Explanation:

• Option A (Incorrect): A callable bond allows the issuer to retire the bond before maturity, but it does not mandate the issuer to do so annually.
• Option B (Incorrect): A step-up note features a coupon rate that increases over time according to a predetermined schedule, but it does not involve the retirement of principal.
• Option C (Correct): A sinking fund provision requires the issuer to retire a portion of the bond's principal each year, ensuring gradual repayment rather than a lump sum at maturity. This aligns with the requirement described in the question.