<PAGE>
COMPASS-G
LOGO
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT D
DIRECTORS AND OFFICERS OF
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
PROFESSIONALLY MANAGED COMBINATION
JOHN D. McNEIL, Chairman and Director
FIXED/VARIABLE GROUP ANNUITY
DONALD A. STEWART, President and Director
FOR QUALIFIED AND NON-QUALIFIED
RETIREMENT PLANS
DAVID D. HORN, Director
--------------------------------------------
RICHARD B. BAILEY, Director
ANNUAL REPORT, DECEMBER 31, 1997
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.
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
LEGAL COUNSEL
Covington & Burling
1201 Pennsylvania Avenue, N.W.
P.O. Box 7566, Washington, D.C. 20044
[LOGO]
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
ISSUED BY
or accompanied by an effective prospectus.
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
COG-3-2/98
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT D
STATEMENT OF CONDITION-- December 31, 1997
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C> <C>
Investments in mutual funds: Shares Cost Value
---------- ------------ ------------
Massachusetts Investors Trust
("MIT")*............................. 2,566,191 $ 35,973,786 $ 44,954,184
Massachusetts Investors Growth Stock
Fund ("MIG")*........................ 1,260,336 14,191,936 15,655,513
MFS Total Return Fund ("MTR")*........ 2,367,141 34,452,574 37,448,566
MFS Growth Opportunities Fund
("MGO")*............................. 310,025 4,100,632 4,315,629
MFS Bond Fund ("MFB")*................ 203,087 2,652,888 2,765,166
MFS World Governments Fund ("MWG")*... 197,529 2,229,092 2,141,903
MFS/Sun Life Series Trust:
Capital Appreciation Series
("CAS")............................ 1,238,336 38,570,681 49,704,867
Government Securities Series
("GSS")............................ 924,758 11,626,944 12,059,410
High Yield Series ("HYS")........... 623,498 5,418,842 6,054,623
Money Market Series ("MMS")......... 6,341,994 6,341,994 6,341,994
------------ ------------
$155,559,369 $181,441,855
------------
------------
<CAPTION>
LIABILITIES:
<S> <C> <C> <C>
Payable to sponsor................................................ 1,358
------------
Net Assets.................................................. $181,440,497
------------
------------
</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................... 668,603 $ 44.1981 $ 29,541,406 $ -- $ 29,541,406
MIT-Level 3................... 347,926 44.5374 15,412,778 -- 15,412,778
MIG-Level 2................... 225,178 43.9157 9,888,833 -- 9,888,833
MIG-Level 3................... 118,801 48.5502 5,766,680 -- 5,766,680
MTR-Level 2................... 759,684 33.2755 25,226,540 -- 25,226,540
MTR-Level 3................... 403,015 30.3501 12,221,632 -- 12,221,632
MTR-Level 4................... 17 23.1768 394 -- 394
MGO-Level 2................... 100,623 32.3990 3,278,893 -- 3,278,893
MGO-Level 3................... 29,668 34.7993 1,036,736 -- 1,036,736
MFB-Level 2................... 86,309 21.1171 1,853,463 -- 1,853,463
MFB-Level 3................... 41,360 21.3778 911,703 -- 911,703
MWG-Level 2................... 50,083 21.6012 1,081,666 -- 1,081,666
MWG-Level 3................... 55,415 19.1324 1,060,237 -- 1,060,237
CAS-Level 2................... 680,351 43.3190 29,464,142 129,273 29,593,415
CAS-Level 3................... 431,268 46.0988 19,875,434 7,478 19,882,912
CAS-Level 4................... 5,247 44.9674 228,881 -- 228,881
GSS-Level 2................... 377,706 20.1019 7,590,175 3,257 7,593,432
GSS-Level 3................... 225,343 19.5696 4,411,356 4,816 4,416,172
GSS-Level 4................... 2,450 19.3101 47,992 -- 47,992
HYS-Level 2................... 161,891 24.6550 3,991,546 2,929 3,994,475
HYS-Level 3................... 89,331 22.9753 2,053,428 4,455 2,057,883
HYS-Level 4................... 102 22.4774 2,292 -- 2,292
MMS-Level 2................... 246,919 15.8347 3,904,270 2,712 3,906,982
MMS-Level 3................... 158,492 14.7470 2,335,608 -- 2,335,608
MMS-Level 4................... 6,803 14.4723 99,492 -- 99,492
------------ ----------- ------------
Net Assets....................................... $181,300,730 $154,920 $181,440,497
------------ ----------- ------------
------------ ----------- ------------
</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, 1997
<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............... $ 3,576,267 $ 2,503,163 $ 4,775,114 $ 540,786 $ 314,816 $ 102,827
Mortality and expense risk charges.... 584,251 179,472 528,249 53,591 48,523 31,794
----------- ----------- ----------- ----------- ------------ -----------
Net investment income............. $ 2,992,016 $ 2,323,691 $ 4,246,865 $ 487,195 $ 266,293 $ 71,033
----------- ----------- ----------- ----------- ------------ -----------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment
transactions:
Proceeds from sales................. $29,532,831 $ 7,350,937 $27,407,019 $ 1,943,627 $ 3,888,216 $1,453,186
Cost of investments sold............ 21,338,109 6,174,599 23,014,779 1,441,879 3,748,442 1,473,275
----------- ----------- ----------- ----------- ------------ -----------
Net realized gains (losses)....... $ 8,194,722 $ 1,176,338 $ 4,392,240 $ 501,748 $ 139,774 $ (20,089)
----------- ----------- ----------- ----------- ------------ -----------
Net unrealized appreciation
(depreciation) on investments:
End of year......................... $ 8,980,397 $ 1,463,577 $ 2,995,992 $ 214,997 $ 112,279 $ (87,189)
Beginning of year................... 7,387,121 (734,918) 3,660,194 339,931 131,161 (5,732)
----------- ----------- ----------- ----------- ------------ -----------
Change in unrealized appreciation
(depreciation)................... $ 1,593,276 $ 2,198,495 $ (664,202) $ (124,934) $ (18,882) $ (81,457)
----------- ----------- ----------- ----------- ------------ -----------
Realized and unrealized gains
(losses)........................... $ 9,787,998 $ 3,374,833 $ 3,728,038 $ 376,814 $ 120,892 $ (101,546)
----------- ----------- ----------- ----------- ------------ -----------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS............................. $12,780,014 $ 5,698,524 $ 7,974,903 $ 864,009 $ 387,185 $ (30,513)
----------- ----------- ----------- ----------- ------------ -----------
----------- ----------- ----------- ----------- ------------ -----------
<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............... $ 4,746,173 $ 1,501,159 $ 647,242 $ 520,316 $ 19,227,863
Mortality and expense risk charges.... 619,019 214,567 96,313 118,704 2,474,483
----------- ----------- ----------- ----------- ------------
Net investment income............. $ 4,127,154 $ 1,286,592 $ 550,929 $ 401,612 $ 16,753,380
----------- ----------- ----------- ----------- ------------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains on investment
transactions:
Proceeds from sales................. $22,063,515 $15,612,388 $ 5,935,864 $15,510,305 $130,697,888
Cost of investments sold............ 15,738,062 15,549,778 5,420,620 15,510,305 109,409,848
----------- ----------- ----------- ----------- ------------
Net realized gains................ $ 6,325,453 $ 62,610 $ 515,244 $ -- $ 21,288,040
----------- ----------- ----------- ----------- ------------
Net unrealized appreciation on
investments:
End of year......................... $11,134,186 $ 432,466 $ 635,781 $ -- $ 25,882,486
Beginning of year................... 10,533,155 452,216 666,274 -- 22,429,402
----------- ----------- ----------- ----------- ------------
Change in unrealized
appreciation..................... $ 601,031 $ (19,750) $ (30,493) $ -- $ 3,453,084
----------- ----------- ----------- ----------- ------------
Realized and unrealized gains....... $ 6,926,484 $ 42,860 $ 484,751 $ -- $ 24,741,124
----------- ----------- ----------- ----------- ------------
INCREASE IN NET ASSETS FROM
OPERATIONS............................. $11,053,638 $ 1,329,452 $ 1,035,680 $ 401,612 $ 41,494,504
----------- ----------- ----------- ----------- ------------
----------- ----------- ----------- ----------- ------------
</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,
-------------------------- ------------------------ --------------------------
1997 1996 1997 1996 1997 1996
------------ ------------ ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income........................ $ 2,992,016 $ 4,320,604 $ 2,323,691 $ 3,076,432 $ 4,246,865 $ 4,866,763
Net realized gains (losses).................. 8,194,722 1,322,346 1,176,338 (187,382) 4,392,240 2,787,930
Net unrealized gains (losses)................ 1,593,276 4,752,859 2,198,495 (390,114) (664,202) (1,349,654)
------------ ------------ ----------- ----------- ------------ ------------
Increase in net assets from operations... $ 12,780,014 $ 10,395,809 $ 5,698,524 $ 2,498,936 $ 7,974,903 $ 6,305,039
------------ ------------ ----------- ----------- ------------ ------------
PARTICIPANT TRANSACTIONS:
Accumulation Activity:
Purchase payments received................. $ 7,414,274 $ 8,484,377 $ 1,659,301 $ 2,166,246 $ 6,596,639 $ 9,144,366
Net transfers between Sub-Accounts and
Fixed Account............................. 926,030 818,874 277,942 44,987 (1,493,129) (1,402,954)
Withdrawals, surrenders, annuitizations,
and contract charges...................... (26,661,131) (15,324,516) (5,570,136) (3,595,513) (25,159,273) (17,519,924)
------------ ------------ ----------- ----------- ------------ ------------
Net accumulation activity................ $(18,320,827) $ (6,021,265) $(3,632,893) $(1,384,280) $(20,055,763) $ (9,778,512)
------------ ------------ ----------- ----------- ------------ ------------
Annuitization Activity:
Adjustments to annuity reserve............. $ -- $ 214 $ -- $ -- $ -- $ 217
------------ ------------ ----------- ----------- ------------ ------------
Net annuitization activity............... $ -- $ 214 $ -- $ -- $ -- $ 217
------------ ------------ ----------- ----------- ------------ ------------
Decrease in net assets from participant
transactions................................ $(18,320,827) $ (6,021,051) $(3,632,893) $(1,384,280) $(20,055,763) $ (9,778,295)
------------ ------------ ----------- ----------- ------------ ------------
Increase (decrease) in net assets.......... $ (5,540,813) $ 4,374,758 $ 2,065,631 $ 1,114,656 $(12,080,860) $ (3,473,256)
NET ASSETS:
Beginning of year............................ 50,494,997 46,120,239 13,589,882 12,475,226 49,529,426 53,002,682
------------ ------------ ----------- ----------- ------------ ------------
End of year.................................. $ 44,954,184 $ 50,494,997 $15,655,513 $13,589,882 $ 37,448,566 $ 49,529,426
------------ ------------ ----------- ----------- ------------ ------------
------------ ------------ ----------- ----------- ------------ ------------
<CAPTION>
MG0 MFB MWG
Sub-Account Sub-Account Sub-Account
-------------------------- ------------------------ --------------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
-------------------------- ------------------------ --------------------------
1997 1996 1997 1996 1997 1996
------------ ------------ ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income........................ $ 487,195 $ 408,265 $ 266,293 $ 336,345 $ 71,033 $ 43,609
Net realized gains (losses).................. 501,748 255,782 139,774 (79,670) (20,089) (231,857)
Net unrealized gains (losses)................ (124,934) 185,013 (18,882) (109,340) (81,457) 306,316
------------ ------------ ----------- ----------- ------------ ------------
Increase (decrease) in net assets from
operations.............................. $ 864,009 $ 849,060 $ 387,185 $ 147,335 $ (30,513) $ 118,068
------------ ------------ ----------- ----------- ------------ ------------
PARTICIPANT TRANSACTIONS:
Accumulation Activity:
Purchase payments received................. $ 671,571 $ 757,184 $ 614,719 $ 822,947 $ 410,460 $ 490,349
Net transfers between Sub-Accounts and
Fixed Account............................. 19,958 361 (247,713) (213,342) (339,526) (178,620)
Withdrawals, surrenders, annuitizations,
and contract charges...................... (1,534,890) (1,699,049) (3,388,353) (1,301,908) (1,019,371) (1,256,945)
------------ ------------ ----------- ----------- ------------ ------------
Net accumulation activity................ $ (843,361) $ (941,504) $(3,021,347) $ (692,303) $ (948,437) $ (945,216)
------------ ------------ ----------- ----------- ------------ ------------
Increase (decrease) in net assets.......... $ 20,648 $ (92,444) $(2,634,162) $ (544,968) $ (978,950) $ (827,148)
NET ASSETS:
Beginning of year............................ 4,294,981 4,387,425 5,399,328 5,944,296 3,120,853 3,948,001
------------ ------------ ----------- ----------- ------------ ------------
End of year.................................. $ 4,315,629 $ 4,294,981 $ 2,765,166 $ 5,399,328 $ 2,141,903 $ 3,120,853
------------ ------------ ----------- ----------- ------------ ------------
------------ ------------ ----------- ----------- ------------ ------------
</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
Sub-Account Sub-Account Sub-Account
-------------------------- -------------------------- -------------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
-------------------------- -------------------------- -------------------------
1997 1996 1997 1996 1997 1996
------------ ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income................. $ 4,127,154 $ 3,233,560 $ 1,286,592 $ 1,046,631 $ 550,929 $ 596,805
Net realized gains.................... 6,325,453 2,669,928 62,610 307,873 515,244 145,630
Net unrealized gains (losses)......... 601,031 2,455,689 (19,750) (1,354,993) (30,493) 179,227
------------ ------------ ------------ ------------ ----------- ------------
Increase (decrease) in net assets
from operations.................. $ 11,053,638 $ 8,359,177 $ 1,329,452 $ (489) $ 1,035,680 $ 921,662
------------ ------------ ------------ ------------ ----------- ------------
PARTICIPANT TRANSACTIONS:
Accumulation Activity:
Purchase payments received.......... $ 6,447,175 $ 6,939,855 $ 2,574,283 $ 3,634,713 $ 1,164,890 $ 1,337,369
Net transfers between Sub-Accounts
and Fixed Account.................. 865,318 1,007,214 (1,799,091) (2,176,253) (275,269) (690,101)
Withdrawals, surrenders,
annuitizations, and contract
charges............................ (18,586,687) (7,071,186) (13,777,389) (5,692,379) (5,055,478) (1,364,716)
------------ ------------ ------------ ------------ ----------- ------------
Net accumulation activity......... $(11,274,194) $ 875,883 $(13,002,197) $ (4,233,919) $(4,165,857) $ (717,448)
------------ ------------ ------------ ------------ ----------- ------------
Annuitization Activity:
Annuitizations...................... $ -- $ 102,853 $ -- $ --
Annuity payments and contract
charges............................ (12,103) (8,376) (2,042) (2,033) (1,847) (1,716)
Adjustments to annuity reserve...... (7,554) 365 (170) (82) (12) (40)
------------ ------------ ------------ ------------ ----------- ------------
Net annuitization activity........ $ (19,657) $ 94,842 $ (2,212) $ (2,115) $ (1,859) $ (1,756)
------------ ------------ ------------ ------------ ----------- ------------
Increase (decrease) in net assets from
participant transactions............. $(11,293,851) $ 970,725 $(13,004,409) $ (4,236,034) $(4,167,716) $ (719,204)
------------ ------------ ------------ ------------ ----------- ------------
Increase (decrease) in net assets... $ (240,213) $ 9,329,902 $(11,674,957) $ (4,236,523) $(3,132,036) $ 202,458
NET ASSETS:
Beginning of year..................... 49,945,421 40,615,519 23,732,553 27,969,076 9,186,686 8,984,228
------------ ------------ ------------ ------------ ----------- ------------
End of year........................... $ 49,705,208 $ 49,945,421 $ 12,057,596 $ 23,732,553 $ 6,054,650 $ 9,186,686
------------ ------------ ------------ ------------ ----------- ------------
------------ ------------ ------------ ------------ ----------- ------------
<CAPTION>
MMS
Sub-Account Total
-------------------------- ----------------------------
Year Ended Year Ended
December 31, December 31,
-------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income................. $ 401,612 $ 521,549 $ 16,753,380 $ 18,450,563
Net realized gains.................... -- -- 21,288,040 6,990,580
Net unrealized gains (losses)......... -- -- 3,453,084 4,675,003
------------ ------------ ------------- -------------
Increase (decrease) in net assets
from operations.................. $ 401,612 $ 521,549 $ 41,494,504 $ 30,116,146
------------ ------------ ------------- -------------
PARTICIPANT TRANSACTIONS:
Accumulation Activity:
Purchase payments received.......... $ 1,325,566 $ 2,033,183 $ 28,878,878 $ 35,810,589
Net transfers between Sub-Accounts
and Fixed Account.................. 210,852 2,860,850 (1,854,628) 71,016
Withdrawals, surrenders,
annuitizations, and contract
charges............................ (8,920,064) (7,496,733) (109,672,772) (62,322,869)
------------ ------------ ------------- -------------
Net accumulation activity......... $ (7,383,646) $ (2,602,700) $ (82,648,522) $ (26,441,264)
------------ ------------ ------------- -------------
Annuitization Activity:
Annuitizations...................... $ -- $ -- $ -- $ 102,853
Annuity payments and contract
charges............................ (221) (222) (16,213) (12,347)
Adjustments to annuity reserve...... (9) (16) (7,745) 658
------------ ------------ ------------- -------------
Net annuitization activity........ $ (230) $ (238) $ (23,958) $ 91,164
------------ ------------ ------------- -------------
Increase (decrease) in net assets from
participant transactions............. $ (7,383,876) $ (2,602,938) $ (82,672,480) $ (26,350,100)
------------ ------------ ------------- -------------
Increase (decrease) in net assets... $ (6,982,264) $ (2,081,389) $ (41,177,976) $ 3,766,046
NET ASSETS:
Beginning of year..................... 13,324,346 15,405,735 222,618,473 218,852,427
------------ ------------ ------------- -------------
End of year........................... $ 6,342,082 $ 13,324,346 $ 181,440,497 $ 222,618,473
------------ ------------ ------------- -------------
------------ ------------ ------------- -------------
</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), an affiliate 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>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT D
NOTES TO FINANCIAL STATEMENTS-- continued
(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 1997 1996 1997 1996 1997 1996 1997 1996 1997 1996
--------------- ---------- ---------- -------- -------- ---------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MIT-Level 2 1,035,562 1,325,017 119,997 213,227 (78,771) (137,127) (408,185) (365,555) 668,603 1,035,562
MIT-Level 3 374,426 317,412 56,588 54,820 87,556 146,277 (170,644) (144,083) 347,926 374,426
MIT-Level 4 101,111 59,347 20,016 20,336 13,893 22,513 (135,020) (1,085) -- 101,111
MIG-Level 2 286,668 382,429 24,657 52,364 (6,604) (39,167) (79,543) (108,958) 225,178 286,668
MIG-Level 3 146,881 108,010 18,311 23,827 9,095 35,946 (55,486) (20,902) 118,801 146,881
MIG-Level 4 7,527 4,837 995 696 5,279 2,133 (13,801) (139) -- 7,527
MTR-Level 2 1,220,754 1,642,626 122,825 250,489 (95,836) (147,071) (488,059) (525,290) 759,684 1,220,754
MTR-Level 3 447,243 423,134 69,668 71,193 59,761 116,241 (173,657) (163,325) 403,015 447,243
MTR-Level 4 212,122 177,310 45,961 56,047 (11,935) (16,491) (246,131) (4,744) 17 212,122
MGO-Level 2 128,456 172,600 14,964 26,515 (2,534) (6,753) (40,263) (63,906) 100,623 128,456
MGO-Level 3 27,750 21,847 6,533 3,963 3,047 5,491 (7,662) (3,551) 29,668 27,750
MGO-Level 4 3,601 2,467 641 684 (624) 578 (3,618) (128) -- 3,601
MFB-Level 2 119,172 157,192 13,246 20,762 (6,694) (16,500) (39,415) (42,282) 86,309 119,172
MFB-Level 3 74,041 78,816 7,182 8,920 (1,215) 11,059 (38,648) (24,754) 41,360 74,041
MFB-Level 4 98,114 90,684 12,307 17,356 (5,773) (7,565) (104,648) (2,361) -- 98,114
MWG-Level 2 80,813 128,962 7,813 11,616 (14,242) (8,539) (24,301) (51,226) 50,083 80,813
MWG-Level 3 70,547 67,461 13,242 13,383 (2,198) 28 (26,176) (10,325) 55,415 70,547
CAS-Level 2 779,654 834,945 78,476 117,027 (28,613) (21,021) (149,166) (151,297) 680,351 779,654
CAS-Level 3 408,890 362,964 55,556 62,771 45,603 36,328 (78,781) (53,173) 431,268 408,890
CAS-Level 4 178,569 143,089 22,562 27,585 (180) 15,496 (195,704) (7,601) 5,247 178,569
GSS-Level 2 496,576 726,698 51,339 87,437 (55,743) (142,794) (114,466) (174,765) 377,706 496,576
GSS-Level 3 344,849 309,543 43,387 48,880 7,712 109,394 (170,605) (122,968) 225,343 344,849
GSS-Level 4 454,901 494,152 43,269 66,642 (48,251) (86,710) (447,469) (19,183) 2,450 454,901
HYS-Level 2 177,022 213,240 20,630 27,922 (9,930) (20,980) (25,831) (43,160) 161,891 177,022
HYS-Level 3 97,148 99,034 8,624 8,703 9,157 5,818 (25,598) (16,407) 89,331 97,148
HYS-Level 4 163,622 160,381 23,922 31,305 (11,531) (19,915) (175,911) (8,149) 102 163,622
MMS-Level 2 364,557 530,592 52,788 84,555 32,929 139,608 (203,355) (390,198) 246,919 364,557
MMS-Level 3 281,464 265,443 19,839 31,809 11,873 88,273 (154,684) (104,061) 158,492 281,464
MMS-Level 4 271,307 296,406 15,511 23,924 (31,926) (34,336) (248,089) (14,687) 6,803 271,307
</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, 1997, the
related statements of operations for the year then ended and the statements of
changes in net assets for the years ended December 31, 1997 and 1996. 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, 1997 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,
1997, 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 6, 1998
8
