<PAGE>
DEAR CONTRACT OWNERS:
This past year has been a difficult one for investors in both fixed-income
securities and equities. In February, the Federal Reserve Board initiated a
series of increases in short-term interest rates in an effort to restrain
anticipated inflationary pressures. This caused a major sell-off in fixed-income
markets around the world. As a result, with the exception of the Money Market
Series, which seeks to maintain a constant net asset value per share, all of the
fixed-income alternatives available under your contract experienced negative
total returns during the fiscal year ended December 31, 1994.
The past year was also difficult for the stock market with many stocks
performing significantly worse than the market averages. For the 12 months ended
December 31, 1994, the market as measured by the Standard & Poor's 500 Composite
Index (S&P 500), a popular, unmanaged index of common stock performance, had a
return of +1.31%. As a result, during that same period, all of the equity
options available under your contract also experienced disappointing total
returns.
ECONOMIC ENVIRONMENT
The economic expansion, which is about to enter its fifth year, has gained
firmer underpinnings as employers have been stepping up hiring levels. Increased
employment, stronger capital spending by businesses, and strengthening overseas
economies resulted in 4% real (adjusted for inflation) gross domestic product
growth in 1994. Interest rates rose significantly in 1994, which should help
restrain, but not curtail, the economic expansion. Based on improving economic
fundamentals both here and abroad, we expect the business expansion to continue
well into 1995.
Despite a stronger economy, inflation at the consumer level has remained
relatively benign at 2.7% in 1994, the fourth straight year of 3.0% or less. Due
to a prolonged period of below-trend-line growth and continued pressure on
corporations to emphasize effective cost controls, wage growth and unit labor
costs have remained subdued. However, as the economy has exhibited continuing
strength, various industrial commodity prices have been rising substantially
faster than consumer prices. Nevertheless, businesses have had difficulty
passing these price increases on to the consumer. With the economy continuing to
expand, we expect to see some upward movement in inflation from below 3% to the
3 1/2% range.
BOND MARKETS
The Federal Reserve has shown a willingness to raise short-term rates to slow
the economy in an effort to dampen inflationary pressures. The Federal Reserve
most recently raised the federal funds rate 75 basis points (0.75%) on November
15, and we expect the Federal Reserve to raise short-term rates again in the
coming months if it believes that current efforts have not been sufficient to
dampen inflationary expectations. Although we believe fundamentals are favorable
for lower long-term rates sometime in 1995, this will not likely occur until the
Federal Reserve is comfortable that its policy toward slowing the economic
expansion has been successful. Thus, we believe that yields on long-term
securities will move moderately higher in the near term.
During 1994, the high-yield bond market posted a negative total return due
primarily to the rise in U.S. Treasury bond yields. Principal value and interest
on Treasury securities are guaranteed by the U.S. government if held to
maturity. Throughout the year, the spread between yields on high-yield bonds and
Treasury securities remained relatively stable at about 360 basis points (3.6%).
Against a backdrop of rising interest rates and level credit spreads, high-yield
bonds generally outperformed other fixed-income securities which had longer
durations. The credit quality of the typical high-yield
1
<PAGE>
company improved as the economy strengthened, and as a result, the annualized
default rate was at its lowest level in 10 years. However, the default rate may
increase in the coming year if higher short-term interest rates cause the
domestic expansion to slow in late 1995. The average credit quality of
first-time high-yield issuers was lower than in recent years, and these riskier
companies will find it more difficult to meet their debt obligations as the
economy slows. In addition, credit spreads have historically widened prior to
the peak in an economic cycle.
International bond markets continue to grapple with the prospect of global
economic recovery. Anticipation of interest rate cuts has been replaced by
concern over eventual central bank rate hikes. This has led to higher interest
rates and a weaker dollar. Countries with high deficits and/or debt burden, such
as Italy and Sweden, have been hit especially hard. Long-term interest rates
rose between 200 and 400 basis points (2% to 4%), with the smaller countries
such as Australia, Spain and Italy suffering the worst declines in bond prices.
We believe the bond markets have overreacted, however, and in due course will
have a firmer tone.
STOCK MARKET
The stock market proved volatile in 1994, influenced by both a strengthening
economy and uncertainty over interest rates. Although the stronger economy has
been beneficial to corporate earnings, higher interest rates have negatively
impacted price-to-earnings multiples (or stock valuations). Given our
expectation of further upward pressure on short-term interest rates as the
Federal Reserve continues to lean against the current economic expansion, we
believe the stock market will have difficulty sustaining any significant
improvement. When interest rates finally stabilize, however, we expect the stock
market to benefit given our continuing outlook for improved corporate earnings.
Performance results for the year ended December 31, 1994 for Regatta and Regatta
Gold contracts are shown in the table on the following page, while information
on the current investment strategy for each series of MFS/Sun Life Series Trust
may be found in the accompanying Series Trust annual report.
On behalf of the
Board of Directors,
John D. McNeil
Chairman
January 20, 1995
2
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT F
PERFORMANCE SUMMARY
These performance results do not reflect any applicable surrender charges. Past
performance is no guarantee of future results.
<TABLE>
<CAPTION>
Unit Value
------------------------------------ Percent Change
December 31, 1993 December 31, 1994 in Unit Value
----------------- ----------------- ---------------
<S> <C> <C> <C>
MFS REGATTA CONTRACTS:
Capital Appreciation Series....................................... $ 16.3574 $ 15.5512 -4.93
Government Securities Series...................................... 13.8738 13.3872 -3.51
High Yield Series................................................. 16.0549 15.4801 -3.58
Managed Sectors Series............................................ 15.0587 14.5653 -3.28
Money Market Series............................................... 11.5560 11.8185 +2.27
Total Return Series............................................... 14.7834 14.2495 -3.61
World Governments Series.......................................... 15.1215 14.2437 -5.80
MFS REGATTA GOLD CONTRACTS:
Capital Appreciation Series....................................... $ 14.9429 $ 14.2064 -4.93
Conservative Growth Series........................................ 12.2052 11.9036 -2.47
Government Securities Series...................................... 11.6996 11.2891 -3.51
High Yield Series................................................. 13.2209 12.7475 -3.58
Managed Sectors Series............................................ 12.6760 12.2606 -3.28
Money Market Series............................................... 10.3527 10.5878 +2.27
Research Series*.................................................. 10.0000 9.8615 -1.39
Total Return Series............................................... 12.3142 11.8694 -3.61
Utilities Series.................................................. 10.0000 9.3739 -6.26
World Asset Allocation Series*.................................... 10.0000 10.0367 +0.37
World Governments Series.......................................... 12.3309 11.6151 -5.80
World Growth Series............................................... 10.6200 10.7803 +1.51
World Total Return Series*........................................ 10.0000 10.0195 +0.20
</TABLE>
*Results reflect unannualized performance from the period November 7, 1994
(commencement of investment operations) to December 31, 1994. December 31, 1993
unit values reflect beginning unit value on November 7, 1994.
STATEMENT OF CONDITION -- December 31, 1994
<TABLE>
<CAPTION>
Assets:
Investments in MFS/Sun Life Series Trust: Shares Cost Value
----------- -------------- --------------
<S> <C> <C> <C>
Capital Appreciation Series ("CAS").............................................. 15,546,045 $ 403,897,954 $ 379,444,897
Conservative Growth Series ("CGS")............................................... 7,957,852 130,831,761 130,956,442
Government Securities Series ("GSS")............................................. 22,228,132 283,100,445 269,446,089
High Yield Series ("HYS")........................................................ 8,802,267 72,547,050 72,055,389
Managed Sectors Series ("MSS")................................................... 5,436,296 114,133,313 108,085,836
Money Market Series ("MMS")...................................................... 203,157,645 203,157,645 203,157,645
Research Series ("RES").......................................................... 391,744 3,860,071 3,871,280
Total Return Series ("TRS")...................................................... 51,588,442 765,334,785 778,274,442
Utilities Series ("UTS")......................................................... 2,242,118 21,759,297 21,338,798
World Asset Allocation Series ("WAA")............................................ 298,587 2,985,338 3,003,118
World Governments Series ("WGS")................................................. 11,025,415 133,357,787 125,434,887
World Growth Series ("WGR")...................................................... 9,061,390 100,025,165 99,157,984
World Total Return Series ("WTR")................................................ 137,844 1,379,853 1,384,031
-------------- --------------
$2,236,370,464 $2,195,610,838
--------------
--------------
Liability:
Payable to sponsor.............................................................................................. 90,053
--------------
Net assets................................................................................................ $2,195,520,785
--------------
--------------
</TABLE>
See notes to financial statements
3
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT F
STATEMENT OF CONDITION -- continued
<TABLE>
<CAPTION>
Deferred Variable Annuity Contracts Reserve for
-------------------------------------- Variable
NET ASSETS APPLICABLE TO CONTRACT OWNERS: Unit Value Value Annuities Total
---------- -------------- ----------- --------------
Units
----------
<S> <C> <C> <C> <C> <C>
MFS Regatta Contracts:
CAS.................................... 6,184,731 $ 15.5512 $ 96,173,392 $ 175,427 $ 96,348,819
GSS.................................... 4,235,203 13.3872 56,697,536 220,353 56,917,889
HYS.................................... 839,825 15.4801 13,003,889 14,775 13,018,664
MSS.................................... 2,066,642 14.5653 30,099,533 7,760 30,107,293
MMS.................................... 3,873,044 11.8185 45,769,935 415,189 46,185,124
TRS.................................... 14,225,539 14.2495 202,696,964 1,043,621 203,740,585
WGS.................................... 1,967,375 14.2437 28,026,156 79,501 28,105,657
-------------- ----------- --------------
$ 472,467,405 $1,956,626 $ 474,424,031
-------------- ----------- --------------
MFS Regatta Gold Contracts:
CAS.................................... 19,909,649 $ 14.2064 $ 282,812,710 $ 351,131 $ 283,163,841
CGS.................................... 10,979,711 11.9036 130,689,597 261,584 130,951,181
GSS.................................... 18,784,262 11.2891 212,061,058 498,271 212,559,329
HYS.................................... 4,605,818 12.7475 58,706,581 317,905 59,024,486
MSS.................................... 6,351,641 12.2606 77,873,569 102,524 77,976,093
MMS.................................... 14,774,386 10.5878 156,416,560 332,228 156,748,788
RES.................................... 392,528 9.8615 3,871,280 -- 3,871,280
TRS.................................... 48,270,556 11.8694 572,914,204 1,556,142 574,470,346
UTS.................................... 2,273,439 9.3739 21,310,879 27,920 21,338,799
WAA.................................... 299,210 10.0367 3,003,118 -- 3,003,118
WGS.................................... 8,334,019 11.6151 96,801,492 529,315 97,330,807
WGR.................................... 9,182,555 10.7803 98,992,127 161,187 99,153,314
WTR.................................... 138,126 10.0195 1,384,031 -- 1,384,031
-------------- ----------- --------------
$1,716,837,206 $4,138,207 $1,720,975,413
-------------- ----------- --------------
NET ASSETS APPLICABLE TO SPONSOR................................... $ 121,341 $ -- $ 121,341
-------------- ----------- --------------
Net assets................................................. $2,189,425,952 $6,094,833 $2,195,520,785
-------------- ----------- --------------
-------------- ----------- --------------
</TABLE>
See notes to financial statements
4
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT F
STATEMENT OF OPERATIONS -- Year Ended December 31, 1994
<TABLE>
<CAPTION>
CAS CGS GSS HYS MSS MMS RES
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account*
------------- ------------ ------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Dividend income and
capital gain
distributions
received.............. $ 32,730,984 $ 1,648,699 $ 14,102,493 $ 4,285,200 $ 11,772,826 $ 6,481,559 $ --
Mortality and expense
risk charges.......... 4,379,608 1,339,985 3,179,715 832,178 1,251,222 2,136,254 3,602
Distribution expense
risk charges.......... 157,578 -- 89,979 21,274 47,903 64,702 --
Administrative expense
charges............... 367,975 160,798 291,587 78,588 102,244 191,648 432
------------- ------------ ------------- ------------ ------------- ------------ ------------
Net investment
income
(expense)......... $ 27,825,823 $ 147,916 $ 10,541,212 $ 3,353,160 $ 10,371,457 $ 4,088,955 $ (4,034)
------------- ------------ ------------- ------------ ------------- ------------ ------------
------------- ------------ ------------- ------------ ------------- ------------ ------------
REALIZED AND UNREALIZED
GAINS (LOSSES):
Realized gains (losses)
on investment
transactions:
Proceeds from
sales............... $ 168,229,693 $ 3,936,598 $ 46,912,933 $ 82,182,013 $ 30,253,463 $309,203,050 $167,790
Cost of investments
sold................ 155,579,765 3,467,188 45,923,619 84,017,597 27,940,553 309,203,050 171,667
------------- ------------ ------------- ------------ ------------- ------------ ------------
Net realized gains
(losses).......... $ 12,649,928 $ 469,410 $ 989,314 $ (1,835,584) $ 2,312,910 $ -- $ (3,877)
------------- ------------ ------------- ------------ ------------- ------------ ------------
Net unrealized
appreciation
(depreciation) on
investments:
End of period........ $ (24,453,057) $ 124,681 $ (13,654,356) $ (491,661) $ (6,047,477) $ -- $ 11,209
Beginning of
period.............. 33,543,210 4,020,954 6,278,438 2,862,574 10,136,236 -- --
------------- ------------ ------------- ------------ ------------- ------------ ------------
Change in
unrealized
appreciation
(depreciation).... $ (57,996,267) $(3,896,273) $ (19,932,794) $ (3,354,235) $ (16,183,713) $ -- $ 11,209
------------- ------------ ------------- ------------ ------------- ------------ ------------
Realized and unrealized
gains (losses)........ $ (45,346,339) $(3,426,863) $ (18,943,480) $ (5,189,819) $ (13,870,803) $ -- $ 7,332
------------- ------------ ------------- ------------ ------------- ------------ ------------
INCREASE (DECREASE) IN
NET ASSETS FROM
OPERATIONS............ $ (17,520,516) $(3,278,947) $ (8,402,268) $ (1,836,659) $ (3,499,346) $ 4,088,955 $ 3,298
------------- ------------ ------------- ------------ ------------- ------------ ------------
------------- ------------ ------------- ------------ ------------- ------------ ------------
</TABLE>
*For the period from November 7, 1994 (commencement of investment operations) to
December 31, 1994.
See notes to financial statements
5
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT F
STATEMENT OF OPERATIONS -- continued
<TABLE>
<CAPTION>
TRS UTS WAA WGS WGR WTR
Sub-Account Sub-Account Sub-Account* Sub-Account Sub-Account Sub-Account* Total
------------- ----------- ------------ ------------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Dividend income and
capital gain
distributions
received.............. $ 29,511,760 $ 4,930 $-- $ 11,284,999 $ 15,288 $-- $ 111,838,738
Mortality and expense
risk charges.......... 9,221,405 182,729 2,648 1,610,896 808,859 1,291 24,950,392
Distribution expense
risk charges.......... 325,266 -- -- 45,713 -- -- 752,415
Administrative expense
charges............... 781,302 21,927 318 147,595 97,063 155 2,241,632
------------- ----------- ------------ ------------- ------------- ------------ --------------
Net investment
income (expense).. $ 19,183,787 $ (199,726) $(2,966) $ 9,480,795 $ (890,634) $(1,446) $ 83,894,299
------------- ----------- ------------ ------------- ------------- ------------ --------------
------------- ----------- ------------ ------------- ------------- ------------ --------------
REALIZED AND UNREALIZED
GAINS (LOSSES):
Realized gains (losses)
on investment
transactions:
Proceeds from
sales............... $ 53,301,147 $2,993,532 $17,410 $ 28,274,119 $ 24,070,900 $33,296 $ 749,575,944
Cost of investments
sold................ 44,169,598 3,115,564 17,557 29,147,452 22,575,486 33,233 725,362,329
------------- ----------- ------------ ------------- ------------- ------------ --------------
Net realized gains
(losses).......... $ 9,131,549 $ (122,032) $ (147) $ (873,333) $ 1,495,414 $ 63 $ 24,213,615
------------- ----------- ------------ ------------- ------------- ------------ --------------
Net unrealized
appreciation
(depreciation) on
investments:
End of period........ $ 12,939,657 $ (420,499) $17,780 $ (7,922,900) $ (867,181) $ 4,178 $ (40,759,626)
Beginning of
period.............. 69,149,939 22,690 -- 8,502,641 716,829 -- 135,233,511
------------- ----------- ------------ ------------- ------------- ------------ --------------
Change in
unrealized
appreciation
(depreciation).... $ (56,210,282) $ (443,189) $17,780 $ (16,425,541) $ (1,584,010) $ 4,178 $ (175,993,137)
------------- ----------- ------------ ------------- ------------- ------------ --------------
Realized and unrealized
gains (losses)........ $ (47,078,733) $ (565,221) $17,633 $ (17,298,874) $ (88,596) $ 4,241 $ (151,779,522)
------------- ----------- ------------ ------------- ------------- ------------ --------------
INCREASE (DECREASE) IN
NET ASSETS FROM
OPERATIONS............ $ (27,894,946) $ (764,947) $14,667 $ (7,818,079) $ (979,230) $ 2,795 $ (67,885,223)
------------- ----------- ------------ ------------- ------------- ------------ --------------
------------- ----------- ------------ ------------- ------------- ------------ --------------
</TABLE>
*For the period from November 7, 1994 (commencement of investment operations) to
December 31, 1994.
See notes to financial statements
6
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT F
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
CAS CGS GSS
Sub-Account Sub-Account Sub-Account
----------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
----------------------------- ----------------------------- -----------------------------
<CAPTION>
1994 1993 1994 1993 1994 1993
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(expense).................. $ 27,825,823 $ 4,701,566 $ 147,916 $ 479,271 $ 10,541,212 $ 8,564,805
Net realized gains
(losses)................... 12,649,928 17,949,555 469,410 132,124 989,314 1,805,405
Net unrealized gains
(losses)................... (57,996,267) 11,962,856 (3,896,273) 2,308,898 (19,932,794) (546,544)
------------- ------------- ------------- ------------- ------------- -------------
Increase (decrease) in net
assets from operations... $ (17,520,516) $ 34,613,977 $ (3,278,947) $ 2,920,293 $ (8,402,268) $ 9,823,666
------------- ------------- ------------- ------------- ------------- -------------
PARTICIPANT TRANSACTIONS:
Accumulation Activity:
Purchase payments
received................. $ 131,738,032 $ 110,564,332 $ 54,704,628 $ 42,500,009 $ 81,307,573 $ 91,253,868
Net transfers between
Sub-Accounts and Fixed
Account.................. (30,000,160) 7,715,689 5,906,300 5,360,043 (10,559,956) 13,443,082
Withdrawals, surrenders,
annuitizations and
contract charges......... (22,127,701) (16,673,990) (4,909,494) (1,703,557) (18,857,834) (10,411,003)
------------- ------------- ------------- ------------- ------------- -------------
Net accumulation
activity............... $ 79,610,171 $ 101,606,031 $ 55,701,434 $ 46,156,495 $ 51,889,783 $ 94,285,947
------------- ------------- ------------- ------------- ------------- -------------
Annuitization Activity:
Annuitizations............ $ 325,123 $ 292,314 $ 131,189 $ 114,686 $ 519,211 $ 440,410
Annuity payments.......... (135,087) (52,288) (58,514) (15,802) (131,378) (122,454)
Net transfers between
Sub-Accounts............. (13,777) (19,251) 68,480 26 (128,389) 13,596
Adjustments to annuity
reserve.................. (138,996) 207,885 (3,424) (997) 41,563 (6,793)
------------- ------------- ------------- ------------- ------------- -------------
Net annuitization
activity............... $ 37,263 $ 428,660 $ 137,731 $ 97,913 $ 301,007 $ 324,759
------------- ------------- ------------- ------------- ------------- -------------
Increase in net assets from
participant transactions... $ 79,647,434 $ 102,034,691 $ 55,839,165 $ 46,254,408 $ 52,190,790 $ 94,610,706
------------- ------------- ------------- ------------- ------------- -------------
Increase in net assets.... $ 62,126,918 $ 136,648,668 $ 52,560,218 $ 49,174,701 $ 43,788,522 $ 104,434,372
NET ASSETS:
Beginning of year........... 317,385,742 180,737,074 78,390,963 29,216,262 225,688,696 121,254,324
------------- ------------- ------------- ------------- ------------- -------------
End of year................. $ 379,512,660 $ 317,385,742 $ 130,951,181 $ 78,390,963 $ 269,477,218 $ 225,688,696
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
</TABLE>
See notes to financial statements
7
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT F
STATEMENT OF CHANGES IN NET ASSETS -- continued
<TABLE>
<CAPTION>
HYS MSS MMS
Sub-Account Sub-Account Sub-Account
--------------------------- ---------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
--------------------------- ---------------------------- -----------------------------
<CAPTION>
1994 1993 1994 1993 1994 1993
------------ ------------ ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(expense).................... $ 3,353,160 $ 2,150,049 $ 10,371,457 $ (1,099,073) $ 4,088,955 $ 1,145,352
Net realized gains (losses)... (1,835,584) 2,256,839 2,312,910 5,045,999 -- --
Net unrealized gains
(losses)..................... (3,354,235) 1,858,458 (16,183,713) (1,426,592) -- --
------------ ------------ ------------- ------------ ------------- -------------
Increase (decrease) in net
assets from operations... $ (1,836,659) $ 6,265,346 $ (3,499,346) $ 2,520,334 $ 4,088,955 $ 1,145,352
------------ ------------ ------------- ------------ ------------- -------------
PARTICIPANT TRANSACTIONS:
Accumulation Activity:
Purchase payments
received................... $ 25,863,588 $ 20,601,720 $ 29,286,189 $ 26,489,524 $ 169,065,890 $ 100,938,073
Net transfers between
Sub-Accounts and Fixed
Account.................... (10,800,800) 11,179,745 (4,775,869) (3,338,814) (47,970,496) (81,687,693)
Withdrawals, surrenders,
annuitizations and contract
charges.................... (6,561,955) (2,962,687) (7,012,701) (4,617,864) (21,288,054) (11,024,797)
------------ ------------ ------------- ------------ ------------- -------------
Net accumulation
activity................. $ 8,500,833 $ 28,818,778 $ 17,497,619 $ 18,532,846 $ 99,807,340 $ 8,225,583
------------ ------------ ------------- ------------ ------------- -------------
Annuitization Activity:
Annuitizations.............. $ 143,700 $ 122,694 $ 68,728 $ 57,305 $ 559,738 $ 6,213
Annuity payments............ (71,050) (28,444) (32,033) (14,084) (103,980) (44,011)
Net transfers between
Sub-Accounts............... 119,221 5,187 976 3,147 122,710 (109,126)
Adjustments to annuity
reserve.................... (8,871) (1,378) (388) (508) 96,065 (189,635)
------------ ------------ ------------- ------------ ------------- -------------
Net annuitization
activity................. $ 183,000 $ 98,059 $ 37,283 $ 45,860 $ 674,533 $ (336,559)
------------ ------------ ------------- ------------ ------------- -------------
Increase in net assets from
participant transactions..... $ 8,683,833 $ 28,916,837 $ 17,534,902 $ 18,578,706 $ 100,481,873 $ 7,889,024
------------ ------------ ------------- ------------ ------------- -------------
Increase in net assets...... $ 6,847,174 $ 35,182,183 $ 14,035,556 $ 21,099,040 $ 104,570,828 $ 9,034,376
NET ASSETS:
Beginning of year............. 65,195,976 30,013,793 94,047,830 72,948,790 98,484,425 89,450,049
------------ ------------ ------------- ------------ ------------- -------------
End of year................... $ 72,043,150 $ 65,195,976 $ 108,083,386 $ 94,047,830 $ 203,055,253 $ 98,484,425
------------ ------------ ------------- ------------ ------------- -------------
------------ ------------ ------------- ------------ ------------- -------------
</TABLE>
See notes to financial statements
8
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT F
STATEMENT OF CHANGES IN NET ASSETS -- continued
<TABLE>
<CAPTION>
RES TRS UTS
Sub-Account Sub-Account Sub-Account
------------ ----------------------------- ---------------------------
<S> <C> <C> <C> <C> <C>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
------------ ----------------------------- ---------------------------
<CAPTION>
1994** 1994 1993 1994 1993*
------------ ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (expense)....... $ (4,034) $ 19,183,787 $ 9,193,215 $ (199,726) $ (2,032)
Net realized gains (losses)........... (3,877) 9,131,549 6,721,382 (122,032) (93)
Net unrealized gains (losses)......... 11,209 (56,210,282) 33,455,673 (443,189) 22,690
------------ ------------- ------------- ------------ ------------
Increase (decrease) in net assets
from operations.................. $ 3,298 $ (27,894,946) $ 49,370,270 $ (764,947) $ 20,565
------------ ------------- ------------- ------------ ------------
PARTICIPANT TRANSACTIONS:
Accumulation Activity:
Purchase payments received.......... $1,223,399 $ 222,713,883 $ 232,135,192 $ 17,617,955 $ 1,907,801
Net transfers between Sub-Accounts
and Fixed Account.................. 2,663,995 (7,151,070) 32,557,862 2,488,460 870,567
Withdrawals, surrenders,
annuitizations and contract
charges............................ (19,412) (51,917,624) (33,138,008) (828,336) (1,194)
------------ ------------- ------------- ------------ ------------
Net accumulation activity......... $3,867,982 $ 163,645,189 $ 231,555,046 $ 19,278,079 $ 2,777,174
------------ ------------- ------------- ------------ ------------
Annuitization Activity:
Annuitizations...................... $ -- $ 816,949 $ 998,805 $ 27,927 $ --
Annuity payments.................... -- (624,252) (426,277) -- --
Net transfers between
Sub-Accounts....................... -- (63,499) 71,007 -- --
Adjustments to annuity reserve...... -- 21,464 (39,612) 1 --
------------ ------------- ------------- ------------ ------------
Net annuitization activity........ $ -- $ 150,662 $ 603,923 $ 27,928 $ --
------------ ------------- ------------- ------------ ------------
Increase in net assets from
participant transactions............. $3,867,982 $ 163,795,851 $ 232,158,969 $ 19,306,007 $ 2,777,174
------------ ------------- ------------- ------------ ------------
Increase in net assets.............. $3,871,280 $ 135,900,905 $ 281,529,239 $ 18,541,060 $ 2,797,739
NET ASSETS:
Beginning of year..................... -- 642,310,026 360,780,787 2,797,739 --
------------ ------------- ------------- ------------ ------------
End of year........................... $3,871,280 $ 778,210,931 $ 642,310,026 $ 21,338,799 $ 2,797,739
------------ ------------- ------------- ------------ ------------
------------ ------------- ------------- ------------ ------------
</TABLE>
*For the period from November 16, 1993 (commencement of investment operations)
to December 31, 1993.
**For the period from November 7, 1994 (commencement of investment operations)
to December 31, 1994.
See notes to financial statements
9
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT F
STATEMENT OF CHANGES IN NET ASSETS -- continued
<TABLE>
<CAPTION>
WAA WGS WGR
Sub-Account Sub-Account Sub-Account
------------ ----------------------------- ---------------------------
<S> <C> <C> <C> <C> <C>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
------------ ----------------------------- ---------------------------
<CAPTION>
1994** 1994 1993 1994 1993*
------------ ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (expense)....... $ (2,966) $ 9,480,795 $ 4,381,253 $ (890,634) $ (18,478)
Net realized gains (losses)........... (147) (873,333) 1,651,717 1,495,414 6,570
Net unrealized gains (losses)......... 17,780 (16,425,541) 7,866,536 (1,584,010) 716,829
------------ ------------- ------------- ------------ ------------
Increase (decrease) in net assets
from operations.................... $ 14,667 $ (7,818,079) $ 13,899,506 $ (979,230) $ 704,921
------------ ------------- ------------- ------------ ------------
PARTICIPANT TRANSACTIONS:
Accumulation Activity:
Purchase payments received.......... $1,457,362 $ 37,946,650 $ 37,269,033 $ 62,712,792 $ 5,340,380
Net transfers between Sub-Accounts
and Fixed Account.................. 1,534,984 (17,688,160) 10,516,383 21,605,891 12,894,684
Withdrawals, surrenders,
annuitizations and contract
charges............................ (3,895) (8,869,406) (4,652,823) (3,238,104) (49,858)
------------ ------------- ------------- ------------ ------------
Net accumulation activity......... $2,988,451 $ 11,389,084 $ 43,132,593 $ 81,080,579 $ 18,185,206
------------ ------------- ------------- ------------ ------------
Annuitization Activity:
Annuitizations...................... $ -- $ 303,841 $ 258,892 $ 139,258 $ --
Annuity payments.................... -- (162,696) (130,055) (9,292) --
Net transfers between
Sub-Accounts....................... -- (142,264) 35,414 36,542 --
Adjustments to annuity reserve...... -- (338) (2,731) (4,670) --
------------ ------------- ------------- ------------ ------------
Net annuitization activity........ $ -- $ (1,457) $ 161,520 $ 161,838 $ --
------------ ------------- ------------- ------------ ------------
Increase in net assets from
participant transactions............. $2,988,451 $ 11,387,627 $ 43,294,113 $ 81,242,417 $ 18,185,206
------------ ------------- ------------- ------------ ------------
Increase in net assets.............. $3,003,118 $ 3,569,548 $ 57,193,619 $ 80,263,187 $ 18,890,127
NET ASSETS:
Beginning of year..................... -- 121,866,916 64,673,297 18,890,127 --
------------ ------------- ------------- ------------ ------------
End of year........................... $3,003,118 $ 125,436,464 $ 121,866,916 $ 99,153,314 $ 18,890,127
------------ ------------- ------------- ------------ ------------
------------ ------------- ------------- ------------ ------------
</TABLE>
*For the period from November 16, 1993 (commencement of investment operations)
to December 31, 1993.
**For the period from November 7, 1994 (commencement of investment operations)
to December 31, 1994.
See notes to financial statements
10
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT F
STATEMENT OF CHANGES IN NET ASSETS -- continued
<TABLE>
<CAPTION>
WTR
Sub-Account TOTAL
------------ ---------------------------------
<S> <C> <C> <C>
Year Ended Year Ended
December 31, December 31,
------------ ---------------------------------
<CAPTION>
1994** 1994 1993
------------ --------------- ---------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (expense)....... $ (1,446) $ 83,894,299 $ 29,491,687
Net realized gains (losses)........... 63 24,213,615 35,569,561
Net unrealized gains (losses)......... 4,178 (175,993,137) 56,222,982
------------ --------------- ---------------
Increase (decrease) in net assets
from operations.................... $ 2,795 $ (67,885,223) $ 121,284,230
------------ --------------- ---------------
PARTICIPANT TRANSACTIONS:
Accumulation Activity:
Purchase payments received.......... $ 756,005 $ 836,393,946 $ 668,999,932
Net transfers between Sub-Accounts
and Fixed Account.................. 626,641 (94,120,240) 9,511,548
Withdrawals, surrenders,
annuitizations and contract
charges............................ (1,410) (145,635,926) (85,235,781)
------------ --------------- ---------------
Net accumulation activity......... $1,381,236 $ 596,637,780 $ 593,275,699
------------ --------------- ---------------
Annuitization Activity:
Annuitizations...................... $ -- $ 3,035,664 $ 2,291,319
Annuity payments.................... -- (1,328,282) (833,415)
Net transfers between
Sub-Accounts....................... -- -- --
Adjustments to annuity reserve...... -- 2,406 (33,769)
------------ --------------- ---------------
Net annuitization activity........ $ -- $ 1,709,788 $ 1,424,135
------------ --------------- ---------------
Increase in net assets from
participant transactions............. $1,381,236 $ 598,347,568 $ 594,699,834
------------ --------------- ---------------
Increase in net assets.............. $1,384,031 $ 530,462,345 $ 715,984,064
NET ASSETS:
Beginning of year..................... -- 1,665,058,440 949,074,376
------------ --------------- ---------------
End of year........................... $1,384,031 $ 2,195,520,785 $ 1,665,058,440
------------ --------------- ---------------
------------ --------------- ---------------
</TABLE>
**For the period from November 7, 1994 (commencement of investment operations)
to December 31, 1994.
See notes to financial statements
11
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT F
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION
Sun Life of Canada (U.S.) Variable Account F (the "Variable Account"), a
separate account of Sun Life Assurance Company of Canada (U.S.), the Sponsor,
was established on July 13, 1989 as a funding vehicle for the variable portion
of certain group combination fixed/variable annuity contracts. 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 series of MFS/Sun Life Series
Trust (the "Series Trust"), an open-end management investment company registered
under the Investment Company Act of 1940. Massachusetts Financial Services
Company, a wholly-owned subsidiary of the Sponsor, is investment adviser to the
Series Trust.
(2) SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATIONS
Investments in shares of the Series Trust are recorded at their net asset value.
Realized gains and losses on sales of shares of the Series Trust are determined
on the identified cost basis. Dividend income and capital gain distributions
received by the Sub-Accounts are reinvested in additional Series Trust 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 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 deductions are
transferred periodically to the Sponsor. Currently, the deduction is at an
effective annual rate of 1.25%.
Each year on the contract anniversary, an account administration fee ("Account
Fee") equal to the lesser of $30 and 2% of the participant's account value is
deducted from the participant's account to reimburse the Sponsor for certain
administrative expenses. After the annuity commencement date the Account Fee
will be deducted pro rata from each variable 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) of up to 6% of certain
amounts withdrawn, when applicable, may be deducted to cover certain expenses
relating to the sale of the contracts and certificates.
For assuming the risk that withdrawal charges may be insufficient to compensate
it for the costs of distributing the MFS Regatta contracts, the Sponsor makes a
deduction from the Variable Account at the
12
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT F
NOTES TO FINANCIAL STATEMENTS -- continued
end of each valuation period for the first seven account years at an effective
annual rate of 0.15% of the net assets attributable to such contracts. No
deduction for the distribution expense charge is made after the seventh account
anniversary.
As reimbursement for administrative expenses attributable to MFS Regatta Gold
contracts which exceed the revenues received from the Account Fees described
above derived from such contracts, the Sponsor makes a deduction from the
Variable Account at the end of each valuation period at an effective annual rate
of 0.15% of the net assets attributable to such contracts.
(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 reserves
are accomplished by transfers to or from the Sponsor.
(5) UNIT ACTIVITY FROM PARTICIPANT TRANSACTIONS
<TABLE>
<CAPTION>
Units Transferred
Between Sub-Accounts and
Units Outstanding Fixed Accumulation
Beginning of Year Units Purchased Account
---------------------- ---------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
---------------------- ---------------------- -------------------------
<CAPTION>
1994 1993 1994 1993 1994 1993
---------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
MFS REGATTA CONTRACTS
------------------------------
CAS Sub-Account............... 7,272,302 8,168,037 9,333 11,880 (455,183) (147,448)
GSS Sub-Account............... 4,708,841 4,761,049 10,633 8,662 (21,084) 309,527
HYS Sub-Account............... 1,087,265 1,031,001 -- 2,109 (47,560) 157,473
MSS Sub-Account............... 2,431,072 2,768,568 1,536 3,137 (134,616) (150,604)
MMS Sub-Account............... 3,081,737 4,115,845 4,866 18,404 1,706,748 (390,320)
TRS Sub-Account............... 15,806,723 16,375,301 10,133 68,466 (92,067) 678,654
WGS Sub-Account............... 2,300,611 2,205,650 2,332 2,657 (73,063) 214,539
MFS REGATTA GOLD CONTRACTS
------------------------------
CAS Sub-Account............... 13,245,124 5,131,355 9,091,150 7,157,645 (1,559,101) 1,323,916
CGS Sub-Account............... 6,412,270 2,557,065 4,513,854 3,126,934 483,956 869,119
GSS Sub-Account............... 13,661,303 5,447,047 7,175,667 7,297,390 (868,594) 1,399,121
HYS Sub-Account............... 3,599,473 1,380,530 1,996,981 1,488,977 (717,869) 841,473
MSS Sub-Account............... 4,525,423 2,614,510 2,365,855 2,058,010 (238,446) 7,969
MMS Sub-Account............... 6,055,673 4,101,024 16,275,632 9,046,083 (6,440,721) (6,769,998)
RES Sub-Account............... -- -- 124,868 -- 269,642 --
TRS Sub-Account............... 32,979,812 12,952,314 18,470,599 17,772,619 (520,442) 3,423,684
UTS Sub-Account............... 279,796 -- 1,824,507 175,364 258,454 104,544
WAA Sub-Account............... -- -- 145,953 -- 153,647 --
WGR Sub-Account............... 1,778,644 -- 5,802,910 448,238 1,954,152 1,338,071
WGS Sub-Account............... 7,008,613 3,405,280 3,238,912 2,872,676 (1,467,047) 989,303
WTR Sub-Account............... -- -- 75,613 -- 62,654 --
</TABLE>
13
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT F
NOTES TO FINANCIAL STATEMENTS -- continued
(5) UNIT ACTIVITY FROM PARTICIPANT TRANSACTIONS -- continued
<TABLE>
<CAPTION>
Units Withdrawn,
Surrendered and Units Outstanding
Annuitized End of Year
------------------------- ----------------------
<S> <C> <C> <C> <C>
Year Ended Year Ended
December 31, December 31,
------------------------- ----------------------
<CAPTION>
1994 1993 1994 1993
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
MFS REGATTA CONTRACTS
------------------------------
CAS Sub-Account............... (641,721) (760,167) 6,184,731 7,272,302
GSS Sub-Account............... (463,187) (370,397) 4,235,203 4,708,841
HYS Sub-Account............... (199,880) (103,318) 839,825 1,087,265
MSS Sub-Account............... (231,350) (190,029) 2,066,642 2,431,072
MMS Sub-Account............... (920,307) (662,192) 3,873,044 3,081,737
TRS Sub-Account............... (1,499,250) (1,315,698) 14,225,539 15,806,723
WGS Sub-Account............... (262,505) (122,235) 1,967,375 2,300,611
MFS REGATTA GOLD CONTRACTS
------------------------------
CAS Sub-Account............... (867,524) (367,792) 19,909,649 13,245,124
CGS Sub-Account............... (430,369) (140,848) 10,979,711 6,412,270
GSS Sub-Account............... (1,184,114) (482,255) 18,784,262 13,661,303
HYS Sub-Account............... (272,767) (111,507) 4,605,818 3,599,473
MSS Sub-Account............... (301,191) (155,066) 6,351,641 4,525,423
MMS Sub-Account............... (1,116,198) (321,436) 14,774,386 6,055,673
RES Sub-Account............... (1,982) -- 392,528 --
TRS Sub-Account............... (2,659,413) (1,168,805) 48,270,556 32,979,812
UTS Sub-Account............... (89,318) (112) 2,273,439 279,796
WAA Sub-Account............... (390) -- 299,210 --
WGR Sub-Account............... (353,151) (7,665) 9,182,555 1,778,644
WGS Sub-Account............... (446,459) (258,646) 8,334,019 7,008,613
WTR Sub-Account............... (141) -- 138,126 --
</TABLE>
14
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Participants in Sun Life of Canada (U.S.) Variable Account F
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 F (the "Variable Account") as of December 31, 1994 and
the related statement of operations for the year then ended and the statements
of changes in net assets for the years ended December 31, 1994 and 1993. 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 with the custodian of securities held for the Variable Account as
of December 31, 1994. 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,
1994, 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 3, 1995
----------------------------------------
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.
15
<PAGE>
MFS REGATTA
MFS REGATTA GOLD
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, Assistant 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 02103-9986
GENERAL DISTRIBUTOR
Clarendon Insurance Agency, Inc.
500 Boylston Street, Boston, Massachusetts 02116-3741
LEGAL COUNSEL
Covington & Burling
1201 Pennsylvania Avenue, N.W.
P.O. Box 7566, Washington, D.C. 20044-7566
AUDITORS
Deloitte & Touche LLP
125 Summer Street, Boston, Massachusetts 02110-1616
ACCOUNT INFORMATION
For account information, please 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 any business
day from 8 a.m. to 6 p.m. Eastern time.
GOLD-2 2/95 84M
[LOGO]
ANNUAL REPORT - DECEMBER 31, 1994
PROFESSIONALLY MANAGED ANNUITIES ISSUED BY
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.),
A WHOLLY-OWNED SUBSIDIARY OF
SUN LIFE ASSURANCE COMPANY OF CANADA
