
net assets..... $ (4,215,659) $ 3,766,046 $ 12,530,701
NET ASSETS:
Beginning of
year............. 19,621,394 218,852,427 206,321,726
------------- ------------- -------------
End of year....... $ 15,405,735 $222,618,473 $ 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 revenues 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 Transferred Units Withdrawn,
Units Outstanding Between Sub-Accounts Surrendered and Units Outstanding
Beginning of Year Units Purchased and Fixed Account Annuitized End of Year
--------------------- ----------------- ---------------------- ---------------------- ------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
--------------------- ----------------- ---------------------- ---------------------- ------------------------
Sub-Accounts 1996 1995 1996 1995 1996 1995 1996 1995 1996 1995
--------------- ---------- ---------- -------- -------- ---------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MIT-Level 2 1,325,017 1,302,429 213,227 304,799 (137,127) 2,239 (365,555) (284,450) 1,035,562 1,325,017
MIT-Level 3 317,412 354,395 54,820 45,258 146,277 8,829 (144,083) (91,070) 374,426 317,412
MIT-Level 4 59,347 421,137 20,336 24,234 22,513 4,424 (1,086) (390,448) 101,110 59,347
MIG-Level 2 382,429 393,686 52,364 77,506 (39,167) (8,205) (108,959) (80,558) 286,667 382,429
MIG-Level 3 108,010 127,769 23,827 20,579 35,946 8,202 (20,902) (48,540) 146,881 108,010
MIG-Level 4 4,837 429,508 696 4,995 2,133 (9,612) (138) (420,054) 7,528 4,837
MTR-Level 2 1,642,626 1,726,666 250,489 355,684 (147,071) (38,296) (525,290) (401,428) 1,220,754 1,642,626
MTR-Level 3 423,134 756,604 71,193 91,823 116,241 (22,980) (163,324) (402,313) 447,244 423,134
MTR-Level 4 177,310 329,757 56,047 76,222 (16,491) (16,128) (4,743) (212,541) 212,123 177,310
MGO-Level 2 172,600 201,423 26,515 31,135 (6,753) 1,108 (63,906) (61,066) 128,456 172,600
MGO-Level 3 21,847 59,105 3,963 6,878 5,491 2,216 (3,551) (46,352) 27,750 21,847
MGO-Level 4 2,467 16,384 684 268 578 (419) (129) (13,766) 3,600 2,467
MFB-Level 2 157,192 173,242 20,762 28,890 (16,500) (9,159) (42,282) (35,781) 119,172 157,192
MFB-Level 3 78,816 130,119 8,920 16,967 11,059 (7,548) (24,754) (60,722) 74,041 78,816
MFB-Level 4 90,684 111,663 17,356 19,759 (7,565) 3,221 (2,360) (43,959) 98,115 90,684
MWG-Level 2 128,962 158,464 11,616 23,878 (8,539) (7,073) (51,227) (46,307) 80,812 128,962
MWG-Level 3 67,461 101,949 13,383 13,728 28 1,694 (10,324) (49,910) 70,548 67,461
MWG-Level 4 -- 160,179 -- 1,660 -- (4,646) -- (157,193) -- --
CAS-Level 2 834,945 829,460 117,027 155,497 (21,021) (16,888) (151,298) (133,124) 779,653 834,945
CAS-Level 3 362,964 365,537 62,771 70,611 36,328 (3,819) (53,174) (69,365) 408,889 362,964
CAS-Level 4 143,089 160,474 27,585 24,304 15,496 (5,237) (7,601) (36,452) 178,569 143,089
GSS-Level 2 726,698 746,715 87,437 158,219 (142,794) (26,368) (174,765) (151,868) 496,576 726,698
GSS-Level 3 309,543 338,634 48,880 37,182 109,394 (6,591) (122,968) (59,682) 344,849 309,543
GSS-Level 4 494,152 519,083 66,642 77,682 (86,710) (47,652) (19,184) (54,961) 454,900 494,152
HYS-Level 2 213,240 206,627 27,922 36,334 (20,980) 12,587 (43,161) (42,308) 177,021 213,240
HYS-Level 3 99,034 80,917 8,703 11,281 5,818 45,065 (16,405) (38,229) 97,150 99,034
HYS-Level 4 160,381 145,707 31,305 36,474 (19,915) (9,026) (8,149) (12,774) 163,622 160,381
MMS-Level 2 530,592 634,761 84,555 132,695 139,608 (21,847) (390,198) (215,017) 364,557 530,592
MMS-Level 3 265,443 417,392 31,809 31,937 88,273 (25,114) (104,062) (158,772) 281,463 265,443
MMS-Level 4 296,406 404,055 23,924 25,520 (34,336) 16,480 (14,686) (149,649) 271,308 296,406
</TABLE>
7
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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 December 31, 1996, the
related statements of operations for the year then ended and the statements of
changes in net assets for the years ended December 31, 1996 and 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. Our procedures included
confirmation of securities held at December 31, 1996 by correspondence with the
custodian. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Variable Account as of December 31,
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
February 7, 1997
8
