<PAGE>
<PAGE>
SUN LIFE OF CANADA (U.S.)
VARIABLE ACCOUNT B
----------
FINANCIAL STATEMENTS FOR THE
YEAR ENDED DECEMBER 31, 1998
AND INDEPENDENT AUDITORS' REPORT
<PAGE>
SUN LIFE OF CANADA (U.S.)
VARIABLE ACCOUNT B
STATEMENT OF CONDITION
DECEMBER 31, 1998
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investment in MFS/Sun Life Series Trust:
Money Market Series ("MMS"),
278,412 shares at $1.00 per share
(cost $278,412) $ 278,412
LIABILITY:
Payable to sponsor (76,265)
------------------
NET ASSETS $ 202,147
------------------
------------------
APPLICABLE TO OWNERS OF VARIABLE ANNUITY CONTRACTS:
Deferred contracts (49,055 units at
$3.18224 per unit) $ 156,104
Reserve for variable annuities 46,043
------------------
$ 202,147
------------------
------------------
</TABLE>
See notes to audited financial statements.
<PAGE>
SUN LIFE OF CANADA (U.S.)
VARIABLE ACCOUNT B
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Dividends $ 15,047
EXPENSE:
Mortality and expense risk charges 2,208
------------------
NET INVESTMENT INCOME $ 12,839
------------------
------------------
</TABLE>
See notes to audited financial statements.
<PAGE>
SUN LIFE OF CANADA (U.S.)
VARIABLE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
1998 1997
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income $ 12,839 $ 12,908
Net increase in net assets
from operations 12,839 12,908
------------- -------------
PARTICIPANT TRANSACTIONS:
Net accumulation activity:
Redemptions (40,700) (20,138)
------------- -------------
Annuitization activity:
Annuity payments (10,390) (15,454)
Actuarial adjustment (2,139) 1,602
------------- -------------
Net annuitization activity (12,529) (13,852)
------------- -------------
Net decrease in net assets from
participant activity (53,229) (33,990)
------------- -------------
NET DECREASE IN NET ASSETS (40,390) (21,082)
NET ASSETS
Beginning of year 242,537 263,619
------------- -------------
End of year $ 202,147 $ 242,537
------------- -------------
------------- -------------
</TABLE>
See notes to audited financial statements.
<PAGE>
SUN LIFE OF CANADA (U.S.)
VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION:
Sun Life of Canada (U.S.) Variable Account B (the "Variable Account"), a
separate account of Sun Life Assurance Company of Canada (U.S.) (the
"Sponsor") was established as a funding vehicle for individual 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.
2. 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 taxable and, therefore, no provision has
been made for federal income taxes.
3. INVESTMENT VALUATIONS:
At December 31, 1998, the Variable Account was fully invested in shares of
MFS/Sun Life Series Trust, Money Market Series ("MMS"). Investment in
shares of MMS are recorded at their net asset value. Dividend income
received by MMS is reinvested in additional shares of MMS and is recognized
on the ex-dividend date.
4. MORTALITY AND EXPENSES RISK CHARGES:
A deduction based on the value of either the variable accumulation units
credited to a deferred contract's accumulation account or the annuity units
credited to either an immediate or a deferred contract, as the case may be,
is made by the Sponsor 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.
Currently, the deduction is at an effective annual rate of 1.0% of the
respective values.
<PAGE>
SUN LIFE OF CANADA (U.S.)
VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. RESERVE FOR VARIABLE ANNUITIES:
The reserve for variable annuities (contracts in payment period) has been
calculated using the Progressive Annuity Table (for year of birth 1900)
with interest equal to the assumed interest rate used in determining the
annuity units and the annuity unit values. Separate tables were used for
male and female annuitants. Required adjustments to the reserve will be
accomplished by transfers to or from the Sponsor.
6. CHANGE IN ACCUMULATION UNITS OUTSTANDING:
<TABLE>
<CAPTION>
Years Ended
December 31,
1998 1997
---- ----
<S> <C> <C>
Redeemed during the year (12,756) (7,675)
Units outstanding:
Beginning of year 61,811 69,486
------ ------
End of year 49,055 61,811
------ ------
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Participants in Sun Life of Canada (U.S.) Variable Account B 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 B (the "Variable Account") as of December 31, 1998
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, 1998 and
1997. 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, 1998
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,
1998, 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
February 6, 1999
